[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for LSI Industries Inc. for the period ended December 31, 2023, including key financial statements and notes [Condensed Consolidated Statements of Operations](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) Net sales decreased for both three and six-month periods ended December 31, 2023, while six-month net income increased to $13,934 thousand Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2023 | Six Months Ended Dec 31, 2022 | | :--- | :--- | :--- | :--- | :--- | | **Net Sales** | $109,005 | $128,804 | $232,446 | $255,873 | | **Gross Profit** | $31,536 | $34,140 | $68,125 | $68,878 | | **Operating Income** | $7,819 | $9,038 | $18,847 | $19,059 | | **Net Income** | $5,906 | $6,417 | $13,934 | $12,678 | | **Diluted EPS** | $0.20 | $0.22 | $0.47 | $0.44 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) Total assets decreased to $287,548 thousand as of December 31, 2023, primarily due to reductions in receivables and inventory, while shareholders' equity increased Balance Sheet Highlights (in thousands) | Account | Dec 31, 2023 | June 30, 2023 | | :--- | :--- | :--- | | **Total Current Assets** | $141,393 | $149,876 | | Inventories | $60,154 | $63,718 | | Goodwill | $45,030 | $45,030 | | **Total Assets** | **$287,548** | **$296,149** | | **Total Current Liabilities** | $65,554 | $76,562 | | Long-term Debt | $17,950 | $31,629 | | **Total Liabilities** | $94,614 | $118,571 | | **Total Shareholders' Equity** | **$192,934** | **$177,578** | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Operating cash flow remained stable at $19,868 thousand for the six months ended December 31, 2023, with decreased cash used in financing activities Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended Dec 31, 2023 | Six Months Ended Dec 31, 2022 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | **$19,868** | **$20,062** | | Net cash used in investing activities | ($3,323) | ($994) | | Net cash used in financing activities | ($15,728) | ($18,779) | | **Increase in cash and cash equivalents** | **$832** | **$303** | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section details accounting policies, segment reporting, debt structure, and equity compensation, providing context for the financial statements - Revenue is disaggregated by timing (point in time vs. over time) and by segment. For the six months ended Dec 31, 2023, **$181,500 thousand** of revenue was recognized at a point in time, while **$50,900 thousand** was recognized over time[36](index=36&type=chunk) - The company operates two reportable segments: **Lighting** and **Display Solutions**. Corporate activities are reported separately[38](index=38&type=chunk) - As of December 31, 2023, the company was in compliance with all loan covenants associated with its credit facility[53](index=53&type=chunk) - In January 2024, the Board of Directors declared a quarterly cash dividend of **$0.05 per share**, indicating an annual rate of **$0.20 per share**[54](index=54&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%20(MD%26A)) Management discusses financial results, highlighting a 15% Q2 net sales decrease due to project delays, improved gross margin, strong operating cash flow, and reduced net debt - Q2 FY2024 net sales decreased **15% YoY** to **$109,005 thousand**, primarily due to a temporary delay in project demand in the grocery market affecting the Display Solutions Segment[71](index=71&type=chunk) - Despite a **9% sales decline** for the six-month period, adjusted operating income remained flat at **$21,400 thousand**, demonstrating effective cost management and improved manufacturing productivity[74](index=74&type=chunk) - The company significantly improved its leverage, with the Net Debt to Trailing 12-Month Adjusted EBITDA ratio decreasing to **0.4x** at December 31, 2023, from **1.3x** a year prior[78](index=78&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) The Lighting segment's operating income grew 31% despite a sales dip, while Display Solutions saw a 29% sales decline and 57% operating income drop due to a temporary pause Segment Performance - Three Months Ended Dec 31, 2023 vs 2022 (in thousands) | Segment | Net Sales 2023 | Net Sales 2022 | % Change | Operating Income 2023 | Operating Income 2022 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Lighting** | $64,795 | $66,833 | -3% | $8,856 | $6,754 | +31% | | **Display Solutions** | $44,210 | $61,971 | -29% | $3,302 | $7,762 | -57% | Segment Performance - Six Months Ended Dec 31, 2023 vs 2022 (in thousands) | Segment | Net Sales 2023 | Net Sales 2022 | % Change | Operating Income 2023 | Operating Income 2022 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Lighting** | $132,436 | $134,366 | -1% | $17,609 | $15,912 | +11% | | **Display Solutions** | $100,010 | $121,507 | -18% | $10,521 | $14,258 | -26% | - Lighting segment gross margin improved to **35.0%** in Q2 FY2024 from **30.6%** in Q2 FY2023, attributed to stable pricing, higher-value sales mix, favorable material costs, and improved productivity[80](index=80&type=chunk) - The decline in Display Solutions sales was unfavorably impacted by a temporary pause in demand within the grocery market vertical related to a pending merger of two large grocery chains[83](index=83&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with working capital increasing to $75,800 thousand and a current ratio of 2.2 to 1, supported by $19,900 thousand in operating cash flow - Working capital was **$75,800 thousand** at Dec 31, 2023, up from **$73,300 thousand** at June 30, 2023. The current ratio improved to **2.2 to 1** from **2.0 to 1**[106](index=106&type=chunk) - Net inventories decreased by **$3,500 thousand** from June 30, 2023, to **$60,200 thousand** at December 31, 2023, reflecting improved inventory management[107](index=107&type=chunk) - The company generated **$19,900 thousand** of cash from operating activities in the first six months of fiscal 2024, demonstrating continued strong cash flow generation[109](index=109&type=chunk) - As of December 31, 2023, **$70,700 thousand** was available for borrowing under the **$75,000 thousand** revolving line of credit, and the company was in compliance with all loan covenants[108](index=108&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company reports no material changes in its market risk exposure since June 30, 2022, referring to its Annual Report on Form 10-K - There have been no material changes in the company's exposure to market risk since June 30, 2022[116](index=116&type=chunk) [Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of December 31, 2023, with no material changes in internal control over financial reporting - Based on an evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of December 31, 2023[118](index=118&type=chunk) - No changes occurred in the company's internal control over financial reporting during the second quarter ended December 31, 2023, that have materially affected, or are reasonably likely to materially affect, these controls[119](index=119&type=chunk) [PART II. OTHER INFORMATION](index=33&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section includes other required disclosures and exhibits [Other Information](index=33&type=section&id=Item%205.%20Other%20Information) There is no other information to report for the period - None[122](index=122&type=chunk) [Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications by the Principal Executive Officer and Principal Financial Officer - Exhibits filed include CEO and CFO certifications (**31.1, 31.2, 32.1, 32.2**) and various Inline XBRL documents for financial reporting (**101 series**)[123](index=123&type=chunk) [Signatures](index=34&type=section&id=SIGNATURES) This section contains the official signatures certifying the report's accuracy [Signatures](index=34&type=section&id=Signatures) The report is duly signed on February 6, 2024, by James A. Clark, Chief Executive Officer and President, and James E. Galeese, Executive Vice President and Chief Financial Officer - The report was signed on **February 6, 2024**, by James A. Clark (CEO) and James E. Galeese (CFO)[127](index=127&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q 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 ...

LSI Industries Inc. (NASDAQ:LYTS) Q1 2024 Earnings Conference Call November 2, 2023 11:00 AM ET Company Participants Jim Galeese - Chief Financial Officer Jim Clark - President and Chief Executive Officer Conference Call Participants Aaron Spychalla - Craig Hallum Capital Group Amit Dayal - H.C. Wainwright George Gianarikas - Canaccord Genuity Richard Fearon - Accretive Capital Partners Operator Greetings, and welcome to LSI Industries' Fiscal First Quarter 2024 Results Conference Call. At this time, all pa ...

Part I [Business](index=5&type=section&id=ITEM%201.%20BUSINESS) LSI Industries Inc. is a leading producer of non-residential lighting and retail display solutions, organized into Lighting and Display Solutions segments, primarily serving the U.S. market - LSI is a leading producer of non-residential lighting and retail display solutions, with a focus on high-performance, American-made products[16](index=16&type=chunk) - The company operates out of **eleven manufacturing facilities** located in six U.S. states and one province in Ontario, Canada[25](index=25&type=chunk) - Research and development costs totaled **$3.4 million** in fiscal 2023 and **$3.6 million** in fiscal 2022[28](index=28&type=chunk) - As of June 30, 2023, the company had **1,540 full-time employees** and **87 agency employees**[33](index=33&type=chunk) Net Sales by Business Segment (in thousands) | Segment | 2023 | 2022 | | :--- | :--- | :--- | | Lighting Segment | $272,451 | $233,449 | | Display Solutions Segment | $224,528 | $221,671 | | **Total Net Sales** | **$496,979** | **$455,120** | [Lighting Segment](index=5&type=section&id=Lighting%20Segment) The Lighting Segment, representing 55% of fiscal 2023 net sales, manufactures and sells outdoor and indoor LED lighting fixtures and control solutions for various commercial markets - The Lighting Segment serves vertical markets such as refueling/convenience stores, parking lots/garages, quick-service restaurants, retail, grocery, automotive dealerships, sports courts, and warehouses[18](index=18&type=chunk) - Products include a variety of lighting fixtures, poles, and accessories, with a focus on energy-efficient LED light sources and advanced control options like sensors and wireless technologies[19](index=19&type=chunk) [Display Solutions Segment](index=5&type=section&id=Display%20Solutions%20Segment) The Display Solutions Segment, accounting for 45% of fiscal 2023 net sales, provides visual image and display elements, including digital signage and refrigerated displays, with project management services - Major products include signage, canopy graphics, digital signage, menu board systems, and refrigerated/non-refrigerated merchandising displays[20](index=20&type=chunk) - The segment provides comprehensive project management services, including installation, site surveys, permitting, and content management, to support large rollout programs for customers[20](index=20&type=chunk) [Risk Factors](index=8&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces strategic, operational, legal/regulatory, and financial risks, including economic downturns, competitive pressures, supply chain disruptions, and cybersecurity threats - **Strategic Risks** include potential negative impacts from lower economic activity in key end markets (refueling, grocery, etc.), inability to execute business strategies, intense competition affecting prices, and concentration of sales in the refueling/convenience store and grocery markets[43](index=43&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk)[48](index=48&type=chunk) - **Operational Risks** include supply chain vulnerabilities such as price increases and shortages of raw materials (steel, aluminum, LEDs), cybersecurity threats to IT systems, labor shortages, potential product recalls or warranty claims, and reliance on independent sales representatives[54](index=54&type=chunk)[55](index=55&type=chunk)[59](index=59&type=chunk)[60](index=60&type=chunk) - **Legal and Regulatory Risks**: Potential changes in U.S. trade policies, such as import tariffs, could increase costs for components sourced from foreign countries and adversely affect the business[68](index=68&type=chunk)[69](index=69&type=chunk) - **Financial Risks** include stock price volatility affecting capital raising, adverse effects from inflation and interest rate increases, and anti-takeover provisions in organizational documents and Ohio law that could deter a change in control[72](index=72&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk) [Unresolved Staff Comments](index=15&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) The company reports no unresolved written comments from the Securities and Exchange Commission staff issued 180 days or more before the end of fiscal year 2023 - There are no unresolved staff comments[77](index=77&type=chunk) [Properties](index=15&type=section&id=ITEM%202.%20PROPERTIES) The company operates owned and leased properties for corporate headquarters, manufacturing, and office functions, with key facilities in Ohio, Kentucky, Maine, Texas, North Carolina, and Ontario - The company owns its corporate headquarters and several manufacturing facilities in Cincinnati, OH, Independence, KY, and Columbus, OH[78](index=78&type=chunk) - Key leased manufacturing facilities are located in Houston, TX; Burlington, NC; and Collingwood, ON, Canada[78](index=78&type=chunk) [Legal Proceedings](index=15&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) Information regarding legal proceedings is detailed in Note 13 of the Consolidated Financial Statements, with the company believing their ultimate disposition will not have a material adverse effect - For information on legal proceedings, refer to Note 13 – Contingencies of the Notes to the Consolidated Financial Statements[78](index=78&type=chunk) [Mine Safety Disclosures](index=15&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company - Not applicable[79](index=79&type=chunk) Part II [Market for Common Equity, Stockholder Matters, and Issuer Purchases](index=16&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) LSI's common stock trades on NASDAQ under 'LYTS', with an indicated annual dividend of $0.20 per share, and no shares repurchased in fiscal 2023 under its program - The company's common stock is traded on the NASDAQ Global Select Market under the symbol **"LYTS"**[81](index=81&type=chunk) - The indicated annual cash dividend rate at the end of fiscal 2023 was **$0.20 per share**[82](index=82&type=chunk) - The company did not repurchase any shares during the fiscal year ended June 30, 2023, under its **$15 million** share repurchase program[83](index=83&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=23&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) In fiscal 2023, LSI's net sales increased 9.2% to $497.0 million, with operating income rising significantly to $37.0 million, driven by strong operating cash flow of $49.6 million used to reduce debt Fiscal 2023 vs. 2022 Consolidated Results (in thousands) | Metric | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Total Net Sales | $496,979 | $455,120 | +9.2% | | Total Operating Income | $37,028 | $21,201 | +74.7% | | Adjusted Operating Income (Non-GAAP) | $41,956 | $24,973 | +68.0% | | Net Income | $25,762 | $15,032 | +71.4% | | Diluted EPS | $0.88 | $0.54 | +63.0% | - The company generated **$49.6 million** of cash from operating activities in fiscal 2023, a significant turnaround from a **$3.8 million** use of cash in fiscal 2022, primarily due to effective working capital management and higher earnings[146](index=146&type=chunk) - Net Debt to Adjusted EBITDA ratio improved significantly from **2.20** at the end of fiscal 2022 to **0.65** at the end of fiscal 2023[125](index=125&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) The Lighting Segment's net sales grew 16.7% to $272.5 million, with operating income up 51.1%, while Display Solutions sales increased 1.3% to $224.5 million, with operating income up 41.7%, both driven by improved margins and mix Lighting Segment Performance (in thousands) | Metric | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $272,451 | $233,449 | +16.7% | | Gross Profit | $86,761 | $70,120 | +23.7% | | Operating Income | $31,633 | $20,942 | +51.1% | Display Solutions Segment Performance (in thousands) | Metric | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $224,528 | $221,671 | +1.3% | | Gross Profit | $50,179 | $39,076 | +28.4% | | Operating Income | $24,920 | $17,589 | +41.7% | [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity improved in fiscal 2023, with working capital decreasing to $73.3 million due to inventory reduction, and $49.6 million cash from operations used to pay down debt - Working capital decreased by **$8.5 million** to **$73.3 million** at June 30, 2023, mainly driven by a **$10.7 million** decrease in inventory[141](index=141&type=chunk)[144](index=144&type=chunk) - Cash from operations was **$49.6 million** in FY2023, compared to a use of cash of **$3.8 million** in FY2022[146](index=146&type=chunk) - The company used cash from operations and financing activities to pay down its line of credit, reducing total debt from **$79.6 million** to **$35.2 million** year-over-year[148](index=148&type=chunk)[240](index=240&type=chunk) [Critical Accounting Policies and Use of Estimates](index=28&type=section&id=Critical%20Accounting%20Policies%20and%20Use%20of%20Estimates) The warranty reserve is a critical accounting policy requiring significant judgment, with the liability increasing to $6.5 million at the end of fiscal 2023 from $4.5 million in the prior year - The most critical accounting policy is the warranty reserve, which involves estimating future costs for repair or replacement of defective products[151](index=151&type=chunk)[152](index=152&type=chunk) Product Warranty Liability Changes (in thousands) | | June 30, 2023 | June 30, 2022 | | :--- | :--- | :--- | | Beginning Balance | $4,491 | $5,295 | | Additions charged to expense | $6,626 | $2,960 | | Deductions for repairs | ($4,616) | ($3,764) | | **Ending Balance** | **$6,501** | **$4,491** | [Quantitative and Qualitative Disclosures About Market Risk](index=16&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to market risks from interest rate fluctuations on variable-rate debt, raw material price volatility, and minimal foreign currency risk, without using derivative instruments for hedging - The company is exposed to interest rate risk due to its variable-rate **$75 million** revolving line of credit and **$25 million** term loan[86](index=86&type=chunk)[87](index=87&type=chunk) - The company faces raw material price risk for commodities like steel, aluminum, and LEDs; in fiscal 2023, the raw material component of cost of goods sold subject to this risk was approximately **$226.3 million**[88](index=88&type=chunk) - Foreign currency risk is minimal, as sales from Mexican and Canadian subsidiaries represent only about **4%** of consolidated net sales[90](index=90&type=chunk) [Financial Statements and Supplementary Data](index=17&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section includes the company's consolidated financial statements for fiscal years 2023 and 2022, along with management's report on internal control and the independent auditor's unqualified opinions - The independent auditor, Grant Thornton LLP, issued an unqualified opinion on both the consolidated financial statements and the effectiveness of the company's internal control over financial reporting as of June 30, 2023[161](index=161&type=chunk)[168](index=168&type=chunk) Consolidated Balance Sheet Highlights (in thousands) | | June 30, 2023 | June 30, 2022 | | :--- | :--- | :--- | | Total Current Assets | $149,876 | $158,917 | | Total Assets | $296,149 | $311,080 | | Total Current Liabilities | $76,562 | $77,082 | | Total Long-Term Debt | $31,629 | $76,025 | | Total Shareholders' Equity | $177,578 | $147,769 | Consolidated Cash Flow Highlights (in thousands) | | 2023 | 2022 | | :--- | :--- | :--- | | Net cash from Operating Activities | $49,588 | ($3,863) | | Net cash from Investing Activities | ($3,203) | ($1,573) | | Net cash from Financing Activities | ($47,149) | $5,633 | [Changes in and Disagreements with Accountants](index=17&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) This item is not applicable - Not applicable[91](index=91&type=chunk) [Controls and Procedures](index=18&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded the company's disclosure controls and procedures were effective as of June 30, 2023, with no material changes in internal control over financial reporting during the fourth fiscal quarter - The Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2023, the company's disclosure controls and procedures were effective[94](index=94&type=chunk) - There were no changes in internal control over financial reporting during the quarter ended June 30, 2023, that materially affected, or are reasonably likely to materially affect, the company's internal control[96](index=96&type=chunk) [Other Information](index=18&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) No directors or officers reported the adoption or termination of Rule 10b5-1 trading arrangements during the fourth quarter of fiscal 2023 - No directors or officers reported the adoption or termination of Rule 10b5-1 trading arrangements in the fourth quarter[97](index=97&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=18&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) Information regarding directors, executive officers, the Audit Committee, and the company's code of ethics is incorporated by reference from the 2023 Proxy Statement - Information required for this item is incorporated by reference from the Proxy Statement for the Annual Meeting of Shareholders to be held November 1, 2023[100](index=100&type=chunk) [Executive Compensation](index=19&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) Information regarding director and executive compensation, including the Compensation Discussion and Analysis, is incorporated by reference from the company's 2023 Proxy Statement - Information required for this item is incorporated by reference from the 2023 Proxy Statement[103](index=103&type=chunk) [Security Ownership and Related Stockholder Matters](index=19&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Information regarding security ownership of certain beneficial owners and management, as well as equity compensation plan information, is incorporated by reference from the company's 2023 Proxy Statement - Information required for this item is incorporated by reference from the 2023 Proxy Statement[103](index=103&type=chunk) [Certain Relationships, Related Transactions, and Director Independence](index=19&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) Information regarding related person transactions and director independence is incorporated by reference from the company's 2023 Proxy Statement - Information required for this item is incorporated by reference from the 2023 Proxy Statement[104](index=104&type=chunk) [Principal Accountant Fees and Services](index=19&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) Information concerning fees and services provided by the principal accountant, Grant Thornton LLP, is incorporated by reference from the company's 2023 Proxy Statement - Information required for this item is incorporated by reference from the 2023 Proxy Statement[105](index=105&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=19&type=section&id=ITEM%2015.%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists documents filed as part of the Form 10-K, including consolidated financial statements, various exhibits, and certifications from principal executive and financial officers - The report includes consolidated financial statements, exhibits, and certifications as part of the filing[108](index=108&type=chunk) - Key exhibits filed include loan agreements, employment agreements, and equity incentive plans[108](index=108&type=chunk)[109](index=109&type=chunk) - Financial Statement Schedule II – Valuation and Qualifying Accounts is provided on page 61[90](index=90&type=chunk)[288](index=288&type=chunk) [Form 10-K Summary](index=21&type=section&id=ITEM%2016.%20FORM%2010-K%20SUMMARY) This item is not included in the report - Not included[112](index=112&type=chunk)

Fiscal Fourth Quarter 2023 Results Conference Call August 17, 2023 Such statements, whether expressed or implied, are based upon current expectations of LSI and speak only as of the date made. Reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to differ materially from those expressed or implied. Forward-looking statements include statements that address activiti ...

Financial Data and Key Metrics Changes - The company reported fourth quarter earnings per share of $0.28, with adjusted EPS at $0.30, compared to $0.18 and $0.21 for the prior year quarter, reflecting improved profitability and a lower effective tax rate [22] - Full year sales increased to $497 million, representing a 9% year-over-year growth, while adjusted net income increased 61% to $29 million, and adjusted earnings per share increased 55% to $0.99 per share, marking the highest full year EPS in over 20 years [46] - The adjusted EBITDA for the full year increased to $52 million, with the adjusted EBITDA margin rate expanding 270 basis points to 10.4% [46] Business Line Data and Key Metrics Changes - Display Solutions sales for the full year increased by 1%, but increased by 13% when excluding a large digital menu board order, indicating ongoing strength in grocery, c-store, and QSR market verticals [25] - Lighting sales increased by 5% in Q4, marking the ninth consecutive quarter of growth, with full year lighting sales increasing by 17% [47] - The gross margin rate for lighting improved to 33% in Q4, while the full year margin rate improved to 32%, 190 basis points above last year [47] Market Data and Key Metrics Changes - The company entered fiscal '24 with a project quotation level steady at a high level, and Q4 bookings were favorable with a book-to-bill ratio above 1 [24] - There is a noted slowing in large projects, but small and medium project activity remains healthy, with lengthening quote-to-order conversion periods being observed [24] - The company continues to see strong inquiry levels for branding and image initiatives, particularly in the refueling c-store and grocery space [25] Company Strategy and Development Direction - The company aims to reach $800 million in sales and nearly $100 million in EBITDA performance by 2028, with a balanced approach to growth through organic activities and M&A [14][16] - The strategic focus is on high potential vertical markets such as grocery, c-store, warehousing, manufacturing, automotive, and sports courts, with differentiated goods and services designed for these markets [16] - The introduction of more than 20 new products is planned for 2024, including a next-generation environmentally friendly refrigerated display solution [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to manage and seek out continued productivity and cost opportunities while managing price, margin, and cash flow [20] - The company noted that while there are external pressures affecting timing, the overall inquiry levels and project activity remain healthy [39] - Management highlighted that the macroeconomic environment is stable, but there are extended timelines for project execution due to external factors such as financing and labor issues [79] Other Important Information - The company reduced its net debt to about $35 million, lowering the ratio of net debt to trailing 12-month adjusted EBITDA to 0.7x, providing balance sheet flexibility for growth initiatives [23] - A regular cash dividend of $0.05 per share was declared, payable September 5 for shareholders of record on August 28 [23] Q&A Session Summary Question: Factors influencing the second half of FY '24 being stronger than the first half - Management indicated that while they are not shielded from macroeconomic factors, their strategy focuses on vertical markets that are more resistant to economic cycles, which has proven effective over the past five years [51] Question: Update on capital allocation priorities - Management stated that there would be no material changes in capital allocation models, with a focus on organic growth and maintaining a disciplined approach to M&A opportunities [55] Question: M&A outlook and environment - Management expressed optimism about the current M&A environment, noting that they are actively looking for opportunities but remain disciplined in their approach to ensure strategic fit and cultural alignment [58] Question: Impact of lead time delays on operating profits - Management indicated that while there could be mid-single digit adjustments on a quarter-by-quarter basis due to delays, these do not significantly disrupt overall quarterly performance [89] Question: Size of the opportunity for the R-290 refrigerated display - Management emphasized the importance of earning every project and maintaining customer loyalty, noting that while the market is larger than their current share, they need to actively pursue new opportunities [93]

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for LSI Industries Inc [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) Presents LSI Industries Inc.'s unaudited condensed consolidated financial statements and detailed notes for Q3 and YTD fiscal 2023 [CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) Details the company's net sales, gross profit, operating income, net income, and EPS for the specified periods | Metric (In thousands, except per share data) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Nine Months Ended March 31, 2023 | Nine Months Ended March 31, 2022 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Net Sales | $117,470 | $110,111 | $373,343 | $327,651 | | Gross profit | $32,204 | $26,793 | $101,082 | $76,751 | | Operating income | $7,732 | $5,161 | $26,791 | $14,027 | | Net income | $4,669 | $3,618 | $17,347 | $9,856 | | Basic EPS | $0.16 | $0.13 | $0.62 | $0.36 | | Diluted EPS | $0.16 | $0.13 | $0.60 | $0.35 | [CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) Presents net income and other comprehensive income components, such as foreign currency translation adjustments | Metric (In thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Nine Months Ended March 31, 2023 | Nine Months Ended March 31, 2022 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Net Income | $4,669 | $3,618 | $17,347 | $9,856 | | Foreign currency translation adjustment | $117 | $46 | $192 | $11 | | Comprehensive Income | $4,786 | $3,664 | $17,539 | $9,867 | [CONDENSED CONSOLIDATED BALANCE SHEETS](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) Outlines the company's financial position, including assets, liabilities, and shareholders' equity at specific dates | Metric (In thousands) | March 31, 2023 | June 30, 2022 | | :-------------------------------- | :------------- | :------------ | | **ASSETS** | | | | Cash and cash equivalents | $1,350 | $2,462 | | Accounts receivable, net | $69,288 | $77,750 | | Inventories | $67,661 | $74,421 | | Total current assets | $145,822 | $158,917 | | Net property, plant and equipment | $25,264 | $27,158 | | Goodwill | $45,030 | $45,030 | | Other intangible assets, net | $64,394 | $67,964 | | Total assets | $291,019 | $311,080 | | **LIABILITIES & SHAREHOLDERS' EQUITY** | | | | Current maturities of long-term debt | $3,571 | $3,571 | | Accounts payable | $24,749 | $34,783 | | Accrued expenses | $37,717 | $36,264 | | Total current liabilities | $66,037 | $74,618 | | Long-term debt | $46,002 | $76,025 | | Total shareholders' equity | $167,743 | $147,769 | | Total liabilities & shareholders' equity | $291,019 | $311,080 | [CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY](index=8&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20SHAREHOLDERS'%20EQUITY) Details changes in shareholders' equity, reflecting net income, dividends, and equity compensation impacts - Total shareholders' equity increased from **$147,769 thousand** at June 30, 2022, to **$167,743 thousand** at March 31, 2023, primarily driven by net income of **$17,347 thousand** and increases in common shares issued for compensation and stock option exercises, partially offset by cash dividends paid[21](index=21&type=chunk)[22](index=22&type=chunk) [CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS](index=10&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Summarizes cash flows from operating, investing, and financing activities for the reporting periods | Metric (In thousands) | Nine Months Ended March 31, 2023 | Nine Months Ended March 31, 2022 | | :----------------------------------------------------- | :------------------------------- | :------------------------------- | | Net cash flows provided by (used in) operating activities | $32,548 | $(12,668) |\n| Net cash flows (used in) investing activities | $(1,753) | $(776) |\n| Net cash flows (used in) provided by financing activities | $(31,985) | $12,402 |\n| (Decrease) in cash and cash equivalents | $(1,112) | $(1,034) |\n| Cash and cash equivalents at end of period | $1,350 | $1,248 | [NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=11&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) Provides detailed explanations and disclosures supporting the condensed consolidated financial statements [NOTE 1 - INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=11&type=section&id=NOTE%201%20-%20INTERIM%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) Confirms the interim financial statements are unaudited and prepared in accordance with GAAP - The interim financial statements are unaudited and prepared in accordance with GAAP for interim financial information, including all normal adjustments and disclosures necessary to present fairly the Company's financial position, results of operations, and cash flows as of and for the periods ended March 31, 2023 and 2022[28](index=28&type=chunk) [NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=11&type=section&id=NOTE%202%20-%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Outlines key accounting policies, including revenue recognition and the impact of new accounting standards - Revenue is generally recognized at the point of shipment when control transfers to the customer, except for customized products and installation services, where revenue is recognized over time using a cost-based input method due to no alternative use and a legal right to payment[30](index=30&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk) Disaggregation of Revenue by Timing and Type (Three Months Ended March 31, In thousands) | Segment / Type of Revenue | 2023 (Lighting) | 2023 (Display Solutions) | 2022 (Lighting) | 2022 (Display Solutions) | | :--------------------------------------- | :-------------- | :----------------------- | :-------------- | :----------------------- | | Products and services transferred at a point in time | $57,249 | $42,378 | $49,283 | $41,231 | | Products and services transferred over time | $9,458 | $8,385 | $7,843 | $11,754 | | **Total Net Sales** | **$66,707** | **$50,763** | **$57,126** | **$52,985** | | LED lighting, digital signage, electronic circuit boards | $55,894 | $4,907 | $47,196 | $6,906 | | Poles, printed graphics, display fixtures | $9,920 | $37,019 | $9,358 | $35,536 | | Project management, installation, shipping | $893 | $8,837 | $572 | $10,543 | Disaggregation of Revenue by Timing and Type (Nine Months Ended March 31, In thousands) | Segment / Type of Revenue | 2023 (Lighting) | 2023 (Display Solutions) | 2022 (Lighting) | 2022 (Display Solutions) | | :--------------------------------------- | :-------------- | :----------------------- | :-------------- | :----------------------- | | Products and services transferred at a point in time | $173,917 | $136,894 | $144,006 | $114,099 | | Products and services transferred over time | $27,157 | $35,375 | $21,656 | $47,890 | | **Total Net Sales** | **$201,074** | **$172,269** | **$165,662** | **$161,989** | | LED lighting, digital signage, electronic circuit boards | $165,839 | $17,883 | $136,701 | $31,885 | | Poles, printed graphics, display fixtures | $32,681 | $120,173 | $27,403 | $99,965 | | Project management, installation, shipping | $2,554 | $34,213 | $1,558 | $30,139 | - The Company is evaluating the impact of ASU 2021-08 on business combinations, which requires applying ASC 606 to contract assets and liabilities acquired[37](index=37&type=chunk) [NOTE 3 - SEGMENT REPORTING INFORMATION](index=13&type=section&id=NOTE%203%20-%20SEGMENT%20REPORTING%20INFORMATION) Details financial performance and assets for the Lighting and Display Solutions operating segments - The Company operates two segments: Lighting and Display Solutions. The Lighting Segment focuses on LED lighting fixtures and controls for various markets, while the Display Solutions Segment provides visual image and display elements, including digital signage and project management services[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk) Segment Financial Information (Three Months Ended March 31, In thousands) | Metric | 2023 (Lighting) | 2023 (Display Solutions) | 2022 (Lighting) | 2022 (Display Solutions) | | :-------------------- | :-------------- | :----------------------- | :-------------- | :----------------------- | | Net Sales | $66,707 | $50,763 | $57,126 | $52,985 | | Operating Income | $6,529 | $5,501 | $4,959 | $4,556 | Segment Financial Information (Nine Months Ended March 31, In thousands) | Metric | 2023 (Lighting) | 2023 (Display Solutions) | 2022 (Lighting) | 2022 (Display Solutions) | | :-------------------- | :-------------- | :----------------------- | :-------------- | :----------------------- | | Net Sales | $201,074 | $172,269 | $165,662 | $161,989 | | Operating Income | $22,441 | $19,759 | $13,921 | $12,142 | Identifiable Assets by Segment (In thousands) | Segment | March 31, 2023 | June 30, 2022 | | :---------------------- | :------------- | :------------ | | Lighting Segment | $142,656 | $152,431 | | Display Solutions Segment | $140,666 | $152,302 | | Corporate and Eliminations | $7,697 | $6,347 | | **Total Identifiable Assets** | **$291,019** | **$311,080** | [NOTE 4 - EARNINGS PER COMMON SHARE](index=15&type=section&id=NOTE%204%20-%20EARNINGS%20PER%20COMMON%20SHARE) Presents basic and diluted earnings per common share calculations for the reporting periods Earnings Per Common Share (In thousands, except per share data) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Nine Months Ended March 31, 2023 | Nine Months Ended March 31, 2022 | | :-------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Net income | $4,669 | $3,618 | $17,347 | $9,856 | | Basic EPS | $0.16 | $0.13 | $0.62 | $0.36 | | Diluted EPS | $0.16 | $0.13 | $0.60 | $0.35 | | Weighted average common shares outstanding (Basic) | 28,306 | 27,378 | 28,012 | 27,220 | | Weighted average common shares outstanding (Diluted) | 29,611 | 28,083 | 29,055 | 27,945 | [NOTE 5 – INVENTORIES, NET](index=17&type=section&id=NOTE%205%20%E2%80%93%20INVENTORIES,%20NET) Provides a breakdown of inventory components, including raw materials, work-in-progress, and finished goods Inventories, Net (In thousands) | Category | March 31, 2023 | June 30, 2022 | | :-------------- | :------------- | :------------ | | Raw materials | $49,946 | $51,637 | | Work-in-progress | $7,800 | $3,029 | | Finished goods | $9,915 | $19,755 | | **Total Inventories** | **$67,661** | **$74,421** | [NOTE 6 - ACCRUED EXPENSES](index=17&type=section&id=NOTE%206%20-%20ACCRUED%20EXPENSES) Details the various categories of accrued expenses, such as customer prepayments and compensation Accrued Expenses (In thousands) | Category | March 31, 2023 | June 30, 2022 | | :------------------------ | :------------- | :------------ | | Customer prepayments | $3,847 | $6,416 | | Compensation and benefits | $12,683 | $9,611 | | Accrued warranty | $5,127 | $4,491 | | Operating lease liabilities | $1,290 | $1,274 | | Accrued sales commissions | $5,629 | $4,783 | | Accrued freight | $3,625 | $3,680 | | Accrued FICA | $546 | $1,122 | | Finance lease liabilities | $325 | $275 | | Accrued income tax | $- | $109 | | Other accrued expenses | $4,645 | $4,503 | | **Total Accrued Expenses** | **$37,717** | **$36,264** | [NOTE 7 - GOODWILL AND OTHER INTANGIBLE ASSETS](index=18&type=section&id=NOTE%207%20-%20GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS) Discusses goodwill impairment testing, and provides a breakdown of other intangible assets and amortization - The Company performed its annual preliminary goodwill impairment test as of March 1, 2023, for its three reporting units (one in Lighting, two in Display Solutions), and all units passed the test with significant business enterprise values above their carrying values. The definitive test is expected in Q4 fiscal 2023 with no anticipated changes[52](index=52&type=chunk) Goodwill, Net (In thousands) | Segment | March 31, 2023 | June 30, 2022 | | :---------------------- | :------------- | :------------ | | Lighting Segment | $9,208 | $9,208 | | Display Solutions Segment | $35,822 | $35,822 | | **Goodwill, net** | **$45,030** | **$45,030** | Other Intangible Assets, Net (In thousands) | Category | March 31, 2023 (Net Amount) | June 30, 2022 (Net Amount) | | :---------------------------- | :-------------------------- | :------------------------- | | Customer relationships | $45,121 | $47,683 | | LED technology firmware, software | $5,480 | $6,368 | | Trade name (amortized) | $1,529 | $1,609 | | Trademarks and trade names (indefinite-lived) | $12,102 | $12,102 | | **Total Other Intangible Assets** | **$64,394** | **$67,964** | Expected Annual Amortization Expense (In thousands) | Year | Amount | | :---------- | :----- | | 2023 | $4,808 | | 2024 | $4,760 | | 2025 | $4,760 | | 2026 | $4,760 | | 2027 | $4,754 | | After 2027 | $32,020 | [NOTE 8 - DEBT](index=20&type=section&id=NOTE%208%20-%20DEBT) Outlines the company's long-term debt, including credit facilities and compliance with loan covenants Long-Term Debt (In thousands) | Category | March 31, 2023 | June 30, 2022 | | :------------------------ | :------------- | :------------ | | Secured line of credit | $29,930 | $57,275 | | Term loan, net | $19,643 | $22,321 | | **Total debt** | **$49,573** | **$79,596** | | Less: amounts due within one year | $3,571 | $3,571 | | **Total amounts due after one year, net** | **$46,002** | **$76,025** | - As of March 31, 2023, the Company had **$45.1 million** available for borrowing under its **$75 million** revolving line of credit, with a borrowing rate of **6.3%**. The Company is in compliance with all loan covenants[57](index=57&type=chunk)[58](index=58&type=chunk) [NOTE 9 - CASH DIVIDENDS](index=20&type=section&id=NOTE%209%20-%20CASH%20DIVIDENDS) Reports cash dividends paid and declared, including the quarterly and annual dividend rates - The Company paid cash dividends of **$4.1 million** for the nine months ended March 31, 2023, and declared a regular quarterly cash dividend of **$0.05 per share** in April 2023, indicating an annual rate of **$0.20 per share**[59](index=59&type=chunk) [NOTE 10 – EQUITY COMPENSATION](index=21&type=section&id=NOTE%2010%20%E2%80%93%20EQUITY%20COMPENSATION) Details changes to the equity compensation plan and the associated stock compensation expense - Shareholders approved an amendment to the 2019 Omnibus Award Plan, increasing authorized shares by **2,350,000**. As of March 31, 2023, **2,463,673 shares** remained reserved for issuance. Stock compensation expense was **$0.9 million** for the three months and **$2.3 million** for the nine months ended March 31, 2023[60](index=60&type=chunk)[61](index=61&type=chunk) [NOTE 11 - SUPPLEMENTAL CASH FLOW INFORMATION](index=21&type=section&id=NOTE%2011%20-%20SUPPLEMENTAL%20CASH%20FLOW%20INFORMATION) Provides additional details on cash payments for interest and income taxes, and non-cash activities Supplemental Cash Flow Information (In thousands) | Category | Nine Months Ended March 31, 2023 | Nine Months Ended March 31, 2022 | | :------------------------------------------- | :------------------------------- | :------------------------------- | | Cash Payments: Interest | $2,325 | $1,067 |\n| Cash Payments: Income taxes | $7,808 | $3,581 |\n| Non-cash investing and financing activities: Issuance of common shares as compensation | $270 | $225 |\n| Non-cash investing and financing activities: Issuance of common shares to fund deferred compensation plan | $1,530 | $3,089 |\n| Non-cash investing and financing activities: Issuance of common shares to fund ESPP plan | $97 | $- | [NOTE 12 - COMMITMENTS AND CONTINGENCIES](index=21&type=section&id=NOTE%2012%20-%20COMMITMENTS%20AND%20CONTINGENCIES) Addresses legal proceedings and other commitments, noting no material adverse effects are anticipated - The Company is involved in various legal proceedings in the normal course of business but management believes their ultimate disposition will not have a material adverse effect on financial position, results of operations, cash flows, or liquidity. No standby letters of credit were issued as of March 31, 2023[63](index=63&type=chunk)[64](index=64&type=chunk) [NOTE 13 - LEASES](index=21&type=section&id=NOTE%2013%20-%20LEASES) Describes the company's operating and finance leases, including lease terms, costs, and liabilities - The Company leases manufacturing facilities, office space, and equipment, with most being operating leases. Lease terms range from one to seven years, with some renewal options. Total lease cost for the nine months ended March 31, 2023, was **$2,650 thousand**[65](index=65&type=chunk)[69](index=69&type=chunk) Operating and Finance Lease Information (In thousands) | Category | March 31, 2023 | June 30, 2022 | | :------------------------------------- | :------------- | :------------ | | Total operating right-of-use assets | $6,770 | $8,664 | | Total operating lease liabilities | $7,405 | $9,514 | | Weighted Average remaining Lease Term (Operating) | 2.52 years | 3.05 years | | Total finance lease assets, net | $1,196 | $1,410 | | Total finance lease liabilities | $1,361 | $1,521 | | Weighted Average remaining Lease Term (Finance) | 4.06 years | 4.80 years | | Weighted Average Discount Rate | 4.86% | 4.86% | Maturities of Lease Liability (In thousands) | Year | Operating Lease Liabilities | Finance Lease Liabilities | Net Lease Commitments | | :---------- | :-------------------------- | :------------------------ | :-------------------- | | 2023 | $1,235 | $182 | $1,323 | | 2024 | $3,399 | $337 | $3,359 | | 2025 | $2,253 | $362 | $2,584 | | 2026 | $952 | $362 | $1,314 | | 2027 | $323 | $303 | $626 | | Thereafter | $4 | $- | $4 | | **Total lease payments** | **$8,166** | **$1,546** | **$9,210** | | Less: Interest | $(761) | $(185) | $(946) | | **Present Value of Lease Liabilities** | **$7,405** | **$1,361** | **$8,264** | [NOTE 14 – INCOME TAXES](index=24&type=section&id=NOTE%2014%20%E2%80%93%20INCOME%20TAXES) Explains the consolidated effective tax rate and factors influencing its changes for the periods - The consolidated effective tax rate increased to **32.6%** for the three months ended March 31, 2023 (from **22.9%** in 2022), and to **27.0%** for the nine months ended March 31, 2023 (from **22.4%** in 2022). This increase is primarily due to higher pre-tax profits in higher-taxing jurisdictions (Puerto Rico and Canada) and unfavorable discrete tax adjustments[73](index=73&type=chunk)[99](index=99&type=chunk)[113](index=113&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=25&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Analyzes the company's financial performance, liquidity, and capital resources for the reported periods [Note About Forward-Looking Statements](index=25&type=section&id=Note%20About%20Forward-Looking%20Statements) Highlights that the report contains forward-looking statements subject to risks and uncertainties - The report contains forward-looking statements, identified by words like 'believe,' 'expect,' and 'will,' which are subject to risks and uncertainties that could cause actual results to differ materially. The Company undertakes no obligation to update these statements[74](index=74&type=chunk) [Summary of Consolidated Results](index=25&type=section&id=Summary%20of%20Consolidated%20Results) Provides an overview of consolidated net sales and operating income, segmented by business unit Net Sales by Business Segment (In thousands) | Segment | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Nine Months Ended March 31, 2023 | Nine Months Ended March 31, 2022 | | :---------------------- | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Lighting Segment | $66,707 | $57,126 | $201,074 | $165,662 | | Display Solutions Segment | $50,763 | $52,985 | $172,269 | $161,989 | | **Total Net Sales** | **$117,470** | **$110,111** | **$373,343** | **$327,651** | Operating Income (Loss) by Business Segment (In thousands) | Segment | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Nine Months Ended March 31, 2023 | Nine Months Ended March 31, 2022 | | :---------------------- | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Lighting Segment | $6,529 | $4,959 | $22,441 | $13,921 | | Display Solutions Segment | $5,501 | $4,556 | $19,759 | $12,142 | | Corporate and Eliminations | $(4,298) | $(4,354) | $(15,409) | $(12,036) | | **Total Operating Income** | **$7,732** | **$5,161** | **$26,791** | **$14,027** | - Net sales for the three months ended March 31, 2023, increased **7% YoY** to **$117.5 million**, driven by a **17% growth** in the Lighting Segment, partially offset by a **4% decline** in the Display Solutions Segment due to timing of shipments and program transitions. For the nine months, net sales increased **14% YoY** to **$373.3 million**, with growth in both segments[78](index=78&type=chunk)[79](index=79&type=chunk) - Operating income for the three months ended March 31, 2023, increased by **$2.6 million** to **$7.7 million**, and for the nine months, it increased by **$12.8 million** to **$26.8 million**. This improvement was attributed to increased volume, a higher value sales mix, price discipline, improved program pricing, and effective cost management[80](index=80&type=chunk)[81](index=81&type=chunk) [Non-GAAP Financial Measures](index=26&type=section&id=Non-GAAP%20Financial%20Measures) Reconciles GAAP to Non-GAAP financial measures, including Adjusted Operating Income, Net Income, EBITDA, and Free Cash Flow - The Company uses Non-GAAP financial measures, including Adjusted Operating Income, Adjusted Net Income, EBITDA, Adjusted EBITDA, and Free Cash Flow, to provide greater comparability and enhanced visibility into operating performance by excluding items such as long-term performance-based compensation, severance, acquisition, and consulting costs[82](index=82&type=chunk) Reconciliation of Operating Income to Adjusted Operating Income (In thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Nine Months Ended March 31, 2023 | Nine Months Ended March 31, 2022 | | :---------------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Operating Income as reported | $7,732 | $5,161 | $26,791 | $14,027 | | Long-Term Performance Based Compensation | $968 | $780 | $2,521 | $2,466 | | Consulting expense: Commercial Growth Initiatives | $75 | $- | $864 | $- | | Acquisition Costs | $- | $21 | $- | $361 | | Severance costs | $- | $5 | $46 | $5 | | **Adjusted Operating Income** | **$8,775** | **$5,967** | **$30,222** | **$16,859** | Reconciliation of Net Income to Adjusted Net Income (In thousands, except per share data) | Metric | Three Months Ended March 31, 2023 (Net Income) | Three Months Ended March 31, 2023 (Diluted EPS) | Three Months Ended March 31, 2022 (Net Income) | Three Months Ended March 31, 2022 (Diluted EPS) | | :---------------------------------------- | :--------------------------------------------- | :---------------------------------------------- | :--------------------------------------------- | :---------------------------------------------- | | Net Income as reported | $4,669 | $0.16 | $3,618 | $0.13 | | Long-Term Performance Based Compensation | $769 | $0.03 | $576 | $0.02 | | Consulting expense: Commercial Growth Initiatives | $59 | $- | $- | $- | | Acquisition Costs | $- | $- | $16 | $- | | Severance costs | $- | $- | $4 | $- | | **Net Income adjusted** | **$5,497** | **$0.19** | **$4,214** | **$0.15** | | Metric | Nine Months Ended March 31, 2023 (Net Income) | Nine Months Ended March 31, 2023 (Diluted EPS) | Nine Months Ended March 31, 2022 (Net Income) | Nine Months Ended March 31, 2022 (Diluted EPS) | | :---------------------------------------- | :-------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :--------------------------------------------- | | Net Income as reported | $17,347 | $0.60 | $9,856 | $0.35 | | Long-Term Performance Based Compensation | $2,107 | $0.08 | $1,850 | $0.07 | | Consulting expense: Commercial Growth Initiatives | $708 | $0.02 | $- | $- | | Acquisition costs | $- | $- | $285 | $0.01 | | Severance costs | $38 | $- | $4 | $- | | **Net Income adjusted** | **$20,200** | **$0.70** | **$11,995** | **$0.43** | Reconciliation of Operating Income to EBITDA and Adjusted EBITDA (In thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Nine Months Ended March 31, 2023 | Nine Months Ended March 31, 2022 | | :---------------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Net Income as reported | $4,669 | $3,618 | $17,347 | $9,856 | | Income Tax | $2,257 | $1,074 | $6,434 | $2,851 | | Interest Expense, net | $877 | $524 | $2,924 | $1,287 | | Other expense (income) | $(71) | $(55) | $86 | $33 | | Operating Income as reported | $7,732 | $5,161 | $26,791 | $14,027 | | Depreciation and Amortization | $2,455 | $2,531 | $7,295 | $7,632 | | **EBITDA** | **$10,187** | **$7,692** | **$34,086** | **$21,659** | | Long-term performance based compensation | $968 | $780 | $2,521 | $2,466 | | Consulting Expense - Commercial Growth Initiatives | $75 | $- | $864 | $- | | Acquisition Costs | $- | $21 | $- | $361 | | Severance costs | $- | $5 | $46 | $5 | | **Adjusted EBITDA** | **$11,230** | **$8,498** | **$37,517** | **$24,491** | Reconciliation of Cash Flow from Operations to Free Cash Flow (In thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Nine Months Ended March 31, 2023 | Nine Months Ended March 31, 2022 | | :-------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Cash Flow from Operations | $12,486 | $3,875 | $32,548 | $(12,668) |\n| Capital expenditures | $(759) | $(531) | $(1,754) | $(1,276) |\n| **Free Cash Flow** | **$11,727** | **$3,344** | **$30,794** | **$(13,944)** | Net Debt to Adjusted EBITDA (In thousands) | Metric | March 31, 2023 | March 31, 2022 | | :------------------------------------ | :------------- | :------------- | | Total Debt | $49,573 | $84,958 | | Less: Cash and cash equivalents | $(1,350) | $(1,248) | | **Net Debt** | **$48,223** | **$83,710** | | Adjusted EBITDA - Trailing 12 Months | $48,117 | $31,309 | | **Net Debt to Adjusted EBITDA Ratio** | **1.0** | **2.7** | [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Compares the company's financial performance for the three and nine months ended March 31, 2023 and 2022 [THREE MONTHS ENDED MARCH 31, 2023, COMPARED TO THREE MONTHS ENDED MARCH 31, 2022](index=30&type=section&id=THREE%20MONTHS%20ENDED%20MARCH%2031,%202023,%20COMPARED%20TO%20THREE%20MONTHS%20ENDED%20MARCH%2031,%202022) Analyzes the financial performance of Lighting and Display Solutions segments for the three-month period Lighting Segment Performance (Three Months Ended March 31, In thousands) | Metric | 2023 | 2022 | Change ($) | Change (%) | | :-------------------- | :------ | :------ | :--------- | :--------- | | Net Sales | $66,707 | $57,126 | $9,581 | 17% | | Gross Profit | $20,278 | $16,654 | $3,624 | 22% | | Operating Income | $6,529 | $4,959 | $1,570 | 32% | - Lighting Segment net sales grew **17%** due to continued growth in indoor and outdoor applications across multiple verticals, supported by new product introductions and diverse price-points. Gross profit margin improved to **30.4%** from **29.2%** due to increased sales, focus on competitive verticals, and price discipline[89](index=89&type=chunk)[90](index=90&type=chunk) Display Solutions Segment Performance (Three Months Ended March 31, In thousands) | Metric | 2023 | 2022 | Change ($) | Change (%) | | :-------------------- | :------ | :------ | :--------- | :--------- | | Net Sales | $50,763 | $52,985 | $(2,222) | (4)% | | Gross Profit | $11,927 | $10,171 | $1,756 | 17% | | Operating Income | $5,501 | $4,556 | $945 | 21% | - Display Solutions Segment net sales decreased **4%** due to changes in shipment timing and the completion of large digital signage programs, transitioning to new ones. Despite lower sales, gross profit margin improved significantly to **23.5%** from **19.2%** due to improved program pricing and a favorable project mix[93](index=93&type=chunk)[94](index=94&type=chunk) - Consolidated net income for the three months ended March 31, 2023, was **$4.7 million**, up from **$3.6 million** in the prior year, with diluted EPS of **$0.16** compared to **$0.13**. The effective tax rate increased to **32.6%** from **22.9%** due to higher pre-tax profits in higher-taxing jurisdictions[99](index=99&type=chunk)[100](index=100&type=chunk) [NINE MONTHS ENDED MARCH 31, 2023, COMPARED TO NINE MONTHS ENDED MARCH 31, 2022](index=31&type=section&id=NINE%20MONTHS%20ENDED%20MARCH%2031,%202023,%20COMPARED%20TO%20NINE%20MONTHS%20ENDED%20MARCH%2031,%202022) Analyzes the financial performance of Lighting and Display Solutions segments for the nine-month period Lighting Segment Performance (Nine Months Ended March 31, In thousands) | Metric | 2023 | 2022 | Change ($) | Change (%) | | :-------------------- | :------- | :------- | :--------- | :--------- | | Net Sales | $201,074 | $165,662 | $35,412 | 21% | | Gross Profit | $63,015 | $49,009 | $14,006 | 29% | | Operating Income | $22,441 | $13,921 | $8,520 | 61% | - Lighting Segment net sales increased **21%** for the nine months, driven by broad-based growth across all vertical market applications and strengthened lighting offerings. Gross profit margin improved to **31.3%** from **29.6%** due to increased sales, focus on competitive verticals, and price discipline[101](index=101&type=chunk)[102](index=102&type=chunk) Display Solutions Segment Performance (Nine Months Ended March 31, In thousands) | Metric | 2023 | 2022 | Change ($) | Change (%) | | :-------------------- | :------- | :------- | :--------- | :--------- | | Net Sales | $172,269 | $161,989 | $10,280 | 6% | | Gross Profit | $38,061 | $27,766 | $10,295 | 37% | | Operating Income | $19,759 | $12,142 | $7,617 | 63% | - Display Solutions Segment net sales increased **6%** for the nine months, primarily due to growth in grocery and refueling/convenience-store verticals. Gross profit margin significantly improved to **22.1%** from **17.1%** due to increased sales, improved program pricing, and a favorable sales mix[105](index=105&type=chunk)[106](index=106&type=chunk) - Consolidated net income for the nine months ended March 31, 2023, was **$17.3 million**, up from **$9.9 million** in the prior year, with diluted EPS of **$0.60** compared to **$0.35**. The effective tax rate increased to **27.0%** from **22.4%** due to higher pre-tax profits in higher-taxing jurisdictions[113](index=113&type=chunk)[114](index=114&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) Assesses the company's working capital, cash flow, debt, and available credit for future operations - Working capital decreased to **$79.8 million** at March 31, 2023, from **$84.3 million** at June 30, 2022, primarily due to decreases in net accounts receivable (**$8.5 million**) and net inventory (**$6.7 million**), partially offset by a **$10.0 million** decrease in accounts payable[116](index=116&type=chunk)[117](index=117&type=chunk)[119](index=119&type=chunk) - The Company generated **$32.5 million** in cash from operating activities for the nine months ended March 31, 2023, a significant improvement from a **$12.7 million** use of cash in the prior year, driven by effective working capital management and improved earnings[121](index=121&type=chunk) - As of March 31, 2023, **$45.1 million** was available under the **$75 million** revolving line of credit, which, along with cash from operations, is deemed adequate for operational and capital expenditure needs for the remainder of fiscal 2023[120](index=120&type=chunk) - Cash used in financing activities was **$32.0 million** for the nine months ended March 31, 2023, primarily for debt reduction, compared to a **$12.4 million** source of cash in the prior year. This reduction was supported by improved working capital and earnings, and **$3.1 million** from stock option exercises[123](index=123&type=chunk) [Off-Balance Sheet Arrangements](index=34&type=section&id=Off-Balance%20Sheet%20Arrangements) Confirms the absence of financial instruments with off-balance sheet risk or arrangements - The Company has no financial instruments with off-balance sheet risk or off-balance sheet arrangements[125](index=125&type=chunk) [Cash Dividends](index=34&type=section&id=Cash%20Dividends) Reports the latest declared cash dividend and the company's annual dividend rate - In April 2023, the Board of Directors declared a regular quarterly cash dividend of **$0.05 per share**, payable May 16, 2023, to shareholders of record as of May 8, 2023, maintaining an indicated annual rate of **$0.20 per share**[126](index=126&type=chunk) [Critical Accounting Policies and Estimates](index=34&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Refers to the summary of significant accounting policies in the prior fiscal year's annual report - 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 2022 Annual Report on Form 10-K[127](index=127&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=34&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) States that there have been no material changes in market risk exposure since June 30, 2022 - No material changes in market risk exposure have occurred since June 30, 2022[128](index=128&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=35&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Confirms the effectiveness of disclosure controls and procedures and reports no material changes in internal control [Disclosure Controls and Procedures](index=35&type=section&id=Disclosure%20Controls%20and%20Procedures) Affirms the effectiveness of the company's disclosure controls and procedures as of March 31, 2023 - As of March 31, 2023, the Company's disclosure controls and procedures were deemed effective by the Chief Executive Officer and Chief Financial Officer[130](index=130&type=chunk) [Changes in Internal Control](index=35&type=section&id=Changes%20in%20Internal%20Control) Reports no material changes in internal control over financial reporting during the second quarter - No material changes in internal control over financial reporting occurred during the second quarter ended March 31, 2023[131](index=131&type=chunk) [PART II. OTHER INFORMATION](index=35&type=section&id=PART%20II.%20OTHER%20INFORMATION) Contains additional information not covered in Part I, including other disclosures and exhibits [ITEM 5. OTHER INFORMATION](index=35&type=section&id=ITEM%205.%20OTHER%20INFORMATION) Indicates that there is no other information to report in this section - No other information is reported in this section[133](index=133&type=chunk) [ITEM 6. EXHIBITS](index=36&type=section&id=ITEM%206.%20EXHIBITS) Lists all exhibits filed with the Form 10-Q, including certifications and interactive data files - Exhibits include certifications (31.1, 31.2, 32.1, 32.2), Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE), and the Cover Page Interactive Data File (104)[135](index=135&type=chunk) [SIGNATURES](index=37&type=section&id=SIGNATURES) Confirms the official signing of the report by the company's principal executive and financial officers - The report was signed on behalf of LSI Industries Inc. by James A. Clark, Chief Executive Officer and President, and James E. Galeese, Executive Vice President and Chief Financial Officer, on May 5, 2023[137](index=137&type=chunk)[138](index=138&type=chunk)

LSI Industries Inc. (NASDAQ:LYTS) Q3 2023 Results Conference Call April 27, 2023 11:00 AM ET Company Participants Jim Galeese - Chief Financial Officer Jim Clark - President and Chief Executive Officer Conference Call Participants Aaron Spychalla - Craig-Hallum Amit Dayal - HCI Wainwright George Gianarikas - Canaccord Rick Fearon - Accretive Capital Partners Operator Good day, and welcome to the LSI Industries Fiscal Third Quarter 2023 Results Conference Call [Operator Instructions]. I would now like to tur ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) Presents the company's unaudited condensed consolidated financial statements and related notes [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) Presents unaudited condensed consolidated financial statements, including operations, balance sheets, cash flows, and related notes [Condensed Consolidated Statements of Operations](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) Details the company's revenues, costs, and net income over specific reporting periods Condensed Consolidated Statements of Operations (In thousands, except per share data) | Metric | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Net Sales | $128,804 | $111,143 | $255,873 | $217,540 | | Gross profit | $34,140 | $25,448 | $68,878 | $49,958 | | Operating income | $9,038 | $4,422 | $19,059 | $8,866 | | Net income | $6,417 | $3,105 | $12,678 | $6,238 | | Basic EPS | $0.23 | $0.11 | $0.45 | $0.23 | | Diluted EPS | $0.22 | $0.11 | $0.44 | $0.22 | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) Presents net income and other comprehensive income components, such as foreign currency translation adjustments Condensed Consolidated Statements of Comprehensive Income (In thousands) | Metric | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :-------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Net Income | $6,417 | $3,105 | $12,678 | $6,238 | | Foreign currency translation adjustment | $68 | $9 | $75 | ($35) | | Comprehensive Income | $6,485 | $3,114 | $12,753 | $6,203 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) Summarizes the company's assets, liabilities, and shareholders' equity at specific points in time Condensed Consolidated Balance Sheets (In thousands) | Metric | December 31, 2022 | June 30, 2022 | | :-------------------- | :---------------- | :------------ | | Cash and cash equivalents | $2,765 | $2,462 | | Accounts receivable, net | $67,352 | $77,750 | | Inventories | $73,205 | $74,421 | | Total current assets | $149,025 | $158,917 | | Total assets | $296,283 | $311,080 | | Total current liabilities | $64,134 | $74,618 | | Long-term debt | $59,250 | $76,025 | | Total shareholders' equity | $161,316 | $147,769 | | Total liabilities & shareholders' equity | $296,283 | $311,080 | [Condensed Consolidated Statements of Shareholders' Equity](index=8&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20SHAREHOLDERS%27%20EQUITY) Outlines changes in shareholders' equity, including net income, stock compensation, and dividends Condensed Consolidated Statements of Shareholders' Equity (In thousands) | Metric | Balance at June 30, 2022 | Net Income | Other comprehensive loss | Stock compensation awards | Restricted stock units issued, net | Shares issued for deferred compensation | Activity of treasury shares, net | Deferred stock compensation | Stock compensation expense | Stock options exercised, net | Dividends — $0.20 per share | Balance at December 31, 2022 | | :-------------------- | :----------------------- | :--------- | :----------------------- | :------------------------ | :--------------------------------- | :-------------------------------------- | :------------------------------- | :-------------------------- | :------------------------- | :--------------------------- | :---------------------------- | :--------------------------- | | Common Shares (Amount) | $139,500 | - | - | $173 | ($465) | $1,087 | - | - | $1,415 | $1,278 | - | $142,988 | | Treasury Shares (Amount) | ($5,927) | - | - | - | - | - | ($1,061) | - | - | - | - | ($6,988) | | Key Executive Compensation | $5,927 | - | - | - | - | - | - | $1,061 | - | - | - | $6,988 | | Accumulated Other Comprehensive Income (Loss) | $45 | - | $75 | - | - | - | - | - | - | - | - | $120 | | Retained Earnings | $8,224 | $12,678 | - | - | - | - | - | - | - | - | ($2,694) | $18,208 | | Total Shareholders' Equity | $147,769 | $12,678 | $75 | $173 | ($465) | $1,087 | ($1,061) | $1,061 | $1,415 | $1,278 | ($2,694) | $161,316 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Reports cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (In thousands) | Metric | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :-------------------- | :---------------------------- | :---------------------------- | | Net cash flows provided by (used in) operating activities | $20,062 | ($16,543) | | Net cash flows used in investing activities | ($994) | ($245) | | Net cash flows (used in) provided by financing activities | ($18,779) | $15,445 | | Cash and cash equivalents at end of period | $2,765 | $914 | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) Provides detailed explanations of accounting policies, segment information, and specific financial items [NOTE 1 - Interim Condensed Consolidated Financial Statements](index=11&type=section&id=NOTE%201%20-%20INTERIM%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) Explains the basis of preparation for the unaudited interim financial statements, adhering to GAAP and SEC rules - The interim financial statements are unaudited and prepared in accordance with **GAAP** for interim financial information and **SEC rules**. They include all normal adjustments and disclosures necessary to present fairly the Company's financial position as of **December 31, 2022**, and results of operations and cash flows for the periods ended **December 31, 2022** and **2021**[29](index=29&type=chunk) [NOTE 2 - Summary of Significant Accounting Policies](index=11&type=section&id=NOTE%202%20-%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Details the company's revenue recognition policies and other significant accounting principles - Revenue is recognized when performance obligations are satisfied, typically at shipment for products, or over time for customized products and installation services where control transfers as work is performed. The Company applies practical expedients for contracts with expected duration of one year or less, expensing sales commissions as incurred and omitting disclosures on remaining performance obligations[31](index=31&type=chunk)[33](index=33&type=chunk)[43](index=43&type=chunk) Disaggregation of Revenue by Timing of Recognition (In thousands) | Metric | Lighting Segment 2022 | Display Solutions Segment 2022 | Lighting Segment 2021 | Display Solutions Segment 2021 | | :------------- | :-------------------- | :----------------------------- | :-------------------- | :----------------------------- | | Products and services transferred at a point in time | $58,591 | $47,027 | $50,141 | $35,437 | | Products and services transferred over time | $8,242 | $14,944 | $7,135 | $18,430 | | **Total** | **$66,833** | **$61,971** | **$57,276** | **$53,867** | Disaggregation of Revenue by Type of Product and Services (In thousands) | Metric | Lighting Segment 2022 | Display Solutions Segment 2022 | Lighting Segment 2021 | Display Solutions Segment 2021 | | :------------- | :-------------------- | :----------------------------- | :-------------------- | :----------------------------- | | LED lighting, digital signage solutions, electronic circuit boards | $54,410 | $5,801 | $47,626 | $12,551 | | Poles, printed graphics, display fixtures | $11,632 | $41,683 | $9,079 | $31,127 | | Project management, installation services, shipping and handling | $791 | $14,487 | $571 | $10,189 | | **Total** | **$66,833** | **$61,971** | **$57,276** | **$53,867** | [NOTE 3 - Segment Reporting Information](index=13&type=section&id=NOTE%203%20-%20SEGMENT%20REPORTING%20INFORMATION) Provides financial data for the company's Lighting and Display Solutions operating segments - The Company operates in **two** segments: Lighting and Display Solutions. The Lighting Segment focuses on non-residential LED lighting fixtures and electronic circuit boards. The Display Solutions Segment manufactures and installs visual image and display elements, including digital signage and project management services[41](index=41&type=chunk)[42](index=42&type=chunk) Segment Net Sales (In thousands) | Segment | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :---------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Lighting Segment | $66,833 | $57,276 | $134,366 | $108,536 | | Display Solutions Segment | $61,971 | $53,867 | $121,507 | $109,004 | | **Total Net Sales** | **$128,804** | **$111,143** | **$255,873** | **$217,540** | Segment Operating Income (Loss) (In thousands) | Segment | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :---------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Lighting Segment | $6,754 | $4,623 | $15,912 | $8,962 | | Display Solutions Segment | $7,762 | $3,837 | $14,258 | $7,586 | | Corporate and Eliminations | ($5,478) | ($4,038) | ($11,111) | ($7,682) | | **Total Operating Income** | **$9,038** | **$4,422** | **$19,059** | **$8,866** | Segment Identifiable Assets (In thousands) | Segment | December 31, 2022 | June 30, 2022 | | :---------------------- | :---------------- | :------------ | | Lighting Segment | $143,741 | $152,431 | | Display Solutions Segment | $145,722 | $152,302 | | Corporate and Eliminations | $6,820 | $6,347 | | **Total Identifiable Assets** | **$296,283** | **$311,080** | [NOTE 4 - Earnings Per Common Share](index=17&type=section&id=NOTE%204%20-%20EARNINGS%20PER%20COMMON%20SHARE) Calculates basic and diluted earnings per share based on net income and weighted average shares outstanding Earnings Per Common Share (In thousands, except per share data) | Metric | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Net income | $6,417 | $3,105 | $12,678 | $6,238 | | Weighted average shares outstanding (Basic) | 28,078 | 27,292 | 27,874 | 27,144 | | Basic income per share | $0.23 | $0.11 | $0.45 | $0.23 | | Weighted average shares outstanding (Diluted) | 29,204 | 28,067 | 28,766 | 27,895 | | Diluted income per share | $0.22 | $0.11 | $0.44 | $0.22 | [NOTE 5 – Inventories, Net](index=18&type=section&id=NOTE%205%20%E2%80%93%20INVENTORIES%2C%20NET) Details the composition of inventories, including raw materials, work-in-progress, and finished goods Inventories, Net (In thousands) | Inventories | December 31, 2022 | June 30, 2022 | | :------------------------- | :---------------- | :------------ | | Raw materials | $51,532 | $51,637 | | Work-in-progress | $6,844 | $3,029 | | Finished goods | $14,829 | $19,755 | | **Total Inventories** | **$73,205** | **$74,421** | [NOTE 6 - Accrued Expenses](index=18&type=section&id=NOTE%206%20-%20ACCRUED%20EXPENSES) Lists various accrued liabilities, such as customer prepayments, compensation, and warranty obligations Accrued Expenses (In thousands) | Accrued Expenses | December 31, 2022 | June 30, 2022 | | :------------------------------ | :---------------- | :------------ | | Customer prepayments | $3,940 | $6,416 | | Compensation and benefits | $9,865 | $9,611 | | Accrued warranty | $4,516 | $4,491 | | Operating lease liabilities | $1,347 | $1,274 | | Accrued FICA | $3,528 | $1,122 | | Finance lease liabilities | $3,348 | $275 | | Accrued income tax | $396 | $109 | | Other accrued expenses | $281 | $4,503 | | Accrued sales commissions | $6,049 | - | | Accrued Freight | - | - | | **Total Accrued Expenses** | **$33,270** | **$36,264** | [NOTE 7 - Goodwill and Other Intangible Assets](index=18&type=section&id=NOTE%207%20-%20GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS) Reports goodwill and other intangible assets, including customer relationships and LED technology, and their amortization - Goodwill and indefinite-lived intangible assets are reviewed at least annually for impairment, using qualitative factors or a combination of market and income approaches. The Company has **three** reporting units with goodwill: one in Lighting and two in Display Solutions[54](index=54&type=chunk)[55](index=55&type=chunk) Goodwill, Net (In thousands) | Segment | December 31, 2022 | June 30, 2022 | | :---------------------- | :---------------- | :------------ | | Lighting Segment | $9,208 | $9,208 | | Display Solutions Segment | $35,822 | $35,822 | | **Goodwill, net** | **$45,030** | **$45,030** | Other Intangible Assets, Net (In thousands) | Asset Class | December 31, 2022 Net Amount | June 30, 2022 Net Amount | | :-------------------------- | :----------------------------- | :----------------------- | | Customer relationships | $45,975 | $47,683 | | LED technology firmware, software | $5,775 | $6,368 | | Trademarks and trade names (indefinite-lived) | $12,102 | $12,102 | | **Total Other Intangible Assets** | **$65,584** | **$67,964** | Amortization Expense of Other Intangible Assets (In thousands) | Period | 2022 | 2021 | | :-------------------- | :--- | :--- | | Three Months Ended Dec 31 | $1,190 | $1,198 | | Six Months Ended Dec 31 | $2,380 | $2,413 | [NOTE 8 - Debt](index=20&type=section&id=NOTE%208%20-%20DEBT) Details the company's debt facilities, including secured line of credit and term loan, and compliance with covenants Debt (In thousands) | Debt | December 31, 2022 | June 30, 2022 | | :------------------ | :---------------- | :------------ | | Secured line of credit | $42,310 | $57,275 | | Term loan, net | $20,511 | $22,321 | | **Total debt** | **$62,821** | **$79,596** | | Less: amounts due within one year | $3,571 | $3,571 | | **Total amounts due after one year, net** | **$59,250** | **$76,025** | - The Company's debt facilities include a **$25 million** term loan and a **$75 million** secured revolving line of credit, both expiring in fiscal **2026**. As of **December 31, 2022**, the borrowing rate on the revolving line of credit was **6.1%**, and **$32.7 million** was available for borrowing. The Company is in compliance with all loan covenants[60](index=60&type=chunk)[61](index=61&type=chunk) [NOTE 9 - Cash Dividends](index=20&type=section&id=NOTE%209%20-%20CASH%20DIVIDENDS) Reports cash dividends paid and declared, indicating the company's dividend policy - The Company paid cash dividends of **$2.7 million** in both the six months ended December 31, 2022, and 2021. A quarterly cash dividend of **$0.05 per share** was declared in January 2023, indicating an annual rate of **$0.20 per share**[62](index=62&type=chunk) [NOTE 10 – Equity Compensation](index=21&type=section&id=NOTE%2010%20%E2%80%93%20EQUITY%20COMPENSATION) Outlines the company's equity compensation plans, including authorized shares and stock compensation expense - Shareholders approved an amendment to the 2019 Omnibus Award Plan in November 2022, increasing authorized shares by **2,350,000**. As of **December 31, 2022**, **2,637,095** shares remained reserved. Stock compensation expense was **$0.8 million** for the three months and **$1.4 million** for the six months ended **December 31, 2022**[63](index=63&type=chunk)[64](index=64&type=chunk) [NOTE 11 - Supplemental Cash Flow Information](index=21&type=section&id=NOTE%2011%20-%20SUPPLEMENTAL%20CASH%20FLOW%20INFORMATION) Provides additional details on cash payments for interest and income taxes, and non-cash investing/financing activities Cash Payments (In thousands) | Metric | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :--------------------------- | :---------------------------- | :---------------------------- | | Interest | $1,689 | $627 | | Income taxes | $4,299 | $2,820 | | Non-cash investing and financing activities | | Issuance of common shares as compensation | $173 | $150 | | Issuance of common shares to fund deferred compensation plan | $1,087 | $2,569 | [NOTE 12 - Commitments and Contingencies](index=21&type=section&id=NOTE%2012%20-%20COMMITMENTS%20AND%20CONTINGENCIES) Discusses legal proceedings and other commitments, assessing their potential financial impact - The Company is involved in various legal proceedings in the normal course of business and provides reserves when losses are probable and estimable. Management believes the ultimate disposition of these matters will not materially adversely affect the Company's financial position, results of operations, cash flows, or liquidity[66](index=66&type=chunk) [NOTE 13 - Leases](index=21&type=section&id=NOTE%2013%20-%20LEASES) Details the company's lease arrangements for facilities and equipment, including lease costs and liabilities - The Company leases manufacturing facilities, office space, and equipment, primarily through operating leases with terms of **one to seven years**. Lease expense is recognized on a straight-line basis[68](index=68&type=chunk)[70](index=70&type=chunk) Total Lease Cost (In thousands) | Metric | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :-------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Operating lease cost | $885 | $870 | $1,776 | $1,749 | | Financing lease cost | $91 | $94 | $183 | $189 | | Sublease income | ($116) | ($94) | ($232) | ($188) | | **Total lease cost** | **$882** | **$892** | **$1,771** | **$1,794** | Operating Lease Liabilities (In thousands) | Metric | December 31, 2022 | June 30, 2022 | | :-------------------------- | :---------------- | :------------ | | Total operating right-of-use assets | $7,548 | $8,664 | | Total operating lease liabilities | $8,304 | $9,514 | | Weighted Average remaining Lease Term (in years) | 2.72 | 3.05 | | Weighted Average Discount Rate | 4.82% | 4.81% | Maturities of Lease Liability (In thousands) | Year | Operating Lease Liabilities | Finance Lease Liabilities | Operating Subleases | Net Lease Commitments | | :--- | :-------------------------- | :------------------------ | :------------------ | :-------------------- | | 2023 | $2,134 | $207 | ($189) | $2,152 | | 2024 | $3,399 | $337 | ($377) | $3,359 | | 2025 | $2,253 | $362 | ($31) | $2,584 | | 2026 | $952 | $362 | - | $1,314 | | 2027 | $323 | $303 | - | $626 | | Thereafter | $4 | - | - | $4 | | **Total lease payments** | **$9,065** | **$1,571** | **($597)** | **$10,039** | [NOTE 14 – Income Taxes](index=23&type=section&id=NOTE%2014%20%E2%80%93%20INCOME%20TAXES) Explains the company's effective income tax rate and its reconciliation to the statutory rate - The Company's effective income tax rate is based on expected income and statutory rates, with quarterly adjustments to reflect the anticipated annual rate[73](index=73&type=chunk) Reconciliation of Effective Tax Rate | Metric | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Provision for income taxes at the anticipated annual tax rate | 21.5% | 23.8% | 24.0% | 24.0% | | Uncertain tax positions | (1.2)% | (3.9)% | - | (1.5)% | | Tax rate changes | (1.9)% | - | - | - | | Share-based compensation | (0.3)% | 0.1% | 0.8% | (0.3)% | | **Effective tax rate** | **18.1%** | **20.0%** | **24.8%** | **22.2%** | [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=24&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management's discussion and analysis of financial condition, results of operations, non-GAAP measures, and liquidity [Summary of Consolidated Results](index=24&type=section&id=Summary%20of%20Consolidated%20Results) Summarizes the company's consolidated net sales and operating income performance across segments Consolidated Net Sales by Business Segment (In thousands) | Segment | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :---------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Lighting Segment | $66,833 | $57,276 | $134,366 | $108,536 | | Display Solutions Segment | $61,971 | $53,867 | $121,507 | $109,004 | | **Total Net Sales** | **$128,804** | **$111,143** | **$255,873** | **$217,540** | - Net sales increased by **16%** to **$128.8 million** for the three months ended December 31, 2022, and by **18%** to **$255.9 million** for the six months ended December 31, 2022, driven by double-digit growth in both Lighting (**17%** and **24%**) and Display Solutions (**15%** and **12%**) segments[79](index=79&type=chunk)[80](index=80&type=chunk) - Operating income for the three months ended December 31, 2022, increased by **$4.6 million** to **$9.0 million**, and for the six months, it increased by **$10.2 million** to **$19.1 million**, attributed to increased volume, higher-value sales mix, price discipline, and effective cost management[81](index=81&type=chunk)[82](index=82&type=chunk) [Non-GAAP Financial Measures](index=25&type=section&id=Non-GAAP%20Financial%20Measures) Reconciles GAAP to Non-GAAP financial measures, providing enhanced visibility into operating performance - The Company uses Non-GAAP financial measures, including Adjusted Operating Income, Adjusted Net Income, EBITDA, Adjusted EBITDA, Free Cash Flow, and Net Debt to Adjusted EBITDA, to provide greater comparability and enhanced visibility into operating performance by excluding items such as stock compensation, severance, and consulting expenses related to commercial growth initiatives[83](index=83&type=chunk) Reconciliation of Operating Income to Adjusted Operating Income (In thousands) | Metric | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Operating Income as reported | $9,038 | $4,422 | $19,059 | $8,866 | | Stock compensation expense | $1,002 | $1,130 | $1,553 | $1,686 | | Consulting expense: Commercial Growth Initiatives | $486 | - | $789 | - | | Acquisition Costs | - | $340 | - | $340 | | Severance costs | $33 | - | $46 | - | | **Adjusted Operating Income** | **$10,559** | **$5,892** | **$21,447** | **$10,892** | Reconciliation of Net Income to Adjusted Net Income (In thousands, except per share data) | Metric | Three Months Ended Dec 31, 2022 | Diluted EPS 2022 | Three Months Ended Dec 31, 2021 | Diluted EPS 2021 | | :------------------------------------------ | :------------------------------ | :--------------- | :------------------------------ | :--------------- | | Net Income as reported | $6,417 | $0.22 | $3,105 | $0.11 | | Stock compensation expense | $785 | $0.03 | $867 | $0.03 | | Consulting expense: Commercial Growth Initiatives | $399 | $0.01 | - | - | | Acquisition Costs | - | - | $269 | $0.01 | | Severance costs | $26 | - | - | - | | **Net Income adjusted** | **$7,627** | **$0.26** | **$4,241** | **$0.15** | Reconciliation of Operating Income to EBITDA and Adjusted EBITDA (In thousands) | Metric | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Operating Income as reported | $9,038 | $4,422 | $19,059 | $8,866 | | Depreciation and Amortization | $2,419 | $2,538 | $4,840 | $5,101 | | **EBITDA** | **$11,457** | **$6,960** | **$23,899** | **$13,967** | | Stock compensation expense | $1,002 | $1,130 | $1,553 | $1,686 | | Consulting Expense - Commercial Growth Initiatives | $486 | - | $789 | - | | Acquisition Costs | - | $340 | - | $340 | | Severance costs | $33 | - | $46 | - | | **Adjusted EBITDA** | **$12,978** | **$8,430** | **$26,287** | **$15,993** | Reconciliation of Cash Flow from Operations to Free Cash Flow (In thousands) | Metric | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :-------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Cash Flow from Operations | $9,481 | ($8,654) | $20,064 | ($16,543) | | Capital expenditures | ($561) | ($448) | ($994) | ($745) | | **Free Cash Flow** | **$8,920** | **($9,102)** | **$19,070** | **($17,288)** | Net Debt to Adjusted EBITDA (In thousands) | Metric | December 31, 2022 | June 30, 2022 | | :-------------------------- | :---------------- | :------------ | | Total Debt | $62,821 | $79,596 | | Less: Cash and cash equivalents | ($2,765) | ($2,462) | | **Net Debt** | **$60,056** | **$77,134** | | Adjusted EBITDA - Trailing 12 Months | $45,387 | $35,091 | | **Net Debt to Adjusted EBITDA** | **1.3** | **2.2** | [Results of Operations (Three Months Ended December 31, 2022 vs 2021)](index=28&type=section&id=THREE%20MONTHS%20ENDED%20DECEMBER%2031%2C%202022%2C%20COMPARED%20TO%20THREE%20MONTHS%20ENDED%20DECEMBER%2031%2C%202021) Compares the company's financial performance for the three months ended December 31, 2022, against the prior year [Lighting Segment](index=28&type=section&id=Lighting%20Segment_3M) Analyzes the Lighting Segment's net sales, gross profit margin, and operating income for the three-month period - Lighting Segment net sales increased **17%** to **$66.8 million**, driven by broad-based growth across vertical markets and enhanced product offerings. Gross profit margin improved to **30.6%** from **29.5%**, leading to a **45.9%** increase in operating income to **$6.8 million**[94](index=94&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk) [Display Solutions Segment](index=30&type=section&id=Display%20Solutions%20Segment_3M) Analyzes the Display Solutions Segment's net sales, gross profit margin, and operating income for the three-month period - Display Solutions Segment net sales increased **15%** to **$62.0 million**, primarily due to growth in grocery and refueling/convenience-store verticals. Gross profit margin significantly improved to **22.1%** from **15.9%**, resulting in a **102.3%** increase in operating income to **$7.8 million**[97](index=97&type=chunk)[98](index=98&type=chunk)[100](index=100&type=chunk) [Corporate and Eliminations](index=30&type=section&id=Corporate%20and%20Eliminations_3M) Discusses changes in corporate operating expenses and eliminations for the three-month period - Operating expenses for Corporate and Eliminations increased by **$1.5 million** to **$5.5 million**, mainly due to higher performance-based incentive plan expenses and **$0.5 million** in commercial growth initiative consulting expenses[102](index=102&type=chunk) [Consolidated Results](index=31&type=section&id=Consolidated%20Results_3M) Summarizes consolidated net interest expense, effective tax rate, net income, and diluted EPS for the three-month period - Net interest expense increased to **$1.3 million** from **$0.5 million** due to higher borrowing costs. The effective tax rate was **18.1%** (2022) compared to **20.1%** (2021). Net income rose to **$6.4 million** from **$3.1 million**, with diluted EPS increasing to **$0.22** from **$0.11**[103](index=103&type=chunk)[104](index=104&type=chunk)[105](index=105&type=chunk) [Results of Operations (Six Months Ended December 31, 2022 vs 2021)](index=31&type=section&id=SIX%20MONTHS%20ENDED%20DECEMBER%2031%2C%202022%2C%20COMPARED%20TO%20SIX%20MONTHS%20ENDED%20DECEMBER%2031%2C%202021) Compares the company's financial performance for the six months ended December 31, 2022, against the prior year [Lighting Segment](index=31&type=section&id=Lighting%20Segment_6M) Analyzes the Lighting Segment's net sales, gross profit margin, and operating income for the six-month period - Lighting Segment net sales increased **24%** to **$134.4 million**, driven by broad-based growth. Gross profit margin improved to **31.8%** from **29.8%**, leading to a **77%** increase in operating income to **$15.9 million**[106](index=106&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk) [Display Solutions Segment](index=32&type=section&id=Display%20Solutions%20Segment_6M) Analyzes the Display Solutions Segment's net sales, gross profit margin, and operating income for the six-month period - Display Solutions Segment net sales increased **12%** to **$121.5 million**, primarily from grocery and refueling/convenience-store verticals. Gross profit margin improved to **21.5%** from **16.1%**, resulting in an **88%** increase in operating income to **$14.3 million**[109](index=109&type=chunk)[110](index=110&type=chunk)[112](index=112&type=chunk) [Corporate and Eliminations](index=32&type=section&id=Corporate%20and%20Eliminations_6M) Discusses changes in corporate operating expenses and eliminations for the six-month period - Operating expenses for Corporate and Eliminations increased by **$3.4 million** to **$11.1 million**, driven by higher performance-based incentive plan expenses and **$0.8 million** in commercial growth initiative consulting expenses[114](index=114&type=chunk) [Consolidated Results](index=32&type=section&id=Consolidated%20Results_6M) Summarizes consolidated net interest expense, effective tax rate, net income, and diluted EPS for the six-month period - Net interest expense increased to **$2.0 million** from **$0.8 million** due to higher borrowing costs. The effective tax rate was **24.8%** (2022) compared to **22.2%** (2021). Net income rose to **$12.7 million** from **$6.2 million**, with diluted EPS increasing to **$0.44** from **$0.22**[115](index=115&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) Assesses the company's working capital, cash flows, debt, and ability to meet operational and capital needs - Working capital marginally increased to **$84.9 million** at December 31, 2022, from **$84.3 million** at June 30, 2022, with the current ratio improving to **2.32 to 1** from **2.13**. DSO decreased to **52 days** from **55 days**, and net inventories decreased by **$1.2 million**[119](index=119&type=chunk)[120](index=120&type=chunk) - Cash generated from operations was **$20.1 million** for the six months ended December 31, 2022, a significant improvement from a use of **$16.5 million** in the prior year, primarily due to effective working capital management and improved earnings[122](index=122&type=chunk) - The Company used **$18.8 million** in financing activities, primarily to pay down its line of credit, compared to a source of **$15.4 million** in the prior year. As of December 31, 2022, **$32.7 million** was available under the **$75 million** revolving credit facility, which, along with operating cash flows, is deemed adequate for fiscal 2023 operational and capital expenditure needs[121](index=121&type=chunk)[124](index=124&type=chunk) - The Board of Directors declared a regular quarterly cash dividend of **$0.05 per share** in January 2023, maintaining an indicated annual rate of **$0.20 per share**[127](index=127&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=34&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Reports no material changes in the company's market risk exposure since June 30, 2022 - No material changes in market risk exposure since **June 30, 2022**[129](index=129&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=34&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Confirms effective disclosure controls and procedures, with no material changes to internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of **December 31, 2022**[131](index=131&type=chunk) - No material changes in internal control over financial reporting occurred during the second quarter ended **December 31, 2022**[132](index=132&type=chunk) [PART II. OTHER INFORMATION](index=35&type=section&id=PART%20II.%20OTHER%20INFORMATION) Provides additional information not covered in the financial statements, including market risk, controls, and exhibits [ITEM 5. OTHER INFORMATION](index=35&type=section&id=ITEM%205.%20OTHER%20INFORMATION) Indicates no other information to report for the period - No other information to report[135](index=135&type=chunk) [ITEM 6. EXHIBITS](index=35&type=section&id=ITEM%206.%20EXHIBITS) Lists exhibits filed with Form 10-Q, including certifications and Inline XBRL documents - Exhibits include certifications (**31.1**, **31.2**, **32.1**, **32.2**) and Inline XBRL documents (**101.INS**, **101.SCH**, **101.CAL**, **101.DEF**, **101.LAB**, **101.PRE**, **104**)[136](index=136&type=chunk) [SIGNATURES](index=36&type=section&id=SIGNATURES) Contains authorized signatures for the Form 10-Q report, confirming submission - The report is signed by James A. Clark, Chief Executive Officer and President, and James E. Galeese, Executive Vice President and Chief Financial Officer, on **February 7, 2023**[139](index=139&type=chunk)[140](index=140&type=chunk)

LSI Industries Inc. (NASDAQ:LYTS) Q2 2023 Earnings Conference Call January 26, 2023 11:00 AM ET Company Participants Jim Galeese - Chief Financial Officer Jim Clark - President and Chief Executive Officer Conference Call Participants George Gianarikas - Canaccord Genuity Aaron Spychalla - Craig-Hallum Amit Dayal - H.C. Wainwright Operator Greetings and welcome to the LSI Industries Fiscal Second Quarter 2023 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I ...