LSI(LYTS) - 2025 Q4 - Annual Results

Executive Summary Fiscal 2025 Fourth Quarter Highlights LSI Industries demonstrated strong performance in Q4 FY2025, achieving significant growth in sales and profitability, primarily driven by improved demand in the lighting and display solutions markets, alongside a substantial increase in adjusted EBITDA margin Fiscal 2025 Fourth Quarter Key Financial Data | Metric | Amount ($ million) | Change (YoY) | | :------------------- | :-------------- | :---------- | | Net Sales | 155.1 | +20% | | Net Income | 8.2 | - | | Adjusted Net Income | 10.6 | - | | Diluted EPS | 0.26 | - | | Adjusted Diluted EPS | 0.34 | - | | EBITDA | 15.5 | - | | Adjusted EBITDA | 17.0 | - | - Adjusted EBITDA margin improved by 250 basis points from the prior fiscal quarter, reaching 11.0%[4][6] Fiscal 2025 Full Year Highlights LSI achieved record sales in fiscal year 2025, driven by organic growth and strategic acquisitions, while also generating strong adjusted EBITDA and free cash flow, maintaining a healthy balance sheet Fiscal 2025 Full Year Key Financial Data | Metric | Amount ($ million) | Change (YoY) | | :------------------- | :-------------- | :---------- | | Net Sales | 573.4 | +22% | | Net Income | 24.4 | - | | Adjusted Net Income | 32.9 | - | | Diluted EPS | 0.79 | - | | Adjusted Diluted EPS | 1.07 | - | | EBITDA | 48.3 | - | | Adjusted EBITDA | 55.0 | - | | Free Cash Flow | 34.7 | - | - Net sales reached a record $573.4 million, representing a 22% year-over-year increase[5][6] - Net debt to trailing twelve-month adjusted EBITDA ratio was 0.8x, indicating a healthy balance sheet[6][8] Management Commentary & Business Review Overall Performance and Strategic Focus Management highlighted balanced performance across both lighting and display solutions segments in Q4, with improved sales and profitability, achieving record full-year sales through acquisitions and focusing on long-term value creation and operational discipline - Fourth-quarter order activity increased 11% year-over-year, with a book-to-bill ratio of 1.0[12] - Backlog at fiscal year-end grew 13% year-over-year[12] - The company is in the early stages of a cross-selling initiative aimed at expanding its addressable market and deepening customer relationships[13] Segment Performance LSI's Display Solutions and Lighting segments both achieved significant growth in Q4, with Display Solutions benefiting from acquisitions and vertical market demand, and Lighting from improved project order rates Display Solutions Segment The Display Solutions segment achieved strong growth in Q4, driven by organic sales and the contribution from the Canada's Best acquisition, with notable performance in the gas/convenience store and grocery vertical markets, and EMI Industries also succeeding Display Solutions Segment Fiscal 2025 Fourth Quarter Sales Growth | Metric | Q4 FY2025 Sales ($ million) | Year-over-Year Growth | | :------------------- | :--------------------------------- | :------- | | Total Sales | 82.3 | +29% | | Organic Sales | - | +10% | | Gas/Convenience Store Vertical Sales | - | +23% | | Grocery Vertical Sales | - | +31% | - EMI Industries, as part of LSI, achieved record sales in its first year and improved its adjusted EBITDA margin by over 200 basis points[15] - The grocery display business saw its Q4 operating margin improve by over 200 basis points sequentially from Q3[16] Lighting Segment The Lighting segment achieved sales growth and improved profitability in Q4, primarily due to better project order rates, and despite anticipated increased tariff impacts in Q1 FY2026, the company plans to offset these through price increases and cost reduction measures Lighting Segment Fiscal 2025 Fourth Quarter Performance | Metric | Q4 FY2025 Sales Growth | Adjusted Operating Income Growth | Operating Margin Improvement (YoY) | | :------------------- | :----------------------- | :----------------- | :------------- | | Sales | +12% | - | - | | Adjusted Operating Income | - | +32% | - | | Operating Margin | - | - | +250 basis points | - Backlog at the end of fiscal 2025 increased 20% year-over-year[18] - Increased tariff impacts are anticipated in Q1 FY2026, but the company plans to partially offset higher costs through implemented price increases and other cost reduction measures[19] Acquisitions and Market Expansion LSI continues to advance its vertical market strategy through the successful integration of EMI Industries (acquired April 2024) and the recent acquisition of Canada's Best Holdings (acquired March 2025), expanding its geographic reach and entering new market verticals including banking - Integrated EMI Industries (acquired April 2024) and Canada's Best Holdings (acquired March 2025) during fiscal 2025[5][17] - The Canada's Best acquisition provided geographic expansion capabilities and established a presence in additional market verticals, including banking[17] Outlook and Strategic Plan LSI is well-positioned for fiscal 2026, committed to achieving the goals outlined in its 2028 "Fast Forward Plan," focusing on advancing its vertical market strategy, expanding addressable markets, entering new verticals, enhancing operational excellence, and maintaining a disciplined capital allocation approach - LSI is well-positioned for fiscal 2026 to achieve the goals outlined in its 2028 "Fast Forward Plan"[19] - The company is committed to advancing its vertical market strategy, with a focus on expanding addressable markets, pursuing new vertical entries, and enhancing operational excellence[19] Financial Results Consolidated Statements of Operations LSI achieved growth in net sales and gross profit for both Q4 and the full fiscal year 2025, with an increase in Q4 operating income, though full-year net income slightly decreased due to various expenses Consolidated Statements of Operations (Q4 & Full Year FY2025 vs. Q4 & Full Year FY2024) | Metric | Three Months Ended June 30, 2025 ($ thousand) | Three Months Ended June 30, 2024 ($ thousand) | Twelve Months Ended June 30, 2025 ($ thousand) | Twelve Months Ended June 30, 2024 ($ thousand) | | :--------------------------- | :----------------------------- | :----------------------------- | :------------------------------- | :------------------------------- | | Net Sales | 155,066 | 129,007 | 573,377 | 469,638 | | Cost of Sales | 114,298 | 95,173 | 431,016 | 335,962 | | Gross Profit | 40,433 | 33,834 | 141,785 | 133,168 | | Selling and Administrative Expenses | 25,648 | 21,257 | 94,000 | 87,281 | | Operating Income | 11,944 | 9,011 | 35,769 | 35,517 | | Income Before Income Taxes | 11,777 | 7,887 | 33,038 | 33,099 | | Net Income | 8,172 | 5,668 | 24,383 | 24,977 | | Diluted Earnings Per Share | 0.26 | 0.19 | 0.79 | 0.83 | Consolidated Balance Sheets As of June 30, 2025, LSI maintained a healthy balance sheet with increased total assets and stockholders' equity, a strong current ratio, and manageable long-term debt Consolidated Balance Sheets (As of June 30, 2025 vs. June 30, 2024) | Metric | June 30, 2025 ($ thousand) | June 30, 2024 ($ thousand) | | :------------------- | :--------------------- | :--------------------- | | Current Assets | 194,166 | 162,499 | | Property, Plant and Equipment, Net | 31,154 | 32,959 | | Other Assets | 171,042 | 153,342 | | Total Assets | 396,362 | 348,800 | | Current Liabilities | 97,349 | 79,207 | | Long-Term Debt | 44,986 | 50,658 | | Other Long-Term Liabilities | 23,305 | 14,580 | | Stockholders' Equity | 230,722 | 204,355 | | Total Liabilities and Stockholders' Equity | 396,362 | 348,800 | - As of June 30, 2025, the current ratio was 2.0 to 1[29] Cash Flow and Capital Allocation LSI generated robust free cash flow in both Q4 and the full fiscal year 2025, prioritizing capital allocation for organic expansion, acquisition-related investments, and debt reduction, resulting in a healthy net debt to adjusted EBITDA ratio Free Cash Flow (Q4 & Full Year FY2025 vs. Q4 & Full Year FY2024) | Metric | Three Months Ended June 30, 2025 ($ thousand) | Three Months Ended June 30, 2024 ($ thousand) | Twelve Months Ended June 30, 2025 ($ thousand) | Twelve Months Ended June 30, 2024 ($ thousand) | | :------------------- | :----------------------------- | :----------------------------- | :------------------------------- | :------------------------------- | | Cash Flow from Operating Activities | 9,499 | 11,096 | 38,118 | 43,393 | | Capital Expenditures | (950) | (762) | (3,465) | (5,388) | | Free Cash Flow | 8,549 | 10,334 | 34,653 | 38,005 | Net Debt to Adjusted EBITDA Ratio (As of June 30, 2025 vs. June 30, 2024) | Metric | June 30, 2025 ($ thousand) | June 30, 2024 ($ thousand) | | :--------------------------- | :--------------------- | :--------------------- | | Total Debt | 48,557 | 54,229 | | Less: Cash | (3,457) | (4,110) | | Net Debt | 45,100 | 50,119 | | Adjusted EBITDA - Trailing Twelve Months | 55,067 | 51,436 | | Net Debt to Adjusted EBITDA Ratio | 0.82 | 0.97 | - In fiscal 2025, LSI prioritized capital allocation towards organic expansion, acquisition-related investments, and debt reduction[8] Cash Dividend Declaration The Board declared a regular quarterly cash dividend of $0.05 per share for Q4 FY2025, representing an indicative annual dividend rate of $0.20 per share, with future dividends subject to Board discretion based on earnings, cash flow needs, financial condition, and strategic opportunities - The Board of Directors declared a regular quarterly cash dividend of $0.05 per share for Q4 FY2025[9][31] - The indicative annual cash dividend rate is $0.20 per share[31] Non-GAAP Financial Measures & Reconciliations Explanation of Non-GAAP Measures LSI utilizes non-GAAP financial measures such as adjusted operating income, net income, EPS, EBITDA, adjusted EBITDA, net debt to adjusted EBITDA ratio, free cash flow, and organic sales growth to provide a clearer view of ongoing operational performance by excluding certain non-recurring or non-operating items - Non-GAAP measures exclude items such as long-term performance-based compensation expense, acquisition intangible asset amortization expense, business growth opportunity expenses, acquisition costs, lease expense for acquired leases, and restructuring and severance costs[32] - These metrics are used by management and parties interested in the company to evaluate business operating performance[32] Reconciliation of Operating Income, Net Income, and EPS This section details the reconciliation of GAAP operating income, net income, and diluted EPS to their adjusted non-GAAP counterparts for Q4 and the full fiscal years 2025 and 2024, highlighting the impact of various adjustments Reconciliation of Operating Income, Net Income, and EPS (Q4 & Full Year FY2025 vs. Q4 & Full Year FY2024) | Metric | Three Months Ended June 30, 2025 ($ thousand) | Three Months Ended June 30, 2024 ($ thousand) | Twelve Months Ended June 30, 2025 ($ thousand) | Twelve Months Ended June 30, 2024 ($ thousand) | | :----------------------------------- | :----------------------------- | :----------------------------- | :------------------------------- | :------------------------------- | | Reported Operating Income | 11,944 | 9,011 | 35,769 | 35,517 | | Adjusted Operating Income | 15,120 | 12,576 | 48,361 | 46,395 | | Reported Net Income | 8,172 | 5,668 | 24,383 | 24,977 | | Adjusted Net Income | 10,577 | 8,304 | 32,883 | 32,294 | | Reported Diluted EPS | 0.26 | 0.19 | 0.79 | 0.83 | | Adjusted Diluted EPS | 0.34 | 0.28 | 1.07 | 1.07 | - Beginning in Q1 FY2025, LSI includes acquisition intangible asset amortization expense as an add-back for non-GAAP reconciliation[34] Reconciliation of Net Income to Adjusted EBITDA, Free Cash Flow, and Net Debt This section provides detailed reconciliations of net income to EBITDA and adjusted EBITDA for Q4 and the full fiscal years 2025 and 2024, along with calculations for free cash flow and the net debt to adjusted EBITDA ratio Reconciliation of Net Income to Adjusted EBITDA (Q4 & Full Year FY2025 vs. Q4 & Full Year FY2024) | Metric | Three Months Ended June 30, 2025 ($ thousand) | Three Months Ended June 30, 2024 ($ thousand) | Twelve Months Ended June 30, 2025 ($ thousand) | Twelve Months Ended June 30, 2024 ($ thousand) | | :--------------------------- | :----------------------------- | :----------------------------- | :------------------------------- | :------------------------------- | | Reported Net Income | 8,172 | 5,668 | 24,383 | 24,977 | | Reported Operating Income | 11,944 | 9,011 | 35,769 | 35,517 | | EBITDA | 15,499 | 11,867 | 48,344 | 45,516 | | Adjusted EBITDA | 17,087 | 14,044 | 55,067 | 51,436 | | Adjusted EBITDA as a Percentage of Sales | 11.0% | 10.9% | 9.6% | 11.0% | Organic vs. Inorganic Sales Growth This section disaggregates net sales for Q4 and the full fiscal year 2025 into organic and inorganic components, illustrating comparable sales and the contribution of recent acquisitions (EMI and Canada's Best Holdings) to overall growth Organic vs. Inorganic Sales (Q4 FY2025 vs. Q4 FY2024) | Metric | Q4 FY2025 ($ thousand) | Q4 FY2024 ($ thousand) | Percentage Change | | :------------------- | :------------------------ | :------------------------ | :--------- | | Lighting Segment | 72,743 | 65,095 | 12% | | Display Solutions Segment | 82,323 | 63,912 | 29% | | Total Net Sales | 155,066 | 129,007 | 20% | | Less: EMI | 22,819 | 18,074 | - | | Less: Canada's Best Holdings | 7,180 | - | - | | Total Organic Net Sales | 125,067 | 110,933 | 11% | Organic vs. Inorganic Sales (YTD FY2025 vs. YTD FY2024) | Metric | YTD FY2025 ($ thousand) | YTD FY2024 ($ thousand) | Percentage Change | | :------------------- | :-------------------- | :-------------------- | :--------- | | Lighting Segment | 248,356 | 262,413 | -5% | | Display Solutions Segment | 325,021 | 207,225 | 57% | | Total Net Sales | 573,377 | 469,638 | 22% | | Less: EMI | 94,830 | 18,073 | - | | Less: Canada's Best Holdings | 8,549 | - | - | | Total Organic Net Sales | 469,998 | 451,565 | 4% | - Organic net sales for Q4 FY2025 increased 11% year-over-year to $125.1 million[37] Eight-Quarter Adjusted Net Income Reconciliation This section provides a comprehensive reconciliation of net income to adjusted net income for eight consecutive quarters from Q1 FY2024 to Q4 FY2025, detailing non-GAAP adjustments and their impact on quarterly EPS Eight-Quarter Adjusted Net Income Reconciliation (Q1 FY2024 to Q4 FY2025) | Quarter | Reported Net Income ($ thousand) | Reported Diluted EPS | Adjusted Net Income ($ thousand) | Adjusted Diluted EPS | | :------- | :------------------ | :--------------- | :-------------------- | :--------------- | | Q1 FY2024 | 8,028 | 0.27 | 9,610 | 0.32 | | Q2 FY2024 | 5,906 | 0.20 | 7,249 | 0.24 | | Q3 FY2024 | 5,375 | 0.18 | 7,131 | 0.24 | | Q4 FY2024 | 5,668 | 0.19 | 8,304 | 0.28 | | Q1 FY2025 | 6,682 | 0.22 | 7,981 | 0.26 | | Q2 FY2025 | 5,647 | 0.18 | 7,996 | 0.26 | | Q3 FY2025 | 3,883 | 0.13 | 6,331 | 0.20 | | Q4 FY2025 | 8,172 | 0.26 | 10,577 | 0.34 | Company Information About LSI Industries LSI Industries is a US-based manufacturer of commercial lighting, graphics, and display solutions, providing American-made products and comprehensive project management services for strategic vertical markets - LSI is headquartered in Cincinnati and listed on the Nasdaq Stock Market under the ticker symbol LYTS[22] - The company manufactures advanced lighting, graphics, and display solutions, including non-residential indoor and outdoor lighting, printed graphics, digital graphics, refrigerated, and custom displays[22] - The company employs approximately 2,000 people across 19 manufacturing facilities in the United States and Canada[22] Conference Call Details Details for the Q4 FY2025 conference call are provided, including webcast and dial-in access, along with replay information - The conference call was held on August 21, 2025, at 11:00 AM ET, to review the company's financial results and conduct a Q&A session[20] - A webcast and presentation materials for the conference call are available in the Investor Relations section of the LSI Industries website[21] Forward-Looking Statements & Contacts A disclaimer regarding forward-looking statements and contact information for investor and media inquiries are provided - For uncertainties that could cause actual results to differ materially from forward-looking statements, refer to the risk factors included in the company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q[23] - Contact information for investor and media contacts, Bill Seymour and Noel Ryan, is provided[24]