Financial Analysis

NOTE 15 COMMITMENTS AND CONTINGENCIES The Company is party to various negotiations, customer bankruptcies, and legal proceedings arising in the normal course of business. The Company provides reserves for these matters when a loss is probable and reasonably estimable. The Company does not disclose a range of potential loss because the likelihood of such a loss is remote. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Companys financial position, results of operations, cash flows or liquidity. The Company recorded a $3.4 million contingent liability related to the future earnout payments as part of the acquisition of Canadas Best Holding (CBH). (Refer to Footnote 3.) The $3.4 million represents the value of the earnout converted from its functional currency to USD as of June 30, 2025. …

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NOTE 9 REVOLVING LINE OF CREDIT AND LONG-TERM DEBT The Companys long-term debt as of June 30, 2025, and June 30, 2024, consisted of the following: June 30, June 30, (In thousands) 2025 2024 Secured line of credit $ 36,956 $ 38,766 Term loan, net of debt issuance costs of $8 and $14, respectively 11,601 15,463 Total debt 48,557 54,229 Less: amounts due within one year 3,571 3,571 Total amounts due after one year, net $ 44,986 $ 50,658 In September 2021, the Company amended its existing $100 million secured line of credit, to a $25 million term loan and $75 million remaining as a secured revolving line of credit. Both facilities expire in the first quarter of fiscal 2027. The principal of the term loan is repaid annually in the amount of $3.6 million over a five -year period with a balloon payment of the remaining balance due last month. Interest on both the revolving line of credit and the term loan is charged based upon an increment over the Secured Overnight Financing Rate (SOFR) or a base rate, at the Companys option. The base rate is calculated as the highest of (a) the Prime rate, (b) the sum of the Overnight Funding Rate plus 50 basis points and (c) the sum of the Daily SOFR Rate plus 100 basis points. The increment over the SOFR borrowing rate fluctuates between 100 and 225 basis points, and the increment over the Base Rate fluctuates between 0 and 125 basis points, both of which depend upon the ratio of indebtedness to earnings before interest, taxes, depreciation, and …

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Twelve Months Ended (In thousands) June 30, 2025 Lighting Segment Display Solutions Segment Timing of revenue recognition Products and services transferred at a point in time $ 208,193 $ 259,432 Products and services transferred over time 40,164 65,588 $ 248,357 $ 325,020 Type of Product and Services LED lighting, digital signage solutions, electronic circuit boards $ 202,552 $ 26,144 Poles and other display solutions elements 43,211 233,792 Project management, installation services, shipping and handling 2,594 65,084 $ 248,357 $ 325,020 Twelve Months Ended (In thousands) June 30, 2024 Lighting Segment Display Solutions Segment Timing of revenue recognition Products and services transferred at a point in time $ 219,820 $ 151,972 Products and services transferred over time 42,593 55,253 $ 262,413 $ 207,225 Type of Product and Services LED lighting, digital signage solutions, electronic circuit boards $ 215,758 $ 32,521 Poles and other display solutions elements 43,719 132,604 Project management, installation services, shipping and handling 2,936 42,100 $ 262,413 $ 207,225

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NOTE 11 EQUITY COMPENSATION In November 2019, the Companys shareholders approved the 2019 Omnibus Award Plan (as amended on November 1, 2022, the 2019 Omnibus Plan). The purpose of the 2019 Omnibus Plan is to provide a means through which the Company may attract and retain key personnel and to provide a means by which directors, officers, and employees can acquire and maintain an equity interest in the Company. The 2019 Omnibus Plan replaced the 2012 Stock Incentive Plan (2012 Stock Plan). The number of shares of common stock authorized for issuance under the 2019 Omnibus Plan is 5,000,000 which are combined with the remaining shares available under the 2012 Stock Plan. The number of shares reserved for issuance under the 2019 Omnibus Plan is 1,361,881 shares all of which are available for future grant or award as of June 30, 2025. The 2019 Omnibus Plan allows for the grant of non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance stock units and other stock-based awards. Inducement awards are granted by the Company to attract and retain key executives. Inducement awards are separately registered securities and are not part of the 2019 Omnibus Plan. In fiscal 2025, 107,217 RSUs and 279,359 PSUs were granted. Employee Stock Purchase Plan In November of 2021, our board of directors and shareholders approved the LSI Employee Stock Purchase Plan (ESPP). A total of 270,000 shares of common stock were provided for issuan …

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NOTE 8 GOODWILL AND OTHER INTANGIBLE ASSETS The carrying values of goodwill and other intangible assets with indefinite lives are reviewed at least annually for possible impairment. The Company may first assess qualitative factors in order to determine if goodwill and indefinite-lived intangible assets are impaired. If through the qualitative assessment it is determined that it is more likely than not that goodwill and indefinite-lived assets are not impaired, no further testing is required. If it is determined more likely than not that goodwill and indefinite-lived assets are impaired, or if the Company elects not to first assess qualitative factors, the Companys impairment testing continues with the estimation of the fair value of the reporting unit using a combination of a market approach and an income (discounted cash flow) approach, at the reporting unit level. The estimation of the fair value of the reporting unit requires significant management judgment with respect to revenue and expense growth rates, changes in working capital and the selection and use of an appropriate discount rate. The estimates of the fair value of reporting units are based on the best information available as of the date of the assessment. The use of different assumptions would increase or decrease estimated discounted future operating cash flows and could increase or decrease an impairment charge. Company management uses its judgment in assessing whether assets may have become impaired between …

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NOTE 13 INCOME TAXES The following information is provided for the years ended June 30, 2025, and 2024: (In thousands) 2025 2024 Components of income (loss) before income taxes: United States $ 30,083 $ 32,295 Foreign 2,955 804 Income before income taxes $ 33,038 $ 33,099 Provision for income taxes U.S. Federal $ 8,403 $ 6,909 Foreign 700 (30 ) State and local 1,933 2,851 Total current $ 11,036 $ 9,730 Deferred (2,381 ) (1,608 ) Total provision for income taxes $ 8,655 $ 8,122 (In thousands) 2025 2024 Reconciliation to federal statutory rate: Federal statutory rate 21.0 21.0 State and local taxes, net of federal benefit 3.5 4.2 Foreign operations (0.1 ) (0.5 ) Federal tax credits (0.9 ) (1.1 ) Officer's Compensation 1.8 1.9 Transaction costs 0.7 - Uncertain tax position activity 0.4 0.5 Stock-based compensation (2.8 ) (2.3 ) Tax rate changes - - Other 2.6 0.8 Effective tax rate 26.2 24.5 The components of deferred income tax assets and (liabilities) at June 30, 2025, and 2024 are as follows: Components of deferred income tax assets and liabilities (In thousands) 2025 2024 Uncertain tax positions $ 241 $ 241 Reserves against current assets 2,384 1,408 Accrued expenses 3,962 3,029 Deferred compensation 2,479 2,008 Stock-based compensation 2,017 1,859 Capitalized R&D 3,885 1,985 State net operating loss carryover and credits 108 120 Lease Liability 4,841 4,187 Canadian NOL - 313 U.S. Federal net operating loss carryover and credits - 52 Deferred income tax asset before valua …

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"New Accounting Pronouncements: In October 2023, the FASB issued ASU 2023 - 06, Disclosure Improvements: Codification Amendments in Response to SEC's Disclosure Update and Simplification Initiative. This ASU amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification. The effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S- X or Regulation S-K becomes effective, with early adoption prohibited. The Company will monitor the removal of various requirements from the current regulations in order to determine when to adopt the related amendments, but it does not anticipate that the adoption of the new guidance will have a material impact on the Companys consolidated financial statements and related disclosures. The Company will continue to evaluate the impact of this guidance on its consolidated financial statements. In November 2023 , the FASB issued ASU 2023 - 07, Segment Reporting (Topic 280 ): Improvements to Reportable Segment Disclosures. This ASU expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The standard requires interim and annual disclosure of significant segment expenses that are regularly provided to the chief operating decision-maker (""CODM"") and included within the reported measure of a segments profit or loss, requires interim disclosures about a repor …

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NOTE 4 BUSINESS SEGMENT INFORMATION The accounting guidance on Segment Reporting establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information of those segments to be presented in financial statements. Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker (the Companys Chief Executive Officer or CODM) in making decisions on how to allocate resources and assess performance. The Companys two operating segments are Lighting and Display Solutions, with one executive team under the organizational structure reporting directly to the CODM with responsibilities for managing each segment. Corporate and Eliminations, which captures the Companys corporate administrative activities, is also reported in the segment information. The Companys method for measuring profitability on a reportable segment basis and used by the CODM to assess performance is adjusted operating income and adjusted earnings before interest, tax, depreciation, amortization, along with other non-GAAP adjustments (adjusted EBITDA). These measurements are used to monitor performance compared to prior periods and forecasted results. The Lighting Segment includes non-residential outdoor and indoor lighting fixtures utilizing LED light sources that have been fabricated and assembled for the Companys markets, primarily t …

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"NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Consolidation: The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and include the accounts of LSI Industries Inc. (an Ohio corporation) and its subsidiaries (collectively, the Company), all of which are wholly owned. All intercompany transactions and balances have been eliminated in consolidation. Revenue Recognition: The Company recognizes revenue when it satisfies the performance obligation in its customer contracts or purchase orders. Most of the Companys products have a single performance obligation which is satisfied at a point in time when control is transferred to the customer. Control is generally transferred at the time of shipment when title and risk of ownership passes to the customer. For customer contracts with multiple performance obligations, the Company allocates the transaction price and any discounts to each performance obligation based on relative standalone selling prices. Payment terms are typically within 30 to 90 days from the shipping date, depending on the terms with the customer. The Company offers standard warranties that do not represent separate performance obligations. Installation is a separate performance obligation, except for the Companys digital signage products. For digital signage products, installation is not a separate performance obligation as the product and installation is the …

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NOTE 10 CASH DIVIDENDS The Company paid cash dividends of $6.0 million and $5.7 million in fiscal years 2025 and 2024, respectively. Dividends on restricted stock units in the amount of $0.1 million were accrued for both fiscal years as of June 30, 2025, and 2024. These dividends are paid upon the vesting of the restricted stock units when shares are issued to the award recipients. In August 2025 , the Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable September 10, 2025, to shareholders of record September 2, 2025. …

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