Financial Analysis

NOTE 16 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 has recorded a $7.0 million contingent liability related to the future earnout payments as part of the acquisition of Canadas Best Holding (CBH), or which $2.1 million is classified as short term, while $4.9 million is classified as long term. The $7.0 million represents the value of the earnout converted from its functional currency to USD as of June 30, 2026. As of June 30, 2025, the company recorded a $3.4 million contingent liability related to the future earnout payments, and $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 10 REVOLVING LINE OF CREDIT AND LONG-TERM DEBT The Companys long-term debt as of June 30, 2026 and June 30, 2025 , consisted of the following: June 30, June 30, (In thousands) 2026 2025 Secured line of credit $ 60,000 $ 36,956 Term loan, net of debt issuance costs of $ 1,569 , and $ 8 , respectively 195,931 11,601 Total debt 255,931 48,557 Less: amounts due within one year 10,000 3,571 Total amounts due after one year, net $ 245,931 $ 44,986 In March of 2026 , the Company entered into a $350 million senior secured credit facility consisting of a $200 million five -year term loan and a $150 million revolving credit facility. The Company is required to make quarterly principal payments of $2.5 million against the term loan, starting in the quarter ending June 30, 2026, with an increase to $3.75 million of such quarterly payments scheduled in June 2028 and with an increase to $5.0 million of such quarterly payments scheduled in June 2030, and the balance of the term loan due at maturity on March 24, 2031 . The revolving credit facility is also scheduled to expire on March 24, 2031 . Interest on the term loan and any loans made under the revolving credit facility is based on the Secured Overnight Financing Rate ( SOFR ) or a customary base rate (which may include Daily Simple SOFR or the Prime Rate), to be determined by reference to customary market benchmarks, in each case plus an applicable margin that is anticipated to vary based on the Companys consolidated total net lev …

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Twelve Months Ended (In thousands) June 30, 2026 Display Lighting Solutions Segment Segment Timing of revenue recognition Products and services transferred at a point in time $ 219,613 $ 368,166 Products and services transferred over time 46,610 55,008 $ 266,223 $ 423,174 Type of Product and Services Lighting, poles, electronic components $ 263,543 $ - Signage and display products - 355,114 Project management, installation services, shipping and handling 2,680 68,060 $ 266,223 $ 423,174 Twelve Months Ended (In thousands) June 30, 2025 Display Lighting Solutions Segment 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 Lighting, poles, electronic components $ 245,763 $ - Signage and display products - 259,936 Project management, installation services, shipping and handling 2,594 65,084 $ 248,357 $ 325,020 Twelve Months Ended (In thousands) June 30, 2024 Display Lighting Solutions Segment 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 Lighting, poles, electronic components $ 259,477 $ - Signage and display products - 165,125 Project management, installation services, shipping and handling 2,936 42,100 $ 262,413 $ 207,225 …

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NOTE 12 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 994,651 shares all of which are available for future grant or award as of June 30, 2026 . 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 2026 85,958 RSUs and 203,614 PSUs were granted, and 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 to …

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NOTE 9 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 14 INCOME TAXES The following information is provided for the years ended June 30, 2026, 2025 and 2024: (In thousands) 2026 2025 2024 Components of income before income taxes: United States $ 30,396 $ 30,083 $ 32,295 Foreign 1,078 2,955 804 Income before income taxes $ 31,474 $ 33,038 $ 33,099 Provision (benefit) for income taxes - current U.S. Federal $ 637 $ 8,384 $ 6,907 Foreign 1,781 700 (30 ) State and local 575 1,933 2,851 Total current $ 2,993 $ 11,017 $ 9,728 Provision (benefit) for income taxes - deferred U.S. Federal 5,485 (2,279 ) (983 ) International (446 ) 202 (665 ) State and local 863 (285 ) 42 Total deferred $ 5,902 $ (2,362 ) $ (1,606 ) Total provision for income taxes $ 8,895 $ 8,655 $ 8,122 2026 2025 2024 (In thousands) Amount Rate Amount Rate Amount Rate Reconciliation to federal statutory rate: Federal statutory rate $ 6,610 21.0 $ 6,937 21.0 $ 6,951 21.0 State and local taxes, net of federal benefit (a) 1,135 3.6 1,146 3.5 1,402 Foreign tax effects 4.2 Canada Transaction costs 884 2.8 - - - - Statutory income tax rate differential 247 0.8 299 1.0 39 0.1 Other 156 0.5 - - (208 ) (0.6 ) Other foreign jurisdictions 41 0.1 (19 ) (0.1 ) 11 0.1 Effects of changes in tax laws or rates enacted Effects of cross-border tax laws (32 ) (0.1 ) 155 0.5 (47 ) (0.1 ) Tax credits (429 ) (1.4 ) (284 ) (0.9 ) (353 ) (1.1 ) Non-taxable or non-deductible items Transaction costs 830 2.7 220 0.6 - - Officer's compensation 3,886 12.5 591 1.8 615 1.8 Other 129 0.4 124 0.4 4 …

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New Accounting Pronouncements: In December 2023, the FASB issued ASU 2023 - 09 , Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures. This ASU requires additional disclosures of various income tax components that affect the rate reconciliation based on the applicable taxing jurisdictions, as well as the qualitative and quantitative aspects of those components. The standard also requires information pertaining to taxes paid to be disaggregated for federal, state and foreign taxes, and contains other disclosure requirements. This ASU is effective for fiscal years beginning after December 15, 2024 , and interim periods within fiscal years beginning after December 15, 2025 , with early adoption permitted. The Company has adopted this new guidance on its consolidated financial statements and related disclosures by providing greater visibility into the rate reconciliation by jurisdiction, and disaggregation of taxes paid by jurisdiction. The Company adopted the ASU on a retrospective basis, with applicable disclosures included in Note 14 Income Taxes. The adoption of ASU 2023 - 09 did not have a significant impact on the Companys consolidated financial statements, other than requiring expanded income tax disclosures. …

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NOTE 18 - RELATED PARTY A limited liability company owned (the LLC) and controlled by LSI's Chief Executive Officer, James A. Clark, owns an aircraft that is dry leased to an unrelated third party. Pursuant to a separate arrangement, the third -party dry leases the aircraft to LSI for qualifying business travel by certain of the Companys executive officers. Payments made by LSI depend on actual usage. For the period from July 1, 2025 through June 30, 2026, the LLC received aggregate payments of $236,000 in connection with this arrangement. …

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NOTE 5 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 leadership team reporting directly to the CODM with responsibilities for managing the performance across the segments. The Companys methods for measuring profitability under GAAP on a reportable segment basis and used by the CODM to assess performance is adjusted net income. These measurements are used to monitor performance compared to prior periods and forecasted results. The CODM does not look at disaggregated expenses at the segment level. The CODM does review expenses on a consolidated basis which is consistent with the categories of expense reported on the consolidated statements of operations. The Lighting Segment includes non-residential outdoor and indoor lighting fixtures utilizing LED light sources that have been fabricated and assembled for the Companys markets, primarily the refueling and convenience s …

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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 11 CASH DIVIDENDS The Company paid cash dividends of $6.5 million, $6.0 million and $5.7 million in fiscal years 2026, 2025 and 2024, respectively. Dividends on restricted stock units in the amount of $0.1 million were accrued for the fiscal years ending June 30, 2026, 2025 & 2024. These dividends are paid upon the vesting of the restricted stock units when shares are issued to the award recipients. In August 2026 , the Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable September 8, 2026 , to shareholders of record August 31, 2026 . …

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