~~The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.~~

Three Months Ended

September 30

(In thousands)

2022

2021

Net Income
$ 6,262 $ 3,133

Foreign currency translation adjustment
7 (44 )

Comprehensive Income
$ 6,269 $ 3,089

CONDENSED CONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 4. CONTROLS AND PROCEDURES

PART II.OTHER INFORMATION

ITEM 5. OTHER INFORMATION

ITEM 6. EXHIBITS

SIGNATURES

PART I.FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended						Nine Months Ended
	March 31						March 31
(In thousands, except per share data)	2023			2022			2023		2022

Net Sales	$	117,470		$	110,111		$	373,343	$	327,651

Cost of products and services sold		85,266			83,318			272,230		250,900

Severence Costs		-			-			31		-

Gross profit		32,204			26,793			101,082		76,751

Selling and administrative expenses		24,472			21,632			74,291		62,724

Operating income		7,732			5,161			26,791		14,027

Interest expense		877			524			2,924		1,287

Other (income) expense		(71	)		(55	)		86		33

Income before income taxes		6,926			4,692			23,781		12,707

Income tax expense		2,257			1,074			6,434		2,851

Net income	$	4,669		$	3,618		$	17,347	$	9,856


Earnings per common share (see Note 4)
Basic	$	0.16		$	0.13		$	0.62	$	0.36
Diluted	$	0.16		$	0.13		$	0.60	$	0.35


Weighted average common shares outstanding
Basic		28,306			27,378			28,012		27,220
Diluted		29,611			28,083			29,055		27,945

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended				Nine Months Ended
	March 31				March 31
(In thousands)	2023		2022		2023		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

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	March 31,			June 30,
(In thousands, except shares)	2023			2022

ASSETS

Current assets

Cash and cash equivalents	$	1,350		$	2,462

Accounts receivable, less allowance for credit losses of $386 and $499, respectively		69,288			77,750

Inventories		67,661			74,421

Refundable income taxes		2,906			1,041

Other current assets		4,617			3,243

Total current assets		145,822			158,917

Property, Plant and Equipment, at cost
Land		4,010			4,010
Buildings		24,624			24,495
Machinery and equipment		68,075			66,762
Buildings under finance leases		2,033			2,033
Construction in progress		720			618
		99,462			97,918
Less accumulated depreciation		(74,198	)		(70,760	)
Net property, plant and equipment		25,264			27,158

Goodwill		45,030			45,030

Other intangible assets, net		64,394			67,964

Operating lease right-of-use assets		6,770			8,664

Other long-term assets, net		3,739			3,347

Total assets	$	291,019		$	311,080

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	March 31,			June 30,
(In thousands, except shares)	2023			2022

LIABILITIES & SHAREHOLDERS' EQUITY

Current liabilities
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

Finance lease liabilities		1,036			1,246

Operating lease liabilities		6,115			8,240

Other long-term liabilities		4,086			3,182

Commitments and contingencies (Note 12)		-			-

Shareholders' Equity
Preferred shares, without par value;
Authorized 1,000,000 shares, none issued		-			-
Common shares, without par value;
Authorized 50,000,000 shares;
Outstanding 28,349,720 and 27,484,514 shares, respectively		146,000			139,500
Treasury shares, without par value		(6,736	)		(5,927	)
Deferred compensation plan		6,736			5,927
Retained earnings		21,506			8,224
Accumulated other comprehensive income		237			45

Total shareholders' equity		167,743			147,769

Total liabilities & shareholders' equity	$	291,019		$	311,080

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

														Accumulated
	Common Shares					Treasury Shares						Key Executive		Other		Retained			Total
	Number Of					Number Of						Compensation		Comprehensive		Earnings			Shareholders'
	Shares		Amount			Shares			Amount			Amount		Income		(Loss)			Equity

Balance at June 30, 2021		26,863	$	132,526			(346	)	$	(2,450	)	$	2,450	$	49	$	(1,405	)	$	131,170

Net Income		-		-			-			-			-		-		9,856			9,856
Other comprehensive income		-		-			-			-			-		11		-			11
Stock compensation awards		30		225			-			-			-		-		-			225
Restricted stock units issued, net of shares withheld for tax withholdings		80		(250	)		-			-			-		-		-			(250	)
Shares issued for deferred compensation		412		3,089			-			-			-		-		-			3,089
Activity of treasury shares, net		-		-			(401	)		(3,007	)		-		-		-			(3,007	)
Deferred stock compensation		-		-			-			-			3,007		-		-			3,007
Stock compensation expense		-		2,466			-			-			-		-		-			2,466
Stock options exercised, net		5		26			-			-			-		-		-			26
Dividends — $0.20 per share		-		-			-			-			-		-		(4,048	)		(4,048	)

Balance at March 31, 2022		27,390	$	138,082			(747	)	$	(5,457	)	$	5,457	$	60	$	4,403		$	142,545

														Accumulated
	Common Shares					Treasury Shares						Key Executive		Other					Total
	Number Of					Number Of						Compensation		Comprehensive		Retained			Shareholders'
	Shares		Amount			Shares			Amount			Amount		Income		Earnings			Equity

Balance at June 30, 2022		27,484	$	139,500			(822	)	$	(5,927	)	$	5,927	$	45	$	8,224		$	147,769

Net Income		-		-			-			-			-		-		17,347			17,347
Other comprehensive loss		-		-			-			-			-		192		-			192
Stock compensation awards		37		270			-			-			-		-		-			270
ESPP Stock Awards		10		97			-			-			-		-		-			97
Restricted stock units issued, net of shares withheld for tax withholdings		301		(844	)		-			-			-		-		-			(844	)
Shares issued for deferred compensation		168		1,530			-			-			-		-		-			1,530
Activity of treasury shares, net		-		-			(69	)		(809	)		-		-		-			(809	)
Deferred stock compensation		-		-			-			-			809		-		-			809
Stock compensation expense				2,308			-			-			-		-		-			2,308
Stock options exercised, net		349		3,139			-			-			-		-		-			3,139
Dividends — $0.20 per share		-		-			-			-			-		-		(4,065	)		(4,065	)

Balance at March 31, 2023		28,349	$	146,000			(891	)	$	(6,736	)	$	6,736	$	237	$	21,506		$	167,743

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended
	March 31
(In thousands)	2023			2022

Cash Flows from Operating Activities
Net income	$	17,347		$	9,856
Non-cash items included in net income
Depreciation and amortization		7,295			7,632
Deferred income taxes		59			26
Deferred compensation plan		1,530			3,089
Stock compensation expense		2,308			2,466
Employee Stock Purchase Plan Discount		97			-
Issuance of common shares as compensation		270			225
Loss on disposition of fixed assets		37			57
Allowance for doubtful accounts		(80	)		205
Inventory obsolescence reserve		740			752

Changes in certain assets and liabilities
Accounts receivable		8,542			(16,104	)
Inventories		6,020			(20,175	)
Refundable income taxes		(1,865	)		247
Accounts payable		(10,034	)		5,695
Accrued expenses and other		2,830			(3,708	)
Customer prepayments		(2,548	)		(2,931	)
Net cash flows provided by (used in) operating activities		32,548			(12,668	)

Cash Flows from Investing Activities
Purchases of property, plant and equipment		(1,754	)		(1,276	)
Adjustment to JSI acquisition purchase price		-			500
Proceeds from the sale of fixed assets		1			-
Net cash flows (used in) investing activities		(1,753	)		(776	)

Cash Flows from Financing Activities
Payments of long-term debt		(150,547	)		(113,195	)
Borrowings of long-term debt		120,524			130,006
Cash dividends paid		(4,065	)		(3,989	)
Shares withheld for employees' taxes		(844	)		(250	)
Payments on financing lease obligations		(192	)		(196	)
Proceeds from stock option exercises		3,139			26
Net cash flows (used in) provided by financing activities		(31,985	)		12,402

Change related to foreign currency		78			8

(Decrease) in cash and cash equivalents		(1,112	)		(1,034	)

Cash and cash equivalents at beginning of period		2,462			2,282

Cash and cash equivalents at end of period	$	1,350		$	1,248

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

~~Page 4~~

~~LSI INDUSTRIES INC.~~

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

~~(Unaudited)~~

September 30, June 30,
(In thousands, except shares)

2022

2022

ASSETS

Current assets

Cash and cash equivalents
$ 9,028 $ 2,462

Accounts receivable, less allowance for credit losses of $508 and $499, respectively
75,449 77,750

Inventories
80,457 74,421

Refundable income taxes
1,118 1,041

Other current assets
4,355 3,243

Total current assets
170,407 158,917

Property, Plant and Equipment, at cost
Land
4,010 4,010
Buildings
24,469 24,495
Machinery and equipment
67,115 66,762
Buildings under finance leases
2,033 2,033
Construction in progress
563 618
98,190 97,918
Less accumulated depreciation
(71,913 ) (70,760 )
Net property, plant and equipment
26,277 27,158

Goodwill
45,030 45,030

Other intangible assets, net
66,774 67,964

Operating lease right-of-use assets
7,826 8,664

Other long-term assets, net
3,187 3,347

Total assets
$ 319,501 $ 311,080

~~The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.~~

~~Page 5~~

~~LSI INDUSTRIES INC.~~

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

~~(Unaudited)~~

September 30,

June 30,

(In thousands, except shares)

2022

2022

LIABILITIES & SHAREHOLDERS' EQUITY

Current liabilities
Current maturities of long-term debt
$ 3,571 $ 3,571
Accounts payable
41,133 34,783
Accrued expenses
35,231 36,264

Total current liabilities
79,935 74,618

Long-term debt
73,975 76,025

Finance lease liabilities
1,174 1,246

Operating lease liabilities
7,381 8,240

Other long-term liabilities
3,307 3,182

Commitments and contingencies (Note 12)
- -

Shareholders' Equity
Preferred shares, without par value; Authorized 1,000,000 shares, none issued
- -
Common shares, without par value; Authorized 40,000,000 shares; Outstanding 27,777,410 and 27,484,514 shares, respectively
140,599 139,500
Treasury shares, without par value
(6,439 ) (5,927 )
Deferred compensation plan
6,439 5,927
Retained earnings
13,078 8,224
Accumulated other comprehensive income
52 45

Total shareholders' equity
153,729 147,769

Total liabilities & shareholders' equity
$ 319,501 $ 311,080

~~The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.~~

~~Page 6~~

~~LSI INDUSTRIES INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY~~

~~(Unaudited)~~

Common Shares

Treasury Shares

Key Executive

Accumulated
Other

Retained

Total

(In thousands, except per share data)

Number Of
Shares

Number Of
Shares

Compensation
Amount

Comprehensive
Income (Loss)

Earnings
(Loss)

Shareholders'
Equity

Amount

Amount

Balance at June 30, 2021
26,863 $ 132,526 (346 ) $ (2,450 ) $ 2,450 $ 49 $ (1,405 ) $ 131,170

Net Income
- - - - - - 3,133 3,133
Other comprehensive loss
- - - - - (44 ) - (44 )
Stock compensation awards
10 75 - - - - - 75
Restricted stock units issued, net of shares withheld for tax withholdings
79 (247 ) - - - - - (247 )
Shares issued for deferred compensation
263 2,042 - - - - - 2,042
Activity of treasury shares, net
- - (261 ) (2,021 ) - - - (2,021 )
Deferred stock compensation
- - - - 2,021 - - 2,021
Stock compensation expense
- 556 - - - - - 556
Stock options exercised, net
3 16 - - - - - 16
Dividends — $0.20 per share
- - - - - - (1,328 ) (1,328 )

Balance at September 30, 2021
27,218 $ 134,968 (607 ) $ (4,471 ) $ 4,471 $ 5 $ 400 $ 135,373

Common Shares

Treasury Shares

Key Executive

Accumulated
Other

Retained

Total

Number Of
Shares

Number Of
Shares

Compensation
Amount

Comprehensive
Income (Loss)

Earnings
(Loss)

Shareholders'
Equity

Amount

Amount

Balance at June 30, 2022
27,484 $ 139,500 (822 ) $ (5,927 ) $ 5,927 $ 45 $ 8,224 $ 147,769

Net Income
- - - - - - 6,262 6,262
Other comprehensive loss
- - - - - 7 - 7
Stock compensation awards
12 75 - - - - - 75
Restricted stock units issued, net of shares withheld for tax withholdings
201 (66 ) - - - - - (66 )
Shares issued for deferred compensation
80 539 - - - - - 539
Activity of treasury shares, net
- - (77 ) (512 ) - - - (512 )
Deferred stock compensation
- - - - 512 - - 512
Stock compensation expense
- 551 - - - - - 551
Stock options exercised, net
- - - - - - - -
Dividends — $0.20 per share
- - - - - - (1,408 ) (1,408 )

Balance at September 30, 2022
27,777 $ 140,599 (899 ) $ (6,439 ) $ 6,439 $ 52 $ 13,078 $ 153,729

~~The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.~~

~~Page 7~~

~~LSI INDUSTRIES INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(Unaudited)~~

Three Months Ended

September 30

(In thousands)

2022

2021

Cash Flows from Operating Activities
Net income
$ 6,262 $ 3,133
Non-cash items included in net income
Depreciation and amortization
2,421 2,563
Deferred income taxes
350 (13
)
Deferred compensation plan
539 2,042
Stock compensation expense
551 556
Issuance of common shares as compensation
75 75
Loss on disposition of fixed assets
2 14
Allowance for doubtful accounts
8 10
Inventory obsolescence reserve
250 572

Changes in certain assets and liabilities
Accounts receivable
2,293 (6,260 )
Inventories
(6,286 ) (9,578 )
Refundable income taxes
(77 ) 138
Accounts payable
6,350 8,359
Accrued expenses and other
(1,943 ) (6,663
)
Customer prepayments
(212 ) (2,837
)
Net cash flows provided by (used in) operating activities
10,583 (7,889 )

Cash Flows from Investing Activities
Purchases of property, plant and equipment
(434 ) (297 )
Net cash flows (used in) investing activities
(434 ) (297 )

Cash Flows from Financing Activities
Payments of long-term debt
(47,123 ) (42,533 )
Borrowings of long-term debt
45,073 52,659
Cash dividends paid
(1,408 ) (1,326 )
Shares withheld for employees' taxes
(66 ) (247 )
Payments on financing lease obligations
(66 ) (64 )
Proceeds from stock option exercises
- 16
Net cash flows (used in) provided by financing activities
(3,590 ) 8,505

Change related to foreign currency
7 (31 )

Increase in cash and cash equivalents
6,566 288

Cash and cash equivalents at beginning of period
2,462 2,282

Cash and cash equivalents at end of period
$ 9,028 $ 2,570

~~The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.~~

~~Page~~ 8

LSI INDUSTRIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The interim condensed consolidated financial statements are unaudited and are prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, and rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the interim financial statements include all normal adjustments and disclosures necessary to present fairly the Company’s financial position as of ~~September 30, 2022,~~March 31, 2023, the results of its operations for the ~~three-month~~three and nine-month periods ended ~~September 30,~~March 31, 2023, and 2022, ~~and 2021,~~ and its cash flows for the ~~three-month~~nine-month periods ended ~~September 30, 2022,~~March 31, 2023, and ~~2021.~~2022. These statements should be read in conjunction with the financial statements and footnotes included in the fiscal 2022 Annual Report on Form 10-K. Financial information as of June 30, 2022, has been derived from the Company’s audited consolidated financial statements.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation:

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.

Revenue Recognition:

The Company recognizes revenue when it satisfies the performance obligation in its customer contracts or purchase orders. Most of the Company’s products have a single performance obligation which is satisfied at a point in time when control is transferred to the customer. Control is generally transferred at time of shipment when title and risk of ownership passes to the customer. 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 Company’s digital signage products. For digital signage products, installation is not a separate performance obligation as the product and installation is the combined item promised in digital signage contracts. The Company is not always responsible for installation of products it sells and has no post-installation responsibilities other than standard warranties.

A number of the Company's display solutions and select lighting products are customized for specific customers. As a result, these customized products do not have an alternative use. For these products, the Company has a legal right to payment for performance to date and generally does not accept returns on these items. The measurement of performance is based upon cost plus a reasonable profit margin for work completed. Because there is no alternative use and there is a legal right to payment, the Company transfers control of the item as the item is being produced and therefore, recognizes revenue over time. The customized product types are as follows:

●

Customer specific branded print graphics

●

Electrical components based on customer specifications

●

Digital signage and related media content

The Company also offers installation services for its display solutions elements and select lighting products. Installation revenue is recognized over time as the customer simultaneously receives and consumes the benefits provided through the installation process.

For these customized products and installation services, revenue is recognized using a cost-based input method: recognizing revenue and gross profit as work is performed based on the relationship between the actual cost incurred and the total estimated cost for the performance obligation.

~~Page 9~~

On occasion, the Company enters into bill-and-hold arrangements on a limited basis. Each bill-and-hold arrangement is reviewed and revenue is recognized only when certain criteria have been met: (1) the customer has requested delayed delivery and storage of the products by the Company because the customer wants to secure a supply of the products but lacks storage space; (ii) the risk of ownership has passed to the customer; (iii) the products are segregated from the Company’s other inventory items held for sale; (iv) the products are ready for shipment to the customer; and (v) the Company does not have the ability to use the products or direct them to another customer.

Disaggregation of Revenue

The Company disaggregates the revenue from contracts with customers by the timing of revenue recognition because the Company believes it best depicts the nature, amount, and timing of its revenue and cash flows. The table below presents a reconciliation of the disaggregation by reportable segments:

	Three Months Ended								Three Months Ended
(In thousands)	September 30, 2022				September 30, 2021				March 31, 2023				March 31, 2022
											Display				Display
									Lighting		Solutions		Lighting		Solutions
	Lighting Segment		Display Solutions Segment		Lighting Segment		Display Solutions Segment		Segment		Segment		Segment		Segment
Timing of revenue recognition
Products and services transferred at a point in time	$	58,077	$	47,489	$	44,582	$	37,431	$	57,249	$	42,378	$	49,283	$	41,231
Products and services transferred over time		9,456		12,047		6,678		17,706		9,458		8,385		7,843		11,754
	$	67,533	$	59,536	$	51,260	$	55,137	$	66,707	$	50,763	$	57,126	$	52,985

Three Months Ended

September 30, 2022

September 30, 2021

Lighting
Segment

Display
Solutions
Segment

Lighting
Segment

Display
Solutions
Segment

Type of Product and Services

LED lighting, digital signage solutions, electronic circuit boards
$ 55,535 $ 7,175 $ 41,879 $ 12,428
Poles, other display solution elements
11,129 41,471 8,966 33,302
Project management, installation services, shipping and handling
869 10,890 415 9,407
$ 67,533 $ 59,536 $ 51,260 $ 55,137

	Nine Months Ended
	March 31, 2023				March 31, 2022
			Display				Display
	Lighting		Solutions		Lighting		Solutions
	Segment		Segment		Segment		Segment
Timing of revenue recognition
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
	$	201,074	$	172,269	$	165,662	$	161,989

	Three Months Ended
	March 31, 2023				March 31, 2022
			Display				Display
	Lighting		Solutions		Lighting		Solutions
	Segment		Segment		Segment		Segment
Type of Product and Services
LED lighting, digital signage solutions, 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 services, shipping and handling		893		8,837		572		10,543
	$	66,707	$	50,763	$	57,126	$	52,985

	Nine Months Ended
	March 31, 2023				March 31, 2022
			Display				Display
	Lighting		Solutions		Lighting		Solutions
	Segment		Segment		Segment		Segment
Type of Product and Services
LED lighting, digital signage solutions, 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 services, shipping and handling		2,554		34,213		1,558		30,139
	$	201,074	$	172,269	$	165,662	$	161,989

Practical Expedients and Exemptions

●

The Company’s contracts with customers have an expected duration of one year or less, as such, the Company applies the practical expedient to expense sales commissions as incurred and has omitted disclosures on the amount of remaining performance obligations.

●

Shipping costs that are not material in context of the delivery of products are expensed as incurred.

●

The Company’s accounts receivable balance represents the Company’s unconditional right to receive payment from its customers with contracts. Payments are generally due within 30 to 90 days of completion of the performance obligation and invoicing; therefore, payments do not contain significant financing components.

●

The Company collects sales tax and other taxes concurrent with revenue-producing activities which are excluded from revenue. Shipping and handling costs are treated as fulfillment activities and included in cost of products and services sold on the Consolidated Statements of Operations.

New Accounting Pronouncements:

In October 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,” creating an exception to the recognition and measurement principles in ASC 805. The amendment requires that entities apply ASC 606, “Revenue from Contracts with Customers,” rather than using fair value, to recognize and measure contracts assets and contract liabilities from contracts with customers acquired in a business combination. The ASU is effective for fiscal years beginning after December 15, 2022, and interim periods therein. Early adoption is permitted, including adoption in an interim period, regardless of whether a business combination occurs in that period. The guidance should be applied prospectively; however, an entity that elects to early adopt in an interim period should apply the amendments to all business combinations that occurred during the fiscal year that includes that interim period. The Company is evaluating the impact this guidance may have on its consolidated financial statements and related disclosures.

~~Page 10~~

In December 2019, the Financial Accounting Standards Board ("FASB") issued ASU 2019-12, "Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740)." This guidance removes certain exceptions to the general principles in ASC 740 such as recognizing deferred taxes for equity investments, the incremental approach to performing intra-period tax allocation and calculating income taxes in interim periods. The standard also simplifies accounting for income taxes under U.S. GAAP by clarifying and amending existing guidance, including the recognition of deferred taxes for goodwill, the allocation of taxes to members of a consolidated group and requiring that an entity reflect the effect of enacted changes in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The Company adopted ASC 2019-12 effective July 1, 2021, which did not have a material impact on its consolidated financial statements or disclosures.

NOTE 3 - SEGMENT REPORTING 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 Company’s Chief Executive Officer or “CODM”) in making decisions on how to allocate resources and assess performance. The Company’s two operating segments are Lighting and Display Solutions (formerly known as the Graphics Segment), with one executive team under the organizational structure reporting directly to the CODM with responsibilities for managing each segment. Corporate and Eliminations, which captures the Company’s corporate administrative activities, is also reported in the segment information.

The Lighting Segment includes non-residential outdoor and indoor lighting fixtures utilizing LED light sources that have been fabricated and assembled for the Company’s markets, primarily the refueling and convenience store markets, parking lot and garage markets, quick-service restaurant market, retail and grocery store markets, the automotive market, the warehouse market, and the sports court and field market. The Company also services lighting product customers through the commercial and industrial project, stock and flow, and renovation channels. In addition to the manufacture and sale of lighting fixtures, the Company offers a variety of lighting controls to complement its lighting fixtures which include sensors, photocontrols, dimmers, motion detection and Bluetooth systems. ~~The Company also services lighting product customers through the commercial and industrial project, stock and flow, and renovation channels.~~ The Lighting Segment also includes the design, engineering and manufacturing of electronic circuit boards, assemblies and sub-assemblies which are sold directly to customers.

The Display Solutions Segment manufactures, sells and installs exterior and interior visual image and display elements, including printed graphics, structural graphics, digital signage, menu board systems, display fixtures, refrigerated displays, and custom display elements. These products are used in visual image programs in several markets including the refueling and convenience store markets, parking lot and garage markets, quick-service restaurant market, retail and grocery store markets, the automotive market, the warehouse market, and the sports court and field market. The Display Solutions Segment also provides a variety of project management services to complement our display elements, such as installation management, site surveys, permitting, and content management which are offered to our customers to support our digital signage.

The Company’s corporate administration activities are reported in the Corporate and Eliminations line item. These activities primarily include intercompany profit in inventory eliminations, expense related to certain corporate officers and support staff, the Company’s internal audit staff, expense related to the Company’s Board of Directors, equity compensation expense for various equity awards granted to corporate administration employees, certain consulting expenses, investor relations activities, and a portion of the Company’s legal, auditing, and professional fee expenses. Corporate identifiable assets primarily consist of cash, invested cash (if any), refundable income taxes (if any), and deferred income taxes.

There were no customers or customer programs representing a concentration of 10% or more of the Company’s consolidated net sales in the three and nine months ended ~~September 30,~~March 31, 2023, or March 31, 2022. There was ~~One~~no ~~customer program in the Display Solutions Segment represents $12.3 million or 12%~~concentration of ~~the Company’s net sales in the three months ended September 30, 2021.~~accounts receivable at March 31, 2023. One customer in the Display Solutions Segment represents $8.5 million or ~~11%~~10.9% of the Company’s accounts receivable at ~~September~~June 30, 2022. ~~There was no concentration of accounts receivable at September 30, 2021.~~

~~Page 11~~

Summarized financial information for the Company’s operating segments is provided for the indicated periods and as of ~~September 30, 2022,~~March 31, 2023, and ~~September 30, 2021:~~March 31, 2022:

	Three Months Ended				Nine Months Ended
(In thousands)	March 31				March 31
	2023		2022		2023		2022
Net Sales:
Lighting Segment	$	66,707	$	57,126	$	201,074	$	165,662
Display Solutions Segment		50,763		52,985		172,269		161,989
	$	117,470	$	110,111	$	373,343	$	327,651

	Three Months Ended
(In thousands)	September 30
	2022			2021
Net Sales:
Lighting Segment	$	67,533		$	51,260
Display Solutions Segment		59,536			55,137
	$	127,069		$	106,397

Operating Income (Loss):
Lighting Segment	$	9,158		$	4,339		$	6,529		$	4,959		$	22,441		$	13,921
Display Solutions Segment		6,496			3,749			5,501			4,556			19,759			12,142
Corporate and Eliminations		(5,633	)		(3,644	)		(4,298	)		(4,354	)		(15,409	)		(12,036	)
	$	10,021		$	4,444		$	7,732		$	5,161		$	26,791		$	14,027

Capital Expenditures:
Lighting Segment	$	249		$	180
Display Solutions Segment		162			221
Corporate and Eliminations		23			(104	)
	$	434		$	297

Depreciation and Amortization:
Lighting Segment	$	1,387		$	1,461
Display Solutions Segment		974			1,031
Corporate and Eliminations		60			71
	$	2,421		$	2,563

	September 30, 2022		June 30, 2022
Total Assets:
Capital Expenditures:
Lighting Segment	$	151,856	$	152,431	$	402	$	272	$	725		$	624
Display Solutions Segment		160,099		152,302		338		185		1,038			660
Corporate and Eliminations		7,546		6,347		19		74		(9	)		(8	)
	$	319,501	$	311,080	$	759	$	531	$	1,754		$	1,276

Depreciation and Amortization:
Lighting Segment	$	1,344	$	1,450	$	4,113	$	4,361
Display Solutions Segment		1,044		1,021		2,993		3,068
Corporate and Eliminations		67		60		189		203
	$	2,455	$	2,531	$	7,295	$	7,632

	March 31, 2023		June 30, 2022
Identifiable Assets:
Lighting Segment	$	142,656	$	152,431
Display Solutions Segment		140,666		152,302
Corporate and Eliminations		7,697		6,347
	$	291,019	$	311,080

The segment net sales reported above represent sales to external customers. Segment operating income, which is used in management’s evaluation of segment performance, represents net sales less all operating expenses. Identifiable assets are those assets used by each segment in its operations.

The Company records a 10% mark-up on intersegment revenues. Any intersegment profit in inventory is eliminated in consolidation. Intersegment revenues were eliminated in consolidation as follows:

~~Inter-segment sales~~

Three Months Ended

(In thousands)

September 30

2022

2021

Lighting Segment inter-segment net sales
$ 6,143 $ 10,457

Display Solutions Segment inter-segment net sales
$ 66 $ 163

Inter-segment sales
	Three Months Ended				Nine Months Ended
(In thousands)	March 31				March 31
	2023		2022		2023		2022
Lighting Segment inter-segment net sales	$	5,101	$	5,683	$	16,312	$	27,406

Display Solutions Segment inter-segment net sales	$	175	$	54	$	139	$	289

The Company’s operations are located solely within North America. As a result, the geographic distribution of the Company’s net sales and long-lived assets originate within North America.

~~Page 12~~

NOTE 4 - EARNINGS PER COMMON SHARE

The following table presents the amounts used to compute basic and diluted earnings per common share, as well as the effect of dilutive potential common shares on weighted average shares outstanding (in thousands, except per share data):

Three Months Ended

September 30

2022

2021

BASIC EARNINGS PER SHARE

Net income
$ 6,262 $ 3,133

Weighted average shares outstanding during the period, net of treasury shares
26,730 26,553
Weighted average vested restricted stock units outstanding
46 17
Weighted average shares outstanding in the Deferred Compensation Plan during the period
865 426
Weighted average shares outstanding
27,641 26,996

Basic earnings per common share
$ 0.23 $ 0.12

DILUTED EARNINGS PER SHARE

Net income
$ 6,262 $ 3,133

Weighted average shares outstanding:

Basic
27,641 26,996

Effect of dilutive securities (a):

Impact of common shares to be issued under stock option plans, and contingently issuable shares, if any
1,023 747
Weighted average shares outstanding
28,664 27,743

Diluted earnings per common share
$ 0.22 $ 0.11

Anti-dilutive securities (b)
213 989

	Three Months Ended				Nine Months Ended
	March 31				March 31
	2023		2022		2023		2022

BASIC EARNINGS PER SHARE

Net income	$	4,669	$	3,618	$	17,347	$	9,856

Weighted average shares outstanding during the period, net of treasury shares		27,376		26,642		27,050		26,606
Weighted average vested restricted stock units outstanding		52		31		70		26
Weighted average shares outstanding in the Deferred Compensation Plan during the period		878		705		892		588
Weighted average shares outstanding		28,306		27,378		28,012		27,220

Basic income per share	$	0.16	$	0.13	$	0.62	$	0.36


DILUTED EARNINGS PER SHARE

Net income	$	4,669	$	3,618	$	17,347	$	9,856

Weighted average shares outstanding:

Basic		28,306		27,378		28,012		27,220

Effect of dilutive securities (a):
Impact of common shares to be issued under stock option plans, and contingently issuable shares, if any		1,305		705		1,043		725
Weighted average shares outstanding		29,611		28,083		29,055		27,945

Diluted income per share	$	0.16	$	0.13	$	0.60	$	0.35


Anti-dilutive securities (b)		-		1,427		181		1,043

(a)

Calculated using the “Treasury Stock” method as if dilutive securities were exercised and the funds were used to purchase common shares at the average market price during the period.

(b)

Anti-dilutive securities were excluded from the computation of diluted net income per share for the three months ended ~~September 30,~~March 31, 2023, and March 31, 2022, ~~and September 30, 2021,~~ because the exercise price was greater than the average fair market price of the common shares or because the assumed proceeds from the award’s exercise or vesting was greater than the average fair market price of the common shares.

~~Page~~ 13

NOTE 5 – INVENTORIES, NET

The following information is provided as of the dates indicated:

	September 30,		June 30,		March 31,		June 30,
(In thousands)	2022		2022		2023		2022

Inventories:
Raw materials	$	53,962	$	51,637	$	49,946	$	51,637
Work-in-progress		6,156		3,029		7,800		3,029
Finished goods		20,339		19,755		9,915		19,755
Total Inventories	$	80,457	$	74,421	$	67,661	$	74,421

NOTE 6 - ACCRUED EXPENSES

The following information is provided as of the dates indicated:

	September 30,		June 30,		March 31,		June 30,
(In thousands)	2022		2022		2023		2022

Accrued Expenses:
Customer prepayments	$	6,204	$	6,416	$	3,847	$	6,416
Compensation and benefits		8,752		9,611		12,683		9,611
Accrued warranty		4,319		4,491		5,127		4,491
Operating lease liabilities		1,187		1,274		1,290		1,274
Accrued sales commissions		2,506		4,783		5,629		4,783
Accrued Freight		4,139		3,680
Accrued freight						3,625		3,680
Accrued FICA		1,161		1,122		546		1,122
Finance lease liabilities		280		275		325		275
Accrued income tax		1,835		109		-		109
Other accrued expenses		4,848		4,503		4,645		4,503
Total Accrued Expenses	$	35,231	$	36,264	$	37,717	$	36,264

NOTE 7 - 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 Company’s impairment testing continues with the estimation of the fair value of the reporting unit using a combination of a market approach and an income (discounted cash flow) approach, at the reporting unit level. The estimation of the fair value of reporting unit requires significant management judgment with respect to revenue and expense growth rates, changes in working capital and the selection and use of an appropriate discount rate. The 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 annual impairment tests. Indicators such as adverse business conditions, economic factors and technological change or competitive activities may signal that an asset has become impaired.

The Company identified its reporting units in conjunction with its annual goodwill impairment testing. The Company has a total of three reporting units that contain goodwill. One reporting unit is within the Lighting Segment and two reporting units are within the Display Solutions Segment. The tradename intangible assets have an indefinite life and are also tested separately on an annual basis. The Company relies upon a number of factors, judgments and estimates when conducting its impairment testing including, but not limited to, the Company’s stock price, operating results, forecasts, anticipated future cash flows, and marketplace data. There are inherent uncertainties related to these factors and judgments in applying them to the analysis of goodwill impairment.

~~Page 14~~

As of March 1, 2023, the Company performed its annual preliminary goodwill impairment test on the three reporting units that contain goodwill. The preliminary goodwill impairment test of the reporting unit in the Lighting Segment passed with a business enterprise value of $34.4 million or 21% above the carrying value of the reporting unit including goodwill. The preliminary goodwill impairment test of one reporting unit with goodwill in the Display Solutions Segment passed with an estimated business enterprise value of $13.6 million or 5,426% above the carrying value of the reporting unit including goodwill. The preliminary goodwill impairment test of the second reporting unit with goodwill in the Display Solutions Segment passed with an estimated business enterprise value of $99.4 million or 15% above the carrying value of the reporting unit including goodwill. The definitive impairment test is expected to be completed in the fourth quarter of fiscal 2023. It is anticipated that the results of the definitive test will not change when the test is complete

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

Goodwill
(In thousands)				Display									Display
	Lighting			Solutions						Lighting			Solutions
	Segment			Segment			Total			Segment			Segment			Total
Balance as of September 30, 2022
Balance as of March 31, 2023
Goodwill	$	70,971		$	63,347		$	134,318		$	70,971		$	63,347		$	134,318
Accumulated impairment losses		(61,763	)		(27,525	)		(89,288	)		(61,763	)		(27,525	)		(89,288	)
Goodwill, net as of September 30, 2022	$	9,208		$	35,822		$	45,030
Goodwill, net as of March 31, 2023										$	9,208		$	35,822		$	45,030

Balance as of June 30, 2022
Goodwill	$	70,971		$	63,347		$	134,318		$	70,971		$	63,347		$	134,318
Accumulated impairment losses		(61,763	)		(27,525	)		(89,288	)		(61,763	)		(27,525	)		(89,288	)
Goodwill, net as of June 30, 2022	$	9,208		$	35,822		$	45,030		$	9,208		$	35,822		$	45,030

The Company has two indefinite-lived intangible assets. The Company performed its annual review of indefinite-lived intangible assets as of March 1, 2023, and determined there was no impairment. The preliminary impairment test of the first indefinite-lived intangible asset passed with a fair market value of $17.0 million or 399% above its carrying value. The preliminary impairment test of the second indefinite-lived intangible asset passed with a fair market value of and $10.5 million or 21% above its carrying value. The definitive indefinite-lived impairment test is expected to be completed in the fourth quarter of fiscal 2023. It is anticipated that the results of the definitive test will not change when the test is complete.

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

Other Intangible Assets
	September 30, 2022						March 31, 2023
(In thousands)	Gross						Gross
	Carrying		Accumulated		Net		Carrying		Accumulated		Net
	Amount		Amortization		Amount		Amount		Amortization		Amount
Amortized Intangible Assets
Customer relationships	$	62,083	$	15,254	$	46,829	$	62,083	$	16,962	$	45,121
Patents		268		268		-		268		268		-
LED technology firmware, software		20,966		14,895		6,071		20,966		15,486		5,480
Trade name		2,658		1,075		1,583		2,658		1,129		1,529
Non-compete		260		71		189		260		98		162
Total Amortized Intangible Assets		86,235		31,563		54,672		86,235		33,943		52,292

Indefinite-lived Intangible Assets
Trademarks and trade names		12,102		-		12,102		12,102		-		12,102
Total indefinite-lived Intangible Assets		12,102		-		12,102		12,102		-		12,102

Total Other Intangible Assets	$	98,337	$	31,563	$	66,774	$	98,337	$	33,943	$	64,394

Other Intangible Assets
	June 30, 2022
(In thousands)	Gross
	Carrying		Accumulated		Net
	Amount		Amortization		Amount
Amortized Intangible Assets
Customer relationships	$	62,083	$	14,400	$	47,683
Patents		268		268		-
LED technology firmware, software		20,966		14,598		6,368
Trade name		2,658		1,049		1,609
Non-compete		260		58		202
Total Amortized Intangible Assets		86,235		30,373		55,862

Indefinite-lived Intangible Assets
Trademarks and trade names		12,102		-		12,102
Total indefinite-lived Intangible Assets		12,102		-		12,102

Total Other Intangible Assets	$	98,337	$	30,373	$	67,964

~~Page 15~~16

	Three Months Ended				Three Months Ended				Nine Months Ended
	September 30				March 31				March 31
(In thousands)	2022		2021		2023		2022		2023		2022

Amortization Expense of Other Intangible Assets	$	1,190	$	1,215	$	1,190	$	1,198	$	3,570	$	3,611

The Company expects to record annual amortization expense as follows:

(In thousands)

2023	$	3,618	$	4,808
2024		4,760		4,760
2025		4,760		4,760
2026		4,760		4,760
2027		4,754		4,754
After 2027		32,020		32,020

NOTE 8 - DEBT

The Company’s long-term debt as of ~~September 30, 2022,~~March 31, 2023, and June 30, 2022, consisted of the following:

	September 30,		June 30,		March 31,		June 30,
(In thousands)	2022		2022		2023		2022

Secured line of credit	$	56,144	$	57,275	$	29,930	$	57,275
Term loan, net of debt issuance costs of $26 and $30, respectively		21,402		22,321
Term loan, net of debt issuance costs of $22 and $30, respectively						19,643		22,321
Total debt		77,546		79,596		49,573		79,596
Less: amounts due within one year		3,571		3,571		3,571		3,571
Total amounts due after one year, net	$	73,975	$	76,025	$	46,002	$	76,025

In September 2021, the Company amended its existing $100 million secured line of credit, to a $25 million term loan and $75 million remaining as a secured revolving line of credit. Both facilities expire in the third quarter of fiscal 2026. The principal of the term loan is repaid annually in the amount of $3.6 million over a ~~five-year~~five-year period with a balloon payment of the remaining balance due on the last month. Interest on both the revolving line of credit and the term loan is charged based upon an increment over the LIBOR rate or a base rate, at the Company’s 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 LIBOR Rate plus 100 basis points as long as a Daily LIBOR rate is offered, ascertainable and not unlawful. The increment over the LIBOR borrowing rate fluctuates between 100 and 225 basis points, and the increment over the Base Rate fluctuates between 0 and 125 basis points, both of which depend upon the ratio of indebtedness to earnings before interest, taxes, depreciation, and amortization (“EBITDA”), as defined in the line of credit agreement. As of ~~September 30, 2022,~~March 31, 2023, the Company’s borrowing rate against its revolving line of credit was ~~4.8%~~6.3%. The increment over LIBOR borrowing rate will be ~~175~~125 basis points for the ~~second~~fourth quarter of fiscal 2023. The fee on the unused balance of the $75 million committed line of credit fluctuates between 15 and 25 basis points. Under the terms of this line of credit, the Company has agreed to a negative pledge of real estate assets and is required to comply with financial covenants that limit the ratio of indebtedness to EBITDA and require a minimum fixed charge ratio. As of ~~September 30, 2022,~~March 31, 2023, there was ~~$18.9~~$45.1 million available for borrowing under the $75 million line of credit.

The Company is in compliance with all of its loan covenants as of ~~September 30, 2022.~~March 31, 2023.

NOTE 9 - CASH DIVIDENDS

The Company paid cash dividends of ~~$1.4~~$4.1 million and ~~$1.3~~$4.0 million ~~in both~~for the ~~three~~nine months ended ~~September 30,~~March 31, 2023, and March 31, 2022, ~~and September 30, 2021,~~ respectively. Dividends on restricted stock units in the amount of $0.2 million and $0.1 million were accrued as of both September 30, 2022, and 2021, respectively. These dividends will be paid upon the vesting of the restricted stock and performance stock units when shares are issued to the award recipients. In ~~November 2022,~~April 2023, the Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable ~~November 22, 2022,~~May 16, 2023, to shareholders of record as of ~~November 14, 2022.~~May 8, 2023. The indicated annual cash dividend rate is $0.20 per share.

~~Page 16~~17

NOTE 10 – EQUITY COMPENSATION

In November 2022, the Company’s shareholders approved anthe amendment toand restatement of the 2019 Omnibus Award Plan (“2019 Omnibus Plan”) which increased the number of shares authorized for issuance under the plan by 2,350,000 and ~~to remove~~removed the Plan’s fungible share counting feature. The purpose of the 2019 Omnibus Plan is to provide a means ~~through which the Company may~~to attract and retain key personnel and to ~~provide a means by which~~align the interests of the directors, officers, and employees ~~can~~with the Company’s shareholders. The plan also provides a vehicle whereby directors and officers may acquire ~~and maintain an equity interest~~shares in order to meet the ~~Company. The number of shares that remain reserved for issuance~~ownership requirements under the ~~2019 Omnibus Plan prior to the amendment of the Plan equates to 1,253,908 as of September 30, 2022.~~Company’s Stock Ownership Policy. The 2019 Omnibus Plan allows for the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock units ~~(“RSUs”),~~RSUs, performance stock units (“PSUs”) and other ~~stock-based~~ awards. Except for Restricted Stock Unit (“RSU”) grants which are time-based, participants in the Company’s Long-Term Equity Compensation Plans are awarded the opportunity to acquire shares over a three-year performance measurement period tied to specific company performance metrics. The number of shares that remain reserved for issuance under the 2019 Omnibus Plan equates to 2,463,673 as of March 31, 2023.

In the ~~three months ended September 30, 2022,~~first quarter of fiscal 2023, the Company granted 164,348 PSU’s and ~~196,522~~197,915 RSU’s, both with a weighted average market value of $6.90. Stock compensation expense was ~~$0.6~~$0.9 million and $0.8 million for ~~both~~ the three months ended ~~September 30,~~March 31, 2023, and 2022, respectively, and ~~2021.~~$2.3 million and $2.5 million in the nine months ended March 31, 2023, and 2022, respectively.

NOTE 11 - SUPPLEMENTAL CASH FLOW INFORMATION

Three Months Ended

(In thousands)

September 30

2022

2021

Cash Payments:

Interest
$ 679 $ 203
Income taxes
$ 664 $ 1,183

Non-cash investing and financing activities

Issuance of common shares as compensation
$ 75 $ 75
Issuance of common shares to fund deferred compensation plan
$ 539 $ 2,042

	Nine Months Ended
(In thousands)	March 31
	2023		2022
Cash Payments:
Interest	$	2,325	$	1,067
Income taxes	$	7,808	$	3,581

Non-cash investing and financing activities
Issuance of common shares as compensation	$	270	$	225
Issuance of common shares to fund deferred compensation plan	$	1,530	$	3,089
Issuance of common shares to fund ESPP plan	$	97	$	-

NOTE 12 - 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~~Because it is not possible to predict with certainty the outcome or costs of these matters, the Company does not disclose a range of potential ~~loss because the likelihood of such a loss is remote.~~losses. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position, results of operations, cash flows or liquidity.

The Company may occasionally issue a standby letter of credit in favor of third parties. As of ~~September 30, 2022,~~March 31, 2023, there were no such standby letters of credit issued.

NOTE 13 - LEASES

The Company leases certain manufacturing facilities along with a small office space, several forklifts, several small tooling items, and various items of office equipment. The Company also acquired buildings, machinery, and forklift leases with the acquisition of JSI, as well as one sublease. All but two of the Company’s leases are operating leases. Leases have a remaining term of one to seven years some of which have an option to renew. The Company does not assume renewals in determining the lease term unless the renewals are deemed reasonably certain. The lease agreements do not contain any material residual guarantees or material variable lease payments.

The Company has periodically entered into short-term operating leases with an initial term of twelve months or less. The Company elected not to record these leases on the balance sheet. For the three and nine months ended ~~September 30,~~March 31, 2023, and 2022, ~~and 2021,~~ the rent expense for these leases is immaterial.

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

Lease expense is recognized on a straight-line basis over the lease term. The Company used its incremental borrowing rate when determining the present value of lease payments.

	Three Months Ended						Nine Months Ended
	March 31						March 31
(In thousands)	2023			2022			2023			2022

Operating lease cost	$	884		$	868		$	2,661		$	2,617
Financing lease cost:
Amortization of right of use assets		74			74			221			221
Interest on lease liabilities		16			19			51			61
Variable lease cost		22			22			65			65
Sublease income		(116	)		(94	)		(348	)		(283	)
Total lease cost	$	880		$	889		$	2,650		$	2,681

Supplemental Cash Flow Information:
	Nine Months Ended
	March 31
(In thousands)	2023		2022

Cash flows from operating leases
Fixed payments - operating cash flows	$	2,754	$	2,669
Liability reduction - operating cash flows	$	2,451	$	2,271

Cash flows from finance leases
Interest - operating cash flows	$	51	$	61
Repayments of principal portion - financing cash flows	$	192	$	196

Operating Leases:	March 31,			June 30,
	2023			2022

Total operating right-of-use assets	$	6,770		$	8,664

Accrued expenses (Current liabilities)	$	1,290		$	1,274
Long-term operating lease liability		6,115			8,240
Total operating lease liabilities	$	7,405		$	9,514

Weighted Average remaining Lease Term (in years)		2.52			3.05

Weighted Average Discount Rate		4.82	%		4.81	%

Finance Leases:	March 31,			June 30,
	2023			2022

Buildings under finance leases	$	2,033		$	2,033
Equipment under finance leases		30			11
Accumulated depreciation		(867	)		(634	)
Total finance lease assets, net	$	1,196		$	1,410

Accrued expenses (Current liabilities)	$	325		$	275
Long-term finance lease liability		1,036			1,246
Total finance lease liabilities	$	1,361		$	1,521

Weighted Average remaining Lease Term (in years)		4.06			4.80

Weighted Average Discount Rate		4.86	%		4.86	%

~~Page 17~~

Three Months Ended

September 30

(In thousands)

2022

2021

Operating lease cost
$ 863 $ 879
Financing lease cost:

Amortization of right of use assets
74 74
Interest on lease liabilities
18 21
Variable lease cost
22 22
Sublease income
(116 ) (94 )
Total lease cost
$ 861 $ 902

Supplemental Cash Flow Information:

Three Months Ended

September 30

(In thousands)

2022

2021

Cash flows from operating leases

Fixed payments - operating cash flows
$ 885 $ 887
Liability reduction - operating cash flows
$ 779 $ 744

Cash flows from finance leases

Interest - operating cash flows
$ 18 $ 21
Repayments of principal portion - financing cash flows
$ 66 $ 64

Operating Leases:

September 30,

June 30,

2022

2022

Total operating right-of-use assets
$ 7,826 $ 8,664

Accrued expenses (Current liabilities)
$ 1,187 $ 1,274
Long-term operating lease liability
7,381 8,240
Total operating lease liabilities
$ 8,568 $ 9,514

Weighted Average remaining Lease Term (in years)
2.83 3.05

Weighted Average Discount Rate
4.82 % 4.81 %

Finance Leases:

September 30,

June 30,

2022

2022

Buildings under finance leases
$ 2,033 $ 2,033
Equipment under finance leases
30 30
Accumulated depreciation
(719 ) (634 )
Total finance lease assets, net
$ 1,344 $ 1,429

Accrued expenses (Current liabilities)
$ 280 $ 275
Long-term finance lease liability
1,174 1,246
Total finance lease liabilities
$ 1,454 $ 1,521

Weighted Average remaining Lease Term (in years)
4.54 4.80

Weighted Average Discount Rate
4.86 % 4.86 %

~~Page 18~~

												Operating
												Lease			Finance Lease			Operating			Net Lease
Maturities of Lease Liability:	Operating Lease Liabilities			Finance Lease Liabilities			Operating Subleases		Net Lease Commitments			Liabilities			Liabilities			Subleases			Commitments
2023	$	2,792		$	275		$	377	$	3,444		$	1,235		$	182		$	(94	)	$	1,323
2024		3,285			337			377		3,999			3,399			337			(377	)		3,359
2025		2,136			362			31		2,529			2,253			362			(31	)		2,584
2026		835			362			-		1,197			952			362						1,314
2027		215			303			-		518			323			303						626
Thereafter		4			-			-		4			4									4
Total lease payments	$	9,267		$	1,639		$	785	$	11,691		$	8,166		$	1,546		$	(502	)	$	9,210
Less: Interest		(699	)		(185	)				(884	)		(761	)		(185	)					(946	)
Present Value of Lease Liabilities	$	8,568		$	1,454				$	10,807		$	7,405		$	1,361					$	8,264

NOTE 1614 – INCOME TAXES

The Company's effective income tax rate is based on expected income, statutory rates and tax planning opportunities available in the various jurisdictions in which it operates. The Company operated in the United States of America, Canada, Mexico and Puerto Rico for the nine months ended March 31, 2023, and the Company operated in the United States of America, Canada, and Mexico for the nine months ended March 31, 2022. For interim financial reporting, the Company estimates the annual income tax rate based on projected taxable income for the full year and records a quarterly income tax provision or benefit in accordance with the anticipated annual rate. The Company refines the estimates of the year's taxable income as new information becomes available, including actual year-to-date financial results. This continual estimation process often results in a change to the expected effective income tax rate for the year. When this occurs, the Company adjusts the income tax provision during the quarter in which the change in estimate occurs so that the year-to-date provision reflects the expected income tax rate. Significant judgment is required in determining the effective tax rate and in evaluating tax positions.

	Three Months Ended						Three Months Ended						Nine Months Ended
	September 30						March 31						March 31
	2022			2021			2023			2022			2023			2022
Reconciliation of effective tax rate:

Provision for income taxes at the anticipated annual tax rate		26.20	%		24.2	%		30.5	%		22.4	%		25.9	%		23.4	%
Uncertain tax positions		1.0			0.8			1.2			0.5			0.3			(0.8	)
Deferred Income Tax Adjustment		1.6			-
Other								0.7			-			0.2			-
Share-based compensation		1.8			(0.8	)		0.2			-			0.6			(0.2	)
Effective tax rate		30.6	%		24.2	%		32.6	%		22.9	%		27.0	%		22.4	%

~~Page 19~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Note About Forward-Looking Statements

This report includes estimates, projections, statements relating to our business plans, objectives, and expected operating results that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may appear throughout this report, including this section. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “focus,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties that may cause actual results to differ materially. We describe risks and uncertainties that could cause actual results and events to differ materially in in our Annual Report on Form 10-K in the following sections: “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Quantitative and Qualitative Disclosures about Market Risk,” and “Risk Factors.” All of those risks and uncertainties are incorporated herein by reference. We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or otherwise.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the results of operations and financial condition of LSI Industries Inc. MD&A is provided as a supplement to, and should be read in conjunction with, our Annual Report on Form 10-K for the year ended June 30, 2022, and our financial statements and the accompanying Notes to Financial Statements (Part I, Item 1 of this Form 10-Q).

Our condensed consolidated financial statements, accompanying notes and the “Safe Harbor” Statement, each as appearing earlier in this report, should be referred to in conjunction with this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Summary of Consolidated Results

Net Sales by Business Segment
	Three Months Ended				Nine Months Ended
	March 31				March 31
(In thousands)	2023		2022		2023		2022

Lighting Segment	$	66,707	$	57,126	$	201,074	$	165,662
Display Solutions Segment		50,763		52,985		172,269		161,989
	$	117,470	$	110,111	$	373,343	$	327,651

Net Sales by Business Segment

Three Months Ended

September 30

(In thousands)

2022

2021

Lighting Segment
$ 67,533 $ 51,260
Display Solutions Segment
59,536 55,137
$ 127,069 $ 106,397

Operating Income (Loss) by Business Segment

Three Months Ended

September 30

(In thousands)

2022

2021

Lighting Segment
$ 9,158 $ 4,339
Display Solutions Segment
6,496 3,749
Corporate and Eliminations
(5,633 ) (3,644 )
$ 10,021 $ 4,444

Operating Income (Loss) by Business Segment
	Three Months Ended						Nine Months Ended
	March 31						March 31
(In thousands)	2023			2022			2023			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	)
	$	7,732		$	5,161		$	26,791		$	14,027

Net sales of ~~$127.1~~$117.5 million for the three months ended ~~September 30, 2022,~~March 31, 2023, increased ~~$20.7~~$7.4 million or ~~19%~~7% as compared to net sales of ~~$106.4~~$110.1 million for the three months ended ~~September 30, 2021.~~March 31, 2022. Net sales were driven by increased net sales of the Lighting Segment (an increase of ~~$16.2~~$9.6 million or ~~32%~~17%) ~~and increased~~partially offset by decreased net sales of the Display Solutions Segment (a decrease of $2.2 million or 4%). The 17% growth in the Lighting Segment was driven by continued growth in both indoor and outdoor applications, across multiple verticals. The 4% decline in the Display Solutions Segment was due to changes in the timing of shipments and completion of several large digital signage programs, while transitioning to new programs.

Net sales of $373.3 million for the nine months ended March 31, 2023, increased $45.7 million or 14% as compared to net sales of $327.7 million for the nine months ended March 31, 2022. Net sales were driven by increased net sales in both Lighting Segment (an increase of ~~$4.4~~$35.4 million or 8%21%) and the Display Solutions Segment (an increase of $10.3 million or 6%). ~~Growth in both reportable segments reflects the ongoing strength in demand levels from our~~The Company continues to make progress on its key ~~vertical markets, focusing on higher-value applications where our differentiated~~growth initiatives, including cross selling products ~~and solutions meet the unique requirements of our~~to grow existing customers as well as programs to attain new customers.

~~Page 20~~21

Operating income of ~~$10.0~~$7.7 million for the three months ended ~~September 30, 2022,~~March 31, 2023, represents a ~~$5.6~~$2.6 million increase from operating income of ~~$4.4~~$5.1 million in the three months ended ~~September 30, 2021.~~March 31, 2022. Adjusted operating income, a Non-GAAP measure, was ~~$10.9~~$8.8 million in the three months ended ~~September 30, 2022,~~March 31, 2023, compared to ~~$5.0~~$6.0 million in the three months ended ~~September 30, 2021.~~March 31, 2022. Refer to “Non-GAAP Financial Measures” below for a reconciliation of Non-GAAP financial measures to U.S. GAAP measures. The increase in operating income was the result of increased volume leveraged by a ~~higher-value~~higher value sales mix, continued price ~~realization offsetting inflation,~~discipline coupled with improved program pricing, and continued effective cost ~~management.The~~management.

Operating income of $26.8 million for the nine months ended March 31, 2023, represents a $12.8 million increase from operating income of $14.0 million in the nine months ended March 31, 2022. Adjusted operating income, a Non-GAAP financial measure, was $30.2 million in the nine months ended March 31, 2023, compared to $16.9 million in the nine months ended March 31, 2022. Refer to “Non-GAAP Financial Measures” below for a reconciliation of Non-GAAP financial measures to U.S. GAAP measures. The Company continues to focus on actions such as the introduction of new products and the cross selling of existing products, which increase its value and importance to customers in verticals where the Company sees profitable growth.

Non-GAAP Financial Measures

We believe it is appropriate to evaluate our performance after making adjustments to the as-reported U.S. GAAP operating income, net income, and earnings per share. Adjusted operating income, net income, and earnings per share, which exclude the impact of ~~stock~~long-term performance based compensation expense, severance costs, acquisition costs, and consulting expense related to commercial growth initiatives, are Non-GAAP financial measures. Also included below are Non-GAAP financial measures including Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA and Adjusted EBITDA), Free Cash Flow, ~~and~~ Net Debt to Adjusted ~~EBITDA.~~EBITDA, and free cash flow. We believe that these adjusted supplemental measures are useful in assessing the operating performance of our business. These supplemental measures are used by our management, including our chief operating decision maker, to evaluate business results. Although the impacts of some of these items have been recognized in prior periods and could recur in future periods, we exclude these items because they provide greater comparability and enhanced visibility into our results of operations. These non-GAAP measures may be different from non-GAAP measures used by other companies. In addition, the non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP measures have limitations, in that they do not reflect all amounts associated with our results as determined in accordance with U.S. GAAP. Therefore, these measures should be used only to evaluate our results in conjunction with corresponding GAAP measures. Below is a reconciliation of these Non-GAAP measures to operating income, net income, and earnings per share for the periods indicated along with the calculation of EBITDA and Adjusted EBITDA, Free Cash Flow, and Net Debt to Adjusted EBITDA.

Reconciliation of net income to adjusted net income

Three Months Ended

September 30

(In thousands, except per share data)

2022

2021

Diluted EPS

Diluted EPS

Net Income as reported
$ 6,262 $ 0.22 $ 3,133 $ 0.11

Stock compensation expense
420 (1 ) 0.01 407 (5 ) 0.02

Consulting expense: Commercial Growth Initiatives
226 (2 ) 0.01 - -

Severance costs
9 (3 ) - - -

Tax rate difference between reported and adjusted net income
160 (4 ) 0.01 - -

Net Income adjusted
$ 7,077 $ 0.25 $ 3,540 $ 0.13

Reconciliation of operating income to adjusted operating income:

	Three Months Ended
	March 31
(In thousands)	2023		2022

Operating Income as reported	$	7,732	$	5,161

Long-Term Performance Based Compensation		968		780

Consulting expense: Commercial Growth Initiatives		75		-

Acquisition Costs		-		21

Severance costs		-		5

Adjusted Operating Income	$	8,775	$	5,967

Reconciliation of operating income to adjusted net income:

	Three Months Ended
	March 31
(In thousands, except per share data)	2023					2022
		Diluted EPS					Diluted EPS

Net Income as reported	$	4,669		$	0.16	$	3,618		$	0.13

Long-Term Performance Based Compensation		769	(1)		0.03		576	(3)		0.02

Consulting expense: Commercial Growth Initiatives		59	(2)		-		-			-

Acquisition Costs		-			-		16	(4)		-

Severance costs		-			-		4	(5)		-
Net Income adjusted	$	5,497		$	0.19	$	4,214		$	0.15

The following represents the income tax effects of the adjustments in the tables above, which were calculated using the estimated combined U.S., Canada and Mexico effective income tax rates for the periods indicated (in thousands):

⁽¹⁾~~$131~~$199

⁽²⁾~~$77~~$16

⁽³⁾$3$204

⁽⁴⁾~~$160~~$5

⁽⁵⁾~~$149~~$1

Reconciliation of operating income to adjusted operating income:

	Nine Months Ended
	March 31
(In thousands)	2023		2022

Operating Income as reported	$	26,791	$	14,027

Long-Term Performance Based Compensation		2,521		2,466

Consulting expense: Commercial Growth Initiatives		864		-

Acquisition costs		-		361

Severance costs		46		5

Adjusted Operating Income	$	30,222	$	16,859

~~Page 21~~23

Reconciliation of operating income to adjusted operating income:

Three Months Ended

September 30

(In thousands)

2022

2021

Operating Income as reported
$ 10,021 $ 4,444

Stock compensation expense
551 556
��
Consulting expense: Commercial Growth Initiatives
303 -

Severance costs
12 -

Adjusted Operating Income
$ 10,887 $ 5,000

Reconciliation of operating income to adjusted net income:

Reconciliation of operating income to EBITDA and Adjusted EBITDA

Three Months Ended

September 30

(In thousands)

2022

2021

Operating Income as reported
$ 10,021 $ 4,444

Depreciation and Amortization
2,421 2,563

EBITDA
$ 12,442 $ 7,007

Stock compensation expense
551 556
Consulting expense: Commercial Growth Initiatives
303 -
Severance costs
12 -

Adjusted EBITDA
$ 13,308 $ 7,563

	Nine Months Ended
	March 31
(In thousands, except per share data)	2023					2022
		Diluted EPS					Diluted EPS

Net Income as reported	$	17,347		$	0.60	$	9,856		$	0.35

Long-Term Performance Based Compensation		2,107	(1)		0.08		1,850	(4)		0.07

Consulting expense: Commercial Growth Initiatives		708	(2)		0.02		-			-

Acquisition costs		-			-		285	(5)		0.01

Severance costs		38	(3)		-		4	(6)		-
Net Income adjusted	$	20,200		$	0.70	$	11,995		$	0.43

(1) $414

Reconciliation of cash flow from operations to free cash flow

Three Months Ended

September 30

(In thousands)

2022

2021

Cash Flow from Operations
$ 10,583 $ (7,889 )

Capital expenditures
(434 ) (297 )

Free Cash Flow
$ 10,149 $ (8,186 )

(2) $156

(3) $8

(4) $616

(5) $76

(6) $1

Net Debt to Adjusted EBITDA

September 30,

(In thousands)

2022

2021

Current portion and long-term debt as reported
$ 3,571 $ 3,571

Long-Term Debt
73,975 76,025
Total Debt
77,546 79,596

Less: Cash and cash equivalents
9,028 2,570

Net Debt
$ 68,518 $ 77,026

Adjusted EBITDA - Trailing 12 Months
$ 40,836 $ 30,907

Net Debt to Adjusted EBITDA
1.7 2.5

Reconciliation of operating income to EBITDA and Adjusted EBITDA
	Three Months Ended						Nine Months Ended
	March 31						March 31
(In thousands)	2023			2022			2023		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

~~Page 22~~24

Reconciliation of cash flow from operations to free cash flow
	Three Months Ended						Nine Months Ended
	March 31						March 31
(In thousands)	2023			2022			2023			2022

Cash Flow from Operations	$	12,486		$	3,875		$	32,548		$	(12,668	)

Capital expenditures		(759	)		(531	)		(1,754	)		(1,276	)

Free Cash Flow	$	11,727		$	3,344		$	30,794		$	(13,944	)

Net Debt to Adjusted EBITDA
	March 31,			March 31,
(In thousands)	2023			2022

Current portion and long-term debt as reported	$	3,571		$	3,571

Long-Term Debt		46,002			81,387
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		1.0			2.7

Results of Operations

THREE MONTHS ENDED ~~SEPTEMBER 30, 2022,~~MARCH 31, 2023, COMPARED TO THREE MONTHS ENDED ~~SEPTEMBER 30, 2021~~MARCH 31, 2022

Lighting Segment
	Three Months Ended				Three Months Ended
	September 30				March 31
(In thousands)	2022		2021		2023		2022

Net Sales	$	67,533	$	51,260	$	66,707	$	57,126
Gross Profit		22,279		15,457	$	20,278	$	16,654
Operating Income		9,158		4,339	$	6,529	$	4,959

Lighting Segment net sales of ~~$67.5~~$66.7 million in the three months ended ~~September 30, 2022,~~March 31, 2023, increased ~~32%~~17% from net sales of ~~$51.3~~$57.1 million in the same period in fiscal 2022. ~~Growth~~The 17% growth in the Lighting Segment was ~~broad-based, with sales increasing double digits~~driven by continued growth in both ~~project business~~indoor and ~~shipments to distributor stock.~~outdoor applications, across multiple verticals. The ~~Company’s efforts over the last two years to strengthen its lighting offering for select vertical market applications~~Company continues to ~~position LSI~~make progress in the market by increasing sales in all major verticals it serves with the introduction of new products, providing customers to ~~win additional business which has resulted in a growth in net sales.~~select from multiple features and price-points, based on their unique requirements.

Gross profit of ~~$22.3~~$20.3 million in the three months ended ~~September 30, 2022,~~March 31, 2023, increased ~~$6.8~~$3.6 million or ~~44%~~22% from the same period of fiscal 2022. Gross profit as a percentage of net sales was ~~33.0%~~30.4% in the three months ended ~~September 30, 2022,~~March 31, 2023, compared to ~~30.2%~~29.2% in the same period of fiscal 2022. The improvement in gross profit as a percentage of sales was driven by the increase in net sales resulting from the Company’s continued focus on verticals where it competes coupled with new product offerings, and ~~from targeted pricing actions to offset the impact~~continued price discipline, all of ~~inflation, and effective cost control.~~which in turn result in improved margins.

Operating expenses of ~~$13.1~~$13.7 million in the three months ended ~~September 30, 2022,~~March 31, 2023, increased $2.0 million from the same period of fiscal 2022, primarily driven by higher commission expense to its agent network as a result of higher net sales.

Lighting Segment operating income of ~~$9.2~~$6.5 million for the three months ended ~~September 30, 2022,~~March 31, 2023, increased ~~$4.8~~$1.5 million from operating income of ~~$4.3~~$5.0 million in the same period of fiscal 2022 primarily driven by sales volume and by an improvement in gross profit as a percentage of sales.

Display Solutions Segment
	Three Months Ended				Three Months Ended
	September 30				March 31
(In thousands)	2022		2021		2023		2022

Net Sales	$	59,536	$	55,137	$	50,763	$	52,985
Gross Profit	$	12,453	$	9,036	$	11,927	$	10,171
Operating Income	$	6,496	$	3,749	$	5,501	$	4,556

Display Solutions Segment net sales of ~~$59.5~~$50.8 million in the three months ended ~~September 30, 2022, increased $4.4~~March 31, 2023, decreased $2.2 million or 8%4% from net sales of ~~$55.1~~$53.0 million in the same period in fiscal 2022. The 4% decline in the Display Solutions Segment was driven by changes in the timing of shipments and completion of several large digital signage programs, while transitioning to new programs.

Gross profit of $11.9 million in the three months ended March 31, 2022, increased $1.8 million or 17% from the same period of fiscal 2022. Gross profit as a percentage of net sales in the three months ended March 31, 2023, was 23.5% compared to 19.2% in the same period of fiscal 2022. While sales were lower compared to the same period in the prior fiscal year, gross profit and gross profit as a percentage of sales improved. The improvement in gross profit as a percentage of sales was driven by improved program pricing and a favorable project mix.

Operating expenses of $6.4 million in the three months ended March 31, 2023, increased $0.8 million from $5.6 million in the same period of fiscal 2022. The increase of $0.8 million was driven by several factors including compensation, benefits, and commercial sales and marketing programs costs to support sales growth initiatives.

Display Solutions Segment operating income of $5.5 million in the three months ended March 31, 2023, increased $0.9 million from operating income of $4.6 million in the same period of fiscal 2022. The increase of $0.9 million was primarily driven by an improvement in gross profit as a percentage of sales.

Corporate and Eliminations
	Three Months Ended
	March 31
(In thousands)	2023			2022

Gross Profit (Loss)	$	(1	)	$	(32	)
Operating (Loss)	$	(4,298	)	$	(4,354	)

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

Operating expenses of $4.3 million in the three months ended March 31, 2023, remained flat from the same period of fiscal 2022 as a result of efforts to contain costs.

Consolidated Results

The Company reported $0.9 million and $0.5 million of net interest expense in the three months ended March 31, 2023, and March 31, 2022, respectively. The increase in interest expense is the result of increased borrowing costs. The Company also recorded other (income) of ($0.1) million in the three months ended March 31, 2023, and March 31, 2022, respectively, both of which are related to net foreign exchange currency transaction gains through our Mexican and Canadian subsidiaries.

The $2.3 million of income tax expense in the three months ended March 31, 2023, represents a consolidated effective tax rate of 32.6%. The $1.1 million of income tax expense in the three months ended March 31, 2022, represents a consolidated effective tax rate of 22.9%. The increase in the effective tax rate is primarily driven by an increase in pre-tax profits in the higher taxing jurisdictions of Puerto Rico and Canada along with unfavorable discrete tax adjustments.

The Company reported net income of $4.7 million in the three months ended March 31, 2023, compared to net income of $3.6 million in the three months ended March 31, 2022. Non-GAAP adjusted net income was $5.5 million for the three months ended March 31, 2023, compared to adjusted net income of $4.2 million for the three months ended March 31, 2022 (Refer to the Non-GAAP tables above). The increase in Non-GAAP adjusted net income is primarily the result of an increase in sales and an increase in the gross profit as a percentage of sales. Diluted earnings per share of $0.16 was reported in the three months ended March 31, 2023, as compared to $0.13 diluted earnings per share in the same period of fiscal 2022. The weighted average common shares outstanding for purposes of computing diluted earnings per share in the three months ended March 31, 2023, were 29,611,000 shares compared to 28,083,000 shares in the same period last year.

NINE MONTHS ENDED MARCH 31, 2023, COMPARED TO NINE MONTHS ENDED MARCH 31, 2022

Lighting Segment
	Nine Months Ended
	March 31
(In thousands)	2023		2022

Net Sales	$	201,074	$	165,662
Gross Profit	$	63,015	$	49,009
Operating Income	$	22,441	$	13,921

Lighting Segment net sales of $201.1 million in the nine months ended March 31, 2023, increased 21% from net sales of $165.7 million in the same period in fiscal 2022. The 21% growth in the Lighting Segment was driven by continued growth in both indoor and outdoor applications, across multiple verticals. Sales growth was broad-based, with significant increases in all vertical market applications. The Company’s continued efforts over the last two years to strengthen its lighting offering for select vertical market applications continues to position LSI to win additional business.

Gross profit of $63.0 million in the nine months ended March 31, 2023, increased $14.0 million or 29% from the same period of fiscal 2022. Gross profit as a percentage of net sales was 31.3% in the nine months ended March 31, 2023, compared to 29.6% in the same period of fiscal 2022. The improvement in gross profit as a percentage of sales was driven by the increase in net sales resulting from the Company’s continued focus on verticals where it competes coupled with new product offerings, and continued price discipline, all of which in turn result in improved margins.

Operating expenses of $40.6 millionin the nine months ended March 31, 2023, increased $5.5 million or 16% from the same period of fiscal 2022, primarily driven by higher commission expense paid to its agent network as a result of higher net sales.

Lighting Segment operating income of $22.4 million for the nine months ended March 31, 2023, increased $8.5 million from operating income of $13.9 million in the same period of fiscal 2022 primarily driven by sales volume and by an improvement in gross profit as a percentage of sales.

Display Solutions Segment
	Nine Months Ended
	March 31
(In thousands)	2023		2022

Net Sales	$	172,269	$	161,989
Gross Profit	$	38,061	$	27,766
Operating Income	$	19,759	$	12,142

Display Solutions Segment net sales of $172.3 million in the nine months ended March 31, 2023, increased $10.3 million or 6% from net sales of $162.0 million in the same period in fiscal 2022. The sales increase is primarily the result of growth in both the grocery and refueling/convenience-store verticals.

Gross profit of ~~$12.5~~$38.1 million in the ~~three~~nine months ended ~~September 30, 2022,~~March 31, 2023, increased ~~$3.4~~$10.3 million or ~~38%~~37% from the same period of fiscal 2022. Gross profit as a percentage of net sales in the ~~three~~nine months ended ~~September 30, 2022,~~March 31, 2023, was ~~20.9%~~22.1% compared to ~~16.4%~~17.1% in the same period of fiscal 2022. The improvement in gross profit as a percentage of sales was driven by the increase in net sales, improved program pricing, and ~~from targeted pricing actions to offset the impact of inflation, as well as~~ favorable ~~project~~sales mix.

Operating expenses of ~~$6.0~~$18.3 million in the ~~three~~nine months ended ~~September 30, 2022, increased $0.7 million from $5.3 million in the same period of fiscal 2022, primarily driven by investments in commercial resources.~~

~~Display Solutions Segment operating income of $6.5 million in the three months ended September 30, 2022,~~March 31, 2023, increased $2.7 million from ~~operating income of $3.7~~$15.6 million in the same period of fiscal 2022. The increase of ~~$2.8~~$2.7 million was driven by several factors including compensation, benefits, and commercial sales and marketing programs costs to support sales growth, along with an increase in short-term performance-based incentive plan expense driven by improved business performance.

Display Solutions Segment operating income of $19.8 million in the nine months ended March 31, 2023, increased $7.7 million or 63% from operating income of $12.1 million in the same period of fiscal 2022. The increase was primarily driven by an increase in sales and an improvement of gross profit as a percentage of sales.

~~Page 23~~28

Corporate and Eliminations
	Three Months Ended						Nine Months Ended
	September 30						March 31
(In thousands)	2022			2021			2023			2022

Gross Profit	$	6		$	17
Gross Profit (Loss)							$	6		$	(24	)
Operating (Loss)	$	(5,633	)	$	(3,644	)	$	(15,409	)	$	(12,036	)

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

Operating expenses of ~~$5.6~~$15.4 million in the ~~three~~nine months ended ~~September 30, 2022,~~March 31, 2023, increased ~~$2.0~~$3.4 million ~~or 55%~~ from the same period of fiscal 2022. The increase was primarily the result of an increase in short-term and long-term performance-based incentive plan expense driven by improved business ~~performance.~~performance and by commercial growth initiative consulting expense of $0.9 million for which there was no comparable expense in the first nine months of fiscal 2022.

Consolidated Results

The Company reported ~~$0.8~~$2.9 million and ~~$0.2~~$1.3 million of net interest expense in the ~~three~~nine months ended ~~September 30,~~March 31, 2023, and March 31, 2022, ~~and September 30, 2021,~~ respectively. The increase in interest expense is primarily the results of increased borrowing costs. The Company also recorded other expense of ~~$0.2~~$0.1 million and ~~$0.1 million~~a negligible amount in the ~~three~~nine months ended ~~September 30,~~March 31, 2023, and March 31, 2022, ~~and September 30, 2021,~~ respectively, ~~both of which is~~ related to net foreign exchange currency transaction net losses through our Mexican and Canadian subsidiaries.

The ~~$2.8~~$6.4 million of income tax expense in the ~~three~~nine months ended ~~September 30,~~March 31, 2023, represents a consolidated effective tax rate of 27.0%. The $2.9 million income tax expense in the nine months ended March 31, 2022, represents a consolidated effective tax rate of ~~30.6%~~22.4%. ~~Impacting~~The increase in the effective tax rate is primarily driven by an increase in ~~a valuation reserve related to the Company’s deferred tax assets and from a higher anticipated annual tax rate. The $1.0 million of income tax expense~~pre-tax profits in the ~~three months ended September 30, 2021, represents a consolidated effective~~higher taxing jurisdictions of Puerto Rico and Canada along with unfavorable discreate tax ~~rate of 24.2%.~~adjustments.

The Company reported net income of ~~$6.3~~$17.3 million in the ~~three~~nine months ended ~~September 30, 2022,~~March 31, 2023, compared to net income of ~~$3.1~~$9.9 million in the ~~three~~nine months ended ~~September 30, 2021.~~March 31, 2022. Non-GAAP adjusted net income was ~~$7.1~~$20.2 million for the ~~three~~nine months ended ~~September 30, 2022,~~March 31, 2023, compared to adjusted net income of ~~$3.5~~$12.0 million for the ~~three~~nine months ended ~~September 30, 2021~~March 31, 2022 (Refer to the Non-GAAP tables above). The increase in Non-GAAP adjusted net income is primarily the ~~net~~ result of an increase in sales and an increase in the gross profit as a percentage of sales. Diluted earnings per share of ~~$0.22~~$0.60 was reported in the ~~three~~nine months ended ~~September 30, 2022,~~March 31, 2023, as compared to ~~$0.11~~$0.35 diluted earnings per share in the same period of fiscal 2022. The weighted average common shares outstanding for purposes of computing diluted earnings per share in the ~~three~~nine months ended ~~September 30, 2022,~~March 31, 2023, were ~~28,664,000~~29,055,000 shares compared to ~~27,743,000~~27,945,000 shares in the same period last year.

~~Page 24~~

Liquidity and Capital Resources

The Company considers its level of cash on hand, borrowing capacity, current ratio and working capital levels to be its most important measures of short-term liquidity. For long-term liquidity indicators, the Company believes its ratio of long-term debt to equity and our historical levels of net cash flows from operating activities to be the most important measures.

At ~~September 30, 2022,~~March 31, 2023, the Company had working capital of ~~$90.5~~$79.8 million compared to $84.3 million at June 30, 2022. The ratio of current assets to current liabilities was ~~2.13~~2.2 to ~~1 for both September 30, 2022,~~1.0 at March 31, 2023, and 2.1 at June 30, 2022. The ~~increase~~decrease in working capital from June 30, 2022, to ~~September 30, 2022,~~March 31, 2023, is primarily driven by a ~~$6.0~~$8.5 million ~~increase~~decrease in net accounts receivable and a $6.7 million decrease in net inventory ~~a $1.0~~partially offset by $10.0 million decrease in accounts payable. Also contributing to the change in working capital was an increase in refundable income taxes and other current assets of $3.2 million, an increase in accrued expenses of $1.4 million, and a ~~$6.6~~$1.1 million ~~increase~~decrease in cash and cash equivalents, ~~partially offset by~~resulting in a ~~$6.4 million~~net increase ~~in accounts payable and a $2.3 million decrease in net accounts receivable.~~to working capital, of $0.7 million.

Net accounts receivable was ~~$75.5~~$69.3 million and $77.8 million at ~~September 30, 2022,~~March 31, 2023, and June 30, 2022, respectively. DSO ~~increased to 55~~remained the same at 54 days at ~~September 30, 2022, from 54 days~~March 31, 2023, and at June 30, 2022.

Net inventories of ~~$80.5~~$67.7 million at ~~September 30, 2022, increased $6.1~~March 31, 2023, decreased $6.7 million from $74.4 million at June 30, ~~2022.~~2022, is due to ongoing improvement in the supply chain. The ~~increase~~decrease of ~~$6.1~~$6.7 million is the result of ~~an increase~~a decrease in ~~gross~~net inventory of ~~$6.1~~$3.8 million in the Lighting Segment and a ~~negligible change~~$2.9 million decrease in ~~obsolescence reserves. Lighting Segment~~ net ~~inventory increased $3.4 million as the Company continues to mitigate the risk of any lingering supply chain challenges. Net~~ inventory in the Display Solutions ~~Segment increased $2.7 million to support several on-going programs.~~Segment.

Cash generated from operations and borrowing capacity under the Company’s line of credit is its primary source of liquidity. In September 2021, the Company amended its existing $100 million secured line of credit, to a $25 million term loan and $75 million remaining as a secured revolving line of credit. Both facilities expire in the third quarter of fiscal 2026. As of ~~September 30, 2022, $18.9~~March 31, 2023, $45.1 million of the credit line was available. The Company is in compliance with all of its loan covenants. The $100 million credit facility plus cash flows from operating activities are adequate for operational and capital expenditure needs for the remainder of fiscal 2023. The Company also has on file with the SEC a shelf registration statement which allows it to sell any combination of common stock, preferred stock warrants, senior or subordinated debt securities or other securities in one or more offerings if it chooses to do so in the future. The Company expects to maintain the effectiveness of this shelf registration statement for the foreseeable future.

The Company had a source of ~~$10.6~~$32.5 million of cash from operating activities in the ~~three~~nine months ended ~~September 30, 2022,~~March 31, 2023, compared to a use of cash of ~~$7.9~~$12.7 million in the ~~three~~nine months ended ~~September 30, 2021.~~March 31, 2022. The increase in net cash flows from operating activities is primarily the result of effective management of the Company’s working capital and from improved earnings.

The Company used ~~$0.4~~$1.8 million and ~~$0.3~~$0.8 million of cash related to investing activities to support the Company’s various capital initiatives, in the ~~three~~nine months ended ~~September 30,~~March 31, 2023, and March 31, 2022, ~~and September 30, 2021,~~ respectively. Capital expenditures increased from $1.3 million in the nine months ended March 31, 2022, to $1.8 million in the nine months ended March 31, 2023. We received $0.5 million of cash related to the settlement of working capital adjustments from the acquisition of JSI in the nine months ended March 31, 2022.

The Company had a use of cash of ~~$3.6~~$32.0 million related to financing activities in the ~~three~~nine months ended ~~September 30, 2022,~~March 31, 2023, compared to a source of cash of ~~$8.5~~$12.4 million in the ~~three~~nine months ended ~~September 30, 2021.~~March 31, 2022. The ~~$12.1~~$44.4 million change in cash flow was primarily the result of cash generated from improved working capital management and from improved earnings, which was used to pay down the Company’s line of credit in the first ~~quarter~~nine months of fiscal 2023. Also contributing to the reduction of debt was $3.1 million of cash received from the exercise of stock options in the second and third quarters of fiscal 2023.

The Company has on its balance sheet financial instruments consisting primarily of cash and cash equivalents, short-term investments, revolving lines of credit, and long-term debt. The fair value of these financial instruments approximates carrying value because of their short-term maturity and/or variable, market-driven interest rates.

Off-Balance Sheet Arrangements

The Company has no financial instruments with off-balance sheet risk and have no off-balance sheet arrangements.

Cash Dividends

In ~~November 2022,~~April 2023, the Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable ~~November 22, 2022,~~May 16, 2023, to shareholders of record as of ~~November 14, 2022.~~May 8, 2023. The indicated annual cash dividend rate for fiscal 2023 is $0.20 per share. The Board of Directors has adopted a policy regarding dividends which indicates that dividends will be determined by the Board of Directors in its discretion based upon its evaluation of earnings, cash flow requirements, financial condition, debt levels, stock repurchases, future business developments and opportunities, and other factors deemed relevant.

~~Page 25~~

Critical Accounting Policies and Estimates

A summary of our 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our exposure to market risk since June 30, 2022. Additional information can be found in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, which appears on page 18 of the Annual Report on Form 10-K for the fiscal year ended June 30, 2022.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as such term is defined Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized, and reported within required time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

We conducted, under the supervision of our management, including the Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~September 30, 2022,~~March 31, 2023, our disclosure controls and procedures were effective. Management believes that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q are fairly presented in all material respects in accordance with GAAP for interim financial statements, and the Company’s Chief Executive Officer and Chief Financial Officer have certified that, based on their knowledge, the condensed consolidated financial statements included in this report fairly present in all material respects the Company’s financial condition, results of operations and cash flows for each of the periods presented in this report.

Changes in Internal Control

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the ~~fiscal~~second quarter ended ~~September 30, 2022,~~March 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~Page 26~~

PART II. OTHER INFORMATION

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibits:

~~10.1~~

~~Fiscal Year 2023 Long-Term Incentive Plan (LTIP)*++~~

~~10.2~~

~~Fiscal Year 2023 Short-Term Incentive Plan (STIP)*++~~

~~10.3~~

Nonqualified Deferred Compensation Plan Amended and Restated as of August 17, 2022*

31.1	Certification of Principal Executive Officer required by Rule 13a-14(a)

31.2	Certification of Principal Financial Officer required by Rule 13a-14(a)

32.1	Section 1350 Certification of Principal Executive Officer

32.2	Section 1350 Certification of Principal Financial Officer

101.INS Inline XBRL Instance Document

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

104	Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)

* Management compensatory agreement.

++ Certain portions of this exhibit have been omitted pursuant to Item 601(b)(10) of Regulation S-K. The omitted information is not material and would likely cause competitive harm to the Registrant if publicly disclosed. The Registrant hereby agrees to furnish a copy of any omitted portion to the SEC upon request.

~~Page 27~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	LSI Industries Inc.


	By:	/s/ James A. Clark
		James A. Clark
		Chief Executive Officer and President
		(Principal Executive Officer)


	By:	/s/ James E. Galeese
		James E. Galeese
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)
~~November 4, 2022~~May 5, 2023

~~Page 28~~33

☒		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER 30, 2022,~~MARCH 31, 2023, OR

☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________________ TO ~~________________.~~________________ .

10000 Alliance Road, Cincinnati, Ohio		45242
(Address of principal executive offices)		(Zip Code)
(513) 793-3200
Registrant’s telephone number, including area code)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	LYTS	~~NASDAQGlobal~~NASDAQ Global Select Market

	Large accelerated filer ☐	Accelerated filer ☒	Emerging growth company ☐
	Non-accelerated filer ☐	Smaller reporting company ☒

PART I.FINANCIAL INFORMATION		3

ITEM 1.		FINANCIAL STATEMENTS	3

	~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS~~	3

	~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~		4

	~~CONDENSED CONSOLIDATED BALANCE SHEETS~~		5

	~~CONDENSED CONSOLIDATED BALANCE SHEETS~~		6

	~~CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY~~		7

	~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~		8

	~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~		9

~~ITEM 2.~~		~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~	20

~~ITEM 3.~~		~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~	26

~~ITEM 4.~~		~~CONTROLS AND PROCEDURES~~	26

~~PART II.~~ ~~OTHER INFORMATION~~			27

~~ITEM 5.~~		~~OTHER INFORMATION~~	27

~~ITEM 6.~~		~~EXHIBITS~~	27

	~~SIGNATURES~~		28

	September 30,			June 30,
(In thousands, except shares)	2022			2022

ASSETS

Current assets

Cash and cash equivalents	$	9,028		$	2,462

Accounts receivable, less allowance for credit losses of $508 and $499, respectively		75,449			77,750

Inventories		80,457			74,421

Refundable income taxes		1,118			1,041

Other current assets		4,355			3,243

Total current assets		170,407			158,917

Property, Plant and Equipment, at cost
Land		4,010			4,010
Buildings		24,469			24,495
Machinery and equipment		67,115			66,762
Buildings under finance leases		2,033			2,033
Construction in progress		563			618
		98,190			97,918
Less accumulated depreciation		(71,913	)		(70,760	)
Net property, plant and equipment		26,277			27,158

Goodwill		45,030			45,030

Other intangible assets, net		66,774			67,964

Operating lease right-of-use assets		7,826			8,664

Other long-term assets, net		3,187			3,347

Total assets	$	319,501		$	311,080