UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, ~~2023,~~2024, OR

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

Commission File No. 0-13375

LSI Industries Inc.

(Exact name of registrant as specified in its charter)

Ohio

31-0888951

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer Identification No.)

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

Securities registered pursuant to Section 12(b) of the Act:

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

Indicate by checkmark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by checkmark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April ~~28, 2023,~~26, 2024, there were ~~28,367,653~~29,129,848 shares of the registrant's common stock, no par value per share, outstanding.

LSI INDUSTRIES INC.

FORM 10-Q

FOR THE QUARTER ENDED March 31, ~~2023~~2024

INDEX

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	89

	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	910

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	21

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	30 28

ITEM 4. CONTROLS AND PROCEDURES	31 29

PART II. OTHER INFORMATION	31 29

ITEM 5. OTHER INFORMATION	31 29

ITEM 6. EXHIBITS	32 30

	SIGNATURES	33 31

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended						Nine Months Ended				Three Months Ended					Nine Months Ended
	March 31						March 31				March 31					March 31
(In thousands, except per share data)	2023			2022			2023		2022		2024		2023			2024		2023

Net Sales	$	117,470		$	110,111		$	373,343	$	327,651	$	108,186	$	117,470		$	340,632	$	373,343

Cost of products and services sold		85,266			83,318			272,230		250,900		76,846		85,266			240,789		272,230

Severence Costs		-			-			31		-
Severance and restructuring costs												130		-			508		31

Gross profit		32,204			26,793			101,082		76,751		31,210		32,204			99,335		101,082

Severance and restructuring costs												12		-			40		-

Selling and administrative expenses		24,472			21,632			74,291		62,724		23,538		24,472			72,788		74,291

Operating income		7,732			5,161			26,791		14,027		7,660		7,732			26,507		26,791

Interest expense		877			524			2,924		1,287		134		877			1,153		2,924

Other (income) expense		(71	)		(55	)		86		33		75		(71	)		142		86

Income before income taxes		6,926			4,692			23,781		12,707		7,451		6,926			25,212		23,781

Income tax expense		2,257			1,074			6,434		2,851		2,076		2,257			5,903		6,434

Net income	$	4,669		$	3,618		$	17,347	$	9,856	$	5,375	$	4,669		$	19,309	$	17,347


Earnings per common share (see Note 4)
Basic	$	0.16		$	0.13		$	0.62	$	0.36	$	0.18	$	0.16		$	0.67	$	0.62
Diluted	$	0.16		$	0.13		$	0.60	$	0.35	$	0.18	$	0.16		$	0.64	$	0.60


Weighted average common shares outstanding
Basic		28,306			27,378			28,012		27,220		29,163		28,306			28,981		28,012
Diluted		29,611			28,083			29,055		27,945		30,122		29,611			30,005		29,055

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				Three Months Ended				Nine Months Ended
	March 31				March 31				March 31				March 31
(In thousands)	2023		2022		2023		2022		2024		2023		2024		2023

Net Income	$	4,669	$	3,618	$	17,347	$	9,856	$	5,375	$	4,669	$	19,309	$	17,347

Foreign currency translation adjustment		117		46		192		11		31		117		46		192

Comprehensive Income	$	4,786	$	3,664	$	17,539	$	9,867	$	5,406	$	4,786	$	19,355	$	17,539

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,			March 31,			June 30,
(In thousands, except shares)	2023			2022			2024			2023

ASSETS

Current assets

Cash and cash equivalents	$	1,350		$	2,462		$	7,175		$	1,828

Accounts receivable, less allowance for credit losses of $386 and $499, respectively		69,288			77,750
Accounts receivable, less allowance for credit losses of $493 and $435, respectively								68,730			77,681

Inventories		67,661			74,421			60,331			63,718

Refundable income taxes		2,906			1,041			2,654			3,120

Other current assets		4,617			3,243			4,595			3,529

Total current assets		145,822			158,917			143,485			149,876

Property, Plant and Equipment, at cost
Land		4,010			4,010			4,010			4,010
Buildings		24,624			24,495			24,600			24,561
Machinery and equipment		68,075			66,762			67,713			67,457
Buildings under finance leases		2,033			2,033			2,033			2,033
Construction in progress		720			618			1,792			1,231
		99,462			97,918			100,148			99,292
Less accumulated depreciation		(74,198	)		(70,760	)		(74,043	)		(73,861	)
Net property, plant and equipment		25,264			27,158			26,105			25,431

Goodwill		45,030			45,030			45,030			45,030

Other intangible assets, net		64,394			67,964			59,633			63,203

Operating lease right-of-use assets		6,770			8,664			9,063			8,921

Other long-term assets, net		3,739			3,347			4,653			3,688

Total assets	$	291,019		$	311,080		$	287,969		$	296,149

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,			March 31,			June 30,
(In thousands, except shares)	2023			2022			2024			2023

LIABILITIES & SHAREHOLDERS' EQUITY

Current liabilities
Current maturities of long-term debt	$	3,571		$	3,571		$	3,571		$	3,571
Accounts payable		24,749			34,783			26,114			29,206
Accrued expenses		37,717			36,264			36,576			43,785

Total current liabilities		66,037			74,618			66,261			76,562

Long-term debt		46,002			76,025			12,782			31,629

Finance lease liabilities		1,036			1,246			719			960

Operating lease liabilities		6,115			8,240			6,222			5,954

Other long-term liabilities		4,086			3,182			3,548			3,466

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
Preferred shares, without par value; Authorized 1,000,000 shares, none issued								-			-
Common shares, without par value; Authorized 50,000,000 shares; Outstanding 29,112,651 and 28,488,570 shares, respectively								154,475			148,691
Treasury shares, without par value		(6,736	)		(5,927	)		(8,520	)		(7,166	)
Deferred compensation plan		6,736			5,927			8,520			7,166
Retained earnings		21,506			8,224			43,577			28,548
Accumulated other comprehensive income		237			45			385			339

Total shareholders' equity		167,743			147,769			198,437			177,578

Total liabilities & shareholders' equity	$	291,019		$	311,080		$	287,969		$	296,149

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)

	Common Shares					Treasury Shares						Key Executive			Accumulated Other					Total
	Number Of					Number Of						Compensation			Comprehensive		Retained			Shareholders'
(In thousands, except per share data)	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		-		-			-			-			-			-		6,261			6,261
Other comprehensive gain		-		-			-			-			-			7		-			7
Board stock compensation		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-based compensation expense		-		551			-			-			-			-		-			551
Stock options exercised, net		-		-			-			-			-			-		-			-
Dividends — $0.05 per share		-		-			-			-			-			-		(1,408	)		(1,408	)

Balance at September 30, 2022		27,777	$	140,599			(899	)	$	(6,439	)	$	6,439		$	52	$	13,077		$	153,728

Net Income		-		-			-			-			-			-		6,417			6,417
Other comprehensive gain		-		-			-			-			-			68		-			68
Board stock compensation		23		98			-			-			-			-		-			98
Restricted stock units issued, net of shares withheld for tax withholdings		71		(399	)		-			-			-			-		-			(399	)
Shares issued for deferred compensation		57		548			-			-			-			-		-			548
Activity of treasury shares, net		-		-			(58	)		(549	)		-			-		-			(549	)
Deferred stock compensation		-		-			-			-			549			-		-			549
Stock-based compensation expense		-		864			-			-			-			-		-			864
Stock options exercised, net		192		1,278			-			-			-			-		-			1,278
Dividends — $0.05 per share		-		-			-			-			-			-		(1,286	)		(1,286	)

Balance at December 31, 2022		28,120	$	142,988			(957	)	$	(6,988	)	$	6,988			120	$	18,208		$	161,316

Net Income		-		-			-			-			-			-		4,669			4,669
Other comprehensive gain		-		-			-			-			-			117		-			117
Board stock compensation awards		2		97			-			-			-			-		-			97
ESPP stock Awards		10		97			-			-			-			-		-			97
Restricted stock units issued, net of shares withheld for tax withholdings		29		(379	)		-			-			-			-		-			(379	)
Shares issued for deferred compensation		31		443			-			-			-			-		-			443
Activity of treasury shares, net		-		-			66			252			-			-		-			252
Deferred stock compensation		-		-			-			-			(252	)		-		-			(252	)
Stock-based compensation expense		-		893			-			-			-			-		-			893
Stock options exercised, net		157		1,861			-			-			-			-		-			1,861
Dividends — $0.05 per share		-		-			-			-			-			-		(1,371	)		(1,371	)

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 SHAREHOLDERS’ EQUITY

(Unaudited)

														Accumulated								Common Shares					Treasury Shares						Key Executive		Accumulated Other						Total
	Common Shares					Treasury Shares						Key Executive		Other		Retained			Total			Number Of					Number Of						Compensation		Comprehensive			Retained			Shareholders'
	Number Of					Number Of						Compensation		Comprehensive		Earnings			Shareholders'			Shares		Amount			Shares			Amount			Amount		Income			Earnings			Equity
	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
Balance at June 30, 2023																							28,488	$	148,691			(922	)	$	(7,166	)	$	7,166	$	339		$	28,548		$	177,578

Net Income		-		-			-			-			-		-		9,856			9,856			-		-			-			-			-		-			8,028			8,028
Other comprehensive income		-		-			-			-			-		11		-			11
Stock compensation awards		30		225			-			-			-		-		-			225
Other comprehensive loss																							-		-			-			-			-		(56	)		-			(56	)
Board stock compensation																							9		113			-			-			-		-			-			113
ESPP stock awards																							3		57			-			-			-		-			-			57
Restricted stock units issued, net of shares withheld for tax withholdings		80		(250	)		-			-			-		-		-			(250	)		276		-			-			-			-		-			-			-
Shares issued for deferred compensation		412		3,089			-			-			-		-		-			3,089			32		437			-			-			-		-			-			437
Activity of treasury shares, net		-		-			(401	)		(3,007	)		-		-		-			(3,007	)		-		-			(30	)		(417	)		-		-			-			(417	)
Deferred stock compensation		-		-			-			-			3,007		-		-			3,007			-		-			-			-			417		-			-			417
Stock compensation expense		-		2,466			-			-			-		-		-			2,466
Stock-based compensation expense																							-		1,220			-			-			-		-			-			1,220
Stock options exercised, net		5		26			-			-			-		-		-			26			70		549			-			-			-		-			-			549
Dividends — $0.20 per share		-		-			-			-			-		-		(4,048	)		(4,048	)
Dividends — $0.05 per share																							-		-			-			-			-		-			(1,380	)		(1,380	)

Balance at March 31, 2022		27,390	$	138,082			(747	)	$	(5,457	)	$	5,457	$	60	$	4,403		$	142,545
Balance at September 30, 2023																							28,878	$	151,067			(952	)	$	(7,583	)	$	7,583	$	283		$	35,196		$	186,546

Net Income																							-		-			-			-			-		-			5,906			5,906
Other comprehensive gain																							-		-			-			-			-		71			-			71
Board stock compensation																							7		112			-			-			-		-			-			112
ESPP stock awards																							4		41			-			-			-		-			-			41
Restricted stock units issued, net of shares withheld for tax withholdings																							28		(244	)		-			-			-		-			-			(244	)
Shares issued for deferred compensation																							36		506			-			-			-		-			-			506
Activity of treasury shares, net																							-		-			(36	)		(505	)		-		-			-			(505	)
Deferred stock compensation																							-		-			-			-			505		-			-			505
Stock-based compensation expense																							-		814			-			-			-		-			-			814
Stock options exercised, net																							107		628			-			-			-		-			-			628
Dividends — $0.05 per share																							-		-			-			-			-		-			(1,446	)		(1,446	)

Balance at December 31, 2023																							29,060	$	152,924			(988	)	$	(8,088	)	$	8,088	$	354		$	39,656		$	192,934

Net Income																							-		-			-			-			-		-			5,375			5,375
Other comprehensive gain																							-		-			-			-			-		31			-			31
Board stock compensation																							8		113			-			-			-		-			-			113
ESPP stock awards																							4		47			-			-			-		-			-			47
Restricted stock units issued, net of shares withheld for tax withholdings																							-		(60	)		-			-			-		-			-			(60	)
Shares issued for deferred compensation																							29		431			-			-			-		-			-			431
Activity of treasury shares, net																							-		-			(31	)		(432	)		-		-			-			(432	)
Deferred stock compensation																							-		-			-			-			432		-			-			432
Stock-based compensation expense																							-		927			-			-			-		-			-			927
Stock options exercised, net																							12		93			-			-			-		-			-			93
Dividends — $0.05 per share																							-		-			-			-			-		-			(1,454	)		(1,454	)

Balance at March 31, 2024																							29,113	$	154,475			(1,019	)	$	(8,520	)	$	8,520	$	385		$	43,577		$	198,437

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

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

LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended
	March 31
(In thousands)	2024			2023

Cash Flows from Operating Activities
Net income	$	19,309		$	17,347
Non-cash items included in net income
Depreciation and amortization		7,143			7,295
Deferred income taxes		(1,143	)		59
Deferred compensation plan		1,374			1,530
ESPP discount		145			97
Stock compensation expense		2,961			2,308
Issuance of common shares as compensation		338			270
Loss on disposition of fixed assets		173			37
Allowance for credit losses		57			(80	)
Inventory obsolescence reserve		(1,259	)		740

Changes in certain assets and liabilities
Accounts receivable		8,894			8,542
Inventories		4,646			6,020
Refundable income taxes		466			(1,865	)
Accounts payable		(3,092	)		(10,034	)
Accrued expenses and other		(6,865	)		2,830
Customer prepayments		(850	)		(2,548	)
Net cash flows provided by operating activities		32,297			32,548

Cash Flows from Investing Activities
Proceeds from the sale of fixed assets		32			1
Purchases of property, plant and equipment		(4,626	)		(1,754	)
Net cash flows used in investing activities		(4,594	)		(1,753	)

Cash Flows from Financing Activities
Payments of long-term debt		(102,366	)		(150,547	)
Borrowings of long-term debt		83,520			120,524
Cash dividends paid		(4,280	)		(4,065	)
Shares withheld for employees' taxes		(304	)		(844	)
Payments on financing lease obligations		(241	)		(192	)
Proceeds from stock option exercises		1,270			3,139
Net cash flows used in financing activities		(22,401	)		(31,985	)

Change related to foreign currency		45			78

Increase (decrease) in cash and cash equivalents		5,347			(1,112	)

Cash and cash equivalents at beginning of period		1,828			2,462

Cash and cash equivalents at end of period	$	7,175		$	1,350

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.~~

~~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 March 31, ~~2023,~~2024, the results of its operations for the three and nine-month periods ended March 31, ~~2023,~~2024, and ~~2022,~~2023, and its cash flows for the nine-month periods ended March 31, ~~2023,~~2024, and ~~2022.~~2023. These statements should be read in conjunction with the financial statements and footnotes included in the fiscal ~~2022~~2023 Annual Report on Form 10-K. Financial information as of June 30, ~~2022,~~2023, 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~~2023 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.

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)	March 31, 2023				March 31, 2022				March 31, 2024				March 31, 2023
			Display				Display
	Lighting		Solutions		Lighting		Solutions
	Segment		Segment		Segment		Segment		Lighting Segment		Display Solutions Segment		Lighting Segment		Display Solutions Segment
Timing of revenue recognition
Products and services transferred at a point in time	$	57,249	$	42,378	$	49,283	$	41,231	$	53,619	$	30,304	$	57,249	$	42,378
Products and services transferred over time		9,458		8,385		7,843		11,754		11,263		13,000		9,458		8,385
	$	66,707	$	50,763	$	57,126	$	52,985	$	64,882	$	43,304	$	66,707	$	50,763

	Nine Months Ended
	March 31, 2023				March 31, 2022
			Display				Display		Nine Months Ended
	Lighting		Solutions		Lighting		Solutions		March 31, 2024				March 31, 2023
	Segment		Segment		Segment		Segment		Lighting Segment		Display Solutions Segment		Lighting Segment		Display Solutions Segment
Timing of revenue recognition
Products and services transferred at a point in time	$	173,917	$	136,894	$	144,006	$	114,099	$	165,890	$	99,560	$	173,917	$	136,894
Products and services transferred over time		27,157		35,375		21,656		47,890		31,428		43,754		27,157		35,375
	$	201,074	$	172,269	$	165,662	$	161,989	$	197,318	$	143,314	$	201,074	$	172,269

	Three Months Ended
	March 31, 2023				March 31, 2022
			Display				Display		Three Months Ended
	Lighting		Solutions		Lighting		Solutions		March 31, 2024				March 31, 2023
	Segment		Segment		Segment		Segment		Lighting Segment		Display Solutions Segment		Lighting Segment		Display Solutions Segment
Type of Product and Services
LED lighting, digital signage solutions, electronic circuit boards	$	55,894	$	4,907	$	47,196	$	6,906	$	53,917	$	8,321	$	55,894	$	4,907
Poles, printed graphics, display fixtures		9,920		37,019		9,358		35,536
Poles, other display solution elements										10,181		26,628		9,920		37,019
Project management, installation services, shipping and handling		893		8,837		572		10,543		784		8,355		893		8,837
	$	66,707	$	50,763	$	57,126	$	52,985	$	64,882	$	43,304	$	66,707	$	50,763

	Nine Months Ended
	March 31, 2023				March 31, 2022
			Display				Display		Nine Months Ended
	Lighting		Solutions		Lighting		Solutions		March 31, 2024				March 31, 2023
	Segment		Segment		Segment		Segment		Lighting Segment		Display Solutions Segment		Lighting Segment		Display Solutions Segment
Type of Product and Services
LED lighting, digital signage solutions, electronic circuit boards	$	165,839	$	17,883	$	136,701	$	31,885	$	162,524	$	26,045	$	165,839	$	17,883
Poles, printed graphics, display fixtures		32,681		120,173		27,403		99,965
Poles, other display solution elements										32,532		86,326		32,681		120,173
Project management, installation services, shipping and handling		2,554		34,213		1,558		30,139		2,262		30,943		2,554		34,213
	$	201,074	$	172,269	$	165,662	$	161,989	$	197,318	$	143,314	$	201,074	$	172,269

1011

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~~There has not been a material impact on the ~~impact this guidance may have on its~~Company’s consolidated financial statements and related ~~disclosures.~~

~~In December 2019,~~disclosures as a result of its adoption of 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 effectiveon July 1, ~~2021, which did not have a material impact on its consolidated financial statements or disclosures.~~

2023.

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 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 March 31, ~~2023,~~2024, or ~~March 31, 2022.~~2023. There was no concentration of accounts receivable at March 31, ~~2023.~~ ~~One~~ ~~customer in the Display Solutions Segment represents $8.5 million~~2024, or ~~10.9% of the Company’s accounts receivable at June 30, 2022.~~2023.

Summarized financial information for the Company’s operating segments is provided for the indicated periods and as of March 31, ~~2023,~~2024, and March 31, ~~2022:~~2023:

	Three Months Ended				Nine Months Ended				Three Months Ended						Nine Months Ended
(In thousands)	March 31				March 31				March 31						March 31
	2023		2022		2023		2022		2024			2023			2024			2023
Net Sales:
Lighting Segment	$	66,707	$	57,126	$	201,074	$	165,662	$	64,882		$	66,707		$	197,318		$	201,074
Display Solutions Segment		50,763		52,985		172,269		161,989		43,304			50,763			143,314			172,269
	$	117,470	$	110,111	$	373,343	$	327,651	$	108,186		$	117,470		$	340,632		$	373,343

Operating Income (Loss):
Lighting Segment									$	7,268		$	6,529		$	24,877		$	22,441
Display Solutions Segment										4,064			5,501			14,585			19,759
Corporate and Eliminations										(3,672	)		(4,298	)		(12,955	)		(15,409	)
									$	7,660		$	7,732		$	26,507		$	26,791

Capital Expenditures:
Lighting Segment									$	999		$	401		$	3,012		$	725
Display Solutions Segment										167			338			1,215			1,038
Corporate and Eliminations										111			19			399			(9	)
									$	1,277		$	758		$	4,626		$	1,754

Depreciation and Amortization:
Lighting Segment									$	2,635		$	1,344		$	3,944		$	4,113
Display Solutions Segment										1,970			1,044			2,946			2,993
Corporate and Eliminations										75			67			253			189
									$	4,680		$	2,455		$	7,143		$	7,295

Operating Income (Loss):
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

Capital Expenditures:
Lighting Segment
$ 402 $ 272 $ 725 $ 624
Display Solutions Segment
338 185 1,038 660
Corporate and Eliminations
19 74 (9 ) (8 )
$ 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		March 31, 2024		June 30, 2023
Identifiable Assets:
Total Assets:
Lighting Segment	$	142,656	$	152,431	$	135,569	$	142,941
Display Solutions Segment		140,666		152,302		138,449		145,307
Corporate and Eliminations		7,697		6,347		13,951		7,901
	$	291,019	$	311,080	$	287,969	$	296,149

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				Nine Months Ended				Three Months Ended				Nine Months Ended
(In thousands)	March 31				March 31				March 31				March 31
	2023		2022		2023		2022		2024		2023		2024		2023
Lighting Segment inter-segment net sales	$	5,101	$	5,683	$	16,312	$	27,406	$	6,318	$	5,101	$	18,468	$	16,312

Display Solutions Segment inter-segment net sales	$	175	$	54	$	139	$	289	$	96	$	175	$	536	$	139

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.

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				Nine Months Ended				Three Months Ended				Nine Months Ended
	March 31				March 31				March 31				March 31
	2023		2022		2023		2022		2024		2023		2024		2023

BASIC EARNINGS PER SHARE

Net income	$	4,669	$	3,618	$	17,347	$	9,856	$	5,375	$	4,669	$	19,309	$	17,347

Weighted average shares outstanding during the period, net of treasury shares		27,376		26,642		27,050		26,606		28,084		27,376		27,933		27,050
Weighted average vested restricted stock units outstanding		52		31		70		26		75		52		78		70
Weighted average shares outstanding in the Deferred Compensation Plan during the period		878		705		892		588		1,004		878		970		892
Weighted average shares outstanding		28,306		27,378		28,012		27,220		29,163		28,306		28,981		28,012

Basic income per share	$	0.16	$	0.13	$	0.62	$	0.36
Basic earnings per common share									$	0.18	$	0.16	$	0.67	$	0.62


DILUTED EARNINGS PER SHARE

Net income	$	4,669	$	3,618	$	17,347	$	9,856	$	5,375	$	4,669	$	19,309	$	17,347

Weighted average shares outstanding:

Basic		28,306		27,378		28,012		27,220		29,163		28,306		28,981		28,012

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		959		1,305		1,024		1,043
Weighted average shares outstanding		29,611		28,083		29,055		27,945		30,122		29,611		30,005		29,055

Diluted income per share	$	0.16	$	0.13	$	0.60	$	0.35
Diluted earnings per common share									$	0.18	$	0.16	$	0.64	$	0.60


Anti-dilutive securities (b)		-		1,427		181		1,043		3		-		10		181

(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 March 31, ~~2023,~~2024, and March 31, ~~2022,~~2023, 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.

1314

NOTE 5 – INVENTORIES ~~NET~~

The following information is provided as of the dates indicated:

March 31,

June 30,

(In thousands)

2023

2022

Inventories:
Raw materials
$ 49,946 $ 51,637
Work-in-progress
7,800 3,029
Finished goods
9,915 19,755
Total Inventories
$ 67,661 $ 74,421

	March 31,		June 30,
(In thousands)	2024		2023

Inventories:
Raw materials	$	44,051	$	47,689
Work-in-progress		3,790		3,373
Finished goods		12,490		12,656
Total Inventories	$	60,331	$	63,718

NOTE 6 - ACCRUED EXPENSES

The following information is provided as of the dates indicated:

March 31,

June 30,

(In thousands)

2023

2022

Accrued Expenses:
Customer prepayments
$ 3,847 $ 6,416
Compensation and benefits
12,683 9,611
Accrued warranty
5,127 4,491
Operating lease liabilities
1,290 1,274
Accrued sales commissions
5,629 4,783
Accrued freight
3,625 3,680
Accrued FICA
546 1,122
Finance lease liabilities
325 275
Accrued income tax
- 109
Other accrued expenses
4,645 4,503
Total Accrued Expenses
$ 37,717 $ 36,264

	March 31,		June 30,
(In thousands)	2024		2023

Accrued Expenses:
Customer prepayments	$	4,575	$	5,425
Compensation and benefits		10,016		13,116
Accrued warranty		6,009		6,501
Operating lease liabilities		3,557		3,566
Accrued sales commissions		4,185		5,082
Accrued Freight		2,898		3,821
Accrued FICA		543		546
Finance lease liabilities		317		284
Other accrued expenses		4,476		5,444
Total Accrued Expenses	$	36,576	$	43,785

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.

~~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

Lighting

Solutions

Segment

Segment

Total

Balance as of March 31, 2023

Goodwill
$ 70,971 $ 63,347 $ 134,318
Accumulated impairment losses
(61,763 ) (27,525 ) (89,288 )
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
Accumulated impairment losses
(61,763 ) (27,525 ) (89,288 )
Goodwill, net as of June 30, 2022
$ 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.~~

Goodwill				Display
(In thousands)	Lighting			Solutions
	Segment			Segment			Total
Balance as of March 31, 2024
Goodwill	$	70,971		$	63,347		$	134,318
Accumulated impairment losses		(61,763	)		(27,525	)		(89,288	)
Goodwill, net as of March 31, 2024	$	9,208		$	35,822		$	45,030

Balance as of June 30, 2023
Goodwill	$	70,971		$	63,347		$	134,318
Accumulated impairment losses		(61,763	)		(27,525	)		(89,288	)
Goodwill, net as of June 30, 2023	$	9,208		$	35,822		$	45,030

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

Other Intangible Assets							March 31, 2024
	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	$	16,962	$	45,121	$	62,083	$	20,379	$	41,704
Patents		268		268		-		268		268		-
LED technology firmware, software		20,966		15,486		5,480		20,966		16,670		4,296
Trade name		2,658		1,129		1,529		2,658		1,238		1,420
Non-compete		260		98		162		260		149		111
Total Amortized Intangible Assets		86,235		33,943		52,292		86,235		38,704		47,531

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	$	33,943	$	64,394	$	98,337	$	38,704	$	59,633

Other Intangible Assets							June 30, 2023
	June 30, 2022
(In thousands)	Gross						Gross
	Carrying		Accumulated		Net		Carrying		Accumulated		Net
	Amount		Amortization		Amount		Amount		Amortization		Amount
Amortized Intangible Assets
Customer relationships	$	62,083	$	14,400	$	47,683	$	62,083	$	17,817	$	44,266
Patents		268		268		-		268		268		-
LED technology firmware, software		20,966		14,598		6,368		20,966		15,783		5,183
Trade name		2,658		1,049		1,609		2,658		1,156		1,502
Non-compete		260		58		202		260		110		150
Total Amortized Intangible Assets		86,235		30,373		55,862		86,235		35,134		51,101

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	$	30,373	$	67,964	$	98,337	$	35,134	$	63,203

	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	March 31				March 31				March 31				March 31
(In thousands)	2023		2022		2023		2022		2024		2023		2024		2023

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

The Company expects to record annual amortization expense as follows:

(In thousands)

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

(In thousands)

2024	$	4,760
2025	$	4,760
2026	$	4,760
2027	$	4,754
2028	$	4,708
After 2028	$	27,359

NOTE 8 - DEBT

The Company’s long-term debt as of March 31, ~~2023,~~2024, and June 30, ~~2022,~~2023, consisted of the following:

	March 31,		June 30,		March 31,		June 30,
(In thousands)	2023		2022		2024		2023

Secured line of credit	$	29,930	$	57,275	$	-	$	18,729
Term loan, net of debt issuance costs of $22 and $30, respectively		19,643		22,321
Term loan, net of debt issuance costs of $20 and $30, respectively						16,353		16,471
Total debt		49,573		79,596	$	16,353	$	35,200
Less: amounts due within one year		3,571		3,571		3,571		3,571
Total amounts due after one year, net	$	46,002	$	76,025	$	12,782	$	31,629

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 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~~Secured Overnight Financing Rate (SOFR) 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~~SOFR Rate plus 100 basis ~~points as long as a Daily LIBOR rate is offered, ascertainable and not unlawful.~~points. The increment over the ~~LIBOR~~SOFR borrowing rate fluctuates between 100 and 225 basis points, and the increment over the Base Rate fluctuates between 0 and 125 basis points, both of which depend upon the ratio of indebtedness to earnings before interest, taxes, depreciation, and amortization (“EBITDA”), as defined in the line of credit agreement. As of March 31, ~~2023,~~2024, the ~~Company’s borrowing rate~~Company has no borrowings against its revolving line of credit. If the Company had borrowed on its revolving line of credit, ~~was 6.3%~~the borrowing rate as of March 31, 2024, would have been 6.6%. The increment over ~~LIBOR~~the SOFR borrowing rate will be ~~125~~100 basis points for the fourth quarter of fiscal ~~2023.~~2024. 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 March 31, ~~2023, there~~2024, the entire $75 million revolving line of credit was ~~$45.1 million~~ available for ~~borrowing under the $75 million line of credit.~~borrowing.

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

2024.

NOTE 9 - CASH DIVIDENDS

The Company paid cash dividends of ~~$4.1~~$4.3 million and ~~$4.0~~$4.1 million for the nine months ended March 31, ~~2023,~~2024, and March 31, ~~2022,~~2023, respectively. In April ~~2023,~~2024, the Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable May 1614, 2024, ~~2023,~~ to shareholders of record as of May 86, 2024~~, 2023.~~. The indicated annual cash dividend rate is $0.20 per share.

NOTE 10 – EQUITY COMPENSATION

~~In November 2022, the Company’s shareholders approved the amendment and restatement of the~~The 2019 Omnibus Award Plan (“2019 Omnibus Plan”) ~~which increased the number of shares authorized~~authorizes for issuance ~~under the plan by~~up to 2,350,000 ~~and removed the Plan’s fungible share counting feature.~~shares. The purpose of the 2019 Omnibus Plan is to provide a means to attract and retain key personnel and to align the interests of the directors, officers, and employees with the Company’s shareholders. The plan also provides a vehicle whereby directors and officers may acquire shares in order to meet the ownership requirements under the 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 awards. ~~Except for Restricted Stock Unit (“RSU”)~~While RSU grants ~~which~~ are time-based, PSU grants offer 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~~As of March 31, 2024, 1,944,773 shares ~~that~~ remain ~~reserved~~available for issuance under the 2019 Omnibus ~~Plan equates to 2,463,673 as of March 31, 2023.~~Plan.

In the first ~~quarter~~nine months of fiscal ~~2023,~~2024, the Company granted ~~164,348 PSU’s~~175,251 PSUs and ~~197,915 RSU’s,~~116,834 RSUs, both with a weighted average market value of ~~$6.90.~~$12.76. Stock compensation expense was $0.9 million and ~~$0.8~~$0.9 million for the three months ended March 31, ~~2023,~~2024, and ~~2022,~~2023, respectively, and ~~$2.3~~$2.9 million and ~~$2.5~~$2.3 million in the nine months ended March 31, ~~2023,~~2024, and ~~2022,~~2023, respectively.

In the third quarter of fiscal 2024, the Company granted 30,000 inducement stock options, with a weighted average fair market value of $14.41. Stock compensation expense was $0.1 million for the three and nine months ended March 31, 2024, respectively.

In November of 2021, our board of directors approved the LSI Employee Stock Purchase Plan (“ESPP”). A total of 270,000 shares of common stock were provided for issuance under the ESPP. Employees may participate at their discretion and are able to purchase, through payroll deduction, common stock at a 10% discount on a quarterly basis. Employees may end their participation at any time during the offering period, and participation ends automatically upon termination of employment with the company. During the first nine months of fiscal year 2024, employees purchased 11,000 shares. At March 31, 2024, 245,000 shares remained available for purchase under the ESPP.

NOTE 11 - SUPPLEMENTAL CASH FLOW INFORMATION

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 $ -

	Nine Months Ended
(In thousands)	March 31
	2024		2023
Cash Payments:
Interest	$	1,122	$	2,325
Income taxes	$	6,317	$	7,808

Non-cash investing and financing activities
Issuance of common shares as compensation	$	338	$	270
Issuance of common shares to fund deferred compensation plan	$	1,374	$	1,530
Issuance of common shares to fund ESPP plan	$	145	$	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. 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 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 March 31, ~~2023,~~2024, 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~~has 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 March 31, ~~2023,~~2024, and ~~2022,~~2023, 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						Three Months Ended						Nine Months Ended
	March 31						March 31						March 31						March 31
(In thousands)	2023			2022			2023			2022			2024			2023			2024			2023

Operating lease cost	$	884		$	868		$	2,661		$	2,617		$	993		$	884		$	2,893		$	2,661
Financing lease cost:
Amortization of right of use assets		74			74			221			221			73			74			219			221
Interest on lease liabilities		16			19			51			61			13			16			41			51
Variable lease cost		22			22			65			65			22			22			65			65
Sublease income		(116	)		(94	)		(348	)		(283	)		(116	)		(116	)		(348	)		(348	)
Total lease cost	$	880		$	889		$	2,650		$	2,681		$	985		$	880		$	2,870		$	2,650

Supplemental Cash Flow Information:					Nine Months Ended
	Nine Months Ended
	March 31				March 31
(In thousands)	2023		2022		2024		2023

Cash flows from operating leases
Fixed payments - operating cash flows	$	2,754	$	2,669	$	2,806	$	2,754
Liability reduction - operating cash flows	$	2,451	$	2,271	$	2,421	$	2,451

Cash flows from finance leases
Interest - operating cash flows	$	51	$	61	$	41	$	51
Repayments of principal portion - financing cash flows	$	192	$	196	$	241	$	192

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 %

Operating Leases:	March 31,			June 30,
	2024			2023

Total operating right-of-use assets	$	9,063		$	8,921

Accrued expenses (Current liabilities)	$	3,557		$	3,566
Long-term operating lease liability		6,222			5,954
Total operating lease liabilities	$	9,779		$	9,520

Weighted Average remaining Lease Term (in years)		3.77			3.31

Weighted Average Discount Rate		5.35	%		5.44	%

Operating
Lease Finance Lease Operating Net Lease
Maturities of Lease Liability:

Liabilities

Liabilities

Subleases

Commitments

2023
$ 1,235 $ 182 $ (94 ) $ 1,323
2024
3,399 337 (377 ) 3,359
2025
2,253 362 (31 ) 2,584
2026
952 362 1,314
2027
323 303 626
Thereafter
4 4
Total lease payments
$ 8,166 $ 1,546 $ (502 ) $ 9,210
Less: Interest
(761 ) (185 ) (946 )
Present Value of Lease Liabilities
$ 7,405 $ 1,361 $ 8,264

Finance Leases:	March 31,			June 30,
	2024			2023

Buildings under finance leases	$	2,033		$	2,033
Equipment under finance leases		41			34
Accumulated depreciation		(1,159	)		(929	)
Total finance lease assets, net	$	915		$	1,138

Accrued expenses (Current liabilities)	$	317		$	284
Long-term finance lease liability		719			960
Total finance lease liabilities	$	1,036		$	1,244

Weighted Average remaining Lease Term (in years)		3.08			3.83

Weighted Average Discount Rate		4.86	%		4.86	%

Maturities of Lease Liability:	Operating Lease Liabilities			Finance Lease Liabilities			Operating Subleases			Net Lease Commitments
2024	$	3,577		$	317		$	(94	)	$	3,800
2025		2,675			362			(31	)		3,006
2026		1,824			362			-			2,186
2027		1,360			114			-			1,474
2028		496			-			-			496
Thereafter		1,049			-			-			1,049
Total lease payments	$	10,981		$	1,155		$	(125	)	$	12,011
Less: Interest		(1,202	)		(119	)					(1,321	)
Present Value of Lease Liabilities	$	9,779		$	1,036					$	10,690

NOTE 14 – 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						Nine Months Ended						Three Months Ended						Nine Months Ended
	March 31						March 31						March 31						March 31
	2023			2022			2023			2022			2024			2023			2024			2023
Reconciliation of effective tax rate:

Provision for income taxes at the anticipated annual tax rate		30.5	%		22.4	%		25.9	%		23.4	%		25.3	%		30.5	%		26.0	%		25.9	%
Uncertain tax positions		1.2			0.5			0.3			(0.8	)		2.6			1.2			0.3			0.3
Other		0.7			-			0.2			-			-			0.7			-			0.2
Share-based compensation		0.2			-			0.6			(0.2	)		-			0.2			(2.9	)		0.6
Effective tax rate		32.6	%		22.9	%		27.0	%		22.4	%		27.9	%		32.6	%		23.4	%		27.0	%

NOTE 15 – SUBSEQUENT EVENTS

On April 18, 2024, the Company announced the acquisition of privately held EMI Industries (“EMI”) for an all-cash purchase price of $50 million. LSI funded the acquisition with cash and availability under its existing credit facility. Florida-based EMI is a metal and millwork manufacturer of standard and customized fixtures, displays, and food equipment for the convenience store, grocery, and restaurant industries. EMI designs and manufactures products from five production facilities located across the United States. EMI reported total revenue of $87.0 million in calendar 2023. Upon closing, the transaction will be immediately accretive to LSI on an adjusted earnings per share basis. EMI will become part of LSI’s display solutions segment on a reporting basis moving forward.

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,~~2023, 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

Operating Income (Loss) by Business Segment
	Three Months Ended						Nine Months Ended
Net Sales by Business Segment													Three Months Ended				Nine Months Ended
	March 31						March 31						March 31				March 31
(In thousands)	2023			2022			2023			2022			2024		2023		2024		2023

Lighting Segment	$	6,529		$	4,959		$	22,441		$	13,921		$	64,882	$	66,707	$	197,318	$	201,074
Display Solutions Segment		5,501			4,556			19,759			12,142			43,304		50,763		143,314		172,269
Corporate and Eliminations		(4,298	)		(4,354	)		(15,409	)		(12,036	)
	$	7,732		$	5,161		$	26,791		$	14,027		$	108,186	$	117,470	$	340,632	$	373,343

Operating Income by Business Segment	Three Months Ended						Nine Months Ended
	March 31						March 31
(In thousands)	2024			2023			2024			2023

Lighting Segment	$	7,268		$	6,529		$	24,877		$	22,441
Display Solutions Segment		4,064			5,501			14,585			19,759
Corporate and Eliminations		(3,672	)		(4,298	)		(12,955	)		(15,409	)
	$	7,660		$	7,732		$	26,507		$	26,791

Net sales of $108.2 million for the three months ended March 31, 2024, decreased $9.3 million or 8% as compared to net sales of $117.5 million for the three months ended March 31, ~~2023, increased $7.4 million or 7% as compared to~~2023. The decrease in net sales ~~of $110.1~~was attributed to a $1.8 million ~~for the three months ended March 31, 2022. Net sales were driven by increased~~decrease in net sales of the Lighting Segment, ~~(an increase~~while the remainder of ~~$9.6 million or 17%) partially offset by decreased~~the decrease in net sales ofwas attributable to the Display Solutions ~~Segment (a decrease of $2.2 million or 4%). The 17%~~Segment. In our Display Solutions segment, recent program awards generated strong growth in the ~~Lighting Segment was driven by continued growth in both indoor~~refueling/c-store and ~~outdoor applications, across multiple verticals. The 4% decline~~QSR verticals, partially offsetting delayed activity in the ~~Display Solutions Segment~~grocery vertical. Our diverse end-market exposure and solid execution was ~~due to changes in~~key during the ~~timing~~third quarter, as certain verticals demonstrated robust or stable demand strength, while the grocery vertical remains unfavorably impacted by the proposed merger of ~~shipments~~two industry participants, and ~~completion of several large digital signage programs, while transitioning to new programs.~~longer than expected regulatory review.

Net sales of $340.6 million for the nine months ended March 31, 2024, decreased $32.7 million or 9% as compared to net sales of $373.3 million for the nine months ended March 31, ~~2023, increased $45.7~~2023. Net sales in the Lighting Segment decreased ($3.8 million or ~~14% as compared to net sales of $327.7 million for~~2%) from the ~~nine months ended March 31, 2022.~~prior year. Net sales ~~were driven by increased net sales~~ in ~~both Lighting Segment (an increase of $35.4 million or 21%) and~~ the Display Solutions Segment ~~(an increase of $10.3~~decreased ($29.0 million or 6%17%). from the prior year. The ~~Company continues to make progress on its key growth initiatives, including cross selling products to grow existing customers as well as programs to attain new customers.~~challenges previously addressed above in the grocery market have been the primary cause of the decline in total sales year-over-year.

Operating income of $7.7 million for the three months ended March 31, ~~2023, represents a $2.6 million increase~~2024, remained stable from ~~operating income of $5.1 million~~the same period in ~~the three months ended March 31, 2022.~~fiscal 2023. Adjusted operating income, a Non-GAAP measure, was $8.8 million in the three months ended March 31, ~~2023, compared to $6.0 million~~2024, and was also unchanged from the period in ~~the three months ended March 31, 2022.~~fiscal 2023. Refer to “Non-GAAP Financial Measures” below for a reconciliation of Non-GAAP financial measures to U.S. GAAP measures. ~~The increase~~Despite an 8% decrease in sales, operating income ~~was~~remained consistent from prior year which reflects the ~~result of increased volume leveraged by a higher value~~Company’s focus in higher-value, solutions-based sales mix, continued ~~price~~sales discipline, ~~coupled with improved program pricing,~~ and ~~continued effective cost management.~~moderating input costs.

Operating income of ~~$26.8~~$26.5 million for the nine months ended March 31, ~~2023, represents a $12.8~~2024, declined slightly from $26.8 million ~~increase from~~ operating income ~~of $14.0 million in~~for the nine months ended March 31, ~~2022.~~2023. Adjusted operating income, a Non-GAAP financial measure, was $30.2 million in the nine months ended March 31, ~~2023, compared~~2024, and remained equal to ~~$16.9 million~~the same period in ~~the nine months ended March 31, 2022.~~fiscal 2023. Refer to “Non-GAAP Financial Measures” below for a reconciliation of Non-GAAP financial measures to U.S. GAAP measures. ~~The Company continues~~Similar 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~~third quarter results, the Company ~~sees profitable growth.~~was able to maintain the same level of operating income despite a 9% decline in sales.

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 long-term performance based compensation expense, severance ~~costs, acquisition~~and restructuring 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, and free cash flow.~~EBITDA. 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 operating income to adjusted operating income:~~

Reconciliation of operating income to adjusted operating income:	Three Months Ended
	March 31
(In thousands)	2024		2023

Operating Income as reported	$	7,660	$	7,732

Long-Term Performance Based Compensation		1,021		968

Consulting expense: Commercial Growth Initiatives		-		75

Severance costs and Restructruing costs		141		-

Adjusted Operating Income	$	8,822	$	8,775

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
Reconciliation of net income to adjusted net income											Three Months Ended
	March 31										March 31
(In thousands, except per share data)	2023					2022					2024					2023
		Diluted EPS					Diluted EPS							Diluted EPS					Diluted EPS

Net Income as reported	$	4,669		$	0.16	$	3,618		$	0.13	$	5,375		$	0.18	$	4,669		$	0.16

Long-Term Performance Based Compensation		769	(1)		0.03		576	(3)		0.02		767	⁽¹⁾		0.03		769	⁽³⁾		0.03

Consulting expense: Commercial Growth Initiatives		59	(2)		-		-			-		-			-		59	⁽⁴⁾		-

Acquisition Costs		-			-		16	(4)		-
Severance costs and Restructruing costs												101	⁽²⁾		-		-			-

Severance costs		-			-		4	(5)		-
Net Income adjusted	$	5,497		$	0.19	$	4,214		$	0.15	$	6,243		$	0.21	$	5,497		$	0.19

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) ~~$199~~$254

(2) ~~$16~~$40

(3) ~~$204~~$199

(4) $5$16

~~(5) $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

2322

~~Reconciliation of operating income to adjusted net income:~~

Reconciliation of operating income to adjusted operating income:	Nine Months Ended
	March 31
(In thousands)	2024		2023

Operating Income as reported	$	26,507	$	26,791

Long-Term Performance Based Compensation		3,195		2,521

Consulting expense: Commercial Growth Initiatives		19		864

Severance costs and Restructruing costs		529		46

Adjusted Operating Income	$	30,250	$	30,222

	Nine Months Ended
Reconciliation of net income to adjusted net income											Nine Months Ended
	March 31										March 31
(In thousands, except per share data)	2023					2022					2024						2023
		Diluted EPS					Diluted EPS							Diluted EPS						Diluted EPS

Net Income as reported	$	17,347		$	0.60	$	9,856		$	0.35	$	19,309		$	0.64		$	17,347		$	0.60

Long-Term Performance Based Compensation		2,107	(1)		0.08		1,850	(4)		0.07		2,366	(1)		0.08			2,107	(4)		0.08

Consulting expense: Commercial Growth Initiatives		708	(2)		0.02		-			-		13	(2)		-			708	(5)		0.02

Acquisition costs		-			-		285	(5)		0.01
Severance costs and Restructruing costs												390	(3)		0.01			38	(6)		-

Severance costs		38	(3)		-		4	(6)		-
Tax rate difference between reported and adjusted net income												(732	)		(0.02	)		-			-

Net Income adjusted	$	20,200		$	0.70	$	11,995		$	0.43	$	21,346		$	0.71		$	20,200		$	0.70

(1) ~~$414~~$829

(2) ~~$156~~$6

(3) $8$139

(4) ~~$616~~$414

(5) ~~$76~~$156

(6) $1$8

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

2423

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 )

Reconciliation of Net Income to Adjusted EBITDA	Three Months Ended					Nine Months Ended
	March 31					March 31
(In thousands)	2024		2023			2024		2023
Net Income - Reported	$	5,375	$	4,669		$	19,309	$	17,347

Income Tax		2,076		2,257			5,903		6,434
Interest Expense, Net		134		877			1,153		2,924
Other (Income) Expense		75		(71	)		142		86
Operating Income as reported	$	7,660	$	7,732		$	26,507	$	26,791

Depreciation and Amortization		2,415		2,455			7,143		7,295

EBITDA	$	10,075	$	10,187		$	33,650	$	34,086

Long-Term Performance Based Compensation		1,021		968			3,195		2,521
Consulting expense: Commercial Growth Initiatives		-		75			19		864
Severance costs and Restructruing costs		141		-			529		46

Adjusted EBITDA	$	11,237	$	11,230		$	37,393	$	37,517

Reconciliation of cash flow from operations to free cash flow	Three Months Ended						Nine Months Ended
	March 31						March 31
(In thousands)	2024			2023			2024			2023

Cash Flow from Operations	$	12,429		$	12,486		$	32,297		$	32,548

Capital expenditures		(1,277	)		(759	)		(4,626	)		(1,754	)

Free Cash Flow	$	11,152		$	11,727		$	27,671		$	30,794

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

Net Debt to Adjusted EBITDA	March 31
(In thousands)	2024			2023

Current portion and long-term debt as reported	$	3,571		$	3,571
Long-Term Debt		12,782			46,002
Total Debt		16,353			49,573
Less: Cash and cash equivalents		(7,175	)		(1,350	)

Net Debt	$	9,178		$	48,223

Adjusted EBITDA - Trailing 12 Months	$	51,496		$	48,117

Net Debt to Adjusted EBITDA		0.2			1.0

Results of Operations

THREE MONTHS ENDED MARCH 31, ~~2023,~~2024, COMPARED TO THREE MONTHS ENDED MARCH 31, ~~2022~~2023

Lighting Segment					Three Months Ended
	Three Months Ended
	March 31				March 31
(In thousands)	2023		2022		2024		2023

Net Sales	$	66,707	$	57,126	$	64,882	$	66,707
Gross Profit	$	20,278	$	16,654	$	21,564	$	20,278
Operating Income	$	6,529	$	4,959	$	7,268	$	6,529

Lighting Segment net sales of ~~$66.7~~$64.9 million in the three months ended March 31, ~~2023, increased 17%~~2024, decreased 3% from net sales of ~~$57.1~~$66.7 million in the same period in fiscal ~~2022. The 17% growth in~~2023. Demand levels for the ~~Lighting Segment was driven by continued growth in both indoor~~non-residential construction market have decreased slightly, and ~~outdoor applications, across multiple verticals. The Company~~while our quotation pipeline remains highly active, the order conversion period continues to make progress in the market by increasing sales in all major verticals it serves with the introduction of new products, providing customers to select from multiple features and price-points, based on their unique requirements. lengthen, specifically for larger projects.

Gross profit of ~~$20.3~~$21.6 million in the three months ended March 31, ~~2023,~~2024, increased ~~$3.6~~$1.3 million or ~~22%~~6% from the same period of fiscal ~~2022.~~2023. Gross profit as a percentage of net sales was ~~30.4%~~33.2% in the three months ended March 31, ~~2023,~~2024, compared to ~~29.2%~~30.4% in the same period of fiscal ~~2022.~~2023. The improvement in gross profit as a percentage of sales on a 3% decrease in net sales was driven by ~~the increase in net~~stable pricing, a higher-value sales ~~resulting from the Company’s~~mix, continued ~~focus on verticals where it competes coupled with new product offerings,~~sales price disciplines, favorable material input costs, and ~~continued price discipline, all of which in turn result in~~ improved ~~margins.~~manufacturing productivity.

Operating expenses of ~~$13.7~~$14.3 million in the three months ended March 31, ~~2023,~~2024, increased ~~$2.0~~$0.6 million or 4% from the same period of fiscal ~~2022,~~2023, primarily driven by ~~higher commission expense to its~~driven by continued investments in the agent network ~~as a result of higher net sales.~~and commercial sales initiatives.

Lighting Segment operating income of ~~$6.5~~$7.3 million for the three months ended March 31, ~~2023,~~2024, increased ~~$1.5~~$0.8 million or 11% from operating income of ~~$5.0~~$6.5 million in the same period of fiscal ~~2022~~2023 primarily driven ~~by sales volume and~~ by an improvement in gross profit as a percentage of ~~sales.~~sales on lower net sales, and continued sales price disciplines, favorable material input costs, and improved manufacturing productivity.

Display Solutions Segment					Three Months Ended
	Three Months Ended
	March 31				March 31
(In thousands)	2023		2022		2024		2023

Net Sales	$	50,763	$	52,985	$	43,304	$	50,763
Gross Profit	$	11,927	$	10,171	$	9,645	$	11,927
Operating Income	$	5,501	$	4,556	$	4,064	$	5,501

Display Solutions Segment net sales of ~~$50.8~~$43.3 million in the three months ended March 31, ~~2023,~~2024, decreased ~~$2.2~~$7.5 million or 4%15% from net sales of ~~$53.0~~$50.8 million in the same period in fiscal ~~2022. The 4% decline~~2023. Despite growth in the refueling/c-store and QSR verticals, sales in the Display Solutions ~~Segment was driven~~segment continue to be unfavorably impacted by ~~changes~~a temporary pause in projected demand within the ~~timing~~grocery market vertical related to the pending merger of ~~shipments and completion of several large digital signage programs, while transitioning to new programs.~~two larger grocery chains.

Gross profit of ~~$11.9~~$9.6 million in the three months ended March 31, ~~2022, increased $1.8~~2024, decreased $2.3 million or ~~17%~~19% from the same period of fiscal ~~2022.~~2023. Gross profit as a percentage of net sales in the three months ended March 31, ~~2023,~~2024, was ~~23.5%~~22.3% compared to ~~19.2%~~23.5% 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.~~2023. The ~~improvement~~reduction in gross profit as a percentage of sales was primarily driven by ~~improved~~the decrease in net sales partially offset by favorable program pricing and ~~a favorable project mix.~~prudent cost management.

Operating expenses of ~~$6.4~~$5.6 million in the three months ended March 31, ~~2023, increased~~2024, decreased $0.8 million from ~~$5.6~~$6.4 million in the same period of fiscal ~~2022.~~2023. The ~~increase of $0.8 million~~decrease in operating expenses was primarily driven by ~~several factors including compensation, benefits, and commercial sales and marketing programs~~efforts to manage costs ~~to support sales growth initiatives.~~in line with the decline in net sales.

Display Solutions Segment operating income of ~~$5.5~~$4.1 million in the three months ended March 31, ~~2023, increased $0.9~~2024, decreased $1.4 million from operating income of ~~$4.6~~$5.5 million in the same period of fiscal ~~2022.~~2023. The ~~increase of $0.9 million~~decrease in operating income was primarily driven by ~~an improvement~~the decrease in ~~gross profit as a percentage of~~net sales.

Corporate and Eliminations							Three Months Ended
	Three Months Ended
	March 31						March 31
(In thousands)	2023			2022			2024			2023

Gross Profit (Loss)	$	(1	)	$	(32	)	$	1		$	(1	)
Operating (Loss)	$	(4,298	)	$	(4,354	)	$	(3,672	)	$	(4,298	)

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

Operating expenses of ~~$4.3~~$3.7 million in the three months ended March 31, ~~2023, remained flat from~~2024, decreased $0.6 million or 15% for operating expenses of $4.3 million in the same period of fiscal ~~2022 as a~~2023. The decrease was primarily the result of ~~efforts to contain costs.~~cost containment initiatives across several of the Company’s cost categories.

Consolidated Results

The Company reported ~~$0.9~~$0.1 million and ~~$0.5~~$0.9 million of net interest expense in the three months ended March 31, ~~2023,~~2024, and March 31, ~~2022,~~2023, respectively. The ~~increase~~decrease in interest expense iswas the result of ~~increased borrowing costs.~~the Company’s ability to paydown its debt from cash generated by operations. The Company also recorded a nominal amount of other ~~(income)~~income which is related to net foreign exchange currency transaction net gains and (losses) through the Company’s Mexican and Canadian subsidiaries.

The $2.1 million of ~~($0.1) million~~income tax expense in the three months ended March 31, ~~2023, and March 31, 2022, respectively, both~~2024, represents a consolidated effective tax rate of ~~which are related to net foreign exchange currency transaction gains through our Mexican and Canadian subsidiaries.~~

27.9%. The income tax rate for 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~~decrease in the effective tax rate is primarily driven by ~~an increase~~a decrease in pre-tax profits in the higher taxing jurisdictions outside of ~~Puerto Rico and Canada along with unfavorable discrete tax adjustments.~~the United States where the Company conducts business.

The Company reported net income of ~~$4.7~~$5.4 million in the three months ended March 31, ~~2023,~~2024, compared to net income of ~~$3.6~~$4.6 million in the three months ended March 31, ~~2022.~~2023. Non-GAAP adjusted net income was $6.2 million for the three months ended March 31, 2024, compared to adjusted net income of $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 net results result of ~~an increase~~a decrease in net sales ~~and~~more than offset by an increase in the gross profit as a percentage of ~~sales.~~sales, a decrease in operating expenses primarily driven by efforts to manage costs in line with the decline in net sales, and a decrease in interest expense resulting from a reduction in debt. Diluted earnings per share of ~~$0.16~~$0.18 was reported in the three months ended March 31, ~~2023,~~2024, as compared to ~~$0.13~~$0.16 diluted earnings per share in the same period of fiscal ~~2022.~~2023. The weighted average common shares outstanding for purposes of computing diluted earnings per share in the three months ended March 31, ~~2023,~~2024, were ~~29,611,000~~30,122,000 shares compared to ~~28,083,000~~29,611,000 shares in the same period last year.

NINE MONTHS ENDED MARCH 31, ~~2023,~~2024, COMPARED TO NINE MONTHS ENDED MARCH 31, ~~2022~~2023

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	Nine Months Ended
	March 31
(In thousands)	2024		2023

Net Sales	$	197,318	$	201,074
Gross Profit	$	67,542	$	63,015
Operating Income	$	24,877	$	22,441

Lighting Segment net sales of ~~$201.1~~$197.3 million in the nine months ended March 31, ~~2023, increased 21%~~2024, decreased 2% from net sales of ~~$165.7~~$201.1 million in the same period in fiscal ~~2022.~~2023. Despite continued softness in the non-residential construction market, which contributed to the small decline in sales, the Company continues to outperform the broader market and gain market share.

Gross profit of $67.5 million in the nine months ended March 31, 2024, increased $4.5 million or 7% from the same period of fiscal 2023. Gross profit as a percentage of net sales was 34.2% in the nine months ended March 31, 2024, compared to 31.3% in the same period of fiscal 2023. The ~~21%~~improvement in gross profit as a percentage of sales on a 2% decrease in net sales was driven by stable pricing, a higher-value sales mix, continued sales price disciplines, favorable material input costs, and improved manufacturing productivity.

Operating expenses of $42.7 millionin the nine months ended March 31, 2024, increased $2.1 million from the same period of fiscal 2023, primarily driven by driven by continued investments in the agent network and the sales team.

Lighting Segment operating income of $24.9 million for the nine months ended March 31, 2024, increased $2.5 million or 11% from operating income of $22.4 million in the same period of fiscal 2023 primarily driven by an improvement in gross profit as a percentage of sales on lower net sales, and continued sales price disciplines, favorable material input costs, and improved manufacturing productivity.

Display Solutions Segment	Nine Months Ended
	March 31
(In thousands)	2024		2023

Net Sales	$	143,314	$	172,269
Gross Profit	$	31,793	$	38,061
Operating Income	$	14,585	$	19,759

Display Solutions Segment net sales of $143.3 million in the nine months ended March 31, 2024, decreased $29.0 million or 17% from net sales of $172.3 million in the same period in fiscal 2023. Despite recent growth in the ~~Lighting Segment was driven~~refueling/c-store and QSR verticals, sales in the Display Solutions segment continue to be unfavorably impacted by ~~continued growth~~a temporary pause in ~~both indoor and outdoor applications, across multiple verticals. Sales growth was broad-based, with significant increases in all~~projected demand within the grocery market vertical ~~market applications. The Company’s continued efforts over~~related to the ~~last~~pending merger of two ~~years to strengthen its lighting offering for select vertical market applications continues to position LSI to win additional business.~~larger grocery chains.

2726

Gross profit of ~~$63.0~~$31.8 million in the nine months ended March 31, ~~2023, increased $14.0~~2024, decreased $6.3 million or ~~29%~~17% 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 million~~in 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 $38.1 million in the nine months ended March 31, 2023, increased $10.3 million or 37% from the same period of fiscal 2022.~~2023. Gross profit as a percentage of net sales in the nine months ended March 31, ~~2023,~~2024, was ~~22.1%~~22.2% compared to ~~17.1%~~22.1% in the same period of fiscal ~~2022.~~2023. The small improvement in gross profit as a percentage of sales was driven ~~by the increase in net sales,~~ improved program pricing, and favorable sales ~~mix.~~mix on lower sales.

Operating expenses of ~~$18.3~~$17.2 million in the nine months ended March 31, ~~2023, increased $2.7~~2024, decreased $1.1 million or 6% from ~~$15.6~~$18.3 million in the same period of fiscal ~~2022.~~2023. The ~~increase of $2.7 million~~decrease in operating expenses was primarily driven by ~~several factors including compensation, benefits, and commercial sales and marketing programs~~efforts to manage costs ~~to support sales growth, along~~in line with ~~an increase~~the decline in ~~short-term performance-based incentive plan expense driven by improved business performance.~~net sales.

Display Solutions Segment operating income of ~~$19.8~~$14.6 million in the nine months ended March 31, ~~2023, increased $7.7~~2024, decreased $5.2 million or ~~63%~~26% from operating income of ~~$12.1~~$19.8 million in the same period of fiscal ~~2022.~~2023. The ~~increase~~decrease in operating income was primarily driven by ~~an increase~~the decrease in ~~sales and an improvement of gross profit as a percentage of~~net sales.

Corporate and Eliminations							Nine Months Ended
	Nine Months Ended
	March 31						March 31
(In thousands)	2023			2022			2024			2023

Gross Profit (Loss)	$	6		$	(24	)
Gross Profit							$	-		$	6
Operating (Loss)	$	(15,409	)	$	(12,036	)	$	(12,955	)	$	(15,409	)

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

Operating expenses of ~~$15.4~~$13.0 million in the nine months ended March 31, ~~2023, increased $3.4~~2024, decreased $2.6 million from the same period of fiscal ~~2022.~~2023. The ~~increase~~decrease was primarily the result of ~~an increase in short-term and long-term performance-based incentive plan expense driven by improved business performance and by commercial growth initiative consulting expense~~cost containment initiatives across several of ~~$0.9 million for which there was no comparable expense in~~ the ~~first nine months of fiscal 2022.~~Company’s cost categories.

Consolidated Results

The Company reported ~~$2.9~~$1.2 million and ~~$1.3~~$2.9 million of net interest expense in the nine months ended March 31, ~~2023,~~2024, and March 31, ~~2022,~~2023, respectively. The ~~increase~~decrease in interest expense ~~is primarily~~was the ~~results~~result of ~~increased borrowing costs.~~the Company’s ability to paydown its debt from cash generated by operations. The Company also recorded a nominal amount of other ~~expense of $0.1 million and a negligible amount in the nine months ended March 31, 2023, and March 31, 2022, respectively,~~income which is related to net foreign exchange currency transaction net ~~losses~~gains through ~~our~~the Company’s Mexican and Canadian subsidiaries.

The $5.9 million of income tax expense in the nine months ended March 31, 2024, represents a consolidated effective tax rate of 23.4%. The $6.4 million of income tax expense in the nine months ended 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 22.4%. The increase~~decrease in the effective tax rate is primarily driven by ~~an increase~~the favorable tax treatment of the Company’s long-term performance based compensation in ~~pre-tax profits~~fiscal 2024 with no comparable favorable tax treatment in ~~the higher taxing jurisdictions of Puerto Rico and Canada along with unfavorable discreate tax adjustments.~~fiscal 2023.

The Company reported net income of $19.3 million in the nine months ended March 31, 2024, compared to net income of $17.3 million in the nine months ended March 31, ~~2023, compared to~~2023. Non-GAAP adjusted net income ~~of $9.9~~was $21.3 million infor the nine months ended March 31, ~~2022. Non-GAAP~~2024, compared to adjusted net income ~~was~~of $20.2 million for the nine months ended March 31, 2023 ~~compared to adjusted net income of $12.0 million for the nine months ended March 31, 2022~~ (Refer to the Non-GAAP tables above). The increase in Non-GAAP adjusted net income is primarily the net results result of ~~an increase~~a decrease in net sales ~~and~~more than offset by an increase in the gross profit as a percentage of ~~sales.~~sales, a decrease in operating expenses primarily driven by efforts to manage costs in line with the decline in net sales, and a decrease in interest expense resulting from a reduction in debt. Diluted earnings per share of ~~$0.60~~$0.64 was reported in the nine months ended March 31, ~~2023,~~2024, as compared to ~~$0.35~~$0.60 diluted earnings per share in the same period of fiscal ~~2022.~~2023. The weighted average common shares outstanding for purposes of computing diluted earnings per share in the nine months ended March 31, ~~2023,~~2024, were ~~29,055,000~~30,005,000 shares compared to ~~27,945,000~~29,055,000 shares in the same period last year.

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 March 31, ~~2023,~~2024, the Company had working capital of ~~$79.8~~$77.2 million compared to ~~$84.3~~$73.3 million at June 30, ~~2022.~~2023. Non-cash working capital for the period ending March 31, 2024, was $70.0 million which represents a drop of $1.4 million from $71.4 million non-cash working capital as of June 30, 2023. The ratio of current assets to current liabilities was 2.2 to 1.0 at March 31, ~~2023,~~2024, and ~~2.1~~2.0 at June 30, ~~2022.~~2023. The decrease in non-cash working capital from June 30, ~~2022,~~2023, to March 31, ~~2023,~~2024, is primarily driven by a ~~$8.5~~$9.0 million decrease in net accounts receivable and a ~~$6.7~~$3.4 million decrease in net inventory 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~~payable and ~~other current assets of $3.2 million, an increase in~~ accrued ~~expenses of $1.4 million, and a $1.1 million decrease in cash and cash equivalents, resulting in a net increase to working capital, of $0.7 million.~~ expenses.

Net accounts receivable was ~~$69.3~~$68.7 million and $77.8 million at March 31, ~~2023,~~2024, and June 30, ~~2022,~~2023, respectively. DSO ~~remained the same at 54~~was 58 days at March 31, 2023, ~~and~~slightly higher than 57 days at June 30, ~~2022.~~2023.

Net inventories of ~~$67.7~~$60.3 million at March 31, ~~2023,~~2024, decreased ~~$6.7~~$3.4 million from ~~$74.4~~$63.7 million at June 30, ~~2022, is due to ongoing improvement in the supply chain.~~2023. The decrease of ~~$6.7~~$3.4 million is the net result of a decrease in net inventory of ~~$3.8~~$4.2 million in the Lighting Segment ~~and~~partially offset by a ~~$2.9~~$0.8 million ~~decrease~~increase in net inventory in the Display Solutions 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 facility, 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 March 31, ~~2023, $45.1~~2024, the entire $75 million of the revolving 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.~~2024.

The Company ~~had a source of $32.5~~generated $32.3 million of cash from operating activities in the nine months ended March 31, ~~2023,~~2024, compared to a ~~use~~similar generation of cash of ~~$12.7~~$32.5 million in the nine months ended March 31, ~~2022.~~2023. The ~~increase in net cash flows from operating activities is primarily the result of effective management of the Company’s~~Company continues to effectively manage its working capital ~~and~~while generating increasing cash flow from ~~improved earnings.~~earnings in both fiscal years, resulting in strong cash flow from operations.

The Company used ~~$1.8~~$4.6 million and ~~$0.8~~$1.8 million of cash related to investing activities to support the Company’s various capital initiatives, in the nine months ended March 31, ~~2023,~~2024, and March 31, ~~2022,~~2023, respectively. ~~Capital expenditures~~The Company has increased ~~from $1.3 million~~its investment in ~~the nine months ended March 31, 2022,~~equipment and tooling year-over-year 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.support sales growth and new products.

The Company ~~had a use~~used cash of ~~cash of~~$22.4 million and $32.0 million related to financing activities in the nine months ended March 31, 2024, and March 31, 2023, ~~compared to a source~~respectively. The use of cash ~~of $12.4 million~~ in ~~the nine months ended March 31, 2022. The $44.4 million change in cash flow~~both fiscal years was primarily the result of cash generated from improved earnings and effective working capital management, ~~and from improved earnings,~~ which in turn was used to pay down the Company’s line of ~~credit in the first nine months of fiscal 2023. Also contributing to the reduction of debt was~~credit. The Company also received $1.3 million and $3.1 million of cash ~~received from~~in fiscal 2024 and fiscal 2023, respectively, related to the exercise of stock ~~options in~~options. This influx of cash also contributed to the ~~second and third quarters~~pay down of ~~fiscal 2023.~~the Company’s line of credit. On or about April 18, 2024, the Company borrowed $44.0 million, net of available cash, under the credit facility for the purposes of financing the acquisition of EMI.

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 April ~~2023,~~2024, the Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable May ~~16, 2023,~~14, 2024, to shareholders of record as of May ~~8, 2023.~~6, 2024. The indicated annual cash dividend rate for fiscal ~~2023~~2024 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.

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~~2023 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.~~2023. Additional information can be found in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, which appears on page 1816 of the Annual Report on Form 10-K for the fiscal year ended June 30, ~~2022.~~2023.

3028

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 March 31, ~~2023,~~2024, 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 second quarter ended March 31, ~~2023,~~2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 5. OTHER INFORMATION

~~None.~~None.

ITEM 6. EXHIBITS -

Exhibits:

10.1*

Nonqualified Deferred Compensation Plan Amended and Restated as of January 24, 2024

19.1	Insider Trading Policy Amended and Restated as of January 24, 2024

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.

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)
May ~~5, 2023~~6, 2024

3331

(In thousands)

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

	Operating
	Lease			Finance Lease			Operating			Net Lease
Maturities of Lease Liability:	Liabilities			Liabilities			Subleases			Commitments
2023	$	1,235		$	182		$	(94	)	$	1,323
2024		3,399			337			(377	)		3,359
2025		2,253			362			(31	)		2,584
2026		952			362						1,314
2027		323			303						626
Thereafter		4									4
Total lease payments	$	8,166		$	1,546		$	(502	)	$	9,210
Less: Interest		(761	)		(185	)					(946	)
Present Value of Lease Liabilities	$	7,405		$	1,361					$	8,264