LSI Industries — Fiscal 2027 Q1 Earnings Summary

Financial Performance:

• Net sales reached $225.9 million, a 44% year-over-year increase; organic sales excluding the Royston acquisition declined 2%.
• Net income was $7.1 million ($0.19 diluted EPS), compared to $7.3 million ($0.23 diluted EPS) in the prior year.
• Adjusted net income was $11.6 million ($0.31 adjusted diluted EPS), a 19% increase from the prior year.
• Adjusted EBITDA was $22.2 million, a 41% increase year-over-year, with an adjusted EBITDA margin of 9.8%.
• Free cash flow was $13.8 million, representing 62% of adjusted EBITDA.
• Total net debt decreased by $14.3 million from the prior quarter, resulting in a net debt to proforma TTM adjusted EBITDA ratio of 2.6x.
• Cash and credit facility availability totaled $122.6 million at quarter-end.
• Lighting segment net sales were $64.8 million (down 6%); Display Solutions segment net sales were $161.0 million (up 83%).

Guidance and Future Outlook:

• Management anticipates project activity to ramp steadily throughout fiscal 2027 and into fiscal 2028, specifically regarding a 2,500-site refueling/c-store refresh program for a major oil company.
• A 3,000-store interior renovation program for a large QSR customer is scheduled to begin in late Q3 of fiscal 2027 and is expected to continue over three years.
• Manufacturing consolidation from Collingwood, Ontario, to a Toronto-area facility is expected to occur in fiscal Q2 and Q3, generating over $1.0 million in annual cost savings.
• Management expects to continue driving operating leverage and expanding cross-selling opportunities across combined LSI-Royston customers in refueling/c-store, grocery, and QSR markets.

Business Segments and Product Lines:

• Display Solutions: Sales increased over 80% year-over-year; organic sales (excluding Royston) increased 1%. Order rates increased 4% year-over-year.
• Refueling/C-store Vertical: Sales increased 5% year-over-year, driven by demand from large customers and renovation projects.
• Grocery Vertical: Sales remain at a high level, led by check stand and display case product sales.
• QSR Vertical: Demand remains soft; however, order activity for a large customer's renovation program was secured.
• Lighting Segment: Net sales declined 6% due to soft demand in parking, small retail, warehouse, and automotive applications, though growth occurred in refueling, sports, and banking.
• Royston Integration: Royston delivered standalone sales growth of 8% and expanded adjusted EBITDA margin by 100 basis points sequentially.
• Marketing: Launched the "Category of One" marketing campaign at the NACS tradeshow in early October.

Market and Competitive Landscape:

• Demand in refueling/c-store and grocery verticals remains resilient and elevated.
• Non-residential lighting market demand in North America showed softness, contributing to organic sales declines.
• LSI was selected as one of three providers for a major QSR customer's 3,000-store renovation program.
• Customers are prioritizing investments in consumer experiences, brand identity, and physical environment modernization.

Risks and Challenges:

• Headwinds include cost inflation and elevated interest rates impacting non-residential construction activity.
• Customers are facing challenges meeting project renovation schedules, leading to delayed site releases and changes to product delivery/installation requirements.
• Seasonal slowdowns are expected as customers pause activity ahead of the holiday season.
• Forward-looking statements note risks related to competitive products, supply chain disruptions, labor costs, interest rate fluctuations, and integration of acquisitions.

Management Commentary and Tone:

• CEO James A. Clark stated the team executed well, delivering profitable growth, strong free cash flow conversion, and debt reduction.
• Management expressed confidence in the "Category of One" value proposition and the integration of Royston.
• Clark noted that while inflationary pressures create a challenging environment, demand across most vertical markets remains healthy early in fiscal 2027.
• The tone emphasized a focus on expanding cross-selling opportunities and realizing a greater share of wallet across multi-site retail chains.

Other Key Points:

• The Board of Directors declared a quarterly cash dividend of $0.05 per share, payable November 24, 2026, to shareholders of record on November 16, 2026.
• The indicated annual cash dividend rate is $0.20 per share.
• The acquisition of Royston Group, completed in March 2026, contributed significantly to the 44% total sales growth.
• A conference call was held on November 5, 2026, at 11:00 A.M. ET to review results.
• LSI employs approximately 3,000 people across 23 manufacturing plants in the U.S. and Canada.