LSI Industries Reports Fiscal 2025 Second Quarter Results and Declares Quarterly Cash Dividend

CINCINNATI--(BUSINESS WIRE)--LSI Industries Inc. (Nasdaq: LYTS, “LSI” or the “Company”) a leading U.S. based manufacturer of commercial lighting and display solutions, today reported financial results for the fiscal 2025 second quarter ended December 31, 2024. FISCAL 2025 SECOND QUARTER RESULTS Net sales of $147.7 million, + 36% y/y Organic net sales +14% y/y Net income of $5.6 million, or $0.18 per diluted share Adjusted Net Income $8.0 million or $0.26 per diluted share EBITDA of $11.5 million; Adjusted EBITDA of $13.3 million Free cash flow of $8.8 million Ratio of net debt to TTM Adjusted EBITDA of 0.6x LSI delivered significant year-over-year growth in sales and profitability in the fiscal second quarter, driven by broad-based demand strength across its vertical markets. Fiscal second quarter results benefitted from solid organic growth within the Display Solutions segment, together with contributions from the EMI acquisition completed in April 2024. The Company reported net sales of $147.7 million in the fiscal second quarter, an increase of 36% versus the prior year period. Net sales, excluding contributions from the EMI acquisition, increased 14% versus the fiscal second quarter of 2024. LSI reported net income of $5.6 million, or $0.18 per diluted share, in the second quarter, while adjusted net income was $8.0 million, or $0.26 per diluted share. The Company generated adjusted EBITDA of $13.3 million or 9.0% of net sales, an increase of more than 20% versus the year-ago period. A reconciliation of GAAP and non-GAAP financial results is included in this press release. The Company generated free cash flow of $8.8 million in the second quarter, or nearly $41.4 million on a trailing twelve-month basis. Given continued strength in cash generation, LSI reduced its ratio of net debt to trailing twelve-month Adjusted EBITDA to 0.6x, down from 1.3x at the time of the EMI acquisition in April 2024. At the end of the second quarter, LSI had cash and availability on its credit facility totaling $67 million. The Company declared a regular cash dividend of $0.05 per share payable on February 11, 2025, to shareholders of record on February 3, 2025. MANAGEMENT COMMENTARY “LSI delivered 14% organic sales growth in the fiscal second quarter, supported by strong demand across our core refueling, c-store, and grocery verticals,” stated James A. Clark, President and Chief Executive Officer of LSI. “Including contributions from our most recent acquisition of EMI, which continues to perform ahead of initial expectations, LSI generated total sales growth of 36% in the second quarter, while adjusted net income, adjusted EBITDA and free cash flow generation all increased on-a-year-over-year basis. “Our integrated, solutions-based model is gaining significant traction in the marketplace, positioning us for a solid start to our fiscal third quarter,” continued Clark. “Second quarter order rates increased versus the prior year, resulting in a 12% year-over-year increase in backlog entering the fiscal third quarter. Display Solutions segment orders increased 25% on a year-over-year basis in the second quarter driven by balanced growth across all major verticals. We anticipate that order rates will remain positive into the second half of our fiscal year, given current and projected customer activity across our vertical markets. “Our Display Solutions segment generated organic sales growth of 50% in the second quarter, driven by increased sales across product categories and vertical markets. We continue to execute on a significant backlog of multi-year contracts with large national and international refueling/c-store customer programs where our integrated solutions remain in high demand. Notably, second quarter sales to refueling/c-store customers increased by more than 60%, when compared to the year-ago period. We enter the third quarter with an increased backlog and expect strong sales growth to continue into the fiscal second half. “The grocery vertical generated sales growth over 50% in the quarter driven by the resurgence in refrigerated and non-refrigerated display case demand,” stated Clark. “Termination of the proposed merger between two large grocery industry participants was announced in December 2024. Uncertainty over the proposed merger caused the industry to defer both maintenance and key program investments over the last eighteen months. We began to experience a resurgence in demand during the fiscal first quarter, which accelerated in the second quarter, as expectations that a judicial decision was imminent. “In the fiscal second quarter, we successfully managed the Department of Energy legislation requiring end of life production for refrigerated display cases utilizing the current R448 technology at calendar year-end, with conversion to R290 and other technologies effective January 1, 2025. We worked closely with our customers to proactively plan and adopt the technology transition, including the launch of our new R290 product line. We are well positioned to capitalize on increased demand levels for display case products throughout the calendar year. “EMI delivered a solid performance in the second quarter, contributing to the over 100% total sales growth for Display Solutions. EMI sales were $23.4 million, substantially above what is historically a softer period for store renovations as our customers focus on the critical holiday shopping season. Sales were driven by favorable performance in the QSR, refueling/c-store and Grocery verticals. “Within the Lighting segment, overall sales were lower year-over-year against a challenging prior year comparison. Last year, we had several large lighting projects, including a multi-million-dollar installation at a new EV battery plant complex, that did not recur in the current year. While small project activity levels were healthy during the second quarter, those projects were not sufficient to offset softness in large project activity, resulting in a 10% year-over-year decline in Lighting segment sales. “Importantly, Lighting segment project quote activity remains above prior-year levels, contributing to a segment book-to-bill of 1.1 exiting the second quarter which, on a historical basis, is elevated entering a seasonally slower period for our construction markets. While our Lighting segment backlog was 6% above the prior year exiting the second quarter, we expect order rates to accelerate as we enter the second half of our fiscal year. “Innovation and new product vitality remains a central focus for our business. Over the last four years, we’ve launched more than 30 new products each year. In fiscal 2025, we anticipate more than 40 new product launches and refreshes, consistent with an innovation roadmap created to exceed specific customer requirements across each vertical market. During the second quarter, we launched multiple commercial programs designed to further accelerate adoption of our recent product launches, including our V-LOCITY series of outdoor area lights, new continuous indoor Linear fixtures, and Zone High Bay for sports court applications. Enhanced training and marketing programs for our sales force, agency partners, and customers have led to accelerated adoption of new products, consistent with our commercial strategy.” Clark concluded, “LSI remains well positioned to drive continued, profitable growth entering the second half of our fiscal year 2025. Order rates and backlog remain strong; demand conditions across most end-markets are robust; and we’re capitalizing on favorable, multi-year secular opportunities where our vertically integrated, solutions-based model is uniquely suited to support our growing base of customers. We also continue to prioritize a combination of organic and inorganic growth, as outlined within our Fast Forward strategy, while maintaining our disciplined, returns-driven approach toward capital deployment.” FISCAL 2025 SECOND QUARTER CONFERENCE CALL A conference call will be held today at 11:00 A.M. ET to review the Company’s financial results and conduct a question-and-answer session. A webcast of the conference call and accompanying presentation materials will be available in the Investor Relations section of LSI Industries’ website at www.lsicorp.com. Individuals can also participate by teleconference dial-in. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time to register, download and install any necessary audio software. Domestic Live: 877-407-4018 International Live: 201-689-8471 To listen to a replay of the teleconference, which subsequently will be available through February 6, 2025 Domestic Replay: 844-512-2921 International Replay: 412-317-6671 Conference ID: 13751021 ABOUT LSI INDUSTRIES Headquartered in Cincinnati, LSI Industries (NASDAQ: LYTS) specializes in the creation of advanced lighting, graphics, and display solutions. The Company’s American-made products, which include lighting, print graphics, digital graphics, millwork, metal and refrigerated products, and custom displays, are engineered to elevate brands in competitive markets. With a workforce of approximately 1,900 employees and 16 facilities throughout North America, LSI is dedicated to providing top-quality solutions to its clients. Additional information about LSI is available at www.lsicorp.com. FORWARD-LOOKING STATEMENTS For details on the uncertainties that may cause our actual results to be materially different than those expressed in our forward-looking statements, visit https://investors.lsicorp.com as well as our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q which contain risk factors. Three Months Ended December 31 Six Months Ended (Unaudited) December 31 2024 2023 (In thousands, except per share data) 2024 2023 $ 147,734 $ 109,005 Net sales $ 285,829 $ 232,446 112,804 77,438 Cost of products sold 217,147 163,943 69 - Expense on step-up basis of acquired lease 136 - - 31 Severance costs and restructuring costs 38 378 34,861 31,536 Gross profit 68,508 68,125 1,669 849 Long-term performance based compensation 2,853 2,174 - 4 Severance costs and restructuring costs 22 10 1,408 1,190 Amortization expense of acquired intangible assets 2,816 2,380 - - Acquisition costs 48 - 81 - Consulting expense: commercial growth initiatives 81 19 23,244 21,674 Selling and administrative costs 45,098 44,695 8,459 7,819 Operating Income 17,590 18,847 382 (29 ) Other (income) expense 322 67 728 453 Interest expense, net 1,603 1,019 7,349 7,395 Income before taxes 15,665 17,761 1,702 1,489 Income tax 3,336 3,827 $ 5,647 $ 5,906 Net income $ 12,329 $ 13,934 Weighted Average Common Shares Outstanding 29,930 29,024 Basic 29,761 28,890 30,876 30,043 Diluted 30,709 29,949 Earnings Per Share $ 0.19 $ 0.20 Basic $ 0.41 $ 0.48 $ 0.18 $ 0.20 Diluted $ 0.40 $ 0.47 (amounts in thousands) December 31 June 30, 2024 2024 Current assets $ 163,405 $ 162,499 Property, plant and equipment, net 31,534 32,959 Other assets 149,606 153,342 Total assets $ 344,545 $ 348,800 Current maturities of long-term debt $ 3,571 $ 3,571 Other current liabilities 74,977 75,636 Long-term debt 34,615 50,658 Other long-term liabilities 14,267 14,580 Shareholders' equity 217,115 204,355 $ 344,545 $ 348,800 Three Months Ended December 31, 2024 Results Net sales for the three months ended December 31, 2024, were $147.7 million representing an increase of 36% compared to the three months ended December 31, 2023, net sales of $109.0 million. Lighting Segment net sales of $58.2 million decreased 10% and Display Solutions Segment net sales of $89.5 million increased 103% from last year’s second quarter net sales. Net income for the three months ended December 31, 2024, was $5.6 million, or $0.18 per share, compared to $5.9 million or $0.20 per share for the three months ended December 31, 2023. Earnings per share represents diluted earnings per share. Six Months Ended December 31, 2024 Results Net sales for the six months ended December 31, 2024, were $285.8 million representing a 23% increase from the six months ended December 31, 2023, net sales of $232.4 million. Lighting Segment net sales of $116.6 million decreased 12% and Display Solutions Segment net sales of $169.2 million increased 69% from last year’s net sales. Net income for the six months ended December 31, 2024, was $12.3 million, or $0.40 per share, compared to $13.9 million or $0.47 per share for the six months ended December 31, 2023. Earnings per share represents diluted earnings per share. Balance Sheet The balance sheet at December 31, 2024, included current assets of $163.4 million, current liabilities of $78.5 million and working capital of $84.9 million, which includes cash of $4.7 million. The current ratio was 2.1 to 1. The balance sheet also included shareholders’ equity of $217.1 million and long-term debt of $34.6 million. It is the Company’s priority to continuously generate sufficient cash flow, coupled with an approved credit facility, to adequately fund operations. Cash Dividend Actions The Board of Directors declared a regular quarterly cash dividend of $0.05 per share in connection with the second quarter of fiscal 2025, payable February 11, 2025, to shareholders of record as of the close of business on February 3, 2025. The indicated annual cash dividend rate is $0.20 per share. The Board of Directors has adopted a policy regarding dividends which provides that dividends will be determined by the Board of Directors in its discretion based upon its evaluation of earnings both on a GAAP and non-GAAP basis, cash flow requirements, financial condition, debt levels, stock repurchases, future business developments and opportunities, and other factors deemed relevant by the Board. Non-GAAP Financial Measures This press release includes adjustments to GAAP operating income, net income, and earnings per share for the three and six months ended December 31, 2024, and 2023. Operating income, net income, and earnings per share, which exclude the impact of long-term performance based compensation expense, the amortization expense of acquired intangible assets, commercial growth opportunity expense, acquisition costs, the lease expense on the step-up basis of acquired leases, and restructuring and severance costs, are non-GAAP financial measures. We further note that while the amortization expense of acquired intangible assets is excluded from the measures, the revenue of the acquired companies is reflected in the measures and the acquired assets contribute to revenue generation. We exclude these items because we believe they are not representative of the ongoing results of the operations of the business. Also included in this press release are non-GAAP financial measures, including Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA and Adjusted EBITDA), Net Debt to Adjusted EBITDA, Free Cash Flow, and organic sales growth. We believe that these are useful as supplemental measures in assessing the operating performance of our business. These measures are used by our management, including our chief operating decision maker, to evaluate business results, and are frequently referenced by those who follow the Company. 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 net income and earnings per share reported for the periods indicated along with the calculation of EBITDA, Adjusted EBITDA, Free Cash Flow, Net Debt to Adjusted EBITDA, and organic sales growth. Three Months EndedDecember 31 Six Months EndedDecember 31 (Unaudited) 2024 2023 % Change (In thousands, except per share data) 2024 2023 % Change $ 147,734 $ 109,005 36 % Net sales $ 285,829 $ 232,446 23 % 8,459 7,819 8 % Operating income as reported 17,590 18,847 -7 % 1,669 849 Long-term performance based compensation 2,853 2,174 81 - Consulting expense: commercial growth initiatives 81 19 - - Acquisition costs 48 - 1,408 1,190 Amortization expense of acquired intangible assets 2,816 2,380 69 - Expense on step-up basis of acquired lease 136 - - 35 Severance costs and Restructuring costs 60 388 $ 11,686 $ 9,893 18 % Operating income as adjusted $ 23,584 $ 23,808 -1 % $ 5,647 $ 5,906 -4 % Net income as reported $ 12,329 $ 13,934 -12 % $ 7,996 $ 7,249 10 % Net income as adjusted $ 15,977 $ 16,859 -5 % $ 0.18 $ 0.20 -7 % Earnings per share (diluted) as reported $ 0.40 $ 0.47 -14 % $ 0.26 $ 0.24 7 % Earnings per share (diluted) as adjusted $ 0.52 $ 0.56 -8 % Three Months Ended Six Months Ended December 31 December 31 2024 2023 (In thousands, except per share data) 2024 2023 DilutedEPS DilutedEPS DilutedEPS DilutedEPS Reconciliation of net income to adjusted net income $ 5,647 $ 0.18 $ 5,906 $ 0.20 Net income as reported $ 12,329 $ 0.40 $ 13,934 $ 0.47 1,294 0.04 625 0.02 Long-term performance based compensation 2,161 $ 0.07 1,599 0.05 1,090 0.04 885 0.03 Amortization expense of acquired intangible assets 2,132 $ 0.07 1,755 0.06 62 - - - Consulting expense: commercial growth initiatives 62 $ - 13 - - - 34 - Severance costs and Restructuring costs 45 $ - 290 0.01 - - - - Acquisition costs 50 - - 53 - - - Expense on step-up basis of acquired lease 103 $ 0.01 - - (150 ) - (201 ) (0.01 ) Tax rate difference between reported and adjustednet income (905 ) $ (0.03 ) (732 ) (0.03 ) $ 7,996 $ 0.26 $ 7,249 $ 0.24 Net income adjusted $ 15,977 $ 0.52 $ 16,859 $ 0.56 Three Months EndedDecember 31 (Unaudited; In thousands) Six Months EndedDecember 31 Net Income to Adjusted EBITDA 2024 2023 % Change 2024 2023 % Change $ 5,647 $ 5,906 Net income as reported $ 12,329 $ 13,934 1,702 1,489 Income tax 3,336 3,827 728 453 Interest expense, net 1,603 1,019 382 (29 ) Other (income) expense 322 67 $ 8,459 $ 7,819 8 % Operating Income as reported $ 17,590 $ 18,847 -7 % 3,018 2,357 Depreciation and amortization 5,958 4,728 $ 11,477 $ 10,176 13 % EBITDA $ 23,548 $ 23,575 0 % 1,669 849 Long-term performance based compensation 2,853 2,174 81 - Consulting expense: commercial growth initiatives 81 19 - - Acquisition costs 48 - 69 - Expense on step-up basis of acquired lease 136 - - 35 Severance costs and Restructuring costs 60 388 $ 13,296 $ 11,060 20 % Adjusted EBITDA $ 26,726 $ 26,156 2 % 9.0 % 10.1 % Adjusted EBITDA as a percentage of sales 9.4 % 11.3 % Three Months EndedDecember 31 (Unaudited; In thousands) Six Months EndedDecember 31 Free Cash Flow 2024 2023 % Change 2024 2023 % Change $ 9,891 $ 9,276 7 % Cash flow from operations $ 21,737 $ 19,868 9 % (1,066 ) (1,956 ) Capital expenditures (1,825 ) (3,349 ) $ 8,825 $ 7,320 21 % Free cash flow $ 19,912 $ 16,519 21 % Net Debt to Adjusted EBITDA Ratio December 31 June 30 (amounts in thousands) 2024 2024 Current maturity of debt $ 3,571 $ 3,571 Long-term debt 34,615 50,658 Total debt $ 38,186 $ 54,229 Less: cash (4,712 ) (4,110 ) Net debt $ 33,474 $ 50,119 Adjusted EBITDA - trailing twelve months $ 52,006 $ 51,436 Net debt to adjusted EBITDA ratio 0.6 1.0 Organic compared to Inorganic Sales Q2 2024 Q2 2025 % Variance Lighting Segment $ 64,796 $ 58,210 -10 % Display Solutions Segment - Comparable Display Solutions Sales $ 44,209 $ 66,133 50 % - EMI $ - $ 23,391 Total Display Solutions Sales $ 44,209 $ 89,524 103 % Total net sales $ 109,005 $ 147,734 36 % Less: EMI - 23,391 Total organic net sales $ 109,005 $ 124,343 14 % Reconciliation of net income to adjusted net income - Six quarter view FY 2024 DilutedEPS DilutedEPS Q1 2024 Q2 2024 Net income reported $ 8,028 $ 0.27 $ 5,906 $ 0.20 Consulting expense: commercial growth initiatives 13 - - - Amortization expense of acquired intangible assets 870 0.03 885 0.03 Severance costs/Restructuring costs 256 0.01 34 - Long-term performance based compensation 974 0.03 625 0.02 Tax rate difference between reported and adjusted net income (531 ) (0.02 ) (201 ) (0.01 ) Net income adjusted $ 9,610 $ 0.32 $ 7,249 $ 0.24 Adjusted net income % 7.8 % 6.7 % FY 2024 DilutedEPS DilutedEPS Q3 2024 Q4 2024 Net income reported $ 5,375 $ 0.18 $ 5,668 $ 0.19 Acquisition costs - - 722 0.02 Amortization expense of acquired intangible assets 888 0.03 1,028 0.04 Severance costs/Restructuring costs 101 - 5 - Long-term performance based compensation 767 0.03 906 0.03 Tax rate difference between reported and adjusted net income - (25 ) - Net income adjusted $ 7,131 $ 0.24 $ 8,304 $ 0.28 Adjusted net income % 6.6 % 6.4 % FY 2025 DilutedEPS DilutedEPS Q1 2025 Q2 2025 Net income reported $ 6,682 $ 0.22 $ 5,647 $ 0.18 Acquisition costs 36 - - - Consulting expense: commercial growth initiatives - - 62 - Amortization expense of acquired intangible assets 1,042 0.03 1,090 0.04 Lease expense on the step-up basis of acquired leases 50 - 53 - Severance costs/Restructuring costs 45 - - - Long-term performance based compensation 881 0.03 1,294 0.04 Tax rate difference between reported and adjusted net income (755 ) (0.02 ) (150 ) - Net income adjusted $ 7,981 $ 0.26 $ 7,996 $ 0.26 Adjusted net income % 5.8 % 5.4 %

LSI Industries Reports Fiscal 2025 Second Quarter Results and Declares Quarterly Cash Dividend

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