LSI Industries : 2023 Annual Report

LSI INDUSTRIES

2 0 2 3 A N N U A L R E P O R T

Dear Fellow Shareholders,

As I have done in the past, I would like to start this letter by expressing sincere appreciation and thanks to our dedicated workforce and team members. Their commitment to LSI and hard work throughout the past year has truly been remarkable. Their efforts have demonstrated exceptional diligence and unwavering support for our customers, agents, and suppliers. To LSI's employees, agents and partners, I say thank you for your valuable contributions to our 2023 results. To our customers, I say thank you for your continued support and confidence.

Fiscal year 2023 marks a significant milestone for LSI. Our year-end financial report paints a compelling story, with revenues of $497 million, reflecting a 9% increase over the prior year. Moreover, our adjusted EBITDA grew 49% in the year, reaching $51.6 million, which is 10.4% of our revenues. This accomplishment becomes all the more striking when evaluated against the backdrop of project delays, persistent supply chain disruptions, a competitive labor market, and ongoing inflationary pressures.

It is important to acknowledge that LSI's dedicated team has demonstrated remarkable ingenuity in combating these challenges. Through innovative approaches and hard work, we have not only delivered but consistently exceeded the superior standards of service and quality that have become synonymous with our brand over the course of nearly five decades.

This achievement results from a series of changes implemented throughout our organization over the past three years. These changes have effectively established LSI as a leader in customer-centricity,particularly within the key vertical markets we serve. The outcomes of these improvements are reflected in our results, underscoring the strength and effectiveness of our strategic blueprint. This momentum drives

us to seize opportunities in growing verticals such as Automotive, Grocery & Pharmacy, Parking Lot & Garage, Refueling & C-Store, Quick Serve Restaurants, Retail, Sports Courts & Fields, and Warehousing while leveraging their growth trajectories.

SCALE: $500.0MM

FISCAL YEAR

FINANCIAL HIGHLIGHTS

	NET			ADJUSTED
	SALES			NET INCOME
+3% 315.6	+44%455.1	+9%497	SCALE: $30.0MM	9.8	18.0	29.0
2021	2022	2023		2021	2022	2023

HY-VEE GROCERY STORE | GRETNA, NE

1 | LSI INDUSTRIES • 2023 ANNUAL REPORT

		FISCAL YEAR
	FINANCIAL HIGHLIGHTS
	ADJUSTED	ADJUSTED
	EARNINGS PER SHARE		EBITDA
			0.99			51.6
SCALE: $1.00	0.36	0.64	SCALE: $52.0MM	21.1	35.1
	2021	2022	2023	2021	2022	2023
BUC-EES REFUELING | RICHMOND, KY

Delivering on the Strategic Plan:

In 2019, we introduced what we called "The Plan Forward," an ambitious strategy aimed at achieving a 67% increase in revenues and a 300% growth in adjusted EBITDA by 2025. This plan was built upon four key pillars: Expanding our Vertical Focus, Transforming our Customer Engagement, Establishing a Service Business, and Expanding through Organic Growth and Strategic Acquisitions.

I'm pleased to announce that in 2023, we not only met but exceeded these objectives, achieving them two years ahead of our projected timeline. This achievement significantly reinforces our progress towards building a better business, firmly demonstrating the capabilities and dedication of our employees and the effectiveness of our strategic focus on vertical markets.

Planning for the Next Phase of Ambitious Growth.

Having achieved our initial objectives, the drive for continued growth has only strengthened. This year, we introduced our "Fast Forward" initiative, which outlines our ambitious goals for the Company's expansion by 2028. In this plan, we're setting our sights on reaching $800 million in revenue and doubling our Adjusted EBITDA to $100 million.

"Fast Forward," outlines a strategic roadmap that includes targeted vertical market expansion, innovative product offerings, diligent business management with a focus on organic growth, expanding margins, strategic acquisitions and optimizing our assets. This multifaceted approach reflects our commitment to keep LSI as the preferred partner in the vertical markets we proudly serve.

2023 stands apart with a sequence of notable accomplishments:

• Three consecutive years of sales growth
• Pivotal wins in transformative lighting projects, including an EV battery plant venture in Kentucky and the Air Force One hanger
• Over 40 product launches in the year, highlighted by the revolutionary REDiMount mounting system for refueling canopies.
• Expansion into the Latin American and Puerto Rico market with our key Refueling partners
• JSI surpasses sales and margin expectations for a second consecutive year
• JSI's concerted focus on leveraging new refrigeration technology (R-290), a natural non-ozone depleting refrigerant which echoes our commitment to a clean environment

LSI INDUSTRIES • 2023 ANNUAL REPORT | 2

Expanding our Presence

Our expansion within the lighting and display markets is steadily gaining momentum, driven by our strategic focus on key market verticals, which include Automotive, Grocery & Pharmacy, Parking Lot & Garage, Refueling & C-Store, Quick Serve Restaurants, Retail, Sports Courts & Fields, and Warehousing. This

growth story is underpinned by purposeful product development and precise commercial strategies, paving the way for distinct competitive advantages.

As part of "Fast Forward," we are channeling our efforts into key areas: Enterprise Growth, commitment to being the Partner of Choice, fostering Business Excellence, and prudent Capital Allocation. Each of these pillars is crucial to our ongoing success, and their strength lies in our dedication to our valued customers, partners and agents. The enduring relationships we cultivate and the trust we establish with our lighting agents, contractors, and end consumers form the bedrock of our operational philosophy. Our core is defined by our unwavering commitment to becoming the most capable, trusted and agile partner.

Advancing Sustainability

We've achieved noteworthy progress in environmental, social, and governance (ESG) objectives. Our commitment to environmental sustainability is evident through rigorous efficiency standards for

our products, minimized energy footprints in their operational contexts, and the incorporation of eco- sensitive elements like recyclable materials and R-290 refrigerants. Our continuous assessment of sourcing and manufacturing practices underscores our steadfast dedication to responsible processes.

Looking Forward

As we conclude the chapter that was 2023 and continue shaping LSI's narrative, I am profoundly moved by the dedication of our employees, who are building a more robust, more innovative company for the future. I extend my heartfelt gratitude to you, our investors, for your unwavering belief in our mission. The momentum we've collectively generated is only the beginning; we are poised for another year of unprecedented achievements in 2024.

Driving Innovation

Our commitment to innovation remains unwavering, exemplified by the introduction of nearly 40 new or refined products in the past year.

One standout example is the REDiMount adapter system, which is an out-of-the-box system that transforms the way canopy lighting is installed and maintained. The REDiMount system is a testament to customer-driven innovation, reducing installation time by over 50% and simplifying future upgrades. Our intimate knowledge of key verticals allows us to provide enhanced, differentiated value to our customers. REDiMount is more than a traditional product launch for us; it was created by understanding our customers' and installers' needs and providing an innovative solution to meet them.

Additionally, JSI is designing and developing a new refrigerant product line based on R-290 technology. R-290 is an environmentally friendly refrigerant, free from ozone-depleting attributes. JSI is set to release these new display systems to the market in the second half of fiscal 2024. Anticipation for this innovative line remains high, aligning perfectly with the growing interest in environmental and energy transition technologies.

40+ NEW &

REDESIGNED

James A. Clark

President and Chief Executive Officer LSI Industries

LIGHTING & DISPLAY SOLUTION

PRODUCTS IN FISCAL 2023

YOUNGSTOWN STATE UNIVERSITY | YOUNGSTOWN, OH

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

• ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED JUNE 30, 2023

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	10000 Alliance Road	IRS Employer I.D.
(State or other jurisdiction of	Cincinnati, Ohio 45242	No. 31-0888951
incorporation or organization)	(Address of principal executive offices)
	[phone]
	(Telephone of principal executive offices)

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 shares, no par value	LYTS	The NASDAQ Stock Market LLC (NASDAQ Global Select Market)

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ο No ☑

Indicate by check mark 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 check mark 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 check mark 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 ☑	Non-accelerated filer ☐	Smaller reporting company ☑
Emerging growth 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 check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that

prepared or issued its audit report. ☑

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ο No ☑

As of December 31, 2022, the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was approximately $310,976,226 based upon a closing sale price of $12.11 per share as reported on The NASDAQ Global Select Market.

At August 31, 2023, there were 28,550,376 shares of common stock.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement to be delivered to shareholders in connection with the 2023 Annual Meeting of Shareholders to be held on November 1, 2023 are incorporated by reference in Part III, as specified.

LSI INDUSTRIES INC.
2023 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
	Begins on
	Page
PART I
ITEM 1. BUSINESS	5
ITEM 1A. RISK FACTORS	8
ITEM 1B. UNRESOLVED STAFF COMMENTS	15
ITEM 2. PROPERTIES	15
ITEM 3. LEGAL PROCEEDINGS	16
ITEM 4. MINE SAFETY DISCLOSURESES	15
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES	16
ITEM 6. [RESERVED]	16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS	16
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	17
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE	17
ITEM 9A. CONTROLS AND PROCEDURES	18
ITEM 9B. OTHER INFORMATION	18
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS	18
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	18
ITEM 11. EXECUTIVE COMPENSATION	19
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS	19
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE	19
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES	19
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	19
ITEM 16. FORM 10-K SUMMARY	21
SIGNATURES	22

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 the following sections: "Business" (Part I, Item 1 of this Form 10- K), "Risk Factors" (Part I, Item 1A of this Form 10-K), and "Management's Discussion and Analysis of Financial Condition and Results of Operations" (Part II, Item 7 of this Form 10-K). These forward-looking statements generally are identified by the words "encourage," "believe," "project," "expect," "anticipate," "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 "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Quantitative and Qualitative Disclosures about Market Risk" (Part II, Item 7A of this Form 10-K). Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date they are made. We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or otherwise.

Website and Social Media Disclosure

We use our website (www.lsicorp.com) and our corporate Facebook, YouTube, LinkedIn, Vimeo and Instagram accounts as channels of distribution of company information. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, Securities and Exchange Commission, or SEC, filings and public conference calls and webcasts. The contents of our website and social media channels are not, however, a part of this report.