LSI Industries Q1 Earnings Call Highlights

Key Points

• Royston drove much of LSI’s growth: Fiscal Q1 2027 revenue rose 44% to about $226 million, and adjusted EBITDA increased 41% to $22.2 million. Free cash flow of $13.8 million helped reduce net debt by $14 million.
• Near-term demand remains uneven: Lighting sales fell about 6%, while customer project delays and weakness in quick-service restaurants weighed on results and outlook. Still, Display Solutions orders and pro forma backlog each grew 4% year over year.
• Management is pursuing growth and deleveraging: LSI was selected for a 3,000-store restaurant renovation and began a 2,500-site refueling program. Net debt has fallen by more than $23 million since the Royston acquisition, and the company targets leverage of 2× or less within 12–18 months.

LSI Industries NASDAQ: LYTS reported a 44% increase in fiscal 2027 first-quarter revenue as the Royston acquisition added to sales, but executives said customer project delays and weakness in lighting and quick-service restaurants remain near-term challenges.

Revenue was approximately $226 million, while adjusted EBITDA rose 41% to $22.2 million. Free cash flow was $13.8 million, helping the company reduce net debt by $14 million during the quarter.

President and CEO Jim Clark said the company was making progress integrating Royston and pursuing efficiency improvements, even as inflation, project timing and a seasonal slowdown in retail renovations weighed on the outlook.

Royston Drives Sales Growth

The acquisition accounted for much of the year-over-year revenue increase. Excluding Royston, Display Solutions sales increased 1%, CFO Jim Galeese said. Convenience-store and grocery sales generated mid-single-digit growth within the segment, while quick-service restaurant and banking sales fell by double digits.

Clark said Royston’s sales rose 8% sequentially and its adjusted EBITDA margin improved by 100 basis points from the preceding quarter. Galeese said all three Royston businesses posted pro forma sales growth from the prior-year quarter.

Management is working to improve margins at SignResource, including by moving through a lower-margin backlog. Galeese said the company is targeting a sequential margin improvement of more than 200 basis points for SignResource in fiscal second quarter.

LSI also has identified $1 million in incremental procurement savings and is implementing them, Galeese said. Separately, the company expects to complete the consolidation of its Collingwood, Ontario, manufacturing operation into its Canada’s Best facility near Toronto by the end of the fiscal year. Management expects the move to generate more than $1 million in annual savings.

Renovation Programs Advance

Clark said LSI was selected as one of three providers for a 3,000-store interior renovation program at a large quick-service restaurant customer. The program is expected to begin late in the fiscal third quarter and continue for approximately three years.

During the question-and-answer session, Clark said the project does not currently include Royston products because LSI had been working on it for nearly three years, before the acquisition. LSI will provide project-management resources, and Clark said the company hopes to capture a larger share of the work as the program progresses.

LSI also began work during the quarter on a previously announced 2,500-site refueling renovation program. Galeese said the award now includes signage, which he described as an early cross-selling win for Royston. Clark said activity on the program is expected to build through fiscal 2027 and into fiscal 2028.

Another convenience-store chain is in the early stages of a potentially significant renovation program, Clark said. He added that LSI had moved to some field deployments, although he did not provide a site count or a timetable for a final decision.

Grocery order activity rose 12% during the quarter, Clark said. Across Display Solutions, orders and pro forma backlog each increased 4% from the prior-year quarter, according to management.

Lighting Weakness and Project Delays

Lighting sales fell approximately 6% year over year as growth in refueling, sports and banking was offset by weakness in areas including parking, smaller retail, warehousing and automotive. Galeese said pricing and cost management supported a 10-basis-point improvement in the segment’s gross margin rate.

Lighting quotes over the preceding three months increased 5% from a year earlier, while orders rose 1%, Galeese said, reflecting a longer period between quotes and orders. Clark said some customers were pushing projects into the next calendar year as they reassessed budgets.

Galeese also said Display Solutions customers had increased the number of schedule changes and project pushouts, ranging from several weeks to several months. He cited project budgets, delayed job sites and skilled-labor availability among the reasons.

Debt Reduction and Strategic Plan

LSI has reduced net debt by more than $23 million in the six months since acquiring Royston, bringing net debt to pro forma trailing-12-month adjusted EBITDA to 2.6 times, Galeese said. He reiterated the company’s expectation of reaching a leverage ratio of two times or lower within the next 12 to 18 months.

Clark said the company plans to share an updated strategic plan in December that will extend its planning horizon to 2032. He said operating efficiencies, including better equipment utilization and potential facility consolidation, are part of the effort to reach the company’s 12.5% EBITDA margin goal under its Fast Forward 2028 plan.

About LSI Industries (NASDAQ:LYTS)

LSI Industries Inc NASDAQ: LYTS designs and manufactures commercial lighting and display solutions for businesses and organizations. Its offerings include indoor and outdoor LED lighting, lighting controls, digital signage, visual display systems, and related graphics and branding products.

The company serves a range of markets, including petroleum and convenience stores, quick-service restaurants, automotive dealerships, grocery and retail locations, sports facilities, and other commercial and industrial environments.

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