LSI INDUSTRIES INC Q2 FY2025 earnings call

• Growth in Q2 with strong orders across segments; Grocery segment recovering, refueling projects/QSR moving forward. - Display Solutions had robust project activity in refueling/c-store, service revenue growth. - Transitioned refrigeration from R448 to R290. - Strong interest in V-LOCITY outdoor lighting; National Sales Meeting in Cincinnati upcoming. - Integrated EMI effectively and focus on vertical market orientation. - Improved financial metrics in Q2 with increased sales, adjusted EPS, EBITDA, and strong cash generation.

Display Solutions had a robust quarter with project activity in the refueling/c-store vertical, service revenue increasing over 100% in Q2, operating income doubling and operating margin improving 100 basis points. Grocery sales increased over 60% due to programs released and R448 product shipments. Lighting sales were below prior year due to demand fluctuations across verticals and project size, but large project orders improved sequentially. Refrigeration transitioned from R448 to R290. EMI continues to perform well and contribute to growth.

• Anticipate elevated order activity in Display Solutions (Grocery, refueling/c-store) through Q3 and Q4, though not at Q2 levels. - Expect margin improvements as inefficiencies from rapid ramp-up are addressed. - Continued focus on operational efficiency and EMI integration to drive profitable growth.

• Inefficiencies from rapid ramp-up in Q2 impacting margin. - Port strikes and potential tariffs affecting supply chain and margins. - Uncertainty in distinguishing surge demand from normal run rate in grocery segment.

Q: Aaron Spychalla asked about strength continuing in second half, seasonality, and gross margins.

A: James Clark discussed elevated orders in Display Solutions, margin improvements as inefficiencies are addressed, and impact of port strikes and tariffs.

Q: Sameer Joshi asked about new product launches and EMI growth.

A: James Clark explained new product launch categories and EMI growth due to cultural fit and cross-selling.

Q: George Gianarikas asked about surge in order activity verticals and supply chain/permitting.

A: James Clark clarified surge in grocery, QSR, and refueling/c-store, and discussed normalizing permitting and supply chain impacts.