Executive Summary
LSI Industries delivered a robust second quarter of fiscal 2025 (Q2 2025), reporting total revenue of $147.7 million, up 36% year-over-year and 7% quarter-over-quarter, with organic growth contributing 14% YoY. The Display Solutions segment led the top-line acceleration, with revenue roughly doubling and organic growth of approximately 50%, driven by resurgence in grocery and continued activity in refueling/c-store sites. The EMI acquisition, completed prior to the period, contributed to margin expansion and a meaningful uplift in operating performance, while service revenue more than doubled, underscoring the value of end-to-end product integration.
Key financial metrics also reflect disciplined cash generation and a meaningful deleveraging trajectory: free cash flow for the quarter was $8.8 million and trailing twelve-month net debt declined to a leverage ratio of 0.6x since EMI integration, supported by solid operating cash flow of $9.9 million. Backlog excluding EMI rose 14% versus the prior year, signaling durable demand across verticals and a favorable mix shift toward higher-value project work. Management highlighted ongoing strength in Grocery, QSR, and petroleum/c-store channels, plus ongoing momentum in the Lighting and Display Solutions platforms, including next-generation product introductions like V-LOCITY.
Looking ahead, management stated that order activity is expected to remain robust in the near term, with elevated demand sustaining into Q3 and Q4, albeit with visibility on pace and mix still developing. While margin dynamics were temporarily pressured by ramp-up inefficiencies as the expanded production base absorbed surges in orders, the company expects margins to normalize as manufacturing runs at steadier throughput and EMI-related integration gains accrue. Investors should monitor (i) the pace of demand normalization versus surges, (ii) EMI cross-selling and integration benefits, (iii) the evolution of DoE refrigerant transitions and related supply-chain implications, and (iv) potential tariff or permitting developments that could affect near-term cost structure.
Key Performance Indicators
QoQ: -15.49% | YoY:-4.39%
QoQ: -17.39% | YoY:-5.00%
Key Insights
Revenue: $147.734 million; YoY +35.53%, QoQ +6.98%. Gross Profit: $34.861 million; Gross Margin 23.60%; YoY +10.54%, QoQ +3.61%. Operating Income: $8.459 million; Operating Margin 5.73%; YoY +8.19%, QoQ -7.36%. EBITDA: $11.095 million; EBITDA Margin 7.51%. Net Income: $5.647 million; Net Margin 3.82%; YoY -4.39%, QoQ -15.49%. EPS: $0.19 (GAAP); Diluted EPS $0.18; YoY -5.00%, QoQ -17.39%. Weighted Avg Shares: 29.93 million basic; 30.88 million diluted.
Cash Flow and Balance Sheet: Net cash provi...
Financial Highlights
Revenue: $147.734 million; YoY +35.53%, QoQ +6.98%. Gross Profit: $34.861 million; Gross Margin 23.60%; YoY +10.54%, QoQ +3.61%. Operating Income: $8.459 million; Operating Margin 5.73%; YoY +8.19%, QoQ -7.36%. EBITDA: $11.095 million; EBITDA Margin 7.51%. Net Income: $5.647 million; Net Margin 3.82%; YoY -4.39%, QoQ -15.49%. EPS: $0.19 (GAAP); Diluted EPS $0.18; YoY -5.00%, QoQ -17.39%. Weighted Avg Shares: 29.93 million basic; 30.88 million diluted.
Cash Flow and Balance Sheet: Net cash provided by operating activities $9.891 million; free cash flow $8.825 million for the quarter. Cash and cash equivalents at period end $4.712 million. Total debt $55.294 million; net debt $50.582 million. Current ratio 2.08x; quick ratio 1.20x; cash ratio 0.06x. Days sales outstanding (DSO) 51.14; days of inventory outstanding (DIO) 55.36; cash conversion cycle 80.72 days. Backlog, excluding EMI, up 14% YoY. Capital expenditures were $1.066 million for the period. Backlog strength and cash flow generation underpin a gradual deleveraging trajectory as EMI-driven cross-sell and efficiency initiatives mature.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
147.73M |
35.53% |
6.98% |
| Gross Profit |
34.86M |
10.54% |
3.61% |
| Operating Income |
8.46M |
8.19% |
-7.36% |
| Net Income |
5.65M |
-4.39% |
-15.49% |
| EPS |
0.19 |
-5.00% |
-17.39% |
Key Financial Ratios
operatingProfitMargin
5.73%
operatingCashFlowPerShare
$0.33
freeCashFlowPerShare
$0.3
dividendPayoutRatio
26.4%
Management Commentary
Key operating themes drawn from the management call:
- Growth and backlogs: Management highlighted that Q2 was driven by Display Solutions with notable strength in grocery and refueling/c-store verticals, and that total comparable orders were up 4% YoY, contributing to a higher backlog. They also noted approximately 1,000 refueling/c-store sites worked on in Q2, marking the strongest quarter in years for the segment’s service and project activity.
- EMI integration and cross-selling: The EMI acquisition contributed to Display Solutions’ operating income doubling vs. the prior-year quarter, with a 100 basis point margin expansion from volume leverage while absorbing ramp-up costs. Management emphasized cross-selling opportunities as EMI products and services are integrated and scaled across customer programs.
- Margin dynamics and efficiency: James Clark acknowledged near-term margin pressures due to the rapid ramp-up and learning curve for a larger, more complex mix of products (including new V-LOCITY outdoor lighting). He indicated that margins should stabilize as efficiencies improve and the EMI integration matures, forecasting margin normalization in subsequent quarters.
- Product roadmap and commercialization: James Clark underscored a disciplined approach to new product launches, including the V-LOCITY platform, which is designed to complement Mirada and to broaden opportunities across the outdoor lighting segment. The company continues to invest in product vitality and manufacturing readiness to support higher-volume programs.
- Supply chain and tariffs: Management described proactive contingency planning for potential tariffs and supply-chain disruptions, noting a shift toward domestic emphasis (LSI is approximately 70% domestic sourcing) and hedging measures to minimize downside exposure. They indicated the onshoring strategy aligns with an expectation of modest tariff impact.
The good news is we did not miss a beat, and we didn’t leave any orders on the table. In fact, we were able to capture some orders from competitors that were not able to respond in a timely fashion.
— James Clark
Display Solutions had a robust quarter as project activity continues in the refueling/c-store vertical, including strong contributions from specific customer programs in Mexico and Central America. This represents our highest quarter in many years.
— James Galeese
Forward Guidance
Near-term outlook centers on sustained elevated activity in Display Solutions, grocery, and refueling/c-store pipelines, with management signaling that order momentum should remain robust through Q3 and into the second half of fiscal 2025. The company expects continued organic growth in key verticals, supported by EMI-enabled cross-selling and improved service revenue. Margin recovery is anticipated as the ramp-up inefficiencies unwind and EMI’s integration gains accrue over the next 12–18 months. Management also highlighted a disciplined capital deployment approach and an ongoing Fast Forward plan to drive profitable growth. Key catalysts and monitors include:
- Backlog trajectory and order mix across Grocery, QSR, and refueling/c-store channels.
- EMI integration timing, cost synergies, and cross-sell opportunities with existing product lines.
- DoE refrigerant transition (R448 to R290) and related supply-chain implications.
- Tariff and permitting developments and their potential cost impacts, with a base expectation of limited exposure due to domestic sourcing.
- LatAm market momentum and the pace of new product introductions (e.g., V-LOCITY) to broaden addressable markets.