Quarterly Report for Quarter Ending MARCH 31, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 this section. These forward-looking statements generally are identified by the words "believe," "project," "expect," "anticipate," "focus," "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 in our Annual Report on Form 10-K in the following sections: "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Quantitative and Qualitative Disclosures about Market Risk," and "Risk Factors." All of those risks and uncertainties are incorporated herein by reference. We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or otherwise.

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help the reader understand the results of operations and financial condition of LSI Industries Inc. MD&A is provided as a supplement to, and should be read in conjunction with, our Annual Report on Form 10-K for the year ended June 30, 2025, and our financial statements and the accompanying Notes to Financial Statements (Part I, Item 1 of this Form 10-Q).

Our condensed consolidated financial statements, accompanying notes and the "Safe Harbor" Statement, each as appearing earlier in this report, should be referred to in conjunction with this Management's Discussion and Analysis of Financial Condition and Results of Operations.

Summary of Consolidated Results

Net Sales by Business Segment		Three Months Ended								Nine Months Ended
		March 31,								March 31,
(In thousands)		2026				2025				2026				2025
Lighting Segment		$	60,038			$	58,967			$	195,764			$	175,614
Display Solutions Segment			90,487				73,514				259,012				242,696
Total Net Sales		$	150,525			$	132,481			$	454,776			$	418,310

Operating Income (Loss) by Business Segment		Three Months Ended								Nine Months Ended
		March 31,								March 31,
(In thousands)		2026				2025				2026				2025
Lighting Segment		$	6,938			$	7,154			$	23,034			$	18,885
Display Solutions Segment			7,895				4,510				22,562				20,344
Corporate and Eliminations			(10,757	)			(5,429	)			(21,683	)			(15,404	)
Total Operating Income		$	4,076			$	6,235			$	23,913			$	23,825

Net sales of $150.5 million for the three months ended March 31, 2026, increased 14% as compared to net sales of $132.5 million for the three months ended March 31, 2025. The increase in net sales reflects growth in both of the Company's segments with a 23% sales growth in the Display Solutions segment and a 2% sales growth in the Lighting segment. The 23% growth in the Display Solutions Segment was primarily driven by strong demand levels across a broad base of customers in both the grocery and refueling/c-store verticals. Third quarter net sales in the Display Solutions segment also reflects Royston net sales of $6.6 million for the 6-day stub period. Royston was acquired on March 24, 2026. Lighting Segment sales improved 2% compared to the same period last year despite a lengthening project quote to order conversion period.

Net sales of $454.8 million for the nine months ended March 31, 2026, increased 9% as compared to net sales of $418.3 million for the nine months ended March 31, 2025. The increase in net sales reflects growth in both of the Company's segments with a 7% sales growth in the Display Solutions segment and a 12% sales growth in the Lighting segment. As stated in the overview of the third quarter, the demand levels across a broad base of customers in both the grocery and refueling/c-store verticals contributed to the year-over-year growth in the Display Solutions segment. Net sales in the period for the Display Solutions segment also reflects Royston net sales of $6.6 million for the 6-day stub period. Royston was acquired on March 24, 2026. Growth in the Lighting Segment continued for the third straight quarter with period-over-period sales growth contributing to the year-to-date growth in net sales of 12%.

Operating income of $4.1 million for the three months ended March 31, 2026, represents a 35% decrease in operating income from $6.2 million in the three months ended March 31, 2025. Operating income for the three months ended March 31, 2026, was impacted by $6.5 million of acquisition-related costs. Adjusted operating income, a Non-GAAP measure, was $13.4 million in the three months ended March 31, 2026, representing a 39% increase compared to adjusted operating income of $9.7 million in the three months ended March 31, 2025. Refer to "Non-GAAP Financial Measures" below for a reconciliation of Non-GAAP financial measures to U.S. GAAP measures. The quarter-over-quarter sales growth of 14% coupled with improved margins resulting from improved productivity and price optimization resulted in leveraged adjusted operating income growth.

Operating income of $23.9 million for the nine months ended March 31, 2026, represents a slight increase from operating income of $23.8 million in the nine months ended March 31, 2025. Operating income for the three months ended March 31, 2026, was impacted by $6.9 million of acquisition-related costs. Adjusted operating income, a Non-GAAP financial measure, was $39.1 million in the nine months ended March 31, 2026, compared to adjusted operating income of $33.2 million in the nine months ended March 31, 2025. Refer to "Non-GAAP Financial Measures" below for a reconciliation of Non-GAAP financial measures to U.S. GAAP measures. The year-over-year sales growth of 9% coupled with improved margins resulting from improved productivity and price optimization resulted in the growth in operating income.

Non-GAAP Financial Measures

This report includes adjustments to GAAP operating income, net income, and earnings per share for the three months and nine months ended March 31, 2026, and 2025. 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 non-GAAP financial measures, the revenue of the acquired companies is included in the measures, and the acquired assets contribute to the generation of revenue. We believe these non-GAAP measures will provide increased transparency to our core operating performance of the business. Also included in this report are non-GAAP financial measures, including Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA and Adjusted EBITDA), Net Debt to Adjusted EBITDA, and Free Cash Flow. 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.

		Three Months Ended
Reconciliation of operating income to adjusted operating income:		March 31,
		2026				2025
(In thousands)
Operating income as reported		$	4,076			$	6,235
Long-term performance based compensation			715				1,116
Amortization expense of acquired intangible assets			1,732				1,465
Restructuring/severance costs			25				-
Acquisition costs			6,519				774
Lease expense on the step-up basis of acquired leases			317				67
Adjusted operating income		$	13,384			$	9,657

Reconciliation of net income to adjusted net income		Three Months Ended
		March 31,
(In thousands, except per share data)		2026								2025
						Diluted EPS								Diluted EPS
Net income as reported		$	2,091			$	0.06			$	3,883			$	0.13
Long-term performance based compensation			597	(1)			0.02				879	(7)			0.02
Amortization expense of acquired intangible assets			1,377	(2)			0.05				1,128	(8)			0.04
Restructuring/severance costs			19	(3)			-				-				-
Acquisition costs			4,898	(4)			0.15				577	(9)			0.02
Lease expense on the step-up basis of acquired leases			241	(5)			0.01				52	(10)			-
Foreign Currency transaction loss on intercompany loan			(147	)(6)			(0.01	)			-				-
Tax rate difference between reported and adjusted net income			523				0.01				(188	)			(0.01	)
Net income adjusted		$	9,599			$	0.29			$	6,331			$	0.20

The following represents the income tax effects of the adjustments in the tables above, which were calculated using the estimated combined U.S., Canada and Mexico effective income tax rates for the periods indicated (in thousands):

⁽¹⁾ $118

⁽²⁾ $355

⁽³⁾ $6

⁽⁴⁾ $1,621

⁽⁵⁾ $76

^{(6) (}$49)

⁽⁷⁾ $237

⁽⁸⁾ $337

⁽⁹⁾ $197

⁽¹⁰⁾ $15

		Nine Months Ended
Reconciliation of operating income to adjusted operating income:		March 31,
		2026				2025
(In thousands)
Operating income as reported		$	23,913			$	23,825
Long-term performance based compensation			2,999				3,969
Amortization expense of acquired intangible assets			4,844				4,281
Restructuring/severance costs			(46	)			60
Consulting expense: commercial growth opportunities			-				81
Acquisition costs			6,939				822
Lease expense on the step-up basis of acquired leases			453				203
Adjusted operating income		$	39,102			$	33,241

Reconciliation of net income to adjusted net income		Nine Months Ended
		March 31,
(In thousands, except per share data)		2026								2025
						Diluted EPS								Diluted EPS
Net income as reported		$	15,703			$	0.48			$	16,212			$	0.53
Long-term performance based compensation			2,264	(1)			0.07				3,039	(7)			0.09
Amortization expense of acquired intangible assets			3,653	(2)			0.12				3,260	(8)			0.11
Restructuring/severance costs			(35	(3)			-				45	(9)			-
Acquisition costs			5,205	(4)			0.16				627	(10)			0.02
Lease expense on the step-up basis of acquired leases			340	(5)			0.01				155	(11)			0.01
Consulting expense: commercial growth opportunities			-				-				62	(12)			-
Foreign Currency transaction loss on intercompany loan			207	(6)			0.01				-				-
Tax rate difference between reported and adjusted net income			430				0.01				(1,093				(0.03	)
Net income adjusted		$	27,767			$	0.86			$	22,307			$	0.73

The following represents the income tax effects of the adjustments in the tables above, which were calculated using the estimated combined U.S., Canada and Mexico effective income tax rates for the periods indicated (in thousands):

(1) $735

(2) $1,191

(3) $113

(4) ($11)

(5) $1,734

(6) $52

(7) $930

(8) $1,021

(9) $15

(10) $195

(11) $48

(12) $19

		Three Months Ended								Nine Months Ended
Reconciliation of net income to EBITDA and adjusted EBITDA		March 31,								March 31,
		2026				2025				2026				2025
(In thousands)
Net income - reported		$	2,091			$	3,883			$	15,703			$	16,212
Income tax			1,267				1,713				5,745				5,049
Interest expense, net			474				661				1,794				2,264
Other expense (income)			244				(22	)			671				300
Operating income as reported		$	4,076			$	6,235			$	23,913			$	23,825
Depreciation and amortization			3,394				3,062				9,820				9,020
EBITDA		$	7,470			$	9,297			$	33,733			$	32,845
Acquisition costs			6,519				774				6,939				822
Long-term performance based compensation			715				1,116				2,999				3,969
Consulting expense: commercial growth opportunities			-				-				-				81
Restructuring/severance costs			25				-				(46	)			60
Lease expense on the step-up basis of acquired leases			317				67				453				203
Adjusted EBITDA		$	15,046			$	11,254			$	44,078			$	37,980

		Three Months Ended								Nine Months Ended
Reconciliation of cash flow from operations to free cash flow		March 31,								March 31,
		2026				2025				2026				2025
(In thousands)
Cash flow from operations		$	6,930			$	6,882			$	32,589			$	28,619
Capital expenditures			(591	)			(690	)			(3,242	)			(2,515	)
Free cash flow		$	6,339			$	6,192			$	29,347			$	26,104

Net debt to adjusted EBITDA		March 31,
(In thousands)		2026				2025
Current portion and long-term debt as reported		$	58,000			$	3,571
Long-Term Debt			203,006				51,789
Debt as reported		$	261,006			$	55,360
Less:
Cash and cash equivalents as reported			(10,333	)			(4,301	)
Net debt		$	250,673			$	51,059
Adjusted EBITDA - Trailing 12 Months		$	92,970			$	52,024
Net debt to adjusted EBITDA			2.7				1.0

Results of Operations

THREE MONTHS ENDED MARCH 31, 2026, COMPARED TO THREE MONTHS ENDED MARCH 31, 2025

Display Solutions Segment		Three Months Ended
		March 31,
(In thousands)		2026				2025
Net Sales		$	90,487			$	73,514
Gross Profit		$	17,323			$	12,457
Operating Income		$	7,895			$	4,510

Display Solutions net sales of $90.5 million increased 23% from same period in fiscal 2025. The 23% growth in the Display Solutions Segment was primarily driven by strong demand levels across a broad base of customers in both the grocery and refueling/c-store verticals. Third quarter net sales in the Display Solutions segment also reflects Royston net sales of $6.6 million for the 6-day stub period. Royston was acquired on March 24, 2026.

Gross profit of $17.3 million in the three months ended March 31, 2026, increased 39% from the same period of fiscal 2025. Gross profit as a percentage of net sales improved 220 basis points from the same period as last year. The strong demand in grocery and refueling/c-store verticals coupled with increased productivity and price optimization contributed to the quarter-over-quarter leveraged growth in gross margin.

Operating expenses of $9.4 million in the three months ended March 31, 2026, increased 19% from the same period of fiscal 2025, primarily driven by the acquisition costs and related operating costs related to the Royston acquisition, and by continued investment in commercial initiatives to drive growth.

Display Solutions Segment operating income of $7.9 million in the three months ended March 31, 2026, increased 75% from the same period of fiscal 2025. The increase in operating income, driven by the net effect of an increase in net sales, improved gross margin as a percentage of sales, partially offset by an increase in operating expenses.

Lighting Segment		Three Months Ended
		March 31,
(In thousands)		2026				2025
Net Sales		$	60,038			$	58,967
Gross Profit		$	20,908			$	20,384
Operating Income		$	6,939			$	7,154

Lighting Segment net sales of $60.0 million in the three months ended March 31, 2026, increased 2% compared to net sales of $59.0 million in the same period in fiscal 2025. Lighting Segment sales improved 2% compared to the same period last year despite less favorable weather conditions in the early part of the quarter.

Gross profit of $20.9 million in the three months ended March 31, 2026, increased 3% from the same period of fiscal 2025. Gross profit as a percentage of sales improved 30 basis points as a result of pricing actions taken in response to shifts in material input costs.

Operating expenses of $14.0 million in the three months ended March 31, 2026, increased 6% from the same period of fiscal 2025, driven mostly by higher commission expense from improved sales along with a continued investment in sales initiatives to generate sales growth.

Lighting Segment operating income of $7.0 million for the three months ended March 31, 2026, decreased 3% from operating income of $7.2 million in the same period of fiscal 2025 primarily driven by the net effect of an increase in net sales, a 30-basis point improvement in gross margin, offset by an increase in operating expenses.

Corporate and Eliminations		Three Months Ended
		March 31,
(In thousands)		2026				2025
Gross Profit (Loss)		$	8			$	2
Operating (Loss)		$	(10,757	)		$	(5,429	)

The gross profit relates to the change in the intercompany profit in inventory elimination.

Operating expenses of $10.8 million in the three months ended March 31, 2026, increased from $5.4 million from the same period of fiscal 2025. The increase in expense is primarily the result of acquisition-related costs for Royston and CBH of $5.3 million.

Consolidated Results

The Company reported $0.5 million and $0.7 million of net interest expense in the three months ended March 31, 2026, and March 31, 2025, respectively. The decrease in interest expense is the result of a reduction of quarter-over-quarter average outstanding debt driven by profitability and by sustained working capital management. The overall reduction in interest expense was partially offset by the company incurred additional debt on March 24, 2026 to acquire Royston. The Company also recorded other expense of $0.2 million compared to other income of ($0.1) million in the three months ended March 31, 2026, and March 31, 2025, respectively, which is related to net foreign exchange currency transaction gains and losses through the Company's Mexican and Canadian subsidiaries.

The $1.3 million of income tax expense in the three months ended March 31, 2026, represents a consolidated effective tax rate of 37.7%. The $1.7 million of income tax expense in the three months ended March 31, 2025, represents a consolidated effective tax rate of 30.6%. The effective tax rate for the three months ended March 31, 2026, was impacted by the unfavorable tax treatment related to acquisition-related costs. Impacting the effective tax rate of both reported periods was the favorable tax treatment of the Company's long-term performance-based compensation.

The Company reported net income of $2.1 million in the three months ended March 31, 2026, compared to net income of $3.9 million in the three months ended March 31, 2025. Non-GAAP adjusted net income was $9.6 million for the three months ended March 31, 2026, compared to adjusted net income of $6.3 million for the three months ended March 31, 2025 (Refer to the Non-GAAP tables above). The increase in Non-GAAP adjusted net income is primarily the net result of an increase in net sales, improved gross margin rate resulting from improved productivity and price optimization, partially offset by an increase in operating expense mostly resulting from an increase in sales. Diluted adjusted earnings per share of $0.28 was reported in the three months ended March 31, 2026, compared to $0.20 diluted adjusted earnings per share in the same period of fiscal 2025. The weighted average common shares outstanding for purposes of computing diluted earnings per share in the three months ended March 31, 2026, were 33,855,000 shares compared to 30,966,000 shares in the same period last year.

NINE MONTHS ENDED MARCH 31, 2026, COMPARED TO NINE MONTHS ENDED MARCH 31, 2025

Display Solutions Segment		Nine Months Ended
		March 31,
(In thousands)		2026				2025
Net Sales		$	259,012			$	242,696
Gross Profit		$	48,820			$	43,308
Operating Income		$	22,562			$	20,344

Display Solutions net sales of $259.0 million increased 7% from same period in fiscal 2025. Net sales within the Display Solution segment have returned to its normal seasonal sales levels, driven in part by the third quarter growth resulting from strong demand levels across a broad base of customers in both the grocery and refueling/c-store verticals. Year-to-date net sales in the Display Solutions segment also reflects Royston net sales of $6.6 million for the 6-day stub period. Royston was acquired on March 24, 2026.

Gross profit of $48.8 million in the nine months ended March 31, 2026, increased 13% from the same period of fiscal 2025. Gross profit as a percentage of net sales in the nine months ended March 31, 2026, increased 100 basis points. The strong demand in grocery and refueling/c-store verticals coupled with increased productivity and price optimization contributed to the year-over-year leveraged growth in gross margin.

Operating expenses of $26.2 million in the nine months ended March 31, 2026, increased 14% from the same period of fiscal 2025, primarily driven by the acquisition costs and related operating costs related to the Royston acquisition, and by continued investment in commercial initiatives to drive growth.

Operating income of $22.6 million in the nine months ended March 31, 2026, increased 11% from the same period of fiscal 2025. The increase in operating income driven by the net effect of an increase in net sales, improved gross margin as a percentage of sales, partially offset by an increase in operating expenses.

Lighting Segment		Nine Months Ended
		March 31,
(In thousands)		2026				2025
Net Sales		$	195,764			$	175,614
Gross Profit		$	67,127			$	58,042
Operating Income		$	23,034			$	18,885

Lighting Segment net sales of $195.8 million in the nine months ended March 31, 2026, increased 12% compared to net sales of $175.6 million in the same period in fiscal 2025. The increase in net sales is the result of the Company's investment in commercial initiatives to drive growth which continues to deliver above market net sales growth despite overall market headwinds.

Gross profit of $67.1 million in the nine months ended March 31, 2026, increased 16% from the same period of fiscal 2025. Gross profit as a percentage of sales improved 120 basis points as a result of pricing actions taken in response to shifts in material input costs.

Operating expenses of $44.1 million in the nine months ended March 31, 2026, increased 16% from the same period of fiscal 2025, driven mostly by higher commission expense from higher sales along with a continued investment in sales initiatives to generate sales growth.

Lighting Segment operating income of $23.0 million for the nine months ended March 31, 2026, increased 22% from operating income of $18.9 million in the same period of fiscal 2025. The increase in operating income is primarily driven by the net effect of an increase in net sales, a 120-basis point improvement in gross margin, partially offset by an increase in operating expenses.

Corporate and Eliminations		Nine Months Ended
		March 31,
(In thousands)		2026				2025
Gross Profit (Loss)		$	3			$	1
Operating (Loss)		$	(21,683	)		$	(15,404	)

The gross profit relates to the change in the intercompany profit in inventory elimination.

Operating expenses of $21.7 million in the nine months ended March 31, 2026, increased from $15.4 from the same period of fiscal 2025. The increase in expense is primarily the result of acquisition-related costs of $5.9 million and also by a small increase in an investment in commercial initiatives to support the growth of the Company.

Consolidated Results

The Company reported $1.8 million and $2.3 million of net interest expense in the nine months ended March 31, 2026, and March 31, 2025, respectively. The decrease in interest expense is the result of a reduction of year-over-year average outstanding debt driven by profitability and by sustained working capital management. The overall reduction in interest expense was partially offset by the company incurred additional debt on March 24, 2026 to acquire Royston. The Company also recorded other expense of $0.7 million and $0.3 million in the nine months ended March 31, 2026, and March 31, 2025, respectively, both of which are related to net foreign exchange currency transaction gains and losses through the Company's Mexican and Canadian subsidiaries.

The $5.7 million of income tax expense in the nine months ended March 31, 2026, represents a consolidated effective tax rate of 26.8%. The $5.0 million of income tax expense in the nine months ended March 31, 2025, represents a consolidated effective tax rate of 23.7%. The effective tax rate for the three months ended March 31, 2026, was impacted by the unfavorable tax treatment related to acquisition-related costs. Impacting the effective tax rate of both reported periods was the favorable tax treatment of the Company's long-term performance-based compensation.

The Company reported net income of $15.7 million in the nine months ended March 31, 2026, compared to net income of $16.2 million in the nine months ended March 31, 2025. Non-GAAP adjusted net income was $27.8 million for the nine months ended March 31, 2026, compared to adjusted net income of $22.3 million for the nine months ended March 31, 2025 (Refer to the Non-GAAP tables above). The increase in Non-GAAP adjusted net income is primarily the net result of an increase in net sales, improved gross margin rate resulting from improved productivity and price optimization, partially offset by an increase in operating expense mainly resulting from an increase in sales. Diluted adjusted earnings per share of $0.86 was reported in the nine months ended March 31, 2026, compared to $0.72 diluted adjusted earnings per share in the same period of fiscal 2025. The weighted average common shares outstanding for purposes of computing diluted earnings per share in the nine months ended March 31, 2026, were 32,387,000 shares compared to 30,790,000 shares in the same period last year.

Liquidity and Capital Resources

The Company considers its level of cash on hand, borrowing capacity, current ratio and working capital levels to be its most important measures of short-term liquidity. For long-term liquidity indicators, the Company believes its ratio of long-term debt to equity and our historical levels of net cash flows from operating activities to be the most important measures.

At March 31, 2026, the Company had working capital of $90.9 million compared to $96.8 million at June 30, 2025. The ratio of current assets to current liabilities was 1.5 to 1 as of March 31, 2026, and 2.0 as of June 30, 2025. The acquisition of Royston in the third quarter of fiscal 2026 accounted for an additional $47.7 million of net working capital and also added $58 million in short-term debt. When the impact of the acquisition of Royston is removed from the year-over-year comparison, net working capital increased $4.4 million to $101.2 million. The net increase in working capital excluding Royston is the result of a $6.2 million decrease in net accounts receivable more than offset by a $4.3 million increase in inventory, a $2.3 million increase in other current assets and a $2.9 million decrease in current liabilities.

Net accounts receivable was $135.8 million and $104.3 million at March 31, 2026, and June 30, 2025, respectively. The acquisition of Royston accounted for $37.6 million of the year-over-year change. DSO increased to 63 days at March 31, 2026, excluding the impact of Royston, from 57 days at June 30, 2025.

Net inventories of $116.6 million at March 31, 2026, increased $36.8 million from $79.8 million at June 30, 2025. The acquisition of Royston accounted for $32.5 million of the increase in net inventory. When the impact of the Royston acquisition is removed from the period-over-period change in net inventory, net inventory increased $4.3 million. The increase in the Lighting Segment net inventory accounted for all of the increase in total net inventory.

Cash generated from operations and borrowing capacity under the Company's line of credit is its primary source of liquidity. The Company has a $200 million term loan and a $150 million revolving line of credit. Both credit facilities commenced in the third quarter of fiscal 2026 to accommodate the acquisition of Royston. Both credit facilities expire in the third quarter of fiscal 2031. As of March 31, 2026, $89 million of the credit line was available. The Company is in compliance with all of its loan covenants as of March 31, 2026. The $350 million credit facility plus cash flows from operating activities are adequate for operational and capital expenditure needs for the remainder of fiscal 2026.

The Company generated $32.6 million of cash from operating activities in the nine months ended March 31, 2026, compared to $28.6 million of cash generated from operating activities in the same period in fiscal 2025. The Company continues to effectively manage its working capital while generating increasing cash flow from earnings in both fiscal years, resulting in strong cash flow from operations.

The Company invested $3.2 million and $2.5 million of cash related to purchases of property, plant and equipment in the nine months ended March 31, 2026, and March 31, 2025, respectively. The Company continues to invest in equipment and tooling to support sales growth. In the third quarter of FY 2026 the Company acquired Royston for $336.8 million net of cash received.

The Company had a net source of cash of $309.3 million and a net use of cash of $3.2 million related to financing activities in the nine months ended March 31, 2026, and March 31, 2025, respectively. The acquisition of Royston accounted for $238.7 million of the source of cash through the debt refinancing from the Company's credit facility. In addition, the Company raised $98.1 million of net proceeds from the sale of common stock in a public equity offering in February of 2026. Both the debt financing along with the public equity offering served as the source of funds to acquire Royston. Not including the cost to acquire Royston, the Company continues to generate positive cash flow from its operations in order to pay down its debt and fund its dividend payments to shareholders.

The Company has on its balance sheet financial instruments consisting primarily of cash and cash equivalents, revolving lines of credit, and long-term debt. The fair value of these financial instruments approximates carrying value because of their short-term maturity and/or variable, market-driven interest rates.

Off-Balance Sheet Arrangements

The Company has no financial instruments with off-balance sheet risk and have no off-balance sheet arrangements.

Cash Dividends

In April 2026, the Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable May 12, 2026, to shareholders of record as of May 4, 2026. The indicated annual cash dividend rate for fiscal 2026 is $0.20 per share. The Board of Directors has adopted a policy regarding dividends which indicates that dividends will be determined by the Board of Directors in its discretion based upon its evaluation of earnings, cash flow requirements, financial condition, debt levels, stock repurchases, future business developments and opportunities, and other factors deemed relevant.

Critical Accounting Policies and Estimates

A summary of our significant accounting policies is included in Note 1 to the audited consolidated financial statements of the Company's fiscal 2025 Annual Report on Form 10-K.