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Greetings, and welcome to the LSI Industries Inc. Fiscal 2026 Second Quarter Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Jim Galeese, Chief Financial Officer. Please go ahead.

Welcome, everyone, and thank you for joining today's call. We issued a press release before the market opened this morning detailing our fiscal 2026 second quarter results. In addition to this release, we also posted a conference call presentation in the Investor Relations section of our corporate website. Information contained in this presentation will be referenced throughout today's conference call. Included are certain non-GAAP measures for improved transparency of our operating results. A complete reconciliation of GAAP and non-GAAP results is contained in our press release and 10-Q. Please note that management's commentary and responses to questions on today's conference call may include forward-looking statements about our business outlook. Such statements involve risks and opportunities, and actual results could differ materially. I refer you to our safe harbor statement which appears in this morning's press release for more details. Today's call will begin with remarks summarizing our fiscal second quarter results. At the conclusion of these prepared remarks, we will open the line for questions. With that, I'll turn the call over to LSI President and Chief Executive Officer, Jim Clark.

Thank you, Jim, and good morning, everyone. I appreciate you joining us today. This morning, we'll be reviewing our second quarter results for fiscal 2026. As you likely saw in our earnings release, we delivered solid second-quarter results that were in line with our expectations. Revenue was essentially flat year over year at $147 million while profitability and free cash flow improved. Given the strength of the prior year comparisons, particularly within Display Solutions, I'm pleased how this quarter performed and how our teams executed throughout the quarter. Jim Galeese will walk through the financial details in a few minutes, but I want to spend some time on a few areas that I think were important as we move into the second half of the year. As we've discussed previously, the second quarter of last year benefited from unusually strong event-driven demand, most notably in the grocery vertical, following the resolution of a failed merger between two large grocery chains. The release of pent-up demand drove exceptional growth of 100% in our Display Solutions segments, with 50% of that being organic growth in Q2 of last year. This demand pattern in groceries has returned to a more normalized level. And against that backdrop, flat consolidated sales and improved margin represents solid execution. More importantly, we continue to see healthy customer engagement, active planning discussions, and increasing order trends as we exit the quarter. Lighting delivered another strong quarter with sales growth of 15% year over year and meaningful margin expansion. This follows 18% growth in the first quarter, and we're encouraged by the consistency of performance across multiple end markets. Several factors have contributed to the strength in lighting, including the addition of aluminum poles to our steel pole product line, an increase in large project shipments, continued momentum in our national account strategy, and solid traction from recent product introductions as we remain focused on product vitality. As we exit the second quarter, lighting orders were up approximately 10% year over year, resulting in a book to bill above one. This gives us continued confidence as we look ahead. In Display Solutions, we maintained a high level of execution across several large multiyear customer programs. Particularly in the refueling area, convenience store, quick-serve retail, and casual dining restaurant verticals. While revenues declined slightly year over year due to the prior year comparisons, orders improved sequentially and were up year over year supporting an improved backlog entering into the third quarter. What's particularly encouraging is how the opportunity set within display solutions continues to evolve. Historically, much of our growth in food services has come from quick-serve restaurant customers. These programs often involve large numbers of sites, sometimes hundreds at a time, with individual product values ranging from $20,000 to $40,000 per location. This work remains an important and durable part of our business, and we continue to win and execute well in that space. While at the same time, we are now seeing meaningful traction beyond traditional QSR into the casual dining space and premium food services. With these programs, they typically involve fewer locations and the value per site is significantly higher, often ranging from $250,000 to $1 million per location. These opportunities align well with our capabilities in custom fabrication, integrated design, and program execution, and they represent a natural extension of the platform we've built over the past several years. We're also encouraged by improving activity in the international market, particularly in Mexico and the islands. Conditions strengthened during the quarter after several softer periods. Based on what we're seeing today, we expect activity to remain elevated into fiscal and calendar year 2027. Over the last two quarters, I've emphasized that our focus for 2026 and what will continue into 2027 will be our people. That commitment remains unwavering. Talent management through thoughtful role design, succession planning, and deeper cross-team integration are not just priorities, they're essential to creating a single unified organization we continue to bring JSI and EMI together under the LSI umbrella. While there will be opportunities for operational consolidation in the future, the greatest return on our investment will continue to come from empowering our people. Aligning them around shared goals, and enabling them to collaborate more seamlessly. The core objective of this integration is to unlock meaningful cross-selling opportunities by breaking down silos, improving transparency, and ensuring our teams are working as one cohesive commercial engine. A few months ago, we brought on a senior sales leader within our display solutions group specifically targeted to enhance visibility into our current sales activities, pipeline development, and near-term conversion opportunities. Just as importantly, this role is helping us to strengthen alignment between sales, operations, and execution, ensuring that we are not only identifying opportunities across brands, but we act on them quickly, consistently, and with a unified customer experience. Next week, we will take another important step forward as we host our sales meeting here in Cincinnati. Bringing together nearly 120 sales employees and marketing professionals from across the organization, we will be spending several days together, including time over the weekend, focused on collaboration, alignment, and building the relationship that makes true cross-selling and coordinated execution possible. This time together is not just about strategy and planning. It's about reinforcing our shared purpose, our culture, and continuing to work on becoming one integrated team moving forward as one organization. From a customer perspective, we continue to see increasing engagement from large, sophisticated organizations that place a premium on supplier scale, geographic coverage, and manufacturing depth. In several cases, customers have specifically cited our ability to design, fabricate, and deliver across multiple regions as a key differentiator. This capability continues to elevate the types of programs we're invited to pursue. Profitability and cash generation were highlights of the quarter. Adjusted EBITDA increased year over year to $13.4 million, and margin performance benefited from disciplined project pricing, productivity improvements, and effective cost management, which together helped offset ongoing cost inflations. Free cash flow was strong at $23 million, driven by profitability and continued working capital discipline. We used that cash flow to reduce our total debt by $22.7 million during the quarter, ending with a net leverage ratio of 0.4. The balance sheet strength supports our fast-forward strategy, allowing us to invest in our organic growth, pursue operational improvements, and maintain optionality around future acquisition opportunities, all while continuing to return capital to our shareholders through our dividends and other programs. Execution across the organization continues to reflect LSI's high SAGE ratio and culture. Our team stayed focused during a quarter that required careful management of mix, margin, and timing. I'm proud of how they delivered. The collaboration between sales, operation, design, and supply chain continues to be strong, and that alignment is showing up both in execution and in customer confidence. Looking ahead to the '6, we expect continued progress on our goals supported by improving order trends and backlog. We remain confident in the secular growth outlook across our key vertical markets and in our ability to grow above the market through a differentiated solutions-based approach. In closing, I want to thank you for your continued support in LSI. We're executing well, we're financially strong, and we remain focused on building long-term value through disciplined growth and operational excellence. With that, I'll turn the call back over to Jim Galeese for a more detailed review of our financial results.

Good morning, all. LSI Industries Inc. generated sales of $147 million in Q2, consistent with the prior year, successfully offsetting challenging prior-year comps. Adjusted net income and adjusted EBITDA were modestly above the prior year and all were double-digit above the same quarter fiscal 2024. Adjusted earnings per share were $0.26 for the quarter. Cash flow in the quarter was higher than expected at $23 million following a timing-related softer first quarter. The strong cash flow lowered our debt to EBITDA leverage ratio to 0.4 times, providing significant capital allocation flexibility. With our amended financing facility, LSI has cash and availability of approximately $100 million. Next, a few comments on our two reportable segments. As mentioned, Lighting had an outstanding quarter, realizing sales growth of 15%. This represents the third consecutive quarter of double-digit growth as compared to the prior year quarter. Referencing various reports on non-resi construction, our double-digit growth rate continues to outperform the market. As a result of volume and effective margin management, adjusted operating income increased 29%, with the adjusted gross margin rate improving 190 basis points versus last year. One of the growth opportunities identified for Lighting was increasing our business with national accounts. We felt our operating model capabilities aligned closely with satisfying strict customer requirements, so investments were made to support this initiative. Results reflect significant progress in gaining new customers and sales. This, along with the health of our key vertical markets, is driving our strong growth rate. We expect favorable momentum to continue into the '26 as lighting orders for Q2 were 10% above the prior year, a book-to-bill ratio above one on strong shipment quarter and an improved backlog. Shifting to Display Solutions. Jim did an excellent job providing context to the current quarter's performance for Display, and how to interpret comparisons to the prior year. I'll just add a few additional comments. For the grocery vertical, second-quarter sales reflect a return to normal seasonal demand. Implications were lower sales this quarter versus the pull-forward of last year, but also a return to more predictable demand flows, allowing us to plan and fulfill customer programs more efficiently. For example, Q2 adjusted gross margin improved 30 basis points despite lower production volume, reflecting improved productivity enabled by more stable production scheduling. Orders also followed a return to seasonal demand patterns, Q2 grocery orders increased double digits year over year, generating a strong book-to-bill ratio of 1.2 versus under one last year in building backlog. We expect sales growth in grocery in the '26. Activity remains high in the refueling c-store vertical, as we continue to execute against several large customer programs. In addition to our established foundation of large customers, we recently added multiple mid-sized projects, representing a combination of new and existing customers and brands. Building relationships with new customers provides the opportunity to expand our sustainable, repeat business model successfully built and executed. Over time, growing growth in our service business is also providing cross-selling opportunities. For one refueling c-store customer, where we are currently active with service at over 140 sites, the opportunity to present our broader solution set resulted in a significant number of sites specifying our Archer perimeter lighting system, generating an expansion of revenue per site. The QSR vertical has been sluggish as large chains manage multiple priorities, inflation, leadership changes, and shifting consumer habits. Our teams, however, are very busy working with customers on numerous programs in the concept and development phases. So future investments are planned, the timing of release remains unclear. In summary, LSI delivered a solid Q2 in 2026, and we remain encouraged by the level of activity in the majority of key vertical markets. Work to market the value of our LSI solution set is ongoing, and we expect to generate growth in Q3 and the second half of the fiscal year. I'll now turn the call back to the moderator for the question and answer session.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. One moment while we poll for questions. Our first question is from Aaron Spychalla with Craig Hallum.

Yes. Good morning, Jim and Jim. Thanks for taking the questions. Maybe first on refueling in C store. You talked about onboarding multiple projects given some more targeted sales initiatives. So it sounds like a little bit more consistent growth is expected there. Can you just maybe help frame that opportunity a little bit for us more on what that looks like and just, you know, some of those initiatives?

Yes. Aaron, it's Jim Clark. Thanks for the question. I think that the word I'd use is steady. I can think about this call last year, this time, and we were looking at a project that we knew in the refueling sector was gonna run out into fiscal year 2026, and that has proven true. Right now, I would say we have a number of those projects, smaller in scale, but the same kind of makeup where we have received the order, we're looking for the releases, and we've got a nice path in front of us gonna bring us through the remainder of '26 and into '27. So I can't give specific color on any one particular project. They're all a little bit different, but I would say they're geographically spread, both internationally and domestically. The business is healthy in both its content and its pace.

Yes, Aaron. Jim G. here. I'll just add on to Jim's comments that we have this very strong foundation with our large core, repeatable customers that we've done business with multiple cycles for years. Some of these mid-sized customers indicate two things. Number one, the health of the vertical, the level of activity going on there, and secondly, it's a combination of having done business with some of these customers before, but several of them are new, and some of those are actually non-domestic entities. It is an opportunity for us to further develop relationships and build on this foundation that we have. It sends a positive signal about the health of the vertical.

Yeah, that's helpful. Thanks. And then maybe on Mexico, good commentary on activity levels there. Can you just talk about some of the market drivers you noted elevated demand into FY '27? Maybe just at what level has that business been for you, and where can it get to if we look out into FY '27?

You know, I think that, in general, relatively conservative. We look the best we can when we start to forecast out six, nine, twelve, or eighteen months. It gets difficult for us, but I'll comment on this: if you look at that market in general, and it's just one of the markets, right? I don't want to get overly focused on c-store because we've got grocery in there, we've got QSR, we've got casual dining that I just talked about today. We've got auto, we've got a number of other segments. We talk a lot about grocery and C store, but they are not our only verticals, and I feel good about the momentum in all of them right now, to tell you the truth. What we're seeing is a competitive environment that's accelerating. If you look at companies like Wawa's, Sheetz, Casey's, and conversations around Circle K and 7-Eleven, it says a lot in that particular vertical about the pace of that industry, the competitive forces that have come to play, and new construction is driving remodel. Remodel is driving remodel. And this pace to continue to refresh their location, refresh the aesthetics of the location, the capabilities both in food services and other services, it bodes really well for us. We see this going on for many years, and that's just within that vertical. We think the things that returned to normal have a nice upward curve to them. We believe that the competitive forces in grocery also have the same dynamics we talk about in c-store, which are competitors raising the game, and the foundation in those industries raising their game along with it. That bodes very well for us. Someone asked me just the other day to recap new construction versus remodel. We love new construction, but it's a smaller component, 20, 80, 20. It's 80% remodel. That remodel is on a nice curve where it's trending kind of five year remodels right now. People are investing in those stores and putting money in them to be competitive with all these new starts and the changing environment.

Okay, that's helpful. And maybe on the non-U.S. or the Mexico component, just how does that potentially look as we move out, like, pipeline and just maybe what that business can become for you?

Yeah. I think that basically, Mexico, all the chaos, the global chaos of trade and duties and immigration caused a lot of question marks over heads in Mexico. I think a lot of that has normalized now, and folks are ready to get back to their original plans. I would argue that we're far behind based on their plans, and now it's just a matter of how much effort they start and try to go on their plan from day one or start and try to catch up with some of the things that were in arrears. That will materialize over the summer, and we'll have a better vision on that.

And Aaron, I would just add that the deregulation of the external retail or environment's been a nice win for LSI. It's had its ebbs and flows and probably will continue to have some ebbs and flows, but one thing is certain. Our partners, oil company partners who entered Mexico, it truly reflects that we are partners with them. So it's not a supplier relationship. We bring some experiences to them as they enter and grow in that market, and vice versa. Right now, that activity is on an upswing, and in the intermediate term, we see that upswing as positive to continue.

And we're in the second inning on that, by the way. To even say we've scratched the surface would be an overstatement.

Okay. Yeah. Understood. And then maybe just one on EMI, the integration. Can you just talk about where margins stand today as we get closer to that two-year mark? Talk about some of the operational initiatives there and maybe more broadly across the business as well.

Well, first of all, we love EMI, we love the whole team, and it fit in well. I think we've talked about this before, but when we look at M&A, we don't just look at the financials. We look at culture and everything else associated with the business as much as we look at any element. I want to underline the culture part. What I usually say is we look at the operational efficiency, the sales synergies, the balance sheet with as much weight as we look at culture. Our thinking behind that from an M&A perspective is if we're a square and they're a triangle, that takes a lot of work to kind of get them into our company and get them operating in the same rhythm. They demonstrated, the people there and their culture, are very close to LSI's culture. So it was a real win-win together, just like JSI was, just like Canada's Best is. We've talked about it before. They've had better than 200 bps of improvement in their margin, and we're continuing on that. I think that for us to reach, to get them up to that 10.5 and better, we probably still got a full year left in that journey, but I'm very pleased with the progress.

Understood. Thanks for the color. I'll turn it over.

Okay. Our next question is from Christopher Glynn with Oppenheimer and Company.

Thanks. Good morning, Jim. You know, wanted to go into your comment about the premium food services, get a better picture of what that entails. And I had a couple of other opportunities in mind. I don't know if they fit into premium food services or other, but how do you look at, like, the campus meal plan infrastructures and maybe hotel buffets?

Yes. So Chris, thanks for the question. I wanted to kind of highlight what we're going to just kind of moniker as premium food services, and it was really to delineate and differentiate between QSR. We've always had a very strong position in QSR. We remain in that. We see a lot of growth opportunities, particularly on our display solutions side, and across the gamut—our digital menu board, our refrigerated products, our food-grade countertops, all of that. We love QSR. But we've always had a spot in this premium food services, and I want to break it up into two pieces. One, we'll call casual dining. Those are restaurants that are, you know, think about waiter-waitress service, a restaurant that you're gonna come in, typically a chain, and some of them are larger, some of them are smaller. But the numbers tend to be smaller than QSR, but the investment inside the store is measurably bigger. Right? So we were just looking at a project last week that's gonna tip over a million dollars just for this restaurant interior. We have steady business in that, and there are indications that it's improving. On the campus side and on the food services side, particularly related to refrigeration, we have been making inroads there. We sat down just over two years ago to double our effort there. We have a steady business, but we don't have the volume that I think we deserve. And they've been working across EMI and across JS. They've been working very hard to put themselves in those spots. The difference between our core business, where we have multiple projects that span across multiple years, when we get into this premium food services side, a campus for a college, cafeteria plans, these casual dining restaurants, hospitality, the number of locations tends to be smaller. If we get a project, a lot of times it's a project of one, or maybe a regional project of five or twelve or something like that. But the scale of the project is much bigger—10, 20 times the size of our smaller projects. Same kind of development time, but we think that our spot is unique to their demands because we're able to come in and truly be a one-stop-shop, from refrigeration to countertops to steel, to lighting, to graphics, to millwork. It's a nice fit, and I think that the work we're doing in these other sectors has created more visibility for us and more credibility. So we come in much more credible, much more recognized, and I think we're starting to see the beginning of that as a viable market for us, one that we can continue to grow exponentially.

Yeah. Thanks. Seems like campus could be a nice-sized vertical at some point. And then you've talked about the three acquisitions today and the one-point integrated team. Appreciate that explanation. Messaging is really well packaged, and obviously suggests the opportunity to continue to do the appropriate consolidation. So I was just curious about how you think about what might be an appropriate leverage ratio range for the right kind of deal?

When we're talking M&A, what do we look at for multiples? Is that what you were saying? Or you were talking about leverage?

No. I was talking about your balance sheet.

Yeah. We've talked about this before. I mean, certainly anything below three, we're comfortable with, and we sleep even better when it's below two. Right now, we're at 0.4. We've had a demonstrated history of using our debt revolver, using debt inside the company to go and make acquisitions and then quickly put ourselves into a leverage ratio where we're comfortable. But generally, we want to be, certainly below three. If we had something extraordinary, we always talk about it in terms of incremental or exponential. Right? So incremental is something we do within our debt revolver, and it's, you know, 50, 80, 100, 125 million maybe. We're very much there. And then we look at exponential, which might be something that pushes us into the threes. I can't see a scenario where the first number wouldn't start any greater than a three. But, yeah, that would be exponential, and we're always on the look for that. We just haven't found the right fit for us at this point.

Yeah. Chris, you know, we feel very strong about our cash flow generation. As you saw, we had an excellent cash flow quarter. We're on pace now for our fourth consecutive year of cash flow exceeding free cash flow exceeding $30 million. So we're comfortable at looking at M&A transactions of sizes and then the ability to bring that leverage ratio down pretty quickly given our cash flow generation capabilities.

Thank you, guys. Our next question is from Alex Rygiel with Texas Capital.

Thank you. Good morning, everyone. Very nice quarter. First question here, could you give us an update on the Canada Best acquisition integration activities and the traction, in particular, on entering the banking vertical in the U.S.?

So Alex, thanks for the question. Canada's Best has worked out very well for us. Again, I just talked about it a minute ago about culture, and they were just another good fit. I couldn't underline that enough, that we look at the balance sheet, but we look at culture with as much diligence and as much focus as we look at anything else in the business. These guys have been great. They hustle, they are proud and energized to be part of LSI and part of a bigger team. But I gotta tell you, they're true entrepreneurs. The whole team up there, they look for opportunities. They are more emboldened with the financial strength of LSI and the capabilities. I didn't talk about this specifically, but JSI has a facility up there in Collingwood. Our Canada's Best facility is just outside of Toronto. We're in the process right now of integrating those two, making them a stronger Canadian operation under one umbrella. So it has worked out very well for us. We have begun to talk to retail bank environments here in the U.S. These projects typically, when we're talking about hundreds or thousands of sites, it's not unusual for the gestation period to be twelve, eighteen, or twenty-four months for us to get involved in a large project. I can't say we've had any meaningful wins yet, but we're investing time. They will have a spot at our sales meeting next week to talk about the markets they're in, the diversity, and how they're addressing those markets. We have teams collaborating on that. We're hopeful we're able to talk about retail banking as another top five, top 10 market for us, within the next twelve months. So, in summary, activity started. We've had some small wins, and we're looking to push that forward.

And then secondly, more broadly on price increases. I believe your last price increase might have been around March. Can you talk to us if there have been any recent price increases or if there's a need for price increases given tariff implications or other raw material cost inflation?

Yes. When you look at the two segments, Display Solutions is minimally impacted by tariffs. I'm not giving specific numbers, but I would broadly say no more than 10% or 15% of any material or any product we use in display solutions has been impacted by tariffs. Lighting is a little bit more because of the sourcing locations on some key components and things like that. But in terms of pricing, we make price adjustments now as opposed to price changes. Some categories and products are more susceptible, and others are more stable. We're always looking for the opportunity. We're disciplined in pricing, and we respect fairness. We are market competitive and make it difficult for others to breach. Pricing is one of them, but we're disciplined. We don't want to overstep our bounds and bring different competitive forces into our customer environment. We are price disciplined and focused on it. Most of what we're doing now is price adjustments as opposed to blanket price changes.

Yeah, just to reinforce Jim's comments. We are principally a project-based business. Given that, it gives us the opportunity, on a regular basis, to examine pricing and make sure we are aligned with what's going on with our cost structure, particularly our material input costs. Our team does an excellent job of maintaining current cost. When making project quotes, we are accurate and make pricing decisions that optimize our margin management.

And I will just add on the closing comment. We always reserve the right for price review. Even when we win an award, have a three-year project, we are not locking ourselves in on pricing for three years. We have good relationships with our customers. We're upfront about negotiations and project costs. That discipline around price goes both ways. We want to ensure we're good stewards for LSI and we want to ensure we're good partners for our customers.

And then lastly, you talked a little bit about some operational improvement opportunities. Are there any notable CapEx needs associated with that over the next twelve months?

Nothing notable. Our CapEx is relatively small. We don't see anything material impacting that, at least in the foreseeable future. But I will say, not related to that question but not specific to spending, we are looking for these opportunities. We always talked a few years back about building a better company before we built a bigger company. We've built that better company, we've built a bigger company. Now we're going back and making those improvements and doing it in respectful ways for the people within our company, for our customers, to ensure we're not doing anything disruptive. We are after all of those improvements and consolidation and rationalization, and all of the opportunities are hidden in it.

You know, Alex, I would just broaden your comment that it's not just about capital spend but also about investment. We invest in multiple ways, not just CapEx, like looking at our facilities footprints, our talent structure, new product introductions, development costs, etcetera. We are aggressive in having our team put forth proposals to us in all those categories. We invest accordingly, and I think those investments are showing up in some performance areas across our two reportable segments.

Very helpful. Thank you. Our next question is from George Gianarikos with Canaccord Genuity.

Hi. Thank you for taking my questions. Maybe to focus first on your statement here in the press release that you expect above-market growth for the year. Can you sort of talk a little bit about the competitive environment and what you're seeing there that gives you the conviction you can grow faster than the competition? Thank you.

Yes, good morning, George, and thanks for the call. I think we hit on it a little bit earlier, and I appreciate bringing it up again. We think there's a lot of dynamics going on in the spaces we're playing in. You know, we purposely, if you remember the whole story of how we constructed our first plan and then the fast-forward plan, it was about narrowing the aperture and looking for markets where we thought we could make an impact and differentiate ourselves. But the other component, the other leg of the stool, was identifying those markets with some type of disruption for long-term growth, which we define as five or ten years. I underline that new entrants in the convenience store space are very aggressive, they're committed to the customer environment in those stores, aligning well with what we're delivering. The grocery market, the work and investment they're putting in for shopper experience, branding, and customer experience, it's key. Lighting plays a big role in this. But our entry has been Display Solutions, which gets us in the door. The combination of products, the uniformity of it, our ability to deliver, our services component, I think it puts us in a category of one. I feel like we have the opportunity to not only win those projects but accelerate our win rate with those projects.

Thank you. And maybe just one last question for me. Focusing on the M&A opportunities, that you've been focusing on and have executed on, I'm curious as to what the return dynamics look like with the bump up in rates here that we've seen and your willingness and desire to use debt as a way to finance them. What has that done to the pipeline and the available pool of acquisitions in the marketplace? Thank you.

Yes, I don't want to poke the bear here, but obviously, I don't like that the rates are higher. But I do feel like there's been a leveling effect, particularly regarding private equity. The multiples are more realistic, and the conversations are more business-oriented. I don't feel there's as much of the fever pace as there was a couple of years ago. Deals were just getting done sometimes, one, two, three turns higher multiple than we would even consider. So even with higher rates, the environment’s better for strategic acquirers like us. It just comes down to the selection process. We're picky buyers, right? I talked about it a couple times on the call today. It can't just be the company performance or the products. The culture has to be there. We don't want to go in and try to rework anyone or fight an opposing or different culture. It doesn't mean theirs isn't good, but ours is better. We want to have similar thoughts, goals, and tools. It makes it trickier because we are so selective. But, to be completely honest, the rates aren't that bad as we look at them. And I do think they have helped turn conversations more realistic and more business-oriented. I wouldn't mind lower rates, don't get me wrong, but I feel better in this environment than I did when it was free money.

Thank you so much.

Thank you, George.

Our next question is from Sameer Joshi with H.C. Wainwright.

Hey, good morning, Jim and Jim. Thanks for taking my question. Congratulations on a better than expected quarter. Really good performance in the Display segment here. Most of the questions were answered already, but just digging a little deeper into the implications of meaningful traction in the casual dining and the premium fast food services, where there are large projects. I think you mentioned the timing is similar, so that is good. But in terms of visibility and profitability, how does it compare with QSR?

First of all, Sameer, thank you for the question. Very good to hear your voice. I was hesitant to even bring up casual dining because when you look at QSR, typically, the projects we're involved in are multi-site, hundreds and hundreds of sites. And when we talk about them, we talk about a project award, and a project deployment or release schedule tends to go on for six months or a year. It's much easier for us to get the visibility and talk about it. But at the same token, I felt like we were underselling the work we were doing, particularly because we see the real cross-selling happening more in this casual dining space more quickly, I should say. And I wanted to draw attention to it. The casual dining space is going to be counted in the dozens, as opposed to the hundreds. The project sizes are going to be much larger, and they tend to be larger. The combination of goods and services we offer tends to be much bigger. I would just say it's a work in progress, developing and picking up speed. If you give us two or three more quarters to talk about it, I'll have more visibility and maybe a stronger story to tell. But we've always been in this space. I don't want anybody to think it's new or that it represents a significant turn. But I did want to bring it up because I just feel momentum building in it. The project sizes are much bigger, which I think reflects on our cross-selling opportunity. And just in general, I think we see some more accelerated market activity right now, which could end tomorrow with one bad quarter of sales in that casual dining spot. But right now, looking ahead for the rest of 2026 even though it's just January, I feel pretty good about it.

Thanks for that color. Bringing this out gives us better insight into the inner workings of the company. Thanks for that. And then just one immediate question. I know Q3, the fiscal Q3, is historically a low quarter, especially in the Display segment. Are things any different for the current year fiscal third quarter?

Well, I'm not going to hide the fact that I said it in my comments. I’m enthusiastic about what Q3 could be, but I'm moderate in the sense that I think it's going to track similar to our other Q3s. On a comparative to any other quarter, Q3 is always our toughest. But on a comparable basis to prior year, I have very little doubt we will outperform prior year. How much we'll do that? I’d like to say that we have opportunities. I feel good about Q3. But if it’s Q3 and bleeds into Q4 or is more moderated over Q3 or Q4, I can't tell right now. But I feel good.

That's fine. And that's good to hear. Thanks a lot for taking my questions.

You're welcome. Thank you.

There are no further questions at this time. I'd like to hand the floor back over to Jim Clark, President and CEO, for any closing remarks.

I'd just like to say that we're proud of the accomplishment of the team in Q2. Myself and Jim are two people out of 2,000 that are here. We're very happy with the work they're doing, we're very happy with the confidence our customers have in us, and we're encouraged by what we see in front of us. That's a good quarter, and we're looking for even better ones in the future. Thank you for your time and attention and your interest in LSI Industries Inc.