Lighting … A Smaller Segment of LSI

LSI Industries, the parent of LSI Lighting and Atlas Lighting, reported 3Q fiscal year 2026 earnings on April 23.  As one of the few remaining publicly traded lighting manufacturers that reports, although not of the size or scale of the two majors (Signify and Acuity), LSI is another lighting data point for the industry.  This marks its fourth quarter of growth; however, growth slowed from recent double-digits to 2%.  3Q sales for Lighting were only $60 million, an annualized run rate of $240 million

Overall, the company grew 9% on total sales of $150.5 million. The performance shifts the business’ mix towards Display Solutions, as that segment accounts for 60% of sales, versus 40% for Lighting.  Lighting is the support leg, rather than the growth engine for the business. Perhaps the model is that lighting becomes a cash cow, a la Acuity, with Display Solutions and other investments being the growth engine?  This trend may accelerate.

Management characterized the Lighting Segment as outperforming the broader commercial and industrial lighting market despite a lengthening quote‑to‑order cycle.  Project quotation activity remained stable, with increased activity in national accounts offsetting softer general C&I activity.  Weather also dampened outdoor projects earlier in the quarter.  Over the full nine‑month fiscal year, Lighting had grown 12% year‑over‑year on $195.8 million of sales.

But, while management may feel it is “outperforming”, the reality is that it is a small player in the market with only $60 million in the quarter. And Q1 is historically a softer lighting quarter, especially for outdoor due to weather issues (which occurred in January and February.) Lighting is also subject to commodity pricing (and tariff) issues.

LSI Lighting Expected to Slow

LSI’s Lighting segment, which includes Atlas Lighting and LSI Lighting, is expected to experience a near‑term setback: management guided for Lighting segment sales to decline to the mid‑single‑digit percentage range during the next quarter.  Management highlighted that Lighting is facing “near‑term softness”, due to the lengthened quote‑to‑order conversion period, macroeconomic influences, and challenging project timing for larger capital programs, but not a structural collapse in demand.

This is consistent with the findings and outlook from Channel Marketing Group / ElectricalTrends QI Pulse of Lighting report and Acuity’s ABL sales being down 3% overall (but up slightly in the channel.)

Outlook By Segment for Rest of 2026

Outdoor and large‑project indoor lighting (e.g., parking, high‑bay, industrial) will likely see the sharpest pullback, since they are most sensitive to project timing and macro conditions.  The Indoor and specialty/commercial (e.g., retail, retail‑adjacent, vertical‑focused work) may be slightly more resilient but still weighed down by the same project‑timing drag.

Analyst Questions

Analyst questions were most concerned with the slowdown in Lighting and the projected 4Q decline, even though the quarter was strong on the top and bottom lines.  Lighting grew only 2%, down sharply from prior‑year quarters and below the double‑digit pace that had defined the prior streak.  This trajectory raises the risk that the multi‑quarter string of above‑market Lighting growth is ending, even if management says orders are more delayed than lost.   However, investors worry this is not just a timing blip but a sign that non‑residential capital spending is becoming more selective, which would hit Lighting harder than the more program‑driven display business.  A further concern is whether margins can be maintained if volumes fall further.

As an industry, and the Pulse of Lighting confirmed, the non-residential market has been “challenged” for a number of years. Remember, Acuity first called it “tepid” and now states it’s due to delays and labor, and last year it was tariffs delaying decisions and …  and so on. The reality is that, in many parts of the country, the new commercial construction market is slow and the large office element of this is the slowest segment. Construction numbers can look good, thanks for data centers, but the amount of lighting needed for them is nominal.

And, if you think lighting is the future? FYI, LSI Industries acquired Royston Group at the end of March for $325 million. Royston is a vertically integrated provider of custom store fixtures, interior and exterior signage, and refrigerated and heated display cases. Royston’s FY 2025 revenues were $272 million, more than the lighting business.

Thinking About LSI Lighting’s Future

For LSI, the questions become:

• What percentage of the lighting business is LSI Lighting vs Atlas Lighting?
• Which should have focus, perhaps investment, to generate growth?
  • What will enable them to grow / take share?
• Longer-term, is the lighting division important enough to invest in given its size and trajectory?
• What is its point of differentiation to capture share?

Where do you see LSI’s lighting divisions – LSI Lighting and Atlas Lighting – in the marketplace? If the industry is going through consolidation (and there were deals last year), should LSI be a buyer or a seller?