DAKT 10-K & 10-Q changes, risk factors and insider trading
Daktronics Inc. · Nasdaq · Miscellaneous Manufacturing Industries · CIK 915779 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Global conflicts could adversely impact our business and financial results.”
New heading “Increases in the cost or limited availability of computing infrastructure, including memory and processing resources, could adversely affect our business, financial condition, and results of operations.”
Largest changes
Any misappropriation, loss, orsee in full comparisonotherunauthorized disclosure of confidential or personally identifiable information, whether by us or by our third-party service providers, could adversely affect our business and operations. We could face significantfinescosts, including remediation, investigation, penalties, litigation, andpenaltiesreputationalunderharm,various global laws revolving around data loss, lackany ofadequate data protection, or lack of required reporting. Any disruption in our digital technologieswhich could materially and adversely affect ourbusinessbusiness, financial condition, andoperations,resultscausingofpotentiallyoperations.significantForexpensesfurthertodiscussionrecoverofandourmodifycybersecurity programs, please thedatadiscussionsystems,settoforthreimburseincustomers’thislosses,Formand10-Kto“PartinvestigateI,andItemremediate1C.any vulnerabilities, which could severely damage our reputation with customers, suppliers, employees, and investors and expose us to risk of litigation and liability.Cybersecurity.”
“In addition, we are currently experiencing cost inflation across certain commodity and electronic component categories. Aluminum, which is used extensively in our display cabinets, structures, and related products, has experienced price increases driven by market conditions, tariffs, and supply chain factors, increasing our manufacturing costs. Similarly, increased industry demand for certain computing components associated with artificial intelligence and data center infrastructure investments has contributed to higher costs and supply constraints for certain inputs used in our products. …”see in full comparison
“During fiscal 2025, our business, operations, and financial results have been impacted by the changing United States import tariff laws and the resulting reactions of other countries. Our complex manufacturing processes in the United States, which generate approximately 80 percent of our manufactured output, rely on direct components and inputs from over 40 countries. China has been the greatest source for semiconductor type components, including LEDs, printed circuit boards, and other integrated circuits. …”see in full comparison
“Our domestic and foreign operations, sales, earnings, and strategies for profitable growth can be adversely affected by global conditions and compliance with global regulations and governmental orders. …”see in full comparison
We rely heavily on complex information systems and technologies for the successful operation of our business,see in full comparisonforthe support of our offerings, andforthe collection and retention of business data. Any information system failureof,or security breachin security,could adversely affect our operations,atandleastweuntilcannot guarantee that our datacancould be restored and/orthebreachesvulnerabilities remediated. Despite the security measures we have in place, ourfacilities andsystems and those of our third-party service providers may be vulnerable to cybersecuritybreaches,incidents,actsincludingof vandalism,ransomware, computer viruses,misplaced or lost data, ransomwaremalicious attacks, programmingissues, and/orerrors, humanerrorserror, or other similar events.OurThe increasing useand adoptionofgenerativeartificialArtificial Intelligenceintelligence (“AI”)intechnologiesourmaybusinessfurtherprocessincrease the sophistication anddecision making are in the early stages and pose business risk. The usefrequency ofAIcybersecuritytechnologies can create the opportunity for potential loss or inadvertent dissemination of data and inaccurate or flawed outputs.threats.
“In particular, increased demand for memory, processors, and other key electronic components may limit availability or reduce our purchasing leverage with suppliers. The cost of acquiring, leasing, or accessing compute and memory resources may continue to increase due to growing industry demand, supply chain constraints, geopolitical factors, inflationary pressures, changes in vendor pricing, tariffs, or other market conditions. …”see in full comparison
Full comparison: every changed paragraph (123)
Investing in our common stock involves risk.risk and our future results may be affected by a number of factors over which we have little or no control. You should carefully consider the risks and uncertainties described below, together with all of the other information set forth in this Annual Report on Form 10-K and documents incorporated by reference herein, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Consolidated Financial Statements and related notes, before making a decision to invest in our common stock. The discussion in this Item 1A contains forward-looking statements discussed above.
GeopoliticalChanges issues,in conflicts,trade governmentalpolicies actions, includingand the imposition of tariffs, changeshave in laws, regulations,affected, and policies,may andcontinue otherto global events could adversely affectaffect, our results of operations and financial condition.
During fiscal 2025 and fiscal 2026, our business, operations, and financial results were impacted by changes in United States import tariff policies and the resulting responses from other countries. Our complex manufacturing processes in the United States, which generate approximately 80 percent of our manufactured output, rely on components and inputs sourced from over 40 countries. China has historically been a significant source of semiconductor-related components, including LEDs, printed circuit boards, and other integrated circuits. In addition, certain jurisdictions, including Canada, have imposed or may impose retaliatory tariffs on United States-origin goods, increasing the cost of exporting our products into those markets. United States tariff rates on these imports have ranged from approximately 10 percent to significantly higher levels, with certain proposed or applied rates substantially exceeding these levels.
While certain U.S. tariffs have been struck down by the courts, the United States has subsequently announced additional new tariffs on virtually all nonexempt imports, and the U.S. tariff rate remains elevated. Shifts in tariffs, trade agreements, import and export restrictions, trade sanctions, sector-specific trade barriers, and other governmental trade actions, whether enacted by the United States or other countries, especially those instituted in significant markets or markets where our significant customers or suppliers are located, and the associated uncertainty of long-term trade policies, could impact our sales volume, sales price, and production and other costs.
Changes in trade policies may also cause disruptions to material sourcing and availability, global supply chains and logistics, and access to end markets. Additionally, changes in U.S. trade policy and associated responses from trading partners may create shifts in global market dynamics, disrupt the long-term planning process for governments and private enterprises, and result in continued global financial market volatility. The impact of these changes in trade policies and the resulting trade and market uncertainty could have a negative impact on our results of operations.
Following the invalidation of certain tariff actions, the Company has submitted, and will continue to submit, tariff recovery claims through the U.S. Customs and Border Protection (“CBP”) Commercial Accounting Program and Enforcement process seeking a refund of tariffs paid pursuant to the International Emergency Economic Powers Act (“IEEPA”). The amount, timing, and realization of any refund or credit remains uncertain and subject to CBP review.
In addition to direct tariff costs, our suppliers have incurred tariff-related costs in their own supply chains and the uncertainty of the tariff landscape continues to make these tariff-related costs volatile. Many of our supplies have passed these tariff-related costs to us and these costs may increase in the future. Alternative suppliers may charge higher prices or may not have sufficient capacity or reliability, which could further increase our costs or disrupt supply.
While we seek to mitigate these impacts through pricing actions, changes in manufacturing locations, supplier diversification, and product redesign, we may not be able to fully offset increased costs or implement such changes on a timely basis. Tariffs and trade policies are expected to continue to evolve, and the United States, other countries, and international trade bodies may institute new tariffs or more restrictive trade policies or remedies. As a result, we may face additional uncertainties and adverse impacts on our business, financial condition, and results of operations.
In addition, competitors may benefit from manufacturing or sourcing strategies, including near-shoring or alternative supply chain structures, or may qualify for tariff exemptions or more favorable trade treatment that are not available to us, which could place us at a competitive disadvantage.
Impacts on our business include, but are not limited to: (i) increased raw material and component costs due to tariffs or supply constraints; (ii) disruptions in the availability of components; (iii) challenges in planning and optimizing our global supply chain, leading to increased operating costs and reduced profitability; (iv) delays or reductions in customer orders due to economic uncertainty or tariff-related pricing impacts; and (v) the need to increase prices, which may reduce demand or adversely affect our competitive position.
Global conflicts could adversely impact our business and financial results.
Geopolitical tensions or conflicts in regions where we conduct business, including the Middle East, may result in delays in customer decision-making, project timing, or order activity, and could reduce or disrupt demand in affected markets. To date, we have not experienced material disruptions from certain regional conflicts; however, ongoing uncertainty may negatively impact customer demand, project timing, or execution in these regions in future periods, and may also restrain shipping routes, cause increases in inflation, or result in cyberattacks. We cannot predict the extent to which these factors may affect our business, financial condition, or results of operations.
Such factors and conditions can create trade restrictions, increase tariff costs, increase prices for raw materials and components used in our products, increase the cost of sales, decrease demand for our products, increase cost of compliance, cause material business interruptions, or have other implications on our business operations. Additionally, such issues, actions, conflicts, or sanctions may significantly devalue various global currencies and have a negative impact on economies in geographies in which we do business.
These impacts could reduce profitability and could have a material adverse effect on our results of operations and financial condition if they escalate into geographies in which we do business, manufacture our products, or obtain raw materials and components for production.
During fiscal 2025, our business, operations, and financial results have been impacted by the changing United States import tariff laws and the resulting reactions of other countries. Our complex manufacturing processes in the United States, which generate approximately 80 percent of our manufactured output, rely on direct components and inputs from over 40 countries. China has been the greatest source for semiconductor type components, including LEDs, printed circuit boards, and other integrated circuits. United States tariff rates on these imports can range from 10 percent to much higher levels, with proposed or applied rates as high as 170 percent for certain items of Chinese origin. In addition to higher costs due directly to tariffs, some of our suppliers may be subject to tariffs in their supply chain that they will pass on to us, or alternative suppliers are increasing and charging higher prices or may not have the capacity and reliability needed, which also could result in higher prices paid by us. In addition, some countries, like Canada, are imposing retaliatory tariffs on United States goods, which increases our cost to export United States-made displays into Canada. Although we can mitigate some of the additional tariff costs through pricing to customers or by shifting manufacturing location, changing suppliers, or redesigning for available lower cost and/or lower tariffed components, we may not be able to avoid additional costs, increase prices to customers to completely compensate for the tariffs, or timely mitigate the cost impacts of the changing global tariff structure. These rates and market dynamics have been changing dynamically and frequently which makes future costs and impacts for tariff related factors indeterminable.
In addition, our competitors have near-shored production or import into the United States under favorable exemptions not available to us which can create a competitive imbalance. Impacts on our business include, but are not limited to:
•increases in raw material input costs for specific tariffs or changes in the availability of components;
•our inability to plan effective and cost efficient supply chain structures for the changing tariff landscape, causing increases in costs to operate our business and thus lower profitability;
•hesitancies or delays by customers in placing orders due to the uncertainty of tariff rates and their impact on the economy; and
•charging higher prices than our competitors, creating competitive disadvantages and loss of business
Our overall performance depends in part on worldwide economic conditions. The United States and other key international economies have experienced downturns and recessions from time to time during which economic activity was impacted by falling demand for a variety of goods and services; restricted credit; poorreduced liquidity; reduced corporate profitability; volatility in credit, equity and foreign exchange markets; increased unemployment; bankruptcies; and overall economic uncertainty. These conditions affect consumer and entertainment spending and could materially and adversely affect our customers’ ability or willingness to purchase our products, delay prospective customers’ purchasing decisions, reduce the value of their contracts, or affect attrition rates, all of which could adversely affect our operating results.
We rely on global supply chains, and inflationary pressures canmay increase our input costs faster than our ability to raise prices. TheseIn couldaddition, disruptions in global supply chains may limit or eliminate our ability to sell our products or receiveobtain parts and components throughor ourincrease globalthe supplycost chainsof andthose inputs. These factors could have a material adverse effect on our results of operations.
The interest rates applicable to borrowings under our credit agreement with JPMorgan Chase Bank, N.A. are based on variable rate benchmarks, including the Secured Overnight Financing Rate (“SOFR”), or alternative base rates, and are influenced by broader market conditions and monetary policy. As a result, increases in these benchmark rates will increase the cost of borrowings under our credit facility. In addition, we incur commitment fees on unused portions of our revolving credit facility, which may increase our overall financing costs.
The rate of interest we pay on our asset-based lending facility with JPMorgan Chase Bank, N.A. is correlated to the Standard Overnight Fund Rate (“SOFR”), which is determined by governmental policy decisions. Increases in SOFR will increase the rate of any borrowing on this facility.
We operate manufacturing operations in three locations in the United States -States, Brookings, South Dakota, Sioux Falls, South Dakota, and Redwood Falls, Minnesota, and we have production facilities in Ireland and China. Additionally, we plan to open a new manufacturing facility in Saltillo, Mexico during fiscal 2027. Unexpected events could result in damage to, and a complete or partial closure of, one or more of our manufacturing facilities, which could make it difficult to supplymanufacture and deliver products to our customers with product and provide our employees with work,customers, thereby adversely affecting our business, operating results, or financial condition. Additionally, such events could disrupt our data centers or cloud-based infrastructure, or result in cybersecurity incidents, potentially rendering critical computing processes and systems temporarily unavailable, which may impair our ability to operate effectively.
The occurrence of one or more unexpected events in the United States or in other countries may impact the operations of our suppliers and customers, may disrupt our operations and could create additional uncertainties, forcing customers to reduce, delay, or cancel already planned projects or cause our suppliers not to perform, resulting in parts and component shortages.shortages, or disrupt transportation and logistic networks.
We depend on a single-source or a limited number of suppliers for our raw materials and components from countries around the world. The loss, an interruption, or a material change in our business relationships with our suppliers or in global supply chain conditions canmay causeresult in a disruption in our supply chains and a substantial increase in the costs of such raw materials and components.
Geopolitical tensions can impact our ability to obtain key materials and components. Such changes can result in extended lead times or supply changes, which could disrupt or delay our scheduled product deliveries to our end user customers and may result in the loss oflost sales and endcustomer user customersrelationships and cause harm to our sales, financial condition, and results of operations.
The performance and financial condition of a supplier may cause us to alter our business terms with that supplier, cease doing business with that particular supplier, or change our sourcing practices. Our suppliers are subject to fluctuations in global economic cycles and conditions, governmental regulations, and other business risk factors which may impact their ability to operate their businesses. Our supply chain includes semiconductor-type components including LEDs, printed circuit boards, and other integrated circuits, which are sourced or packaged directly or indirectly primarily through suppliers in Taiwan or China. Imports from China to the United States have been subject to increased import/export controls and tariffs.tariffs, which may increase costs, limit availability of key components, or disrupt our supply chain. Geopolitical tensions, tariff and trade controls, other governmental actions, and shipping disruptions can impact our suppliers’ ability to deliver components and raw materials.
In order to reduce manufacturing lead times and plan for adequate component supply, from time to time, we may issue purchase orders or prepay for components and products that are non-cancelable and non-returnable. In addition, we may purchase components and products that have extended lead teamstimes to ensure adequate supply to support long-term customer demand and mitigate the impact of supply disruptions. If we are unable to use all of the components we have purchased, we may have excess inventory or obsolescence, or increased inventory or carrying costs, which could have an adverse impact on our results of operationoperations or financial condition.
We operate in highly competitive markets and face significant competition and pricing pressures. If we are not able to continue to enhance existing products or are unable to keep up with the rapidly changing product developments and new technologies, or effectively market and compete effectively inwith our new or enhanced products that respond to customer needs and preferences, we could lose market share and orders, which would negatively impact our results of operations.
The electronic display industry is characterized by ongoing product improvement, innovations,innovation, and development and low-cost competition. We compete against products produced in foreign countries and the United States. Our competitors may develop lower-cost or lower-featured products, may be willing to charge lower prices to increase their market share, bring new products to the market faster, or marketoffer new andor uniquedifferentiated product,products, service,services, and controller offerings. Some competitors have more capital and other resources, which may allow them to take advantage of acquisition opportunities or adapt more quickly to changes in customer requirements. Other competitors use sponsorships as a way to win business at a particular location or market. In addition, our products compete with other forms of advertising, such as television, print media, digital and mobile, and fixed display signs. To remain competitive, we must anticipate and respond quickly to provide innovative, customer-valued products and services that meet our customers’ needs, enhance our existing products, introduce new products and features, and continue to price our products competitively. Relevant innovation is an important part of our growth strategy. Product development involves complex and resource-intensive processes, including research, planning, design, engineering, testing, and marketing. We may not always be able to develop or introduce new or improved products in a timely manner, or at all.
To remain competitive, we must anticipate and respond quickly to provide innovative, customer-valued products and services that meet our customers’ needs, enhance our existing products, introduce new products and features, and continue to price our products competitively. Relevant innovation is an important part of our growth strategy. Product development involves complex and resource-intensive processes, including research, planning, design, engineering, testing, and marketing. We may not always be able to develop or introduce new or improved products in a timely manner, or at all.
We rely on a variety of intellectual property rights we useused in our products and services. We may not be able to successfully preserve our intellectual property rights in the future, and these rights could be invalidated, circumvented, or challenged. In particular, the laws of certain countries in which our products are sold do not protect our products and intellectual property rights to the same extent as the laws of the United States. If litigation is necessary in the future to enforce our intellectual property rights, to protect our trade secrets, or to determine the validity and scope of the proprietary rights of others, such litigation could result in substantial costs and diversion of resources even if we ultimately prevail.
We cannot control all of the various factors that might affect our suppliers’ timely and effective delivery of raw materials and components to our manufacturing facilities or the availability of freight capacity for us to deliver products to our customers. In addition to increased costs, these factors could delay delivery of products, which may result in the assessment of liquidated damages or other contractual damages that could negatively impact our profits.results of operations.
Cost inflation and shortages of the raw materials and components used to manufacture our products have and may continue to occur due to various factors, such as worldwide demand, natural disasters, logisticlogistics disruptions, war and other conflicts, and trade regulations.
In addition, we are currently experiencing cost inflation across certain commodity and electronic component categories. Aluminum, which is used extensively in our display cabinets, structures, and related products, has experienced price increases driven by market conditions, tariffs, and supply chain factors, increasing our manufacturing costs. Similarly, increased industry demand for certain computing components associated with artificial intelligence and data center infrastructure investments has contributed to higher costs and supply constraints for certain inputs used in our products. While we continue to pursue sourcing, design, and pricing actions to mitigate these impacts, sustained inflation or shortages in these categories could adversely affect our margins, competitiveness, financial condition, and results of operations.
Electronic and other components and materials used in our products are sometimes in short supply, which may impact our ability to meet customer demand. Transportation costs and availability can fluctuate due to fluctuations in oil prices and other social, economic, and geopolitical factors. Certain key components, including semiconductor memory and related electronic inputs, have experienced supply constraints and cost increases, which have increased, and may continue to increase, our input costs and adversely affect our results of operations.
If we experience shortages or increases in the prices we pay for raw materials and components and are unable to pass on those increases to our customers or are unable to manufacture our products at all or on a timely basis, it could negatively affect our business, financial condition, or results of operationsoperations, as suchsimilar conditions have adversely affected our business in the past. In addition to increased costs, these factors could delay delivery of products, which may result in the assessment of liquidated damages or other contractual damages that could negatively impact our profits.
Trade disruptions and trade policies between countries could make us subject to additional regulatory costs and challenges, affect global economic and market conditions, and contribute to volatility in foreign exchange markets, which we may be unable to effectively manage through our foreign exchange risk management program. We monitor for these types of situations and evaluate waysseek to minimizemitigate these impacts through vendor negotiations, alternative sources,sourcing, and potentialpricing priceadjustments; adjustments.however, these efforts may not be successful.
Expanding our international footprint remainsis aan keyimportant part of our growth strategy.strategy; However,however, operating across multiple countries exposes us to a variety of risks that may not be present in our domestic operations. We manufacture certain products and source components in multiple international locations, including China, and a portion of these products and components are imported into the United States and other markets, which increases our exposure to tariffs, trade restrictions, and other cross-border regulatory risks.
In addition, international operationsoperations, including our manufacturing expansion in Mexico, often require significant upfront investment in market development, personnel, and facilities, which may not yield immediate returns. Legal systems, intellectual property protections, and enforcement mechanisms may be less predictable or less robust in some jurisdictions, increasing our exposure to potential disputes or infringement.
These and other factors may impact our ability to operate efficiently and profitably in international markets. WhileAlthough we take stepsattempt to manage these risks, there can be no assurance that our efforts will be successful or that international operations will not have a material adverse effect on our business.
Depending on a contract’s scope of work, we may hireengage third-party subcontractors to performfor on-site installation and service-related activities, hireuse manufacturers offor structures or elements of structures related to on-site installations, hirerely on contract manufacturers for certain product lines, or purchase specialty non-display related system elementscomponents from otherthird companies.parties. If we are unable to hireengage qualified subcontractors, find qualified manufacturers for on-site elements, find qualified contract manufacturers, or purchaseother specialtythird-party non-display system elements,providers, our ability to successfully complete a project could be impaired. If we are not able to locate qualified third party subcontractors or manufacturers, the amount we are required to pay may exceed what we have estimated, and we may suffer reduced margins or losses on these contracts. If the subcontractor or manufacturer fails to perform, we may be required to source these services to other third parties on a delayed basis or on less favorable terms, which could impact contract profitability. There is a risk that we may have disputes with our subcontractors relating to, among other things, the quality and timeliness of work performed, customer concerns about the subcontractor, or faulty workmanship, resulting in claims against us for failure to meet required project specifications and negatively impacting our financial condition and results of operations.
These third parties are subject to fluctuations in global economic cycles and conditions and other business risk factors which may adversely impact their ability to operate their businesses. The performance and financial condition of the third parties may cause us to altermodify our business terms or to cease doing business with a particular third party or change our sourcing practices.party.
We increase and decreaseadjust our production and services capacity and the overhead supporting order fulfillment based on anticipated market demand. Market demand, however, has not always developed as expected or remained at a consistent level.consistent. These underutilization and overbooking capacity risks can potentially decrease our profitability and result in the impairment of certain assets.
The following factors are among those that could complicate capacity planning for market demand: (i) changes in the demand for and mix of products that our customers buy; (ii) tariff landscape and import/export controls; (iii) our ability to scale down or to add and train our manufacturing and services staff in advance of demand changes; (iv) the market’s pace of technological change; (v) variability in our manufacturing or services productivity; (vi) long lead times for and availability of raw materials and components used in production; (vii) our ability to engage qualified third parties; (viii) geographic location of orders and related shipping methods; and (ix) long lead times associated with capital expenditures for plant and equipment.
The following factors are among those that could complicate capacity planning for market demand:
•changes in the demand for and mix of products that our customers buy;
•tariff landscape and import/export controls;
•our ability to scale down or to add and train our manufacturing and services staff in advance of demand changes;
•the market’s pace of technological change;
•variability in our manufacturing or services productivity;
•long lead times for and availability of raw materials and components used in production;
•our ability to engage qualified third parties;
•geography of the order and related shipping methods; and
•long lead times for our plant and equipment expenditures.
Customer demand and the timing and size of large contracts create volatility in supply chain planning and capacity requirements to fulfill orders. Awards of large contracts and their timing and amounts are difficult to predict, may not be repeatable, and are outside of our control. Market demand has not always developed as expected or remained at a consistent level. Adjusting supply chain material planning and production and services capacity to meet this variedvariability in demand can increase costs. Demand for our products is also influenced by trends and capital spending within key end markets, which may be adversely affected by economic or industry-specific conditions. Large contracts or customer awards include projects for college and professional sports facilities markets, the OOH niche, the transportation market, and the large spectacular niche. These projects can have short delivery time frames. Some factors that may cause our operating results to vary due to timing and size of the awards include:
Some factors that may cause our operating results to vary due to timing and size of the awards include: (i) the timing of orders and related deliveries, including delays or cancellations of orders; (ii) our ability to obtain raw materials and components timely and at reasonable prices; (iii) our ability to adjust and utilize production and services capacity; (iv) our ability to engage third parties to support production and fulfillment; (v) new product introductions; (vi) variations in product mix; and (vii) customer financial wherewithal and the related economic conditions impacting their business.
•the timing of orders and related deliveries, including delays or cancellations of orders;
Management's Discussion & Analysis (MD&A)
Largest changes
“During fiscal 2024, we converted pandemic-related, pent-up backlog into record levels of sales and gross profit. In fiscal 2025 and beyond, we are more dependent on the timing, size, and profitability profile of the orders we win and market conditions to be able to generate sales and gross profit at similar levels. …”see in full comparison
“As of the date these financial statements were issued, no amounts related to potential refunds have been recorded in the accompanying financial statements. The Company is evaluating available information and monitoring developments related to the ongoing litigation and CBP’s refund process. Due to the uncertainty regarding eligibility, timing, and the final resolution of tariff refund related administrative matters, the Company is unable to reasonably estimate the likelihood, amount or timing of any potential refunds.”see in full comparison
“We expect that increases in tariffs will increase the Company’s cost of sales, although their timing and precise effects are unpredictable. In particular, if the additional reciprocal tariffs go into effect, the Company will incur substantial additional increases in its cost of sales, and sales volumes into the United States would likely decline. However, the Company is developing plans to mitigate the impact of these tariffs, as well as possible operational changes that could result in a change in the country of origin for certain of the Company’s products. …”see in full comparison
“On May 28, 2025, a three-judge panel of the United States Court of International Trade (“CIT”) held that President Trump’s recent imposition of tariffs pursuant to the International Emergency Economic Powers Act (the “IEEPA”) is unlawful. On May 29, 2025, in response to President Trump’s appeal of the CIT’s ruling, the United States Court of Appeals for the Federal Circuit issued an administrative stay of the decision while it considers President Trump’s appeal. …”see in full comparison
“In March and April 2025, the Trump Administration announced a series of additional special tariffs, some of which have been temporarily paused. The additional special tariffs in effect as of April 26, 2025 include tariffs of 10 percent on all or substantially all products imported by the Company and an additional tariff on substantially all products of Chinese origin. In addition, in April 2025, the Trump Administration announced a series of so-called “reciprocal” tariffs on dozens of countries with which the United States has a trade deficit. …”see in full comparison
“We have made global investments in manufacturing capacity and the advancement in display and control technologies. A majority of digital displays are constructed using standard surface mount display technology. Chip on board technologies are advancing for narrow pixel pitch (“NPP”) applications. Micro-LED technologies (also referred to as NPP) are being used and advanced, especially for displays installed for short viewing distances. …”see in full comparison
Full comparison: every changed paragraph (77)
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides a narrative from the perspective of management relating to the financial condition, results of operations, liquidity, capital resources, and other factors that may impact our financial performance.
Daktronics operates on a 52- or 53-week fiscal year, with our fiscal year ending on the Saturday closest to April 30 of each year. When April 30 falls on a Wednesday, the fiscal year ends on the preceding Saturday. Within each fiscal year, each quarter is comprised of a 13-week period following the beginning of each fiscal year. In each 53-week year, an additional week is added to the first quarter, and each of the last three quarters is comprised of a 13-week period. The fiscal year ended May 2, 2026 contained operating results for 53 weeks. The fiscal years ended April 26, 2025,2025 and April 27, 2024, and April 29, 20232024 contained operating results for 52 weeks.
The year-over-year comparisons in this MD&A are as of and for the fiscal years ended AprilMay 26,2, 20252026 and April 27,26, 2024,2025, unless stated otherwise. TheInformation pertaining to fiscal year 2024, including but not limited to, a comparison of fiscal 20242025 with fiscal 2023, including the2024 results of operationsoperations, liquidity, and liquidity,other information, can be found in Part II, Item 7 section“Management’s Discussion And Analysis Of Financial Condition And Results Of Operations” of our Annual Report on Form 10-K for fiscal 20242025 filed with the SEC on June 26,25, 20242025 under the sections entitled “Results of Operations - Consolidated Performance Summary” and “Results of Operations - Reportable Segment Performance Summary,Summary.” which sections are incorporated by reference herein.
Contribution marginmargin, which is a non-GAAPfinancial measure wethat useis not defined under accounting principles generally accepted in the United States (“GAAP”), is utilized by management to evaluate segment profitability and consistsguide ofresource allocation decisions. It is defined as gross profit less selling expenses. Selling expenses consist primarily ofinclude personnel relatedpersonnel-related costs, travel and entertainment expenses,entertainment, marketing related expensesexpenditures (showrooms,such as showroom operations, product demonstration,demonstrations, depreciation and maintenance, conventionsconventions, and trade show expensesshows), thecosts costassociated ofwith customer relationship management/ and marketing systems, bad debt expenses,expense, third-party commissions, and other related expenses. In additionthe “Results of Operations - Reportable Segment Performance Summary” section of this MD&A, contribution margin is reconciled to gross profit, management uses contribution margin as another measure of assessing segment profitability and allocating selling resources to each segment. Management believes that contribution marginwhich is usefulthe tomost investorsdirectly becausecomparable it permits investors to view and evaluate our segmentGAAP financial performance through the same lens as management.measure.
In addition to gross profit, management considers contribution margin a meaningful metric for assessing the financial performance of individual segments. Management believes this measure provides investors with a useful view of our segment-level performance consistent with the approach used by management. By presenting contribution margin, we aim to enhance transparency and allow investors to better understand how we evaluate and manage our business operations.
Daktronics designs, manufactures, and provides electronic display systems and solutions used to inform, entertain, and communicate in a variety of end markets, including sports, commercial, and transportation. Our offerings include standard display products as well as customized digital display systems integrated with control, software, and content management capabilities.
Our product portfolio ranges from small-scale scoreboards and message displays to large, complex video display systems deployed in stadiums, arenas, commercial facilities, and other high-visibility environments. These systems are often integrated with related technologies, including control systems, timing equipment, audio systems, and software platforms that enable customers to manage and operate display content.
We operate a vertically integrated business model that includes product design and engineering, manufacturing, installation, and ongoing support services. This lifecycle approach allows us to support customers from initial project planning and system deployment through long-term maintenance, upgrades, and replacement cycles.
In addition to equipment sales and installation, we provide a range of services, including technical support, professional services, and software-based solutions. These offerings support customers in operating their systems and managing content over the life of the display and contribute to recurring revenue opportunities.
Our operations include marketing and sales, engineering and development, manufacturing, project execution, and customer service, supported by a global footprint that enables us to serve customers across multiple regions.
We are industry leaders in designing and manufacturing electronic scoreboards, programmable display systems, and large screen video displays for sporting, commercial, and transportation applications. We serve our customers by providing high quality standard display products as well as custom-designed and integrated systems. We offer a complete line of products, from small scoreboards and electronic displays to large multimillion-dollar video display systems as well as related control, timing, and sound systems. We are recognized as a technical leader with the capabilities to design, market, manufacture, install, and service complete integrated systems displaying real-time data, graphics, animation, and video. We engage in a full range of activities: marketing and sales, engineering and product design and development, manufacturing, technical contracting, professional services, and customer service and support.
During fiscal 2026, we remained focused on the execution of initiatives intended to support sustainable growth, improve operating margins, and enhance returns on invested capital. The Company’s operating roadmap, informed by multi‑year analysis and planning, is intended to support improved alignment between demand and financial performance. Demand trends during fiscal 2026 reflected continued market adoption of digital display technologies and the breadth of Daktronics’ integrated product and service offerings, underscoring the importance of disciplined execution across our operations.
The business environment remains dynamic, with several external factors continuing to influence customer demand and operational costs. The Company is affected by U.S. government‑imposed tariffs on electronic components, aluminum, steel, and copper, as well as reciprocal tariffs imposed by foreign countries. In addition, changes to U.S. trade policy, including the elimination of the de minimis exemption for certain low‑value shipments, continue to increase logistics and import‑related costs. These tariffs have adversely impacted gross margins and influenced customer purchasing behavior, particularly for projects dependent on federal funding, and may continue to do so in the future. In response, Daktronics continues to evaluate pricing strategies and sourcing plans to mitigate these effects; however, the ultimate impact on demand and profitability remains uncertain.
On February 20, 2026, the U.S. Supreme Court ruled that tariffs imposed by the U.S. presidential administration under the International Emergency Economic Powers Act (“IEEPA”) exceeded presidential authority and were invalid. Following the ruling, the administration implemented a temporary global tariff under alternative trade authorities and has indicated an intention to increase the tariff rate to as much as 15%. The timing, duration, and final rate of these tariffs remain uncertain. In addition, on April 20, 2026, the U.S. Customs and Border Protection (“CBP”) opened a refund portal related to amounts previously paid under the invalidated IEEPA tariffs. While the Company may pursue potential refunds through this process, the timing and amount of refunds, if any, are uncertain.
As of the date these financial statements were issued, no amounts related to potential refunds have been recorded in the accompanying financial statements. The Company is evaluating available information and monitoring developments related to the ongoing litigation and CBP’s refund process. Due to the uncertainty regarding eligibility, timing, and the final resolution of tariff refund related administrative matters, the Company is unable to reasonably estimate the likelihood, amount or timing of any potential refunds.
The global market for digital display systems continues to expand, supported by customer investments in manufacturing capacity and ongoing advancements in display and control technologies. The industry is experiencing increased adoption of surface mount and chip‑on‑board technologies, particularly for narrow pixel pitch (“NPP”) and micro‑LED applications, as customers seek higher performance, increased efficiency, and improved reliability. In addition, continued innovation in software, artificial intelligence, and professional services is influencing content creation, user interfaces, system monitoring, and security capabilities across digital display platforms.
During fiscal 2024, we converted pandemic-related, pent-up backlog into record levels of sales and gross profit. In fiscal 2025 and beyond, we are more dependent on the timing, size, and profitability profile of the orders we win and market conditions to be able to generate sales and gross profit at similar levels. We expect the expansion of the use of digital display systems in the global market over the coming years; however, recent governmental regulations and orders and related geopolitical reactions and changes to or uncertainty around federal funding priorities can impact customers’ willingness to invest in digital display systems, which can impact the timing and levels of orders. For example, announcements from the new United States presidential administration about increased and expansive import tariffs and federal funding priorities has created near-term uncertainty about economic conditions. In recent months, we have observed an increasing number of extended quote times, which we believe is partially attributable to these conditions. As a result, although quoting activity was high, order volume timing was more difficult to predict, which made predicting fiscal 2025 orders more difficult than in fiscal 2024.
In March and April 2025, the Trump Administration announced a series of additional special tariffs, some of which have been temporarily paused. The additional special tariffs in effect as of April 26, 2025 include tariffs of 10 percent on all or substantially all products imported by the Company and an additional tariff on substantially all products of Chinese origin. In addition, in April 2025, the Trump Administration announced a series of so-called “reciprocal” tariffs on dozens of countries with which the United States has a trade deficit. On April 9, 2025, the Trump Administration announced a 90-day pause in the implementation of these reciprocal tariffs (other than the reciprocal tariffs on China, which are discussed above). On May 14, 2025, following negotiations with China, the Trump Administration announced a new trade agreement under which both the United States and China agreed to reduce their additional tariffs while retaining a 10 percent baseline tariff during a 90-day suspension period.
On May 28, 2025, a three-judge panel of the United States Court of International Trade (“CIT”) held that President Trump’s recent imposition of tariffs pursuant to the International Emergency Economic Powers Act (the “IEEPA”) is unlawful. On May 29, 2025, in response to President Trump’s appeal of the CIT’s ruling, the United States Court of Appeals for the Federal Circuit issued an administrative stay of the decision while it considers President Trump’s appeal. This development introduces further uncertainty, as the long-term direction of U.S.-China trade policy remains contingent on ongoing negotiations and future compliance with the agreement. Competitors importing products from China will also be impacted by the Chinese tariffs. On May 30, 2025, the Trump Administration announced an increase in tariffs on steel and aluminum imports, raising the rates from 25 percent to 50 percent. This action was presented as part of a broader effort to support domestic industry and address national security concerns.
Following this, on June 10, 2025, a federal appeals court issued a stay on the lower court’s ruling against tariffs imposed under the IEEPA, allowing those tariffs to remain in effect while the appeal is under review. On June 12, 2025, the administration extended the 10 percent baseline “reciprocal” tariffs on most countries through July 9, 2025, and on Chinese-origin goods through August 12, 2025.
We expect that increases in tariffs will increase the Company’s cost of sales, although their timing and precise effects are unpredictable. In particular, if the additional reciprocal tariffs go into effect, the Company will incur substantial additional increases in its cost of sales, and sales volumes into the United States would likely decline. However, the Company is developing plans to mitigate the impact of these tariffs, as well as possible operational changes that could result in a change in the country of origin for certain of the Company’s products. Specifically, we are monitoring and adjusting pricing for our products and services carefully to account for these unpredictable dynamics. For more information about the impact of tariffs on the Company’s results of operations and financial condition, please see “Part I – Item 1A. Risk Factors - Geopolitical issues, conflicts, governmental actions, including the imposition of tariffs, changes in laws, regulations, and policies, and other global events could adversely affect our results of operations and financial condition” in this Form 10-K.
We have made global investments in manufacturing capacity and the advancement in display and control technologies. A majority of digital displays are constructed using standard surface mount display technology. Chip on board technologies are advancing for narrow pixel pitch (“NPP”) applications. Micro-LED technologies (also referred to as NPP) are being used and advanced, especially for displays installed for short viewing distances. Advancements continue in technologies related to digital displays used in professional services, including the use of artificial intelligence and other software which improve content creation, user interfaces, digital display monitoring systems, and security. We rely on a complex supply chain for raw material and component imports and the global distribution of our products. We are adopting our manufacturing, sourcing capabilities, and product development priorities for these evolving changes in market and technology trends.
Overall,Daktronics we have a unique leadership positionparticipates in our target markets,markets whichthat are large, growing,large and enjoygrowing resilientand are supported by demand drivenfrom bycustomers our customers’ desireseeking to improve theenhance audience experienceexperiences in sports, commercial, and transportation environments. WeAs arethese investingmarkets evolve, the Company continues to invest in capacitycapacity, systems, and resources to growsupport execution, address customer requirements, and pursue growth opportunities; however, the businesstiming and penetrateextent markets.of market adoption and demand may vary based on economic conditions, customer funding availability, and competitive dynamics.
To address evolving market conditions and competitive dynamics, we continue to focus on execution initiatives related to digital capabilities, cost structure optimization, and market expansion. These efforts are intended to enhance operating efficiency, improve delivery and service performance, and support long‑term growth opportunities. While these initiatives are designed to improve financial performance and capital efficiency over time, their effectiveness depends on successful execution, sustained customer demand, and the Company’s ability to manage costs, complexity, and operational change. As a result, the timing and extent of associated benefits remain uncertain.
The Company continues to monitor and adjust its capacity and resource levels in response to market conditions. As part of its efforts to increase manufacturing flexibility and operational agility, Daktronics is expanding its global manufacturing footprint to include a facility in Mexico. The facility is expected to commence production in fiscal 2027. While the Company expects the facility to support cost structure efficiency and manufacturing flexibility over time, the pace of the production ramp‑up and the extent and timing of any associated financial benefits depend on execution, staffing, and market conditions.
There may be periods in which sales levels and expense trends are not fully aligned, particularly as the Company continues to invest in operational execution, systems, and corporate governance. These investments may exert pressure on near‑term profitability; however, they are intended to support operating effectiveness, scalability, and long‑term value creation. The timing and magnitude of any associated benefits remain uncertain and depend on execution and market conditions.
Despite ongoing uncertainties related to tariffs, geopolitical developments, and federal funding priorities, the fundamental drivers of demand within the audiovisual industry continue to influence customer purchasing decisions. Increased adoption of LED‑based display systems across end markets, together with the Company’s ongoing development of technologies, services, and sales channels, may support long‑term growth opportunities. However, actual demand and growth levels will depend on broader economic conditions, customer funding availability, and competitive dynamics.
In addition, to capitalize on this position, we are focused on digital and business transformation, improving our cost structure, and further growing our markets. During fiscal 2025, we formed a the BTO, which has undertaken a comprehensive review of the Company’s business, strategy, and operations and is developing a set of strategic initiatives, enabled in part by the Company’s previously announced digital transformation, to provide even better outcomes for customers, deeper penetration of the Company’s current and adjacent market verticals, above-market growth, and more efficient delivery, fulfillment, and service. These initiatives, overseen by the BTO, were designed and structured to support our ambitious targets to grow revenue faster than our addressable market, expand operating margins to 10-12 percent, and generate returns on capital in the 17-20 percent range consistently above the Company’s cost of capital (the “Business Transformation Plan”). To accelerate these initiatives, we spent approximately $6.8 million for transformation efforts in fiscal 2025.
As our business has grown and become more complex, we have come to recognize the importance of evolving our corporate governance structure and how sound governance practices can facilitate better execution of our strategic commercial goals. Delaware is the legal domicile for most large, publicly traded companies, and its corporate law is well understood, clear, and predictable and provides strong stockholder rights and protections. On April 17, 2025, in an effort to further our Business Transformation Plan and for other strategic reasons, we changed our legal domicile from South Dakota to Delaware.
We carefully evaluate our capacity and resource levels to the conditions identified; however, there can be periods during which sales and expenses can be misaligned and periods in which we invest more in transformational and corporate governance activities, all impacting our profitability levels in the near-term.
We believe the audiovisual industry fundamentals of increased use of LED display systems across industries and our development of new technologies, services, and sales channels will drive long-term growth for our Company.
The following is an analysis of changes in key items included in the statements of operations for fiscal year 20252026 as compared to fiscal year2025 2024.(in thousands).
Sales, orders, gross profit, and operating expenses were impacted as a result of fiscal 2026 including 53 weeks compared to the 52 weeks in fiscal 2025.
Net Sales: The net sales increase in fiscal 2026 was the result of higher volumes of revenue conversion across business units, primarily driven by the Commercial, Live Events, High School Park and Recreation, and International business units.
Net Sales: The net sales decrease in fiscal 2025 was the result of lower volumes in each business unit, primarily driven by the Live Events business unit due to order timing and buildable backlog. The amount of revenue recognized associated with performance obligations satisfied in prior periods during the years ended May 2, 2026 and April 26, 2025 and April 27, 2024 was immaterial.
For the yearyears ended May 2, 2026 and April 26, 2025, our operating income was negatively impacted by a net amount of 0.3 percent of overtimeover‑time revenue, or $1.1 million and $1.2 million.million, Forrespectively, the year ended April 27, 2024, our operating income was positively impacted byreflecting a netconsistent amountlevel of 1.0impact percentfrom ofchanges overtimein revenue,contract orestimates $4.1across million.periods. These changes are aamounts result offrom changes in contract estimates related to projects in progress at the beginning of the respective period. TheseFor the year ended May 2, 2026, these changes in estimates resulted primarily from favorable project execution of 0.4 percent of overtime revenue, or $1.6 million, reduced cost estimates, and contingencies that were relieved when conditions were resolved. Gross unfavorable changes in contract estimates were 0.7 percent of overtime revenue, or $2.6 million, and were immaterial in fiscal 2026. For the year ended April 26, 2025, these changes in estimates resulted primarily from favorable project execution of 0.8 percent of overtime revenue, or $2.8 million, reduced cost estimates, and contingencies that were relieved when conditions were resolved. Gross unfavorable changes in contract estimates were 1.1 percent of overtime revenue, or $4.0 million, and immaterial for the year ended April 26, 2025. For the year ended April 27, 2024, these changes in estimates resulted primarily from favorable project execution of 1.5 percent of overtime revenue, or $6.5 million, reduced cost estimates, and contingencies that were relieved when conditions were resolved. Gross unfavorable changes in contract estimatesimmaterial in fiscal 2024 were 0.6 percent of overtime revenue, or $2.4 million.2025. See “Note 1. Nature of Business and Summary of Significant Accounting Policies” of the Notes to our Consolidated Financial Statements included in this Form 10-K for more information regarding revenue recognition.
Orders: Order volume growth was driven by higher bookings in the Live Events, High School Park and Recreation, Transportation, and International business units, partially offset by reduced activity in the Commercial business unit. Demand remained supported by continued investment in large‑scale video display systems across the professional sports, transportation, education, and international markets. This activity included projects at major professional sports venues, continued momentum in aviation and intelligent transportation systems, increased adoption of video displays in school and community applications, and opportunities in international markets. As a project‑based business, order volume can fluctuate based on the timing and size of individual projects. During fiscal 2026, bookings benefited from a higher level of large-scale projects available in the marketplace.
Order volume growth is attributable to the continued use and market adoption of digital display technology and to our success in capturing existing and new customer orders in the Spectacular and Out‐of‐Home markets in our Commercial business unit. Additionally, there has been solid growth in the High School Parks and Recreation business unit due to continued expansion of video displays, as well as growth attributable to higher demand seen in the International business unit. As we are a project-based business, large-sized project orders can impact levels of orders. During fiscal 2025, fewer large-sized projects were booked to orders in the Live Events and Transportation business units because there were fewer large projects available in the market place.
Gross profit: The gross profit percentage decreaseincrease iswas attributabledriven toby salesa combination of strategic pricing, continued operational efficiencies, and overall project mix differencesacross betweenour periods and a lower sales volume during fiscal 2025 as compared to fiscal 2024.business. Total warranty expense as a percent of sales decreased to 1.61.3 percent for fiscal 20252026 as compared to 2.31.6 percent during fiscal 20242025 primarily due to higherfavorable warrantycost expense in the Live Events and Transportation business in fiscal 2024 that did not occur in fiscal 2025.experience.
InAll fiscalexpense 2025,lines the amounts achievedincreased for variable compensation and profit sharing linked to revenue and operating margins wereachieved immaterial. Inin fiscal 2024,2026 theas compared to amounts achieved in fiscal 2025. For fiscal 2026, these expenses totaled $6.5$3.5 million, consistingincluding of $3.1$1.5 million in cost of sales, $1.2$0.8 million in selling, $1.4$0.8 million in general and administrative, and $0.8$0.4 million in product design and development. In fiscal 2025, the amounts achieved were immaterial.
Selling: Selling expenses increased due to higherincreases personnelin relatedpersonnel-related wages and benefits expenses to retain employees; travel and entertainment; marketing; IT tools; and increased commissionsstaffing levels to support orderfuture growth.
General and administrative: General and administrative expenses decreased primarily due to lower professional fees and other costs as fiscal 2025 included elevated expenses related to investor engagement, corporate governance activities, and transformation initiatives. These decreases were partially offset by ongoing investments in information technology and support functions.
General and administrative increased due to staffing levels for digital transformation strategies and increased professional fees as well as an increase in personnel costs related to management transition costs. During fiscal 2025, additional professional fees included consultant, legal, and advisory related expenses associated with business transformation initiatives and corporate governance matters, which totaled $13.9 million. Management transition costs totaled $2.6 million.
Product design and development: Product design and development expenses increased primarily due to higher personnel-related expensescosts andassociated forwith increased staffing levels.levels, Ouras focuswell hasas beencontinued investments in advanced technologies and engineering services. During the year, we continued to advanceinvest in advancing our product featurescapabilities alignedto withaddress evolving customer needsrequirements and to reduceimprove product costs.cost Weefficiency. Development efforts were focused these efforts on both standard product and control offeringsofferings, andas well as ongoing initiatives in new emerging areas,technologies, including micro-LEDmicro‑LED products and newenhanced control system capabilities.
Interest income (expense), net: Interest income increased primarily due to higher cash levels invested in interest-bearing accounts offsetting interest expense. During fiscal 2025, the interest expense included interest on the Convertible Note, which was settled during fiscal 2025.
Change in fair value of Convertible Note: The change in fair value of the Convertible Note line item results from accounting for the convertible note in the original principal amount of $25.0 million dated May 11, 2023 issued to Alta Fox Opportunities Fund L.P. (the “Convertible Note”) under the fair value option.Note. The fair value change was primarily caused by forcethe forced conversion of the entire Convertible Note in the third and fourth quarterquarters of fiscal 2025. All amounts due under the Convertible Note were paid or satisfiedsettled in fiscal 2025.
Other expense, net: Net other expense decreased in fiscal 2026, primarily reflecting a $3.8 million provision for losses on loans to an equity method affiliate, compared to a $15.5 million provision recorded for losses associated with a different affiliate in fiscal 2025.
Other expense and debt issuance costs write-off, net for fiscal 2025 as compared to the same period one year ago was primarily due to the provision for losses on loans to equity method affiliates of $15.5 million, compared to expensing $3.4 million of debt issuance costs related to the Convertible Note issuance and $6.4 million for impairments recorded for equity method affiliates in fiscal 2024.
Income tax expense: Income tax expense decreasedchanged dueas toa result of accounting for the year-over-yearConvertible decreaseNote. inOur Incomeeffective beforetax incomerate taxes.for fiscal 2026 was 22.2 percent. Our effective tax rate for fiscal 2025 was negative 73.0 percent. The effective income tax rate for fiscal 2025 was primarily impacted due to the Convertible Note fair value adjustment to expense that is not deductible for tax purposes. Additional other items impacting the rate were valuation allowances on equity investments, state taxes, and a write down of deferred taxes related to debt issuance costs on the conversion of the Convertible Note. OurIn fiscal 2026, there were no further impacts of fair value adjustments on the Convertible Note and our effective tax rate forhas fiscalnormalized 2024 was 35.9 percent. The effective income tax rate for fiscal 2024 was prima rily impacted duecloser to the fairU.S. valuestatutory adjustment to the Convertible Note that is not deductible for tax purposes. Additional other items impacting the rate were valuation allowances on equity investments, state taxes, and a prior year provision to return adjustments reduced in part by tax benefits from permanent tax credits.rate. See “Note 12.13. Income Taxes” of the Notes to our Consolidated Financial Statements included in this Form 10-K for further information.
Non-GAAP Reconciliations: The following table shows information regarding our reportable segment financial performance of contribution margin reconciled to GAAP operating income for the fiscal years ended May 2, 2026 and April 26, 2025 and(in April 27, 2024thousands):
(1) Amounts are calculated based on unrounded numbers and therefore may not recalculate using the rounded numbers provided. In addition, percentages may not add in total due to rounding Contribution margin decreasedincreased in fiscal 20252026 compared to fiscal 20242025 in the Commercial, Live Events, High School Park and Recreation, and International business units, offset by improvedreduced contribution margin in the Commercial and Transportation business units.unit. Overall, gross profit decreasedincreased in fiscal 20252026 compared to fiscal 2024, and was2025, primarily attributabledriven toby improved performance across most business units. The increase reflects favorable sales mixmix, differences between periods and a lowerhigher sales volume in thekey Liveend Eventsmarkets, and Internationalthe continued benefits of pricing actions and operational improvements implemented over the past several periods, partially offset by lower gross profit in the Transportation business units.unit. Gross profit improvements inwere thesupported Commercialby andongoing Transportation business units are attributableefforts to strategic pricing actions, closely matchingalign manufacturing capacity towith demand, and stabilization ofstabilize input costs.costs, Fewerand enhance operational efficiency. Additionally, fewer supply chain and operational disruptions paired with our investmentscontributed to increase capacity allowed for improved operationalexecution efficiency.on Weproject regularly adjust our sales and marketing activities and staffing levels to achieve current and expected future sales levels.work.
For the yearyears ended May 2, 2026 and April 26, 2025, our operating income was negatively impacted by a net amount of 0.3 percent of over‑time revenue, or $1.1 million and $1.2 million, respectively, reflecting a consistent level of impact from changes in contract estimates across periods. These amounts result from changes in contract estimates related to projects in progress at the beginning of the respective period. For the year ended May 2, 2026, these changes in estimates resulted primarily from favorable project execution of 0.4 percent of overtime revenue, or $1.2$1.6 million.million, reduced cost estimates, and contingencies that were relieved when conditions were resolved. Gross unfavorable changes in contract estimates were 0.7 percent of overtime revenue, or $2.6 million, and were immaterial in fiscal 2026. For the year ended April 27,26, 2024, our2025, operating income was positively impacted by a net amount of 1.0 percent of overtime revenue, or $4.1 million. These changes are a result of changes in contract estimates related to projects in progress at the beginning of the respective period. These changes in estimates resulted primarily from favorable project execution of 0.8 percent of overtime revenue, or $2.8 million, reduced cost estimates, and contingencies that were relieved when conditions were resolved. Gross unfavorable changes in contract estimates were 1.1 percent of overtime revenue, or $4.1 million, and were immaterialimmaterial. forFor fiscal 2026, the yearLive endedEvents Aprilbusiness 26,unit 2025. Forhad the yearlargest endedgross Aprilpositive 27, 2024, these changes in estimates resulted primarily from favorable project executionimpact of 1.5%$0.9 of overtime revenue, or $6.5 million, reduced cost estimates,million and contingencies$1.7 thatmillion weregross relievednegative whenimpact, conditionswhich wererepresented resolved.0.3 Grosspercent unfavorableand changes in contract estimates were 0.60.7 percent of overtime revenue,revenue orsales $2.4in million.Live Events, respectively. For fiscal 2025, the Live Events business unit had the largest gross positive impact of $1.8 million and $3.0 million gross negative impact, which represented 0.8 percent and 1.3 percent of overtime revenue sales in Live Events, respectively. For fiscal 2024, the Live Events business unit had the largest gross positive impact of $4.5 million and $0.9 million gross negative impact, which represented 1.7 percent and 0.3 percent of overtime revenue sales in Live Events, respectively. For both fiscal 20252026 and fiscal 2024,2025, the remaining business units had immaterial gross positive and gross negative changes. See “Note 1. Nature of Business and Summary of Significant Accounting Policies” of the Notes to our Consolidated Financial Statements included in this Form 10-K and “Critical Accounting Estimates” under “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K for more information regarding revenue recognition.
Commercial: The decreaseincrease in net sales was primarily driven by volatilitythe in order bookingsexecution of larger-sizedorders in Spectacular LED video display projects, On‑Premise digital signage, and thereOOH weredigital fewerbillboard projectsapplications. Order bookings decreased compared to the prior year, primarily reflecting the timing and size of project awards, as fiscal 2025 included a higher level of large project activity in the marketCommercial asbusiness compared to prior years. Order bookings increased due to the continued market adoption of digital display technology.unit. Gross profit as a percentage of sales improved 3.6 pointsincreased due to a shiftmore infavorable mix toof productsprojects, withincluding a higher marginsproportion andof Spectaculars, as well as improved leverage of fixed costs on higher sales volume over relatively fixed cost structures.volume. Selling expenses remained relatively flatconsistent in dollars and as a percent year over year.year-over-year.
Live Events: The increase in net sales was driven by a higher buildable backlog resulting from strong order activity in prior periods and continued execution on large-scale projects. Order bookings increased year over year, reflecting strong demand for large venue projects, including activity in professional sports venues such as Major League Baseball, as well as the timing and size of project awards typical in this business. Gross profit as a percentage of sales increased, primarily due to higher sales volume and a more favorable mix of projects, which improved absorption of fixed costs. Selling expenses increased primarily due to personnel-related wage and benefit costs associated with investments in staffing to support future growth.
Live Events: The decrease in net sales was due to a lower buildable backlog, with declines in the NFL and NBA niches. Order bookings decreased due to the variability in the timing of contract orders, which is natural in large-project business areas. Gross profit as a percentage of sales declined 6.9 points primarily attributable to the sales volume and sales mix differences between periods. Selling expenses remained flat in dollars while increasing 0.6 points due to a lower sales volume.
High School Park and Recreation: The decreaseincrease in net sales was primarily driven by convertinghigher theproject highexecution leveland ofcontinued backlogdemand relatedfor tovideo supplydisplay chain disruptions from the first quarter of fiscal 2024 compared to the more normal level backlog at the beginning of fiscal 2025.systems. Order bookings increased as a result of thecontinued industry trends fortoward schools increasingly usingadopting video display solutions, which aregenerally largerinvolve dollar-sizedhigher-value transactionsprojects thancompared to more traditional scoreboardproduct projects.offerings. Gross profit remained relatively flatincreased in dollars andbut decreased as a percentpercentage yearof oversales, year.primarily reflecting higher sales volume partially offset by a less favorable mix of projects and cost pressures on certain programs. Selling expenses increased primarily becausedue ofto personnel relatedpersonnel-related wage and benefit costs forassociated with investments in staffing to support future growth.
Transportation: The decrease in net sales was primarily driven by lower backlog available for execution compared to the prior year, reflecting the timing of order bookings whichin reducedearlier the level of backlog available to build.periods. Order bookings declinedincreased dueyear toover ayear, smallerreflecting spreadcontinued demand, particularly in the marketairport and uncertaintyintelligent aroundtransportation federalsystems funding.(ITS) markets, as well as the timing of project awards. Gross profit as a percentage of sales increased 5.3 pointsdecreased, primarily due to adjustmentsa relatedless tofavorable Vanguard®project controlmix, systemadded reservestariff-related costs, and competitive pricing pressures, which resulted in fiscalhigher 2024cost thatof didgoods notsold repeatas ina fiscalpercentage 2025.of sales. Selling expenses increased primarily becausedue ofto personnelpersonnel-related related wageswage and benefitsbenefit costs.costs associated with investments in staffing to support future growth.
International: The increase in net sales was primarily driven by higher project execution during the period, reflecting the timing of backlog conversion compared to the prior year. Order bookings increased, reflecting improved demand across various international markets. Gross profit increased due to higher sales volume and improved absorption of fixed costs. Selling expenses increased in dollars, primarily due to higher personnel-related costs and increased sales activity, but decreased as a percentage of sales due to higher revenue volume.
International: The slight decrease in net sales was driven by timing of conversion of orders due to lower backlog compared to one year ago. The increase in order bookings is due to a higher demand in the EMEALA region (Europe, the Middle East, Africa, and Latin America). Gross profit decreased 2.5 points primarily due to lower sales volume over relatively fixed cost structure. Even with efforts to lower selling and other operational costs, our International business unit operated at a negative contribution margin.
Net cash provided by operating activities: The $97.7$49.2 million in cash provided by operating activities for fiscal 20252026 was the result of business profitabilityprofitability, andpartially netoffset positiveby changes in operating assetassets and liabilities. Cash provided by operating activities decreased compared to fiscal 2025, reflecting higher working capital usage in fiscal 2026. Changes in operating assets and liabilities were primarily duedriven toby theincreases in accounts receivable and contract assetassets collectionsassociated andwith ourproject initiativesactivity, toas lowerwell inventoryas continued investment in inventory, partially offset by paymentsincreases ofin accounts payablepayable. andIn incomethe taxes.prior year, operating cash flows benefited from more favorable working capital movements.
What changed in the latest 10-Q
Risk Factors
The discussion of our business and operations included in this Quarterly Report on Form 10-Q should be read together with the risk factors described in Item 1A. of Part I of the Form 10-K. They describe various risks and uncertainties to which we are or may become subject. These risks and uncertainties, together with other factors described elsewhere in this Quarterly Report on Form 10-Q, have the potential to affect our business, financial condition, results of operations, cash flows, strategies, or prospects in a material and adverse manner. New risks may emerge at any time, and we cannot predict those risks or estimate the extent to which they may affect our financial condition or financial results. We review and, where applicable, update our risk factors each quarter. There have been no material changes from the risk factors disclosed in Item 1A. of Part I of the Form 10-K.
No wording changes found in this section.
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Management's Discussion & Analysis (MD&A)
Removed heading “RESULTS OF OPERATIONS”
Removed heading “COMPARISON OF THE NINE MONTHS ENDED JANUARY 31, 2026 AND JANUARY 25, 2025”
Removed heading “Consolidated Performance Summary”
Removed heading “Reportable Segment Performance Summary”
Largest changes
The business environment remains dynamic, withsee in full comparisonseveralchangesexternalinfactorstrade policy and tariffs continuing toinfluenceaffect supply chains, customerdemandpurchasing decisions, andoperationaloperating costs.The Company continues to be affected by U.S. government‑imposed tariffsTariffs on electronic components, aluminum, steel,andcopper,as well as reciprocal tariffs imposed by foreign countries. In addition, changes to U.S. trade policy, including the elimination of the de minimis exemption for low‑value shipments, continued to increase logisticsandimport‑relatedothercosts.importedThesematerialstariffshavemayincreasedimpactproductgross marginscosts andcouldcreatedinfluenceuncertaintycustomerregardingpurchasingfuturebehavior,projectparticularly for projects dependent on federal funding.economics. In response,DaktronicstheisCompanyactivelyhasmonitoring itstaken pricingstrategiesactions, sourcing strategies, andsourcingoperationalplansinitiatives intended to mitigate theseeffects.impacts;However,however, the ultimateimpacteffect ondemanddemand, margins, and profitability remains uncertain.
“COMPARISON OF THE NINE MONTHS ENDED JANUARY 31, 2026 AND JANUARY 25, 2025”see in full comparison
“Orders and backlog are non-GAAP operating measures, and our methodology for determining these metrics may differ from those used by other companies. Management believes that order and backlog levels provide meaningful insight into our business activity, including fluctuations due to seasonality and the timing of large-scale projects. New orders during the period are used to assess market share and competitive performance, while backlog informs capacity and resource planning. …”see in full comparison
see in full comparisonTransportationHigh School Park and Recreation: Sales decreased during the firstnine monthsquarter of fiscal20262027 compared to the same period one yearago,ago primarily due to lowerorderprojectbookingsdeliverywhichactivityreducedduring thelevel of backlog available to build.quarter. Gross profit as a percentage of sales decreased slightly due toanormalshiftvariability in projectmix to smaller projects with tighter marginsandaddedcustomertariff expense, which resulted in higher cost of goods sold as a percentage of sales.mix. Selling expensesincreaseddecreased primarily due topersonnellowerrelatedsaleswagesactivityandduringbenefitsthecosts for investments in staffing to support future growth.period. Order bookingsincreaseddecreasedcompareddue to thepriortimingyear,ofprimarilycustomerdrivenprojectbyawards.strongOrderdemandactivityincanairports.fluctuate from period to period based on customer funding cycles and project timing.
Full comparison: every changed paragraph (99)
This section entitled "“Management’s Discussion and Analysis of Financial Condition and Results of Operations"” (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. The MD&A provides a narrative analysis explaining the reasons for material changes in the (i) financial condition of Daktronics, Inc. and its subsidiaries (the "“Company"”, "“Daktronics"”, "“we"”, "“our"”, or "“us"”) during the period from the most recent fiscal year-end, AprilMay 26,2, 2025,2026, to and including JanuaryAugust 31,1, 2026; and (ii) results of operations of the Company during the current fiscal period(s) as compared to the corresponding period(s) of the preceding fiscal year.
This Quarterly Report on Form 10-Q, including the MD&A, contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect our current views with respect to future events and financial performance. The words "“may,"” "“might,"” "“would,"” "“could,"” "“should,"” "“will,"” "“expect,"” "“estimate,"” "“anticipate,"” "“believe,"” "“intend,"” "“plan,"” "“forecast,"” "“project,"” “continue,” “outlook,” “focus,” “goal,” “target,” “transform,” “expand,” “execute,” “ongoing,” “improve,” “grow,” and similar expressions are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any and all forecasts and projections in this document are “forward-looking statements” and are based on management’s current expectations or beliefs. From time to time, we may also provide oral and written forward-looking statements in other materials we release to the public, such as press releases, presentations to securities analysts or investors, or other communications by us. Any or all forward-looking statements in this Quarterly Report on Form 10-Q and in any public statements we make could be materially different from actual results. Accordingly, we wish to caution investors that any forward-looking statements made by or on behalf of us are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. Important factors that may cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, changes in economic and market conditions, management of growth, timing and magnitude of future contracts, orders, and capital investment projects, fluctuations in margins, interest rate risk, the introduction of new products and technology, the impact of adverse weather conditions, increased regulation, the imposition of tariffs, trade wars, the availability and costs of raw materials, components, and shipping services, geopolitical and governmental actions, including the U.S. federal government shutdown, expansion into new geographical markets, the Company’s recent leadership transition, transformation initiatives, future strategy, and the other risks, trends, and uncertainties described more fully in the Company’s Annual Report on Form 10-K for the fiscal year ended AprilMay 26,2, 20252026 (the "Form 10-K") filed with the Securities and Exchange Commission ("SEC"), this Quarterly Report on Form 10-Q, and other reports filed with or furnished to the SEC by the Company.
The quarter-over-quarter comparisons in this MD&A are as of and for the fiscal quarters ended JanuaryAugust 31,1, 2026 and JanuaryAugust 25,2, 2025 unless otherwise stated.
In addition to gross profit, management considers contribution margin a meaningful metric for assessing the financial performance of individual segments. We believe this measure provides investors with a useful view of our segment-level performance consistent with the approach used by management. By presenting contribution margin, we aim to enhance transparency and allow investors to better understand how we evaluate and manage our business operations. See the section of this Item 2 entitled “Reportable Segment Performance Summary” for a reconciliation of contribution margin to operating income, the most directly comparable GAAP measure.
WeDaktronics aredesigns, recognizedmanufactures, industryand leaderssells electronic display systems and related solutions used in the design and manufacture of electronic scoreboards, programmable display systems, and large-screen video displays serving sporting,sports, commercial, and transportation markets.applications. WeOur serveofferings our customers by delivering high-qualityinclude standard display products as well as custom-designed and integrated systems.systems that incorporate display hardware, control systems, and software.
Our product portfolio ranges from small-scalesmall scoreboards and electronic displays to large, multimillion-dollarlarge-scale video display systems.systems deployed in stadiums, arenas, commercial facilities, and other public venues. These offeringssystems are complementedoften byintegrated with related technologies, including control, timing, and soundaudio systems.systems, Weand are widely acknowledged for our technical expertise and our abilityused to design, market, manufacture, install, and service comprehensive integrated solutions that displaypresent real-time data, graphics, animation, and video.
We operate a vertically integrated business model that includes marketing and sales, engineering and product design and development, manufacturing, installation, and ongoing customer support. This lifecycle approach allows us to support customers from initial system design and installation through long-term maintenance, upgrades, and replacement cycles. In addition to equipment sales and installation, we provide services that include technical support, professional services, and software-based solutions that enable customers to operate and manage their display systems.
Our operations encompass a full spectrum of activities, including marketing and sales, engineering and product design and development, manufacturing, technical contracting, professional services, and customer service and support.
The Company operates on a 52- or 53-week fiscal year ending on the Saturday closest to April 30. When April 30 falls on a Wednesday, the fiscal year ends on the preceding Saturday. Each fiscal quarter consists of 13 weeks, except in a 53-week fiscal year, where the first quarter includes 14 weeks. The ninethree months ended JanuaryAugust 31,1, 2026, and JanuaryAugust 25,2, 2025, included 4013 and 3914 weeks of operations, respectively.
During the first quarter of fiscal 2027, we continued to focus on initiatives intended to support sustainable growth, improve operating performance, and enhance returns on invested capital. These efforts include operational execution, capacity optimization, digital capabilities, and initiatives designed to support long-term scalability and profitability. Demand for digital display systems continues to be supported by the ongoing adoption of LED-based technologies across sports, commercial, and transportation applications; however, customer demand levels and project timing can vary based on economic conditions, funding availability, and other external factors.
During fiscal 2025, we embarked on our business transformation program, which is focused on driving sustainable growth, margin improvement, and enhanced returns on invested capital. The Company’s transformation roadmap, developed through rigorous analysis and planning, is designed to support ambitious sales and profitability targets. Strong order growth during the quarter reflects ongoing market adoption of digital display technologies and the strength of Daktronics’ integrated product and service offerings.
The business environment remains dynamic, with severalchanges externalin factorstrade policy and tariffs continuing to influenceaffect supply chains, customer demandpurchasing decisions, and operationaloperating costs. The Company continues to be affected by U.S. government‑imposed tariffsTariffs on electronic components, aluminum, steel, and copper, as well as reciprocal tariffs imposed by foreign countries. In addition, changes to U.S. trade policy, including the elimination of the de minimis exemption for low‑value shipments, continued to increase logistics and import‑relatedother costs.imported Thesematerials tariffshave mayincreased impactproduct gross marginscosts and couldcreated influenceuncertainty customerregarding purchasingfuture behavior,project particularly for projects dependent on federal funding.economics. In response, Daktronicsthe isCompany activelyhas monitoring itstaken pricing strategiesactions, sourcing strategies, and sourcingoperational plansinitiatives intended to mitigate these effects.impacts; However,however, the ultimate impacteffect on demanddemand, margins, and profitability remains uncertain.
The Company continues to monitor developments related to tariffs and available refund programs associated with certain previously paid tariffs. Daktronics has submitted, and may continue to submit, claims for additional recoveries where appropriate. The Company recognizes tariff refunds when received. Due to uncertainties regarding eligibility, administrative review processes, and the ultimate resolution of outstanding claims, the Company has not recognized assets related to potential recoveries that do not meet the applicable accounting recognition criteria. The timing and amount of any future recoveries remain uncertain.
The global market for digital display systems continues to evolve through advancements in display technologies, control systems, software, and related services. Customers increasingly seek integrated solutions that improve content management, user experience, system monitoring, reliability, and operational efficiency. The adoption of narrow pixel pitch and other advanced display technologies continues to influence customer purchasing decisions across many of the markets we serve.
Daktronics participates in large end markets that continue to benefit from customer investments intended to enhance audience engagement, communication, and operational effectiveness. To address evolving market conditions and competitive dynamics, we continue to focus on operational execution, manufacturing efficiency, product innovation, and market expansion. While these initiatives are expected to support long-term growth opportunities and operating performance, the timing and magnitude of associated benefits depend on execution, customer demand, and broader economic conditions.
The Company also continues to expand its global manufacturing footprint, including the ongoing ramp-up of manufacturing operations in Mexico. We expect these expanded manufacturing facilities to provide additional manufacturing flexibility and support long-term cost structure optimization. However, the timing and extent of associated operational and financial benefits depend on production volumes, staffing, execution, and market conditions.
On February 20, 2026, the U.S. Supreme Court ruled that tariffs imposed by the U.S. presidential administration under the International Emergency Economic Powers Act (“IEEPA”) exceeded presidential authority and were invalidated. Following the ruling, the administration implemented a temporary global tariff under alternative trade authorities and has indicated an intention to increase the rate to up to 15%. The timing, duration, and final rate of these tariffs remain uncertain. We continue to monitor these developments and assess the potential impact on our results of operations.
The global market for digital display systems continues to expand, driven by investments in manufacturing capacity and advancements in display and control technologies. The industry is seeing increased adoption of surface mount and chip-on-board technologies, particularly for narrow pixel pitch (NPP) and micro-LED applications, as manufacturers and customers seek higher performance and efficiency. Innovations in software, artificial intelligence, and professional services are enhancing content creation, user interfaces, monitoring, and security.
We maintain a unique leadership position in our target markets, which are large, growing, and supported by resilient demand from customers seeking to enhance audience experiences in sports, commercial, and transportation environments. We are investing in capacity and resources to grow and deepen market penetration.
To capitalize on this position, we continue to focus on digital and business transformation, cost structure optimization, and market expansion. In fiscal 2025, we established a Business Transformation Office ("BTO") to conduct a comprehensive review of our business, strategy, and operations. The BTO is developing strategic initiatives, enabled in part by our digital transformation, to deliver improved customer outcomes, deeper market penetration, above-market growth, and more efficient delivery, fulfillment, and service. These initiatives are structured to support our ambitious business transformation plan: revenue growth outpacing our addressable market, operating margins of 10–12%, and returns on capital of 17–20%, consistently exceeding our cost of capital.
The Company continues to monitor and adjust its capacity and resource levels in response to market conditions. Daktronics is expanding the Company’s global manufacturing network into Mexico, as part of its broader three-year strategic plan for improving profitable growth and increasing the overall agility of the company’s production capacity. The new facility is expected to be in production by the end of fiscal 2026.
There may be periods wherein saleswhich revenue trends and operating expenses are not fully aligned, particularlyaligned as investmentsthe Company continues to invest in transformationoperational capabilities, systems, manufacturing flexibility, and corporate governancegovernance. areWhile made. Thesethese investments may affect near-term profitabilityprofitability, butthey are intended to support long-term operational effectiveness, scalability, and value creation.
Despite ongoing uncertainties related to tariffs, trade policy, geopolitical developments, and federalbroader fundingeconomic priorities,conditions, Daktronicsthe Company believes that the fundamentallong-term demand drivers ofsupporting the audiovisual industry remain strong.favorable. IncreasedContinued adoption of LEDdigital display systemstechnologies, across industries, combinedtogether with the Company’sCompany's ongoing developmentportfolio of newproducts, technologies,software, services, and salesintegrated channels,solutions, aremay expectedsupport future growth opportunities. Actual demand levels, however, will continue to supportdepend long-termon growth.customer spending priorities, funding availability, competitive conditions, and overall economic activity.
We maintain a unique leadership position in our target markets, which are large, growing, and supported by resilient demand from customers seeking to enhance audience experiences in sports, commercial, and transportation environments
COMPARISON OF THE THREE MONTHS ENDED JANUARYAUGUST 31,1, 2026 AND JANUARYAUGUST 25,2, 2025
Backlog represents the dollar value of contractually binding customer purchase commitmentsorders for integrated electronic display systems and related products and services thatwhich are expected to be recognized asin net sales in futurethe periods.future. Orders are contractually binding purchase commitments from customers. Orders are included in backlog when we haveare receivedin receipt of an executed contract and any required deposits or security,security and the revenue hashave not yet been recognized.recognized into net sales. Certain orders supportedfor bywhich we have received binding letters of intent or contracts arewill excludednot frombe included in backlog until all required contractual documentationdocuments and deposits are received. Orders and backlog are not metrics defined by GAAP, and our methodology for determining orders and backlog may vary from the methodology used by other companies in determining their orders and backlog amounts.
Order and backlog levels provide management and investors additional details surrounding the results of our business activities in the marketplace and highlight fluctuations caused by seasonality and multimillion-dollar projects. Management uses orders to evaluate market share and performance in the competitive environment. Management uses backlog information for capacity and resource planning. Order fulfillment timing is dependent on customer schedules, supply chain conditions, and our capacity availability. We believe order information is useful to investors because it provides an indication of our market share and future revenues.
Orders and backlog are non-GAAP operating measures, and our methodology for determining these metrics may differ from those used by other companies. Management believes that order and backlog levels provide meaningful insight into our business activity, including fluctuations due to seasonality and the timing of large-scale projects. New orders during the period are used to assess market share and competitive performance, while backlog informs capacity and resource planning. Given that orders and backlog are operational measures and that the Company’s methodology for calculating them does not meet the definition of a non-GAAP financial measure, as that term is defined by the SEC, a quantitative reconciliation is not required or provided.
The timing of order fulfillment is subject to customer schedules, supply chain conditions, and our production capacity. We believe order information is useful to investors as an indicator of future revenue and market positioning.
As of JanuaryAugust 31,1, 2026, our product order backlog was $342.3$311.3 million, compared to $273.2$360.3 million as of JanuaryAugust 25,2, 2025, and $341.6$356.2 million as of AprilMay 26,2, 2025.2026. The increasedecrease in backlog year over yearyear-over-year reflects athe higher volumeconversion of existing backlog into revenue at a pace that exceeded order bookings,intake drivenduring bythe continued market adoption and demand for digital display technologies.quarter.
We expect to fulfill the backlog as of JanuaryAugust 31,1, 2026,2026 within the next 24 months. However,The timing of backlog fulfillment timing may be impacted by project delays dueresulting tofrom customer site conditions, which arefactors outside of our control.control, including customer site conditions.
The following is an analysis of changes in key items included in the statements of operations for the three months ended JanuaryAugust 31,1, 2026 and JanuaryAugust 25,2, 2025 (in thousands):
Sales, orders, gross profit, and operating expenses were impacted as a result of the first quarter of fiscal 2027 including 13 weeks. The first quarter of fiscal 2026 contained 14 weeks.
Net Sales: The net sales increase in the thirdfirst quarter of fiscal 20262027 compared to the same period in fiscal 20252026 was the result of higher sales volumes in the Commercial, Live Events, and High School ParksTransportation, and RecreationInternational business units, partially offset by decreased sales in the TransportationCommercial and InternationalHigh School Park and Recreation business units. The amount of recognized revenue associated with performance obligations satisfied in prior years during the three months ended JanuaryAugust 31,1, 2026 and JanuaryAugust 25,2, 2025 was immaterial.
Orders: Order volume decreased in the first quarter of fiscal 2027 compared to the same period in fiscal 2026, reflecting the timing of customer project awards and a strong prior-year comparison period that included an additional week of operations. Variability in orders is typical in the Company's project-based business, with order volume fluctuating from period to period based on the timing and size of customer awards and project bookings.
Order volume increased in the third quarter of fiscal 2026 compared to the same period in fiscal 2025 primarily due to order growth in the High School Parks and Recreation and Transportation business units, partially offset by lower order volume in the Live Events and International business units. Order bookings in the Commercial business unit remained relatively flat. Variability in orders is typical for large project business areas, especially for sports projects, during the Company’s third fiscal quarter.
Gross profit: Gross profit increased in the thirdfirst quarter of fiscal 20262027 compared to the same period in fiscal 20252026 as a result of higher sales volume. Gross profit as a percentage of net sales decreasedincreased slightly to 24.030.5 percent for the thirdfirst quarter of fiscal 20262027 as compared to 24.629.7 percent for the same period a year ago,ago. primarilyThe dueincrease toin projectgross mixprofit variability.margin included the receipt of tariff refunds, partially offset by higher price-sensitive input costs. Total warranty expense as a percentage of sales increased slightly to 1.31.7 percent for the thirdfirst quarter of fiscal 20262027 as compared to 0.91.2 percent for the same period a year ago.
Selling: Selling expenses increased in the thirdfirst quarter of fiscal 20262027 compared to the same period in fiscal 20252026 primarily due to increases in personnel relatedpersonnel-related wages and benefits.benefits and a commission on a large International project completed during the quarter.
General and administrative expenses decreased in the third quarter of fiscal 2026 compared to the same period in fiscal 2025. During the third quarter of fiscal 2026 and fiscal 2025, the Company incurred $2.1 million and $4.8 million, respectively, for expenses related to management transitions, acquisition costs, strategic and digital transformation initiatives, and corporate governance matters.
Product designGeneral and developmentAdministrative: General and administrative expenses increased in the thirdfirst quarter of fiscal 20262027 compared to the same period in fiscal 20252026 primarily due to higher staffing costs andcontinued investments in advancedoperational technologiescapabilities, technology initiatives, and engineeringcorporate services.support functions.
Interest income (expense), net in the third quarter of fiscal 2026 increased compared to the same period one year ago primarily due to higher cash levels invested in interest-bearing accounts. During the third quarter of fiscal 2025, the interest expense included interest on the convertible note, which was settled during fiscal 2025.
Change in fair value of Convertible Note results from accounting for the senior secured convertible note dated May 11, 2023 we issued to Alta Fox Opportunities Fund, LP during fiscal 2024 (the “Convertible Note”) under the fair value option. The fair value change was primarily caused by the forced conversion of the entire Convertible Note in the third and fourth quarters of fiscal 2025. All amounts due under the Convertible Note were settled in fiscal 2025, and the Company has no further obligations under the Convertible Note.
OtherProduct incomeDesign (expense),and netDevelopment: Product design and development expenses increased in the thirdfirst quarter of fiscal 20262027 compared to the same period in fiscal 20252026 primarily due to foreigncontinued currencyinvestment volatilityin product development, engineering resources, and thetechnology Xinitiatives Displayintended Companyto Technologysupport Limitedfuture (“XDC”)growth business combination.opportunities.
Interest Income (Expense), net: Interest income increased in the first quarter of fiscal 2027 compared to the same period a year ago, reflecting higher interest income on invested cash balances and lower interest expense and interest on tariff refunds.
Other Expense, net: Other expense decreased in the first quarter of fiscal 2027 compared to the same period in fiscal 2026 due to lower non-operating expenses recognized during the most recent period. Foreign currency fluctuations continued to impact results in both periods.
Income Tax Expense: For the three months ended August 1, 2026, our effective tax rate was 24.3 percent compared to 25.9 percent for the three months ended August 2, 2025. The decrease in the effective tax rate was primarily attributable to valuation allowances recorded in fiscal 2026 which did not recur in fiscal 2027.
Income tax expense (benefit): For the three months ended January 31, 2026, our effective tax rate was 14.3 percent compared to 3.7 percent for the three months ended January 25, 2025. The lower tax rate in the third quarter of fiscal 2025 is due to the tax effect of the increase of the Convertible Note fair value adjustment to expense that is not deductible for tax purposes reduced by the tax effect of the period's decrease in pre-tax income, whereas in the third quarter of fiscal 2026, the tax rate was reduced by increases to discrete tax benefits and a reversal of a valuation allowance with no fair value adjustments applicable.
Net Income: The increase in net income: reflects higher gross profit and operating income compared to the same period a year ago. For the three months ended JanuaryAugust 31,1, 2026, our earnings per diluted share was $0.06$0.40 compared to a loss per diluted share of $0.36$0.33 in the same period last year.
Non-GAAP Reconciliation: The following table shows information regarding our reportable segment financial performance of contribution margin reconciled to operating income, the most comparable GAAP metric, for the three months ended August 1, 2026 and August 2, 2025 (in thousands):
The following table presents financial performance information for our reportable segments for the three months ended January 31, 2026 and January 25, 2025, including a reconciliation of contribution margin, a non-GAAP measure, to GAAP operating income, which is the most directly comparable GAAP measure to contribution margin:
During the third quarter of fiscal 2026, total net sales increased and gross profit as a percentage of net sales decreased, reflecting the cumulative impact of the following factors:
Commercial: The increase in net sales in the third quarter of fiscal 2026 compared to the same period one year ago was primarily driven by fulfilling orders in Spectacular LED video display projects, On-Premise digital signage, and Out-of-Home digital billboards. Gross profit as a percentage of sales increased due to delivering more profitable projects in the Spectaculars niche and higher sales volume over a relatively fixed cost structure. Selling expenses remained relatively flat. The slight increase in order bookings reflects continued market adoption of digital display technology.
Live Events: The increase in net sales in the third quarter of fiscal 2026 compared to the same period one year ago was due to the fulfillment of large project orders. Gross profit as a percentage of sales in the quarter remained relatively flat. Selling expenses remained relatively flat. Order bookings fluctuate based on the timing of large project bookings and seasonal sports impacts. During the third quarter of fiscal 2026, we booked a large Major League Baseball stadium project, but had lower orders of other large facility projects.
High School Park and Recreation: Sales increased during the third quarter of fiscal 2026 compared to the same period one year ago primarily driven by higher project execution and continued demand for video display systems. Gross profit as a percentage of sales decreased due to price increases not recovering all increases in tariff costs. Selling expenses remained relatively flat. Order bookings increased due to stronger demand for video display systems in school during the off season.
Transportation: Sales decreased during the third quarter of fiscal 2026 compared to the same period one year ago due to lower order bookings in fiscal 2025 which reduced the level of backlog available to build. Gross profit as a percentage of sales decreased due to a shift in project mix toward smaller projects, added tariff expenses, and competitive pricing pressure, which resulted in higher cost of goods sold as a percentage of sales. Selling expenses remained relatively flat. Order bookings increased compared to the prior year, reflecting strong demand and continued momentum in airports.
International: The decrease in net sales in the third quarter of fiscal 2026 was driven by timing of conversion of orders due to lower backlog compared to one year ago. Gross profit as a percentage of sales decreased primarily due to lower sales volume over relatively fixed cost structure. Selling expenses remained relatively flat. Order bookings decreased compared to the same period a year ago, with results primarily reflecting the timing of large stadium project awards in international markets. However, demand remained strong, primarily due to successful order bookings in Australia and Europe.
RESULTS OF OPERATIONS
COMPARISON OF THE NINE MONTHS ENDED JANUARY 31, 2026 AND JANUARY 25, 2025
Consolidated Performance Summary
The following is an analysis of changes in key items included in the statements of operations for the nine months ended January 31, 2026 and January 25, 2025:
DAKT insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 1 Form 4 filing (1 insider, 1 trade date, 98 shares, about $1.6K) and open-market sales in 2 filings (2 insiders, 2 trade dates, 7,636 shares, about $149.6K). Net open-market shares: -7,538 (purchases minus sales); net value about -$148.1K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-21 | Atkins Howard I |
Grant/award | 9,626 | — | — |
| 2026-09-17 | Siegel Andrew David |
Grant/award | 6,594 | — | — |
| 2026-09-17 | Feigin Peter |
Grant/award | 6,594 | — | — |
| 2026-09-17 | Williams Shereta Diana |
Grant/award | 6,594 | — | — |
| 2026-09-17 | Bultena Lance Dean |
Grant/award | 6,594 | — | — |
| 2026-09-17 | Glat Neil |
Grant/award | 6,594 | — | — |
| 2026-09-17 | Griffiths Jose-Marie |
Grant/award | 6,594 | — | — |
| 2026-09-17 | Friel John Patrick |
Grant/award | 6,594 | — | — |
| 2026-09-17 | Bowser Mark F |
Grant/award | 6,594 | — | — |
| 2026-09-05 | Wiemann Bradley T |
Option exercise | 492 | — | — |
| 2026-09-05 | Wiemann Bradley T |
Shares withheld for tax | 330 | $19.67 | $6.5K |
| 2026-09-05 | Wiemann Bradley T |
Option exercise | 500 | — | — |
| 2026-09-05 | Wiemann Bradley T |
Shares withheld for tax | 121 | $19.67 | $2.4K |
| 2026-09-05 | Wiemann Bradley T |
Shares withheld for tax | 118 | $19.67 | $2.3K |
| 2026-09-05 | Wiemann Bradley T |
Option exercise | 1,362 | — | — |
| 2026-08-23 | Anderson Sheila Mae |
Option exercise | 500 | — | — |
| 2026-08-23 | Anderson Sheila Mae |
Option exercise | 500 | — | — |
| 2026-08-23 | Anderson Sheila Mae |
Shares withheld for tax | 121 | $19.00 | $2.3K |
| 2026-08-23 | Anderson Sheila Mae |
Option exercise | 246 | — | — |
| 2026-08-23 | Anderson Sheila Mae |
Shares withheld for tax | 59 | $19.00 | $1.1K |
| 2026-08-23 | Anderson Sheila Mae |
Option exercise | 227 | — | — |
| 2026-08-23 | Anderson Sheila Mae |
Shares withheld for tax | 55 | $19.00 | $1.0K |
| 2026-08-23 | Anderson Sheila Mae |
Option exercise | 2,068 | — | — |
| 2026-08-23 | Anderson Sheila Mae |
Shares withheld for tax | 503 | $19.00 | $9.6K |
| 2026-08-23 | Wendler Brett David |
Option exercise | 500 | — | — |
| 2026-08-23 | Wendler Brett David |
Shares withheld for tax | 121 | $19.00 | $2.3K |
| 2026-08-23 | Wendler Brett David |
Option exercise | 500 | — | — |
| 2026-08-23 | Wendler Brett David |
Shares withheld for tax | 121 | $19.00 | $2.3K |
| 2026-08-23 | Wendler Brett David |
Shares withheld for tax | 496 | $19.00 | $9.4K |
| 2026-08-23 | Wendler Brett David |
Shares withheld for tax | 59 | $19.00 | $1.1K |
| 2026-08-23 | Wendler Brett David |
Option exercise | 227 | — | — |
| 2026-08-23 | Wendler Brett David |
Shares withheld for tax | 55 | $19.00 | $1.0K |
| 2026-08-23 | Wendler Brett David |
Option exercise | 2,038 | — | — |
| 2026-08-23 | Wendler Brett David |
Option exercise | 246 | — | — |
| 2026-08-23 | Kurtenbach Matthew John |
Shares withheld for tax | 121 | $19.00 | $2.3K |
| 2026-08-23 | Kurtenbach Matthew John |
Option exercise | 2,098 | — | — |
| 2026-08-23 | Kurtenbach Matthew John |
Option exercise | 500 | — | — |
| 2026-08-23 | Kurtenbach Matthew John |
Shares withheld for tax | 121 | $19.00 | $2.3K |
| 2026-08-23 | Kurtenbach Matthew John |
Option exercise | 500 | — | — |
| 2026-08-23 | Kurtenbach Matthew John |
Shares withheld for tax | 510 | $19.00 | $9.7K |
| 2026-08-23 | Kurtenbach Matthew John |
Option exercise | 246 | — | — |
| 2026-08-23 | Kurtenbach Matthew John |
Shares withheld for tax | 59 | $19.00 | $1.1K |
| 2026-08-23 | Kurtenbach Matthew John |
Option exercise | 454 | — | — |
| 2026-08-23 | Kurtenbach Matthew John |
Shares withheld for tax | 110 | $19.00 | $2.1K |
| 2026-08-23 | Wiemann Bradley T |
Shares withheld for tax | 110 | $19.00 | $2.1K |
| 2026-08-23 | Wiemann Bradley T |
Shares withheld for tax | 59 | $19.00 | $1.1K |
| 2026-08-23 | Wiemann Bradley T |
Option exercise | 246 | — | — |
| 2026-08-23 | Wiemann Bradley T |
Shares withheld for tax | 121 | $19.00 | $2.3K |
| 2026-08-23 | Wiemann Bradley T |
Option exercise | 500 | — | — |
| 2026-08-23 | Wiemann Bradley T |
Shares withheld for tax | 121 | $19.00 | $2.3K |
| 2026-08-23 | Wiemann Bradley T |
Option exercise | 500 | — | — |
| 2026-08-23 | Wiemann Bradley T |
Option exercise | 454 | — | — |
| 2026-08-23 | Jayaraman Ramesh |
Option exercise | 7,090 | — | — |
| 2026-08-23 | Jayaraman Ramesh |
Shares withheld for tax | 1,726 | $19.00 | $32.8K |
| 2026-07-17 | Wiemann Bradley T |
Open-market sale | 4,000 | $19.22 | $76.9K |
| 2026-07-01 | Anderson Sheila Mae |
Open-market sale | 3,636 | $20.01 | $72.8K |
| 2026-07-01 | Anderson Sheila Mae |
Option exercise | 7,500 | $9.57 | $71.8K |
| 2026-04-30 | Wendler Brett David |
Open-market purchase | 98 | $15.97 | $1.6K |
Well-known investors holding DAKT (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Renaissance Technologies | 2026-06-30 | 785,161 | $15.4M | 0.02% | Reduced 5% |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 139,126 | $2.7M | 0.0% | Reduced 15% |
| D. E. Shaw & Co. | 2026-06-30 | 83,747 | $1.6M | 0.0% | Reduced 30% |
| Two Sigma Investments | 2026-06-30 | 76,039 | $1.5M | 0.0% | Reduced 35% |
| Point72 Asset Management (Steve Cohen) | 2026-06-30 | 41,015 | $802.3K | 0.0% | Reduced 64% |
| Gotham Asset Management (Joel Greenblatt) | 2026-06-30 | 27,997 | $547.6K | 0.0% | Added 13% |
| Millennium Management (Israel Englander) | 2026-06-30 | 24,965 | $488.3K | 0.0% | Reduced 74% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 10,338 | $202.1K | — | Sold out |
| Duquesne Family Office (Stanley Druckenmiller) | 2026-06-30 | 1,123,109 | $22.0K | 0.5% | Added 100% |