DAKTRONICS INC /SD/

Daktronics designs, manufactures, and sells electronic display systems and related solutions used in sports, commercial, and transportation applications. The Company’s offerings include standard display products as well as custom-designed and integrated systems that incorporate display hardware, control systems, and software. The market for large-format digital display systems has evolved from traditional scoreboards and basic electronic displays to integrated visual communication systems that combine hardware, software, and services. Advancements in light emitting diode technology have enabled the development of high-resolution, energy-efficient displays capable of delivering dynamic video, graphics, and data in a wide range of environments. Industry demand is supported by continued adoption of digital display technologies, including the ongoing transition from static to digital signage, increasing display resolution and size, and the use of integrated software and control systems to manage content and operations. In addition, the declining cost of display technologies and advancements in manufacturing processes have expanded the accessibility and application of these systems across a broader set of customers and use cases.

Daktronics encounters a wide variety of competitors that vary by product, geographic area, and business unit, including both domestic and foreign companies which range in size and product offerings. Competitors may develop lower-cost or lower-featured products, may be willing to charge lower prices to increase their market share, or include different service and controller offerings. Some competitors have more capital, governmental funding, supply chain access, 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, the Company’s products compete with other forms of advertising, such as television, print media, digital and mobile, and fixed display signs. Daktronics believes that its ability to compete depends upon customer-centric product and service quality and features, technical expertise, service breadth, and cost-effective solutions.

Daktronics generates revenue through the design, manufacture, and sale of electronic display systems and related solutions, operating 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 the Company to support customers from initial system design and installation through long-term maintenance, upgrades, and replacement cycles. In addition to equipment sales and installation, the Company provides services that include technical support, professional services, and software-based solutions that enable customers to operate and manage their display systems. The Company’s customer base is large and diverse worldwide, ranging from local main street business owners, out-of-home companies, governmental agencies, and schools, colleges, and universities, to the owners and operators of premier professional sports arenas.

Daktronics’ product offerings fall into two broad categories: various families of digital display hardware systems and the control systems and software that manage and drive those displays. The audio/visual hardware and digital media players product families include video displays/video walls, sport scoreboard solutions, LED message displays and signs, intelligent transportation systems dynamic message signs, mass transit displays, sound systems, digital billboards, digital street furniture, digit and price displays, and indoor dynamic messaging systems. The software and controllers product families include the Venus Control Suite, All Sport Scoring Control, Show Control, and Camino. Video displays/video walls are comprised of a large number of full-color pixels capable of showing various levels of video feeds, pre-rendered graphics, and animated content with Real Time Data capabilities, and include red, green, and blue LEDs arranged in various combinations to form pixels. The Galaxy product line is a family of full-matrix displays, available in both indoor and outdoor models and controlled with VCS, used primarily to convey information and on-premise advertising to consumers. The Vanguard family of dynamic message displays is typically used to direct traffic and inform motorists. Digital billboards offer a unique display solution for the Out-of-Home advertising industry, featuring a patented mounting system, self-adjusting brightness, optimized energy consumption, and enhanced network security. Digital street furniture displays are pedestrian-level outdoor LED signage solutions used in OOH advertising and information applications, typically integrated into urban streetscapes. The Fuelight digital price displays for fuel stations use high-brightness LED digits to ensure clear visibility of fuel prices and allow rapid price adjustments via the Fuelink control systems. Indoor dynamic messaging solutions utilize either fine-pitch LED displays or commercial LCD screens to present scheduled digital content, advertising, and informational messaging, managed through the Venus Control Suite software platform.

The Venus Control Suite is a cloud-capable enterprise software platform for digital display management that provides centralized control of content scheduling and device operation across single displays or large networks of displays, deployed on customer premises or via a hosted cloud service. The platform includes scheduling tools that support both playlist-based content playback and slot-based scheduling models. Show Control is an integrated software and hardware platform that centralizes control of video displays in sports and entertainment venues, enabling synchronized, real-time and pre-programmed presentation of multimedia content and event data across multiple display assets. Camino is a real-time graphics and content compositing software platform that enables the creation, rendering, and automated playback of 2D and 3D data-driven content for live event production and broadcast applications, integrating with Show Control systems. All Sport scoring control solutions are offered for a range of sports and levels of play through the All Sport family of controllers, including console-based controllers and software-based solutions such as All Sport Pro.

During fiscal 2026, the Company repurchased 1.4 million shares of Common Stock at a total cost of $25.4 million ¹. During fiscal 2025, the Company repurchased 2.1 million shares of Common Stock at a total cost of $29.5 million ². On June 17, 2016, the Board of Directors authorized a share repurchase program under which the Company may repurchase up to $40.0 million ³ of the Company’s outstanding shares of common stock. On March 4, 2025, the Board approved a $10.0 million ⁴ increase in the limit under the Repurchase Program. On June 23, 2025, the Board approved an additional $10.0 million ⁵ increase in the limit under the Repurchase Program. On December 9, 2025, the Board approved an additional $20.0 million ⁶ increase for a maximum authorized value of $80.0 million ⁷ as of May 2, 2026. As of May 2, 2026, $14.5 million ⁸ of the $80.0 million ⁹ authorized amount remained available for repurchase under the Repurchase Program. On December 22, 2025, the Company acquired X Display Company Technology Limited. During fiscal 2026, the Company recorded a provision for losses of $3.8 million ¹⁰ related to an affiliate note determined to be uncollectible. In fiscal 2025, the Company recorded a provision for losses of $15.5 million ¹¹ related to a different affiliate note determined to be uncollectible. The Company plans to open a facility in Mexico in fiscal 2027. On March 3, 2025, the Company entered into a cooperation agreement with Alta Fox Capital Management, LLC, pursuant to which an Alta Fox-recommended candidate was appointed to the Board of Directors and the Transformation Committee of the Board, and the Company committed to various governance and investor engagement initiatives.

For fiscal 2026, net sales were $838.706 million ¹² compared to $756.477 million ¹³ in fiscal 2025, an increase of 10.9% ¹⁴. Net income was $45.376 million ¹⁵ compared to a net loss of $10.121 million ¹⁶ in fiscal 2025. Diluted earnings per share were $0.92 ¹⁷ compared to a diluted loss per share of $0.21 ¹⁸ in fiscal 2025. Gross profit was $229.006 million ¹⁹ compared to $195.487 million ²⁰ in fiscal 2025, with gross margin improving to 27.3% ²¹ from 25.8% ²². Operating income was $60.848 million ²³ compared to $33.118 million ²⁴ in fiscal 2025. Orders were $860.835 million ²⁵ compared to $781.347 million ²⁶ in fiscal 2025, an increase of 10.2% ²⁷. The net sales increase 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. The gross profit percentage increase was driven by a combination of strategic pricing, continued operational efficiencies, and overall project mix across the business.

Daktronics continues to invest in advancing product capabilities to address evolving customer requirements and to improve product cost efficiency, with development efforts focused on both standard product and control offerings, as well as ongoing initiatives in emerging technologies, including micro-LED products and enhanced control system capabilities. The Company is expanding its global manufacturing footprint to include a facility in Mexico, which is expected to commence production in fiscal 2027, to support cost structure efficiency and manufacturing flexibility over time. The Company also continues to evaluate pricing strategies and sourcing plans to mitigate the effects of tariffs on gross margins and customer purchasing behavior. 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, with the industry experiencing increased adoption of surface mount and chip-on-board technologies, particularly for narrow pixel pitch and micro-LED applications.

The filing does not contain a separate dedicated paragraph on margin and cost outlook beyond the discussion of known trends and uncertainties.

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, which is expected to commence production in fiscal 2027. The Company also continues to focus on execution initiatives related to digital capabilities, cost structure optimization, and market expansion, intended to enhance operating efficiency, improve delivery and service performance, and support long-term growth opportunities.

The filing does not contain specific R&D spending levels, capital expenditure plans, or share repurchase authorization amounts for the upcoming period beyond the existing Repurchase Program authorization of $80.0 million ²⁸ as of May 2, 2026, with $14.5 million ²⁹ remaining available. The Company currently does not pay any dividends on its common stock.

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, which have adversely impacted gross margins and influenced customer purchasing behavior, particularly for projects dependent on federal funding. 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. 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 exceeded presidential authority and were invalid, and 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% ³⁰. The timing, duration, and final rate of these tariffs remain uncertain. Geopolitical tensions or conflicts in regions where the Company conducts 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.

Changes in United States import tariff policies and resulting responses from other countries have impacted and may continue to impact results of operations, with the Company’s complex manufacturing processes in the United States, which generate approximately 80 percent ³¹ of manufactured output, relying on components and inputs sourced from over 40 countries ³². United States tariff rates on imports have ranged from approximately 10 percent ³³ to significantly higher levels, with certain proposed or applied rates substantially exceeding these levels. The Company depends on a single-source or a limited number of suppliers for raw materials and components from countries around the world, and imports from China to the United States have been subject to increased import/export controls and tariffs. As of May 2, 2026, a provision for expected credit losses of $3.8 million ³⁴ was recorded as management’s analysis concluded the loans related to an affiliate are anticipated to be uncollectible. The Company operates in highly competitive markets and faces significant competition and pricing pressures, with competitors that may develop lower-cost or lower-featured products, may be willing to charge lower prices to increase their market share, or include different service and controller offerings. The Company’s product order backlog as of May 2, 2026 was $356.2 million ³⁵ as compared to $341.6 million ³⁶ as of April 26, 2025, and the timing of backlog fulfillment may be impacted by project delays resulting from factors outside of the Company’s control, including customer site conditions.

Management’s message emphasizes that during fiscal 2026, the Company 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 operations. Management highlights that to address evolving market conditions and competitive dynamics, the Company continues to focus on execution initiatives related to digital capabilities, cost structure optimization, and market expansion, which are intended to enhance operating efficiency, improve delivery and service performance, and support long-term growth opportunities. 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, and 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.