What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-12-10 compared with 2025-09-10 · 245 added, 124 removed, 195 unchanged (65% of the section changed)

3 unchanged sentences

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, April 26, 2025, to and including August 2, 2025;

and its subsidiaries (the "Company", "Daktronics", "we", "our", or "us") during the period from the most recent fiscal year-end, April 26, 2025, to and including November 1, 2025;

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.

6 unchanged sentences

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 and orders, fluctuations in margins, the introduction of new products and technology, the impact of adverse weather conditions, increased regulation, the imposition of tariffs, trade wars, and the other risk factors described more fully in the Company’s Annual Report on Form 10-K for the fiscal year ended April 26, 2025 (the "Form 10-K") filed with the Securities and Exchange Commission ("SEC"), as well as other publicly available information about the Company.

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 risk factors described more fully in the Company’s Annual Report on Form 10-K for the fiscal year ended April 26, 2025 (the "Form 10-K") filed with the Securities and Exchange Commission ("SEC"), as well as other publicly available information about the Company.

We also wish to caution investors that other factors might in the future prove to be important in affecting our results of operations.

1 unchanged sentence

We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

The MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes included in Item 1 of Part 1 of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended April 26, 2025 (the “Form 10-K”) (including the information presented therein under "Item 1A.

Risk Factors" of Part I), as well as other publicly available information about the Company.

The quarter-over-quarter comparisons in this MD&A are as of and for the fiscal quarters ended August 2, 2025 and July 27, 2024 unless otherwise stated.

Non-GAAP Measures

Contribution margin is a non-GAAP financial measure utilized by management to evaluate segment profitability and guide resource allocation decisions.

The MD&A should be read in conjunction with the Condensed Consolidated Financial Statements and related Notes included in Item 1 of Part 1 of this Quarterly Report on Form 10-Q, the Form 10-K (including the information presented therein under "Item 1A.

Risk Factors" of Part I), and other publicly available information about the Company.

The quarter-over-quarter comparisons in this MD&A are as of and for the fiscal quarters ended November 1, 2025 and October 26, 2024 unless otherwise stated.

Non-GAAP Financial Measures

Contribution margin , which is a financial measure that is not defined under accounting principles generally accepted in the United States (“GAAP”), is utilized by management to evaluate segment profitability and guide resource allocation decisions.

It is defined as gross profit less selling expenses.

1 unchanged sentence

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.

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.

8 unchanged sentences

Each fiscal quarter consists of 13 weeks, except in a 53-week fiscal year, where the first quarter includes 14 weeks.

The three months ended August 2, 2025, and July 27, 2024, included 14 and 13 weeks of operations, respectively.

The six months ended November 1, 2025, and October 26, 2024, included 27 and 26 weeks of operations, respectively.

Known Trends and Uncertainties

During fiscal 2025, we embarked on our business transformation program.

A rigorous analysis and planning phase culminated in a detailed implementation roadmap designed to support ambitious sales growth, margin expansion, and top-quartile return on invested capital targets.

Strong growth in new orders reflects continued market adoption of digital display technology and our comprehensive product and service offerings.

We anticipate further global expansion in the use of digital display systems over the coming years.

However, recent government regulations, geopolitical developments, and uncertainty around federal funding priorities may affect customer willingness to invest, influencing both the timing and volume of orders.

Recent executive orders from the U.S.

presidential administration introduced broad import tariffs on electronic components, aluminum, and steel, effective August 1, 2025.

These changes are expected to materially increase input costs and may impact gross margins.

In response, we are actively adjusting pricing strategies and sourcing plans to mitigate these impacts.

Competitors importing from China will also be affected, potentially reshaping competitive dynamics.

These developments introduce uncertainty in customer purchasing behavior and order timing, particularly for federally funded projects.

Global investments continue in manufacturing capacity and advancements in display and control technologies.

Most digital displays use standard surface mount technology, while chip-on-board technologies are advancing for narrow pixel pitch ("NPP") applications.

Micro-LED technologies, also referred to as NPP, are increasingly used for displays with short viewing distances.

Innovations in professional services technologies, including artificial intelligence and enhanced software, are improving content creation, user interfaces, monitoring systems, and security.

We rely on a complex global supply chain for raw materials and components and are adapting our manufacturing, sourcing, and product development priorities to align with evolving market and technology trends.

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 several external factors influencing customer demand and operational costs.

government actions have raised costs by imposing tariffs on electronic components, aluminum, and steel starting June 4, 2025.

A 50% tariff on copper implemented by the U.S.

went into effect on August 1, 2025, and was followed by increased reciprocal tariffs from foreign countries ranging from 15% to 40% on August 7, 2025.

The removal of the de minimis exemption on August 29, 2025, which previously allowed low-value shipments to enter the country without paying duties or taxes and with minimal paperwork, has further increased logistics expenses.

These tariffs may impact gross margins and could influence customer purchasing behavior, particularly for projects dependent on federal funding.

In response, Daktronics is actively monitoring its pricing strategies and sourcing plans to mitigate these effects.

However, the ultimate impact on demand remains uncertain.

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.

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.

5 unchanged sentences

revenue growth outpacing our addressable market, operating margins of 10–12%, and returns on capital of 17–20%, consistently exceeding our cost of capital.

To accelerate these efforts, we project spending between $8.0 million and $10.0 million for transformation initiatives in fiscal 2026.

We continuously evaluate our capacity and resource levels in light of these conditions.

However, there may be periods where sales and expenses are misaligned, and times when we invest more heavily in transformation and corporate governance activities, which may affect near-term profitability.

We believe the audiovisual industry’s fundamentals, including increased adoption 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 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 where sales and expenses are not fully aligned, particularly as investments in transformation and corporate governance are made.

These investments may affect near-term profitability but are intended to support long-term value creation.

Despite ongoing uncertainties related to tariffs, geopolitical developments, and federal funding priorities, Daktronics believes that the fundamental drivers of the audiovisual industry remain strong.

Increased adoption of LED display systems across industries, combined with the Company’s ongoing development of new technologies, services, and sales channels, are expected to support long-term growth.

RESULTS OF OPERATIONS

COMPARISON OF THE THREE MONTHS ENDED AUGUST 2, 2025 AND JULY 27, 2024

COMPARISON OF THE THREE MONTHS ENDED NOVEMBER 1, 2025 AND OCTOBER 26, 2024

Product Order Backlog

2 unchanged sentences

Certain orders supported by binding letters of intent or contracts are excluded from backlog until all required contractual documentation and deposits are received.

Orders and backlog are not defined measures under generally accepted accounting principles in the United States (“GAAP”), and our methodology for determining these metrics may differ from that used by other companies.

Orders and backlog are non-GAAP operating measures, and our methodology for determining these metrics may differ from that 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.

Orders are used to assess market share and competitive performance, while backlog informs capacity and resource planning.

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 August 2, 2025, our product order backlog was $360.3 million, compared to $267.2 million as of July 27, 2024, and $341.6 million as of April 26, 2025.

The increase in backlog reflects a higher volume of order bookings, driven by continued market adoption and demand for digital display technologies.

We expect to fulfill the backlog as of August 2, 2025, within the next 24 months.

As of November 1, 2025, our product order backlog was $320.6 million, compared to $236.0 million as of October 26, 2024, and $341.6 million as of April 26, 2025.

The increase in backlog year over year reflects a higher volume of order bookings, driven by continued market adoption and demand for digital display technologies.

We expect to fulfill the backlog as of November 1, 2025, within the next 24 months.

However, fulfillment timing may be impacted by project delays due to customer site conditions, which are outside of our control.

Consolidated Performance Summary

The following is an analysis of changes in key items included in the statements of operations for the three months ended August 2, 2025 and July 27, 2024:

August 2, 2025 % of Net sales (1)

July 27, 2024 % of Net sales (1)

The following is an analysis of changes in key items included in the statements of operations for the three months ended November 1, 2025 and October 26, 2024:

November 1, 2025 % of Net sales (1)

October 26, 2024 % of Net sales (1)

Dollar Change (1)

15 unchanged sentences

Income tax expense 4,381 1.9 3,777 1.8 604 16.0

Net income (loss) $ 16,470 7.5 % $ (4,946) (2.2) % $ 21,416 (433.0) %

Net income $ 17,481 7.6 % $ 21,406 10.3 % $ (3,925) (18.3) %

Diluted earnings per share $ 0.35 $ 0.22 $ 0.13 59.1 %

3 unchanged sentences

In addition, percentages may not add in total due to rounding.

Sales, orders, gross profit, and operating expenses were impacted as a result of the first quarter of fiscal 2026 including 14 weeks compared to the more common 13 weeks.

The first quarter of fiscal 2025 contained 13 weeks.

The sales decrease in the first quarter of fiscal 2026 compared to the same period in fiscal 2025 was the result primarily of lower volumes in the Live Events and Transportation business units, partially offset by increased sales in the Commercial, High School Park and Recreation, and International business units.

The amount of recognized revenue associated with performance obligations satisfied in prior years during the three months ended August 2, 2025 and July 27, 2024 was immaterial.

Order volume increased in the first quarter of fiscal 2026 compared to the same period in fiscal 2025 primarily due to order growth in the Live Events, High School Park and Recreation, and International business units.

Live Events had large order bookings related to two Major League Baseball stadiums and one National Hockey League arena.

High School Park and

Recreation had a record quarter for orders primarily as a result of continued adoption of video in schools.

International continued to grow primarily due to orders in the Middle East and Australia.

Order bookings in the Commercial and Transportation business units remained relatively flat.

The sales increase in the second quarter of fiscal 2026 compared to the same period in fiscal 2025 was the result of higher volumes in the Commercial, Live Events, and International business units, partially offset by decreased sales in the High School Park and Recreation business unit.

Sales in our Transportation business unit were relatively flat.

The amount of recognized revenue associated with performance obligations satisfied in prior years during the three months ended November 1, 2025 and October 26, 2024 was immaterial.

Order volume increased in the second quarter of fiscal 2026 compared to the same period in fiscal 2025 primarily due to order growth in the Live Events, Transportation, and International business units, partially offset by lower order volume in the Spectaculars niche of the Commercial business unit.

Live Events had large order bookings related to three Major League Baseball stadiums and three Major League Soccer arena.

Transportation has seen order growth in airports and Intelligent Transportation Systems (“ITS”).

International continued to grow primarily due to orders in the Middle East and

Order bookings in the High School Park and Recreation business unit remained relatively flat.

Large project bookings can cause comparability differences to the seasonally lower quarters.

Gross profit as a percentage of net sales increased to 29.7 percent for the first quarter of fiscal 2026 as compared to 26.4 percent for the same period a year ago.

The increase was driven by a combination of strategic pricing, operational efficiencies, and favorable project mix across business units.

Total warranty expense as a percentage of sales decreased to 1.2 percent for the first quarter of fiscal 2026 as compared to 2.1 percent for the same period from a year ago primarily driven by lower significant and unusual warranty costs.

Selling expenses in the first quarter of fiscal 2026 remained relatively flat compared to the same period last year.

General and administrative expenses increased in the first quarter of fiscal 2026 compared to the same period in fiscal 2025 primarily due to the additional week in the current reporting period.

Product design and development expenses in the first quarter of fiscal 2026 remained relatively flat compared to the same period last year.

Interest income (expense), net in the first quarter of fiscal 2026 increased compared to interest expense in the same period one year ago primarily due to higher cash levels invested in interest-bearing accounts.

During the first quarter of fiscal 2025, the interest expense included interest on the convertible note, which was settled during fiscal 2025.

Gross profit as a percentage of net sales increased slightly to 27.0 percent for the second quarter of fiscal 2026 as compared to 26.8 percent for the same period a year ago.

The increase was driven by a combination of strategic pricing and operational efficiencies.

Total warranty expense as a percentage of sales decreased slightly to 1.6 percent for the second quarter of fiscal 2026 as compared to 1.7 percent for the same period a year ago.

Selling expenses increased in the second quarter of fiscal 2026 compared to the same period in fiscal 2025 primarily due to the increases in personnel related wages and benefits.

General and administrative expenses decreased in the second quarter of fiscal 2026 compared to the same period in fiscal 2025 primarily due to one-time professional fees expenses in fiscal 2025.

The current period expenses are mostly in line with normal operating levels.

During the second quarter of fiscal 2025, the Company incurred $3.3 million of consultant related expenses associated with the strategic and digital transformation initiatives.

Product design and development expenses increased in the second quarter of fiscal 2026 compared to the same period in fiscal 2025 primarily due to higher staffing costs and investments in advanced technologies and engineering services.

Interest income (expense), net in the second 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 second 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.

1 unchanged sentence

All amounts due under the Convertible Note were settled in fiscal 2025.

Other expense and debt issuance costs write-off, net was relatively flat compared to the same period last year.

Other expense, net decreased in the second quarter of fiscal 2026 compared to the same period in fiscal 2025 primarily due to losses recorded for equity method affiliates and foreign currency volatility.

Income tax expense:

For the three months ended August 2, 2025, our effective tax rate was 25.9 percent compared to an effective tax rate that was skewed for the three months ended July 27, 2024 due to the impact of the fair value adjustment to the Convertible Note in proportion to the nominal pre-tax income.

The lower tax rate is due to having no further impacts of fair value adjustments on convertible notes for the three months ended August 2, 2025.

Net income (loss):

For the three months ended August 2, 2025, our earnings per diluted share was $0.33 compared to a loss per diluted share of $0.11 in the same period last year.

The net loss in the three months ended July 27, 2024 included a $21.6 million change in the valuation of the Convertible Note.

For the three months ended November 1, 2025, our effective tax rate was 20.0 percent compared to 15.0 percent for the three months ended October 26, 2024.

The lower tax rate in the second quarter of fiscal 2025 is due to the reduction of the Convertible Note fair value adjustment to expense in proportion to the period’s increase in pre-tax income, whereas there are no fair value adjustments applicable in the second quarter of fiscal 2026.

For the three months ended November 1, 2025, our earnings per diluted share was $0.35 compared to $0.22 in the same period last year.

Reportable Segment Performance Summary

The following table presents financial performance information for our reportable segments, including a reconciliation of contribution margin, a non-GAAP measure, to GAAP operating income for the three months ended August 2, 2025 and July 27, 2024:

Three Months Ended August 2, 2025

The following table presents financial performance information for our reportable segments for the three months ended November 1, 2025 and October 26, 2024, 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:

Three Months Ended November 1, 2025

Commercial Percent of net sales (1)

13 unchanged sentences

Orders $ 42,281 $ 89,228 $ 35,678 $ 14,076 $ 17,872 $ 199,135

Three Months Ended July 27, 2024

Three Months Ended October 26, 2024

Commercial Percent of net sales (1)

13 unchanged sentences

Orders $ 44,548 $ 70,524 $ 35,838 $ 12,222 $ 14,458 $ 177,590

Three Months Ended Net Dollar and % Change

Net Dollar and % Change

Commercial Percent Change (1)

15 unchanged sentences

In addition, percentages may not add in total due to rounding.

Sales, orders, gross profit, and general and administrative expenses were impacted as a result of the first quarter of fiscal 2026 including 14 weeks compared to the more common 13 weeks.

The first quarter of fiscal 2025 contained 13 weeks.

During the first quarter of fiscal 2026, total net sales declined while gross profit as a percentage of net sales increased, reflecting the cumulative impact of the following factors:

The increase in net sales in the first quarter of fiscal 2026 compared to the same period one year ago was primarily driven by fulfilling orders in our digital billboards niche and Spectacular LED video display projects.

On-Premise digital signage sales were similar to last year.

During the second quarter of fiscal 2026, total net sales and gross profit as a percentage of net sales increased, reflecting the cumulative impact of the following factors:

The increase in net sales in the second quarter of fiscal 2026 compared to the same period one year ago was primarily driven by fulfilling orders in our On-Premise digital signage and Out-of-Home digital billboards niche, partially offset by a decrease in Spectacular LED video display projects.

Gross profit as a percentage of sales increased due to a shift in mix to products with higher margins and higher sales volume over a relatively fixed cost structure.

Selling expense remained relatively flat.

The slight increase in order bookings was primarily driven by increased digital billboard order bookings during the quarter as a result of marketing efforts to independent billboard operators and the timing of a bulk order from a national Out-of-Home advertising company.

The decrease in net sales in the first quarter of fiscal 2026 was due to the absence of the fulfillment of a large project, which we had in the same quarter a year ago and because of order volume declines and the differences in expected timing to fulfill current backlog compared to last year's scheduling.

The decline in gross profit as a percentage of sales in the quarter is attributable to lower sales volume over a relatively fixed cost structure.

Selling expense remained relatively flat.

The decrease in order bookings was primarily driven by delayed commitments from Spectaculars customers due to a competitive market.

The increase in net sales in the second quarter of fiscal 2026 was due to the fulfillment of large project orders.

The increase in gross profit as a percentage of sales in the quarter is attributable to higher sales volume over a relatively fixed cost structure.

Selling expense increased slightly due to personnel related wages and benefit costs for investments in staffing to support future growth.

Order bookings vary because of large project booking impacts and seasonal sports impacts.

During the first quarter of fiscal 2026, orders increased due to a mix of mid-sized project wins, including major stadiums, and strong demand across repeat customers and new accounts.

During the second quarter of fiscal 2026, orders increased due to a mix of large project wins, including professional sports stadiums, and mid-sized project upgrades.

High School Park and Recreation:

Sales increased during the first quarter of fiscal 2026 compared to the same period one year ago, primarily driven by stronger demand for video display systems and continued momentum in school and community markets.

Gross profit as a percentage of sales increased due to a more cost-effective video offering and price increases related to value selling, in addition to the efficient use of manufacturing expenses.

Sales decreased during the second quarter of fiscal 2026 compared to the same period one year ago due to timing for when customers take delivery of video projects, which are larger in dollar amount.

Gross profit as a percentage of sales was also impacted by the lower mix of video projects shipping as they are higher margin business, and margins decreased due to a lower sales volume over steady fixed costs.

Selling expenses remained relatively flat.

Order bookings remained relatively flat.

Transportation:

Sales remained relatively flat during the second quarter of fiscal 2026 compared to the same period one year ago.

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 increased slightly due to personnel related wages and benefit costs for investments in staffing to support future growth.

Order bookings increased compared to the prior year, reflecting growth in airports and ITS.

International:

The increase in net sales in the second quarter of fiscal 2026 was primarily driven by higher backlog and higher orders.

Gross profit as a percentage of sales increased as a result of a higher sales volume.

Selling expense increased in the second quarter of fiscal 2026 compared to the same period in the prior year, primarily driven by personnel related wages and benefit costs for investments in staffing to support future growth.

The increase in order bookings is primarily driven by successful bookings in the Middle East due to a large stadium project and the continued execution of global expansion strategies.

RESULTS OF OPERATIONS

COMPARISON OF THE SIX MONTHS ENDED NOVEMBER 1, 2025 AND OCTOBER 26, 2024

Consolidated Performance Summary

The following is an analysis of changes in key items included in the statements of operations for the six months ended November 1, 2025 and October 26, 2024:

November 1, 2025 % of Net sales (1)

October 26, 2024 % of Net sales (1)

Dollar Change (1)

Percent Change (1)

Net sales $ 448,225 100.0 % $ 434,419 100.0 % $ 13,806 3.2 %

Cost of sales 321,328 71.7 318,858 73.4 2,470 0.8

Gross profit 126,897 28.3 115,561 26.6 11,336 9.8

Operating expenses:

Selling 32,890 7.3 30,340 7.0 2,550 8.4

General and administrative 28,057 6.3 27,273 6.3 784 2.9

Product design and development 21,115 4.7 19,462 4.5 1,653 8.5

Total operating expenses 82,062 18.3 77,075 17.7 4,987 6.5

Operating income 44,835 10.0 38,486 8.9 6,349 16.5

Nonoperating income (expense):

Interest income (expense), net 1,451 0.3 202 — 1,249 618.3

Change in fair value of convertible note — — (11,286) (2.6) 11,286 (100.0)

Other expense, net (2,201) (0.5) (1,999) (0.5) (202) 10.1

Income before income taxes 44,085 9.8 25,403 5.8 18,682 73.5

Income tax expense 10,134 2.3 8,943 2.1 1,191 13.3

Net income $ 33,951 7.6 % $ 16,460 3.8 % $ 17,491 106.3 %

Diluted earnings per share $ 0.68 $ 0.35 $ 0.33 94.3 %

Diluted weighted average shares outstanding 49,608 47,507 $ 2,101 4.4 %

Orders $ 437,678 $ 353,760 $ 83,918 23.7 %

(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.

Sales, orders, gross profit, and operating expenses were impacted as a result of the first six months of fiscal 2026 including 27 weeks compared to the more common 26 weeks.

The first quarter of fiscal 2026 contained 14 weeks.

The sales increase in the first six months of fiscal 2026 compared to the same period in fiscal 2025 was the result primarily of higher volumes in the Commercial, High School Park and Recreation, and International business units, partially offset by decreased sales in the Live Events and Transportation business units.

The amount of recognized revenue associated with performance obligations satisfied in prior years during the six months ended November 1, 2025 and October 26, 2024 was immaterial.

Order volume increased in the first six months of fiscal 2026 compared to the same period in fiscal 2025 primarily due to order growth in the Live Events, High School Park and Recreation, and International business units, partially offset by lower order volume in the Commercial business unit.

Live Events had large order bookings related to multiple Major League Baseball stadiums, one National Hockey League arena, three Major League Soccer stadiums, and various professional sports stadium upgrades.

High School Park and Recreation has seen continued adoption of video in schools.

International continued to grow primarily due to orders in the Middle East, Australia, and Europe.

Order bookings in the Transportation business unit remained relatively flat.

Gross profit as a percentage of net sales increased to 28.3 percent for the first six months of fiscal 2026 as compared to 26.6 percent for the same period a year ago.

The increase was driven by a combination of strategic pricing, operational efficiencies, and favorable project mix across business units.

Total warranty expense as a percentage of sales decreased to 1.4 percent for the first six months of fiscal 2026 as compared to 1.9 percent for the same period from a year ago primarily driven by lower significant and unusual warranty costs.

Selling expenses increased in the first six months of fiscal 2026 compared to the same period in fiscal 2025 primarily due to the increases in personnel related wages and benefits and increased staffing levels to support future growth.

General and administrative expenses increased in the first six months of fiscal 2026 compared to the same period in fiscal 2025 primarily due to personnel related wages and benefits, and increased expenses for technology resources for our digital transformation strategies.

During the first six months of fiscal 2025, the Company incurred $4.3 million of consultant related expenses associated with the strategic and digital transformation initiatives.

Product design and development expenses increased in the first six months of fiscal 2026 compared to the same period in fiscal 2025 primarily due to higher staffing costs and investments in advanced technologies and engineering services.

Interest income (expense), net in the first six months 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 first six months 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 Convertible Note.

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.

Other expense, net remained relatively flat in the first six months of fiscal 2026 compared to the same period in fiscal 2025.

Income tax expense:

For the six months ended November 1, 2025, our effective tax rate was 23.0 percent compared to an effective tax rate of 35.2 percent for the six months ended October 26, 2024.

The higher tax rate in the first six months of fiscal 2025 was primarily due to the impact of the fair value adjustment to the Convertible Note in proportion to the pre-tax income, whereas the tax rate for the first six months of fiscal 2026 is lower due to having no further impacts of fair value adjustments on Convertible Note.

For the six months ended November 1, 2025, our earnings per diluted share was $0.68 compared to $0.35 in the same period last year.

Reportable Segment Performance Summary

The following table presents financial performance information for our reportable segments, including a reconciliation of contribution margin, a non-GAAP measure, to GAAP operating income for the six months ended November 1, 2025 and October 26, 2024:

Six Months Ended November 1, 2025

Commercial Percent of net sales (1) Live Events Percent of net sales (1) High School Park and Recreation Percent of net sales (1) Transportation Percent of net sales (1) International Percent of net sales (1) Total Percent of net sales (1)

Net sales $ 96,919 $ 161,281 $ 105,314 $ 37,849 $ 46,862 $ 448,225

Cost of sales 69,949 72.2 % 121,331 75.2 % 69,286 65.8 % 26,130 69.0 % 34,632 73.9 % 321,328 71.7 %

Gross profit 26,970 27.8 39,950 24.8 36,028 34.2 11,719 31.0 12,230 26.1 126,897 28.3

Selling 9,188 9.5 6,045 3.7 8,678 8.2 3,195 8.4 5,784 12.3 32,890 7.3

Contribution margin 17,782 18.3 33,905 21.0 27,350 26.0 8,524 22.5 6,446 13.8 94,007 21.0

General and administrative — — — — — — — — — — 28,057 6.3

Product design and development — — — — — — — — — — 21,115 4.7

Operating income $ 17,782 18.3 % $ 33,905 21.0 % $ 27,350 26.0 % $ 8,524 22.5 % $ 6,446 13.8 % $ 44,835 10.0 %

Orders $ 86,504 $ 181,447 $ 98,932 $ 35,985 $ 34,810 $ 437,678

Six Months Ended October 26, 2024

Net sales $ 77,638 $ 185,815 $ 96,077 $ 43,968 $ 30,921 $ 434,419

Cost of sales 58,905 75.9 % 144,817 77.9 % 60,957 63.4 % 27,547 62.7 % 26,632 86.1 % 318,858 73.4 %

Gross profit 18,733 24.1 40,998 22.1 35,120 36.6 16,421 37.3 4,289 13.9 115,561 26.6

Selling 8,938 11.5 5,181 2.8 8,087 8.4 2,801 6.4 5,333 17.2 30,340 7.0

Contribution margin 9,795 12.6 35,817 19.3 27,033 28.1 13,620 31.0 (1,044) (3.4) 85,221 19.6

General and administrative — — — — — — — — — — 27,273 6.3

Product design and development — — — — — — — — — — 19,462 4.5

Operating income (loss) $ 9,795 12.6 % $ 35,817 19.3 % $ 27,033 28.1 % $ 13,620 31.0 % $ (1,044) (3.4) % $ 38,486 8.9 %

Orders $ 86,670 $ 121,423 $ 82,285 $ 34,981 $ 28,401 $ 353,760

Net Dollar and % Change

Commercial Percent Change (1) Live Events Percent Change (1) High School Park and Recreation Percent Change (1) Transportation Percent Change (1) International Percent Change (1) Total Percent Change (1)

Net sales $ 19,281 24.8 % $ (24,534) (13.2) % $ 9,237 9.6 % $ (6,119) (13.9) % $ 15,941 51.6 % $ 13,806 3.2 %

Cost of sales 11,044 18.7 (23,486) (16.2) 8,329 13.7 (1,417) (5.1) 8,000 30.0 2,470 0.8

Gross profit 8,237 44.0 (1,048) (2.6) 908 2.6 (4,702) (28.6) 7,941 185.1 11,336 9.8

Selling 250 2.8 864 16.7 591 7.3 394 14.1 451 8.5 2,550 8.4

Contribution margin 7,987 81.5 (1,912) (5.3) 317 1.2 (5,096) (37.4) 7,490 (717.4) 8,786 10.3

General and administrative — — — — — — — — — — 784 2.9

Product design and development — — — — — — — — — — 1,653 8.5

Operating income (loss) $ 7,987 81.5 % $ (1,912) (5.3) % $ 317 1.2 % $ (5,096) (37.4) % $ 7,490 (717.4) % $ 6,349 16.5 %

Orders $ (166) (0.2) % $ 60,024 49.4 % $ 16,647 20.2 % $ 1,004 2.9 % $ 6,409 22.6 % $ 83,918 23.7 %

(1) Amounts are calculated on unrounded numbers and therefore may not recalculate using the rounded numbers provided.

In addition, percentages may not add in total due to rounding.

During the first six months of fiscal 2026, total net sales and gross profit as a percentage of net sales increased, reflecting the cumulative impact of the following factors:

The increase in net sales in the first six months of fiscal 2026 compared to the same period one year ago was primarily driven by fulfilling orders in all niches, including On-Premise digital signage, Out-of-Home digital billboards, and Spectacular LED video display projects.

Gross profit as a percentage of sales increased due to a shift in mix to products with higher margins and higher sales volume over a relatively fixed cost structure.

Selling expense remained relatively flat.

The decrease in order bookings was primarily driven by delayed commitments from Spectaculars customers due to a competitive market.

The decrease in net sales in the first six months of fiscal 2026 was primarily due to the absence of the fulfillment of a large project seen in the first quarter of fiscal 2026, which we had in the first quarter of fiscal 2025.

Additionally, the decrease is driven by order volume declines and the differences in expected timing to fulfill current backlog compared to last year's scheduling.

Selling expense increased slightly due to personnel related wages and benefit costs for investments in staffing to support future growth.

Order bookings vary because of large project booking impacts and seasonal sports impacts.

During the first quarter of fiscal 2026, orders increased due to a mix of large project wins, including professional sports stadiums and arenas, and mid-sized project upgrades.

High School Park and Recreation:

Sales increased during the first six months of fiscal 2026 compared to the same period one year ago, primarily driven by stronger demand for video display systems and continued momentum in school and community markets.

Gross profit as a percentage of sales increased due to more cost-effective video offerings and efficient use of manufacturing expenses.

Selling expenses increased slightly due to personnel related wages and benefit costs for investments in staffing to support future growth.

Order bookings increased due to stronger demand for video display systems across school and community markets, supported by simplified offerings, expanded sales channels, and growing interest in interactive content solutions.

Transportation:

Sales decreased during the first quarter of fiscal 2026 compared to the same period one year ago primarily due to lower order bookings which reduced the level of backlog available to build.

Gross profit as a percentage of sales decreased due to lower sales volume and a shift in project mix, over a fixed cost structure, which resulted in higher cost of goods sold as a percentage of sales.

Selling expenses remained relatively flat.

Order bookings decreased slightly compared to the prior year, reflecting variability in customer purchasing schedules and the timing of infrastructure investments.

Sales decreased during the first six months of fiscal 2026 compared to the same period one year ago, primarily due to lower order bookings which reduced the level of backlog available to build.

Gross profit as a percentage of sales decreased due to a shift in project mix to smaller projects with tighter margins and added tariff expense, which resulted in higher cost of goods sold as a percentage of sales.

Selling expenses increased due to personnel related wages and benefits costs for investments in staffing to support future growth.

Order bookings remained relatively flat during the first six months of fiscal 2026 compared to the same period one year ago.

International:

The increase in net sales in the first quarter of fiscal 2026 was primarily driven by higher backlog and higher orders.

The increase in net sales in the first six months of fiscal 2026 was primarily driven by higher backlog and higher orders.

Gross profit as a percentage of sales increased as a result of a higher sales volume.

Selling expense remained relatively flat in the first quarter of fiscal 2026 compared to the same period in the prior year.

Selling expenses remained relatively flat.

The increase in order bookings is primarily driven by successful bookings in the Middle East due to a large stadium project and the continued execution of global expansion strategies.

LIQUIDITY AND CAPITAL RESOURCES

Three Months Ended

(in thousands) August 2,

2025 July 27,

Six Months Ended

(in thousands) November 1,

2025 October 26,

2024 Dollar Change

6 unchanged sentences

Net cash provided by operating activities:

The $26.1 million of cash provided by operating activities during the first three months of fiscal 2026 was up from the $19.5 million in the same period of fiscal 2025.

This increase was primarily driven by improved business profitability, with net income of $16.5 million in fiscal 2026 compared to a net loss of $4.9 million in fiscal 2025.

Non-cash adjustments, including depreciation and amortization, stock-based compensation, and provisions for doubtful accounts, remained relatively consistent year-over-year.

A significant contributor to the increase was a

favorable shift in operating assets and liabilities, which added $1.7 million in fiscal 2026 versus a $3.8 million use of cash in fiscal 2025.

These improvements were supported by strong collections on receivables and contract assets, as well as inventory reduction efforts, partially offset by payments on accounts payable and income taxes.

The changes in net operating assets and liabilities for the three months ended August 2, 2025 and July 27, 2024 consisted of the following:

Three Months Ended

2025 July 27,

The $42.6 million of cash provided by operating activities during the first six months of fiscal 2026 decreased from the $62.8 million in the same period of fiscal 2025.

This decrease was primarily driven by a large increase in accounts receivable, which used $37.0 million of cash in fiscal 2026 compared to a $6.1

million source of cash in fiscal 2025.

Inventory reductions and improved contract asset positions partially offset this impact, while non-cash adjustments such as depreciation, amortization, and stock-based compensation remained relatively consistent year-over-year.

Changes in operating assets and liabilities used $5.2 million of cash in fiscal 2026, compared to a $22.6 million source of cash in fiscal 2025, mainly due to the shift in accounts receivable and lower inventory reductions.

The changes in net operating assets and liabilities for the six months ended November 1, 2025 and October 26, 2024 consisted of the following:

Six Months Ended

2025 October 26,

(Increase) decrease:

16 unchanged sentences

Net cash used in investing activities:

During the first quarter of fiscal 2026, net cash used in investing activities totaled $5.6 million, primarily driven by $4.3 million in purchases of property and equipment and $1.5 million in net loans to affiliates.

During the first six months of fiscal 2026, net cash used in investing activities totaled $9.5 million, primarily driven by $6.8 million in purchases of property and equipment and $3.0 million in net loans to affiliates.

In comparison, the same period in fiscal 2025 saw $10.5 million in property and equipment purchases and $2.0 million in affiliate investments.

Proceeds from the sale of property and equipment were $0.3 million in fiscal 2026 compared to $0.1 million in fiscal 2025.

Net cash (used in) provided by financing activities:

In the first three months of fiscal 2026, financing activities resulted in a net cash outflow of $11.1 million, which included $10.7 million for repurchased shares and $0.5 million in payments on notes payable.

These were partially offset by $0.1 million in proceeds from stock option exercises.

In the first six months of fiscal 2026, financing activities resulted in a net cash outflow of $11.2 million, which included $12.2 million for repurchased shares, $0.9 million in payments on notes payable, and $0.6 million in tax payments related to RSU issuances.

These were partially offset by $1.2 million in proceeds from stock option exercises and $1.4 million in borrowings on notes payable.

In comparison, the first quarter of fiscal 2025 reflected a net inflow of $2.0 million, primarily driven by $4.2 million in proceeds from the exercise of stock options.

2 unchanged sentences

On May 11, 2023, the Company entered into a $75.0 million senior credit facility (the “Credit Facility”) pursuant to a Credit Agreement dated as of May 11, 2023 (as amended, restated, modified, or supplemented from time to time, the “Credit Agreement”), between and among the Company, JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent”), the Lenders (as defined in the Credit Agreement), and the other Loan Parties (as defined in the Credit Agreement).

The Credit Facility consists of the $60.0 million asset-based revolving credit facility, maturing on May 11, 2026 (the “ABL”), and the $15.0 million delayed draw term loan (the “Delayed Draw Loan”), which are secured by a first-priority mortgage (the “Mortgage”) on the Company’s real estate located in Brookings, South Dakota and a first-priority lien on the Company’s assets pursuant to a Pledge and Security Agreement dated as of May 11, 2023 (the “Pledge and Security agreement”) between and among the Company, Daktronics Installation, Inc., and Administrative Agent.

The ABL and the Delayed Draw Loan are subject to the Credit Agreement.

The Credit Agreement, the Mortgage, and the Pledge and Security Agreement contain customary covenants and conditions.

On June 10, 2025, we entered into a Consent and Amendment No.

4 to Credit Agreement, effective as of June 6, 2025 (the “Fourth Amendment”), which permits the

Company to secure Letters of Credit (as defined in the Credit Agreement) with terms that expire after the Credit Agreement’s scheduled maturity day of May 11, 2026 under certain conditions.

As of August 2, 2025, we had no borrowings against the ABL and $41.5 million of borrowing capacity on the ABL after $2.5 million used to secure Letters of Credit outstanding.

No borrowings were made under the ABL during the period ended August 2, 2025.

As of August 2, 2025, we had an outstanding principal balance of $11.9 million on the Delayed Draw Loan.

As of August 2, 2025, we had $136.9 million in cash and cash equivalents.

The Credit Facility consisted of a $60.0 million asset-based revolving credit facility, maturing on May 11, 2026 (the “ABL”), and the $15.0 million delayed draw term loan (the “Delayed Draw Loan”), which are secured by a first-priority mortgage (the “Mortgage”) on the Company’s real estate located in Brookings, South Dakota and a first-priority lien on the Company’s assets pursuant to a Pledge and Security Agreement dated as of May 11, 2023 (the “Pledge and Security agreement”) between and among the Company, Daktronics Installation, Inc., and the Administrative Agent.

The ABL and the Delayed Draw Loan were subject to the Credit Agreement.

The Credit Agreement also permitted the Company to secure Letters of Credit (as defined in the Credit Agreement) with terms that expire after the Credit Agreement’s scheduled maturity day of May 11, 2026 under certain conditions.

The Credit Agreement, the Mortgage, and the Pledge and Security Agreement contained customary covenants and conditions, including covenants to maintain a fixed charge coverage ratio, which restricted our ability to pay dividends and make stock repurchases.

These restrictions did not have a material impact on our ability to make stock repurchases during the quarter ended November 1, 2025.

The Credit Facility and the Credit Agreement were in effect throughout the periods covered by this Quarterly Report on Form 10-Q, including the quarter ended November 1, 2025, and were superseded and replaced by the New Credit Facility and the New Credit Agreement (as each such term is defined herein).

As of November 1, 2025, we had no borrowings against the ABL and $41.7 million of borrowing capacity on the ABL after $3.2 million used to secure Letters of Credit outstanding.

No borrowings were made under the ABL during the period ended November 1, 2025.

As of November 1, 2025, we had an outstanding principal balance of $11.5 million on the Delayed Draw Loan.

As of November 1, 2025, we had $149.6 million in cash and cash equivalents.

W e believe that our cash flow from operating activities, together with existing cash and cash equivalents and availability under the Credit Facility, will be sufficient to fund our working capital, capital expenditures, debt service, stock repurchases, and other financial requirements for at least the next 12 months.

Our cash equivalent balances consist of high-quality, short-term money market instruments.

We were in compliance with all debt covenants as of August 2, 2025, and we expect to remain in compliance with those covenants for at least the next 12 months.

Our primary sources of cash and sources of funds for our operations are cash flows from operations, current cash and cash equivalents, investments in our affiliates, and borrowings under the Credit Facility.

We were in compliance with all debt covenants under the Credit Agreement as of November 1, 2025.

On November 26, 2025, we entered into a new $71.5 million senior credit facility (the “New Credit Facility”) pursuant to a Credit Agreement (the “New Credit Agreement”), between and among the Company, the Administrative Agent, the Lenders (as defined in the New Credit Agreement), and the other Loan Parties (as defined in the New Credit Agreement).

The New Credit Facility consists of a cash flow-backed revolving line of credit and a term loan that is not collateralized by real estate.

We believe that the New Credit Agreement will enhance financial flexibility in managing its operations and capital structure.

We were in compliance with all debt covenants under the New Credit Agreement as of the date of filing this Quarterly Report on Form 10-Q, and we expect to remain in compliance with those covenants for at least the next 12 months.

See “Note 13.

Subsequent Events” of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for a description of the debt obligations under the New Credit Agreement.

For additional information on financing agreements, see “Note 7.

1 unchanged sentence

Working Capital

Working capital was $221.8 million as of August 2, 2025, and $209.4 million as of April 26, 2025, reflecting a $12.4 million increase over the quarter.

This change was primarily impacted by fluctuations in key components such as accounts receivable, which increased by $31.5 million, and accounts payable, which increased by $18.3 million.

Inventory grew slightly by $3.6 million, while contract assets remained relatively stable.

Working capital was $237.6 million as of November 1, 2025, and $209.4 million as of April 26, 2025, reflecting a $28.1 million increase over the quarter.

This change was primarily impacted by fluctuations in key components such as an increase in cash and cash equivalents by $22.1 million, accounts receivable by $36.6 million, and accounts payable by $14.4 million.

Inventory decreased by $4.7 million and contract assets decreased by $6.6 million.

These shifts are influenced by the seasonality of the sports market and construction cycles, which affect the timing of cash flows.

2 unchanged sentences

To manage cash flow, the Company typically uses upfront cash for materials and services and offsets this with down payments or progress payments from customers.

As of August 2, 2025, the Company had $5.1 million in retainage on long-term contracts included in receivables and contract assets, which is expected to be collected within one year.

As of November 1, 2025, the Company had $5.7 million in retainage on long-term contracts included in receivables and contract assets, which is expected to be collected within one year.

Other Liquidity and Capital Uses

Our long-term capital allocation strategy prioritizes funding operations and growth investments, maintaining prudent liquidity and leverage ratios that reflect the cyclical nature of our business, reducing debt, and returning excess cash to stockholders through dividends and share repurchases.

During the first quarter of fiscal 2026 and the first quarter of fiscal 2025, we repurchased shares of the Company’s common stock, par value $0.00001 per share, but did not issue dividends.

During the first six months of fiscal 2026 and fiscal 2025, we

repurchased shares of the Company’s common stock, par value $0.00001 per share (“Common Stock”), but did not issue dividends.

Our strategies for business growth and profitability improvement rely on capital expenditures and strategic investments.

5 unchanged sentences

We also evaluate strategic investments in new technologies, affiliates, or potential acquisitions aligned with our business strategy.

For fiscal 2026, future investments in our current affiliates are being reviewed on a quarterly basis by our Board.

For fiscal 2026, future investments in our current affiliates are being reviewed on a quarterly basis by our Board of Directors (the “Board”).

We are sometimes required to obtain performance bonds for display installations, and we have a $190.0 million bonding line available through surety companies.

If we were unable to complete the installation work, and our customer would call

upon the bond for payment, the surety company would subrogate its loss to Daktronics.

As of August 2, 2025, we had $57.8 million of bonded work outstanding.

If we were unable to complete the installation work, and our customer would call upon the bond for payment, the surety company would subrogate its loss to Daktronics.

As of November 1, 2025, we had $64.1 million of bonded work outstanding.

Contractual Obligations and Commercial Commitments

During the first three months of fiscal 2026, there were no material changes in our contractual obligations.

During the first six months of fiscal 2026, there were no material changes in our contractual obligations.

See the Form 10-K for additional information regarding our contractual obligations and commercial commitments.

4 unchanged sentences

Management’s Discussion and Analysis of Financial Condition and Results of Operations" in the Form 10-K.

There have been no material changes to the significant accounting policies and critical accounting estimates identified in the Form 10-K during the first three months of fiscal 2026.

There have been no material changes to the significant accounting policies and critical accounting estimates identified in the Form 10-K during the first six months of fiscal 2026.

New Accounting Pronouncements

3 unchanged sentences

We are exposed to certain interest rate, foreign currency, and commodity risks as disclosed in the Form 10-K.

There have been no material changes in our exposure to the market risks identified in the Form 10-K during the first three months of fiscal 2026.

There have been no material changes in our exposure to the market risks identified in the Form 10-K during the first six months of fiscal 2026.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis