What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-03-04 compared with 2025-12-10 · 158 added, 167 removed, 273 unchanged (54% of the section changed)

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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 November 1, 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 January 31, 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.

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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.

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 April 26, 2025 (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.

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

New factors emerge from time to time, and it is not possible for management to predict all such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or a combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

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

We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required by applicable law.

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.

Risk Factors" of Part I), 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 January 31, 2026 and January 25, 2025 unless otherwise stated.

Non-GAAP Financial Measures

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It is defined as gross profit less selling expenses.

Selling expenses primarily include personnel-related costs, travel and entertainment, marketing expenditures (such as showroom operations, product demonstrations, depreciation and maintenance, conventions, and trade shows), costs associated with customer relationship management and marketing systems, bad debt expense, third-party commissions, and other related expenses.

Selling expenses primarily include personnel-related costs, travel and entertainment, marketing expenditures (such as showroom operations, product demonstrations, depreciation and

maintenance, conventions, and trade shows), costs associated with customer relationship management and marketing systems, bad debt expense, third-party commissions, and other related expenses.

In addition to gross profit, management considers contribution margin a meaningful metric for assessing the financial performance of individual segments.

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

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

The nine months ended January 31, 2026, and January 25, 2025, included 40 and 39 weeks of operations, respectively.

Known Trends and Uncertainties

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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.

The business environment remains dynamic, with several external factors continuing to influence customer demand and operational costs.

The Company continues to be 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 low‑value shipments, continued to increase logistics and import‑related costs.

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

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However, the ultimate impact on demand 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 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.

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.

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RESULTS OF OPERATIONS

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

COMPARISON OF THE THREE MONTHS ENDED JANUARY 31, 2026 AND JANUARY 25, 2025

Product Order Backlog

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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 non-GAAP operating measures, 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 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.

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We believe order information is useful to investors as an indicator of future revenue and market positioning.

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.

As of January 31, 2026, our product order backlog was $342.3 million, compared to $273.2 million as of January 25, 2025, 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.

We expect to fulfill the backlog as of January 31, 2026, 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 November 1, 2025 and October 26, 2024:

November 1, 2025 % of Net sales (1)

October 26, 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 January 31, 2026 and January 25, 2025:

January 31, 2026 % of Net sales (1)

January 25, 2025 % of Net sales (1)

Dollar Change (1)

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Total operating expenses 41,707 22.9 40,409 27.0 1,298 3.2

Operating income 21,563 9.4 15,770 7.6 5,793 36.7

Operating income (loss) 1,922 1.1 (3,628) (2.4) 5,550 (153.0)

Nonoperating income (expense):

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Change in fair value of convertible note — — (14,083) (9.4) 14,083 (100.0)

Other expense, net (259) (0.1) (1,164) (0.6) 905 (77.7)

Income before income taxes 21,862 9.5 25,183 12.1 (3,321) (13.2)

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

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

Other income (expense), net 518 0.3 (613) (0.4) 1,131 (184.5)

Income (loss) before income taxes 3,512 1.9 (17,816) (11.9) 21,328 (119.7)

Income tax expense (benefit) 502 0.3 (660) (0.4) 1,162 (176.1)

Net income (loss) $ 3,010 1.7 % $ (17,156) (11.5) % $ 20,166 (117.5) %

Diluted earnings per share $ 0.06 $ (0.36) $ 0.42 (116.7) %

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

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 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.

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

The amount of recognized revenue associated with performance obligations satisfied in prior years during the three months ended January 31, 2026 and January 25, 2025 was immaterial.

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 increased in the third quarter of fiscal 2026 compared to the same period in fiscal 2025 as a result of higher sales volume.

Gross profit as a percentage of net sales decreased slightly to 24.0 percent for the third quarter of fiscal 2026 as compared to 24.6 percent for the same period a year ago, primarily due to project mix variability.

Total warranty expense as a percentage of sales increased slightly to 1.3 percent for the third quarter of fiscal 2026 as compared to 0.9 percent for the same period a year ago.

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

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 design and development expenses increased in the third 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 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.

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 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.

All amounts due under the Convertible Note were settled in fiscal 2025, and the Company has no further obligations under the Convertible Note.

Other income (expense), net increased in the third quarter of fiscal 2026 compared to the same period in fiscal 2025 primarily due to foreign currency volatility and the X Display Company Technology Limited (“XDC”) business combination.

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.

For the three months ended January 31, 2026, our earnings per diluted share was $0.06 compared to a loss per diluted share of $0.36 in the same period last year.

Reportable Segment Performance Summary

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

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:

Three Months Ended January 31, 2026

Commercial Percent of net sales (1)

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Orders $ 41,454 $ 73,370 $ 39,177 $ 31,790 $ 15,320 $ 201,111

Three Months Ended October 26, 2024

Three Months Ended January 25, 2025

Commercial Percent of net sales (1)

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Selling 240 6.2 27 0.9 225 5.9 83 6.5 289 11.6 864 6.0

Contribution 2,286 34.7 4,250 33.5 (3,765) (27.3) (2,309) (31.8) 4,148 502.8 4,610 11.2

Contribution margin 2,781 53.3 6,287 108.3 (18) (0.3) (2,531) (44.8) (535) (271.6) 5,984 26.8

General and administrative — — — — — — — — — — (654) (4.0)

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

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

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:

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.

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 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.

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 remained relatively flat.

Order bookings increased due to stronger demand for video display systems in school during the off season.

Transportation:

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

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 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.

Selling expenses remained relatively flat.

Order bookings increased compared to the prior year, reflecting strong demand and continued momentum in airports.

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.

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 SIX MONTHS ENDED NOVEMBER 1, 2025 AND OCTOBER 26, 2024

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 six months ended November 1, 2025 and October 26, 2024:

November 1, 2025 % of Net sales (1)

October 26, 2024 % of Net sales (1)

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:

January 31, 2026 % of Net sales (1)

January 25, 2025 % of Net sales (1)

Dollar Change (1)

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Income tax expense 10,636 1.7 8,283 1.4 2,353 28.4

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

Net income (loss) $ 36,961 5.9 % $ (696) (0.1) % $ 37,657 (5410.5) %

Diluted earnings per share $ 0.75 $ (0.01) $ 0.76 (7600.0) %

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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.

Sales, orders, gross profit, and operating expenses were impacted as a result of the first nine months of fiscal 2026 including 40 weeks compared to the more common 39 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.

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

The amount of recognized revenue associated with performance obligations satisfied in prior years during the nine months ended January 31, 2026 and January 25, 2025 was immaterial.

Order volume increased in the first nine 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, Transportation, and International business units.

Order bookings in the Commercial business unit remained relatively flat.

Order bookings were supported by continued demand for large‑scale video display systems across professional sports, transportation, education, and international markets.

Activity was driven by projects at major professional sports venues, strong order activity in aviation and ITS, ongoing adoption of video in school and community settings, and international opportunities.

Gross profit as a percentage of net sales increased to 27.1 percent for the first nine months of fiscal 2026 as compared to 26.1 percent for the same period a year ago.

The increase was driven by a combination of strategic pricing, continued operational efficiencies, and overall project mix across the business.

Total warranty expense as a percentage of sales decreased slightly to 1.4 percent for the first nine months of fiscal 2026 as compared to 1.6 percent for the same period from a year ago.

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

General and administrative expenses increased in the first nine months of fiscal 2026 compared to the same period in fiscal 2025 primarily due to personnel-related wages and benefits and included $2.5 million for expenses related to management transitions and acquisition costs.

During the first nine months of fiscal 2025, the Company incurred $9.0 million of consultant related expenses associated with the strategic and digital transformation initiatives and corporate governance matters.

Product design and development expenses increased in the first nine 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 nine 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 nine 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.

1 unchanged sentence

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.

Other expense, net remained relatively flat in the first nine 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.

For the nine months ended January 31, 2026, our effective tax rate was 22.3 percent compared to an effective tax rate of 109.2 percent for the nine months ended January 25, 2025.

The higher tax rate in the first nine months of fiscal 2025 was primarily due to the impact of the fair value adjustment to the Convertible Note that is not deductible for tax purposes in proportion to pre-tax income, whereas the tax rate for the first nine months of fiscal 2026 is lower due to having no further impacts of fair value adjustments on Convertible Note.

For the nine months ended January 31, 2026, our earnings per diluted share was $0.75 compared to a loss per diluted share of $0.01 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

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 nine months ended January 31, 2026 and January 25, 2025:

Nine Months Ended January 31, 2026

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)

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Orders $ 127,958 $ 254,817 $ 138,109 $ 67,775 $ 50,130 $ 638,789

Six Months Ended October 26, 2024

Nine Months Ended January 25, 2025

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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.

During the first nine 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 nine 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 pricing strategies and higher sales volume over a relatively fixed cost structure.

Selling expenses increased due to personnel related wages and benefits costs for investments in staffing to support future growth and an increase in bad debt reserves.

Order bookings remained relatively flat.

The increase in net sales in the first nine months of fiscal 2026 was driven by the fulfillment of a 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 expenses increased 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.

The increase in order bookings is primarily driven by strong demand for large‑scale video display systems across professional sports venues, including multiple professional sports stadium and arena projects.

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.

Sales increased during the first nine months of fiscal 2026 compared to the same period one year ago, reflecting continued expansion of video display installations in school and community markets.

Gross profit as a percentage of sales was impacted by cost increases not fully absorbed by pricing strategies.

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 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.

Sales decreased during the first nine 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.

Order bookings increased compared to the prior year, primarily driven by strong demand in airports.

International:

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 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.

The increase in net sales in the first nine months of fiscal 2026, reflecting conversion of higher backlog into revenue, supported by large project execution and increased production volumes.

Gross profit as a percentage of sales increased primarily due to higher sales volume and favorable project mix.

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

The increase in order bookings is primarily driven by successful bookings across the Middle East, Europe, and Australia, and the continued execution of global expansion strategies.

LIQUIDITY AND CAPITAL RESOURCES

Six Months Ended

(in thousands) November 1,

2025 October 26,

Nine Months Ended

(in thousands) January 31,

2026 January 25,

2025 Dollar Change

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Net cash provided by operating activities:

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.

The $54.3 million of cash provided by operating activities during the first nine months of fiscal 2026 decreased from the $74.8 million in the same period of fiscal 2025.

This decrease was primarily driven by a large increase in accounts receivable, which used $21.9 million of cash in fiscal 2026 compared to a $21.8

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,

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

Changes in operating assets and liabilities used $4.6 million of cash in fiscal 2026, compared to a $31.0 million source of cash in fiscal 2025, mainly due to the shift in accounts receivable, accounts payable, and income tax receivable and payable, and inventory reductions.

The changes in net operating assets and liabilities for the nine months ended January 31, 2026 and January 25, 2025 consisted of the following:

Nine Months Ended

2026 January 25,

(Increase) decrease:

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Net cash used in investing activities:

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.

During the first nine months of fiscal 2026, net cash used in investing activities totaled $14.9 million, primarily driven by $10.4 million in purchases of property and equipment and $5.2 million in loans to affiliates.

In comparison, the same period in fiscal 2025 saw $14.7 million in property and equipment purchases and $3.3 million in affiliate investments.

Proceeds from the sale of property and equipment were $0.6 million in fiscal 2026 compared to $0.2 million in fiscal 2025.

Net cash (used in) provided by financing activities:

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.

Net cash used in financing activities:

In the first nine months of fiscal 2026, financing activities resulted in a net cash outflow of $23.2 million, which included $22.8 million for repurchased shares, $2.6 million in payments on notes payable, and $0.6 million in tax payments related to RSU issuances.

These were partially offset by $1.5 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.

These inflows were partially offset by $1.4 million in payments on notes payable and principal payments on long-term obligations.

In comparison, the first quarter of fiscal 2025 reflected a net outflow of $6.6 million, primarily driven by $9.0 million for repurchased shares and $1.7 million in payments on notes payable.

These outflows were partially offset by $5.1 million in proceeds from the exercise of stock options.

Debt and Cash

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 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.

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.

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”).

The New Credit Facility consists of a cash flow‑backed revolving line of credit (the “Revolver”) and a term loan that is not collateralized by real estate (the “New Term Loan”).

We believe the New Credit Facility enhances financial flexibility in managing our operations and capital structure by extending maturities and providing committed liquidity.

As of January 31, 2026, there were no advances under the New Term Loan, and the balance of letters of credit outstanding under the Revolver was approximately $1.9 million.

For additional information on financing

agreements, see “Note 8.

Financing Agreements” of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

As of January 31, 2026, we had $144.4 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 New 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 under the New Credit Agreement as of January 31, 2026, and we expect to remain in compliance with those covenants for at least the next 12 months.

Working Capital

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.

Working capital was $234.2 million as of January 31, 2026, and $209.4 million as of April 26, 2025, reflecting a $24.8 million increase.

This change was primarily impacted by fluctuations in key components such as an increase in cash and cash equivalents by $16.9 million, accounts receivable by $21.6 million, contract assets by $7.1 million, and accounts payable by $16.9 million.

Inventory decreased by $2.2 million.

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

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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 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.

As of January 31, 2026, the Company had $6.7 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 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.

During the first nine 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.

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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.

As of January 31, 2026, we had $66.0 million of bonded work outstanding.

Contractual Obligations and Commercial Commitments

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

During the first nine 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.

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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 six 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 nine months of fiscal 2026.

New Accounting Pronouncements

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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 six 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 nine 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