Daktronics, Inc. Q4 FY2026 earnings call

Overall Financial & Strategic Progress - Delivered record full-year 2026 revenue and orders, with 11% net sales growth, 290 basis points of operating margin expansion, and 25% adjusted EPS growth to $1.05 - Ended the year with a total backlog of $356 million, up 4% year-over-year; average quarterly backlog in 2026 was the highest in company history outside of the 2024 post-COVID rebound - Returned ~$25 million to shareholders via share repurchases in fiscal 2026, maintaining a disciplined capital allocation framework - The leadership transition from former CEO Brad Wiemann has proceeded smoothly

Growth Initiatives & Market Penetration - Expanded market leadership in core end markets: live events, HSPR, transportation, commercial out-of-home, and international - Strengthened the strategic partnership with Grass Valley to integrate live production technology with Daktronics display and control systems, improving fan engagement and supporting software and services growth - Secured new large commercial out-of-home customers and growing project wins in the Middle East, with a focus on regionally tailored products for international expansion

Operational & Product Milestones - Launched the Camino 8 integrated venue management software, which unifies real-time data, graphics, lighting, audio and display control to elevate in-venue experiences and enable software and recurring revenue growth - Deployed a modernized new customer service system in May 2026, retiring legacy platforms, simplifying the technology stack, and achieving cost efficiencies via automation; full customer adoption is targeted by the end of 2026 - Began expansion of the 110,000+ square foot manufacturing facility in Saltillo, Mexico to increase global production network agility, support North American customer demand, and mitigate geopolitical and trade volatility; production is scheduled to start in July 2026, with first shipments expected in Q2 fiscal 2027 - Implemented value-based pricing actions, improved supply chain efficiency, and accelerated backlog conversion to drive margin expansion

Daktronics achieved full-year fiscal 2026 record total revenue of $839 million, growing 10.9% year-over-year. Four of five business segments delivered double-digit revenue growth in fiscal 2026: - Live Events: 10%+ revenue growth; the segment won all five available bid Major League Baseball stadium projects during the year, completed 11 MLB and 11 college sports display projects in Q4. - High School Parks & Recreation (HSPR): 10%+ revenue growth; video installations increased 18.5% year-over-year in Q4. - Commercial: 16% revenue growth; order volumes were relatively stable against a strong prior year comparison, with healthy underlying demand; the segment booked a large Times Square Spectaculars order in Q4. - International: 25% revenue growth; full-year orders reached $75 million, with large project wins in Qatar and the United Arab Emirates, and a strong pipeline for 2027. - Transportation: Full-year orders hit a record $89 million, growing 24% year-over-year, but revenue was lower due to project timing dynamics (no change to long-term demand). Approximately 62% of total fiscal 2026 revenue came from higher-margin non-project oriented businesses, consistent with prior periods.

- Management reaffirms the original three-year fiscal 2028 targets: 7% to 10% compound annual revenue growth, 10% to 12% operating margin, and 17% to 20% return on invested capital (ROIC); fiscal 2026 performance keeps the company on track to meet these targets - Fiscal 2027 is expected to be a pivotal year of execution for the company's three-year transformation plan, with continued progress toward fiscal 2028 targets supported by a robust end-to-end pipeline and $356 million starting backlog - Project timing and quarterly variability will persist as expected for a project-based business, and the first quarter of fiscal 2027 will have 13 weeks compared to 14 weeks in the year-ago quarter, which impacts year-over-year comparisons - Management expects some increase in depreciation and amortization in fiscal 2027 tied to investments in automation and new manufacturing capacity

- Quarterly revenue and margin results are subject to variability driven by the timing of large project awards, production completion, and installation milestones, due to the company's project-oriented business model and meaningful fixed cost component in cost structure - Input cost volatility, ongoing uncertainty around U.S. tariff rates, exemptions and competitive responses remain headwinds for profitability - Large project conversion timing can impact working capital and near-term free cash flow, as seen in the fourth quarter 2026 working capital draw from timing gaps between project completion and final billing - Competitive pricing pressure persists across end markets

Q: The company has noted a strong pipeline across all verticals for fiscal 2027. Are there any areas expected to deliver outsized growth, how are tariffs impacting current margins, and what is the progress of lean and automation efficiency initiatives? / A: Management confirmed the pipeline is robust across all vertical markets, with the main uncertainty around timing of conversion from pipeline to bookings to revenue. Tariff impacts are no longer a major lingering headwind. While competitive pressure remains, internal initiatives including deeper direct procurement, expansion to indirect procurement, lean manufacturing, and automation are expected to gradually expand margins. The first phase of procurement improvements from the original transformation plan is complete, and new phases of indirect procurement and automation expansion are just getting underway.

Q: Is there a recurring revenue component to the new Camino 8 software, and how does it differ from existing competing products? / A: Camino 8 will include a mix of initial software license revenue and some recurring revenue, which aligns with the company's broader push to grow software and services. Its key differentiator is that it unifies all venue control functions (displays, data, lighting, audio) into a single seamless system for stadium operators, creating clear customer value. Early pipeline development has been strong since its April launch, with solid market interest.

Q: What margin impact is expected from the new Mexico manufacturing facility, and will ramp-up costs suppress margins early on? / A: The primary near-term purpose of the Mexico facility is to add needed production capacity to meet growing customer demand and reduce delivery timelines for compressed project schedules. Margin improvements from the facility, driven by favorable tariff treatment and optimized production costs, will accrue gradually over time rather than being seen immediately. The margin benefits will also combine with the company's other ongoing operational initiatives (automation, lean, procurement) to drive overall margin expansion.

Q: Commercial segment orders were flat year-over-year in 2026; what initiatives are in place to drive demand there? / A: The 2026 order plateau is viewed as a temporary dip in customer investment, not a structural slowdown. The commercial segment's current pipeline is already strong, particularly for large Spectacular out-of-home projects, and value-based pricing initiatives have improved the company's competitive position. Management is closely monitoring segment performance and prioritizing conversion of the existing strong pipeline in 2027.