Daktronics, Inc. Q2 FY2026 earnings call

• Delivered solid results with revenue and profit expansion, achieving 12% fiscal second quarter order growth across all segments and third consecutive top line growth. Operating income over $20M in Q2.
• Live Events won 6 major sports projects, including 3 baseball and 3 soccer, with narrow pixel pitch products and advanced control systems.
• Commercial: On-premise advertising up double-digit; out-of-home business pipeline expanding; indoor spectaculars growing via narrow pixel pitch.
• Transportation orders grew 15% driven by intelligent transportation and parking solutions.
• International orders up 23.6% with strong demand in Middle East and Europe.
• Innovation: Expanded narrow pixel pitch, launched new billboard product series, All Sport Lite mobile scoring app, and Venus Control Suite Live.
• Transformation plan: Strategic price adjustments, SaaS product trial, digital transformation projects, and cost benefits initiatives including faster inventory turnover, improved customer experience, and supply contract renegotiations.

Live Events: Won 6 Major League sports projects (3 baseball, 3 soccer) driving 26.5% order growth. Utilizes narrow pixel pitch products and advanced control systems. Commercial: On-premise advertising up double-digit year-over-year; out-of-home business pipeline expanding; indoor spectaculars growing via narrow pixel pitch; government/military and transportation center out-of-home advertising growing. Orders down 5% year-over-year primarily due to fewer large outdoor spectacular projects. Transportation: Orders grew 15% driven by intelligent transportation systems, aviation, and parking solutions. Awarded 5-year procurement contract from Utah Department of Transportation. International: Orders up 23.6% with strong demand in Middle East and Europe for advertising, stadium, and transportation. Indoor solutions growing via AV integrators. High School Park & Recreation (HSPR): Second quarter orders comparable to last year, expanded presence in high schools, expected strong uptake of solutions and services.

• Product backlog at $321M, up 36% year-over-year, providing a multi-quarter revenue runway.
• Plan to achieve operating margins of 10-12%, return on invested capital of 17-20%, and compound annual growth rate of 7-10% by fiscal year 2028.
• Adding manufacturing capacity in Mexico and Ireland to increase flexibility and complement existing U.S. production.

• Tariff expenses are dynamic and impactful.
• Seasonal slowdown in the third quarter due to holidays reducing order conversion to revenue.
• Outdoor spectacular projects in city centers are competitive and variable.

Q: Talk about how backlog converts to revenue over the fiscal year and margin profile.

A: A higher percentage of backlog is in Live Events, which takes time to convert. Live Events orders at 36% of total orders but 50% of backlog. Seasonal third quarter slowdown and timing of orders affect conversion.

Q: How to think about the third quarter softening and capacity utilization?

A: Third quarter softening due to holidays reducing work days. Mexico plant is complementary, no work moved from U.S. factories, small footprint with expansion potential.

Q: Thoughts on inventory management and working capital?

A: Inventory management improved, focus remains, but not expecting significant further improvement as revenue growth will help.