Daktronics (NasdaqGS:DAKT) Q2 2026 Earnings Call December 10, 2025 11:00 AM ET Company ParticipantsRamesh Jayaraman - President and CEOLindsey Vetter - Executive AssistantAndrew Siegel - Chairman of the BoardBrad Wiemann - Interim President and CEOHoward Atkins - CFO and Chief Transformation OfficerConference Call ParticipantsAnja Soderstrom - Senior Financial Analyst and Equity ResearchAaron Spychalla - Senior Research AnalystOperatorGood day, and thank you for standing by. Welcome to the Daktronics second ...

Financial Data and Key Metrics Changes - Daktronics reported a net income of $17.5 million or $0.35 per fully diluted share for Q2 FY26, a 25.4% increase on a fully adjusted basis compared to last year's adjusted net income of $13.9 million [22][23] - Operating income for the quarter was $21.6 million, up from $15.8 million in Q2 FY25, driven by revenue growth and structural cost savings [23][24] - Gross profit margin improved to 27% and operating margin reached 9.4%, both showing improvement from the previous year [23][24] Business Line Data and Key Metrics Changes - The live events segment saw a 26.5% order growth year-over-year, contributing significantly to overall performance [8][9] - The transportation segment experienced a 15% increase in orders, driven by demand for intelligent transportation systems and aviation projects [11] - The international segment orders increased by 23.6%, with strong demand from the Middle East and Europe [12] Market Data and Key Metrics Changes - Overall, Daktronics achieved a 12% growth in orders across all business segments compared to the previous year [7] - The product backlog grew to $321 million, a 36% increase year-over-year, providing a multi-quarter revenue runway [8][27] Company Strategy and Development Direction - The company is enhancing its global manufacturing footprint with a new facility in Saltillo, Mexico, aimed at increasing production capacity and flexibility [13][36] - Daktronics is focused on innovation, with several new product launches planned, including advanced indoor video displays and next-generation digital billboards [15][17] - The company aims to achieve a compound annual growth rate of 7%-10% by FY28, with a target operating margin of 10%-12.5% [34] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of tariff expenses, which increased to $8.8 million in Q2 FY26 from $1.5 million in the same quarter last year, but emphasized the company's ability to maintain profitability [24][25] - The third quarter is expected to be seasonally slower due to holidays, but management remains optimistic about year-over-year revenue growth [33][50] Other Important Information - The company is implementing a transformation plan that is on track to deliver tangible benefits, including improved operational efficiencies and customer engagement [19][20] - Daktronics has increased its share repurchase capacity to $25.7 million, reflecting a strong cash position of $138.3 million, up 20% from the previous year [31][32] Q&A Session Summary Question: How do you expect the backlog to convert to revenue over the fiscal year? - Management highlighted that a higher percentage of the backlog is in the live events segment, which typically has longer conversion times due to customized orders [41][42] Question: Can you quantify the margin improvements and their breakdown? - The improvements in operating margin are attributed to value-added pricing and structural cost efficiencies, despite the impact of increased tariff expenses [45][46] Question: What is the expected capacity expansion from the new Mexico plant? - The Mexico facility is a small operation that complements existing U.S. production, with no plans to move work from the U.S. to Mexico [47][51]