DAKTRONICS INC /SD/

Previous wording

This Quarterly Report on Form 10-Q, including the MD&A, contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect our current views with respect to future events and financial performance. The words "may," "might," "would," "could," "should," "will," "expect," "estimate," "anticipate," "believe," "intend," "plan," "forecast," "project," and similar expressions are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any and all forecasts and projections in this document are “forward-looking statements” and are based on management’s current expectations or beliefs. From time to time, we may also provide oral and written forward-looking statements in other materials we release to the public, such as press releases, presentations to securities analysts or investors, or other communications by us. Any or all forward-looking statements in this Quarterly Report on Form 10-Q and in any public statements we make could be materially different from actual results. 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.

Current wording

This Quarterly Report on Form 10-Q, including the MD&A, contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect our current views with respect to future events and financial performance. The words "may," "might," "would," "could," "should," "will," "expect," "estimate," "anticipate," "believe," "intend," "plan," "forecast," "project," and similar expressions are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any and all forecasts and projections in this document are “forward-looking statements” and are based on management’s current expectations or beliefs. From time to time, we may also provide oral and written forward-looking statements in other materials we release to the public, such as press releases, presentations to securities analysts or investors, or other communications by us. Any or all forward-looking statements in this Quarterly Report on Form 10-Q and in any public statements we make could be materially different from actual results. 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, 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.

Previous wording

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.

Current wording

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.

Previous wording

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

Current wording

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. 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.

Previous wording

The Company operates on a 52- or 53-week fiscal year ending on the Saturday closest to April 30. When April 30 falls on a Wednesday, the fiscal year ends on the preceding Saturday. 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.

Current wording

The Company operates on a 52- or 53-week fiscal year ending on the Saturday closest to April 30. When April 30 falls on a Wednesday, the fiscal year ends on the preceding Saturday. 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.

Previous wording

To capitalize on this position, we continue to focus on digital and business transformation, cost structure optimization, and market expansion. In fiscal 2025, we established a Business Transformation Office ("BTO") to conduct a comprehensive review of our business, strategy, and operations. The BTO is developing strategic initiatives, enabled in part by our digital transformation, to deliver improved customer outcomes, deeper market penetration, above-market growth, and more efficient delivery, fulfillment, and service. These initiatives are structured to support our ambitious business transformation plan: 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.

Current wording

To capitalize on this position, we continue to focus on digital and business transformation, cost structure optimization, and market expansion. In fiscal 2025, we established a Business Transformation Office ("BTO") to conduct a comprehensive review of our business, strategy, and operations. The BTO is developing strategic initiatives, enabled in part by our digital transformation, to deliver improved customer outcomes, deeper market penetration, above-market growth, and more efficient delivery, fulfillment, and service. These initiatives are structured to support our ambitious business transformation plan: revenue growth outpacing our addressable market, operating margins of 10–12%, and returns on capital of 17–20%, consistently exceeding our cost of capital.

Previous wording

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.

Current wording

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.

Previous wording

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. 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.

Current wording

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. 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.

Previous wording

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.

Current wording

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.

Previous wording

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

Current wording

Europe. 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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

Net income: 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.

Previous wording

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:

Current wording

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:

Previous wording

Commercial: 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. 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.

Current wording

Commercial: 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.

Previous wording

International: The increase in net sales in the first 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 remained relatively flat in the first quarter of fiscal 2026 compared to the same period in the prior year. 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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

Net Sales: 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.

Current wording

Net Sales: 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.

Previous wording

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

Current wording

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.

Previous wording

Gross profitas 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.

Current wording

Gross profitas 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.

Previous wording

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.

Current wording

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.

Previous wording

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:

Current wording

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:

Previous wording

Live Events: 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. 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.

Current wording

Live Events: 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.

Previous wording

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. Selling expenses remained relatively flat. 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.

Current wording

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.

Previous wording

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.

Current wording

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. 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.

Previous wording

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.

Current wording

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. 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.

Previous wording

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

Current wording

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

Previous wording

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. In comparison, the same period in fiscal 2025 saw $5.1 million in property and equipment purchases and $0.9 million in affiliate investments.

Current wording

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. 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.

Previous wording

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 comparison, the first quarter of fiscal 2025 reflected a net inflow of $2.1 million, primarily driven by $3.1 million in proceeds from the exercise of stock options. These inflows were partially offset by $1.0 million in payments on notes payable and principal payments on long-term obligations.

Current wording

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

Previous wording

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

Current wording

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.

Previous wording

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.

Current wording

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).

Previous wording

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.

Current wording

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.

Previous wording

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

Current wording

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

Previous wording

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.

Current wording

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

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

Our strategies for business growth and profitability improvement rely on capital expenditures and strategic investments. We project total capital expenditures of approximately $20.7 million for fiscal 2026. These expenditures will support the acquisition of manufacturing equipment for new or enhanced product lines, expanded production capacity, and increased process automation. Additional investments will target quality and reliability testing equipment, demonstration and showroom assets, and continued upgrades to our information infrastructure.

Current wording

Our strategies for business growth and profitability improvement rely on capital expenditures and strategic investments. We project total capital expenditures of approximately $17.9 million for fiscal 2026. These expenditures will support the acquisition of manufacturing equipment for new or enhanced product lines, expanded production capacity, and increased process automation. Additional investments will target quality and reliability testing equipment, demonstration and showroom assets, and continued upgrades to our information infrastructure.

Previous wording

Beyond capital expenditures, we plan to invest in general and administrative functions to support our digital transformation initiatives. These include modernizing field service automation systems, enhancing enterprise performance planning, and streamlining quoting and sales processes. 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.

Current wording

Beyond capital expenditures, we plan to invest in general and administrative functions to support our digital transformation initiatives. These include modernizing field service automation systems, enhancing enterprise performance planning, and streamlining quoting and sales processes. 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 of Directors (the “Board”).

Previous wording

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.

Current wording

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

Previous wording

During the first three 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.

Current wording

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.

Previous wording

We describe our significant accounting policies in "Note 1. Nature of Business and Summary of Significant Accounting Policies" of the Notes to Consolidated Financial Statements included in the Form 10-K. We discuss our critical accounting estimates in "Part II, Item 7. 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.

Current wording

We describe our significant accounting policies in "Note 1. Nature of Business and Summary of Significant Accounting Policies" of the Notes to Consolidated Financial Statements included in the Form 10-K. We discuss our critical accounting estimates in "Part II, Item 7. 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.