DAKTRONICS INC /SD/

MANUFACTURING NETWORK OPTIMIZATION

Exit of the Ireland Manufacturing Facility: The Company will begin to exit its manufacturing operations at its Ireland facility, with its closure anticipated to be substantially complete by mid-fiscal 2028. The action is intended to reduce fixed costs with a low or negative return outlook and improve manufacturing utilization across the Company’s global manufacturing network.

The Ireland phased-exit is expected to result in $13.5 million of cumulative pre-tax charges, including employee-related costs, facility wind-down and equipment-transfer costs, and potential asset impairments. The Company expects to recognize approximately $5.3 million of related restructuring charges in fiscal 2027 Q2, with the remaining costs, largely severance, charged in subsequent quarters as incurred through the completion of the phased-exit. Fiscal 2027 pre-tax savings are estimated at $0.9 million.

When fully implemented, the Ireland action is expected to generate $7.7 million of annualized pre-tax savings which will fully offset the associated implementation costs in less than two years, while contributing to the Company’s broader structural cost reduction and margin improvement objectives.

As part of the phased-exit of the Ireland facility, Daktronics is working closely with valued existing customers to plan the necessary production to fulfill outstanding orders and build sufficient spare part inventory to meet our warranty and service obligations.

Realignment of production capacity among the U.S., China and Mexico locations: Daktronics is also initiating steps to realign products and manufacturing capabilities across its U.S., Mexico, and China operations. Its new facility in Mexico recently completed its first production run, and the Company is expanding manufacturing capability in China, with a move to a new 355,000 square foot leased space for automatable production. The Company is also optimizing capacity and operational efficiency in our U.S. factories through attrition and voluntary terminations offered to employees. To accomplish realignment, the Company expects approximately $1.0 million in costs, of which $0.3 million in voluntary severance is expected in the current quarter. These charges are expected to be fully recouped within fiscal 2027.

Planned capacity changes, when fully implemented, are expected to generate annualized run rate savings (net) of approximately $7.0 million. The realignment of the factories is intended to provide global capability to cater to evolving customer needs and timelines. The Live Events, High School Park and Recreation, International and Commercial business units will be served from all three country locations based on lead times and product type, while North American intelligent transportation systems will be primarily served from the U.S. facilities. These realignment initiatives are expected to support the future growth of Daktronics and continue to evolve based on customer needs and market demands.

President and CEO Ramesh Jayaraman stated, “Exiting Ireland and aligning our manufacturing capacity will help us manage factory utilization across the network more effectively, improve work force productivity, set the stage for further automation, and streamline procurement initiatives. We are taking these steps to meet the evolving needs of our customers. We expect these actions to result in the reduction of fixed costs by over $14.7 million annually at the new run rate.”