Daktronics Inc.
03/04/2026 | Press release | Distributed by Public on 03/04/2026 14:17
Quarterly Report for Quarter Ending January 31, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" ("MD&A") is intended to provide a reader of our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. The MD&A provides a narrative analysis explaining the reasons for material changes in the (i) financial condition of Daktronics, Inc. and its subsidiaries (the "Company", "Daktronics", "we", "our", or "us") during the period from the most recent fiscal year-end, April 26, 2025, to and including January 31, 2026; and (ii) results of operations of the Company during the current fiscal period(s) as compared to the corresponding period(s) of the preceding fiscal year.
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 risks, trends, and uncertainties 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"), this Quarterly Report on Form 10-Q, and other reports filed with or furnished to the SEC by the Company.
We also wish to caution investors that other factors might in the future prove to be important in affecting our results of operations. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or a combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required by applicable law.
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 reports filed with or furnished to the SEC by the Company.
The quarter-over-quarter comparisons in this MD&A are as of and for the fiscal quarters ended January 31, 2026 and January 25, 2025 unless otherwise stated.
Non-GAAP Financial Measures
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.
In addition to gross profit, management considers contribution margin a meaningful metric for assessing the financial performance of individual segments. We believe this measure provides investors with a useful view of our segment-level performance consistent with the approach used by management. By presenting contribution margin, we aim to enhance transparency and allow investors to better understand how we evaluate and manage our business operations.
Overview
We are recognized industry leaders in the design and manufacture of electronic scoreboards, programmable display systems, and large-screen video displays serving sporting, commercial, and transportation markets. We serve our customers by delivering high-quality standard display products as well as custom-designed and integrated systems.
Our product portfolio ranges from small-scale scoreboards and electronic displays to large, multimillion-dollar video display systems. These offerings are complemented by related control, timing, and sound systems. We are widely acknowledged for our technical expertise and our ability to design, market, manufacture, install, and service comprehensive integrated solutions that display real-time data, graphics, animation, and video.
Our operations encompass a full spectrum of activities, including marketing and sales, engineering and product design and development, manufacturing, technical contracting, professional services, and customer service and support.
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 nine months ended January 31, 2026, and January 25, 2025, included 40 and 39 weeks of operations, respectively.
Known Trends and Uncertainties
During fiscal 2025, we embarked on our business transformation program, which is focused on driving sustainable growth, margin improvement, and enhanced returns on invested capital. The Company's transformation roadmap, developed through rigorous analysis and planning, is designed to support ambitious sales and profitability targets. Strong order growth during the quarter reflects ongoing market adoption of digital display technologies and the strength of Daktronics' integrated product and service offerings.
The business environment remains dynamic, with several external factors continuing to influence customer demand and operational costs. The Company continues to be affected by U.S. government-imposed tariffs on electronic components, aluminum, steel, and copper, as well as reciprocal tariffs imposed by foreign countries. In addition, changes to U.S. trade policy, including the elimination of the de minimis exemption for low-value shipments, continued to increase logistics and import-related costs. These tariffs may impact gross margins and could influence customer purchasing behavior, particularly for projects dependent on federal funding. In response, Daktronics is actively monitoring its pricing strategies and sourcing plans to mitigate these effects. However, the ultimate impact on demand remains uncertain.
On February 20, 2026, the U.S. Supreme Court ruled that tariffs imposed by the U.S. presidential administration under the International Emergency Economic Powers Act ("IEEPA") exceeded presidential authority and were invalidated. Following the ruling, the administration implemented a temporary global tariff under alternative trade authorities and has indicated an intention to increase the rate to up to 15%. The timing, duration, and final rate of these tariffs remain uncertain. We continue to monitor these developments and assess the potential impact on our results of operations.
The global market for digital display systems continues to expand, driven by investments in manufacturing capacity and advancements in display and control technologies. The industry is seeing increased adoption of surface mount and chip-on-board technologies, particularly for narrow pixel pitch (NPP) and micro-LED applications, as manufacturers and customers seek higher performance and efficiency. Innovations in software, artificial intelligence, and professional services are enhancing content creation, user interfaces, monitoring, and security.
We maintain a unique leadership position in our target markets, which are large, growing, and supported by resilient demand from customers seeking to enhance audience experiences in sports, commercial, and transportation environments. We are investing in capacity and resources to grow and deepen market penetration.
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.
The Company continues to monitor and adjust its capacity and resource levels in response to market conditions. Daktronics is expanding the Company's global manufacturing network into Mexico, as part of its broader three-year strategic plan for improving profitable growth and increasing the overall agility of the company's production capacity. The new facility is expected to be in production by the end of fiscal 2026.
There may be periods where sales and expenses are not fully aligned, particularly as investments in transformation and corporate governance are made. These investments may affect near-term profitability but are intended to support long-term value creation.
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.
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED JANUARY 31, 2026 AND JANUARY 25, 2025
Product Order Backlog
Backlog represents the dollar value of contractually binding customer purchase commitments for integrated electronic display systems and related products and services that are expected to be recognized as net sales in future periods. Orders are included in backlog when we have received an executed contract and any required deposits or security, and the revenue has not yet been recognized. Certain orders supported by binding letters of intent or contracts are excluded from backlog until all required contractual documentation and deposits are received.
Orders and backlog are non-GAAP operating measures, and our methodology for determining these metrics may differ from those 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.
The timing of order fulfillment is subject to customer schedules, supply chain conditions, and our production capacity. We believe order information is useful to investors as an indicator of future revenue and market positioning.
As of January 31, 2026, our product order backlog was $342.3 million, compared to $273.2 million as of January 25, 2025, 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.
We expect to fulfill the backlog as of January 31, 2026, within the next 24 months. However, fulfillment timing may be impacted by project delays due to customer site conditions, which are outside of our control.
Consolidated Performance Summary
The following is an analysis of changes in key items included in the statements of operations for the three months ended January 31, 2026 and January 25, 2025:
| January 31, 2026 |
% of Net sales(1)
|
January 25, 2025 |
% of Net sales(1)
|
Dollar Change(1)
|
Percent Change(1)
|
||||||||||||||||||||||||||||||
| Net sales | $ | 181,871 | 100.0 | % | $ | 149,507 | 100.0 | % | $ | 32,364 | 21.6 | % | |||||||||||||||||||||||
| Cost of sales | 138,242 | 76.0 | 112,726 | 75.4 | 25,516 | 22.6 | |||||||||||||||||||||||||||||
| Gross profit | 43,629 | 24.0 | 36,781 | 24.6 | 6,848 | 18.6 | |||||||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||||||||
| Selling | 15,335 | 8.4 | 14,471 | 9.7 | 864 | 6.0 | |||||||||||||||||||||||||||||
| General and administrative | 15,844 | 8.7 | 16,498 | 11.0 | (654) | (4.0) | |||||||||||||||||||||||||||||
| Product design and development | 10,528 | 5.8 | 9,440 | 6.3 | 1,088 | 11.5 | |||||||||||||||||||||||||||||
| Total operating expenses | 41,707 | 22.9 | 40,409 | 27.0 | 1,298 | 3.2 | |||||||||||||||||||||||||||||
| Operating income (loss) | 1,922 | 1.1 | (3,628) | (2.4) | 5,550 | (153.0) | |||||||||||||||||||||||||||||
| Nonoperating income (expense): | |||||||||||||||||||||||||||||||||||
| Interest income (expense), net | 1,072 | 0.6 | 508 | 0.3 | 564 | 111.0 | |||||||||||||||||||||||||||||
| Change in fair value of convertible note | - | - | (14,083) | (9.4) | 14,083 | (100.0) | |||||||||||||||||||||||||||||
| Other income (expense), net | 518 | 0.3 | (613) | (0.4) | 1,131 | (184.5) | |||||||||||||||||||||||||||||
| Income (loss) before income taxes | 3,512 | 1.9 | (17,816) | (11.9) | 21,328 | (119.7) | |||||||||||||||||||||||||||||
| Income tax expense (benefit) | 502 | 0.3 | (660) | (0.4) | 1,162 | (176.1) | |||||||||||||||||||||||||||||
| Net income (loss) | $ | 3,010 | 1.7 | % | $ | (17,156) | (11.5) | % | $ | 20,166 | (117.5) | % | |||||||||||||||||||||||
| Diluted earnings per share | $ | 0.06 | $ | (0.36) | $ | 0.42 | (116.7) | % | |||||||||||||||||||||||||||
| Diluted weighted average shares outstanding | 49,257 | 47,764 | $ | 1,493 | 3.1 | % | |||||||||||||||||||||||||||||
| Orders | $ | 201,111 | $ | 186,904 | $ | 14,207 | 7.6 | % | |||||||||||||||||||||||||||
(1) Amounts are calculated based on unrounded numbers and therefore may not recalculate using the rounded numbers provided. In addition, percentages may not add in total due to rounding.
Net Sales:The sales increase in the third quarter of fiscal 2026 compared to the same period in fiscal 2025 was the result of higher sales volumes in the Commercial, Live Events, and High School Parks and Recreation business units, partially offset by decreased sales in the Transportation and International business units. The amount of recognized revenue associated with performance obligations satisfied in prior years during the three months ended January 31, 2026 and January 25, 2025 was immaterial.
Ordervolume increased in the third quarter of fiscal 2026 compared to the same period in fiscal 2025 primarily due to order growth in the High School Parks and Recreation and Transportation business units, partially offset by lower order volume in the Live Events and International business units. Order bookings in the Commercial business unit remained
relatively flat. Variability in orders is typical for large project business areas, especially for sports projects, during the Company's third fiscal quarter.
Gross profit increased in the third quarter of fiscal 2026 compared to the same period in fiscal 2025 as a result of higher sales volume. Gross profit as a percentage of net sales decreased slightly to 24.0 percent for the third quarter of fiscal 2026 as compared to 24.6 percent for the same period a year ago, primarily due to project mix variability. Total warranty expense as a percentage of sales increased slightly to 1.3 percent for the third quarter of fiscal 2026 as compared to 0.9 percent for the same period a year ago.
Selling expensesincreased in the third quarter of fiscal 2026 compared to the same period in fiscal 2025 primarily due to increases in personnel related wages and benefits.
General and administrativeexpenses decreased in the third quarter of fiscal 2026 compared to the same period in fiscal 2025. During the third quarter of fiscal 2026 and fiscal 2025, the Company incurred $2.1 million and $4.8 million, respectively, for expenses related to management transitions, acquisition costs, strategic and digital transformation initiatives, and corporate governance matters.
Product design and developmentexpenses increased in the third quarter of fiscal 2026 compared to the same period in fiscal 2025 primarily due to higher staffing costs and investments in advanced technologies and engineering services.
Interest income (expense), netin the third 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 third quarter of fiscal 2025, the interest expense included interest on the convertible note, which was settled during fiscal 2025.
Change in fair value of Convertible Noteresults from accounting for the senior secured convertible note dated May 11, 2023 we issued to Alta Fox Opportunities Fund, LP during fiscal 2024 (the "Convertible Note") under the fair value option. The fair value change was primarily caused by the forced conversion of the entire Convertible Note in the third and fourth quarters of fiscal 2025. All amounts due under the Convertible Note were settled in fiscal 2025, and the Company has no further obligations under the Convertible Note.
Other income (expense), net increased in the third quarter of fiscal 2026 compared to the same period in fiscal 2025 primarily due to foreign currency volatility and the X Display Company Technology Limited ("XDC") business combination.
Income tax expense (benefit): For the three months ended January 31, 2026, our effective tax rate was 14.3 percent compared to 3.7 percent for the three months ended January 25, 2025. The lower tax rate in the third quarter of fiscal 2025 is due to the tax effect of the increase of the Convertible Note fair value adjustment to expense that is not deductible for tax purposes reduced by the tax effect of the period's decrease in pre-tax income, whereas in the third quarter of fiscal 2026, the tax rate was reduced by increases to discrete tax benefits and a reversal of a valuation allowance with no fair value adjustments applicable.
Net income:For the three months ended January 31, 2026, our earnings per diluted share was $0.06 compared to a loss per diluted share of $0.36 in the same period last year.
Reportable Segment Performance Summary
The following table presents financial performance information for our reportable segments for the three months ended January 31, 2026 and January 25, 2025, including a reconciliation of contribution margin, a non-GAAP measure, to GAAP operating income, which is the most directly comparable GAAP measure to contribution margin:
| Three Months Ended January 31, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial |
Percent of net sales(1)
|
Live Events |
Percent of net sales(1)
|
High School Park and Recreation |
Percent of net sales(1)
|
Transportation |
Percent of net sales(1)
|
International |
Percent of net sales(1)
|
Total |
Percent of net sales(1)
|
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| Net sales | $ | 43,506 | $ | 74,911 | $ | 31,649 | $ | 15,273 | $ | 16,532 | $ | 181,871 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of sales | 31,399 | 72.2 | % | 59,803 | 79.8 | % | 22,150 | 70.0 | % | 10,795 | 70.7 | % | 14,095 | 85.3 | % | 138,242 | 76.0 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross profit | 12,107 | 27.8 | 15,108 | 20.2 | 9,499 | 30.0 | 4,478 | 29.3 | 2,437 | 14.7 | 43,629 | 24.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Selling | 4,110 | 9.4 | 3,018 | 4.0 | 4,070 | 12.9 | 1,362 | 8.9 | 2,775 | 16.8 | 15,335 | 8.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Contribution margin | 7,997 | 18.4 | 12,090 | 16.1 | 5,429 | 17.2 | 3,116 | 20.4 | (338) | (2.0) | 28,294 | 15.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| General and administrative | - | - | - | - | - | - | - | - | - | - | 15,844 | 8.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Product design and development | - | - | - | - | - | - | - | - | - | - | 10,528 | 5.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating income | $ | 7,997 | 18.4 | % | $ | 12,090 | 16.1 | % | $ | 5,429 | 17.2 | % | $ | 3,116 | 20.4 | % | $ | (338) | (2.0) | % | $ | 1,922 | 1.1 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Orders | $ | 41,454 | $ | 73,370 | $ | 39,177 | $ | 31,790 | $ | 15,320 | $ | 201,111 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended January 25, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial |
Percent of net sales(1)
|
Live Events |
Percent of net sales(1)
|
High School Park and Recreation |
Percent of net sales(1)
|
Transportation |
Percent of net sales(1)
|
International |
Percent of net sales(1)
|
Total |
Percent of net sales(1)
|
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| Net sales | $ | 37,976 | $ | 46,072 | $ | 29,367 | $ | 18,789 | $ | 17,303 | $ | 149,507 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of sales | 28,890 | 76.1 | % | 37,278 | 80.9 | % | 20,075 | 68.4 | % | 11,863 | 63.1 | % | 14,620 | 84.5 | % | 112,726 | 75.4 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross profit | 9,086 | 23.9 | 8,794 | 19.1 | 9,292 | 31.6 | 6,926 | 36.9 | 2,683 | 15.5 | 36,781 | 24.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Selling | 3,870 | 10.2 | 2,991 | 6.5 | 3,845 | 13.1 | 1,279 | 6.8 | 2,486 | 14.4 | 14,471 | 9.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Contribution margin | 5,216 | 13.7 | 5,803 | 12.6 | 5,447 | 18.5 | 5,647 | 30.1 | 197 | 1.1 | 22,310 | 14.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| General and administrative | - | - | - | - | - | - | - | - | - | - | 16,498 | 11.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Product design and development | - | - | - | - | - | - | - | - | - | - | 9,440 | 6.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating income | $ | 5,216 | 13.7 | % | $ | 5,803 | 12.6 | % | $ | 5,447 | 18.5 | % | $ | 5,647 | 30.1 | % | $ | 197 | 1.1 | % | $ | (3,628) | (2.4) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Orders | $ | 40,983 | $ | 78,132 | $ | 34,549 | $ | 13,838 | $ | 19,402 | $ | 186,904 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Dollar and % Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial |
Percent Change(1)
|
Live Events |
Percent Change(1)
|
High School Park and Recreation |
Percent Change(1)
|
Transportation |
Percent Change(1)
|
International |
Percent Change(1)
|
Total |
Percent Change(1)
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| Net sales | $ | 5,530 | 14.6 | % | $ | 28,839 | 62.6 | % | $ | 2,282 | 7.8 | % | $ | (3,516) | (18.7) | % | $ | (771) | (4.5) | % | $ | 32,364 | 21.6 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of sales | 2,509 | 8.7 | 22,525 | 60.4 | 2,075 | 10.3 | (1,068) | (9.0) | (525) | (3.6) | 25,516 | 22.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross profit | 3,021 | 33.2 | 6,314 | 71.8 | 207 | 2.2 | (2,448) | (35.3) | (246) | (9.2) | 6,848 | 18.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Selling | 240 | 6.2 | 27 | 0.9 | 225 | 5.9 | 83 | 6.5 | 289 | 11.6 | 864 | 6.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Contribution margin | 2,781 | 53.3 | 6,287 | 108.3 | (18) | (0.3) | (2,531) | (44.8) | (535) | (271.6) | 5,984 | 26.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| General and administrative | - | - | - | - | - | - | - | - | - | - | (654) | (4.0) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Product design and development | - | - | - | - | - | - | - | - | - | - | 1,088 | 11.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating income | $ | 2,781 | 53.3 | % | $ | 6,287 | 108.3 | % | $ | (18) | (0.3) | % | $ | (2,531) | (44.8) | % | $ | (535) | (271.6) | % | $ | 5,550 | (153.0) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Orders | $ | 471 | 1.1 | % | $ | (4,762) | (6.1) | % | $ | 4,628 | 13.4 | % | $ | 17,952 | 129.7 | % | $ | (4,082) | (21.0) | % | $ | 14,207 | 7.6 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||
(1) Amounts are calculated on unrounded numbers and therefore may not recalculate using the rounded numbers provided. In addition, percentages may not add in total due to rounding.
During the third quarter of fiscal 2026, total net sales increased and gross profit as a percentage of net sales decreased, reflecting the cumulative impact of the following factors:
Commercial: The increase in net sales in the third quarter of fiscal 2026 compared to the same period one year ago was primarily driven by fulfilling orders in Spectacular LED video display projects, On-Premise digital signage, and Out-of-Home digital billboards. Gross profit as a percentage of sales increased due to delivering more profitable projects in the Spectaculars niche and higher sales volume over a relatively fixed cost structure. Selling expenses remained relatively flat. The slight increase in order bookings reflects continued market adoption of digital display technology.
Live Events: The increase in net sales in the third quarter of fiscal 2026 compared to the same period one year ago was due to the fulfillment of large project orders. Gross profit as a percentage of sales in the quarter remained relatively flat. Selling expenses remained relatively flat. Order bookings fluctuate based on the timing of large project bookings and seasonal sports impacts. During the third quarter of fiscal 2026, we booked a large Major League Baseball stadium project, but had lower orders of other large facility projects.
High School Park and Recreation: Sales increased during the third quarter of fiscal 2026 compared to the same period one year ago primarily driven by higher project execution and continued demand for video display systems. Gross profit as a percentage of sales decreased due to price increases not recovering all increases in tariff costs. Selling expenses remained relatively flat. Order bookings increased due to stronger demand for video display systems in school during the off season.
Transportation: Sales decreased during the third quarter of fiscal 2026 compared to the same period one year ago due to lower order bookings in fiscal 2025 which reduced the level of backlog available to build. Gross profit as a percentage of sales decreased due to a shift in project mix toward smaller projects, added tariff expenses, and competitive pricing pressure, which resulted in higher cost of goods sold as a percentage of sales. Selling expenses remained relatively flat. Order bookings increased compared to the prior year, reflecting strong demand and continued momentum in airports.
International: The decrease in net sales in the third quarter of fiscal 2026 was driven by timing of conversion of orders due to lower backlog compared to one year ago. Gross profit as a percentage of sales decreased primarily due to lower sales volume over relatively fixed cost structure. Selling expenses remained relatively flat. Order bookings decreased compared to the same period a year ago, with results primarily reflecting the timing of large stadium project awards in international markets. However, demand remained strong, primarily due to successful order bookings in Australia and Europe.
RESULTS OF OPERATIONS
COMPARISON OF THE NINE MONTHS ENDED JANUARY 31, 2026 AND JANUARY 25, 2025
Consolidated Performance Summary
The following is an analysis of changes in key items included in the statements of operations for the nine months ended January 31, 2026 and January 25, 2025:
| January 31, 2026 |
% of Net sales(1)
|
January 25, 2025 |
% of Net sales(1)
|
Dollar Change(1)
|
Percent Change(1)
|
||||||||||||||||||||||||||||||
| Net sales | $ | 630,096 | 100.0 | % | $ | 583,926 | 100.0 | % | $ | 46,170 | 7.9 | % | |||||||||||||||||||||||
| Cost of sales | 459,570 | 72.9 | 431,584 | 73.9 | 27,986 | 6.5 | |||||||||||||||||||||||||||||
| Gross profit | 170,526 | 27.1 | 152,342 | 26.1 | 18,184 | 11.9 | |||||||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||||||||
| Selling | 48,225 | 7.7 | 44,811 | 7.7 | 3,414 | 7.6 | |||||||||||||||||||||||||||||
| General and administrative | 43,901 | 7.0 | 43,771 | 7.5 | 130 | 0.3 | |||||||||||||||||||||||||||||
| Product design and development | 31,643 | 5.0 | 28,902 | 4.9 | 2,741 | 9.5 | |||||||||||||||||||||||||||||
| Total operating expenses | 123,769 | 19.6 | 117,484 | 20.1 | 6,285 | 5.3 | |||||||||||||||||||||||||||||
| Operating income | 46,757 | 7.4 | 34,858 | 6.0 | 11,899 | 34.1 | |||||||||||||||||||||||||||||
| Nonoperating income (expense): | |||||||||||||||||||||||||||||||||||
| Interest income (expense), net | 2,523 | 0.4 | 710 | 0.1 | 1,813 | 255.4 | |||||||||||||||||||||||||||||
| Change in fair value of convertible note | - | - | (25,369) | (4.3) | 25,369 | (100.0) | |||||||||||||||||||||||||||||
| Other expense, net | (1,683) | (0.3) | (2,612) | (0.4) | 929 | (35.6) | |||||||||||||||||||||||||||||
| Income before income taxes | 47,597 | 7.6 | 7,587 | 1.3 | 40,010 | 527.3 | |||||||||||||||||||||||||||||
| Income tax expense | 10,636 | 1.7 | 8,283 | 1.4 | 2,353 | 28.4 | |||||||||||||||||||||||||||||
| Net income (loss) | $ | 36,961 | 5.9 | % | $ | (696) | (0.1) | % | $ | 37,657 | (5410.5) | % | |||||||||||||||||||||||
| Diluted earnings per share | $ | 0.75 | $ | (0.01) | $ | 0.76 | (7600.0) | % | |||||||||||||||||||||||||||
| Diluted weighted average shares outstanding | 49,528 | 46,944 | $ | 2,584 | 5.5 | % | |||||||||||||||||||||||||||||
| Orders | $ | 638,789 | $ | 540,664 | $ | 98,125 | 18.1 | % | |||||||||||||||||||||||||||
(1) Amounts are calculated based on unrounded numbers and therefore may not recalculate using the rounded numbers provided. In addition, percentages may not add in total due to rounding.
Sales, orders, gross profit, and operating expenses were impacted as a result of the first nine months of fiscal 2026 including 40 weeks compared to the more common 39 weeks. The first quarter of fiscal 2026 contained 14 weeks.
Net Sales:The sales increase in the first nine months of fiscal 2026 compared to the same period in fiscal 2025 was the result primarily of higher volumes in the Commercial, Live Events, High School Park and Recreation, and International business units, partially offset by decreased sales in the Transportation business unit. The amount of recognized revenue associated with performance obligations satisfied in prior years during the nine months ended January 31, 2026 and January 25, 2025 was immaterial.
Ordervolume increased in the first nine 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, Transportation, and International business units. Order bookings in the Commercial business unit remained relatively flat. Order bookings were supported by continued demand for large-scale video display systems across professional sports, transportation, education, and international markets. Activity was driven by projects at major professional sports venues, strong order activity in aviation and ITS, ongoing adoption of video in school and community settings, and international opportunities.
Gross profit as a percentage of net sales increased to 27.1 percent for the first nine months of fiscal 2026 as compared to 26.1 percent for the same period a year ago. The increase was driven by a combination of strategic pricing, continued operational efficiencies, and overall project mix across the business. Total warranty expense as a percentage of sales decreased slightly to 1.4 percent for the first nine months of fiscal 2026 as compared to 1.6 percent for the same period from a year ago.
Selling expensesincreased in the first nine months of fiscal 2026 compared to the same period in fiscal 2025 primarily due to increases in personnel-related wages and benefits and increased staffing levels to support future growth.
General and administrativeexpenses increased in the first nine months of fiscal 2026 compared to the same period in fiscal 2025 primarily due to personnel-related wages and benefits and included $2.5 million for expenses related to management transitions and acquisition costs. During the first nine months of fiscal 2025, the Company incurred $9.0 million of consultant related expenses associated with the strategic and digital transformation initiatives and corporate governance matters.
Product design and developmentexpenses increased in the first nine months of fiscal 2026 compared to the same period in fiscal 2025 primarily due to higher staffing costs and investments in advanced technologies and engineering services.
Interest income (expense), netin the first nine months 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 first nine months of fiscal 2025, the interest expense included interest on the Convertible Note, which was settled during fiscal 2025.
Change in fair value of Convertible Noteresults from accounting for the Convertible Note. The fair value change was primarily caused by the forced conversion of the entire Convertible Note in the third and fourth quarters of fiscal 2025. All amounts due under the Convertible Note were settled in fiscal 2025.
Other expense, net remained relatively flat in the first nine months of fiscal 2026 compared to the same period in fiscal 2025.
Income tax expense: For the nine months ended January 31, 2026, our effective tax rate was 22.3 percent compared to an effective tax rate of 109.2 percent for the nine months ended January 25, 2025. The higher tax rate in the first nine months of fiscal 2025 was primarily due to the impact of the fair value adjustment to the Convertible Note that is not deductible for tax purposes in proportion to pre-tax income, whereas the tax rate for the first nine months of fiscal 2026 is lower due to having no further impacts of fair value adjustments on Convertible Note.
Net income:For the nine months ended January 31, 2026, our earnings per diluted share was $0.75 compared to a loss per diluted share of $0.01 in the same period last year.
Reportable Segment Performance Summary
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 nine months ended January 31, 2026 and January 25, 2025:
| Nine Months Ended January 31, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | Percent of net sales (1) | Live Events | Percent of net sales (1) | High School Park and Recreation | Percent of net sales (1) | Transportation | Percent of net sales (1) | International | Percent of net sales (1) | Total | Percent of net sales (1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 140,425 | $ | 236,192 | $ | 136,963 | $ | 53,122 | $ | 63,394 | $ | 630,096 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of sales | 101,348 | 72.2 | % | 181,134 | 76.7 | % | 91,436 | 66.8 | % | 36,925 | 69.5 | % | 48,727 | 76.9 | % | 459,570 | 72.9 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross profit | 39,077 | 27.8 | 55,058 | 23.3 | 45,527 | 33.2 | 16,197 | 30.5 | 14,667 | 23.1 | 170,526 | 27.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Selling | 13,298 | 9.5 | 9,063 | 3.8 | 12,748 | 9.3 | 4,557 | 8.6 | 8,559 | 13.5 | 48,225 | 7.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Contribution margin | 25,779 | 18.4 | 45,995 | 19.5 | 32,779 | 23.9 | 11,640 | 21.9 | 6,108 | 9.6 | 122,301 | 19.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| General and administrative | - | - | - | - | - | - | - | - | - | - | 43,901 | 7.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Product design and development | - | - | - | - | - | - | - | - | - | - | 31,643 | 5.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating income | $ | 25,779 | 18.4 | % | $ | 45,995 | 19.5 | % | $ | 32,779 | 23.9 | % | $ | 11,640 | 21.9 | % | $ | 6,108 | 9.6 | % | $ | 46,757 | 7.4 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Orders | $ | 127,958 | $ | 254,817 | $ | 138,109 | $ | 67,775 | $ | 50,130 | $ | 638,789 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Nine Months Ended January 25, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | Percent of net sales (1) | Live Events | Percent of net sales (1) | High School Park and Recreation | Percent of net sales (1) | Transportation | Percent of net sales (1) | International | Percent of net sales (1) | Total | Percent of net sales (1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 115,614 | $ | 231,887 | $ | 125,444 | $ | 62,757 | $ | 48,224 | $ | 583,926 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of sales | 87,795 | 75.9 | % | 182,095 | 78.5 | % | 81,032 | 64.6 | % | 39,410 | 62.8 | % | 41,252 | 85.5 | % | 431,584 | 73.9 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross profit | 27,819 | 24.1 | 49,792 | 21.5 | 44,412 | 35.4 | 23,347 | 37.2 | 6,972 | 14.5 | 152,342 | 26.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Selling | 12,808 | 11.1 | 8,172 | 3.5 | 11,932 | 9.5 | 4,080 | 6.5 | 7,819 | 16.2 | 44,811 | 7.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Contribution margin | 15,011 | 13.0 | 41,620 | 17.9 | 32,480 | 25.9 | 19,267 | 30.7 | (847) | (1.8) | 107,531 | 18.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| General and administrative | - | - | - | - | - | - | - | - | - | - | 43,771 | 7.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Product design and development | - | - | - | - | - | - | - | - | - | - | 28,902 | 4.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating income (loss) | $ | 15,011 | 13.0 | % | $ | 41,620 | 17.9 | % | $ | 32,480 | 25.9 | % | $ | 19,267 | 30.7 | % | $ | (847) | (1.8) | % | $ | 34,858 | 6.0 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Orders | $ | 127,653 | $ | 199,555 | $ | 116,834 | $ | 48,819 | $ | 47,803 | $ | 540,664 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Dollar and % Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | Percent Change (1) | Live Events | Percent Change (1) | High School Park and Recreation | Percent Change (1) | Transportation | Percent Change (1) | International | Percent Change (1) | Total | Percent Change (1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 24,811 | 21.5 | % | $ | 4,305 | 1.9 | % | $ | 11,519 | 9.2 | % | $ | (9,635) | (15.4) | % | $ | 15,170 | 31.5 | % | $ | 46,170 | 7.9 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of sales | 13,553 | 15.4 | (961) | (0.5) | 10,404 | 12.8 | (2,485) | (6.3) | 7,475 | 18.1 | 27,986 | 6.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross profit | 11,258 | 40.5 | 5,266 | 10.6 | 1,115 | 2.5 | (7,150) | (30.6) | 7,695 | 110.4 | 18,184 | 11.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Selling | 490 | 3.8 | 891 | 10.9 | 816 | 6.8 | 477 | 11.7 | 740 | 9.5 | 3,414 | 7.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Contribution margin | 10,768 | 71.7 | 4,375 | 10.5 | 299 | 0.9 | (7,627) | (39.6) | 6,955 | (821.1) | 14,770 | 13.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| General and administrative | - | - | - | - | - | - | - | - | - | - | 130 | 0.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Product design and development | - | - | - | - | - | - | - | - | - | - | 2,741 | 9.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating income (loss) | $ | 10,768 | 71.7 | % | $ | 4,375 | 10.5 | % | $ | 299 | 0.9 | % | $ | (7,627) | (39.6) | % | $ | 6,955 | (821.1) | % | $ | 11,899 | 34.1 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Orders | $ | 305 | 0.2 | % | $ | 55,262 | 27.7 | % | $ | 21,275 | 18.2 | % | $ | 18,956 | 38.8 | % | $ | 2,327 | 4.9 | % | $ | 98,125 | 18.1 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||
(1) Amounts are calculated on unrounded numbers and therefore may not recalculate using the rounded numbers provided. In addition, percentages may not add in total due to rounding.
During the first nine months of fiscal 2026, total net sales and gross profit as a percentage of net sales increased, reflecting the cumulative impact of the following factors:
Commercial: The increase in net sales in the first nine months of fiscal 2026 compared to the same period one year ago was primarily driven by fulfilling orders in all niches, including On-Premise digital signage, Out-of-Home digital billboards, and Spectacular LED video display projects. Gross profit as a percentage of sales increased due to pricing strategies and higher sales volume over a relatively fixed cost structure. Selling expenses increased due to personnel related wages and benefits costs for investments in staffing to support future growth and an increase in bad debt reserves. Order bookings remained relatively flat.
Live Events: The increase in net sales in the first nine months of fiscal 2026 was driven by the fulfillment of a large project orders. The increase in gross profit as a percentage of sales in the quarter is attributable to higher sales volume over a relatively fixed cost structure. Selling expenses increased 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. The increase in order bookings is primarily driven by strong demand for large-scale video display systems across professional sports venues, including multiple professional sports stadium and arena projects.
High School Park and Recreation: Sales increased during the first nine months of fiscal 2026 compared to the same period one year ago, reflecting continued expansion of video display installations in school and community markets. Gross profit as a percentage of sales was impacted by cost increases not fully absorbed by pricing strategies. 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 continued interest in interactive content solutions.
Transportation: Sales decreased during the first nine 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 increased compared to the prior year, primarily driven by strong demand in airports.
International: The increase in net sales in the first nine months of fiscal 2026, reflecting conversion of higher backlog into revenue, supported by large project execution and increased production volumes. Gross profit as a percentage of sales increased primarily due to higher sales volume and favorable project mix. Selling expenses increased due to personnel related wages and benefits costs for investments in staffing to support future growth. The increase in order bookings is primarily driven by successful bookings across the Middle East, Europe, and Australia, and the continued execution of global expansion strategies.
LIQUIDITY AND CAPITAL RESOURCES
| Nine Months Ended | |||||||||||||||||
| (in thousands) |
January 31, 2026 |
January 25, 2025 |
Dollar Change | ||||||||||||||
| Net cash provided by (used in): | |||||||||||||||||
| Operating activities | $ | 54,322 | $ | 74,839 | $ | (20,517) | |||||||||||
| Investing activities | (14,948) | (17,782) | 2,834 | ||||||||||||||
| Financing activities | (23,188) | (6,594) | (16,594) | ||||||||||||||
| Effect of exchange rate changes on cash | 731 | 28 | 703 | ||||||||||||||
| Net increase in cash, cash equivalents and restricted cash | $ | 16,917 | $ | 50,491 | $ | (33,574) | |||||||||||
Net cash provided by operating activities:The $54.3 million of cash provided by operating activities during the first nine months of fiscal 2026 decreased from the $74.8 million in the same period of fiscal 2025. This decrease was primarily driven by a large increase in accounts receivable, which used $21.9 million of cash in fiscal 2026 compared to a $21.8
million source of cash in fiscal 2025. Inventory reductions and increased stock-based compensation partially offset this impact, while non-cash adjustments such as depreciation and amortization remained relatively consistent year-over-year. Changes in operating assets and liabilities used $4.6 million of cash in fiscal 2026, compared to a $31.0 million source of cash in fiscal 2025, mainly due to the shift in accounts receivable, accounts payable, and income tax receivable and payable, and inventory reductions.
The changes in net operating assets and liabilities for the nine months ended January 31, 2026 and January 25, 2025 consisted of the following:
| Nine Months Ended | |||||||||||
|
January 31, 2026 |
January 25, 2025 |
||||||||||
| (Increase) decrease: | |||||||||||
| Accounts receivable | $ | (21,911) | $ | 21,803 | |||||||
| Long-term receivables | (1,850) | (2,755) | |||||||||
| Inventories | 3,022 | 25,043 | |||||||||
| Contract assets | (6,792) | 15,761 | |||||||||
| Prepaid expenses and other current assets | (2,330) | 1,173 | |||||||||
| Income tax receivables | 2,628 | (4,596) | |||||||||
| Investment in affiliates and other assets | (4,330) | (954) | |||||||||
| Increase (decrease): | |||||||||||
| Accounts payable | 23,990 | (16,871) | |||||||||
| Contract liabilities | (1,886) | 2,327 | |||||||||
| Accrued expenses | 3,670 | (3,656) | |||||||||
| Warranty obligations | (192) | (3,574) | |||||||||
| Long-term warranty obligations | 1,758 | 1,920 | |||||||||
| Income taxes payable | 2,316 | (4,642) | |||||||||
| Long-term marketing obligations and other payables | (2,731) | (15) | |||||||||
| $ | (4,638) | $ | 30,964 | ||||||||
Net cash used in investing activities: During the first nine months of fiscal 2026, net cash used in investing activities totaled $14.9 million, primarily driven by $10.4 million in purchases of property and equipment and $5.2 million in loans to affiliates. In comparison, the same period in fiscal 2025 saw $14.7 million in property and equipment purchases and $3.3 million in affiliate investments. Proceeds from the sale of property and equipment were $0.6 million in fiscal 2026 compared to $0.2 million in fiscal 2025.
Net cash used in financing activities: In the first nine months of fiscal 2026, financing activities resulted in a net cash outflow of $23.2 million, which included $22.8 million for repurchased shares, $2.6 million in payments on notes payable, and $0.6 million in tax payments related to RSU issuances. These were partially offset by $1.5 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 outflow of $6.6 million, primarily driven by $9.0 million for repurchased shares and $1.7 million in payments on notes payable. These outflows were partially offset by $5.1 million in proceeds from the exercise of stock options.
Debt and Cash
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"). The New Credit Facility consists of a cash flow-backed revolving line of credit (the "Revolver") and a term loan that is not collateralized by real estate (the "New Term Loan"). We believe the New Credit Facility enhances financial flexibility in managing our operations and capital structure by extending maturities and providing committed liquidity. As of January 31, 2026, there were no advances under the New Term Loan, and the balance of letters of credit outstanding under the Revolver was approximately $1.9 million. For additional information on financing
agreements, see "Note 8. Financing Agreements" of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
As of January 31, 2026, we had $144.4 millionin cash and cash equivalents. We believe that our cash flow from operating activities, together with existing cash and cash equivalents and availability under the New 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.
Our cash equivalent balances consist of high-quality, short-term money market instruments.
Our primary sources of cash and sources of funds for our operations are cash flows from operations, current cash and cash equivalents, investments in our affiliates, and borrowings under the New Credit Facility. We were in compliance with all debt covenants under the New Credit Agreement as of January 31, 2026, and we expect to remain in compliance with those covenants for at least the next 12 months.
Working Capital
Working capital was $234.2 million as of January 31, 2026, and $209.4 million as of April 26, 2025, reflecting a $24.8 million increase. This change was primarily impacted by fluctuations in key components such as an increase in cash and cash equivalents by $16.9 million, accounts receivable by $21.6 million, contract assets by $7.1 million, and accounts payable by $16.9 million. Inventory decreased by $2.2 million.
These shifts are influenced by the seasonality of the sports market and construction cycles, which affect the timing of cash flows. Specifically, payments for inventory and subcontractors often precede customer receipts, especially on large-scale, customized orders. These projects can span over 12 months, depending on complexity and delivery schedules. To manage cash flow, the Company typically uses upfront cash for materials and services and offsets this with down payments or progress payments from customers.
As of January 31, 2026, the Company had $6.7 million in retainage on long-term contracts included in receivables and contract assets, which is expected to be collected within one year.
Other Liquidity and Capital Uses
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 nine 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.
Our strategies for business growth and profitability improvement rely on capital expenditures and strategic investments. We project total capital expenditures of approximately $15.1 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.
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").
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 January 31, 2026, we had $66.0 million of bonded work outstanding.
Contractual Obligations and Commercial Commitments
During the first nine 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.
Significant Accounting Policies and Estimates
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 nine months of fiscal 2026.
New Accounting Pronouncements
For a summary of recently issued accounting pronouncements and the effects of those pronouncements on our financial results, refer to "Note 1. Basis of Presentation" of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
Daktronics Inc. published this content on March 04, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on March 04, 2026 at 20:17 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]