DAKTRONICS INC /SD/ (DAKT)·Q1 2026 Earnings Summary

Executive Summary

• Q1 FY2026 delivered a broad-based beat: revenue $219.0M vs $196.9M consensus (+11%), diluted EPS $0.33 vs $0.21 consensus (+$0.12), and gross margin 29.7% vs 26.2% consensus; mix, value-based pricing, and manufacturing efficiencies drove margin outperformance. Values retrieved from S&P Global*
• Orders surged 35.4% YoY to $238.5M and backlog rose to $360.3M, setting up a revenue tailwind; sequential revenue growth marked the third consecutive quarter (+26.9% vs Q4) .
• Operating income reached $23.3M (10.6% margin) despite ~$6M tariff expense and the quarter having 14 weeks; operating cash flow rose 34% YoY to $26.1M, cash ended at $136.9M, and $10.7M of shares were repurchased .
• Management reiterated 3-year objectives: 7–10% sales CAGR, 10–12% operating margin, and 17–20% ROIC, and emphasized transformation execution, tariff agility, and balanced capital allocation (buybacks/M&A optionality) .

What Went Well and What Went Wrong

What Went Well

• Record demand indicators: Orders +35.4% YoY to $238.5M; Live Events won three major league stadium projects and High School Park & Recreation achieved a record order quarter; backlog rose to $360.3M .
• Margin expansion: Gross margin improved to 29.7% (vs 26.4% YoY), aided by value-based pricing, manufacturing efficiencies, higher-margin mix, and normalized warranty expense (1.2% vs 2.1%) .
• Strong cash generation and balance sheet: Operating cash flow $26.1M (+34% YoY), ending cash $136.9M, no revolver draws, and share repurchases of $10.7M in Q1 .
  • “Fiscal 2026 is off to a great start, with robust order growth, profit expansion and progress along our transformation roadmap…” — Brad Wiemann, Interim CEO .

What Went Wrong

• Top-line declined YoY: Net sales decreased 3.1% vs Q1 FY2025, reflecting the tail-end of prior record-year growth; Live Events revenue fell YoY despite strong orders (timing/longer project schedules) .
• Tariff headwinds: Tariff expense was ~$6M (incl. ~$1M pre-reciprocal), creating margin pressure amid rate uncertainty; management flagged continued volatility in tariff policy .
• Higher OpEx investment: Operating expenses increased to $41.8M (+13% YoY) to support IT, product efficiency, and growth initiatives, tempering operating leverage despite gross margin gains .

Financial Results

Quarterly Comparisons (oldest → newest)

Notes:

• Q1 FY2026 was a 14-week quarter vs Q1 FY2025’s 13 weeks (approx. ~$1.5M extra profit impact, per CFO) .

YoY: Q1 FY2026 vs Q1 FY2025

Segment Net Sales and Orders (Q1 FY2026 vs Q1 FY2025)

KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We delivered a strong beginning to fiscal 2026… backlog of $360 million… our teams drove strong growth led by live events, high school park and recreation, and international.” — Brad Wiemann, Interim CEO .
• “Operating results… were a solid $23.3 million… a key difference… is the tariff expense… $6 million in the first quarter compared with $1 million a year ago… the quarter benefited from 14 weeks vs 13 weeks (~$1.5M).” — Howard Atkins, Acting CFO .
• “Significant progress was made in digital transformation… modernized service software system… building systems to scale our operations… AI experimentation roadmap.” — Management .
• “We remain agile and ready to implement measures to mitigate future tariff impacts… protections built into contracts and keeping the Company’s supply chain… flexible.” — Management .

Q&A Highlights

• Live Events pipeline and revenue cadence: Won 3/3 large projects (MLB/NHL); cadence recognizes longer-lived projects with some revenue into FY2027; pipeline described as strong .
• Gross margin sustainability: Benefits from mix and fixed-cost leverage; warranty normalized; margin trajectory tied to manufacturing alignment and pricing discipline .
• Capital allocation: M&A optionality considered; substantial buyback capacity remains and board open to expanding authorization; ~$10.7M repurchased in Q1 .
• Transformation costs: Prior consulting costs largely concluded; no material one-time expenses in Q1; future consulting expected to be “quite low” .

Estimates Context

*Values retrieved from S&P Global.

Implications: Q1 beats likely drive upward estimate revisions for margins and EPS, with revenue tailwind supported by backlog; Q4 misses already embedded in FY2025 base .

Key Takeaways for Investors

• Q1 FY2026 was a clean beat on revenue, EPS, and gross margin, supported by structural improvements (pricing, manufacturing alignment) and favorable mix; expect positive estimate revisions for gross margin and EPS near term .
• Orders/backlog strength provides multi-quarter visibility; Live Events orders (81% YoY) suggest robust medium-term growth even with elongated project schedules .
• Tariff uncertainty remains the key swing factor; management’s mitigants (contract protections, supply chain flexibility, global manufacturing) reduce risk, but headline sensitivity persists .
• Elevated IT/product investments are intentional to scale and sustain margin expansion; watch for incremental benefits from service software, control systems, and NPP products .
• Capital allocation is supportive: strong cash generation, ample liquidity, continued buybacks, and optional M&A provide downside protection and upside catalysts .
• Near-term trading: beats on all key metrics and record demand indicators are positive catalysts; tariff headlines and Live Events revenue timing can introduce volatility .
• Medium-term thesis: 3-year targets reaffirmed; execution on transformation and digital initiatives, plus regulatory tailwinds (Buy America Act), support margin/ROIC uplift .