[Management View]
Daktronics reported a strong start to fiscal 2026, with significant order growth and strategic wins in major league sports projects. Management emphasized the impact of digital transformation and value-based pricing on improving gross margins and operating cash flow.

[Outlook]
The company remains optimistic about demand for its video communication displays and control systems, supported by a growing backlog. Management is focused on achieving higher operating margins and a compound annual growth rate of 7%-10% by fiscal 2028, despite tariff uncertainties.

[Financial Performance]
Daktronics achieved $16.5 million in net income for Q1 fiscal 2026, a significant improvement from a loss of $21.6 million in the prior year. Operating income rose to $23.3 million, despite increased tariff expenses. Orders booked grew 35% year-over-year, with a backlog of $360 million providing future revenue visibility.

[Q&A Highlights]
Question 1: Can you discuss the pipeline for live events and order growth for the rest of the year? (Line breaks here)
Answer: Daktronics secured three major league sports projects and expects continued growth in live events, both in-bowl and out-of-bowl. The company is expanding product and service offerings, with a strong pipeline in both college and major league sports.

Question 2: What factors contributed to the strong gross margin performance, and how sustainable are these trends? (Line breaks here)
Answer: The quarter benefited from a favorable revenue mix and improved alignment between manufacturing expenses and revenue production. Fixed cost leverage and normalized warranty costs also supported margins.

Question 3: With a strong balance sheet, what are your thoughts on M&A opportunities? (Line breaks here)
Answer: Daktronics is strategically evaluating M&A opportunities, with a strong cash position allowing for serious consideration. The company remains open to opportunities as they arise.

Question 4: How competitive was the process for winning the three live events projects? (Line breaks here)
Answer: The major league sports market is highly competitive, with Daktronics focusing on upfront processes and financial tools to win projects. The company leverages its services and financial tools to improve margins and reduce competition.

Question 5: How will the digital transformation impact operating expenses and gross margins? (Line breaks here)
Answer: The transformation is expected to drive efficiencies and improve customer experience, with some initial expense increases. Long-term benefits include improved internal efficiency and competitive product offerings.

Question 6: What is the status of the share buyback program, and are there plans to extend it? (Line breaks here)
Answer: Daktronics repurchased over $10 million in shares, with just under $10 million remaining under the current authority. The board is open to considering additional buyback authorities.

Question 7: Were there any residual transformation consulting costs in Q1? (Line breaks here)
Answer: The bulk of transformation consulting costs were incurred last year, with no significant one-time expenses in Q1.

[Sentiment Analysis]
Analysts expressed optimism about Daktronics' strategic initiatives and financial performance. Management maintained a confident tone, highlighting growth opportunities and strategic priorities.

[Quarterly Comparison]
| Key Metrics | Q1 2026 | Q1 2025 |
|------------------------|---------------|---------------|
| Net Income | $16.5 million | -$21.6 million|
| Operating Income | $23.3 million | $22.7 million |
| Orders Booked | $239 million | 35% YoY growth|
| Order Backlog | $360 million | +$18.7 million|
| Operating Cash Flow | $26 million | +34% YoY |
| Cash Balance | $136.9 million| +7% YoY |

[Risks and Concerns]
Tariff expenses remain a significant uncertainty, with potential impacts on future financial performance. The timing of large project deliveries could delay revenue recognition into fiscal 2027.

[Final Takeaway]
Daktronics delivered a strong performance in Q1 2026, driven by strategic wins and operational improvements. The company's focus on digital transformation and value-based pricing is enhancing profitability and positioning it for future growth. However, tariff uncertainties and project timing pose potential risks to revenue recognition. Overall, Daktronics is well-positioned to achieve its long-term growth and margin objectives.