Daktronics outlines 7%–10% annual growth target amid expanded manufacturing and strong backlog

Earnings Call Insights: Daktronics (DAKT) Q2 2026

Management View

• Interim President and CEO Bradley Wiemann stated, "We delivered another quarter of solid results, driving revenue and profit expansion through exemplary execution through the first half of the year." He emphasized the completion of large-scale installations, including Miami Freedom Park, Baltimore Orioles, Aramco Stadium, Zayed Sports City, Philly Airport, San Antonio Spurs, University of Buffalo Football, and the Cincinnati Convention Center.
• Wiemann highlighted, "We are 5 for 5 on large-scale Major League baseball projects for fiscal year 2026," and noted 12% order growth in the second quarter across all business segments.
• He reported a product backlog of $321 million, up 36% year-over-year, supporting a "multi-quarter revenue runway for revenue growth."
• Wiemann announced the opening of a facility in Saltillo, Mexico, targeting production operation in late April 2026, to broaden the company's global manufacturing footprint and provide "optionality as we optimize production going forward."
• The company introduced new products, including a 2.5mm chip-on-board model for narrow pixel pitch displays, a next-generation entry-level digital billboard, the All Sport Lite mobile scoring app, and the Venus Control Suite Live content management platform. Additional launches are planned for the remainder of fiscal 2026.
• Wiemann said, "Our progress down the innovation road map is on schedule," and the transformation plan continues to deliver benefits.
• Acting CFO Howard Atkins stated, "Daktronics second quarter '26 net income after tax was $17.5 million or $0.35 per fully diluted share." He reported operating income of $21.6 million and noted, "Our gross profit margin was 27% in the second quarter and operating margin was 9.4%, both improved from last year."
• Atkins explained, "This year, we incurred $8.8 million of tariff expense gross in the second quarter compared with $1.5 million of tariff expense in the second quarter of fiscal '25."
• Andrew Siegel, Chairman of the Board, introduced Ramesh Jayaraman as the incoming President and CEO, effective February 1, citing his track record as a "transformational leader."

Outlook

• Wiemann reaffirmed the forward-looking plan, targeting "operating margins of 10% to 12%, operating it in the top quartile return on invested capital target of 17% to 20% and achieving a compound annual growth rate of 7% to 10% by fiscal year 2028."
• Atkins commented, "Looking ahead, the third quarter of our fiscal years... are typically seasonally slower largely due to the fact... on the holidays, but we continue to target year-over-year revenue growth."
• Wiemann indicated continued investment in innovative products and services, expansion of manufacturing capacity, and execution of the transformation plan as drivers for sustained growth.

Financial Results

• Atkins reported a net cash balance of $138.3 million at quarter end, a 20% increase from $115.5 million at the previous comparable year-end.
• The company has authorized up to $25.7 million for share repurchases, with $20 million newly authorized by the Board.
• Atkins noted, "We have no borrowings... under our company's bank line of credit and none are contemplated."
• The backlog composition has a higher concentration in Live Events, with approximately 50% of backlog in that segment, which is expected to drive revenue conversion through the spring.
• Operating efficiency improvements resulted in leaner inventories and improved cash position.

Q&A

• Aaron Spychalla, Craig-Hallum Capital Group LLC: Asked about backlog conversion and margin profile. Atkins responded, "A higher percentage of our backlog is now in the Live Events segment... Live Events orders... typically don't start right away, so they're not standard orders... those will be spread out over -- through the spring, actually."
• Spychalla questioned value-added pricing versus operating efficiencies. Atkins replied, "Value-add pricing and the operating efficiencies coming off of the work that we've already done on structural cost savings have positively contributed to -- mostly to the operating margin."
• On the Mexico plant, Spychalla inquired about capacity and investment. Wiemann answered, "It's a small investment. We're leasing the facility in Mexico... it's a small operation at this time. We have room for growth if we need to do that."
• Spychalla also asked about inventory management. Atkins stated, "We're pretty much where we try to get to as a result of the analysis that we did last year and basically pairing off excess inventory and putting in place the processes to keep it managed efficiently."
• Anja Soderstrom, Sidoti & Company, LLC: Asked about third quarter softening. Wiemann explained, "We have fewer days, fewer available work days to convert inventory or convert our backlog over into revenue. So that's the primary thing."
• Soderstrom asked about capacity utilization. Wiemann clarified, "We don't plan to move any work from the U.S. factories over to Mexico, and so this is part of our expansion plans."

Sentiment Analysis

• Analysts focused on backlog conversion, margin improvements, capacity expansion, and inventory management, showing a neutral to slightly positive tone with questions centered on sustainability and execution.
• Management maintained a confident tone during prepared remarks, using phrases like "we are tracking overall toward our objectives" and "our plan is in place."
• During Q&A, management remained detailed and transparent, directly addressing operational and financial questions without visible defensiveness.
• Compared to the previous quarter, the sentiment from both management and analysts remained stable, with continued confidence from management and constructive inquiry from analysts.

Quarter-over-Quarter Comparison

• The current quarter saw the announcement of a new manufacturing facility in Mexico versus no similar expansion in the previous quarter.
• Product backlog grew to $321 million from the prior $360 million, with a higher concentration in Live Events.
• The company continued to report strong order growth in Live Events and Transportation, while Commercial segment orders declined due to fewer large projects.
• Operating and net income metrics remained strong, and the share repurchase authorization was increased compared to the previous quarter.
• Management's tone stayed confident, with additional emphasis on innovation and manufacturing expansion, while analysts continued to focus on operational execution and margin drivers.

Risks and Concerns

• Management identified tariff expenses as a continuing challenge, with $8.8 million incurred in the quarter.
• Seasonality remains a risk, with the third quarter expected to be slower due to holidays limiting workdays.
• The company is maintaining flexibility in manufacturing and supply chain operations to respond to market and cost changes.
• Analysts asked about the impact of tariffs, margin sustainability, and backlog conversion timing, reflecting ongoing concerns about the sustainability of recent gains.

Final Takeaway

Daktronics management highlighted strong execution in project delivery, innovation, and cost efficiencies, supporting double-digit order and revenue growth in the second quarter of fiscal 2026. The company outlined a clear growth strategy with expanded manufacturing in Mexico, a robust product pipeline, and a focus on long-term targets, including 7% to 10% compound annual growth rate by 2028. Challenges such as tariff expenses and seasonality were acknowledged, but the company remains confident in its ability to deliver sustained revenue and profitability improvements through continued transformation initiatives and operational agility.

Read the full Earnings Call Transcript