Q4 2025 Daktronics Inc Earnings Call

Operator: Good day and thank you for standing by.

Sure.

Speaker Change: Good day, and thank you for standing by welcome to the Tektronix fourth quarter of fiscal year 'twenty financial results Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during this session.

Operator: Welcome to the Daktronics fourth quarter fiscal year 25 financial results. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session.

Operator: To ask a question during this session, you'll need to press star 11 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 11 again.

Speaker Change: You will need to press star one on your telephone you will then hear an automated message.

He had just raised to withdraw your question. Please press star one again, please be advised that today's conference is being recorded.

Operator: Please be advised that today's conference is being recorded.

Carla Gatzke: I would now like to hand the conference over to your speaker today, Carla Gatzke, Corporate Secretary. Please go ahead. Thank you, operator.

Now like to hand, the conference over to your Speaker today, Carla Gatzke Corporate Secretary. Please go ahead.

Carla Gatzke: Good morning, everyone. Thank you for participating in our fourth quarter earnings conference call. During today's presentation, we will make forward-looking statements reflecting our expectations and plans about our future financial performance and future business opportunities. These forward-looking statements reflect the company's expectations or beliefs about future events based on information currently available to us. Of course, actual results could differ.

Carla Gatzke: Thank you operator good morning.

Everyone. Thank you for participating in our fourth quarter earnings Conference call.

Today's presentation during today's presentation, we will make forward looking statements, reflecting our expectations and plans.

Our future financial performance and future business opportunities.

These forward looking statements reflect the company's expectations or beliefs about future events based on information currently available to us.

Carla Gatzke: Of course actual results could differ please refer to slide two of the presentation that accompanies today's call our press release, and our SEC filings for information on risk factors, uncertainties and exceptions that could cause actual results to differ materially from these expectations.

Carla Gatzke: Please refer to Slide 2 of the presentation that accompanies today's call, our press release, and our SEC filings for information on risk factors, uncertainties, and exceptions that could cause actual results to differ materially from these expectations. During this presentation, we will also refer to non-GAAP financial measures. You can find the reconciliation of each non-GAAP measure to the most directly comparable GAAP measure in the appendix to the accompanying presentation slides, which may be found on the investor relations page of our website at www.daktronics.com. Our earnings release for the 2025 fourth quarter, which is furnished to the SEC on a form 8-K this morning, also contains certain non-GAAP financial measures.

Carla Gatzke: During this presentation. We will also refer to non-GAAP financial measures you can find a reconciliation of each non-GAAP measure to the most directly comparable GAAP measure in the appendix to the accompanying presentation slides, which may be found on the Investor Relations page of our website at <unk>.

Carla Gatzke: Www Dot Tektronix dot com.

Carla Gatzke: Our earnings release for the 2025 fourth quarter, which is furnished to the SEC form 8-K. This morning also contained.

Carla Gatzke: Reconciliation of these non-GAAP financial measures to the most directly For more information visit www.fema.gov Gap financial measures, as well as a discussion of certain limitations when using non-gap financial measures, are included in the earnings release, which has been posted separately to the Investor Relations page of our website.

Carla Gatzke: Yeah.

Carla Gatzke: Reconciliations to GAAP measures.

Carla Gatzke: Correct.

Carla Gatzke: Yes.

Carla Gatzke: GAAP financial measures as well as a discussion of certain limitations when using non-GAAP financial measures are included in the earnings release, which has been posted separately to the Investor Relations page of our website.

Andrew Siegel: I'll turn the call over to Andrew Siegel, Chairman of the Board, for some introductory remarks. Thanks, Carla, and good morning, everybody, from here in Brookings. I thought maybe I'd just take a few brief minutes to set the stage. Our last quarter call, we shared several pieces of important news beyond our earnings report. First, the senior management transition in which your board named a well-respected company veteran who has led the group of our largest and most profitable segments, Brad Wieman, as interim CEO. We accelerated our financial transformation by asking Director Howard Atkins to take on the acting CFO role until our new CEO can make their own chief financial officer selection.

Speaker Change: I'll turn the call over to Andrew Siegel Chairman of the board for some introductory remarks.

Andrew Siegel: Thanks, Scott and good morning, everybody from here at Brookings, but I'll, maybe I'll just take a few brief minutes to set the stage.

Speaker Change: Last quarter call. We shared several pieces are so important to us beyond their earnings report.

Speaker Change: First the senior management transition and which are coordinating the well respected company veteran who has led the group with our largest and most profitable segments, Brad remain as interim CEO, we accelerated our finance transformation by asking director Howard Atkins to take on the acting CFO role until a new CEO, Ken can make their own chief financial Officer Celeb.

Andrew Siegel: And while you're hearing my voice today, ask me to step up to become chairman of the board. Why does that matter? Well, I'm a non-insider shareholder who first invested on the conviction that the company was undervalued. I continue to view the stock as significantly undervalued, and I'm committed to closing that gap. Secondly, at the time, we announced that we had reached an agreement with our then-largest shareholder, Alpha Fox, pursuant to which the company terminated our poison pill, converted the 9% subordinated debt, undertook a comprehensive review of our exec compensation, and added Alpha Fox's appointee, Peter Feigin, president of the Milwaukee Bucks of the NBA, to our board.

Andrew Siegel: And why.

Andrew Siegel: What you hear in my voice today asked me to step up to become chairman of the board why does that matter well.

Carla Gatzke: Non inside a shareholder who first invested on the conviction that the company was undervalued I continue to view the stock is significantly undervalued and I'm committed to closing that gap.

Carla Gatzke: Secondly at the time, we announced that we had reached agreement with our then largest shareholder of Fox pursuant to which the company terminated a poison pill converted the 9% subordinated debt.

Carla Gatzke: Undertook a comprehensive review of our exec compensation and added other Fox has appointed Peter <unk> and president of the Milwaukee Bucks at the MBA to our board.

Andrew Siegel: Peter's terrific. He jumped in right away with the voice of the customer to provide insight and guidance, particularly to our live events team. So I want to thank Conor Haley of Alpha Fox for that recommendation, for providing the financing, and like many of you have reached out, for continuing to offer constructive ideas about the company's future. Third, we reincorporated the company in Delaware, where corporate law is well understood, clear, and predictable. This re-domestication was accomplished with the overwhelming approval of shareholders, which reflected its importance to supporting our ongoing business transformation plan, while flexibly protecting shareholder interests.

Carla Gatzke: Terrific.

Speaker Change: Jumped in right away with the voice of the customer to provide insight and guidance, particularly to our live events team. So I want to thank Conor Haley volcker fast for that recommendation for providing the financing and like many of you have reached out for continuing to offer constructive ideas about the company's future.

Carla Gatzke: Third we Reincorporated the company in Delaware corporate law is well understood clear and predictable.

Carla Gatzke: This re domestication was accomplished with the overwhelming approval of shareholders, which reflect its importance.

Carla Gatzke: Supporting our ongoing business transformation plan, while flexibly protecting shareholder interests.

Andrew Siegel: Then, on top of this transition and transformation, another T word was thrown into the mix during the past almost three months for us, along with most U.S. manufacturers. If I'm thinking personally, that created many and multivariate challenges. Those challenges were met and managed by the executive team extraordinarily well. Seeing how quickly and often the landscape changed since Liberation Day, it was really remarkable how the potential impact from so many vectors and just the overall uncertainty was expertly met by this team. So, I can report to you that our fourth fiscal quarter was, in addition to being transitional transformation and reactive to the tariff policy uncertainty, was in fact a quarter of strength, stability, and optimism.

Carla Gatzke: On top of this transition and transformation another keyword was thrown into the mix during the past almost three months for us along with most U S manufacturer I think personally that graded inventing and multi various challenges those challenges were met and managed by the executive team extraordinarily well.

Carla Gatzke: How quickly and often the landscape changed since liberation day. It was really remarkable how the potential impact in so many vectors, suggesting overall uncertainty was expertly met by this team. So I can report to you that our fourth fiscal quarter was in addition to being transformational transformation and reactive to the tariff policy.

Carla Gatzke: The uncertainty.

Carla Gatzke: In fact, the quarter strength stability and optimism.

Andrew Siegel: There actually aren't sufficient words that I can come up with, at least, to describe what Brad and Howard and the entire team managed to accomplish in these few short months, but you can glean from our order and backlog growth an absence of upheaval. Further, as you'll hear about shortly from Brad and Howard, our business and digital transformation remains on track to achieve the objectives we set on the last quarter call. I want to thank the entire senior leadership team for their diligence and their steadiness navigating this transition. Personally, I can tell you that I've come to appreciate the character of this team, their loyalty to the company and its stakeholders, and their openness to executing the change that this transformation plan is now driving.

Carla Gatzke: There actually arent sufficient words.

Speaker Change: I can come up with that Lisa described with Brad and Howard and the entire team has accomplished in these few short months, but you can glean from our order and backlog growth.

Carla Gatzke: Absence of upheaval.

Speaker Change: Further as Youll hear about shortly from Brian Howard our business and digital transformation remains on track to achieve the objectives, we set on the last quarter call.

Carla Gatzke:

Carla Gatzke: I want to thank the entire senior leadership team for their diligence and the steadiness navigating this transition.

Carla Gatzke: I can tell you that I've come to appreciate the character of this team the loyalty of the company and its stakeholders and.

Carla Gatzke: The openness to executing the changes this transformation plan is now driving.

Andrew Siegel: You know, it doesn't show up on the balance sheet, but it's an incredible asset nonetheless, and I thank the team. Our fourth quarter results reflect this focus and determination. The Daktronics board remains committed to the shareholders it represents, just as our executive team remains committed to our customers and to maintaining and further developing the unique qualities that make Daktronics the best in the business. And yes, to transforming our operations in order to achieve our revenue growth, margin expansion, and ROIC targets. I mentioned a moment ago that the company had undertaken a comprehensive exec compensation review.

Carla Gatzke: It doesn't show up on our balance sheet, but it is an incredible asset Nonetheless, and I think the team.

Carla Gatzke: Our fourth quarter results reflect this focus and determination that that transport.

Carla Gatzke: Remains committed to the shareholders that represents just as our executive team remains committed to our customers and.

Carla Gatzke: To maintaining and further developing the unique qualities that make tektronix the best in the business and yes, the transforming our operations in order to achieve our revenue growth margin expansion and ROIC targets.

Carla Gatzke: I mentioned, a moment ago that the company is undertaking a comprehensive exec compensation review that's now been completed.

Andrew Siegel: That's now been completed, and you will have seen this morning some detail of the plan the board has adopted in the AK we filed. Most basically, we're making our compensation more competitive. Obviously, we're in the market with a search for CEO and to follow a CFO, so we do have an appreciation for where market is. But more than just making sure comp is competitive, so we attract first-rate talent. The objective is to align the comp plan with the goals of the transformation. So primarily the principles of the plan are meant to further incent our sales leaders toward driving revenue and for functional leaders to achieve the margin expansion and shareholder return goals of the transformation.

Carla Gatzke: <unk> seen this morning, some detail of the plan the board has adopted.

Carla Gatzke: The 8-K, we filed most basically we're making a compensation more competitive obviously when the market with a search for CEO and to follow a CFO. So we do have an appreciation for where market is.

Carla Gatzke: But more than just making sure accomplished competitive so we attract virtually talent.

Carla Gatzke: The objective is to align the comp plan with the goals of the transformation.

Carla Gatzke: So primarily the principles on plan.

Carla Gatzke: To further incent, our sales leaders toward driving revenue and for functional leaders to achieve the margin expansion and shareholder return goals.

Andrew Siegel: So we've now implemented a new exec compensation philosophy, again with the help of nationally recognized consultants who match best practices to the company's culture. That philosophy uses a full range of compensation incentive tools to maximize company-wide performance. on the CEO search in particular. We don't yet have anything to announce with respect to that, but the search committee is very pleased with the quality and quantity of candidates who have responded positively to the opportunity and expressed their excitement about the company and the possibilities before us. So we're on track, and personally I'm feeling good about the tempo of progress here.

Carla Gatzke: <unk>.

Carla Gatzke: So we've now implemented a new exec compensation philosophy again with the help of nationally recognized consultants, who match best practices to the company's culture.

Carla Gatzke: That philosophy uses a full range of compensation incentives to also maximize company wide performance.

Carla Gatzke: On the CEO search in particular, we don't have anything to announce with respect to that but the search committee is very pleased with the quality and quantity of cabinets have responded positively to the opportunity and express our excitement excitement about the company and the possibilities before us. So we're on track and personally I'm feeling good.

Carla Gatzke: The tempo of progress here.

Brad Wieman: So with those preliminaries, let me turn the call to Brad Wieman, our President, our Interim President and CEO. Brad? Okay, thank you, Andrew.

Carla Gatzke: With those preliminaries, let me turn the call to Brad women are present interim president and CEO Brad.

Brad Wieman: And good morning, everyone. Thank you for joining our fourth quarter fiscal 2025 call. I'm on the call with Howard Atkins, our board member and acting chief financial officer. And we will be reviewing our fiscal fourth quarter and 2025 results, accomplishments and then take your questions. Please turn to slide three of the presentation and we'll get started.

Carla Gatzke: Okay. Thank you Andrew and good morning, everyone. Thank you for joining our fourth quarter fiscal 2025 call them on the call with Howard Atkins, Our board member and acting Chief Financial Officer.

Carla Gatzke: And we will be reviewing our fiscal fourth quarter and 2025 results accomplishments and then take your questions.

Carla Gatzke: Please turn to slide three of the presentation and then we'll get started.

Brad Wieman: The main message I want to share with you today is emphasized here. We had a strong finish to a transformational year. We replenished our backlog in the fourth quarter. We were up 29% from Q3 and up 17% year-over-year broad-based. Through strong customer demand, our teams drove strong order growth in the second half with $50 million in new order flow booked across all segments in the fourth quarter alone. This supported 15% sequential sales growth from the third quarter, replenished our backlog, and is setting us up well as we head into fiscal 2026. Additionally, we worked to preserve gross margins through improved value-based pricing and increasing manufacturing efficiencies, including better aligning our capacity to demand and lowering manufacturing costs, which improved our segments' contribution margins.

Carla Gatzke: The main message I wanted to share with you today as emphasized here, we had a strong finish to a transformational year, we replenished our backlog in the fourth quarter, we were up 29% from Q3 and up 17% year over year over year broad based.

Carla Gatzke: Through strong customer demand our teams drove strong order growth in the second half with $50 million of new order flow booked across all segments in the fourth quarter alone will support a 15% sequential sales growth in the third quarter replenish our backlog and is setting us up well as we head into fiscal 2026.

Carla Gatzke: Additionally, we work to preserve gross margins through improved value based pricing and increasing manufacturing efficiencies, including better aligning our capacity to demand and lowering manufacturing costs, which approved our segment's contribution margins.

Brad Wieman: This minimized the effect of year-over-year volume decrease, resulting from lower Q3 orders really related to an atypical delayed baseball ordering season, and resulted in a just operating income of $6 million.

Carla Gatzke: This minimizes the effect of year over year volume decrease resulting from lower Q3 orders really related to an atypical delayed baseball ordering season and resulted in adjusted operating income of $6 million.

Brad Wieman: The Business and Digital Transformation Plan is in place. Our execution of the plan is on track and driving results. And we more than doubled the fourth quarter operating cash flow year over year.

Carla Gatzke: The business and digital transformation plan is in place our execution of the plan is on track and driving results and we more than doubled the fourth quarter operating cash flow year over here.

Brad Wieman: Turning to slide four, we'll talk about our market verticals. In live events, we won major new projects. Some are mentioned here. These include a variety of applications from main video, auxiliary video, fascia, ribbon, interior displays, a wide variety of products and applications. Repeat, these are repeat customers. The one and only on this one, University of Illinois, a very large multimillion dollar system. You may have seen that in our news release. The rest are new customers, all of which are multi-million dollar systems, including Charles Schwab Field in Omaha, as you likely know it as the home of College World Series, Miami Freedom Park, home of the Inter-Miami Football Club, the University of Nebraska football.

Carla Gatzke: Turning to slide four we will talk about our market verticals.

Carla Gatzke: Live events, we won major new projects. Some are mentioned here. These include a variety of applications for main video auxiliary video fascia ribbon interior displays a wide variety of products and applications repeat these are repeat customers that wanted to only on this one.

Carla Gatzke: University of Illinois, a very large multibillion dollar system.

Carla Gatzke: You may have seen that in our news release the.

Carla Gatzke: The rest are new customers all of which are multibillion dollar systems, including Charles Schwab field in Omaha as you.

Carla Gatzke: Likely noted is the home of College World Series, Miami Freedom Park home of the interim Miami Football Club the University of Nebraska Football surprisingly this is our first <unk>.

Brad Wieman: Surprisingly, this is our first install at the University of Nebraska. We're happy to do it. We're replacing a competitor's display on the north end, and this is, like I said, the first video at that stadium. Cincinnati Convention Center purchased seven 15mm exterior displays.

Carla Gatzke: Stall epic University of Nebraska, we are happy to do it we're replacing a competitor or competitors display on the north end.

Carla Gatzke: And this is like I said first video at that stadia.

Speaker Change: Cincinnati Convention Center purchased 715 millimeter exterior displays.

Brad Wieman: Due to the atypical delay in baseball activity, and that was industry-wide, not just us, during the first year, during the year, orders for fiscal 2025 decreased 12% year-over-year, and for Q4 decreased 11% year-over-year, following a record FY24 and 4 quarters. We continue to enhance our products and services as we expect continued growth in the live events business for both in-bowl applications, but also outside the bowl, as more emphasis is placed on entertaining and informing fans through digital technology throughout the venue, which aligns with our control system capabilities, our service and subscription offerings, our narrow pixel pitch product offerings, Our teams continue to focus on winning business aligned with our corporate transformation objectives on long term profitable growth.

Carla Gatzke: Due to the atypical delay in baseball activity and that was industry wide not just us during the first during the year order for fiscal 2025 decreased 12% year over year and for Q4 decreased 11% year over year following a record FY 'twenty.

Carla Gatzke: Quarter.

Carla Gatzke: We continue to enhance our products and services as we expect continued growth in our live events business for both in both applications, but also outside of the wall as more emphasis is placed on entertaining and informing fans through digital technology throughout the venue, which aligns with our control system capabilities, our service and subscription.

Carla Gatzke: Earnings are narrow pixel pitch product offerings.

Carla Gatzke: Our teams continue to focus on winning business align with our corporate transformation objectives on long term profitable growth.

Brad Wieman: In the picture here is Jack Trice Stadium at the University of Iowa, where fans will be welcomed with new products. They're switching over from our previously installed 15 millimeter high-definition technology to a 13 millimeter high-definition technology. The large screen in this project will be 36 feet by 157.

Carla Gatzke: In the picture here is Jack <unk> Stadium at the University of Iowa.

Carla Gatzke: Welcome to the.

Carla Gatzke: New products.

Carla Gatzke: Our.

Carla Gatzke: We installed 15 millimeter high definition technology to a 13 millimeter high definition technology, the large screen and this project will be 36 feet by 157 feet.

Brad Wieman: In our commercial business, all areas saw demand and success in order wins, with orders for the year increasing 31% from last year, and for the fourth quarter, increasing 44% from the fourth quarter of 2024. This business consists of out-of-home and on-premise advertising sales and larger advertising displays, which we call Spectaculars, conducted primarily through channel partners such as sign company resellers and AV integrators. In the on premise area customers are successfully transitioning to our next generation fuel price product. which offer quick deliveries and feature-rich enhancements. Demand in the out-of-home market has been strong throughout the year, which reflects greater optimism that has been developing both in the national and independent billboard operators, who are more often choosing Daktronics due to our recognized brand strength and image quality and reliability, as well as our service responsiveness.

Carla Gatzke: In our commercial business all areas saw demand at success in order wins with orders for the year, increasing 31% from last year and for the fourth quarter, increasing 44% from the fourth quarter of 2024.

Carla Gatzke: Business consists of out of home and on premise advertising sales and larger advertising displays, which we call spectacular.

Carla Gatzke: Conducted primarily through channel partners, such as signed company resellers and integrators.

Carla Gatzke: And the on premise area customers are successfully transitioning to our next generation fuel price products.

Carla Gatzke: Which offer quick deliveries and feature rich enhancements.

Carla Gatzke: Demand in the out of all market.

Carla Gatzke: This has been strong throughout the year, which reflects greater optimism that has been developing both on the national and independent Billboard operators, who are more often choosing deck products due to a recognized brand strength and image quality and reliability as well as our service responsiveness.

Brad Wieman: We released the next generation billboard product in the fourth quarter, which has been well received by customers. Our investments in independent channel continue to pay off. We continue to bring additional AV partners on and are seeing double-digit order growth from this channel. This is a focus area for our indoor application growth. In the picture here is Syracuse University eSports facility. This is a direct view LED video wall bringing eSports and gaming to life at Syracuse.

Carla Gatzke: We released the next generation <unk> product in the fourth quarter, which has been well received by customers.

Carla Gatzke: Our investments in independent channel.

Carla Gatzke: To pay off we continue to bring additional partners on <unk> and double digit order growth from this channel. This is a focus area for our indoor application growth.

Carla Gatzke: In the picture here at Syracuse University Esports facility. This is a direct view led video wall, bringing esports and gaming to life at Syracuse.

Brad Wieman: In our transportation business, orders tend to be large, which creates order variability from quarter to quarter. Orders decreased 10% from last year, but increased 14% for the fourth quarter. Driven by Notable Winds, a multi-million dollar roadway project for an airport. Intelligent Transportation System WIM in California, which drives the implementation and deployment of transportation technology in California, where we are gaining acceptance of our products for intelligent transportation over the roadway. We are also strengthening the airport market pipeline developed through our strategic relationship. This growth is being driven by customers interested in our chip-on-board solution. In the picture here is a rather typical display for our Vanguard ITS roadway displays at Texas Department of Transportation.

Carla Gatzke: In our transportation business orders tend to be large, which creates order variability from quarter to quarter orders decreased 10% from last year, but increased 14% for the fourth quarter.

Carla Gatzke: Driven by notable wins, a multibillion dollar roadway project for an airport.

Carla Gatzke: Intelligent transportation system win in California, which drives the implementation and deployment of transportation technology in California, where we are gaining acceptance of our products for intelligent transportation over the road.

Carla Gatzke: Secondly, the airport market.

Carla Gatzke: Through our.

Carla Gatzke: Strategic relationships.

Carla Gatzke: This growth is being driven by customers interested in our chipping chip on board solutions.

Carla Gatzke: In the picture here is a rather typical display for our vanguard.

Carla Gatzke: Yes roadway displays at Texas Department of transportation.

Brad Wieman: Going forward, we are focused on growing our ITS market by winning new agency approvals. The Buy America Act, DAA, continues to go into full effect in October of 2026. We expect to benefit as a US manufacturer, and our teams are actively promoting the Buy America Act. Our adjacent growth plans are on track as we deliver chip on board solutions across multiple markets.

Carla Gatzke: Going forward, we are focused on growing our Ips market by winning New agency approvals The buy America Act.

Carla Gatzke: <unk> continues to go into full effect in October of 2026, we expect the bank to benefit as a U S manufacturer and our teams are actively promoting the buy America Act.

Carla Gatzke: Our adjacent growth plans are on track as we deliver chip on board solutions across multiple markets.

Brad Wieman: international, our international business, which serves all the end markets of our domestic markets, which we serve outside of North America has been an area of concentration and focused about development for the past several quarters. These efforts are paying off with orders growing 32% from last year and more than doubling from Q4 of last year. Our international orders increased every quarter throughout FY25, and we reached a peak in the fourth quarter, coming in nearly at $25 million. Our largest growing market in FY25 were advertising. Fourth quarter from this was the largest quarter for advertising orders. This was driven by orders from customers in Saudi Arabia, UAE, Germany, Serbia, UK, Georgia, Australia, for both new and replacement displays.

Carla Gatzke: International our international business, which serves all the end markets of our domestic mark markets.

Carla Gatzke: Which we serve outside of North America has been an area of concentration and focus development development for the past several quarters.

Carla Gatzke: These efforts are paying off with orders growing 32% from last year and more than doubling from Q4 of last year. Our international orders increased every quarter throughout FY 'twenty five and we reached a peak in the fourth quarter coming in at nearly <unk> 5 billion.

Carla Gatzke: Our largest growing market in FY 'twenty five were advertising fourth quarter from this was the largest quarter for advertising orders. This was driven by orders from customers in Saudi Arabia UAE.

Carla Gatzke: Germany, Serbia, UK, Georgia, Australia for both new and replacement this place.

Brad Wieman: In our events segment, we won a very large, multi-million dollar project, a Ramco Stadium at Al-Khabar, Saudi Arabia, a planned multi-purpose facility. Our products were specified into those projects. In the industry segment, we won multiple command and control projects across the Middle East throughout fiscal year 25. Pictured here is a recent installation at El Arabia in Dubai and out of home company there.

Carla Gatzke: In our events segment, we had one very large multimillion dollar project Aramco stadium at Al Khobar, Saudi Arabia are planned multipurpose facility.

Carla Gatzke: Our products are specified into those projects.

Carla Gatzke: And the industry segment, we won multiple command and control projects across the middle East throughout fiscal year 'twenty five.

Carla Gatzke: Pictured here is a recent installation that Ela Arabia in Dubai and out of home company there.

Brad Wieman: In our high school park and recreation business, we drove record orders for the year and the quarter. Orders grew 19% for the year and 33% for the fourth quarter. Industry leading value propositions allow the sales team to implement value selling, which separates us from our competition. We are experiencing strong adoption of professional services, particularly in curriculum development and sports marketing. The market continues to convert to full video, indoor and outdoor. Schools of all sizes are purchasing video with the help of Daktronics Sports Marketing. In addition, Daktronics Curriculum, a software as a service product which brings in recurring revenue, teaches students career-ready production skills.

Carla Gatzke: In our high School Park, and Recreation business, we drove record orders for the year and the quarter orders grew 19% for the year at 33% for the fourth quarter industry, leading value proposition has allowed the sales team.

Carla Gatzke: Element value selling which separates us from our competition.

Carla Gatzke: We are experiencing strong adoption of professional services, particularly in curriculum development and sports marketing.

Carla Gatzke: Market continues to convert to full video indoor and outdoor schools of all sizes are purchasing video with the help of Tektronix sports marketing. In addition, <unk> curriculum a software as a service product, which brings in recurring revenue teaches students career ready production skills.

Brad Wieman: Pictured here is Frederick School District in Frederick, Wisconsin.

Carla Gatzke: <unk> here is Frederick School district in Frederick Wisconsin.

Brad Wieman: Turning to slide five. Of course, new products and services are essential for our continued growth and value-added differentiation. In the fourth quarter, we released and sold new products, a digital billboard product and an outdoor video display system. These products leverage platform technology to reduce product complexity, leverage supply chains, and simplify both manufacturing and installation processes. To the right is the new digital billboard in New Orleans for Lamar. In addition, we are in the process of rolling out control system solutions. These include LiveSwitch, which provides video switching and replay for high school venues. In our fiscal year 26, our current year, we will continue to add capabilities to enable expansion into college and university applications.

Speaker Change: Turning to slide five.

Carla Gatzke: Of course, new products and services are essential for our continued growth in value added differentiation in the fourth quarter, we released and sold new products a digital Billboard product in an outdoor video display system. These products leverage platform technology to reduce product complexity leverage supply chain and simplified bulk manufacturer.

Carla Gatzke: <unk> and installation processes.

Carla Gatzke: Further to the right, yes, yes, the new digital Billboard in New Orleans for Lamar.

Carla Gatzke: In addition, we are in the process of Rolling out control system solutions. These include light switch, which provides video switching and replay for high school venues.

Carla Gatzke: In our fiscal year 2006, our current year, we will continue to add capabilities to enable expansion into college and University applications.

Brad Wieman: The following are cloud-based software as a control solution which drives further recurring revenue. Venus Live, which brings new capability to our show control solution for live events. Show Control Next Generation, Scoring, Statistics, Graphics, Content Creation, and Display Control. And the photo in this picture shows a view of Display Studio, which is an in-game tool to display content across all the displays within the venue. Display Studio is a tool that is part of Daktronics' events-focused show control solution. The photo from this picture is Akershaw Stadium, home of the Pittsburgh Steelers.

Carla Gatzke: The following are cloud based software as a solutions control solution, which drives further recurring revenue.

Carla Gatzke: Venus live, which brings new capability to our show control solution for live events.

Carla Gatzke: <unk> control next generation, scoring statistics graphics content creation and display control and the photo in this picture shows a view of display studio, which is an end.

Carla Gatzke: In game tool to display content across all the displays within the venue display studio is a tool that is part of <unk> events focus show control solution.

Carla Gatzke: The photo from this picture is accurate stadium home of the Pittsburgh Steelers.

Brad Wieman: turning to slide six. With respect to business transformation, we made strong progress on these initiatives in the fourth quarter, and our implementation plan is on track and driving results. Actions we have taken to date include taking price adjustments, which I mentioned a moment ago, allowing us to preserve our value-based products and services positioning. launch of SAS trials to target customers. focused approach on prioritized growth areas, business verticals, and geographies, driving faster inventory turnover and improved inventory efficiency by leveraging our platform designs to reduce complexity. released a modernized service software system that will help us to enhance customer experience through better service management and enablement of self-service options.

Carla Gatzke: Turning to slide six.

Carla Gatzke: Okay.

Carla Gatzke: With respect to business transformation, we made strong progress on these initiatives in the fourth quarter and our implementation plan is on track and driving results actions we are taking.

Carla Gatzke: To date include taking price adjustments, which I mentioned, a moment ago, allowing us to preserve our value based products and surface services positioning.

Carla Gatzke: Watch a SaaS trials to target customers.

Carla Gatzke: <unk> approach in our prioritized growth areas business verticals, and geographies driving faster inventory turnover and improved inventory efficiency by leveraging our platform designed to reduce complexity.

Carla Gatzke: Released a modernized service software system that will help us to enhance customer experience through better service management and enablement of self service options.

Brad Wieman: We are working on launching an AI guided troubleshooting and technical services, making increased use of our purchasing power to improve our input costs, and simplifying some of our products, which allows us to bring them to market more quickly. We more than doubled our operating cash flow in the fourth quarter and drove 54.5% growth in operating cash flow for the year, supported by the business transformation efforts as outlined.

Carla Gatzke: We are working on launching of AI guided troubleshooting and technical services, making increased use of our purchasing power to improve it.

Carla Gatzke: Improve our input costs and simplifying some of our products, which allows us to bring them to market more quickly.

Carla Gatzke: We more than doubled our operating cash flow in the fourth quarter and drove 54, 5% growth in operating cash flow for the year supported by the business transformation efforts as outlined.

Brad Wieman: Turning to slide seven. Significant progress was made in digital transformation during Fiscal Year 25, the goal of which is increased internal efficiency and ease of purchasing for our customers. Our e-sales channel is in place and we're adding new products and services. We're testing our enterprise price performance management, which is now an implementation phase. We launched new control systems, as mentioned. Sales to development is on track for configure price quote, which we plan to have an initial release in the latter part of FY26. Additionally, our plan over the next six to 12 months is to enable subscription management, upgrade our ERP, The Enterprise Performance Management Release for Fulfillment Performance Reporting, Customer Data Unification Across All Systems, and Data Governance for Better Decision Making and Regulation Compliance.

Carla Gatzke: Turning to slide seven.

Carla Gatzke: Significant progress was made in digital transformation during fiscal year 'twenty five the goal of which is increased internally internal efficiency and ease of purchasing for our customers.

Carla Gatzke: Our E sales channel is in place and we're adding new products and services.

Carla Gatzke: We're testing of our enterprise price performance management, which is now in the implementation phase, we launched new control systems as mentioned.

Carla Gatzke: Sales to the development is on track for configure price quote, which we plan to have an initial release in the latter part of FY 'twenty six.

Carla Gatzke: Additionally, our plan over the next six to 12 months is to enable subscription management upgrade our ERP.

Carla Gatzke: The enterprise performance management release for fulfillment performance reporting customer data unification across all systems and data governance for better decision, making in regulation compliance.

Howard Atkins: Now I'll turn the call over to Howard Atkins, our Acting Chief Financial Officer, to review our financials. Howard? Thank you Brad and thanks all of you who are listening in today for your interest in the company.

Carla Gatzke: Now I will turn the call over to Howard Atkins, our acting Chief Financial Officer to review our financials.

Carla Gatzke: Sure.

Howard Atkins: Thank you Brad.

Speaker Change: So all of you who are listening in today for your interest in the company.

Howard Atkins: I will be starting my presentation for those of you who are following along with the deck on slide 8. In order to provide clarity about our underlying financial results, I'd like to first go over the non-recurring and other special items that hit the income. During the year, we incurred $16.5 million in non-recurring expenses in connection with various transformation initiatives. About half of those costs, seven and a half million dollars to be precise, were incurred in the fourth quarter. The full year and fourth quarter special items break down as follows. First, we had consulting costs of $7.1 million in the full year and $1 million in the fourth quarter for the business and digital transformation initiatives that we've been talking about.

Speaker Change: I'll be starting my presentation for those of you who are following along with the deck on slide eight.

Speaker Change: And I wanted to provide clarity about our underlying financial results I'd like to first go over the nonrecurring and other special items that hit the income statement.

Speaker Change: During the year, we incurred $16 $5 million in nonrecurring expenses in connection with various transformation initiatives.

Speaker Change: Half of those costs $7 $5 million to be precise were incurred in the fourth quarter.

Speaker Change: The full year and fourth quarter special.

Speaker Change: Special items breakdown as follows first we had consulting costs of $7 $1 million and the full year and $1 million in the fourth quarter for the business and digital transformation initiatives that we've been talking about.

Howard Atkins: The consulting engagements, these consulting engagements were concluded successfully in the fourth quarter. The implementation is beginning to produce the intended results and no further consulting cost is being accrued at this time for these particular initiatives. Next, we recorded expenses for various corporate governance matters, including legal and advisory costs for redomiciling and shareholder relations of $3.9 million for the quarter and $6.8 million for the year. And finally, we recorded $2.6 million for both the fourth quarter and the full year for advisory severance and other compensation costs associated with the management transition that we that we announced in the end of the third All of these non-recurring expenses flow through a G&A expense, and therefore, they impacted pre-tax operating.

Speaker Change: The consulting engagements. These consulting engagements were concluded successfully in the fourth quarter.

Speaker Change: The implementation is beginning to produce the intended results and no further consulting cost as being accrued at this time for these particular initiatives.

Speaker Change: Next we recorded expenses for various corporate governance matters, including legal and advisory costs more.

Speaker Change: Re domicile and shareholder relations.

Speaker Change: $3 9 million for the quarter and $6 $8 million for the year.

Speaker Change: And finally, we recorded $2 $6 million for both the fourth quarter and the full year for advisory severance and other compensation costs associated with the management transition that.

Speaker Change: That we announced.

Speaker Change: In the end of the third quarter.

Speaker Change: All of these nonrecurring expenses flow through G&A expense and therefore, they impacted pre tax operating income.

Howard Atkins: In addition to the above, uh... The above the line non-recurring expenses, we took or incurred several other special non-cash valuation adjustments, including the following. We recorded a non-cash benefit of 2.8 million and a charge of 22 and a half million for the quarter and year respectively for the change in fair value of the convertible note due to its conversion and changes in the stock price over the fair value measurement period in the third and fourth quarter. At year-end, we recorded a non-cash provision for possible loan losses of $15.5 million on a loan to an affiliate in which we have a minority position.

Speaker Change: In addition to the above.

Speaker Change: The.

Speaker Change: The line nonrecurring expenses, we took or incurred several other special noncash valuation adjustments.

Speaker Change: Including the following we recorded a noncash benefit of $2 8 million and a charge of $22 5 million for the quarter and year, respectively for the change in fair value of the convertible note due to its conversion and changes in the stock price over the fair value measurement period in this area in the fourth quarter.

Speaker Change: At year end, we recorded a noncash provisions possible loan losses of $15 $5 million on a loan to an affiliate and which we have a minority position.

Howard Atkins: This was done at year-end 2025. These asset valuation impacts went through other income and therefore impacted reported net income, but not operating.

Speaker Change: This was done at year end 2025.

Speaker Change: The <unk>.

Speaker Change: These asset valuation impacts went through other income and therefore impacted reported net income, but not operating income.

Howard Atkins: Finally, on The Gap, we reviewed all of our estimated costs for open warranties and overtime project contracts, in effect, as of our year-end reporting date. for any additional expected costs due to the significantly higher reciprocal tariff rates that would have been in effect at that time at year end, which impacted over time revenue recognition and warranty expense. These tariff estimates impacted operating income negatively in the fourth quarter by $1.2 million. At the substantially lower tariff rates now under discussion in the recent pause period, this impact would largely be reversed.

Speaker Change: Finally on the gap, we reviewed all of our estimated costs for open warranties.

Speaker Change: Over time and project contracts.

Speaker Change: In fact as of our year end reporting date for.

Speaker Change: <unk> for any additional expected costs due to the significantly higher reciprocal tariff rates that would have been in effect at that time at year end.

Speaker Change: Impacted overtime revenue recognition and warranty expense.

Speaker Change: These tariff estimates impacted operating income negatively in the fourth quarter by $1 2 million.

Speaker Change: At the substantially lower tariff rates now under discussion and the recent pause period.

Speaker Change: This impact would largely be reversed.

Howard Atkins: On slide nine, making the adjustments for these non-recurring expenses. Adjusted operating income for 2025 was $50 million. still down from our record $87 million operating income in 2024. But nevertheless, the second highest adjusted operating income year in the company's history, and more importantly, the second highest year in orders and net sales. As a percentage of revenue, adjusted operating income margin was 6.6% in 2025 versus 10.6%.

Speaker Change: Slide nine making the adjustments for these nonrecurring expenses.

Speaker Change: Adjusted operating income for 2025 was $50 million.

Speaker Change: Still down from a record $87 million operating income in 'twenty four but nevertheless, the second highest adjusted operating income year in the company's history and more importantly, the second highest year in orders and net sales.

Speaker Change: As a percentage of revenue adjusted operating income margin was six 6% in 2025 versus 10, 6% to 2024.

Howard Atkins: Let me talk a little bit now on slide 10 about revenue, and particularly the revenue tailwind that we see coming into 2026. For those of you who haven't been tracking the company over time, let me first try to provide some perspective on orders and revenue. As the world returned to some semblance of normality, as COVID receded several years ago, pent up demand for our products and services resulted in significant post COVID order growth between 2021 and 2024. Combined with our resolution of supply chain bottlenecks during that period, a recapitalization of the company, selective value-based price increases, and new product introductions, the company emerged from that period a larger, healthier organization, which produced record sales and record profits in 2024, with some of that revenue completed in early 2025.

Speaker Change: Can you talk a little bit now on slide 10 about.

Speaker Change: Our revenue and particularly the revenue tailwind that we see coming into 2026.

Speaker Change: For those of you Havent retracted the company over time.

Speaker Change: Let me first try to provide some perspectives on orders and revenue.

Speaker Change: As the world return to some semblance of normality as.

Speaker Change: As Covid receded.

Speaker Change: Several years ago pent up demand for our products and services resulted in significant post Covid order growth between 2021 and 2024.

Speaker Change: Combined with our resolution of supply chain bottlenecks during that period, a recapitalization of the company selective value based price increases and new product introductions. The company emerged from that period, a larger healthier organization, which produced record.

Speaker Change: Record sales and record profits in 2024, and some of that revenue completed in early 2025.

Howard Atkins: Now, with orders in early 25 dipping below revenue for a bit, our revenue declined, bottoming out in seasonally soft third quarter of 2025. The team began rebuilding order flow in the third quarter of last year and particularly in the fourth quarter, with fourth quarter orders up 17% year over year from the fourth quarter of 2024. This growth was broad-based, resulting in a more diverse revenue mix and resulting in a product backlog at year-end 2025 of $342 million, up 8% from a high year-end 2024 backlog. Now, while this order growth did produce a 17% sequential increase in fourth quarter revenue from the third quarter, about $70 million of the third and fourth quarter order.

Speaker Change: Now with orders in early 'twenty five dipping below revenue.

Speaker Change: Our revenue decline bottomed bottoming out and seasonally soft third quarter of 2025.

Speaker Change: The team began rebuilding order flow.

Speaker Change: Third quarter of last year, and particularly in the fourth quarter with fourth quarter orders up 17% year over year from the fourth quarter of 2024.

Speaker Change: This growth was broad based resulting in a more diverse revenue mix and resulting in a product backlog at year end 2025.

Speaker Change: $342 million up 8% from high year end 2020 for backlog.

Speaker Change: Now while this water growth did produce a 17% sequentially sequential increase in fourth quarter revenue from the third quarter.

Speaker Change: About $70 million.

Speaker Change: Third and fourth quarter orders.

Howard Atkins: will start generating revenue only when the projects are started in fiscal 26. The good news here is this is setting the stage for what is shaping up to be a solid revenue growth throughout the coming year, and we are encouraged additionally by the revenue trends that we see at the beginning of the new fiscal year.

Speaker Change: Start generating revenue only when the projects are started fiscal 'twenty six.

Speaker Change: The good news here is this is setting the stage for.

Speaker Change: What is shaping up to be a solid revenue growth throughout the coming year and we are encouraged additionally by the revenue trends that we see at the beginning of the new fiscal year.

Howard Atkins: We now turn to slide 11, which addresses our balance sheet strength and talks a little bit about our capital allocation. We very firmly believe that maintaining a strong balance sheet is important to building a resilient business. Our balance sheet today is stronger than ever.

Speaker Change: You May now turn to slide 11, which addresses our balance sheet strength and talks a little bit about our capital allocation.

Speaker Change: We very firmly believe that maintaining a strong balance sheet is important to building a resilient business our balance sheet today is stronger than ever.

Howard Atkins: In 2025, inventory was efficiently reduced, one of the quick win ideas from the business transformation project that we undertook last Over the year, manufacturing groups reduced inventory by 23%. As sales revenue grows going forward, we would expect to begin adding to inventory again, but obviously now from a lower base than otherwise would have been the case. As previously reported, we converted the 9% subordinated note to common for the terms of that note and neutralized the additional common shares via open market share purchases. The retirement of the note, net net, will save about a million dollars in annualized net interest expense versus today's short-term investment rates.

Speaker Change: In 2025 inventory was efficiently reduced one of the quick win ideas from the business transformation project that we undertook last year.

Speaker Change: Over the year manufacturing groups reduced inventory by 23%.

Speaker Change: As sales revenue grows going forward, we would expect to begin adding to inventory again, but obviously now from a lower base than otherwise would have been the case.

Speaker Change: As previously reported we converted the 9% subordinated note to common for the terms of that node and neutralize the additional common shares via open market share purchases.

Speaker Change: The retirement of the note.

Speaker Change: That will save about $1 million in annualized net interest expense versus today's short term investment rates.

Howard Atkins: We monitor our credit exposure to past-due customer and vendor receivables on the balance sheet and to date have not seen any discernible weakness.

Speaker Change: We monitor our credit exposure to past due customer and vendor receivables on the balance sheet.

Speaker Change: To date have not seen any discernible weakening.

Howard Atkins: Now through our efficient cap working capital management and efforts to preserve adjusted margin, we generated $97.7 million in operating cash and ended 2025 with $128 million in cash, up 57% from last year. The significant increase in cash has provided us added flexibility to invest capital for value creation. We've been maintaining product development and selected IT investments, as we previously disclosed in the third quarter, at relatively high levels as we invest in high growth, wider margin business products and projects and digital transformation to improve selling effectiveness and internal efficiency. We will continue to review product development and IT regularly to make sure we are prioritizing the highest return investments.

Speaker Change: Now through our efficient working capital management and efforts to preserve adjusted margin, we generated $97.7 million in operating cash flow and ended 2025 with $128 million in cash.

Speaker Change: 57% from last year.

Speaker Change: The significant increase in cash is providing us added flexibility to invest capital for value creation.

Speaker Change: We've been maintaining product development and selective investments as we previously disclosed in the third quarter.

Speaker Change: At relatively high levels as we invest in high growth wider margin business products and projects and digital transformation to improve selling effectiveness and internal efficiency.

Speaker Change: We will continue to review product development.

Speaker Change: To make sure we are prioritizing the highest return investments.

Howard Atkins: And in 2025, we repurchased $29 million of common shares in the market at a volume weighted average price of $14.23 per share, in part to neutralize the shares issued to retire the convertible note.

Speaker Change: And in 2025, we repurchased $29 million of common shares in the market.

Speaker Change: On a volume weighted average price of $14 to $3 per share and part to neutralize the shares issued to retire the convertible note.

Howard Atkins: And today we announced the board approval for an additional $10 million share repurchase.

Speaker Change: And today, we announced board approval for an additional $10 million share repurchase program.

Howard Atkins: Let me conclude by touching on tariff facts and impacts as much as we can talk about them and understand them. Ultimately, the ultimate cost of the tariff is not yet reliably determinable because the ultimate rates, of course, have not been set and keep on changing. It's unclear at this point whether imports for both finished products and imports and inputs will ultimately be subject to tariffs, although tariffs on both types of imports, finished products and inputs, are currently on the table. specific import codes are actually unclear. There are exceptions, correct import codes are still uncertain, and applicability, all of these things are still up in the air.

Speaker Change: Let me conclude by touching on tariff effects and impacts.

Speaker Change: As much as we can talk about them and understand them.

Speaker Change: Ultimately the ultimate cost of the tariffs is not yet reliably determinable because the ultimate rates of course have not been set.

Speaker Change: Keep on J&J.

Speaker Change: It's unclear at this point, whether imports were both finished products and imports and inputs.

Speaker Change: We will ultimately be subject to tariff small low tariffs on both types of imports finished products and inputs are currently on the table.

Speaker Change: Specific import code, so far actually unclear.

Speaker Change: There are.

Speaker Change: Exceptions.

Speaker Change: Correct input codes is still uncertain and applicability all of these things are still up in the air.

Howard Atkins: And of course, competitor reactions are all over the place and ultimately also not known.

Speaker Change: And of course competitor reactions are all over the place.

Speaker Change: Ultimately also not known.

Howard Atkins: What I can tell you in terms of relevant Daktronics facts are the following. First, as we've previously mentioned, about 80% of Daktronics finished product is manufactured in our U.S. factories. Second, less than 50% of inputs used by Daktronics U.S. factories are from from imports from all countries into the United States, including China, but many other countries as well. Third, the pre-reciprocal tariffs. These are tariffs that we've been incurring since 2018, have been running at approximately a half a million dollars per month since 2018. And since those are already in effect, have already been reflected over time in our operating costs and pricing.

Speaker Change: What I can tell you in terms of irrelevant Tektronix facts are the following first as we previously mentioned.

Speaker Change: About 80% of Tektronix finished product is manufactured in our U S factories.

Speaker Change: Second less than 50% of inputs used by Doctor on ex U S factories are from.

Speaker Change: From imports.

Speaker Change: Yeah.

Speaker Change: Well countries into the United States, including China, but many other countries as well.

Speaker Change: Third the pre reciprocal tariffs these.

Speaker Change: These are tariffs that we have been.

Speaker Change: Occurring since 2018 have been running at approximately a half a million dollars per months since 2018.

Speaker Change: And since those are already.

Speaker Change: In effect.

Speaker Change: Have already been reflected.

Speaker Change: And our operating costs and pricing.

Howard Atkins: Next, new steel and metals tariffs, which were introduced in February, in our case are very negligible. And finally, in the first five weeks so far in fiscal 2026, the higher tariff rates that have been invoiced to us have cost us about $2 million. And I want to be really clear about what that means. That is gross. It's before any pricing or manufacturing or operating expense mitigation efforts that are already underway. And, more importantly, almost all of that $2 million is at the highest rates that were imposed by the United States on Chinese imports at the end of 2025, which were more than three times the rates currently being discussed between the two countries.

Speaker Change: Next new steel and metals tariffs, which were introduced in February.

Speaker Change: Our case are very negligible.

Speaker Change: And finally in the first five weeks so far in fiscal 2026.

Speaker Change: The higher tariff rates.

Speaker Change: <unk> been invoiced to us.

Speaker Change: Have cost us about $2 million.

Speaker Change: I want to be really clear about what that means that is gross not net.

Speaker Change: For any pricing or manufacturing or other operating expense mitigation efforts that are already underway.

Speaker Change: And more importantly, almost all of that $2 million is at the highest rates that were imposed by the United States on Chinese imports at the end of 2025.

Speaker Change: Which were more than three times the rates currently being discussed between the two countries. So basically.

Howard Atkins: So basically, the things that were on the water after the April 2nd Liberation Day announcement that have now initially come in, but before the U.S. and China paused the reciprocal tariffs as of April 2nd, in that short one-month period, the $2 million just refers to that particular initial piece. And as we know, we're currently in a pause, so we would expect that number to come down in any event for the time being.

Speaker Change: Yes.

Speaker Change: Things that where we are on the water.

Speaker Change: After the April 2nd.

Speaker Change: Liberation.

Speaker Change: <unk>.

Speaker Change: Now initially come in.

Speaker Change: But for you.

Speaker Change: In China.

Speaker Change: Paused.

Speaker Change: The.

Speaker Change: The pre.

Speaker Change: Reciprocal tariffs as of April 2nd in that short one month period, the $2 million is refers to that particular.

Speaker Change: Initial piece and as we know.

Speaker Change: We're currently in a pause so we would expect that number to come down in any event for the time being.

Brad Wieman: Brad will touch on tariff mitigating strategies in a moment.

Speaker Change: Brad will touch on tariff mitigating strategies in a moment.

Brad Wieman: So now let me turn the call back to Brad. Okay, thank you, Howard.

Brad Women: So now let me turn the call back to Brad.

Brad Wieman: Turning to slide 13. We embarked on this journey really to generate better returns for all our stakeholders. We are targeting performance aligned with higher operating margins of 10% to 12%, operating in the top quartile RYC target of 17% to 20%. and achieving a top on annual growth of seven to 10% by fiscal year 28. Our plan is in place, we are executing on it, we have a lot of work to do, and our team is committed to its success. Our goal to achieve this plan through the business and digital transformation we talked about today. To repeat, includes value-based pricing.

Brad Women: Okay. Thank you Howard turning to slide 13.

Brad Women: We embarked on this journey really to generate better returns for all our stakeholders we.

Brad Women: We are targeting performance aligned with higher operating margins of 10% to 12% operating in the top quartile ROIC target of 17% to 20%.

Brad Women: And achieving a compound annual growth of 7%, 10% by fiscal year 2008.

Brad Women: Our plan is in place we are executing on it we have a lot of work to do and our team is committed to its success.

Brad Women: Our goal to achieve this plan through the business and digital transformation, we talked about today.

Brad Women: To repeat includes value based pricing.

Brad Wieman: Revenue Mixed Diversification, New Products for New Applications. Planning, Risk Management, Capital Allocation. Executive Compensation and Digital Transformation.

Brad Women: Revenue mix diversification, new products for new applications planning risk management capital allocation executive compensation and digital transformation.

Brad Wieman: Turn to slide 14. We have faced some headwinds, but we are not unaccustomed to challenges. With regard to the tariff environment, we'll adjust as needed. We have many levers to pull and we will make no regrets adjustments. We can adjust prices as needed in keeping with our value-based positioning. We have protection clauses in our contracts. We have some flexibility in our supply chain. And we have a global footprint that affords us flexibility as needed. And we have an international business with room to grow. It provides revenue diversification and reduces exposure to tariffs. In terms of market positioning, this remains solid and our long term plan is intact.

Brad Women: Turning to slide 14.

Brad Women: We have faced some headwinds, but we are not unaccustomed to challenges with regard to the tariff environment, we'll adjust as needed we have many levers to pull and we will make no regrets adjustments.

Brad Women: We can adjust prices as needed in keeping with our value based positioning.

Brad Women: We have protection clauses in our contracts, we have some flexibility in our supply chain and we have a global footprint that affords us flexibility as needed and.

Brad Women: And we Havent international.

Brad Women: International business with room to grow it provides revenue diversification and reduces exposure to tariffs.

Brad Women: In terms of market positioning this remains solid and our long term plan is intact, our supply chain remains healthy and functional we find that as is true of all of us our customers are becoming acclimated to inflation and are accepting of it as a reality of doing business right now.

Brad Wieman: Our supply chain remains healthy and functional. We find that as is true of all of us, our customers are becoming acclimated to inflation, and are accepting of it as a reality of doing business right now. The transformation plan is unaffected. We are moving ahead at pace on the initiatives that we have laid out, and our long-term objectives remain in place. As for fiscal year 2026, demand for our technology leading display solutions remain strong, and we are remaining flexible and competitive on a value basis in the macro environment. Our priorities are to execute diligently for our customers, to complete the next steps of our business and digital transformation, and to drive forward the achievement of our long-term financial objectives.

Brad Women: The transformation plan is unaffected we are moving ahead at pace.

Brad Women: Given that we have laid out in our long term objectives remain in place.

Brad Women: As for fiscal year 2026 demand for our technology, leading display solutions remained strong and we're remaining flexible and competitive on a value basis in the macro environment.

Brad Women: Our priorities are to execute diligently for our customers to complete the next steps of our business and digital transformation and the dry port the achievement of our long term financial objectives.

Brad Wieman: We are the global industry leader in best-in-class video communication displays and control systems. We're the only US manufacturer of scale with a global footprint and servicing by geographic market. We have new indoor products and control system solutions that are opening pathways to adjacent applications to more deeply serve our customer base with all their needs. We are excited and committed to our future and are executing toward our growth and return objectives.

Brad Women: We are the global industry leader and best in class video communication displays and control systems.

Brad Women: The only U S manufacturer of scale with a global footprint and servicing by geographic market.

Brad Women: We have new indoor products control system solutions that are opening pathways to adjacent applications to more deeply serve our customer base with all their needs.

Brad Women: We are excited and committed to our future and are executing towards our growth and return objectives.

Brad Wieman: I want to thank the entire Daktronics team for their hard work and dedication, particularly during this transformation period and against the macro backdrop.

Brad Women: I want to thank the entire deck products team for their hard work and dedication, particularly during this transformational period against the macro backdrop.

Operator: Now we'll turn the call over to the operator for questions. Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. One moment while we compile our Q&A roster.

Brad Women: Now I will turn the call over to the operator for questions. Thank you.

Speaker Change: Thank you and as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, one moment, while we compile our Q&A roster.

Aaron Spychalla: And our first question is going to come from the line of Aaron Spychalla with Craig Hallam Group. Your line is open, please go ahead. Yeah, good morning, Andrew, Brad, and Howard. Thanks for taking the questions and thanks for all the good color and commentary so far. Um, you know, first for me, I guess on on the top line, as we think about, you know, revenue growth for FY 26, you know, can you just kind of talk a little bit about that? I know you don't guide, but looking at backlog, you know, up high single digits, and just some of your FY 28 targets for, you know, high single digit CAG are just hoping to get a little color on what growth might look like in FY 26.

Speaker Change: And our first question is going to come from the line of Darren <unk> with Craig Hallum Group. Your line is open. Please go ahead.

Darren: Yes, good morning, Andrew Brandon Howard Thanks for taking the questions and thanks for all the good color and commentary so far.

Darren: First for me I guess on the top line as we think about revenue growth for FY 'twenty six.

Darren: Can you just kind of talk a little bit about that.

Darren: No you don't guide, but looking at backlog up high single digits and just some of your FY 'twenty eight targets for high single digit CAGR just <unk>.

Darren: Hoping to get a little color on what growth might look like in FY 'twenty six.

Brad Wieman: Yeah, thanks for the question. We are on track. All our markets were showing, expecting growth across the board, we believe. And the 7 to 10% compound annual growth that we talked about through FY 28, there's going to be some lumpiness year over year in that, but all in all, we think we can achieve that. We think FY 26 is one of those years that can do that. So the business we have out there with the backlog and looking at the orders that we're seeing, we believe fits well into our plan.

Darren: Yes, thanks for the question.

Darren: We are on track.

Darren: All our markets we're showing.

Darren: <unk> growth across the board.

Darren: We believe this.

Darren: 7% to 10% compound annual growth that we talked about through FY 'twenty eight theres going to be some lumpiness throughout year over year in that but all in all we think we can achieve that.

Darren: Slide 26 is one of those years that can do that so.

Darren: So.

Darren: The business, we have out there with the backlog and looking at the orders that we're seeing.

Darren: We believe fits well into our into our plans.

Brad Wieman: All right, thanks for that. And then, you know, on margins, appreciate the color on the tariffs and that it's an uncertain, you know, kind of outlook there. Can you maybe just, you know, give a little more detail on some of the levers that you've maybe pulled so far, what might be to come and, you know, just how you're thinking that can impact margins here as we think about the growth in FY26 and potential margin expansion from here? Yeah, that's one of our strategic objectives, of course, as part of our plan. And that happens in a number of ways with the value based pricing that we we talked about throughout the presentation that those are our objectives and those are in the implementation phase.

Darren: Alright.

Speaker Change: Thanks for that and then on margins I appreciate the color on the tariffs and that it's an uncertain kind of outlook there.

Speaker Change: Can you, maybe just give a little more detail on some of the levers that.

Speaker Change: You may be pulled so far what might be to come and just how youre thinking that can impact margins here as we think about the growth in FY 'twenty six and potential margin expansion from here.

Speaker Change: Yes, that's one of our strategic objectives of course, that's part of our plan.

Speaker Change: And that happens in a number of way with the value based pricing.

Speaker Change: We've talked about throughout the presentation that those are our objectives and those are in implementation phase. So we've implemented a number of value based pricing adjustments already.

Brad Wieman: So we've implemented a number of value based pricing adjustments already. But we're also driving costs out of our operations and getting more lean as we look across the enterprise to improve our overall performance. And we saw that in FY25 to hold our margins and really head down revenue year, and we think we can carry that forward into FY26 and further. In addition to that, we're bringing on, you know, new markets, new services that they're added in. They take time, and they're small at first, but we believe that they're going to be accruative over time, beginning in FY26.

Speaker Change: But we're also driving costs out of our operations and then getting more lean as well.

Speaker Change: Look across the enterprise.

Speaker Change: To improve our overall performance that we saw that in FY 'twenty, five and hold our margins and really a down revenue year.

Speaker Change: We think we can carry that forward into FY 'twenty six and further.

Speaker Change: In addition to that we're bringing on new markets New services that they are additive.

Speaker Change: Sure.

Speaker Change: They take time and Theyre small at first but we believe that theyre going to be accretive over over time, beginning in FY 'twenty six so all those things combined we believe can lead to a higher operating margin here.

Brad Wieman: So all those things combined, we believe, can lead to a higher operating margin year. All right, thanks. And then, you know, maybe turning to the commercial segment, I guess, in particular, you know, really good order activity there. Can you just, you know, give us an update on some of the efforts to expand, you know, the AV network there on the integration side? And just maybe talk about the shift to digital in that market, you know, at a high level, you know, where are we in that conversion? And, you know, how much kind of green space is there for you as that market kind of shifts in the coming years?

Speaker Change: Alright, Thanks, and then.

Speaker Change: Maybe turning to the commercial segment I guess in particular, you know really good.

Speaker Change: <unk> activity. There can you just give us an update on some of the efforts to expand.

Speaker Change: The EV network there on the integration side and just maybe talk about the shift to digital in that market at a high level.

Speaker Change: Where where are we in that conversion and how much kind of green spaces. There for you as that market kind of shifts in the coming years.

Brad Wieman: Yeah, really good question. As you know, in our commercial business, we serve really three, we'll call it four customer groupings. We have an on premise that serves primarily in the retail space. We participate mostly in the outdoor solutions for on premise advertising. And out of all, we're seeing a lot of optimism in that market from both the independent billboard operators, as well as the national customers that are buying, really, our products at a higher rate. I can speak to that in more detail later. In our Spectacular business, we're seeing growth. It's really related back to out-of-home as well.

Speaker Change: Yes really good question.

Speaker Change: As you know in our commercial business, we serve really three.

Speaker Change: All at core customer groupings, we have an on premise that serves primarily in the retail space, we participate mostly in the outdoor solutions for on premise advertising.

Speaker Change: And out of home, we're seeing a lot of.

Speaker Change: Optimism in that market from our bulk of yet.

Speaker Change: <unk>.

Speaker Change: Independent Billboard operators as well as the national customers that are buying our products at a higher rate.

Speaker Change: To that in more detail later.

Speaker Change: Our spectacular business, we're seeing growth, it's really related back to out of home as well, but the segment. You are mentioning is focused around our <unk> integrator space at our independent channel. We see a lot you mentioned green space, we see a lot of opportunity here a lot of room to expand upon that so our plans are.

Brad Wieman: But the segment you're mentioning is focused around our AV integrator space and our independent channel. We see a lot – you mentioned green space. We see a lot of opportunity here, a lot of room to expand upon that. So our plans are to do just that. And we're at the initial stages of really going at a more aggressive plan to grow that part of our business. Our teams have been doing a great job, focused primarily on retail and military. Military has had a little bit of a setback. I tie it primarily to Doge. I think just some slowdown in the military spending market, although that's been small overall.

Speaker Change: To do just that and we are at the initial stages of really growing at a more aggressive.

Speaker Change: Plan to grow that part of our business. Our teams have been doing a great job focused primarily on retail and military.

Speaker Change: Military has had a little bit of a setback.

Speaker Change: Primarily.

Speaker Change: Don.

Speaker Change: I think just some slowdown in the military spending market, although that's been small overall.

Brad Wieman: I see a lot of optimism, and I think we can grow that piece of the business with a lot of upside.

Speaker Change: I've seen a lot of optimism and I think we can grow that piece of the business with a lot of upside I hope that answers your question.

Brad Wieman: I hope that answers your question. No, it does. Great. Thanks for the call. And then just maybe last, you know, thinking about the working capital efforts underway so far, you know, a lot of nice cash generation in the year. You know, just curious on additional kind of levers there, you know, where can that cash conversion, can it get back to where it was a few years ago? And then, you know, any thoughts on capital allocation, just given the balance sheet would be helpful. Thanks.

Speaker Change: No. It does great. Thanks for the color and then just maybe last.

Speaker Change: Thinking about the working capital efforts underway, so far a lot of nice cash generation in the year.

Speaker Change: Just curious on an additional kind of levers there where can can that cash conversion can it get back to where it was a few years ago and then any thoughts on capital allocation just just given the balance sheet would be helpful. Thanks.

Howard Atkins: Well, Ballantyne, I'll answer the second question first, you know... As we our our objective here is to is to grow and grow at obviously profitable margins. So our first use of capital is going to be, you know, getting the growth. We talked about product development and digital transformation. That's where our incremental capital expenditures are going, in particular. We've talked about share repurchase, obviously, with this amount of cash. That is still very much on the table, and it's, you know, economic for our shareholders to do that. So it's a little bit of all of the above, but, you know, the good news is we have the cash and the capital, and our objective is to get it, you know, deployed in the highest return ways we can.

Speaker Change: Well balance sheet I'll ask the answer the second question first.

Speaker Change: As we our our objective here is to use to grow and grow with obviously profitable margins.

Speaker Change: So our first use of capital is going to be.

Speaker Change: Getting the growth.

Speaker Change: We talked about product development.

Speaker Change: The digital transformation, that's where our incremental capital expenditures are going.

Speaker Change: <unk>.

Speaker Change: You've talked about share repurchase obviously with this amount of cash.

Speaker Change: That is still very much on the table and it's economic for our shareholders to do that.

Speaker Change: So it's a little.

Speaker Change: But of all of the above but the good news is we have the cash and the capital.

Speaker Change: And our objective is to get it.

Speaker Change: Lloyd.

Speaker Change: The highest highest return we can.

Operator: Great. Thanks for taking the questions. I'll turn it over. All right, thank you. Thank you and one moment for our next question.

Speaker Change: Great. Thanks for taking the questions I'll turn it over.

Speaker Change: Alright, thank you.

Speaker Change: Thank you and one moment our next question.

Anja Söderström: Our next question comes from the line of Anja Soderstrom with Sidoti. Your line is open. Please go ahead.

Speaker Change: Our next question comes from the line of <unk> <unk> with Sidoti. Your line is open. Please go ahead.

Brad Wieman: Hi, and congrats on the nice performance here, and thank you for taking my questions. Many of them have been answered already, but I'm curious for international strength there. What is the primary driver for that, and do you see that continue into the first quarter? the strength in what is he saying or what which yeah We had, we had a significant growth in orders in the third and fourth quarter. You know, we had a good pipeline to start with, which was very successful in getting that pipeline closed. What creates a good tailwind for us though is that because the orders basically came late in the year, the revenue associated with those orders is largely, almost exclusively going to be earned in 2026, fiscal 26, rather than having already started to be earned in the third and the fourth quarter of 2025.

Speaker Change: And congrats on the nice.

Speaker Change: Ms here and thank.

Speaker Change: Thank you for taking my question is for many of them have been answered already but I am curious for anthem masking the strength there.

Speaker Change: What do you see as the primarily driver for that and do you see that continue into the first quarter.

Speaker Change: The strength and what are you, saying or what.

Speaker Change: Yeah.

Speaker Change: We had we.

Speaker Change: The significant growth in orders in the third and the fourth quarter.

Speaker Change: We had a good pipeline to start with.

Speaker Change: Which is very successful in getting.

Speaker Change: Getting that pipeline closed.

Speaker Change: What creates a good tailwind for us.

Speaker Change: Is.

Speaker Change: That because the borders.

Speaker Change: Basically came late in the year.

Speaker Change: Revenue associated with those orders is largely almost exclusively going to be earned in 2026 fiscal 'twenty six rather than having already started to be earned in the third and the fourth quarter of 2025. So that's what that's what creates this really.

Brad Wieman: So that's what that's what creates this really interesting and you know, opportunity for us to to get the kind of revenue growth that And, you know, the projects will start. throughout the year. So it's not all going to happen in the first quarter necessarily, but you know, it gives us a good, a good start to the year and a mechanism for, you know, continued revenue growth throughout the year as the projects come on board. Thank you and I'm trying to order some backlog trending in the first quarter. Just in general, or overall. Early indications are business is still brisk.

Speaker Change: Interesting.

Speaker Change: And.

Speaker Change: Opportunity for us to get the kind of revenue growth.

Speaker Change: That we that we're looking forward to 2006 and beyond.

Speaker Change: The projects will start.

Speaker Change: Throughout the year, so it's not all going to happen in the first quarter and necessarily but.

Speaker Change: It gives us a good.

Speaker Change: Good start to.

Speaker Change: For the year.

Speaker Change: Mechanism for continued revenue growth throughout the year as the projects come onboard.

Speaker Change: Thank you.

Speaker Change: The orders and backlog trending in the first quarter.

Speaker Change: Just in general.

Speaker Change: Early indications are.

Speaker Change: Businesses still risk.

Howard Atkins: Okay, thank you. And then in terms of the one-time fees, Should we expect more of those in fiscal 2026, or...? Well, no, not in connection with any of the initiatives that we undertook last year. The consulting arrangements that we had for Business Transformation and the one or two particular ones for the Digital Transformation to get that project going or completed, as I mentioned before. So those fees are done because the engagements that we had with the consultants are finished. I can't tell you that there won't be any additional consulting, but as far as the projects that we undertook last year, those are done.

Speaker Change: Okay. Thank you and then in terms of the onetime fees.

Speaker Change: Should we expect more of those.

Speaker Change: Fiscal 2026.

Speaker Change: Well no not in connection with any of the initiatives that we undertook last year the consulting arrangements that we had.

Speaker Change: For business transformation, and one or two particular ones for the digital transformation to get that project going.

Speaker Change: Were completed as I mentioned before so those those those.

Speaker Change: These are done because of the engagements that we have with the consultants are finished.

Speaker Change: I can't tell you that there won't be any additional consulting but.

Speaker Change: But as far as the projects that we undertook last year those are those have done.

Howard Atkins: I will also say that these consulting fees... will are expected to, you know, be more than paid back in, you know, multiple times in terms of, you know, the the transformation results that we expect over the next three years. Okay, got it.

Speaker Change: Hi will.

Speaker Change: So say that these consulting fees.

Speaker Change: Our expected too.

Speaker Change: Be more than paid back.

Speaker Change: Multiple times in terms of the.

Speaker Change: The transformation results that we expect over the next three years.

Howard Atkins: And then also you mentioned the board approved a $10 million buyback program. Did you have anything left on the old one or...? We did, yes, but we'll provide some further commentary on that shortly. Okay, thank you.

Speaker Change: Okay got it.

Speaker Change: And then I will see you mentioned.

Speaker Change: Hard to prove a 10 million buyback program did you have anything left on.

Speaker Change: All right.

Speaker Change: We did yes so.

Speaker Change: But.

Speaker Change: We will provide some further commentary on that.

Speaker Change: Sure.

Operator: That was all for me. Thank you, and again, ladies and gentlemen, if you wish to ask a question at this time, please press star 1-1 on your phone.

Speaker Change: Okay. Thank you that was all for me.

Speaker Change: Alright, thank you.

Speaker Change: Thank you and again, ladies and gentlemen, if you wish to ask a question at this time. Please press star one on your phone.

Mac Furst: And our next question is going to come from the line of Mac Furst with Sinclair Research. Your line is open, please go ahead. Yeah, hi. This is Mac Furst with Singular Research.

Speaker Change: And our next question comes from the line of Matt <unk> with.

Speaker Change: Sinclair Research. Your line is open. Please go ahead.

Speaker Change: Yes, hi.

Speaker Change: As Mac first with singular research.

Howard Atkins: Congratulations on the quarter. This is a question for either Howard Atkins or Brad Rieman. What do you expect business and digital transformation expenses to be in fiscal 2026? When you say expenses, are you talking about additional fees or consulting expenses or? overall expenses. And if you can break them down into consulting expenses and internal expenses, that's just fine. At this point, as I said, we don't, on the business transformation, That project, if you will, that we had last year with the outside consultants... has now really been integrated into the company, but the company owns the results, so the company owns the process, and our leadership team is very active in executing the plan and frankly doesn't need any more consulting expense to make that happen.

Speaker Change: Graduations on the quarter.

Speaker Change: This is a question for either Howard Atkins Bret women.

Speaker Change: What do you expect business and digital transformation expenses to be in fiscal 2026.

Speaker Change: Yes.

Speaker Change: When you say you're talking about.

Speaker Change: Additional fees or consulting expenses or.

Speaker Change: Overall expenses and if you can break them down into consulting expenses and internal expenses Thats just fine.

Speaker Change: Okay.

Speaker Change: At this point as I said, we don't.

Speaker Change: The business transformation.

Speaker Change: That project, if you will that we had last year with the outside consultant.

Speaker Change: It is now really been integrated.

Speaker Change: The company that the company owns the results of the company owns the process and our leadership team is very active in and executing the plan.

Speaker Change: And frankly, it doesn't need any more consulting expense to make that happen.

Howard Atkins: Now, there may be some additional initiatives that that team decides to take in 2025 that is not currently planned for, but I can't guarantee that some idea that the team comes up with in 2025 wouldn't require some outside help, but again, as far as the major project that we had last year, that's behind us now, that engagement.

Speaker Change: Now there may be some additional initiatives that we that that team decides to take.

Speaker Change: In 2025.

Speaker Change: That is not currently planned for but I can't guarantee that some idea of that.

Speaker Change: The team comes up with in 2025.

Speaker Change: It requires some outside help.

Speaker Change: But again as far as the major projects that we had last year that that's behind US now that that engagement has ended.

Howard Atkins: Okay, thank you. Thank you very much. So consulting fees for digital and business transformation in fiscal 2026 will be quite low.

Speaker Change: Okay. Thank you. Thank you very much so consulting fees for digital and business transformation.

Speaker Change: Fiscal 2026 will be quite low.

Howard Atkins: Okay, thank you.

Speaker Change: Okay. Thank you.

Brad Wieman: Thank you, and I'm showing no further questions at this time, and I would like to hand the conference back over to Brad Wieman for closing remarks. Okay, thank you everyone for joining us today and uh... We appreciate all the work that our teams are doing, and I want to just, again, congratulate our leadership team and all the employees at Daktronics for the work that we've done throughout this past transformational year. Like I mentioned earlier, we have a lot of work yet to do, and we're tasked with that, and we're planning to accomplish it. So with that, I wish you all just a wonderful summer.

Speaker Change: Thank you and I'm showing no further questions at this time I would like to hand, the conference back over to Brad Wiedeman for closing remarks.

Brad Wiedeman: Okay. Thank you everyone for joining us today.

Brad Wiedeman: We appreciate all the work that our teams are doing and I wanted to just again congratulate our leadership team and all the employees of deck products for the work that we've done throughout this past transformational year like I mentioned earlier, we have a lot of work yet to do and.

Brad Wiedeman: We're tasked with that we're planning to accomplish it.

Brad Wiedeman: So with that.

Brad Wiedeman: Wish you all just a wonderful summer enjoy it and thank you for joining our call today.

Operator: Enjoy it, and thank you for joining our call today.

Operator: This concludes today's conference call. Thank you for participating and you may now disconnect.

Brad Wiedeman: This concludes today's conference call. Thank you for participating and you may now disconnect.

Brad Wiedeman: Okay.

Brad Wiedeman: [music].

Brad Wiedeman: Okay.

Brad Wiedeman: [music].