DAKT — Fiscal 2026 Annual Financial Report Analysis

Daktronics, the South Dakota maker of stadium video boards, school scoreboards and digital billboards, finished fiscal 2026 with record sales of $838.7 million (up 10.9%) and swung from a $10.1 million net loss to a $45.4 million profit. Most of that swing came from two things: the business itself got more profitable (operating margin rose from 4.4% to 7.3% on price increases and better factory execution), and a large non-cash charge tied to a convertible note that hit fiscal 2025 did not come back.

A note on dates: Daktronics' fiscal year does not match the calendar year. Fiscal 2026 ran from late April 2025 to May 2, 2026, and it was a 53-week year (the extra week fell in the first quarter), while fiscal 2025 had 52 weeks. "Fiscal 2026" here therefore covers roughly May 2025 through April 2026, not calendar 2026.

At a glance

• Operating margin 7.3%, up from 4.4%. Operating margin is the share of sales left after paying to build, sell and develop products, before interest and tax. Operating income rose 84% to $60.8 million on 10.9% more sales, so most of the gain came from higher pricing and efficiency rather than volume alone.
• Record orders of $860.8 million, up 10.2%. New orders exceeded sales by about 3%, which pushed the product backlog (signed orders not yet delivered) up 4.3% to $356.2 million — work the company expects to ship within 24 months.
• Free cash flow fell to $34.9 million from $78.5 million. Profit improved, but more cash got tied up in billed and unbilled customer receivables, so the company converted less of its sales into cash than a year earlier.

Key figures

Where the growth came from

Daktronics reports five business units. Each one's "contribution margin" below is the company's own measure: gross profit minus selling costs, before corporate overhead and R&D.

• Live Events, the largest unit, grew on "a higher buildable backlog resulting from strong order activity in prior periods." Its orders rose 18.4% to $336.0 million; the company says it won all five Major League Baseball stadium installations awarded since the third quarter of fiscal 2025.
• Commercial had the biggest margin improvement, from 13.8% to 18.7%, which the 10-K attributes to "a higher proportion of Spectaculars" (large custom LED installations) and better spreading of fixed factory costs over more sales. Its orders, though, fell 2.5% because fiscal 2025 included more large project awards.
• High School Park & Recreation kept growing as schools move from basic scoreboards to video displays, but its margin slipped on "a less favorable mix of projects and cost pressures on certain programs."
• Transportation was the weak spot: sales fell 5.4% because less backlog was ready to build, and margin dropped 6.2 points on project mix, "added tariff-related costs, and competitive pricing pressures." Its orders rose 23.7% to $89.5 million (airports and roadway systems), so the sales dip looks like timing rather than lost demand.
• International went from a loss to a thin 7.4% contribution margin on 24.5% higher sales. It is still by far the least profitable unit — relevant to the restructuring announced in October (see below).

The fourth quarter (February to early May 2026) was the year's strongest on growth: sales rose 20.9% to $208.6 million, led by Live Events (+42.4%), and operating margin was 6.8% against a loss a year earlier. Fourth-quarter orders fell 7.7% to $222.0 million, but the company notes the year-earlier quarter was inflated by customers ordering ahead of price increases.

What the headline numbers hide

• The extra week flatters growth. Fiscal 2026 had 53 weeks, and the extra week sat in the first quarter, which booked $219.0 million over 14 weeks. As a rough estimate (our arithmetic, not a company figure), one average first-quarter week is about $15–16 million, so like-for-like sales growth was closer to 9% than 10.9%.
• The swing to profit is mostly about fiscal 2025's charges. Fiscal 2025 carried a $22.5 million non-cash charge from the change in fair value of a convertible note (debt that converted into shares) and a $15.5 million provision for losses on a loan to an affiliate. Fiscal 2026 had neither the note charge nor a provision that large — just a $3.8 million provision tied to exiting an investment in a different affiliate. Those items, not the operating business alone, explain why EPS went from -$0.21 to $0.92. The cleaner comparison is the company's adjusted EPS, up 25% from $0.84 to $1.05, or operating income, up 84%.
• The adjusted figures exclude little at the operating level. Adjusted operating income was $64.6 million vs. GAAP $60.8 million; the $3.8 million gap is management transition costs ($2.1 million), consultant costs ($1.1 million) and costs of the XDC asset acquisition ($0.6 million). Adjusted net income also uses a flat 26% tax rate rather than the actual 22.2%.
• The tax rate normalized. The effective tax rate was 22.2% vs. negative 73.0% in fiscal 2025, when the non-deductible convertible-note charge distorted it. That is a return to normal, not a lasting tailwind.
• Share count went up, not down. Diluted shares averaged 49.4 million vs. 47.6 million, mainly because the convertible note turned into shares during fiscal 2025, despite $25.4 million of buybacks (1.4 million shares at an average $17.80). Buybacks did not drive EPS growth this year.
• Cash conversion was adequate, but working capital absorbed cash. Operating cash flow of $49.2 million was about 1.1 times net income, yet half of fiscal 2025's $97.7 million: working-capital changes took $36.0 million this year after releasing $51.4 million last year. Accounts receivable grew 27.8% (to $118.6 million) and contract assets — work done but not yet billed — grew 61.7% (to $66.6 million), both much faster than the 10.9% sales growth. That is consistent with a heavy fourth quarter of project deliveries, but it is worth watching that these balances come back down as bills are collected.
• A small one-off in the fourth quarter margin. Fourth-quarter gross margin of 28.0% included 0.62 points from recapturing a prior-period warranty provision. Separately, full-year warranty expense fell to 1.3% of sales from 1.6% on "favorable cost experience."
• Tariff refunds were not booked. After the February 2026 Supreme Court ruling against the IEEPA tariffs, Daktronics filed refund claims, but recognized nothing at year end because the amount and timing were uncertain. That is a potential upside the fiscal 2026 numbers do not include.

Takeaway: Fiscal 2026's real story is margin, not the jump to a GAAP profit: operating income rose 84% on 11% more sales as pricing and execution improved in four of five units. The weak links are Transportation's tariff-hit margin and an International unit that barely breaks even — the latter now being partly shut down.

Since year end and what to watch

Management did not give a numeric sales or EPS forecast for fiscal 2027. Its stated targets for fiscal 2028 are 7–10% annual revenue growth, a 10–12% operating margin and 17–20% return on invested capital; at 7.3% operating margin in fiscal 2026, the margin target still requires roughly 3 more points of improvement.

Two filings since the year closed add context:

• First quarter of fiscal 2027 (to August 1, 2026, reported September 2): sales rose 7.1% to $234.6 million despite one fewer week, operating margin held at 10.6%, and diluted EPS rose to $0.40 from $0.33. Gross margin was helped by tariff refunds received during the quarter. But orders fell to $191.8 million from $238.5 million and backlog dropped to $311.3 million from $360.3 million a year earlier; the company says a few large orders negotiated in the quarter should book in the second quarter.
• October 2026 restructuring: the board approved exiting the highly customized international transportation business (rail, bus and roadway signs outside North America) and phasing out the factory in Ennistymon, Ireland, at an estimated $13.5 million in charges, about $12.3 million of them in fiscal 2027. Expect that to depress GAAP results this year, while the company says the exit itself should not materially change consolidated results.

Our read: the $356 million year-end backlog equals about five months of fiscal 2026 sales and margins are moving in the right direction, so fiscal 2027 sales growth looks supported. The two things that will decide whether the 10–12% margin target is realistic are (1) whether the orders that slipped from the first quarter actually land in the second quarter and push backlog back up, and (2) whether the Mexico plant, which the 10-K says starts production in fiscal 2027, and the Irish exit lower costs as intended. A second straight quarter of orders below sales would be the first sign the growth cycle is cooling.