Good day, and thank you for standing by. Welcome to Daktronics First Quarter FY 2026 Financial Results Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during this session, you will 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. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Brittany Jacobson, Corporate Administration Supervisor. Please go ahead.

Thank you, Michelle. Good morning, everyone. Thank you for participating in our first 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. 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. 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 slide, which may be found on the Investor Relations page of our website at www.daktronics.com. Our earnings release for the 2026 first quarter, which was furnished to the SEC on a Form 8-K this morning, also contains certain non-GAAP financial measures. Reconciliation of these non-GAAP financial measures to the most directly comparable 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. I'll turn the call over to Brad Wiemann, Interim President and CEO.

Good morning, everyone, and thank you for joining our first quarter 2026 fiscal 2026 call. I'm joined on the call this morning by Howard Atkins, board member and acting chief financial officer. We will review our fiscal 2026 Q1 results and accomplishments and then take your questions. Turning to our slide presentation on slide three. The main message we will be sharing with you today is emphasized here. We delivered a strong beginning to fiscal 2026, and to our three-year plan. Ending cash balance of $136.9 million, and backlog of $360 million, which sets us up well for future revenue generation. Our selling teams are capturing customer demand and drove strong growth led by live events, high school park and recreation, and international. We were successful in winning three of the three large major league sports projects in Q1, along with several college and university projects. In addition, we experienced record order growth from our high school park and recreation business. This supported 35% order growth year over year, strengthening our backlog and setting us up well as we head into the remainder of fiscal 2026. We continue our work to preserve gross margins through improved value-based pricing, strong fixed cost leveraging, as well as cost control. The mix of revenue across businesses also contributed to improved gross margins. The business and digital transformation plan is in place, and our execution of that plan is on track and is driving results. We also generated cash in the quarter and expanded our cash flow from operations by 34% year over year. Now turning to slide four. This is our market verticals, and I'll start with our live events business. We won three of the three large major league sports projects. Two Major League Baseball, and one NHL Arena. In addition to…

Thank you for your continued interest in Daktronics. I will go over our first quarter financial results, including some key references to the year-over-year quarterly comps and where relevant, the company's sequential trends. This first slide includes both last year's first quarter as well as last year's fourth quarter actual results to highlight these particular references. Working up from the bottom line on this slide, Daktronics net income rose to $16.5 million or $0.33 per fully diluted share in the '26. Last year's first quarter loss was largely the result of the $21.6 million fair value adjustment on the convertible notes that have since been converted. And the '25 loss was largely a result of an allowance for credit losses on an affiliate loan of $15.5 million as well as $5.6 million in nonrecurring consulting, legal, and management transition expenses as specified in last quarter's release. We did not have any material one-time expenses in the first quarter results just released. Our effective tax rate continues to run at about 25.9%. Now on a pretax basis, our operating results for the quarter were a solid $23.3 million. The prior quarter result was impacted by the same nonrecurring items I just mentioned, A key difference between this year's $23.3 million operating income and last year's $22.7 million in operating income is the tariff expense before manufacturing mitigation which was $6 million in the first quarter compared with only $1 million in the year-ago comparable period. I should also mention that this year's first quarter benefited from having fourteen weeks of profit instead of just thirteen weeks of profit. If you do the math on that, 14 divided by 13 times the result, you get about a million and a half worth of extra profit in the first quarter of this year.…

Okay. Thank you, Howard. Turning to slide 11, we'll talk about our outlook. For fiscal 2026, demand for our best-in-class dynamic video communication displays and control systems remain strong. Our teams are winning and have created a large and growing backlog providing for revenue tailwind. We are executing on efficient revenue conversion and successful inventory, supply chain, and manufacturing cost management. Our balance sheet strength supports our growth objectives, including a very strong cash position. Although there continues to be tariff uncertainty, we remain agile and ready to pull levers from our management system toolkit to mitigate impact. We are the global industry leader in best-in-class video display communication displays, and control systems. We are the only US manufacturer of scale with a global footprint, and servicing by geographic market. We remain focused on differentiated leading product introductions and supporting growth through high return product development investment spend. We are excited and committed to our future and are executing toward our growth and return objectives outlined in our transformation plan. I want to thank the entire Daktronics team for their hard work and dedication. And with that, I will now turn this back over to the operator for questions.

Thank you. As a reminder to ask a question, please press 11 on your telephone and wait for your name to be announced. Our first question is going to come from the line of Aaron Spekella with Craig Hallum Group. Your line is open. Please go ahead.

Yes. Good morning, Brad and Howard. Thanks for taking the questions. Maybe first for me on live events, good to see the pickup in order activity there. Can you maybe just talk about the pipeline and what that looks like for order growth the rest of the year? And then any thoughts on just the cadence of kind of revenue? You mentioned some potentially in FY '27 just given scheduling. But can that segment, know, get to that high watermark we saw a couple of years ago given activity levels?

Yeah. So as I mentioned in the call, we were three for three on large projects, two major league baseball and one NFL stadium or excuse me, NHL arena project and we're excited about that and excited to win all three. And I also mentioned in there that we continue to see growth and expect growth in the live event space. Both from our in-bowl opportunities and outside the bowl. So we continue to expand on our product offerings and service offerings to provide that expansion both in control systems and displays and services that we offer throughout the venue. We're seeing some growth in that. We're seeing a nice growth in the out-of-bowl side of it, so our NPP products. Provide new opportunities to expand and bring know, the in-bowl experience to the outside of the bowl and throughout the concourse. So we continue to see growth there. Our pipeline can't get into specifics about the pipeline, but we're excited about what the live events business, both in the college university space, as well as the major league sports side of the business is providing. Howard, anything additional you wanted to add to that?

No. I think that's key. I mean, as you said, the pipeline is good. And know, we'll see how quickly everything comes in.

Alright. Thanks for that. And then maybe second, you know, good strong gross margin performance. Just curious if you kind of highlighted the mix, was there any other you know, any one-time items? It sounds like not. But, you know, just curious on you know, we have some seasonality, obviously, in the business later this as we kinda move forward. year, but just how sustainable, those gross margin trends are is.

We did have a mixed benefit as I alluded to. So you know, going forward, it depends on the mix is gonna look like. And know, we'll have to see about that. We did as Brad mentioned, continue to have better alignment between particularly, our manufacturing expenses and revenue production. That helped, and that's, you know, where we intend to operate going forward. We had a small benefit this quarter. I shouldn't say benefit. We had a benefit. We had a cost a year ago in the margin from some unusually high warranty expenses, which normalized this quarter. So it's a little bit of that. But yeah, I mean, you know, what we saw in the quarter was a combination of kind of fixed cost leverage on revenue as well as the mix effect that I just mentioned.

Understood. Thanks for that. And then maybe last for me, just given the balance sheet can you just maybe talk a little bit about thoughts on M and A what you're seeing in the market, any areas of interest, valuations, just some color there would be helpful. Thanks.

Brad, do you wanna start that? And I'll chime in.

Yeah. You know, we've been presented many M and A opportunities in the past. Most continue to come towards us. We're being very strategic about it. About what we wanna do, but certainly the cash position puts us in a place where we could take a little more serious look at that opportunity. Nothing specific to talk about at the moment. We continue to be open to opportunities as they come forward.

Alright. Thanks. I'll turn it over.

Thank you. And one moment for our next question. Our next question will come from the line of Anja Soderstrom with Sidoti. Your line is open. Please go ahead.

Hi. Thank you for taking my questions, and congrats on the nice progress here. I'm just curious with three live events that you won, how is the competitive process there? And did you replace anyone for that?

Sorry. Anja, I missed that last part of your question. Competitive space and what else?

Yeah. And were they currently using someone else and decided to use you instead?

The question being asked about the competitive factors and our the consideration for other companies and whether or not what our competitive factors might be.

Yes.

Yeah. And that varies across each of our businesses and each of our markets. We you know, the opportunities and when we hit the major league sports markets, there's a lot of competition across all our spaces. We put a lot of effort in, of course, in the upfront process to get specified and put ourselves in a position for our products and services. To win those projects. But there is competition on almost every bid we have out there. Now in certain markets, we see opportunities where we can lead in with our services and bring financial tools to the process, which are highly beneficial. So that reduces that overall, you know, competitive thing. And improves our margin space.

Okay. Thank you. And that's it. Sorry. There's some my side, don't know if that's I don't think that's on my end. Just gonna ask about the gross margin as well. You touched on it already in the Q and A, but what's the main driver for the better improvement there, the revenue mix?

Or was that more the efficiencies that you've been implementing?

Yeah. Certainly. It hurt maybe I should let Howard talk about this, but the fixed cost leverage is very important. Of course. Having plants loaded up and operating at a high rate, that was very positive. The mix was also a key thing, and you can see that in our revenue mix as you look back over the quarters. A higher mix of higher profit business was beneficial to that. But not to doubtfully, the things that we've been working on and improving upon value-based selling bringing some of that to the table, both in products and services, not broadly, but across certain areas. Have improved that overall gross margins. But the work that we've done and the plants around inventory management, working with our vendors to improve our overall purchasing power. Those are all coming into fruition, and helping us along that road map.

Okay. And then you're still in the process of implementing systems and undergoing this digital transformation. Is that then gonna help driving the operating expenses lower, or is it also gonna aid the gross margin?

Well, we expect to see efficiencies certainly and improved benefits to our customers and internal teams. So the efficiencies derived from many of those both the business transformation and the digital transformation, There is added expense during these, and we kinda laid out a timeline for that, and we'll buy our IT as well as product development, and Howard alluded to that in the call. We expect to, you know, invest in those as we bring those on and those are part of our plan that we've laid out. So a little bit of expense increase, but also benefits on the other side of it. Through efficiencies. That we expect to gain.

I'd say, Anja, most of the product development is of a nature of remaining on the leading edge of product innovation in our markets. Which has been a hallmark of the company for a long time, and our effort here is to stay ahead of that curve. As a means of both making our product more competitive as well as being able to value price for our products. On the IT side, I think it's a combination of things like making it easier for our customers to do business with us, you know, by having front end, you know, pricing availability and things like that, as well as helping make the company internally more efficient. So you've got the combination of that on the IT side.

Okay. Thank you. And then you touched on the strong balance sheet here already in terms of M and A. But how do you think about the buybacks? How much do you have left on the current authorized program? And are you in talks with the board to extend that?

Yeah. As I mentioned in the quarter, we bought back a little over $10 million worth of shares. We have at the end of the quarter, we had about just under $10 million under that original authority. And you know, our board has been very open to considering additional authorities as we've requested them, and we'll see how that goes. But we certainly have, we will certainly have a cash position to have a very flexible approach to managing our capital position and our share count.

Okay. Thank you. That was all for me.

Thank you. And as a reminder, if you would like to ask a question, please press. Our next question is going to come from the line of Eric DeLamartier with Half Moon Capital LLC. Your line is open. Please go ahead.

Thank you. Last couple of quarters, you've had some consulting and other associated costs related to the transformation plan. Were there any of those costs that can residually been born in Q1 here?

That maybe are one time in nature we should consider adding back. No. No. I mentioned that before. The bulk of the transformation consulting costs were connected with a consultant that we had in last year for close to half the year almost, maybe a little bit longer than that. And those consulting fees are now behind us.

Understood. Thank you.

Thank you. And I'm showing no further questions at this time. And I would like to hand the conference back over to Brad Wiemann for further remarks.

Hey. Thanks, for joining our call today. We plan to present next week at the Sidoti Conference. And in November at the Craig Hallum Alpha Select Conference. We look forward to speaking with you on our second quarter call. Have a great day.

This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone have a great day.