DAKT

DAKTRONICS INC /SD/

NASDAQ · CONSUMER DISCRETIONARY · MISCELLANEOUS MANUFACTURING INDUSTRIES

20.60

+1.14 +5.86%

USD · close Oct 23

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MKT CAP $990.7MP/E 21.0DIV YIELD —FCF YIELD 4.02%REV TTM $854.3M +14.0%NET INCOME $48.3M +327.9%NET CASH $144.1M52W 17.02 – 27.73SEC XBRL · TTM TO Invalid Date

How DAKT rewrote its risk factors

10-K ITEM 1A · FY2025 → FY2026

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240

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−25,413

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New in FY2026

RISK FACTORS Investing in our common stock involves risk and our future results may be affected by a number of factors over which we have little or no control.
You should carefully consider the risks and uncertainties described below, together with all of the other information set forth in this Form 10-K and documents incorporated by reference herein, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Consolidated Financial Statements and related notes, before making a decision to invest in our common stock.
The discussion in this Item 1A contains forward-looking statements discussed above.
The risks and uncertainties described below may not be the only ones we face.
If any of the risks actually occur, our business, operating results, and financial condition could be materially and adversely affected.
In that event, the market price of our common stock could decline, and you could lose part or all of your investment.
Macroeconomic Risks Changes in trade policies and the imposition of tariffs, have affected, and may continue to affect, our results of operations and financial condition.
During fiscal 2025 and fiscal 2026, our business, operations, and financial results were impacted by changes in United States import tariff policies and the resulting responses from other countries.
Our complex manufacturing processes in the United States, which generate approximately 80 percent of our manufactured output, rely on components and inputs sourced from over 40 countries.
China has historically been a significant source of semiconductor-related components, including LEDs, printed circuit boards, and other integrated circuits.
In addition, certain jurisdictions, including Canada, have imposed or may impose retaliatory tariffs on United States-origin goods, increasing the cost of exporting our products into those markets.
United States tariff rates on these imports have ranged from approximately 10 percent to significantly higher levels, with certain proposed or applied rates substantially exceeding these levels.
While certain U.S. tariffs have been struck down by the courts, the United States has subsequently announced additional new tariffs on virtually all nonexempt imports, and the U.S. tariff rate remains elevated.
Shifts in tariffs, trade agreements, import and export restrictions, trade sanctions, sector-specific trade barriers, and other governmental trade actions, whether enacted by the United States or other countries, especially those instituted in significant markets or markets where our significant customers or suppliers are located, and the associated uncertainty of long-term trade policies, could impact our sales volume, sales price, and production and other costs.
Changes in trade policies may also cause disruptions to material sourcing and availability, global supply chains and logistics, and access to end markets.
Additionally, changes in U.S. trade policy and associated responses from trading partners may create shifts in global market dynamics, disrupt the long-term planning process for governments and private enterprises, and result in continued global financial market volatility.
The impact of these changes in trade policies and the resulting trade and market uncertainty could have a negative impact on our results of operations.
Following the invalidation of certain tariff actions, the Company has submitted, and will continue to submit, tariff recovery claims through the U.S.
Customs and Border Protection (“CBP”) Commercial Accounting Program and Enforcement process seeking a refund of tariffs paid pursuant to the International Emergency Economic Powers Act (“IEEPA”).
The amount, timing, and realization of any refund or credit remains uncertain and subject to CBP review.
In addition to direct tariff costs, our suppliers have incurred tariff-related costs in their own supply chains and the uncertainty of the tariff landscape continues to make these tariff-related costs volatile.
Many of our supplies have passed these tariff-related costs to us and these costs may increase in the future.
Alternative suppliers may charge higher prices or may not have sufficient capacity or reliability, which could further increase our costs or disrupt supply.
While we seek to mitigate these impacts through pricing actions, changes in manufacturing locations, supplier diversification, and product redesign, we may not be able to fully offset increased costs or implement such changes on a timely basis.
Tariffs and trade policies are expected to continue to evolve, and the United States, other countries, and international trade bodies may institute new tariffs or more restrictive trade policies or remedies.
As a result, we may face additional uncertainties and adverse impacts on our business, financial condition, and results of operations.
In addition, competitors may benefit from manufacturing or sourcing strategies, including near-shoring or alternative supply chain structures, or may qualify for tariff exemptions or more favorable trade treatment that are not available to us, which could place us at a competitive disadvantage.
Impacts on our business include, but are not limited to: (i) increased raw material and component costs due to tariffs or supply constraints; (ii) disruptions in the availability of components; (iii) challenges in planning and optimizing our global supply chain, leading to increased operating costs and reduced profitability; (iv) delays or reductions in customer orders due to economic uncertainty or tariff-related pricing impacts; and (v) the need to increase prices, which may reduce demand or adversely affect our competitive position.
Global conflicts could adversely impact our business and financial results.
Geopolitical tensions or conflicts in regions where we conduct business, including the Middle East, may result in delays in customer decision-making, project timing, or order activity, and could reduce or disrupt demand in affected markets.
To date, we have not experienced material disruptions from certain regional conflicts; however, ongoing uncertainty may negatively impact customer demand, project timing, or execution in these regions in future periods, and may also restrain shipping routes, cause increases in inflation, or result in cyberattacks.
We cannot predict the extent to which these factors may affect our business, financial condition, or results of operations.
Our business is sensitive to global economic conditions, including recessions, inflation, and interest rate fluctuations.
Weakened global economic or recessionary conditions may materially and adversely affect our industry, business and results of operations.
Our overall performance depends in part on worldwide economic conditions.
The United States and other key international economies have experienced downturns and recessions from time to time during which economic activity was impacted by falling demand for a variety of goods and services; restricted credit; reduced liquidity; reduced corporate profitability; volatility in credit, equity and foreign exchange markets; increased unemployment; bankruptcies; and overall economic uncertainty.
These conditions affect consumer and entertainment spending and could materially and adversely affect our customers’ ability or willingness to purchase our products, delay prospective customers’ purchasing decisions, reduce the value of their contracts, or affect attrition rates, all of which could adversely affect our operating results.
In addition, these demand fluctuations may reduce our ability to effectively utilize our capacity and negatively impact our results of operations.
We rely on global supply chains, and inflationary pressures may increase our input costs faster than our ability to raise prices.
In addition, disruptions in global supply chains may limit our ability to obtain parts and components or increase the cost of those inputs.

and 200 more.

Gone since FY2025

Risk Factors - Geopolitical issues, conflicts, governmental actions, including the imposition of tariffs, changes in laws, regulations, and policies, and other global events could adversely affect our results of operations and financial condition” in this Form 10-K.
We have made global investments in manufacturing capacity and the advancement in display and control technologies.
A majority of digital displays are constructed using standard surface mount display technology.
Chip on board technologies are advancing for narrow pixel pitch (“NPP”) applications.
Micro-LED technologies (also referred to as NPP) are being used and advanced, especially for displays installed for short viewing distances.
Advancements continue in technologies related to digital displays used in professional services, including the use of artificial intelligence and other software which improve content creation, user interfaces, digital display monitoring systems, and security.
We rely on a complex supply chain for raw material and component imports and the global distribution of our products.
We are adopting our manufacturing, sourcing capabilities, and product development priorities for these evolving changes in market and technology trends.
Overall, we have a unique leadership position in our target markets, which are large, growing, and enjoy resilient demand driven by our customers’ desire to improve the audience experience in sports, commercial, and transportation environments.
We are investing in capacity and resources to grow the business and penetrate markets.
In addition, to capitalize on this position, we are focused on digital and business transformation, improving our cost structure, and further growing our markets.
During fiscal 2025, we formed a the BTO, which has undertaken a comprehensive review of the Company’s business, strategy, and operations and is developing a set of strategic initiatives, enabled in part by the Company’s previously announced digital transformation, to provide even better outcomes for customers, deeper penetration of the Company’s current and adjacent market verticals, above-market growth, and more efficient delivery, fulfillment, and service.
These initiatives, overseen by the BTO, were designed and structured to support our ambitious targets to grow revenue faster than our addressable market, expand operating margins to 10-12 percent, and generate returns on capital in the 17-20 percent range consistently above the Company’s cost of capital (the “Business Transformation Plan”).
To accelerate these initiatives, we spent approximately $6.8 million for transformation efforts in fiscal 2025.
As our business has grown and become more complex, we have come to recognize the importance of evolving our corporate governance structure and how sound governance practices can facilitate better execution of our strategic commercial goals.
Delaware is the legal domicile for most large, publicly traded companies, and its corporate law is well understood, clear, and predictable and provides strong stockholder rights and protections.
On April 17, 2025, in an effort to further our Business Transformation Plan and for other strategic reasons, we changed our legal domicile from South Dakota to Delaware.
We carefully evaluate our capacity and resource levels to the conditions identified; however, there can be periods during which sales and expenses can be misaligned and periods in which we invest more in transformational and corporate governance activities, all impacting our profitability levels in the near-term.
We believe the audiovisual industry fundamentals of increased use of LED display systems across industries and our development of new technologies, services, and sales channels will drive long-term growth for our Company.
RESULTS OF OPERATIONS Consolidated Performance Summary The following is an analysis of changes in key items included in the statements of operations for fiscal year 2025 as compared to fiscal year 2024. 2025 % of Net sales (1) 2024 % of Net sales (1) Dollar Change (1) Percent Change (1) Net sales $ 756,477 100.0 % $ 818,083 100.0 % $ (61,606) (7.5) % Cost of sales 560,990 74.2 595,640 72.8 (34,650) (5.8) Gross profit 195,487 25.8 222,443 27.2 (26,956) (12.1) Operating expenses: Selling 60,011 7.9 56,954 7.0 3,057 5.4 General and administrative 63,498 8.4 42,632 5.2 20,866 48.9 Product design and development 38,860 5.1 35,742 4.4 3,118 8.7 Total operating expenses 162,369 21.5 135,328 16.5 27,041 20.0 Operating income 33,118 4.4 87,115 10.6 (53,997) (62.0) Nonoperating income (expense): Interest income (expense), net 1,347 0.2 (3,418) (0.4) 4,765 (139.4) Change in fair value of convertible note (22,521) (3.0) (16,550) (2.0) (5,971) (36.1) Other expense and debt issuance costs write-off, net (17,795) (2.4) (13,096) (1.6) (4,699) 35.9 (Loss) income before income taxes (5,851) (0.8) 54,051 6.6 (59,902) (110.8) Income tax expense 4,270 0.6 19,430 2.4 (15,160) (78.0) Net (loss) income $ (10,121) (1.3) % $ 34,621 4.2 % $ (44,742) (129.2) % Diluted earnings per share $ (0.21) $ 0.74 $ (0.95) (128.4) % Diluted weighted average shares outstanding 47,587 46,543 1,044 2.2 % Orders $ 781,347 $ 740,171 $ 41,176 5.6 % ( 1) Amounts are calculated based on unrounded numbers and therefore may not recalculate using the rounded numbers provided.
In addition, percentages may not add in total due to rounding.
Net Sales: The net sales decrease in fiscal 2025 was the result of lower volumes in each business unit, primarily driven by the Live Events business unit due to order timing and buildable backlog.
The amount of revenue recognized associated with performance obligations satisfied in prior periods during the years ended April 26, 2025 and April 27, 2024 was immaterial.
For the year ended April 26, 2025, our operating income was negatively impacted by a net amount of 0.3 percent of overtime revenue, or $1.2 million.
For the year ended April 27, 2024, our operating income was positively impacted by a net amount of 1.0 percent of overtime revenue, or $4.1 million.
These changes are a result of changes in contract estimates related to projects in progress at the beginning of the respective period.
These changes in estimates resulted primarily from favorable project execution of 0.8 percent of overtime revenue, or $2.8 million, reduced cost estimates, and contingencies that were relieved when conditions were resolved.
Gross unfavorable changes in contract estimates were 1.1 percent of overtime revenue, or $4.0 million, and immaterial for the year ended April 26, 2025.
For the year ended April 27, 2024, these changes in estimates resulted primarily from favorable project execution of 1.5 percent of overtime revenue, or $6.5 million, reduced cost estimates, and contingencies that were relieved when conditions were resolved.
Gross unfavorable changes in contract estimates in fiscal 2024 were 0.6 percent of overtime revenue, or $2.4 million.
Nature of Business and Summary of Significant Accounting Policies” of the Notes to our Consolidated Financial Statements included in this Form 10-K for more information regarding revenue recognition.
Order volume growth is attributable to the continued use and market adoption of digital display technology and to our success in capturing existing and new customer orders in the Spectacular and Out‐of‐Home markets in our Commercial business unit.
Additionally, there has been solid growth in the High School Parks and Recreation business unit due to continued expansion of video displays, as well as growth attributable to higher demand seen in the International business unit.
As we are a project-based business, large-sized project orders can impact levels of orders.
During fiscal 2025, fewer large-sized projects were booked to orders in the Live Events and Transportation business units because there were fewer large projects available in the market place.
Gross profit percentage decrease is attributable to sales mix differences between periods and a lower sales volume during fiscal 2025 as compared to fiscal 2024.
Total warranty expense as a percent of sales decreased to 1.6 percent for fiscal 2025 as compared to 2.3 percent during fiscal 2024 primarily due to higher warranty expense in the Live Events and Transportation business in fiscal 2024 that did not occur in fiscal 2025.
In fiscal 2025, the amounts achieved for variable compensation and profit sharing linked to operating margins were immaterial.
In fiscal 2024, the amounts achieved totaled $6.5 million, consisting of $3.1 million in cost of sales, $1.2 million in selling, $1.4 million in general and administrative, and $0.8 million in product design and development.
Selling expense s increased due to higher personnel related wages and benefits expenses to retain employees; travel and entertainment; marketing; IT tools; and increased commissions to support order growth.

and 812 more.

Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2025 ↗, FY2026 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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