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DATE

Wednesday, Sept. 2, 2026 at 11:00 a.m. ET

CALL PARTICIPANTS

• Investor Relations - Lindsey Vetter
• President and Chief Executive Officer - Ramesh Jayaraman
• Acting Chief Financial Officer - Howard Ian Atkins

TAKEAWAYS

• Net Sales -- $234.6 million, representing 7.1% growth despite the quarter having 13 weeks versus 14 weeks in the prior-year period.
• Diluted EPS -- $0.40, an increase of 21.2% year over year and the highest quarterly result in the past 12 quarters.
• Gross Margin -- 30.5%, rising 80 basis points due to fixed cost operating leverage on higher revenue and mix lift from transportation and international segments.
• Operating Income -- $24.9 million, growing 7.2% year over year as the company managed higher revenue across core markets.
• New Orders -- $191.8 million, decreasing 19.6% year over year reflecting the timing of substantial project negotiations expected to book in the second quarter.
• International Sales -- $28.4 million, a 66.1% increase driven by stadium projects in Colombia and a 50-display rollout in Serbia.
• Transportation Sales -- $21.4 million, rising 29% reflecting narrow pixel pitch adoption in airports and new regional transit projects.
• Live Events Sales -- $86.4 million, up 8.3% as the company completed installations at collegiate venues including Ohio State and Penn State.
• High School Park and Recreation Sales -- $54.7 million, a 7.8% decline attributed to the timing of project completions.
• Commercial Sales -- $43.7 million, down 5.3% year over year.
• Operating Cash Flow -- $31.4 million, compared to $26.1 million in the prior-year first quarter.
• Free Cash Flow -- $27.5 million, reflecting solid earnings and efficient working capital management.
• Share Repurchases -- $4.4 million, representing 225,500 shares repurchased at a volume-weighted average price of $19.56 per share.
• Tariff Refunds -- $3 million, recorded on a cash basis during the quarter, with management expecting several more quarters of refunds.
• Capital Expenditure Guidance -- $20 million annually over the next few years, an increase from the previous $14 million to $16 million range to fund manufacturing automation.
• Product Backlog -- $311.3 million, marking the sixth consecutive quarter the metric has exceeded $300 million.
• Liquidity -- $154.6 million in cash and cash equivalents against $10.5 million in total debt as of August 1, 2026.
• Product Development Expense -- $12.1 million, including approximately $1 million per quarter for microLED development.
• Commission Expense -- $2 million, associated with a large international project completed during the quarter.
• Selling Expense -- $19 million, which remained at approximately 8% of revenue.

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RISKS

• Atkins stated, "rising RAM and sensitive input prices put some upward pressure on cost of goods sold, largely offsetting the tariff refunds in the quarter," regarding first-quarter margin impacts.
• Management reported that the Securities and Exchange Commission is seeking information concerning the company and player Kawhi Leonard in connection with an NBA investigation into the Los Angeles Clippers.
• Jayaraman warned that a decision to exit the customized international transportation business "would impact the long term viability of our Ireland facility," leading to a collective redundancy consultation.

SUMMARY

Daktronics, Inc. (DAKT -3.15%) reported its first quarter fiscal 2027 results, focusing on a multi-pronged strategy of organic growth, operational excellence, and disciplined capital deployment. Management stated that the company is transitioning its manufacturing footprint, which includes the ramp-up of a new facility in Mexico and a potential exit from the customized international transportation business in Ireland. The company is also integrating advanced visualization technology through the full deployment of its Camino 8 graphics engine across professional and collegiate sports venues. Financial priorities include returning capital to shareholders through an active buyback program while increasing capital expenditures to fund manufacturing automation and procurement optimization.

• The company's new manufacturing facility in Mexico completed its first production run of narrow pixel pitch products and is expected to begin shipping in late Q2.
• Camino 8, a next-generation real-time rendering engine, is scheduled for installation in more than 10 venues across the NHL, MLS, and NCAA this fall.
• Management is leveraging AI to analyze global spend across product categories to optimize direct and indirect procurement in the second half of the year.
• Daktronics launched LiveWorx in July, a mobile fan experience platform designed to expand the company's SaaS portfolio for high school sports.
• The company implemented new price increases starting in the second quarter to mitigate market-driven input cost inflation across the supply chain.
• The company is recruiting a corporate development leader to focus on its inorganic growth strategy and anticipates an international leader joining in the second quarter.

INDUSTRY GLOSSARY

• Camino 8: A next-generation 2D and 3D graphics rendering engine used for real-time visualization and control in stadium and arena displays.
• Collective Redundancy Consultation: A legal process where an employer must consult with employees before making large-scale layoffs.
• ITS (Intelligent Transportation Systems): Electronic signage and control systems used for road management, including dynamic message signs for traffic and transit.
• microLED: An advanced display technology that uses tiny individual LEDs as pixels, offering high brightness and energy efficiency.
• Narrow Pixel Pitch (NPP): High-resolution LED display technology where pixels are spaced closely together to provide detailed imagery for indoor applications.
• XDC: A display technology business acquired by Daktronics to enhance its development of microLED solutions.

Full Conference Call Transcript

Operator: Good day, thank you for standing by. Welcome to the Daktronics first Quarter Fiscal Year 27 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 the session, need to press *11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press *11 again. Please be advised that this conference is being recorded. I would now like to turn the call over to your speaker today, Lindsey Vetter. Please go ahead.

Lindsey Vetter: Good morning, everyone. Thank you for participating in our fiscal 27 first quarter earnings conference call. On today's call, we will have Ramesh Jayaraman, our President and Chief Executive Officer and Howard Ian Atkins, our Acting Chief Financial Officer. As a reminder, this presentation will contain forward looking statements under the Private Securities Litigation Reform Act reflecting our expectations and plans about 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 2 of the presentation that accompanies today's call, our press release, and our SEC filings for information on risk factors, uncertainties and expectations that could cause actual results to differ materially from these expectations. We undertake no obligation to publicly update or revise any forward looking statement. During this presentation, we will also refer to non GAAP financial measures. You can find the reconciliation of each non GAAP measure to the 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 fiscal 27 first quarter, which was furnished to the SEC on a Form 8-Ks 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 will now turn the call over to Ramesh.

Ramesh Jayaraman: Thank you, Lindsey, and good morning, everyone. We had a strong start to fiscal 27. and I want to thank our approximately 2.7 thousand employees across the globe for their execution and dedication. Our strategic plan consisting of organic growth, operational excellence, and disciplined capital deployment is working. As reflected in Q1's results in sales, profit expansion, and EPS growth. In Q1, we delivered 7.1% net sales growth. Supported by strong demand across key end markets in the quarter that was 1 week shorter than last year's. We expanded operating income by 7.2% and grew EPS to $0.40 for the quarter. Our new business pipeline remains robust.

The year over year bookings and backlog comparison mainly reflects order timing, as we negotiated substantial projects In Q1, that we expect to receive purchase orders for in Q2. Our focus on growth and operational efficiency generated $31.4 million in cash from operations during the quarter. We returned capital to shareholders through share repurchases, and our balance sheet liquidity remains strong. Of the various numerous highlights this quarter, I will talk about 3 today. 1, our recently opened Mexico manufacturing plant is ramping up. And successfully completed its first major production run of our narrow pixel pitch product. And we expect to ship This in late Q2. 2. Around 2,000 our next generation real time 2D/3D graphics rendering engine.

That integrates with Daktronics show control debuted at the Angel Stadium for the Los Angeles Angels home opener in early April, is now in full deployment. Starting this fall, Camino 8 will be installed in more than 10 venues across the NHL. MLS, and NCAA football volleyball, and basketball programs. 3rd, and most importantly, we continue augmenting our strong management team with key leadership ads in marketing and procurement, and built muscle as we scale the business. Now let's turn to the next slide on our market verticals for an update in the first quarter. In live events, we actively installed college football and basketball projects ahead of the upcoming season.

Including at the University of Illinois, Ohio State, Penn State, and North Carolina. New Camino 8 systems that I mentioned earlier are being installed across a variety of customers across the NHL, MLS, and NCAA volleyball, football, and basketball programs. Live Events remains a highly differentiated business for us. Well positioned to benefit from the shift towards real time graphics and video through Camino 8 and our pipeline continues to be robust in the live events business. Pictured here is the Wake Forest Elite Allegacy Stadium in Winston Salem, North Carolina. In our commercial business, our out of home segment booked a large billboard order along with an airport advertising refresh order from a national customer.

Our on premise business is shipping a large fixed-digit replacement program order received in the prior year. Pictured here is the La Crosse Sign Group for QuikTrip. in Onalaska, Wisconsin. In transportation, Q1, we won large intelligent transportation systems or ITS projects, which helped to grow the backlog in the segment. Our airport business won additional narrow pitch orders from Los Angeles International and Spokane International Airports. Our transit business won large orders from regional transit for SunRail in Florida, and a project in Houston. We are seeing strong acceptance of new products and our backlog and pipeline remains solid. Picture here is the Union Station. In Los Angeles, California.

In the high school, park and recreation business, we booked several large projects this quarter. Including Round Rock, and Northside Independent School Districts in Texas, Los Angeles Harbor College, and Harrisburg High School in South Dakota. We held our annual video summit for high school users of our control systems. An event built for the high school market that connects educators, with industry professionals and producers of Scholastic and professional life events. The event gives educators practical skills they can apply immediately. Youth sports and the shift to video remain strong secular drivers of demand. Further supported by a competitive differentiation through electronic sports marketing's school curriculum that classroom, and other paid professional services.

Our pipeline in the high school parts and business continues to remain strong. Picture here is the Massillon City Schools in Massillon, Ohio. In the international segment, we won a large order in Colombia. For a major football stadium for an outdoor halo display. A long time out of home customer, in Serbia awarded us a large order for an additional 50-display rollout. And our international pipeline remains strong heading into Q2 as especially in stadiums. We continue expanding our presence in specific international markets with recently tailored solutions. Picture here is i-Media, The Metropolitan in Dubai, UAE. In our services business, our control upgrade orders grew. Driven by Camino 8 adoption across our installer customer base.

We also launched LiveWorx in late July. A mobile based fan experience platform built for high school sports, that delivers a professional polished experience on the video board that can be run by 1 person. A QR code lets fans join and engage live in instantly. LiveWorx expands our recurring revenue and strengthens our SaaS portfolio ahead of the fall demand season. Our growth strategy remains underpinned by large, attractive end markets. Benefiting from long term secular demand increasing complexity, growing scale, the adoption of video, and fixed digit displays and increasing software and content requirements. And our results backlog, and pipeline reflect that. Let's move to the next slide to provide more specific about our forward looking strategy.

Our strategy rests on 3 priorities. Accelerating organic growth, strengthening operational excellence, and deploying capital with discipline to expand profitability and improve returns. On organic growth, we are focused on our core businesses. Where we are uniquely positioned to benefit from the secular shift towards greater complexity scale, and video. We are also selectively expanding into new vertical markets in North America. Growing through software and services, and focusing on driving international growth. On operational excellence, we are getting leaner and sharper every quarter. Improving procurement through data driven strategic sourcing, optimizing our global manufacturing footprint, investing in factory automation, and deploying lean principles across the business. With proven leaders directing each effort.

On capital deployment, we are making high return investments in our organic growth and operational efficiency, including our plant network improvements and automation, while sharpening our focus on the m and a pipeline to evaluate complementary products slash solutions vertical markets, and geographies. And we continue to return excess capital to shareholders while preserving flexibility to act when opportunities arise. Let's turn to the next slide for more detail. On these initiatives in the first quarter. We will talk to the strategic execution status under the 3 key pillars, growth, operational excellence, and capital deployment. In addition, we will provide an update on the talent augmentation to our strong management team. Starting with our growth initiatives.

Our new order pipeline in our core markets remain strong. As our sales, marketing, and development teams capture customer demand. We are also recruiting to expand into new verticals and channels which allow us to enter the unserved addressable market in North America. And 3rd, as I mentioned, I Camino 8 expansion earlier we are continuing to make strong progress. LA Angels now using Camino advanced visualization in stadium. And starting this fall, Camino 8 will be installed at 10+ venues for the NHL, MLS, NCAA, football, volleyball, basketball. As we look at our operational initiatives, we hired a new global procurement leader and combined our direct and indirect procurement teams.

We are leveraging AI to analyze our spend cube across product categories, business segments, and vendors. With results applied to optimize direct and indirect procurement starting in the second half of the year. We are optimizing our manufacturing network. Our Mexico ramp up is progressing per schedule. We are increasing automation and manufacturing with initial focus on The US transportation facility, and our China facility planning is underway. In addition, Daktronics is considering a proposal to exit the highly customized international transportation business. A decision to exit such business would impact the long term viability of our Ireland facility. So today, we inform employees our electronic sergeant facility that we are entering into a collective redundancy consultation process.

Looking at the 3rd pillar on capital deployment, we are beginning to invest manufacturing automation to raise efficiency, improve productivity, and reduce production costs. We are planning to have automated vending machine being installed, intended to reduce motion, excess processing, and wait time for metal fabricated enclosure elements used across many of our products. This is a good example of the operational discipline underpinning our margin expansion. We are committed to testing expanding automation with a strong P1 business case and return on invested capital. We are increasing our focus on inorganic growth. At the board level, we have a strategic transactions committee that meets biweekly to review acquisition opportunities in complementary products slash solutions, verticals, and geographies.

That can strengthen our organic growth strategy. We have a search underway for a corporate development leader to support this effort. We continue to return capital to investors. Of our $40 million stock buyback authorization we purchased $4.4 million in Q1. Lastly, but most importantly, building our talent is continued focus for our strategic execution. I am proud of our executive team and our employee base as we continue to build the business together. In Q1,, we further aligned key executive compensation tied to performance on long term shareholder value. We have strengthened capabilities with key additional leadership in procurement, marketing, and IT. And we anticipate having a new international leader to join us in Q2.

Developing key talent is an integral part of our growth and scaling story. And the executive team and I are intent on identifying the highest potential talent within the company. Now I will turn it over to Howard Ian Atkins, our acting CFO, to take us through the financials.

Howard Ian Atkins: Thank you, Ramesh, and good morning, everyone. I am pleased to say that the first quarter was another great quarter. Carrying forward the momentum we had at the end of fiscal 26 into the first quarter with a really good tailwind. The bottom line, if you will, the company earned earnings per share of $0.40 on the quarter. An increase of 21.2% from the first quarter a year ago and our highest quarterly earnings per share in the past 3 years. This result reflects solid operating earnings of $24.9 million up 7.2% from a year ago. Even with 1 less week this quarter than the year ago quarter.

This also reflects the cumulative effect of having repurchased an additional 225 thousand shares equal to $4.4 million at economically attractive yields during this last quarter. Our net sales rose 7.1%. Revenue growth would have been well above that if we would have had the extra week this quarter like we had in the first quarter of last year. Remember, we came into this quarter with 1 of our highest quarterly backlogs, $356 million. Our manufacturing and fulfillment teams did a great job efficiently completing revenue over time project orders. And standard immediate revenue orders, approximately 50% of $356 million backlog was fulfilled in the first quarter.

Gross profit rose 10% this quarter with gross profit margin rising to 30.5% up 80 basis points from last year. Several factors contributed to the higher gross profit margin. First, as you may remember, our gross profit margin does tend to rise when revenue rises due to some fixed cost operating leverage within gross profit. Second, we also had some mix lift this quarter from sales increases and higher margin transportation in the higher margin transportation and international businesses. Third, we began receiving tariff refunds during the quarter, and expect several more quarters of refunds. We will be recording refunds on a cash basis net of client payments going forward as well as we did in the first quarter.

And fourth, rising RAM and sensitive input prices put some upward pressure on cost of goods sold, largely offsetting the tariff refunds in the quarter. We began selectively raising product prices early in the second quarter the quarter that we are in, and we expect to manage through a period of market driven input cost inflation by raising prices with the market and achieving cost savings from procurement and other cost savings initiatives across the supply chain. As mentioned by Ramesh earlier, while orders actually booked, in the first quarter were down from a year ago, we did arrange a few substantial orders which we expect to be booked when we receive the regular purchase orders. Going forward.

Our backlog coming into the second quarter was $311 million This was the sixth consecutive quarter in which product backlog exceeded $300 million This amount does not yet include the substantial orders that I mentioned earlier, which should also generate revenue throughout the balance of the year mostly beginning in the third quarter. Our operating expense trends with respect to operating expenses, our selling expense rose $2.2 million in the quarter, in part due to the $2 million commission expense on a large international We expect to see some increase in selling costs as additional producers are onboarded for new market and sales channel rollouts during the course of the year.

As a percentage of revenue, selling expenses remained at about 8%. Product development expenses increased $1.4 million from a year ago, in part due to having absorbed about $1 million per quarter of labor costs of XDC for the development of our micro LED CapEx depreciation and amortization at $4.7 million this quarter This will gradually increase as we invest more capital in automation during the course of the year. During the last 3 years, the company averaged about $14 million to $16 million of annual CapEx We expect that to be in the $20 million range over the next few years. Given the high expected returns on these investments.

G&A expense increased $1.3 million in the first quarter in part due to consulting, additional management expenses associated with the execution of our business initiatives and our operational excellence programs, which are expected to yield solid results starting in the second half of this year more fully in fiscal 2028. In terms of our earnings overall growth trend in various earnings metrics, over the last 5 quarters show solid growth. Operating income at $24.9 million as I mentioned earlier, exceeding the lower end of our 10% to 12% margin, exceeding the lower end of 10% to 12% target range. EBITDA rising to $29.6 million as I mentioned earlier, in our earnings per share at $0.40 per share.

Another key aspect of our first quarter Importantly, we continue to maintain a resilient balance sheet to profitably and flexibly manage growth and risk. Our operating cash flow in the quarter was $31.4 million with free cash flow at $27.5 million after CapEx cash spend. The result of the solid earnings I mentioned in the quarter and the continued efficient management of working capital. Working capital did increase approximately $16 million in the quarter compared to the last quarter of last year. I am sorry. The last quarter a year ago. But that was in line with the higher revenue, so the ratio remained basically constant.

During the quarter, we purchased $4.4 million shares at a volume weighted average price of $19.56 per share. Roughly 23% of our net income in the quarter. In the last 5 quarters, the company repurchased $29.9 million worth of shares at a volume weighted average price of $18.04 per share. As a result, primarily of cash generation in excess of CapEx, our end of period cash balance reached $155 million after share repurchases with only $10 million in debt. Let me now briefly address a matter that has been in the media concerning the NBA's investigation of Kawhi Leonard and the Clippers in connection with the league's collective bargaining agreement that many of you may have heard about.

As you might expect, we have received requests for information from the MBA Additionally, the Securities and Exchange Commission is seeking information from us concerning the company and Mr. Leonard. We take these requests seriously and are cooperating. At this point, out of respect for the respective processes, we will not be providing further comment. And now let me turn the floor back over to Ramesh.

Ramesh Jayaraman: Thank you, Howard. We are off to a strong start for fiscal 27. With continued momentum in sales, operating margin, and EPS. Daktronics is the leading end to end solution provider and I am absolutely proud to serve the company. As outlined in our investor day, we are the market leader in the large format LED industry with a skilled and committed team. Our large end markets are driven by secular demand trends, all growing at 2x-3x GDP. We are executing well on our strategic growth and operational excellence plans towards a committed profitability goals. We are deploying capital responsibly and with discipline to achieve more profitable, sustainable growth with improved resiliency, reliability, and efficiency.

And we are deploying this capital to maximize returns to our shareholders. Moving to the next slide. As we move deeper into fiscal 27, we continue to track toward our fiscal 28 targets which we affirm today. First, 7%-10% revenue 3 year CAGR. Second, operating margin in the 10%-12% range. And ensuring our ROIC is in the 17%-20% range. We are pleased with our progress. And really excited about our forward plan. We have a strong backlog. Continued demand across the major end markets, and a clear set of carefully considered execution priorities that support our path forward and our confidence. I will turn the call over to the operator to take your questions.

Operator: Thank you. Question or a comment at this time, please press *11 on your telephone. If your question has been answered and you wish to move yourself from the queue, please press *11 again. Our first question comes from Aaron Spychalla with Craig Hallum Capital Group. Your line is open.

Aaron Spychalla: Yeah. Good morning, Ramesh and Howard. Thanks for taking the questions. You know, first for us on live events, sounds like some order timing there. Can you just speak to the confidence in closing some of those here in the second quarter? And then, your performance has just been really solid there. You know, any changes you are seeing in win rates or competitive dynamics in that market?

Ramesh Jayaraman: Aaron, good to have you on the call. So live events, we had you know, as you know, it is large timing oriented business, and really, it is a timing of the negotiations that are in progress that we expect to be slightly delayed. You know, from Q1 into latter part of Q2. So that is where we kind of stand. With regards to all the other businesses, you know, what we can say is our pipeline continues to be robust. Across the board, and, you know, we are beginning to see the pipeline being shaped up as the weeks and months take shape. So that is where we stand.

Aaron Spychalla: Alright. Thanks. And then on, software and services, know, you talked about Camino 8. You know, maybe can you just talk a little bit about some of the goals there, you know, whether it is attach rates or just how, you know, you see margin impact, there as that business grows for you?

Ramesh Jayaraman: Yeah. So, you know, I mean, I think for us, fundamentally, when you look at it, we have been, I would say, in the CapEx side of a stadium build or, you know, a new construction that kind of goes on. Really, what we see is, you know, as we look at our 10 year association with the customer from software It really gives us a unique opportunity to go and to start working with them on 2D, 3D graphics, integrating with our show control. And that is a unique opportunity that allows for customers to be able to deploy and use the solutions across the board. We are beginning to see this more and more from our customers.

To be involved as a part of the operations, and that is where we are playing. And that is giving, you know, I would say, amplification to Camino 8 as we kind of spoke about.

Aaron Spychalla: Brett. Thanks for that. And then maybe 1 last 1 on margins. Howard, how much was the tariff impact in the first quarter? Sounds like you expect some more there, and it does seem early in some of these operational excellence, initiatives. Sounds like some balance between, you know, ASPs and costs, but just how are you thinking about margins trending from here?

Howard Ian Atkins: Yeah. So, Aaron, we did in our release and in our comments here, talk about the pluses and the minuses. To answer your question specifically, tariff refund on a cash basis in the first quarter was about $3 million And as we said, you know, we should-- again, that is going to change from 1 quarter to the next, but you know, we expect to get some more in coming quarters because we are you know, accounting for it on a cash basis. And when received, But as I say, there were pluses and minuses in the quarter, including you know, cost increases that we referred to which largely offset the $3 million Alright.

Aaron Spychalla: Thanks for taking the questions. I will turn it over.

Operator: 1 moment for our next question. Our next question comes from Tom Hayes with ROTH Capital Partners. Your line is open.

Tom Hayes: Hey, good afternoon, my guys. Appreciate you guys taking the call, and congratulations on the nice start to the year. Ramesh, I was wondering if you could provide a little bit more color on the New facility, kind of your progress in Q1, your expectations as kind of we progress through the year and what market or opportunities that really kind provide you the you know, when it is fully up and running?

Ramesh Jayaraman: Yeah. So, Tom, you know, we are being look at our manufacturing network just across the board. Right? So as we kind of start looking at geopolitical movements, commodity movements, supplier movements, we are looking at the entire stuff to say, you know, how do we basically keep the company rolling? 2, as we really look at our customer demand cycle, you know, build up. I think at the Investor Day, we spoke about some of the installations happening in 14 days. She know what we are also beginning to see is tighter schedules that are happening, for us to go cater. So a combination of our world footprint is a part, and Mexico will play a part.

To start with Mexico, we will play a bigger part with the live events business, just in ensuring we are able to cater to the global timeline. So combination for US, China, Mexico, and, obviously, other facilities as we kind of come together go down with those projects will be the first priority. As we get started. So that is where Mexico will be leveraged.

And I think as time kind of builds up and we kind of get comfortable with Mexico and the supply chain and, you know, how it builds out, you know, we will see the best use of the best plan to ensure we get best cost leverage to get it in terms of landed cost per square meter.

Tom Hayes: Okay. Appreciate that. And then, Howard, on the margin, commentary you provided earlier, I just wanted to kind of dig into that a little bit. It sounds like you expect more tariff refunds this year You have put in some price increases that should offset some of the rising raw material prices So does that kind of equate to holding margin flat to maybe upward as you guys progress?

Howard Ian Atkins: You know, again, margin depends on lots of other things. But in terms of those 2 impacts, I think messaging where talking about here is we do expect on a cash basis several more quarters worth of tariff refund And on the RAM and other input costs, you know, it is-- I am sure you understand that is happening now, and our expectation is that we will manage that in a variety of different ways, including some price increases with the market. As you know, we also have a major procurement effort going on right now. So it is, you know, something that we monitor on a day to day basis, frankly.

With a view towards offsetting the offsetting the cost as much as we can. Okay. So that is where we are. Appreciate that. Maybe just 1 last 1. Just to mention again Tom. The price increases that I referred to started the second quarter, not in the first quarter. So there was no offset to the input cost inflation in the first quarter not managed yet by price increases. That will start coming through this quarter.

Tom Hayes: Okay, great. And maybe just lastly, Ramesh, I think in the early part of the presentation, you discussed the strong order activity in transportation. Just kinda talk about some of the drivers of that Thank you.

Ramesh Jayaraman: Yes. I mean, transportation overall as you see the ITS platform, which is the intelligent transport systems. it is the stuff on top of roadways. We, you know, we go through a cycle, and, you know, we have got a decent cycle with the ITS systems that is building up. I think on airports, which is where we kind of forayed into, You know, we have always done the outside of airports--you know, departure places, you know, as people come in. As we forwarded it to the inside, you know, what we are beginning to see is we are beginning to get new orders from more airports, 1.

2 also, you know, expansion orders from the same airports that we have spoken about before. So LAX is a great example. We went through that before. Now we are kind of in the Phase 2, Phase 3 of the build that is beginning to happen. So we feel pretty good about what is kind of building up. And clearly, from mass transit perspective, we are beginning to see some upgrades happening As I just spoke about Florida and other places, Houston, and that is beginning to come. And I think it is coming because of 2 elements.

1, you know, it is a proven fact that, you know, our stuff lasts for a very long time. that is a durability question that happens in transportation. That is evident. 2 is, you know, as some of the new product developments kind of come through, with a narrow pixel line and everything else, we are actually able to expand share with these customers, and that is where we are. Appreciate the color. Thank you.

Operator: Again, ladies and gentlemen, if you have a question or a comment at this time, please press *11 on your telephone. 1 moment for our next question. Our next question comes from Anja Soderstrom with Sidoti. Your line is open.

Anja Soderstrom: Hi. Thank you for taking my question. So Howard, I just want to-- you said you, the price increases came through in the second quarter, so there is a lag of that. In terms of the high input.

Howard Ian Atkins: I am sorry, Anja. I did not get the second half of your question.

Anja Soderstrom: No. So you are only increasing the prices in the second quarter to offset the higher input. So there is a lag of that. But is that going to be an ongoing thing? Continue to see a lag?

Howard Ian Atkins: So price increases are getting impacted in second quarter. Set this second quarter the first I think the point I am trying to make is that the first quarter did not include any offset to the cost increases from new product increase price increases. We did start raising prices selectively in the so far this quarter, and you will see progressively as we go through the quarter the effect of that in the quarter. Okay. So that should help the margin further in the second quarter and throughout the year? Well, again, there are all kinds of other things going through the margin. As we mentioned, the refunds will go through if they continue.

Cost increases will need to be managed properly. But yes, starting this quarter, we will start seeing some price increases impacting the margin.

Anja Soderstrom: Okay. Thank you. And then in terms of just your longer term targets with all the moving parts, what gives you a con confidence in that you are gonna be able to achieve that longer term margin profile?

Ramesh Jayaraman: Yeah. I think it is a few things. Right? 1, I think looking at, you know, going back to what we spoke about, Anja, you know, in the organic side, it is clearly driven by the growth as well as operational excellence. You know, we look at both sides of the coin. And building towards a growth but also an operational excellence part. So on the growth side, as you guys have seen, you know, things have been going pretty you know, pretty stable in terms of where we are. To what we have been kind of expecting. You know? And I think overall, the secular trends remain strong.

We are expanding into new vertical markets that we alluded to the software services gives us stickiness. And, you know, clearly plan is also for more international growth. As we look at building that segment of the business. I think what also gives us confidence is the operational excellence side. Know? And, I mean, you know, as we start looking at procurement, and what we are beginning to do with the data cube and what it is beginning to show us, we have clear opportunities in direct and indirect spend.

2, with the manufacturing network optimization, we will see opportunities as we try to automate That clearly gives us really good returns on investments invested capital that we can see and the lean. So, you know, we are seeing both sides kind of working Down that execution line, and that is gonna be a critical focus for us as we build the business.

Anja Soderstrom: Okay. Thank you. That was all for me.

Operator: And I am not showing any further questions at this time. I will turn the call back over to Ramesh for any further remarks.

Ramesh Jayaraman: Well, thank you, everyone, for joining our call today. We will be participating at the November Raymond James Symposium as well as other investor events coming up. Thank you again for your trust you have placed in us. We are excited about what is to come. Enjoy the last few days of summer and we will speak to you all again in the fall. Have a great day.

Operator: Thank you, ladies and gentlemen. We thank you for your participation. This does conclude today's presentation. Today's presentation. You may now disconnect and have a wonderful day.