• Orders: Decreased by 2.7% from the third quarter of fiscal '24.
• Net Sales: Decreased by 12.2% compared to the third quarter of fiscal '24.
• Gross Profit Margin: 24.6%, similar to 24.5% in the third quarter of fiscal '24.
• Operating Loss: 2.4% of sales in Q3; adjusted operating margin was positive at 1%.
• Cash Flow from Operations: $12 million for the fiscal quarter, $75 million year-to-date.
• Cash, Restricted Cash, and Marketable Securities: $132.2 million at the end of the quarter.
• Working Capital: $232 million with a ratio of 2.4 to 1.
• Backlog: $273 million at the end of the quarter.
• Share Repurchase: $9 million worth of shares purchased, approximately 535,000 shares.

• Warning! GuruFocus has detected 3 Warning Sign with DAKT.

Release Date: March 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Daktronics Inc (NASDAQ:DAKT) reported sequential order growth in the third quarter, particularly in the commercial segment with significant bookings in the out-of-home and international markets.
• The company successfully maintained a steady gross profit margin compared to the previous year, despite a 12% decrease in sales volume, by implementing cost reduction strategies.
• Daktronics Inc (NASDAQ:DAKT) is actively engaging in a business transformation plan aimed at enhancing operating margins and achieving ambitious financial targets by fiscal 2028.
• The company is seeing strong quoting activity internationally, with increased conversion rates from quotes to orders, particularly in Europe, the Middle East, and Australia.
• Daktronics Inc (NASDAQ:DAKT) is focusing on digital transformation initiatives to improve operational efficiencies and enhance customer experiences, which is expected to positively impact various areas of the business.

Negative Points

• Orders for the third quarter of fiscal 2025 decreased by 2.7% compared to the same period in fiscal 2024, primarily due to reduced orders in live events, high school park and recreation, and transportation business units.
• Net sales for the third quarter decreased by 12.2% compared to the third quarter of fiscal 2024, attributed to seasonally lower volumes and reduced sales in live events.
• The company incurred additional costs related to business and digital transformation, corporate governance matters, and consulting services, impacting operating margins.
• Daktronics Inc (NASDAQ:DAKT) is experiencing delays in US-based project bookings, likely due to uncertainties in global tariff policies and federal funding priorities.
• The company is facing challenges in converting strong quoting activity into actual orders in international markets, although improvements are being observed.

Q & A Highlights

Q: Can you provide more details on the delays in bookings, particularly in the transportation segment, and how tariffs are impacting your business? A: Many of our markets have large projects that create lumpiness in order bookings. We continue to see strong quoting activity and are optimistic about future growth. Regarding tariffs, as a US manufacturer, we've been paying tariffs on semiconductors, which affects us less than our competitors who are now facing broader tariffs on products from China.

Q: Could you elaborate on the shift to digital in the high school segment and its growth potential? A: The high school market is exciting, with many schools aspiring to have video displays similar to professional stadiums. As product quality improves and prices become more competitive, more schools are installing video display systems. Currently, fewer than 10% of high schools have converted to video displays, indicating significant growth potential.

Q: What are your thoughts on capital allocation, especially given the recent stock buybacks? A: We work with the board on capital allocation quarterly, focusing on investing in high-value CapEx, development activities, and exploring merger and acquisition opportunities. We also consider ways to return value to shareholders through stock buybacks and other methods.

Q: How is the international market performing, and are there specific regions showing stronger activity? A: International markets have been soft since the pandemic, but we're seeing increased quoting activity and conversion rates, particularly in Europe, the Middle East, and Australia. We expect this trend to continue, barring any geopolitical incidents.

Q: Can you discuss your digital transformation initiatives and their expected impact on efficiency? A: Our digital transformation is expected to positively impact all areas of Daktronics, including product development, sales, services, and fulfillment operations. This will lead to efficiencies and improved operations across the company.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.