Daktronics ((DAKT)) has held its Q3 earnings call. Read on for the main highlights of the call.
The recent earnings call for Daktronics presented a mixed sentiment, reflecting both optimism and challenges. While the company is making significant strides in digital transformation and operational efficiency, it faces hurdles such as declining orders, decreased sales volume, and an operating loss. The balance between achievements and current operational challenges was evident throughout the call.
Sequential Order Growth
The company reported a positive development with sequential order growth in the third quarter. This growth was particularly notable in the commercial segment and was complemented by a rebound in international markets, indicating a potential recovery in these areas.
Major NFL Stadium Project
Daktronics secured a significant project for a new NFL stadium, which is anticipated to convert into revenue by late fiscal 2026 and continue into fiscal 2027. This project represents a substantial opportunity for future revenue streams.
Optimism in End Markets
Despite facing macroeconomic uncertainties, Daktronics remains optimistic about the long-term demand in its end markets. This optimism is fueled by the growth in digital displays and strategic initiatives aimed at capturing this demand.
Digital Transformation and Operational Efficiency
The company is actively pursuing digital transformation with the goal of achieving operating margins of 10% to 12% and a return on capital of 17% to 20% by fiscal 2028. Efforts are underway to enhance cost savings and improve operational efficiency.
Stable Gross Profit Margin
Despite a 12% decrease in sales volume, Daktronics managed to maintain a stable gross profit margin of 24.6%. This stability highlights the company’s effective cost management strategies.
Decline in Orders
Orders for the third quarter of fiscal 2025 saw a decline of 2.7% compared to the previous year. This decrease was primarily due to reduced orders in live events, high school park and recreation, and transportation business units.
Sales Volume Decrease
Net sales for the third quarter decreased by 12.2% compared to the same period in fiscal 2024. This decline was driven by lower volumes in live events, impacting overall sales performance.
Operating Loss
The company reported an operating loss of 2.4% of sales in Q3. This loss was attributed to lower gross margin dollars and additional costs associated with business transformation and corporate governance.
Delayed Project Bookings
There have been delays in U.S.-based project bookings, likely due to recent government actions. These delays are affecting the near-term timing of expected orders, particularly in the transportation business.
Forward-Looking Guidance
Looking ahead, Daktronics is focused on strategic transformation and growth. Despite a 12.2% decrease in net sales, the company maintained a steady gross profit margin. With a backlog of $273 million, Daktronics aims for a return on invested capital of 17% to 20% and operating margins of 10% to 12% by fiscal 2028. The company is investing in digital transformation initiatives and expects significant cost savings by 2028. Additionally, there is strong quoting activity in the international segment and a growing shift towards digital displays in the high school market.
In conclusion, Daktronics’ earnings call highlighted a balanced view of optimism and challenges. While the company is making progress in digital transformation and securing significant projects, it faces obstacles such as declining orders and sales volume. The forward-looking guidance suggests a strategic focus on growth and efficiency, with expectations for improved financial performance in the coming years.