Daktronics ((DAKT)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Daktronics’ recent earnings call revealed a mixed sentiment, characterized by robust growth in order backlog and commercial and international segments, juxtaposed with significant nonrecurring expenses and challenges due to tariff impacts. Despite these hurdles, the company showcased a strong balance sheet and improved cash flow, indicating a cautiously optimistic outlook.
Strong Finish to Fiscal Year 2025
Daktronics reported a strong conclusion to fiscal year 2025, marking a transformational period with a 29% increase in backlog from the third quarter and a 17% year-over-year increase. The company booked $50 million in new orders during the fourth quarter alone, underscoring its robust performance.
Commercial Segment Success
The Commercial segment experienced significant success, with orders increasing by 31% for the year and 44% in the fourth quarter compared to the previous year. This growth was driven by strong demand across all areas, highlighting the segment’s vitality.
International Business Growth
International orders saw a remarkable 32% growth from the previous year and more than doubled from the fourth quarter of the previous year. Key contributions came from advertising markets in Saudi Arabia, UAE, Germany, and other regions, showcasing Daktronics’ expanding global footprint.
Improved Operating Cash Flow
Operating cash flow more than doubled in the fourth quarter and grew by 54.5% for the year, supported by the company’s business transformation efforts. This improvement reflects Daktronics’ effective financial management and strategic initiatives.
Balance Sheet Strength
Ending fiscal 2025 with $128 million in cash, a 57% increase from the previous year, Daktronics demonstrated significant balance sheet strength. This financial flexibility positions the company well for future capital investments.
Nonrecurring Expenses
The company incurred $16.5 million in nonrecurring expenses related to transformation initiatives, including $7.5 million in the fourth quarter. These expenses highlight the cost of strategic changes aimed at long-term growth.
Tariff Impact and Uncertainty
Tariffs posed a significant challenge, with $2 million in higher tariff rates impacting the company in the first five weeks of fiscal 2026. This uncertainty underscores the external pressures faced by Daktronics.
Decreased Operating Income
Adjusted operating income for 2025 was $50 million, a decrease from the record $87 million in 2024. This decline reflects the challenges in maintaining profitability amid various headwinds.
Forward-Looking Guidance
Looking ahead, Daktronics expressed optimism for fiscal 2026, with a 29% increase in backlog from the third quarter and a 17% year-over-year growth. The company anticipates continued revenue growth, supported by strong demand and successful order growth, aligning with its long-term financial targets of a 7-10% compound annual growth rate by fiscal year 2028, with operating margins of 10-12% and a return on invested capital (ROIC) of 17-20%.
In summary, Daktronics’ earnings call painted a picture of a company navigating both opportunities and challenges. While growth in order backlog and international markets was strong, the impact of tariffs and nonrecurring expenses posed significant hurdles. Nevertheless, with a solid balance sheet and strategic initiatives in place, Daktronics remains cautiously optimistic about its future prospects.