DAKTRONICS INC /SD/ Q3 FY2025 earnings call

• Board Transition: Reece Kurtenbach stepping down as Chairman, President, and CEO; Brad Wehman named interim president and CEO, Howard Atkins acting CFO.
• Third Quarter Performance: Drove sequential order growth, preserved margins via cost reductions, activated mitigation strategies. Business transformation office completed planning phase, launched initiatives for operating margin sustainability.
• Financials: Net sales down 12.2% Y/Y, gross profit margin 24.6%, operating loss adjusted for one-time items was 1%. Cash flow from operations $12M for the quarter.
• Digital Transformation: Testing/training for service systems and enterprise performance management tools; enterprise performance management tool near launch, service system launching spring.

Live Events: Demand for MLB was smaller, but won a major NFL stadium project; orders large and installation complex. Commercial: Out-of-home activity strong, Spectacular order wins like Target building display, AV integrator network buildout. Transportation: Orders variable but solid financial performance with upgrades in airports. International: High quoting activity, converting quotes to orders, strong in Europe, Middle East, Australia. High School: Orders down slightly in quarter but year-to-date at record pace, new higher margin products delivered. Revenue contributions not explicitly stated in absolute % but each segment has distinct performance dynamics.

• Aim to grow revenues faster than addressable market growth, achieve 17%-20% return on capital and 10%-12% operating margin by fiscal 2028.
• Annual product development spend ~$40M, working on ERP upgrades, service system launching spring, enterprise performance management tool launching May.

• Delays in US-based project bookings due to U.S. Government actions (tariffs, funding uncertainties).
• Geopolitical incidents could impact international quoting-to-order conversion.

Q: Could you give more color on delays in bookings and tariffs?

A: Delays due to large project order mix and timing; tariffs hit competitors harder as Daktronics already paying some tariffs.

Q: Is international trend continuing into Q4?

A: International quoting activity up, conversion rate improving, likely to continue absent geopolitical incidents.

Q: How does digital transformation affect product development?

A: Digital transformation expected to bring efficiencies in product development, sales, services, and fulfillment operations