Daktronics (NASDAQ:DAKT) used a Sidoti investor event to outline recent operating momentum, ongoing transformation initiatives, and near-term leadership and capacity changes, including the arrival of a new chief executive and the planned ramp of a Mexico manufacturing facility.
Leadership transition and company overview
Acting CEO Brad Wiemann said he will remain in the role for “another week,” with incoming CEO Ramesh Jayaraman expected to start Feb. 1. Wiemann, a 30-plus-year veteran of the company, said Daktronics’ products are widely visible across sports venues, highways, businesses, and transportation hubs, with installations in more than 120 countries and products delivered to more than 12,000 customers annually.
Markets served and manufacturing footprint
Management reviewed five primary business areas—live events, high school parks and recreation, commercial, transportation, and international—along with control systems that enable customers to manage content and provide a subscription-based SaaS revenue opportunity.
On manufacturing, Wiemann said roughly 80% of Daktronics’ revenue comes from products made in the United States, with key facilities in Brookings and Sioux Falls, South Dakota, and Redwood Falls, Minnesota. Additional facilities include Ireland and Shanghai, China. He also noted a new facility in Saltillo, Mexico, expected to come online in the April–May timeframe, which he framed as part of planning for scalability and growth.
Product and technology investment
Wiemann said the company is seeing returns from investments in narrow pixel pitch indoor products and high-resolution outdoor solutions. He added that Daktronics is investing in technologies such as micro-LED, reflective low-power displays, intelligent power management, and SaaS control solutions.
Transformation efforts and second-quarter performance
Management highlighted a broad business transformation effort launched about a year and a half ago with help from an outside consulting firm. Wiemann said initiatives underway include:
- Value-based pricing and “guardrails” around project bidding
- SaaS trials targeting customers
- Prioritizing growth by geography and vertical
- Faster inventory turnover and efficiency tied to platform designs
- Modernized service control software and expanded AI-guided troubleshooting
- Improved input costs through purchasing leverage
- Product simplification to accelerate time to market
Wiemann said project execution in the fiscal second quarter was “excellent” and that the company recorded its third consecutive quarter of top-line growth. He also pointed to a “strong backlog” providing what he called a multi-quarter revenue runway, with orders up 12% year over year. He cited a range of recent installations, including projects at Zayed Sports City in Abu Dhabi, the Baltimore Orioles, Miami Freedom Park, the Philadelphia airport, the San Antonio Spurs, and the Cincinnati Convention Center.
Acting CFO Howard Atkins reviewed second-quarter financial comparisons released Dec. 10. He said adjusted net income was $17.5 million versus $13.9 million a year earlier, noting that the prior-year period was affected by fair value adjustments tied to a convertible note that has since been converted. Atkins also said the company was looking at an effective tax rate of about 20% and referenced potential impacts from depreciation-related provisions tied to R&D and other capital expenses, contingent on profitability.
Atkins said pre-tax operating income was $21.6 million compared with $15.8 million a year ago, with the prior-year quarter including $3.3 million of transformation-related expenses. He reported gross margin of 27% and operating margin of 9.4%, which he said was just below the company’s previously stated 10%–12% target range. He attributed margin performance to strong order growth and backlog conversion, fixed-cost operating leverage, and other factors before his connection briefly dropped.
Wiemann added that cash at quarter-end was $138 million compared with $115 million a year earlier. He said the company repurchased $12.2 million of shares year-to-date and had $25.7 million of remaining repurchase capacity as of Dec. 9, including an additional $20 million authorized by the board. He also said Daktronics replaced an asset-based credit facility with a “more flexible, lower-cost” cash flow facility.
Q&A: CEO outlook, Mexico ramp, margin dynamics, and competition
In response to a question about what investors should expect from the incoming CEO, Wiemann said Jayaraman is in a “look, listen, and learn” process and will communicate strategic initiatives more fully at an Investor Day planned for early April in New York City.
Asked whether the Mexico facility would be USMCA compliant, Wiemann said yes, while noting the agreement is under review and that USMCA was not the primary driver for the move. He cited cost considerations, plant diversification, access to labor, proximity to the U.S. border, and recommendations that came out of the company’s consulting-led work. Atkins said the company is targeting April to begin operations, adding it is “not a huge facility” but important for capacity and network diversification.
Addressing gross margin differences between the first and second quarters, Atkins said margins are influenced by fixed-cost leverage and business mix. He said first-quarter results benefited from a higher mix of high school parks and recreation revenue, which he characterized as higher margin and typically recognized more quickly, while live events is larger but generally lower margin and recognized over a longer period.
On competition, Wiemann said the competitive landscape varies by segment and noted “some exits” among large competitors in live events, prompting conversations with customers seeking replacements and underscoring Daktronics’ emphasis on long-term support.
About Daktronics (NASDAQ:DAKT)
Daktronics, Inc (NASDAQ: DAKT) is a leading designer and manufacturer of electronic display systems, video boards, scoreboards and related control systems. Founded in 1968 in Brookings, South Dakota by Al Kurtenbach and Duane Sander, the company has built a reputation for delivering custom visual display solutions to a wide range of markets. Its product portfolio includes large-format LED video displays, programmable message centers, digital billboards, and audio-visual solutions tailored to sports venues, transportation authorities, retail environments and live event producers.
The company’s primary business activities encompass the engineering, fabrication and installation of display systems for customers around the world.
