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DAKTRONICS INC /SD/ (DAKT)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY2025 revenue of $172.6M fell 20.1% YoY and missed Wall Street consensus ($189.1M) as Live Events volume softened; sequential revenue rose 15.4% as orders reaccelerated .
  • Adjusted EPS beat Street: S&P shows Q4 consensus $0.145 vs actual $0.177*, while GAAP diluted EPS was -$0.19 due to non‑operating valuation and credit loss items; adjusted net income was $8.8M .
  • Orders and backlog strengthened materially: Q4 orders $240.7M (+17% YoY, +29% QoQ) and year‑end backlog $341.6M (+8% YoY), setting a revenue tailwind into FY2026 .
  • Company reconfirmed FY26–FY28 targets (7–10% sales CAGR, 10–12% operating margin, 17–20% ROIC) and authorized an incremental $10M buyback (total program $60M; ~$20M remaining), a potential support for shares .

What Went Well and What Went Wrong

What Went Well

  • Orders and backlog momentum: Q4 orders rose to $240.7M (+17% YoY), backlog reached $341.6M (+8% YoY), with broad-based strength in Commercial, HSPR, and International; management highlighted a “strong finish to a transformational year” and a revenue tailwind into FY2026 .
  • Cash generation and balance sheet: Q4 operating cash flow was $22.9M (FY2025 $97.7M), year‑end cash $127.5M, inventory -23% YoY, and the 9% convertible debt was converted to equity; buyback of $29.5M at ~$14.23 VWAP .
  • Transformation execution: Value-based pricing, manufacturing efficiencies, and a modernized service software system launched; management: “We more than doubled the fourth quarter operating cash flow year over year,” and “execution…is on track and driving results” .

What Went Wrong

  • Revenue miss and margin compression: Net sales fell 20.1% YoY; gross margin slipped to 25.0% (from 25.7%), and GAAP operating margin was -1.0% vs 9.0% last year, driven by lower volumes in Live Events and higher G&A (unique costs) .
  • Non-operating charges: Q4 included a $15.5M provision for possible credit losses on an affiliate loan; FY2025 included a $22.5M non‑cash charge from convertible note fair value changes, pressuring GAAP EPS .
  • Tariff uncertainty: Management cannot reliably determine tariff impacts; Q4 included a ~$1.2M tariff-related mark to OT contracts/warranty (likely reversible) and ~$2M in “reciprocal” tariffs in first five weeks of FY2026 at temporarily high rates .

Financial Results

Headline Metrics vs Prior Periods

MetricQ4 2024Q3 2025Q4 2025
Revenue ($USD Millions)$215.9 $149.5 $172.6
Gross Margin %25.7% 24.6% 25.0%
Operating Margin % (GAAP)9.0% -2.4% -1.0%
Diluted EPS (GAAP, $)$0.05 $(0.36) $(0.19)
Adjusted Operating Income ($USD Millions)$19.4 $1.2 $5.8
Adjusted Net Income ($USD Millions)$12.8 $0.5 $8.8

Segment Net Sales

Business Unit Net Sales ($USD Millions)Q4 2024Q3 2025Q4 2025
Commercial$39.0 $38.0 $40.6
Live Events$104.9 $46.1 $59.6
High School Park & Recreation$36.4 $29.4 $40.5
Transportation$24.2 $18.8 $18.3
International$11.4 $17.3 $13.6
Total$215.9 $149.5 $172.6

KPIs

KPIQ4 2024Q3 2025Q4 2025
Orders ($USD Millions)$205.8 $186.9 $240.7
Backlog ($USD Millions)$316.9 $273.2 $341.6
Operating Cash Flow ($USD Millions)$9.5 $12.0 $22.9
Cash and Cash Equivalents ($USD Millions)$81.7 $132.2 $127.5

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Sales CAGRFY2026–FY20287–10% 7–10% Maintained
Operating MarginFY2026–FY202810–12% 10–12% Maintained
ROICFY2026–FY202817–20% 17–20% Maintained
Non-recurring consulting spendFY2026Elevated in FY2025 Engagements concluded; “quite low” in FY2026 Lowered
Tariff impactFY2026N/AIndeterminable; ~$2M incurred in first five weeks at peak rates; $1.2M Q4 “mark” likely reversible Uncertain
Share repurchase authorizationOngoing$50M prior (inferred)+$10M addition; $60M total; ~$20M remaining Raised

Earnings Call Themes & Trends

TopicQ2 2025 (Dec 2024)Q3 2025 (Mar 2025)Q4 2025 (Jun 2025)Trend
AI/technology initiativesNew show control capability planned for H2; enterprise tools progress Digital transformation planning completed Service software launched; Venus Live, Show Control next-gen; AI-guided troubleshooting piloting Expanding deployment
Supply chainStabilized; operational capacity leveraged Efficient inventory management, schedule reductions Supply chain “healthy”; inventory -23% YoY Improving
Tariffs/macroNot highlightedWarning: US tariff policy may affect bookings timing Highly uncertain; mitigation via pricing, supply flexibility; ~$2M initial FY26 tariffs at peak rates New headwind with mitigations
Product performanceIntuit Dome, HEAT installations highlighted Orders grew sequentially; preserved gross margin Next-gen billboard; indoor control systems; International stadium wins (Saudi Arabia) Robust pipeline
Regional trendsInternational softness International rebound International orders +112% YoY in Q4; advertising-led Strong upturn
Regulatory/legalN/ALeadership transition; governance costs Redomiciled to Delaware; executive comp plan; governance costs elevated in FY2025 Stabilizing
R&D executionProduct development investments Efficiency initiatives in HSPR factory SaaS control rollouts; product platform simplification Scaling

Management Commentary

  • “We had a strong finish to a transformational year. We replenished our backlog…setting us up well as we head into fiscal 2026.”
  • “Following a record revenue year in fiscal 2024…Q4 orders up 17.0 percent…lag between order growth and net sales sets the stage for solid growth in revenue as projects begin in fiscal 2026.”
  • “Significant progress was made in digital transformation…eSales channel is in place…launching AI-guided troubleshooting.”
  • “Ultimately, the ultimate cost of the tariff is not yet reliably determinable…first five weeks of fiscal 2026…cost us about $2 million.”
  • “Adjusted operating income for 2025 was $50 million…second highest adjusted operating income year in the company’s history.”

Q&A Highlights

  • FY2026 growth: Management reiterated 7–10% CAGR through FY2028 and expects FY2026 to be within that range given backlog and early order trends .
  • Margins and tariff mitigation: Levers include value‑based pricing, cost reduction/lean initiatives, and accretive new services to drive operating margin expansion despite tariff uncertainty .
  • Commercial AV channel: Early-stage expansion with double‑digit order growth from AV partners; focus areas include retail and military (short-term slowdown noted) .
  • Capital allocation: Priority on product development and digital transformation; buybacks “on the table” given cash; additional $10M repurchase authorized .
  • One-time fees in FY2026: Business/digital transformation consulting engagements concluded; expected to be “quite low” going forward .

Estimates Context

MetricQ4 2025 Consensus*Q4 2025 Actual (S&P)*Company-Reported GAAP
Revenue ($USD Millions)$189.1*$172.6*$172.6
Primary EPS ($)$0.145*$0.177*$(0.19)

Values retrieved from S&P Global. The EPS divergence reflects non‑GAAP normalization (adjusted net income $8.8M implies ~$0.18/share), while GAAP EPS was negative due to affiliate loan credit loss and convertible note fair value effects .

Key Takeaways for Investors

  • Revenue miss vs consensus was offset by a strong orders/backlog setup; expect a revenue tailwind as Q3/Q4 projects commence in FY2026 .
  • Adjusted profitability remains resilient; Street‑tracked EPS beat underscores core margin preservation despite lower volumes .
  • Tariffs introduce near‑term noise; management has pricing, supply chain, and global manufacturing flexibility to mitigate, but impacts remain uncertain—a key watch item for FYQ1–Q2 .
  • Commercial and HSPR momentum, plus International acceleration (advertising and stadium wins), diversify revenue away from Live Events lumpiness .
  • Balance sheet strength and buyback authorization (~$20M remaining) provide optionality; inventory rightsized and convertible debt retired supports lower interest drag .
  • Transformation initiatives (SaaS control systems, AI-guided service, pricing discipline) should drive margin expansion toward 10–12% over the medium term .
  • Near-term trading: watch tariff policy developments and order conversion cadence; medium-term thesis centers on execution against reconfirmed FY26–FY28 targets and sustained order strength .