Daktronics, Inc. Announces Next Steps in Ongoing Business Transformation Plan

Rhea-AI Summary

Daktronics Inc (NASDAQ: DAKT) has announced the next phase of its ongoing business transformation plan aimed at accelerating profitable growth, increasing profit margins, and driving returns consistently in the mid-to-high teens. The company has formed an internal Business Transformation Office (BTO) and an ad hoc transformation committee of the Board to oversee execution of strategic initiatives.

Key points include:

• Board initiates search for a new Chief Financial Officer
• Sheila Anderson appointed to new role of Chief Data and Analytics Officer
• Company evaluating opportunities to use and potentially augment its $29 million share repurchase authorization
• Expects Q2 fiscal 2025 revenue, gross profit, and operating income to be in line with analyst consensus

The company aims to grow revenue faster than its addressable market, expand operating margins, and generate returns on capital consistently above its cost of capital.

Positive

• Formation of Business Transformation Office to drive strategic initiatives
• Board's ad hoc transformation committee to oversee execution of initiatives
• Search for new CFO with experience in business transformations
• Creation of Chief Data and Analytics Officer role to support digital transformation
• $29 million remaining under existing share repurchase authorization
• Q2 fiscal 2025 financial performance expected to be in line with analyst consensus

Negative

• None.

Insights

Financial Analyst

Daktronics' announcement of its business transformation plan signals a significant strategic shift aimed at enhancing profitability and shareholder value. The formation of a Business Transformation Office and an ad hoc transformation committee demonstrates a serious commitment to change. Key points include:

• Focus on accelerating profitable growth and increasing margins
• Target of mid-to-high teens returns on invested capital
• Search for a new CFO with transformation experience
• Creation of a Chief Data and Analytics Officer role
• $29 million remaining in share repurchase authorization

The company's strong fiscal 2024 performance, with record revenue and profit and $135 million in liquidity, provides a solid foundation for these initiatives. The expectation of Q2 2025 results aligning with analyst consensus suggests near-term stability. However, the success of this transformation will depend on effective execution and market response to the new strategies. Investors should monitor progress on margin expansion and ROIC improvements in upcoming quarters.

Market Research Analyst

Daktronics' transformation plan reflects broader industry trends towards digital transformation and operational efficiency. Key observations:

• The focus on deeper market penetration and expansion into adjacent verticals suggests potential for market share growth
• Emphasis on digital transformation aligns with industry-wide shifts towards data-driven decision-making
• The goal to grow revenue faster than the addressable market indicates an aggressive growth strategy

The company's strong balance sheet and liquidity position ($135 million) provide a buffer for implementing these changes. However, the success of this strategy will depend on market conditions and the company's ability to differentiate itself in a competitive landscape. The potential for increased share repurchases signals management's confidence but should be balanced against investment needs for growth initiatives. Investors should watch for concrete plans and timelines for implementing these strategic initiatives in future communications.

Business Transformation Office Driving Strategic Initiatives to Accelerate Profitable Growth, Increase Margins and Drive Consistent Returns on Invested Capital in the Mid-to-High Teens

Ad Hoc Transformation Committee of the Board to Oversee Execution of Strategic Initiatives

Board of Directors Initiates Search for New Chief Financial Officer to Support the Achievement of the Company’s ROIC Goals

Sheila Anderson Named to Newly Created Role of Chief Data and Analytics Officer to Lead Digital Transformation

BROOKINGS, S.D., Oct. 21, 2024 (GLOBE NEWSWIRE) -- Daktronics Inc (“Daktronics” or the “Company”) (Nasdaq – DAKT) today announced the next phase of its ongoing business transformation plan to accelerate profitable growth, increase profit margins, and drive returns that are consistently in the mid-to-high teens and well above the Company’s cost of capital.

During fiscal 2023 and 2024, the Company significantly strengthened its balance sheet and fulfilled orders, resulting in reducing its backlog to more normal levels, delivering record revenue and profit, and a fiscal year-end 2024 liquidity of more than $135 million.

To drive continued progress, Daktronics has formed an internal Business Transformation Office (“BTO”), which includes the Chief Executive Officer, other members of the leadership team and senior executives from a leading global strategic and operational consulting firm. To underscore the importance of these initiatives and to oversee their execution, the Board has formed an ad hoc transformation committee, chaired by director Howard Atkins, who is also a member of the BTO.  Mr. Atkins has extensive experience in transformational efforts. 

The BTO has undertaken a comprehensive review of the Company’s business, strategy and operations and is developing a set of strategic initiatives, enabled in part by the Company’s previously announced digital transformation, to provide even better outcomes for customers, deeper penetration of its current and adjacent market verticals, above-market growth, and more efficient delivery, fulfilment, and service.  The goal of these initiatives is to grow revenue faster than the Company’s addressable market, expand operating margins, and generate returns on capital in the mid-to-high-teens and consistently above the Company’s cost of capital.

The Board has initiated a search for a new Chief Financial Officer and is seeking to recruit an experienced public company CFO who has served as an integral partner in business transformations aimed at driving returns on capital.

Sheila Anderson, who has served as the company’s CFO since 2012, has been appointed to the newly created position of Chief Data and Analytics Officer to support and accelerate the Company’s digital transformation. Ms. Anderson will continue to serve in her role as CFO until her successor is identified.

“With a strong foundation in place and exciting initiatives underway, we believe Daktronics is well positioned to drive sustainable, profitable growth and strong returns on capital,” said Reece Kurtenbach, Daktronicsʹ Chairman, President and Chief Executive Officer. “I look forward to working closely with the committee and the entire Board of Directors to advance these important initiatives. Together, we are committed to taking actions that will enhance and expand Daktronics’ market leadership position and create significant long-term value for our customers, shareholders and all stakeholders.”

The Board notes that the Company has approximately $29 million remaining under its existing share repurchase authorization and, reflecting its confidence in the Company’s continued transformation, is evaluating opportunities to use and potentially augment that authorization over time.

At this time, Daktronics expects to deliver fiscal 2025 second quarter revenue, gross profit and operating income approximately in line with the current analyst consensus.¹ Daktronics expects to release its fiscal Q2 earnings and host a conference call in early December, at which time the Company will discuss results for the quarter and management’s expectations for the full fiscal year; details for this call will be announced separately.

ABOUT DAKTRONICS

Daktronics has strong leadership positions in, and is the world's largest supplier of, large-screen video displays, electronic scoreboards, LED text and graphics displays, and related control systems. The company excels in the control of display systems, including those that require integration of multiple complex displays showing real-time information, graphics, animation, and video. Daktronics designs, manufactures, markets and services display systems for customers around the world in four domestic business units: Live Events, Commercial, High School Park and Recreation, and Transportation, and one International business unit. For more information, visit the company's website at: www.daktronics.com.

SAFE HARBOR STATEMENT

Cautionary Notice: In addition to statements of historical fact, this news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and is intended to enjoy the protection of that Act. These forward-looking statements reflect the Company's expectations or beliefs concerning future events. The Company cautions that these and similar statements involve risk and uncertainties which could cause actual results to differ materially from our expectations, including, but not limited to, changes in economic and market conditions, management of growth, timing and magnitude of future contracts and orders, fluctuations in margins, the introduction of new products and technology, the impact of adverse weather conditions, increased regulation and other risks described in the company's SEC filings, including its Annual Report on Form 10-K for its 2024 fiscal year. Forward-looking statements are made in the context of information available as of the date stated. The Company undertakes no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur.

Forward-looking statements are made in the context of information available as of the date stated. The Company undertakes no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur.

FOR MORE INFORMATION
Sheila Anderson, Chief Financial Officer
Investor Relations
Tel 605-692-0200
Email investor@daktronics.com

LHA Investor Relations
Carolyn Capaccio / Jody Burfening 
DAKTIRTeam@lhai.com

____________________
¹ FactSet calculates consensus revenue, gross profit and operating income for Q2 2025 to be $200.0 million, $49.7 million and $11.6 million, respectively, as of October 18, 2024. Second quarter 2025 expected results reflect Daktronics’ preliminary estimates based on currently available information and are subject to completion of Daktronics’ financial closing procedures. These results may change, and those changes may be material.

FAQ

What is Daktronics' (DAKT) business transformation plan aiming to achieve?

Daktronics' business transformation plan aims to accelerate profitable growth, increase profit margins, and drive returns consistently in the mid-to-high teens, well above the company's cost of capital.

What organizational changes has Daktronics (DAKT) announced as part of its transformation?

Daktronics has formed a Business Transformation Office (BTO), initiated a search for a new CFO, and appointed Sheila Anderson to the new role of Chief Data and Analytics Officer.

How much is remaining in Daktronics' (DAKT) share repurchase authorization?

Daktronics has approximately $29 million remaining under its existing share repurchase authorization.

What are Daktronics' (DAKT) expectations for Q2 fiscal 2025 financial performance?

Daktronics expects to deliver fiscal 2025 second quarter revenue, gross profit, and operating income approximately in line with the current analyst consensus.