Daktronics Flashes Red As Sales Disappoint, Tariffs Loom Large

Daktronics Inc. (NASDAQ:DAKT) shares initially fell 8.55% to $13.90 in premarket trading Wednesday after the company reported weaker-than-expected fourth-quarter fiscal 2025 sales. This decline occurred despite the company’s reassurance of progress on its business transformation plan, and the stock has since regained its prior losses.

Sales fell 20.1% year over year to $172.6 million, missing the analysts’ estimate of $193.96 million, but rose 15.4% sequentially.

Orders increased 17% to $240.7 million in the quarter, lifting the backlog to $341.6 million, up from $316.9 million a year ago. Strong demand across the Commercial, High School Park and Recreation, and International segments drove this increase.

The gross margin narrowed to 25% in the quarter from 25.7% a year earlier, while the full-year margin fell to 25.8% from 27.2% in fiscal 2024.

Adjusted operating income was $5.8 million, excluding $7.5 million in one-time expenses. For the year, adjusted operating income totaled $49.6 million; reported income dropped to $33.1 million from a record $87.1 million.

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The company posted a fourth-quarter net loss of $9.4 million versus income of $2.5 million a year earlier. The full-year net loss was $10.1 million, with an adjusted income of $40.1 million.

Adjusted net income for the quarter was $8.8 million, or 18 cents per share, beating the consensus estimate of 15 cents.

Full-year operating cash flow reached $97.7 million, including $22.9 million in the fourth quarter. The company spent $19.5 million on capital investments and repurchased $29.5 million in stock.

As of April 26, cash and marketable securities stood at $127.5 million, with $12 million in long-term debt. Inventory fell 23.3% year over year, and the working capital ratio was 2.2.

The company said its transformation plan, aimed at long-term profit growth, is on track, with early gains in pricing, inventory efficiency, and working capital. In the first quarter of fiscal 2026, it launched a new service software system to streamline operations and improve customer experience.

“As we enter fiscal 2026, our transformation efforts ensure we are well-positioned to capitalize on increasing market demand,” said interim President and CEO Brad Wiemann. He noted the company’s strategic focus on expanding indoor markets, enhancing services, and targeting high-growth, high-margin channels.

Daktronics is operating in a volatile tariff landscape, with reciprocal tariffs announced on April 2, 2025, causing significant fluctuations and making it difficult to predict the full impact. Despite this uncertainty, the company is implementing agile measures to mitigate potential disruptions.

These strategies include selective price adjustments and escalation clauses in contracts, leveraging supply chain flexibility, and utilizing its global manufacturing footprint to shift production to lower-tariff facilities or even reshore to the U.S. Daktronics is also focusing on international growth to diversify its revenue streams and reduce exposure to U.S.-based tariffs.

It reaffirmed its three-year targets of 7%-10% annual sales growth, 10%-12% operating margin, and 17%-20% return on invested capital.

Price Action: DAKT shares are trading higher by 1.15% at $15.38 in premarket trading at last check Wednesday.

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