Executive Summary
Daktronics reported QQ1 FY2025 revenue of $226.1 million, up 4.7% sequentially from Q4 2024, with a gross margin of 26.4% and an operating margin of 10.0%. Net income was negative (-$4.95 million) driven by a material negative total other income/expenses item (-$22.5 million) and modest taxes, despite positive operating performance. Management highlighted orderly seasonality normalization from a historically elevated backlog, with a year-over-year order growth of 11% and a quarter-end backlog of $267 million, signaling improving visibility and a path to seasonal revenue generation aligned with fall sports and large project executions.
The quarter benefited from notable project executions in Live Events and High School Park & Recreation (HSPR), including college football stadium installations and the LA Clippers Intuit Dome project, while international demand remained softer on year-over-year basis but improved sequentially. Management emphasized ongoing digital transformation and cost-structure improvements intended to lift profitability over the medium term, including investments in enterprise tools, service offerings, and automated front-end quoting. They guided that FY2025 operating margins would be temporarily pressured by transformation-related costs ($8–$10 million) but expected to drive higher returns as the clearer growth trajectory unfolds into FY2026 and beyond. The company remains focused on expanding its SAM, leveraging control systems leadership, and growing professional services to convert project activity into recurring revenue streams. The stock-of-backlog and cash-flow generation position provides optionality for value creation as the year unfolds.
Key Performance Indicators
QoQ: 16.93% | YoY:-43.52%
QoQ: -296.43% | YoY:-125.77%
QoQ: -302.21% | YoY:-126.19%
Key Insights
Revenue: $226.1 million in Q1 2025, up 4.7% QoQ from Q4 2024 but down 2.8% YoY. Gross profit: $59.70 million; gross margin: 26.40% (vs. prior period margin broadly in the mid-20s). Operating income: $22.72 million; operating margin: 10.05%.
Net income: -$4.95 million; net income margin: -2.19%. Earnings per share (diluted): -$0.11.
EBITDA: $27.61 million; EBITDA margin: 12.22%.
Backlog: $267 million at quarter end, reflecting YoY order growth and a normalization of seasonality after supply-c...
Financial Highlights
Revenue: $226.1 million in Q1 2025, up 4.7% QoQ from Q4 2024 but down 2.8% YoY. Gross profit: $59.70 million; gross margin: 26.40% (vs. prior period margin broadly in the mid-20s). Operating income: $22.72 million; operating margin: 10.05%.
Net income: -$4.95 million; net income margin: -2.19%. Earnings per share (diluted): -$0.11.
EBITDA: $27.61 million; EBITDA margin: 12.22%.
Backlog: $267 million at quarter end, reflecting YoY order growth and a normalization of seasonality after supply-chain challenges; backlog is expected to grow into Q3 before moderating in the summer months, per management commentary.
Cash flow: Net cash provided by operating activities = $19.48 million; free cash flow = $14.40 million. Cash at end of period: $97.19 million; cash at beginning: $81.68 million.
Balance sheet: Total assets $553.89 million; total debt $75.97 million; net debt at period end = -$20.84 million (net cash position). Total stockholders’ equity = $238.21 million.
Liquidity/ratios: Current ratio 2.17x; quick ratio 1.49x; cash ratio 0.49x; days sales outstanding (DSO) 74.3 days; days of inventory outstanding (DIO) 73.0 days; cash conversion cycle 110.9 days.
Key profitability and efficiency metrics: gross margin 26.4%; operating margin 10.0%; pretax margin ~0.10%; net margin -2.19%; return on assets (ROA) -0.89%; return on equity (ROE) -2.08%.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
226.09M |
-2.77% |
4.73% |
| Gross Profit |
59.70M |
-16.09% |
7.80% |
| Operating Income |
22.72M |
-43.52% |
16.93% |
| Net Income |
-4.95M |
-125.77% |
-296.43% |
| EPS |
-0.11 |
-126.19% |
-302.21% |
Key Financial Ratios
operatingProfitMargin
10%
operatingCashFlowPerShare
$0.42
freeCashFlowPerShare
$0.31
priceEarningsRatio
-35.72
Management Commentary
Theme: Backlog and seasonality
- “Backlog of $267 million reflects our year-over-year order growth and continued return to more normal seasonal trends as we continue to anniversary our resolution of past supply chain challenges.” (CEO commentary on backlog and seasonality)
- “Backlog level was $267 million at the end of the quarter, and we’re seeing higher levels of quoting activity.” (Management on pipeline and quoting activity)
Theme: Revenue progression and mix
- “We delivered revenue growth as well as gross and operating profit expansion on a sequential basis.” (CEO on QQ1 2025 sequentially improving profitability)
- “The sequential increase is attributable to production and deliveries ramped up for sports installs, especially for Live Events and High School Park and Recreation business units.” (Causal link between project execution and revenue growth)
Theme: Market conditions and demand signals
- “Live Events demand to remain strong as venues enhanced facilities to entertain fans and attract athletes.” (Market outlook for Live Events)
- “International continues to be slow as compared to prior years… however, it increased 20% sequentially as a result of bookings for digital billboard rollouts.” (International dynamics and offsetting improvement)
Theme: Strategic priorities and cost structure
- “We are investing in digital transformation and other initiatives to lower structural and product costs, which will impact FY2025 margins between $8–$10 million but are expected to yield meaningful returns over time.” (Guidance on transformation investments)
- “We are the only U.S. manufacturer of scale with a global footprint and service seen by geographic market, extending technology leadership, high-quality solutions and world-class service.” (Competitive positioning)
Theme: Back-up and credit position
- “We have an asset-based lending line and roughly $35 million of availability on that line.” (Liquidity and financing flexibility)
Theme: Outlook and usage of backlog
- “Backlog is expected to grow as we move through Q3 and then tend to trend down in our summer months.” (Seasonality and backlog trajectory guidance)
Backlog of $267 million reflects our year-over-year order growth and continued return to more normal seasonal trends as we continue to anniversary our resolution of past supply chain challenges.
— Reece Kurtenbach
There is room for growth, and we believe there is room for margin growth, operating margin growth — how do we balance those two is really the opportunity we have in front of us.
— Reece Kurtenbach
Forward Guidance
Guidance and management commentary indicate a multi-year transformation-led growth trajectory. Key elements include:
- Revenue trajectory: QQ1 2025 results show a seasonally stronger start with expectations for continued order flow into fiscal 2025 and beyond, supported by a backlog of $267 million and an 11% YoY increase in new orders.
- Margin trajectory: Management believes there is room for operating margin expansion, even as near-term transformation initiatives (costs associated with digital transformation, front-end automation, and service-system upgrades) will depress FY2025 operating margins by an estimated $8–$10 million. This implies a path to margin expansion as benefits from automation, pricing discipline, and product mix improvements accrue in 2026 and beyond.
- Digital transformation: Investments in enterprise performance management tools, modernized service and systems management, and automated front-end quoting are slated for 2025–2026, with phased implementations beginning in fiscal 2026. These are intended to improve data-driven capital allocation, reduce structural costs, and accelerate revenue growth through higher-margin services and software offerings (MRR-driven professional services and higher-value content).
- Backlog and seasonality: Management expects backlog to reflect a more seasonal pattern, with Q3 seeing higher activity and Q4 building into the busier summer period. This implies revenue visibility should improve as the year progresses, albeit with quarterly volatility tied to sports calendars and large project timelines.
- Key milestones: The roadmap targets launch of automated frontline sales tools in FY2026, with ongoing progress across five market verticals (Live Events, Commercial, High School, Transportation, International) and a focus on expanding Narrow Pixel Pitch product adoption and control-system-based solutions.
Investment thesis: Daktronics is pursuing a margin-expansion agenda underpinned by premium-value propositions (quality displays, robust control systems, and professional services) and a broader digital-transformation program designed to lower structural costs and lift profitability over the medium term. Key factors investors should monitor include: backlog normalization through Q3, progress and monetization of the Show Control platform and cloud-enabled services, price realization in a competitive environment, and the pace of ERP/quoting-system adoption that could unlock operating leverage.