Daktronics at Sidoti Small-Cap Virtual Conference: Strategic Growth Plans

On Wednesday, 19 March 2025, Daktronics (NASDAQ: DAKT) participated in the Sidoti Small-Cap Virtual Conference, sharing its strategic vision and business transformation initiatives. While the company highlighted its strong market position and diversified offerings, it also acknowledged challenges such as revenue lumpiness and tariff impacts. The firm aims to enhance operational efficiency and pursue growth through both organic initiatives and potential acquisitions.

Key Takeaways

• Daktronics is the leading North American LED video display provider and ranks third globally.
• The company targets a 17% to 20% return on invested capital over the next three years.
• Focus on diversifying revenue streams to mitigate the impact of seasonality and lumpiness.
• Supply chain improvements and digital transformation are key operational priorities.
• Open to M&A opportunities, but primary focus remains on organic growth.

Financial Results

• Trailing twelve-month revenues through Q3 reached approximately $815 million.
• The company aims for a 7% to 10% compound annual growth rate over the next three years.
• Operating margin targets are set between 10% and 12%.

Operational Updates

• Daktronics is undergoing a business transformation to boost efficiency and profitability.
• The firm is investing in enterprise performance management tools to enhance data availability and capital allocation.
• Efforts to diversify sourcing aim to reduce exposure to Chinese tariffs.
• New service tools and sales automation systems are set to roll out in the upcoming fiscal year.

Future Outlook

• Daktronics is focusing on value-based selling and revenue mix diversification.
• Continued investment in IT and data technology platforms is planned to support growth.
• While open to M&A, the company prioritizes organic growth through its current transformation initiatives.

Q&A Highlights

• Sales channels for live events are primarily direct, while commercial business relies on AV integrators.
• SaaS revenues are currently small but expected to grow with new control systems and content sales.
• The company believes its U.S. manufacturing base and diversified sourcing position it well against tariff impacts.

Readers are encouraged to refer to the full transcript for a more detailed understanding of Daktronics’ strategic initiatives and future plans.

Full transcript - Sidoti Small-Cap Virtual Conference:

Anya Soderstrom, Senior Equity Analyst, Sidoti: Okay. So welcome to the Sidoti virtual small cap conference, and thank you for joining us today. I’m Anya Soderstrom, a senior equity analyst here at Sidoti. And as I mentioned, next up, we have Daktronics Inc. And with me today, I have Brad Wiman.

He’s the interim president and CEO and executive vice president. And we also have Howard Atkins. He’s the acting CFO and chief transformation officer. This will be conducted as a presentation by the management team followed by the by q and a. So if you would like to submit a question, you can do so at the bottom of your screen, and we will address the questions at the end of the end of the presentation.

And with that, I’ll hand it over to you, Brad. Thank you for having joining

Brad Wiman, Interim President and CEO and Executive Vice President, Daktronics: us today. Thank you, Anya. Well, good day to all of you, and thank you for taking time to for us to have an opportunity to present Daktronics and what we do. I’ll take a few moments just to introduce myself as I’m due to this role and also to ask Howard to introduce himself. As recently announced, I was named or asked to be interim president and CEO of Daktronics.

It’s quite an honor for me to be in that role. It’s a great company. We do great things. My name is Brad Lehman. I’ve been with the company for over thirty years, mostly in business development and management.

I’ve worked across the company in pretty much all areas, but returned to help the company back in the mid-90s when we were a sub-fifty million dollars company to develop new business, new technology. Today, we’ve grown to over $800,000,000 and quite an opportunity to shoot much higher. I’ve been part of the senior management team for over twenty years, building our commercial transportation and high school park and recreation businesses. I look at much of that as transforming our business to reach higher levels of success, and I’ve been Executive Vice President for the past twelve years. What I love about our company is that what we do is very visible, as you’ll see in our presentation, and attention grabbing.

I’ll get more into that later, but first I’d like to have Howard introduce himself.

Howard Atkins, Acting CFO and Chief Transformation Officer, Daktronics: Thank you, Brad. This is Howard Atkins. I am the acting, Chief Financial Officer, for Daktronics, and concentrating on the business transformation that the company is undertaking. I’ve been a director of Daktronics for a little over two years, and have been involved in, helping the company recapitalize two years ago and providing a special committee of the board oversight of the transformation process. My professional career was in financial services for the most part, where I helped lead a variety of different business and financial transformations in the banking and insurance sector.

I’ve also been a director of numerous companies in the industrial and technology sector, and it’s a pleasure and an honor to be here today.

Brad Wiman, Interim President and CEO and Executive Vice President, Daktronics: Okay. Thanks, Howard. Well, a little bit about Daktronics. We help thousands of excuse me. K.

We help thousands of customers every year to achieve their vision to entertain 18 fans. I guess my screen’s not being shared. One moment. So we can get this back on. Stop that share.

Try this again. Says it’s on.

Anya Soderstrom, Senior Equity Analyst, Sidoti: It looks fine. Can you can you change the slides?

Brad Wiman, Interim President and CEO and Executive Vice President, Daktronics: It looks fine. Okay.

Anya Soderstrom, Senior Equity Analyst, Sidoti: Yeah. Can you go to slide two?

Brad Wiman, Interim President and CEO and Executive Vice President, Daktronics: Yep.

Anya Soderstrom, Senior Equity Analyst, Sidoti: Yeah. There you go.

Brad Wiman, Interim President and CEO and Executive Vice President, Daktronics: Okay. Alright. It’s it’s not, putting a circle around it, but if you can see it, we’ll keep going. So apologize for that. About Daktronics, I’ll start over with that.

We help thousands of customers every year achieve their vision to entertain fans and reach new customers. What we do is very visual, but behind the scenes, we have developed the best talent in the industry to help our customers to achieve their visual, dynamic audio and visual communication systems. Some examples can be seen here. Our displays and solutions are used by a variety of customer types, for both sports venues, transportation mass transit systems, indoor and outdoor applications, using corporate headquarters, museums, retail stores, the list is really endless. Of course, we’ll be talking today about the past and future, and of course this includes risks.

Please read the Safe Harbor statement and take this into consideration in all that we plan to share with you today. Our highlights. Our trailing twelve month revenues through Q3 are roughly $815,000,000 We are the number one North American LED video display provider, number three worldwide, in terms of market share and data provided by FutureSource. Our product sales breadth is large, with product sales of over 12,000 customers annually. We have products installed in over 120 countries.

Why should you consider investing in Daktronics? In a nutshell, Daktronics is a world class business with an unmatched culture of excellence from the quality of our engineering, manufacturing and installation expertise, our solution oriented sales team, to our commitment to customer service through the entire lifetime of display system use. Our mission is to support our customers to inform, entertain, and persuade audiences. What differentiates us is that we are best in class in our industry and the only US manufacturer of scale with a global footprint. What I mean here is that we excel in providing world class, customizable LED video solutions, and we could do this turnkey.

Sales, design, project management, installation, control systems, we do it all all in service. In addition, we have standard solutions, and a lot of them for many customers that deploy that we deploy through sales channel partners made up of hundreds of signed companies and AV integrators. We have developed new solutions that expand opportunities with our current customer base, as well as extending into new ones. We call these adjacent opportunities. One example is shown right here, a product for the Denver Broncos.

We do much on the outside or in the bowl with the scoring solutions, but great opportunities for us in the bowl, and you can imagine that in campuses, retail and elsewhere. Our target markets are large and growing with resilient demand driven by advertising, audience experience and sports fan engagement. Our focus today is to transform our company to build on the strengths that we have while bringing to market new technology advancements and new services to accelerate Daktronics’ profitable growth. With the benefit of fresh perspectives and diversified experiences, Daktronics can further capture its potential and secure our market leadership position. This slide provides a nice overview of our business unit structure, the markets we serve, and our control capabilities.

In our live events segment, which is up in the top left, we sell to major arenas such as the Detroit Tigers facility or as pictured here, the Akron Rubber Ducks, a minor league baseball team. We also sell to colleges and universities and other venues that showcase live performances. These sales are generally sold directly. Our high school park and recreation segment sells increasingly sophisticated traditional scoring and video displays for enhanced sporting applications, and other curriculum usage that emulate those used by bigger sports teams. These projects often incorporate content sales and local advertising for funding sources.

These relationships are maintained through our own Daktronics channels, salespeople, as well as channel partners, signed companies, dealers, and AV channels. In our commercial segment, we serve large projects like you find in Times Square or Las Vegas. But what is often overlooked is our out of home business or our on premise business. We are the largest supplier of digital billboards along freeways, and we have a large extensive line of products for on premise advertising. Here we leverage an extensive, well over 800, perhaps 1,000 signed company network partners for distribution.

In transportation, we are qualified pre qualified in all 50 states to offer solutions to help manage traffic on roadways and visual communication systems at railway stations and airports. Our international market segment is a growth area for us to mimic what we do in North America but on an international basis. And our control capabilities, we also develop that. This enables our customers to operate their displays, show content, content that is inviting and engaging. In addition, it also provides us a nice revenue base for part of a SaaS software model.

We have diversified revenue, this is our trailing twelve months looking back, and the mix that comes with it. Today, we’re focused on further diversifying our business to drive long term growth and profitability. Another differentiator is our global footprint, which puts us close to our customers and provides sales, manufacturing, and service support. We are headquartered in Brookings, South Dakota, with manufacturing here and in Sioux Falls, and operate a factory in Minnesota. These factories produce about 80% of our revenue.

We also have manufacturing capabilities in Ireland and in China. Our industry leadership and market share derives from our diversity of the customers and applications that we serve, along with our growing brand identification for both core and adjacent applications across our addressable market segments. Here are some examples such as in high school park and recreation, Prosper Independent School District up in the top left, where video displays for high schools are becoming more common. Commercial market solution for companies such as Wawa, a longtime customer of Daktronics for both menu boards, control solutions, as well as outdoor pricing for field price and messaging displays. Live event customers such as the Seattle Kraken Arena shown in the picture here, and our transportation business with customers and applications such as information displays at the Minneapolis Airport.

We have thousands of installations at high schools and businesses and communities. Another best in class differentiator for Daktronics is our full service offering. We are the turnkey provider for both end customers as well as our channel partners. We have great customers that buy from us because we are the best in class, and we support them throughout the life of their products. Our delivery of innovation, collaboration, quality and high touch service solidifies these relationships around the world, many of them who come back to us time after time, sometimes decades, or return to us after having tried to lower price competitor.

Our customers use our displays on an average of seven to ten years, sometimes more, and they come back to us for upgrades. We continue to foster relationships with our repeat customers and resellers and are building out our ways to engage them through automation and online solutions. Over time, we have been successful in driving growth through innovation and technology leadership, either ahead of or in lockstep with the addressable market’s growth as visual communication has permeated every aspect of the customer experience. Today, we are enjoying growth and earning returns on our investment in narrow pixel pitch line of products as well as high resolution outdoor solutions. We are also investing in future potential technologies to position us for growth in furthering narrow pixel pitch and micro LED technologies, as well as reflective low power displays, intelligent power management and SAS control solutions.

With that, we have a significant progress in our digital transformation, and Howard on the next slide, we’ll talk about our business transformation. We’re investing in our foundational enterprise performance management tools that will strengthen our management systems, improve data availability to guide capital allocation decisions and focus our investments in the most profitable business segments. We are on track for our phased implementation of these integrated business planning tools, our IT and data technology platforms are key in our business transformation as it supports our aggressive growth ambitions, data driven planning and is foundational to creating operational efficiencies. In FY 2025, we added products to our e sales channel, improved our back office integrations with systems and processes, and which is delivering results particularly in our high school park and recreation segment. Currently, we’re testing a new sales channel rollout launching new control systems, improving our sales tools, yet we have much more to do.

In FY ’26, we plan to further invest in enterprise performance management to replace older legacy systems. This will provide us a greater foundation to build on. We’ll also be rolling out new service tools early in our fiscal year starting in May. And later in the year, we’ll begin to roll out additional sales automation with CPQ or configure price quote systems to streamline our selling process. With that, I’ll turn it over to Howard to talk about business transformation.

Howard Atkins, Acting CFO and Chief Transformation Officer, Daktronics: Thank you, Brad. I’d like to talk a few minutes about our business transformation. About a year or so ago, the company embarked on this so called business transformation. Essentially, what the company is doing is to take a take a great company and make it greater. Take a take a company that has a wonderful business model, and comparative advantages and translate that into a higher trajectory of profit growth going forward.

One of the first things that was done was to set some targets around this journey where we wanted to get to. The specific first order of magnitude target was for return on invested capital. The company had spent many years earning at or just over its cost of capital. And we decided to set a 17% to 20% ROIC target for the company, which was based on data that we had that indicated what top performing publicly traded manufacturing companies were earning. So we are endeavoring to get to a 17 to 20% or so return on invested capital over the next three years.

As you probably know, there are different combinations of growth and margin that can get to any given ROIC target. The combination that we selected for targets on the growth side are seven to nine, seven to 10% compound to growth over the three year period ahead of us, and an operating margin of 10 to 12%. So the combination of those two things, if achieved and sustained will get us to that ROIC target that I just mentioned. The company brought in a very well known strategic consultant, who in collaboration with the executive team and other participants from the company, put together in the last hundred or so days a variety of different initiatives that will get us started on this journey. On the growth side, we are, stepping up our efforts to be a, very strong value based seller.

By that, I mean, we we want to participate in the that segment of the of this market where we can, create value for the customers, the value that they want to have, and and of course, apply pricing that’s consistent with that. Brad mentioned before, revenue mix diversification. That’s an important aspect of both achieving the compound growth rate that we want to get on the top line as well as sustaining it. Historically, the company has been somewhat more dependent on the live event, live events market segment for its growth. We will continue to invest capital in that segment, but we are looking now for the combination of all the rest of the business lines to produce even faster revenue growth going forward.

And we can talk about new some new products such as the AV integrated product and others that are being introduced into the mix. So there’s a variety of different ways of getting to that growth and we’ve we’ve started embarking on that journey. On the cost side of the equation, in terms of operating margin, we have now looked at, everything in the company’s supply chain from procurement through fulfillment. So procurement, inventory management, manufacturing, product processes and so on, with with a view towards seeing where we can do, manage our processes along the supply chain more efficiently. And we’ve already started introducing some of those initiatives already.

And along with that, you know, in order to get this transformation done, as well as sustain the benefits of this transformation. We’ve also been looking at and we’ll continue to look at in the coming quarter or two, our business and financial management practices, to make sure that we have the support from these practices that we need to, as I say, sustain this transformation effort. Specifically, we are looking at our financial planning process with a view towards making sure that the linkages that are necessary between expense investment and revenue are are specified properly, that we have the right capital allocation regimes built into our planning process. And that we are taking into account fully, not only the expectation for top line and bottom line growth, but the risks that are associated with that as we see them, external market risks, as well as execution risks. So all of that’s being factored into our, emerging planning process.

We’re also taking a look at our compensation practices, with a view towards making sure that, our executive team, is compensation is properly aligned with, shareholder interests and that our incentive compensation systems are closely aligned with our performance targets. And then as Brad mentioned before, we’ve got the digital transformation process that’s ongoing as as we talk that will create greater efficiencies in both our internal processes as well as the interfaces between the company and its customers. So let me stop there and, I guess, open up the open up the floor for questions.

Anya Soderstrom, Senior Equity Analyst, Sidoti: Okay. Thank you so much. That was a good presentation. Again, if you would like to participate in the Q and A, you can submit your question at the bottom of your screen. I’ll kick it off here with a question from the audience.

How does the company sell direct with its own Salesforce or through distribution? And how much of the revenue is SaaS driven?

Brad Wiman, Interim President and CEO and Executive Vice President, Daktronics: I covered a little bit of that. Our live events business is primarily direct. However, we are using more AB Integrator partners for that in the bowl and some of the indoor opportunities. We’re expanding that in our high school business as well. Our commercial business, so retail and so forth, those are primarily sold through AV integrators.

So military applications, retail, lot of those opportunities. So our sales channels, side companies, dealers, AV Integrators, I don’t have the exact mix. I would say they make up probably in that 25 to 30% of our overall revenue is, through those channels. SaaS revenues were rather small today. We sell control systems to every customer along with solution, solutions that are internet hosted, they’re web based.

And we have a software model that’s being rolled out and deployed already in some cases. So we’re starting to get that annual monthly and annual revenue stream coming from our control systems. We’ll see that build over time. Today, it’s very small. But of course that’s a high margin piece and we’re excited about what that has to offer.

We also sell content. We sell content, we sell curriculum, we sell a whole bunch of software products to help schools to both teach and to implement and to use their displays in a very attractive way. I hope that answers your question.

Anya Soderstrom, Senior Equity Analyst, Sidoti: Thank you. And in terms of your revenue and your earnings, they can be rather lumpy due to the seasonality you have and also some large projects that that are not repeat and and are unpredictable when they might come in again. Can you just talk about about that seasonality and also what you can do in terms of of holding the margins, how flexible is your is your model in terms of that?

Howard Atkins, Acting CFO and Chief Transformation Officer, Daktronics: Well, the business I’m sorry, Shruti. I mean, the the the, you know, some of our businesses are, lumpy. You know, Brad can talk a little bit about the seasonality, but I think the the bigger issue is the we do have large projects coming through. And, the timing in particular of those projects can vary and therefore have an impact on any particular quarter and even any particular year. So an important implication of what I just said is when we look at our growth target, the 7% to 9%, seven % to 10% top line growth, that’s an average compound to growth rate in any given year.

We may be above or below those particular numbers depending upon the timing of these large orders. The way we can perhaps deal with that comes to the point that Brad mentioned about diversifying the revenue mix. So, statistically speaking, I guess, if you have a lot a lot of lumpy different projects coming through from a variety of different areas, they may average out so that you have the kind of sustainability and the revenue growth that you need. But we’re we’re we are looking at, improving or further diversifying, if you will, the revenue mix of the company. Historically, as we’ve said, the live events segment has been a very large component.

You saw the pie chart before, almost half of the half of the company. Going forward, we’re going to continue to invest capital in the live segment, live event segment because it is an important segment for it for us. But but recognizing its its lumpiness, we we expect and are targeting, even higher growth rates, in in the rest of the company.

Anya Soderstrom, Senior Equity Analyst, Sidoti: Okay. Thank you. I also have a question here about the tariff situation. And are you looking to reduce your sourcing exposure to China?

Brad Wiman, Interim President and CEO and Executive Vice President, Daktronics: The quick answer to that is yes. We have a very diversified, as being a U. S. Manufacturer, we buy components from all over the world. Some of those components only come through China.

So that is true. But we’re buying those components in with the different tariff mix and a finished goods product. So we think from a U. S. Market perspective, we’re well positioned, looking at how tariffs are being implemented across the board.

The products that we would import if it was a finished goods from China has a very high tariff rate, whereas a piece part is a small mix of our overall, what we manufacture here in The U. S. So we think we’re well positioned tariff wise in a competitive environment. That being said, tariffs are always a bit of a negative as we’re all aware that economically, what does that have? How do customers respond to that?

And what’s the pricing pressure that it creates? But overall, we think we’re well suited, and we are looking across every piece of our business to see how we can move things to other areas. Good question.

Anya Soderstrom, Senior Equity Analyst, Sidoti: Okay. Thank you. We’re actually out of time. I’m going to squeeze in one more question because we started late here. And it’s in regards to M and A.

Is that likely to be a part of your, your process going forward? And if so, are the specific areas that are most interesting to you?

Howard Atkins, Acting CFO and Chief Transformation Officer, Daktronics: I think, you know, Brad, please comment, but we’re we’re certainly open to the idea. But, I think our first order of business is to get the kind of organic growth that we can, can, we feel we can get by doing the things that we’ve been talking about here. We’re in a better position to control our destiny if we can get the organic growth, who knows where and when there may be M and A opportunities. And then of course, we’d have to evaluate any from a financial point of view, any particular M and A opportunity against the returns that we get either from organic growth or the returns that we might get for our shareholders by just buying back stock.

Anya Soderstrom, Senior Equity Analyst, Sidoti: Okay. Thank you. And with that, I’m gonna wrap it up. There are some more questions in in the queue here. And, I know you have a pretty good one on one schedule already, but to the extent anyone in the audience would like to catch up with the management team, you can reach out directly to to them or to us here at Sidoti, and we’ll put you in touch and, and make sure, you you get some time with the management to to chat offline.

And with that, I’ll hand it over to you, Brad, for some closing remarks.

Brad Wiman, Interim President and CEO and Executive Vice President, Daktronics: Okay. Well, first of all, thank you for participating in this. This is my first. So this is fun. I haven’t had many opportunities to do this, but I love the company, love the people.

I did see one of the questions about the CEO coming to South Dakota. Come and visit us. We have a great place, great environment. You’ll like our people. Summers are beautiful and, but much more to come, but we appreciate you being here today.

Anya Soderstrom, Senior Equity Analyst, Sidoti: Thank you. Thank you, everyone. Have a good rest of your day.

Howard Atkins, Acting CFO and Chief Transformation Officer, Daktronics: Thank you.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.