Daktronics noted in their press release yesterday, they have been generating record cash flows based on strong sales growth.  Here are highlights from their release.

Fiscal Q2 2025 financial highlights include:

• Sales of $208.3 million, a 4.5 percent increase from the second quarter of fiscal 2024, and fiscal year-to-date sales of $434.4 million, up 0.6 percent compared with the same period last fiscal year
• Gross profit as a percentage of net sales of 26.8 percent, compared to 27.2 percent for the second quarter of fiscal 2024, and the seventh sequential quarter with over a 24.5 percent gross profit, demonstrating the effectiveness of management’s business improvement initiatives
• Operating income of $15.8 million, compared to $19.4 million for the second quarter of fiscal 2024; operating income adjusted for consultant related expenses associated with business transformation initiatives was $19.1 million
• Record cash flows from operations of $43.3 million for the fiscal second quarter and $62.8 million for the first six months of fiscal 2025
• Product order backlog of $236.0 million⁽²⁾ at October 26, 2024, compared to $267.2 million at the end of the first quarter of fiscal 2025 and $306.9 million at the end of the second quarter of fiscal 2024
• Product and service orders of $177.6 million⁽²⁾ for the quarter, a decrease of 3.3 percent from the second quarter of 2024 and $353.8 million on a year-to-date basis, a year-to-date increase of 3.3 percent
• Net income for the quarter was $21.4 million, excluding the non-operating non-cash debt fair value adjustment and operating adjustment for consultant related expenses associated with business transformation initiatives, adjusted net income⁽¹⁾ was $13.9 million for the quarter

Reece Kurtenbach, Daktronicsʹ Chairman, President and Chief Executive Officer, commented, “We delivered strong second fiscal quarter results and made steady progress on our recently announced strategic and digital transformation initiatives. We generated record cash flow from operations of $43.3 million, as our order backlog continued to be reduced in level and in relation to steady sales, reaching total cash flow from operations of $62.8 million for the first half of the year. We completed innovative and visually striking installations at the L.A. Clippers’ Intuit Dome, the Miami HEAT’s Kaseya Center that have both drawn attention in trade and social media. We also served other customers with the completion and update to the latest digital technologies at numerous college and high school sporting facilities and commercial locations.”

Update on Business and Digital Transformation 
Kurtenbach added, “We continue to execute on our business transformation plan, the goal of which 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. During the quarter we made significant progress in a number of areas, including enterprise management tools, new show control capability, and upgrades to service and systems maintenance solutions, which are set to go live in the second half of the fiscal year.”

Key components of this program include:

1. Carefully allocating resources to end market segments, prioritizing investments in areas where Daktronics has clear advantages and opportunities for above market growth at acceptable margins
2. Aligning product delivery with differing customer needs through a tiered product offering strategy with pricing aligned with value delivered
3. Achieving higher profit by reducing product input costs and focusing on efficiency improvements in manufacturing operations
4. Maximizing balance sheet efficiencies
5. Refining our critical business and financial management practices, including product pricing, business planning, and incentive compensation to fully support our performance objectives.

Balance Sheet and Cash Flow 
Cash, restricted cash and marketable securities totaled $134.4 million at October 26, 2024, and $65.4 million of total current and long-term debt was outstanding as of that date, which includes $38.1 million of face value and $27.8 million of adjustments to fair value, and is net of $0.5 million of debt issuance costs. There were no draw-downs on the asset-based revolving credit facility during the first six months of fiscal 2025, and $40.8 million was available to draw at October 26, 2024. In the first six months of fiscal 2025, Daktronics generated $62.8 million of cash from operations and used $10.5 million for purchases of property and equipment. At the end of the fiscal 2025 second quarter, the working capital ratio was 2.3 to 1. Inventory levels dropped 11.9 percent since the end of the 2024 fiscal year on April 27, 2024. Management’s focus remains on managing working capital through expected growth of the Company.

Outlook
Daktronics enters the third quarter of fiscal 2025 with order growth of 3.3 percent year-over-year, and continues to expect order volume to increase for the full fiscal year. The first half of the fiscal year is typically the highest-volume sales of the year, and are expected to be at normal “seasonal” levels for the remainder of fiscal 2025. Management continues to refine and execute its digital and strategic transformation initiatives and will continue to make disciplined investments through the rest of the fiscal year to strengthen Daktronics’ business foundation for future profitability and sustainable returns.

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