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Daktronics Swings to Profit After Investor’s Power Play

Improved earnings reported after the company’s largest shareholder took aim at leadership.

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Courtesy of Daktronics

Daktronics is back in black to end its fiscal third quarter.

For the three-month period ending Jan. 28, the Brookings, SD-based digital signage maker reported $3.7 million in net income. That figure was catalyzed by $185 million in net sales, a new quarterly record for the company and a 32.5 percent increase from the year-ago period.

In fiscal 2022, Daktronics reported a $4.35 million loss in net income for its third quarter.

The swing to profit is validation for Daktronics CEO Reece Kurtenbach, who recently came under fire from the company’s largest shareholder, Alta Fox Capital Management.

In a letter to Daktronics’s strategy and financing review committee, Alta Fox referenced an 8-K regulatory filing in which Daktronics expressed its “substantial doubt about the company’s ability to continue as a going concern,” stating it has “no confidence” in Kurtenbach and CFO Sheila Anderson. The letter concluded with a plea for Daktronics’ board of directors to remove Kurtenbach from his post.

In the announcement of its 3Q earnings, Daktronics said it made “significant progress” on the liquidity issues that required the company to include the “going concern” language in the 8-K filing. There is no mention of that phrase in the 3Q earnings report.

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“I am grateful to our customers who continue to turn to Daktronics for our industry-leading products and systems, despite the unusually long lead times caused by supply chain constraints over the last two years,” Kurtenbach said in a prepared statement. “At the same time, I am proud of how our employees delivered for our customers while facing historically high demand and an unprecedented operating environment.

“Our deliberate actions to carefully align our production planning, inventory and labor force to our strong customer demand are proving successful, as evidenced by our record sales and improved gross profit margins, operating income and cash flow during the third quarter. As we disclosed at the end of the last reported quarter, we have a robust order pipeline and backlog and improving revenue conversion.”

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