Daktronics, Inc. (NASDAQ - DAKT) today reported fiscal 2020 first
quarter net sales of $180.3 million, operating income of $7.6
million, and net income of $7.0 million, or $0.16 per diluted
share, compared to net sales of $154.2 million, operating income of
$4.0 million, and net income of $4.6 million, or $0.10 per diluted
share, for the first quarter of fiscal 2019. Fiscal 2020
first quarter orders were $187.5 million, compared to $159.6
million for the first quarter of fiscal 2019. Product order
backlog at the end of the fiscal 2020 first quarter was $207
million, compared to $177 million a year earlier and $202 million
at the end of the fourth quarter of fiscal 2019.(1)
Fiscal 2020 is a 53-week year and fiscal 2019
was a 52-week year. The extra week of fiscal 2020 fell within
the first quarter, resulting in a 14-week quarter versus a 13-week
quarter comparison. Sales, orders and other results of
operations were impacted due to the additional week of
operations.
Cash used in operating activities in the first
three months of fiscal 2020 was $18.2 million, compared with cash
used in operating activities of $10.3 million in the same period
last year. Cash flow from operating activities fluctuated due
to a rise in accounts receivable, contract assets, and inventories
corresponding with the seasonality of our business. Free cash
flow, defined as cash provided from or used in operating activities
less net investment in property and equipment, was a negative $24.0
million for the first three months of fiscal 2020, as compared to a
negative free cash flow of $14.9 million for the same period of
fiscal 2019. Net investment in property and equipment was
$5.8 million for the first three months of fiscal 2020, as compared
to $4.6 million for the first three months of fiscal 2019.
Cash, restricted cash, and marketable securities at the end of the
first quarter of fiscal 2020 were $33.0 million, which compares to
$43.3 million at the end of the first quarter of fiscal 2019 and
$62.1 million at the end of fiscal 2019.
Orders for the first quarter of fiscal 2020
increased 17.5 percent as compared to the first quarter of fiscal
2019. Orders increased in the Commercial, Live Events, and
International business units, and decreased in the High School Park
and Recreation business unit. Orders were relatively flat in
the Transportation business unit. For comparison, orders
paced at $13.4 million per week during the first quarter of fiscal
2020 as compared to $12.3 million during the same time last
year. Live Event orders increased due to an increase in the
number of projects for professional sports, arenas, and college and
universities venues. The volatility of order timing for large
projects and global accounts varies according to the needs of the
customer and is the primary cause of the change in order volume in
the Commercial, High School Park and Recreation, and International
business units.
Net sales increased by 16.9 percent in the first
quarter of fiscal 2020 as compared to the first quarter of fiscal
2019. Net sales increased in the Commercial, Live Events,
High School Park and Recreation, and Transportation business units,
and decreased in the International business unit. For
comparison, sales revenue paced at $12.9 million per week during
the first quarter of fiscal 2020 as compared to $11.9 million
during the same time last year. The change in sales also
correlates to the increase in order levels as well as the timing of
converting orders and backlog into sales. Our first quarter
is historically one of the busiest quarters as we produce, deliver,
and install during the summer construction season.
Gross profit as a percentage of net sales was
25.2 percent for the first quarter of fiscal 2020 as compared to
24.8 percent a year earlier. Global trade factors caused
approximately $1.5 million in additional tariff expenses, or a 0.8%
impact to gross profit during the first quarter of fiscal 2020 as
compared to a nominal expense the same time last year.
Operating expenses for the first quarter of fiscal 2020 were $37.9
million, compared to $34.2 million for the first quarter of fiscal
2019. Approximately $2.7 million of this increase is due to
the additional week during the first quarter of fiscal 2020.
Operating income as a percent of sales for the quarter increased to
4.2 percent as compared to 2.6 percent during the first quarter of
fiscal 2019. The effective tax rate for the first quarter of
fiscal 2020 was 12.6 percent. During the first quarter of
fiscal 2019 estimated tax credits exceeded estimated tax expense,
resulting in an effective tax benefit of 13.1 percent.
Reece Kurtenbach, chairman, president and chief
executive officer stated, “We are pleased with the strong start to
the year in order and sales volumes. Our teams are focused on
market development and deployment of our newly designed solutions
to both new and existing customers. Our investments are
yielding additional features in our control systems and broadening
our lineup of displays contributing to increased orders."
OutlookKurtenbach added, “We
remain optimistic about our long-term outlook. Our product
and technology portfolios position us for growth and allows us to
serve a growing global customer base. We continue to invest
in new technologies and advanced manufacturing techniques to
provide innovative solutions. While economic concerns linger
and the global tariff and trade environment create headwinds in the
near-term, our pipeline of project opportunities remains active and
support growth. We are focused on these conditions and on
carefully managing capacity and spend to drive profitability.”
Webcast InformationThe company
will host a conference call and webcast to discuss its financial
results today at 10:00 a.m. (CDT). This call will be
broadcast live at http://investor.daktronics.com and available
for replay shortly after the event.
About DaktronicsDaktronics has strong
leadership positions in, and is the world's largest supplier of,
large-screen video displays, electronic scoreboards, LED text and
graphics displays, and related control systems. The company
excels in the control of display systems, including those that
require integration of multiple complex displays showing real-time
information, graphics, animation, and video. Daktronics
designs, manufactures, markets and services display systems for
customers around the world in four domestic business
units: Live Events, Commercial, High School Park and
Recreation, and Transportation, and one International business
unit. For more information, visit the company's website at:
www.daktronics.com, email the company at investor@daktronics.com,
call (605) 692-0200 or toll-free (800) 843-5843 in the United
States, or write to the company at 201 Daktronics Dr., P.O. Box
5128, Brookings, S.D. 57006-5128.
Safe Harbor StatementCautionary
Notice: In addition to statements of historical fact, this news
release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 and is
intended to enjoy the protection of that Act. These
forward-looking statements reflect the Company's expectations or
beliefs concerning future events. The Company cautions that
these and similar statements involve risk and uncertainties which
could cause actual results to differ materially from our
expectations, including, but not limited to, changes in economic
and market conditions, management of growth, timing and magnitude
of future contracts and orders, fluctuations in margins, the
introduction of new products and technology, the impact of adverse
weather conditions, increased regulation and other risks described
in the company's SEC filings, including its Annual Report on Form
10-K for its 2019 fiscal year. Forward-looking
statements are made in the context of information available as of
the date stated. The Company undertakes no obligation to
update or revise such statements to reflect new circumstances or
unanticipated events as they occur.
(1) Backlog is not a measure defined by U.S.
generally accepted accounting principles ("GAAP"), and our
methodology for determining backlog may vary from the methodology
used by other companies in determining their backlog amounts. For
more information related to backlog, see Part I, Item 1. Business
of our Annual Report on Form 10-K for the fiscal year ended April
27, 2019.
For
more information contact: |
INVESTOR RELATIONS: |
Sheila M. Anderson, Chief Financial Officer |
Tel (605) 692-0200 |
Investor@daktronics.com |
|
|
Daktronics, Inc. and
SubsidiariesConsolidated Statements of
Operations(in thousands, except per share
amounts)(unaudited) |
|
Three Months Ended |
|
August 3, 2019 |
|
July 28, 2018 |
|
|
|
|
Net sales |
$ |
180,256 |
|
|
$ |
154,188 |
|
Cost of sales |
134,751 |
|
|
115,941 |
|
Gross profit |
45,505 |
|
|
38,247 |
|
|
|
|
|
Operating expenses: |
|
|
|
Selling |
18,297 |
|
|
16,378 |
|
General and administrative |
9,093 |
|
|
8,537 |
|
Product design and development |
10,500 |
|
|
9,292 |
|
|
37,890 |
|
|
34,207 |
|
Operating income |
7,615 |
|
|
4,040 |
|
|
|
|
|
Nonoperating income
(expense): |
|
|
|
Interest income |
269 |
|
|
197 |
|
Interest expense |
(35 |
) |
|
(39 |
) |
Other income (expense), net |
193 |
|
|
(154 |
) |
|
|
|
|
Income before income taxes |
8,042 |
|
|
4,044 |
|
Income tax expense (benefit) |
1,012 |
|
|
(530 |
) |
Net income |
$ |
7,030 |
|
|
$ |
4,574 |
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
Basic |
45,089 |
|
|
44,638 |
|
Diluted |
45,261 |
|
|
44,831 |
|
|
|
|
|
Earnings per share: |
|
|
|
Basic |
$ |
0.16 |
|
|
$ |
0.10 |
|
Diluted |
$ |
0.16 |
|
|
$ |
0.10 |
|
|
|
|
|
Cash dividends declared per
share |
$ |
0.05 |
|
|
$ |
0.07 |
|
|
|
|
|
|
|
|
|
Daktronics, Inc. and
SubsidiariesConsolidated Balance
Sheets(in thousands) |
|
August 3, 2019 |
|
April 27, 2019 |
|
(unaudited) |
|
|
ASSETS |
|
|
|
CURRENT ASSETS: |
|
|
|
Cash and cash equivalents |
$ |
20,762 |
|
|
$ |
35,383 |
|
Restricted cash |
339 |
|
|
359 |
|
Marketable securities |
11,878 |
|
|
26,344 |
|
Accounts receivable, net |
96,218 |
|
|
65,487 |
|
Inventories |
85,458 |
|
|
78,832 |
|
Contract assets |
42,809 |
|
|
33,704 |
|
Current maturities of long-term receivables |
3,997 |
|
|
2,300 |
|
Prepaid expenses and other current assets |
9,558 |
|
|
8,319 |
|
Income tax receivables |
1,038 |
|
|
1,087 |
|
Property and equipment and other assets available for sale |
1,844 |
|
|
1,858 |
|
Total current assets |
273,901 |
|
|
253,673 |
|
|
|
|
|
Property and equipment, net |
66,707 |
|
|
65,314 |
|
Long-term receivables, less current maturities |
2,163 |
|
|
1,214 |
|
Goodwill |
7,940 |
|
|
7,889 |
|
Intangibles, net |
4,568 |
|
|
4,906 |
|
Investment in affiliates and other assets |
15,361 |
|
|
5,052 |
|
Deferred income taxes |
11,189 |
|
|
11,168 |
|
TOTAL ASSETS |
$ |
381,829 |
|
|
$ |
349,216 |
|
|
|
|
|
Daktronics, Inc. and
SubsidiariesConsolidated Balance Sheets
(continued)(in thousands) |
|
August 3, 2019 |
|
April 27, 2019 |
|
(unaudited) |
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
|
|
CURRENT LIABILITIES: |
|
|
|
Accounts payable |
$ |
57,001 |
|
|
$ |
44,873 |
|
Contract liabilities |
53,421 |
|
|
47,178 |
|
Accrued expenses |
32,850 |
|
|
32,061 |
|
Warranty obligations |
9,650 |
|
|
9,492 |
|
Income taxes payable |
771 |
|
|
468 |
|
Total current liabilities |
153,693 |
|
|
134,072 |
|
|
|
|
|
Long-term warranty obligations |
15,800 |
|
|
14,978 |
|
Long-term contract liabilities |
10,140 |
|
|
10,053 |
|
Other long-term obligations |
8,732 |
|
|
1,339 |
|
Long-term income taxes payable |
727 |
|
|
578 |
|
Deferred income taxes |
544 |
|
|
533 |
|
Total long-term liabilities |
35,943 |
|
|
27,481 |
|
TOTAL LIABILITIES |
189,636 |
|
|
161,553 |
|
|
|
|
|
SHAREHOLDERS' EQUITY: |
|
|
|
Common stock |
58,478 |
|
|
57,699 |
|
Additional paid-in capital |
43,204 |
|
|
42,561 |
|
Retained earnings |
98,373 |
|
|
93,593 |
|
Treasury stock, at cost |
(3,021 |
) |
|
(1,834 |
) |
Accumulated other comprehensive loss |
(4,841 |
) |
|
(4,356 |
) |
TOTAL SHAREHOLDERS'
EQUITY |
192,193 |
|
|
187,663 |
|
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY |
$ |
381,829 |
|
|
$ |
349,216 |
|
|
|
|
|
|
|
|
|
Daktronics, Inc. and
SubsidiariesConsolidated Statements of Cash
Flows(in thousands)(unaudited) |
|
Three Months Ended |
|
August 3, 2019 |
|
July 28, 2018 |
CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
|
Net income |
$ |
7,030 |
|
|
$ |
4,574 |
|
Adjustments to reconcile net income to net cash used in operating
activities: |
|
|
|
Depreciation and amortization |
4,383 |
|
|
4,488 |
|
Loss on sale of property, equipment and other assets |
(26 |
) |
|
(69 |
) |
Share-based compensation |
643 |
|
|
651 |
|
Equity in loss of affiliate |
118 |
|
|
134 |
|
Provision for doubtful accounts |
5 |
|
|
(29 |
) |
Deferred income taxes, net |
(40 |
) |
|
(65 |
) |
Change in operating assets and liabilities |
(30,331 |
) |
|
(19,944 |
) |
Net cash used in operating activities |
(18,218 |
) |
|
(10,260 |
) |
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES: |
|
|
|
Purchases of property and equipment |
(5,856 |
) |
|
(4,727 |
) |
Proceeds from sales of property, equipment and other assets |
73 |
|
|
106 |
|
Purchases of marketable securities |
— |
|
|
(1,986 |
) |
Proceeds from sales or maturities of marketable securities |
14,510 |
|
|
9,181 |
|
Purchases of and loans to equity investment |
(455 |
) |
|
(426 |
) |
Acquisitions, net of cash acquired |
— |
|
|
(2,250 |
) |
Net cash provided by (used in) investing
activities |
8,272 |
|
|
(102 |
) |
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
|
Proceeds from exercise of stock options |
— |
|
|
57 |
|
Principal payments on long-term obligations |
(1,221 |
) |
|
(458 |
) |
Dividends paid |
(2,250 |
) |
|
(3,121 |
) |
Payments for common shares repurchased |
(1,187 |
) |
|
— |
|
Net cash used in financing activities |
(4,658 |
) |
|
(3,522 |
) |
|
|
|
|
EFFECT OF EXCHANGE RATE
CHANGES ON CASH |
(37 |
) |
|
70 |
|
NET DECREASE IN CASH, CASH
EQUIVALENTS AND RESTRICTED CASH |
(14,641 |
) |
|
(13,814 |
) |
|
|
|
|
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH: |
|
|
|
Beginning of period |
35,742 |
|
|
29,755 |
|
End of period |
$ |
21,101 |
|
|
$ |
15,941 |
|
|
|
|
|
Daktronics, Inc. and SubsidiariesNet Sales
and Orders by Business Unit(in thousands)(unaudited) |
|
Three Months Ended |
|
August 3, 2019 |
|
July 28, 2018 |
|
Dollar Change |
|
Percent Change |
Net
Sales: |
|
|
|
|
|
|
|
Commercial |
$ |
44,035 |
|
|
$ |
30,569 |
|
|
$ |
13,466 |
|
|
44.1 |
% |
Live Events |
59,306 |
|
|
49,472 |
|
|
9,834 |
|
|
19.9 |
|
High School Park and Recreation |
30,465 |
|
|
28,120 |
|
|
2,345 |
|
|
8.3 |
|
Transportation |
19,018 |
|
|
17,157 |
|
|
1,861 |
|
|
10.8 |
|
International |
27,432 |
|
|
28,870 |
|
|
(1,438 |
) |
|
(5.0 |
) |
|
$ |
180,256 |
|
|
$ |
154,188 |
|
|
$ |
26,068 |
|
|
16.9 |
% |
Orders: |
|
|
|
|
|
|
|
Commercial |
$ |
38,648 |
|
|
$ |
35,792 |
|
|
$ |
2,856 |
|
|
8.0 |
% |
Live Events |
66,969 |
|
|
39,395 |
|
|
27,574 |
|
|
70.0 |
|
High School Park and Recreation |
30,552 |
|
|
38,449 |
|
|
(7,897 |
) |
|
(20.5 |
) |
Transportation |
22,215 |
|
|
21,916 |
|
|
299 |
|
|
1.4 |
|
International |
29,079 |
|
|
24,058 |
|
|
5,021 |
|
|
20.9 |
|
|
$ |
187,463 |
|
|
$ |
159,610 |
|
|
$ |
27,853 |
|
|
17.5 |
% |
|
Reconciliation of Free Cash Flow*(in
thousands)(unaudited) |
|
Three Months Ended |
|
August 3, 2019 |
|
July 28, 2018 |
Net cash used in operating activities |
$ |
(18,218 |
) |
|
$ |
(10,260 |
) |
Purchases of property and
equipment |
(5,856 |
) |
|
(4,727 |
) |
Proceeds from sales of
property and equipment |
73 |
|
|
106 |
|
Free cash flow |
$ |
(24,001 |
) |
|
$ |
(14,881 |
) |
*In evaluating its business, Daktronics
considers and uses free cash flow as a key measure of its operating
performance. The term free cash flow is not defined under
U.S. generally accepted accounting principles (“GAAP”) and is not a
measure of operating income, cash flows from operating activities
or other GAAP figures and should not be considered alternatives to
those computations. Free cash flow is intended to provide
information that may be useful for investors when assessing period
to period results.
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