Daktronics, Inc. Announces First Quarter Fiscal 2022 Results
September 01 2021 - 7:30AM
Daktronics, Inc. (NASDAQ - DAKT) today reported results for
fiscal 2022 first quarter which ended July 31, 2021.
Q1 FY2022 financial highlights:
- Net sales of $144.7 million were similar to Q1 FY2021 net sales
of $143.6 million.
- Operating income of $5.7 million was lower than Q1 FY2021
operating income of $9.5 million due to inflation in materials and
freight costs, increased personnel spend compared to prior year
during the pandemic, and due to sales mix difference between the
two quarters. Operating income as a percent of sales for Q1 FY2022
was 3.9 percent as compared to 6.6 percent in Q1 FY2021.
- Net income of $3.7 million, and earnings per diluted share of
$0.08 compared to net income of $7.5 million, and
$0.17 earnings per diluted share, for Q1 FY2021.
- First quarter orders of $181.7 million, grew
48.8% year-over-year, driven by increased market activity as
the pandemic restrictions eased and large project bookings.
- Product order backlog of $285 million compared to $192 million
a year earlier.(1) The increase was driven by strong order volume
offset by muted conversion to sales due to supply chain
challenges.
- Balance sheet remains strong. There were no advances under the
loan portion of the line of credit compared to $15 million borrowed
at the end of Q1 FY2021.
Reece Kurtenbach, chairman, president and chief
executive officer stated, "Late last fiscal year, order and quoting
activities began to recover as the pandemic impacts
subsided. Strong market conditions and recovery
continued through the first quarter and orders increased
in all business units. At the same time, material, labor, and
freight availability constraints are creating headwinds in lead
times and inflationary pressures. We expect these
headwinds to persist through this calendar year with some impacts
continuing into next calendar year. Our teams are performing
well to keep up with the robust demand and working through the
dynamic supply chain conditions."
OutlookKurtenbach added, "Our solid backlog and
strong pipeline of opportunities positions us for a successful
year. However, as we work through supply chain challenges, we
expect volatility in our revenue cycles and production
costs. Over the long-term, we believe the fundamentals of the
audiovisual industry are strong and are poised for growth. We
are actively investing in capacity and in new technologies and
markets to meet that expected demand with world-leading solutions
and value. We look forward to the continued global economic
recovery and long-term profitable growth."
First Quarter ResultsOrders for the first
quarter of fiscal 2022 increased 48.8 percent as
compared to the first quarter of fiscal 2021. Each
business unit's order volume was higher in the first quarter
of fiscal 2022 reflecting the recovery from the impact of the
global pandemic among our customers. High School Park and
Recreation performed well throughout the pandemic and continues to
perform well as we emerge from the pandemic driven by the adoption
of video displays at the high school level. The increase also
was created by several multimillion-dollar
orders ("large orders"). During the quarter, we were
awarded a number of arena and stadium projects in both
International and Live Events and had increased activity in the
Commercial and International digital billboard markets. Large
orders create volatility in comparisons between quarters.
Net sales increased by 0.8 percent in
the first quarter of fiscal 2022 as compared to the first
quarter of fiscal 2021. Net sales increased in our
International business unit, and decreased in the Commercial, High
School Park and Recreation, and Transportation business units. Net
sales were flat in our Live Events business unit. Material supply
shortages are creating an increase in lead times and
extending the timing of converting some orders to sales in the
near-term. This has created a larger than typical backlog, which we
expect to fulfill in future quarters.
Gross profit as a percentage of net sales was
22.2 percent for the first quarter of fiscal 2022 as
compared to 24.9 percent a year earlier. The decrease in gross
profit is primarily related to increased input costs including
material, freight, and tariff costs and increased personnel spend
compared to prior year during the pandemic. During the first
quarter of fiscal 2022 we had more large project sales which
generally have lower gross profit because of the competitive
nature of large projects and less service revenue as a percentage
of sales.
Operating expenses for the first quarter of
fiscal 2022 were $26.5 million, compared to
$26.2 million for the first quarter of fiscal 2021, or
an increase of 1.1 percent. Operating income as
a percent of sales for the quarter was 3.9 percent as compared
to an operating income as a percent of sales
of 6.6 percent during the first quarter of fiscal
2021.
The effective tax rate expense for
the first quarter of fiscal 2022 was 25.2 percent
compared to an effective tax rate expense of 16.4 percent for
the first quarter of fiscal 2021. The difference in rates
is primarily driven by estimated tax credits and other
permanent items proportionate to estimated pre-tax earnings in
fiscal 2022 compared to lower estimated pre-tax earnings in fiscal
2021.
Cash, restricted cash, and marketable
securities at the end of the first quarter of fiscal 2022
were $77.2 million, which compares to $45.9 million at
the end of the first quarter of fiscal 2021 and
$80.4 million at the end of fiscal 2021. There were no
advances under the loan portion of the line of credit compared to
$15 million borrowed at the end of the first quarter of fiscal
2021. Free cash flow, defined as cash provided from or used in
operating activities less net investment in property and equipment,
was a negative $2.2 million for the first quarter fiscal
2022, as compared to a positive free cash flow
of $5.5 million for fiscal 2021. Cash provided from
or used in operating activities differed as compared to last year
due to an increase in accounts receivable and inventory required to
support the increased order volume. Net investment in property
and equipment was $1.1 million for fiscal 2022, as
compared to $3.1 million for fiscal 2021. During
fiscal 2021, the share repurchase and dividend programs were
suspended with no related cash outflows during either period
presented. These programs will be suspended for the foreseeable
future.
(1) Backlog is not a measure defined by
accounting principles generally accepted in the United States of
America ("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 May 1,
2021.
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 2021 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.
For more information
contact: |
|
|
INVESTOR RELATIONS: |
|
|
Sheila M. Anderson, Chief
Financial Officer |
|
|
Tel (605) 692-0200 |
|
|
Investor@daktronics.com |
|
|
Daktronics, Inc. and Subsidiaries |
Condensed Consolidated Statements of
Operations |
(in thousands, except per share amounts) |
(unaudited) |
|
|
Three Months Ended |
|
|
July 31, |
|
|
August 1, |
|
|
2021 |
|
|
2020 |
|
Net sales |
$ |
144,732 |
|
|
$ |
143,644 |
|
Cost of sales |
|
112,544 |
|
|
|
107,883 |
|
Gross profit |
|
32,188 |
|
|
|
35,761 |
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
Selling |
|
11,795 |
|
|
|
11,556 |
|
General and administrative |
|
7,571 |
|
|
|
7,124 |
|
Product design and development |
|
7,162 |
|
|
|
7,532 |
|
|
|
26,528 |
|
|
|
26,212 |
|
Operating income |
|
5,660 |
|
|
|
9,549 |
|
|
|
|
|
|
|
|
|
Nonoperating (expense)
income: |
|
|
|
|
|
|
|
Interest income |
|
153 |
|
|
|
85 |
|
Interest expense |
|
(16 |
) |
|
|
(73 |
) |
Other (expense) income, net |
|
(868 |
) |
|
|
(627 |
) |
|
|
|
|
|
|
|
|
Income before income taxes |
|
4,929 |
|
|
|
8,934 |
|
Income tax expense |
|
1,244 |
|
|
|
1,467 |
|
Net income |
$ |
3,685 |
|
|
$ |
7,467 |
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
Basic |
|
45,139 |
|
|
|
44,654 |
|
Diluted |
|
45,419 |
|
|
|
44,751 |
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
Basic |
$ |
0.08 |
|
|
$ |
0.17 |
|
Diluted |
$ |
0.08 |
|
|
$ |
0.17 |
|
|
|
|
|
|
|
|
|
Daktronics, Inc. and Subsidiaries |
Condensed Consolidated Balance Sheets |
(in thousands) |
|
|
July 31, |
|
|
May 1, |
|
|
2021 |
|
|
2021 |
|
|
(unaudited) |
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
74,658 |
|
|
$ |
77,590 |
|
Restricted cash |
|
2,541 |
|
|
|
2,812 |
|
Accounts receivable, net |
|
78,497 |
|
|
|
67,808 |
|
Inventories |
|
84,514 |
|
|
|
74,356 |
|
Contract assets |
|
38,133 |
|
|
|
32,799 |
|
Current maturities of long-term receivables |
|
1,756 |
|
|
|
1,462 |
|
Prepaid expenses and other current assets |
|
9,821 |
|
|
|
7,445 |
|
Income tax receivables |
|
635 |
|
|
|
731 |
|
Total current assets |
|
290,555 |
|
|
|
265,003 |
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
56,208 |
|
|
|
58,682 |
|
Long-term receivables, less current maturities |
|
1,390 |
|
|
|
1,635 |
|
Goodwill |
|
8,311 |
|
|
|
8,414 |
|
Intangibles, net |
|
1,780 |
|
|
|
2,083 |
|
Investment in affiliates and other assets |
|
26,271 |
|
|
|
27,403 |
|
Deferred income taxes |
|
11,941 |
|
|
|
11,944 |
|
Total non-current assets |
|
105,901 |
|
|
|
110,161 |
|
TOTAL ASSETS |
$ |
396,456 |
|
|
$ |
375,164 |
|
|
|
|
|
|
|
|
|
Daktronics, Inc. and Subsidiaries |
Condensed Consolidated Balance Sheets
(continued) |
(in thousands) |
|
|
July 31, |
|
|
May 1, |
|
|
2021 |
|
|
2021 |
|
|
(unaudited) |
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
Accounts payable |
$ |
57,775 |
|
|
$ |
40,251 |
|
Contract liabilities |
|
67,507 |
|
|
|
64,495 |
|
Accrued expenses |
|
27,650 |
|
|
|
30,672 |
|
Warranty obligations |
|
9,986 |
|
|
|
10,464 |
|
Income taxes payable |
|
496 |
|
|
|
738 |
|
Total current liabilities |
|
163,414 |
|
|
|
146,620 |
|
|
|
|
|
|
|
|
|
Long-term warranty obligations |
|
15,395 |
|
|
|
15,496 |
|
Long-term contract liabilities |
|
10,586 |
|
|
|
10,720 |
|
Other long-term obligations |
|
7,848 |
|
|
|
7,816 |
|
Long-term income taxes payable |
|
654 |
|
|
|
548 |
|
Deferred income taxes |
|
378 |
|
|
|
410 |
|
Total long-term liabilities |
|
34,861 |
|
|
|
34,990 |
|
TOTAL LIABILITIES |
|
198,275 |
|
|
|
181,610 |
|
|
|
|
|
|
|
|
|
SHAREHOLDERS' EQUITY: |
|
|
|
|
|
|
|
Common stock |
|
61,172 |
|
|
|
60,575 |
|
Additional paid-in capital |
|
47,117 |
|
|
|
46,595 |
|
Retained earnings |
|
99,701 |
|
|
|
96,016 |
|
Treasury stock, at cost |
|
(7,101 |
) |
|
|
(7,297 |
) |
Accumulated other comprehensive loss |
|
(2,708 |
) |
|
|
(2,335 |
) |
TOTAL SHAREHOLDERS'
EQUITY |
|
198,181 |
|
|
|
193,554 |
|
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY |
$ |
396,456 |
|
|
$ |
375,164 |
|
Daktronics, Inc. and Subsidiaries |
Condensed Consolidated Statements of Cash
Flows |
(in thousands) |
(unaudited) |
|
|
Three Months Ended |
|
|
July 31, |
|
|
August 1, |
|
|
2021 |
|
|
2020 |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
Net income |
$ |
3,685 |
|
|
$ |
7,467 |
|
Adjustments to reconcile net income to net cash (used in) provided
by operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
4,052 |
|
|
|
4,337 |
|
Gain on sale of property, equipment and other assets |
|
(106 |
) |
|
|
(53 |
) |
Share-based compensation |
|
518 |
|
|
|
539 |
|
Equity in loss of affiliates |
|
746 |
|
|
|
529 |
|
Provision for doubtful accounts |
|
(421 |
) |
|
|
1 |
|
Deferred income taxes, net |
|
(32 |
) |
|
|
(4 |
) |
Change in operating assets and liabilities |
|
(9,461 |
) |
|
|
(4,271 |
) |
Net cash (used in) provided by operating
activities |
|
(1,019 |
) |
|
|
8,545 |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES: |
|
|
|
|
|
|
|
Purchases of property and equipment |
|
(1,283 |
) |
|
|
(3,155 |
) |
Proceeds from sales of property, equipment and other assets |
|
149 |
|
|
|
86 |
|
Purchases of and loans to equity investment |
|
(718 |
) |
|
|
(492 |
) |
Net cash used in investing activities |
|
(1,852 |
) |
|
|
(3,561 |
) |
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
|
|
|
|
|
Principal payments on long-term obligations |
|
(200 |
) |
|
|
(210 |
) |
Net cash used in financing activities |
|
(200 |
) |
|
|
(210 |
) |
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATE
CHANGES ON CASH |
|
(132 |
) |
|
|
(481 |
) |
NET (DECREASE) INCREASE IN
CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
|
(3,203 |
) |
|
|
4,293 |
|
|
|
|
|
|
|
|
|
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH: |
|
|
|
|
|
|
|
Beginning of period |
|
80,402 |
|
|
|
40,412 |
|
End of period |
$ |
77,199 |
|
|
$ |
44,705 |
|
Daktronics, Inc. and Subsidiaries |
Net Sales and Orders by Business Unit |
(in thousands) |
(unaudited) |
|
|
Three Months Ended |
|
|
July 31, |
|
|
August 1, |
|
|
Dollar |
|
|
Percent |
|
|
2021 |
|
|
2020 |
|
|
Change |
|
|
Change |
|
Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
$ |
32,781 |
|
|
$ |
34,506 |
|
|
$ |
(1,725 |
) |
|
|
(5.0 |
)% |
Live Events |
|
52,387 |
|
|
|
51,474 |
|
|
|
913 |
|
|
|
1.8 |
|
High School Park and Recreation |
|
27,894 |
|
|
|
28,943 |
|
|
|
(1,049 |
) |
|
|
(3.6 |
) |
Transportation |
|
12,558 |
|
|
|
14,498 |
|
|
|
(1,940 |
) |
|
|
(13.4 |
) |
International |
|
19,112 |
|
|
|
14,223 |
|
|
|
4,889 |
|
|
|
34.4 |
|
|
$ |
144,732 |
|
|
$ |
143,644 |
|
|
$ |
1,088 |
|
|
|
0.8 |
% |
Orders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
$ |
38,329 |
|
|
$ |
25,533 |
|
|
$ |
12,796 |
|
|
|
50.1 |
% |
Live Events |
|
49,686 |
|
|
|
41,860 |
|
|
|
7,826 |
|
|
|
18.7 |
|
High School Park and Recreation |
|
45,711 |
|
|
|
28,099 |
|
|
|
17,612 |
|
|
|
62.7 |
|
Transportation |
|
21,345 |
|
|
|
13,089 |
|
|
|
8,256 |
|
|
|
63.1 |
|
International |
|
26,675 |
|
|
|
13,572 |
|
|
|
13,103 |
|
|
|
96.5 |
|
|
$ |
181,746 |
|
|
$ |
122,153 |
|
|
$ |
59,593 |
|
|
|
48.8 |
% |
Reconciliation of Free Cash
Flow* |
(in thousands) |
(unaudited) |
|
|
Three Months Ended |
|
|
July 31, |
|
|
August 1, |
|
|
2021 |
|
|
2020 |
|
Net cash (used in) provided by operating activities |
$ |
(1,019 |
) |
|
$ |
8,545 |
|
Purchases of property and
equipment |
|
(1,283 |
) |
|
|
(3,155 |
) |
Proceeds from sales of
property and equipment |
|
149 |
|
|
|
86 |
|
Free cash flow |
$ |
(2,153 |
) |
|
$ |
5,476 |
|
*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
accounting principles generally accepted in the United States of
America ("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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