Daktronics, Inc. (NASDAQ - DAKT) today reported results for
fiscal 2022 second quarter which ended October 30, 2021.
Q2 FY2022 financial highlights:
- Net sales increased to $164.5 million as compared to
Q2 FY2021 net sales of $127.4 million as a result of strong
demand and eased pandemic related site restrictions.
- Operating income decreased to $4.4 million as compared to
Q2 FY2021 operating income of $6.7 million due to inflation in
materials and freight costs and increased personnel spend
compared to prior year.
- Net income of $2.4 million, and earnings per diluted share of
$0.05 compared to net income of $3.4 million, and
$0.08 earnings per diluted share, for Q2 FY2021.
- Second quarter orders of $163.7 million, grew
20.7% year-over-year, driven by increased market activity as
the pandemic restrictions eased and economic conditions improved,
including record bookings in Commercial and High School
Park and Recreation business units.
- Product order backlog of $282 million compared to $201
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 Q2 FY2021.
Reece Kurtenbach, chairman, president and chief executive
officer stated, "Market demand continued to return to pre-pandemic
levels and our order bookings grew through the first half of the
year. Our operating expenses have increased as we adjust our
capacity to support increased demand levels and convert our
record high backlog to sales. At the same time, material, labor,
and freight availability constraints are creating headwinds in lead
times and are causing inflationary cost pressures."
OutlookKurtenbach added, "We expect dynamic
supply chain conditions to persist through next calendar year.
As we continue to work through supply chain
challenges, inflationary pressures, and evolving pandemic
impacts, we expect volatility in our pricing, order and
revenue cycles, and production costs in the near term. Over
the long-term, we believe the fundamentals of the audiovisual
industry are strong and are poised for continued growth. To
position us to benefit from both near term growth and long-term
trends, we are actively investing in capacity, in new
technologies, and in different markets to make Daktronics and our
solutions the preferred choice for new and existing customers."
Second Quarter and Year to
Date ResultsOrders for the second quarter of
fiscal 2022 increased 20.7 percent as compared to
the second quarter of fiscal 2021. Each business unit's
order volume grew through the first half of fiscal
2022 reflecting the recovery from the impact of the global
pandemic among our customers. Commercial business unit orders
increase is due to strong demand from customers using systems for
on-premise promotion and out-of-home advertising. High School
Park and Recreation continued growth for the year and
quarter is driven by the adoption of video displays for
sporting and educational use. Transportation order levels increased
as project planning and approval activities resumed and moved
forward for displays used in intelligent transportation systems
and mass transit venues. The International business unit
orders for the quarter were less than last year, same quarter, but
improved through the first half of the year. The pandemic recovery
in regions around the world has varied. While some countries have
eased travel restrictions and we have seen business in those
locations increase, other countries still continue to deal with the
ongoing challenges of the pandemic. Live Events business unit
orders were similar to last year second quarter and increased
on a year to date basis.
Net sales increased by 29.1 percent in
the second quarter of fiscal 2022 as compared to
the second quarter of fiscal 2021. Net sales for the six
months ended Oct. 30, 2021 increased by 14.1 percent
as compared to the same period one year ago. Material supply
and labor 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
19.6 percent for the second quarter of fiscal 2022 as
compared to 26.2 percent a year earlier and 20.8 percent
for the six months ended Oct. 30, 2021 as compared to
25.5 percent for the six months ended 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. In
addition, during the second quarter of fiscal 2022 we had more
large project sales which generally have lower gross profit
because of the competitive nature of large projects.
Operating expenses for the second quarter
of fiscal 2022 were $27.9 million, compared to
$26.7 million for the second quarter of fiscal
2021 or an increase of 4.5 percent and
$54.4 million for the six months ended Oct. 30, 2021 as
compared to $52.9 million for the six months ended a year
prior. The increases were primarily associated with increases in
personnel related expenses.
Operating income as a percent of sales for
the quarter was 2.7 percent as compared to an
operating income as a percent of sales
of 5.2 percent during the second quarter of fiscal
2021 and 3.2 percent for six months ended Oct. 30,
2021 as compared to 6.0 percent for the six months ended a
year prior.
The effective tax rate expense for
the second quarter of fiscal 2022 was 29.6 percent
compared to an effective tax rate expense of 41.1 percent for
the second quarter of fiscal 2021. The effective tax rate
expense for the six months ended Oct. 30, 2021 was
27.0 percent compared to an effective tax rate expense of
26.2 percent for the six months ended a year prior. The
difference in tax rates is primarily driven by a decrease in
estimated tax credits proportionate to an increase in estimated
pre-tax earnings in the second quarter of fiscal 2021 compared to
the second quarter of fiscal 2022.
Cash, restricted cash, and marketable
securities at the end of the second quarter of fiscal
2022 were $61.6 million, which compares to $74.4 million
at the end of the second 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 second 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 $12.3 million for the first six months of
fiscal 2022, as compared to a positive free cash flow
of $34.5 million for the same period in 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 $3.7 million for fiscal 2022, as compared
to $5.4 million for fiscal 2021.
(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: |
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INVESTOR RELATIONS: |
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Sheila M. Anderson, Chief
Financial Officer |
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Tel (605) 692-0200 |
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Investor@daktronics.com |
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Daktronics, Inc. and
SubsidiariesCondensed Consolidated Statements of
Operations(in thousands, except per share
amounts)(unaudited)
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
October 30, |
|
|
October 31, |
|
|
October 30, |
|
|
October 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
Net sales |
|
$ |
164,477 |
|
|
$ |
127,367 |
|
|
$ |
309,209 |
|
|
$ |
271,011 |
|
Cost of sales |
|
|
132,213 |
|
|
|
94,053 |
|
|
|
244,757 |
|
|
|
201,936 |
|
Gross profit |
|
|
32,264 |
|
|
|
33,314 |
|
|
|
64,452 |
|
|
|
69,075 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling |
|
|
12,482 |
|
|
|
12,654 |
|
|
|
24,277 |
|
|
|
24,210 |
|
General and administrative |
|
|
8,201 |
|
|
|
7,264 |
|
|
|
15,772 |
|
|
|
14,388 |
|
Product design and development |
|
|
7,196 |
|
|
|
6,737 |
|
|
|
14,358 |
|
|
|
14,269 |
|
|
|
|
27,879 |
|
|
|
26,655 |
|
|
|
54,407 |
|
|
|
52,867 |
|
Operating income |
|
|
4,385 |
|
|
|
6,659 |
|
|
|
10,045 |
|
|
|
16,208 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonoperating (expense)
income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest (expense) income, net |
|
|
(59 |
) |
|
|
(18 |
) |
|
|
78 |
|
|
|
(6 |
) |
Other (expense) income, net |
|
|
(952 |
) |
|
|
(837 |
) |
|
|
(1,820 |
) |
|
|
(1,464 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
3,374 |
|
|
|
5,804 |
|
|
|
8,303 |
|
|
|
14,738 |
|
Income tax expense |
|
|
1,000 |
|
|
|
2,388 |
|
|
|
2,244 |
|
|
|
3,855 |
|
Net income |
|
$ |
2,374 |
|
|
$ |
3,416 |
|
|
$ |
6,059 |
|
|
$ |
10,883 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
45,350 |
|
|
|
44,893 |
|
|
|
45,271 |
|
|
|
44,808 |
|
Diluted |
|
|
45,499 |
|
|
|
44,977 |
|
|
|
45,490 |
|
|
|
44,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.05 |
|
|
$ |
0.08 |
|
|
$ |
0.13 |
|
|
$ |
0.24 |
|
Diluted |
|
$ |
0.05 |
|
|
$ |
0.08 |
|
|
$ |
0.13 |
|
|
$ |
0.24 |
|
Daktronics, Inc. and
SubsidiariesCondensed Consolidated Balance
Sheets(in thousands)
|
|
October 30, |
|
|
May 1, |
|
|
|
2021 |
|
|
2021 |
|
|
|
(unaudited) |
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
59,727 |
|
|
$ |
77,590 |
|
Restricted cash |
|
|
1,877 |
|
|
|
2,812 |
|
Accounts receivable, net |
|
|
95,156 |
|
|
|
67,808 |
|
Inventories |
|
|
94,790 |
|
|
|
74,356 |
|
Contract assets |
|
|
40,231 |
|
|
|
32,799 |
|
Current maturities of long-term receivables |
|
|
2,167 |
|
|
|
1,462 |
|
Prepaid expenses and other current assets |
|
|
10,897 |
|
|
|
7,445 |
|
Income tax receivables |
|
|
322 |
|
|
|
731 |
|
Total current assets |
|
|
305,167 |
|
|
|
265,003 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
56,084 |
|
|
|
58,682 |
|
Long-term receivables, less current maturities |
|
|
6,357 |
|
|
|
1,635 |
|
Goodwill |
|
|
8,293 |
|
|
|
8,414 |
|
Intangibles, net |
|
|
1,706 |
|
|
|
2,083 |
|
Investment in affiliates and other assets |
|
|
28,259 |
|
|
|
27,403 |
|
Deferred income taxes |
|
|
11,940 |
|
|
|
11,944 |
|
Total non-current assets |
|
|
112,639 |
|
|
|
110,161 |
|
TOTAL ASSETS |
|
$ |
417,806 |
|
|
$ |
375,164 |
|
Daktronics, Inc. and
SubsidiariesCondensed Consolidated Balance
Sheets (continued)(in thousands)
|
|
October 30, |
|
|
May 1, |
|
|
|
2021 |
|
|
2021 |
|
|
|
(unaudited) |
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
65,963 |
|
|
$ |
40,251 |
|
Contract liabilities |
|
|
70,158 |
|
|
|
64,495 |
|
Accrued expenses |
|
|
32,683 |
|
|
|
30,672 |
|
Warranty obligations |
|
|
10,285 |
|
|
|
10,464 |
|
Income taxes payable |
|
|
850 |
|
|
|
738 |
|
Total current liabilities |
|
|
179,939 |
|
|
|
146,620 |
|
|
|
|
|
|
|
|
|
|
Long-term warranty obligations |
|
|
15,493 |
|
|
|
15,496 |
|
Long-term contract liabilities |
|
|
10,707 |
|
|
|
10,720 |
|
Other long-term obligations |
|
|
9,809 |
|
|
|
7,816 |
|
Long-term income taxes payable |
|
|
682 |
|
|
|
548 |
|
Deferred income taxes |
|
|
373 |
|
|
|
410 |
|
Total long-term liabilities |
|
|
37,064 |
|
|
|
34,990 |
|
TOTAL LIABILITIES |
|
|
217,003 |
|
|
|
181,610 |
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS' EQUITY: |
|
|
|
|
|
|
|
|
Common stock |
|
|
61,175 |
|
|
|
60,575 |
|
Additional paid-in capital |
|
|
47,412 |
|
|
|
46,595 |
|
Retained earnings |
|
|
102,075 |
|
|
|
96,016 |
|
Treasury stock, at cost |
|
|
(7,101 |
) |
|
|
(7,297 |
) |
Accumulated other comprehensive loss |
|
|
(2,758 |
) |
|
|
(2,335 |
) |
TOTAL SHAREHOLDERS'
EQUITY |
|
|
200,803 |
|
|
|
193,554 |
|
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
$ |
417,806 |
|
|
$ |
375,164 |
|
Daktronics, Inc. and
SubsidiariesCondensed Consolidated Statements of
Cash Flows(in thousands)(unaudited)
|
|
Six Months Ended |
|
|
|
October 30, |
|
|
October 31, |
|
|
|
2021 |
|
|
2020 |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
6,059 |
|
|
$ |
10,883 |
|
Adjustments to reconcile net income to net cash (used in) provided
by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
7,789 |
|
|
|
8,564 |
|
Gain on sale of property, equipment and other assets |
|
|
(676 |
) |
|
|
(162 |
) |
Share-based compensation |
|
|
1,012 |
|
|
|
1,047 |
|
Equity in loss of investees |
|
|
1,565 |
|
|
|
1,145 |
|
Provision for doubtful accounts |
|
|
(588 |
) |
|
|
153 |
|
Deferred income taxes, net |
|
|
(41 |
) |
|
|
2 |
|
Change in operating assets and liabilities |
|
|
(23,654 |
) |
|
|
18,343 |
|
Net cash (used in) provided by operating
activities |
|
|
(8,534 |
) |
|
|
39,975 |
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES: |
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(4,507 |
) |
|
|
(5,776 |
) |
Proceeds from sales of property, equipment and other assets |
|
|
760 |
|
|
|
341 |
|
Proceeds from sales or maturities of marketable securities |
|
|
— |
|
|
|
247 |
|
Purchases of and loans to equity investees |
|
|
(6,129 |
) |
|
|
(903 |
) |
Net cash used in investing activities |
|
|
(9,876 |
) |
|
|
(6,091 |
) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
|
|
|
|
|
|
Principal payments on long-term obligations |
|
|
(200 |
) |
|
|
(220 |
) |
Proceed from exercise of stock options |
|
|
3 |
|
|
|
— |
|
Tax payments related to RSU issuances |
|
|
(199 |
) |
|
|
(125 |
) |
Net cash used in financing activities |
|
|
(396 |
) |
|
|
(345 |
) |
|
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATE
CHANGES ON CASH |
|
|
8 |
|
|
|
(498 |
) |
NET (DECREASE) INCREASE IN
CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
|
|
(18,798 |
) |
|
|
33,041 |
|
|
|
|
|
|
|
|
|
|
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH: |
|
|
|
|
|
|
|
|
Beginning of period |
|
|
80,402 |
|
|
|
40,412 |
|
End of period |
|
$ |
61,604 |
|
|
$ |
73,453 |
|
Daktronics, Inc. and
SubsidiariesNet Sales and Orders by Business
Unit(in thousands)(unaudited)
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
October 30, |
|
|
October 31, |
|
|
Dollar |
|
|
Percent |
|
|
October 30, |
|
|
October 31, |
|
|
Dollar |
|
|
Percent |
|
|
|
2021 |
|
|
2020 |
|
|
Change |
|
|
Change |
|
|
2021 |
|
|
2020 |
|
|
Change |
|
|
Change |
|
Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
$ |
34,463 |
|
|
$ |
30,356 |
|
|
$ |
4,107 |
|
|
|
13.5 |
% |
|
$ |
67,244 |
|
|
$ |
64,862 |
|
|
$ |
2,382 |
|
|
|
3.7 |
% |
Live Events |
|
|
59,396 |
|
|
|
37,822 |
|
|
|
21,574 |
|
|
|
57.0 |
|
|
|
111,783 |
|
|
|
89,296 |
|
|
|
22,487 |
|
|
|
25.2 |
|
High School Park and Recreation |
|
|
32,747 |
|
|
|
27,578 |
|
|
|
5,169 |
|
|
|
18.7 |
|
|
|
60,641 |
|
|
|
56,521 |
|
|
|
4,120 |
|
|
|
7.3 |
|
Transportation |
|
|
14,053 |
|
|
|
15,323 |
|
|
|
(1,270 |
) |
|
|
(8.3 |
) |
|
|
26,611 |
|
|
|
29,821 |
|
|
|
(3,210 |
) |
|
|
(10.8 |
) |
International |
|
|
23,818 |
|
|
|
16,288 |
|
|
|
7,530 |
|
|
|
46.2 |
|
|
|
42,930 |
|
|
|
30,511 |
|
|
|
12,419 |
|
|
|
40.7 |
|
|
|
$ |
164,477 |
|
|
$ |
127,367 |
|
|
$ |
37,110 |
|
|
|
29.1 |
% |
|
$ |
309,209 |
|
|
$ |
271,011 |
|
|
$ |
38,198 |
|
|
|
14.1 |
% |
Orders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
$ |
58,358 |
|
|
$ |
32,590 |
|
|
$ |
25,768 |
|
|
|
79.1 |
% |
|
$ |
96,687 |
|
|
$ |
58,123 |
|
|
$ |
38,564 |
|
|
|
66.3 |
% |
Live Events |
|
|
40,501 |
|
|
|
40,684 |
|
|
|
(183 |
) |
|
|
(0.4 |
) |
|
|
90,187 |
|
|
|
82,544 |
|
|
|
7,643 |
|
|
|
9.3 |
|
High School Park and Recreation |
|
|
25,651 |
|
|
|
20,117 |
|
|
|
5,534 |
|
|
|
27.5 |
|
|
|
71,362 |
|
|
|
48,216 |
|
|
|
23,146 |
|
|
|
48.0 |
|
Transportation |
|
|
14,699 |
|
|
|
11,633 |
|
|
|
3,066 |
|
|
|
26.4 |
|
|
|
36,044 |
|
|
|
24,722 |
|
|
|
11,322 |
|
|
|
45.8 |
|
International |
|
|
24,498 |
|
|
|
30,642 |
|
|
|
(6,144 |
) |
|
|
(20.1 |
) |
|
|
51,173 |
|
|
|
44,214 |
|
|
|
6,959 |
|
|
|
15.7 |
|
|
|
$ |
163,707 |
|
|
$ |
135,666 |
|
|
$ |
28,041 |
|
|
|
20.7 |
% |
|
$ |
345,453 |
|
|
$ |
257,819 |
|
|
$ |
87,634 |
|
|
|
34.0 |
% |
Reconciliation of Free Cash
Flow*(in thousands)(unaudited)
|
|
Six Months Ended |
|
|
|
October 30, |
|
|
October 31, |
|
|
|
2021 |
|
|
2020 |
|
Net cash (used in) provided by operating activities |
|
$ |
(8,534 |
) |
|
$ |
39,975 |
|
Purchases of property and
equipment |
|
|
(4,507 |
) |
|
|
(5,776 |
) |
Proceeds from sales of
property and equipment |
|
|
760 |
|
|
|
341 |
|
Free cash flow |
|
$ |
(12,281 |
) |
|
$ |
34,540 |
|
*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.
Daktronics (NASDAQ:DAKT)
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