Daktronics, Inc. (NASDAQ - DAKT) today reported its results for
fiscal 2022 third quarter which ended January 29, 2022.
Q3 FY2022 financial highlights:
- Net sales of $139.6 million as a result of record orders and
eased pandemic related site restrictions
- Operating loss of $5.7 million realized due to inflation in
materials and freight costs, increased personnel spend, and a
warranty charge
- Record level of orders of $214.8 million
- Product order backlog of $353 million(1), driven by record
order volume and muted conversion to sales due to supply chain
challenges
Reece Kurtenbach, chairman, president and chief
executive officer stated, "Demand for our products and solutions
were at record levels, reflecting the economic recovery from the
global pandemic, the increasing adoption and use
of audiovisual communication systems, and our reputation
as a leading provider. We continue to navigate the parts and labor
cost and availability headwinds. Sales volumes and gross
profit levels were muted because of the supply chain
disruptions, expediting and other efforts to react to schedule
changes, and inflationary changes. To offset these cost trends,
we began implementing price increases across the business
for deliveries into next fiscal year."
OutlookKurtenbach added, "We
expect dynamic and volatile supply chain and labor conditions to
persist through the calendar year. As the environment
evolves, we plan to adjust and adapt our pricing, production
schedules and capacity levels to best serve our customers and
improve profitability. Over the long-term, we believe the
audiovisual industry is poised for growth. We are actively
investing in new technologies and markets to make Daktronics and
our solutions the preferred choice; positioning the business
for long-term growth and increasing value for our
stakeholders."
Third Quarter and Year to
Date Results
Orders for the third quarter of fiscal
2022 increased 147.2 percent as compared to
the third quarter of fiscal 2021. Each business unit's
order volume grew through the first nine months of fiscal
2022 reflecting the recovery from the impact of the global
pandemic among our customers.
Net sales increased by 48.2 percent in
the third quarter of fiscal 2022 as compared to the third
quarter of fiscal 2021. Net sales for the nine months ended
January 29, 2022 increased by 22.9 percent as
compared to the same period one year ago. Sales growth was driven
by increased orders. 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 contributed to a larger than typical backlog.
Gross profit as a percentage of net sales was
16.0 percent for the third quarter of fiscal 2022 as
compared to 25.4 percent a year earlier and 19.3 percent
for the nine months ended January 29, 2022, as compared to
25.5 percent for the nine months ended a year earlier.
The decline in gross profit percentage in fiscal 2022 is primarily
related to the ongoing supply chain disruptions and inflationary
challenges in materials, freight, and personnel related costs,
the difference in sales mix between periods, a warranty charge, and
other factors experienced during fiscal 2021. Factors
impacting gross profit in the third quarter of fiscal 2021 included
a positive $2.1 million or 2.2 percent gross profit impact
from a litigation claim reversal and adjustments to operations
because of the COVID-19 pandemic.
Operating expenses for the third quarter of
fiscal 2022 were $28.0 million, compared to
$24.2 million for the third quarter of fiscal
2021 or an increase of 15.7 percent and
$82.4 million for the nine months ended January 29, 2022, as
compared to $77.0 million for the same
nine month period in fiscal 2021. The increases were
primarily personnel related expenses.
Operating loss as a percent of sales for
the quarter was 4.1 percent as compared to an
operating loss as a percent of sales
of 0.3 percent during the third quarter of fiscal
2021 and operating income as a percentage of sales
of 1.0 percent for the nine months ended January 29,
2022, as compared to 4.4 percent for the nine months
ended a year prior.
The effective tax rate for the third
quarter of fiscal 2022 was 32.2 percent compared
to 82.0 percent for the third quarter of fiscal
2021. The effective tax rate for the nine months ended January
29, 2022, was 9.4 percent compared to an effective tax
rate of 21.3 percent for the same nine month period in
fiscal 2021. The difference in tax rates is primarily
driven by an increase in estimated permanent tax costs
proportionate to a decrease in estimated pre-tax earnings in the
third quarter of fiscal 2022 compared to no change in the estimated
tax rate for the third quarter of fiscal 2021. Additionally, there
were return-to-provision adjustments made in each respective
quarter impacting the rate.
Cash, restricted cash and marketable
securities at the end of the third quarter of fiscal 2022
were $35.8 million, which compares to $81.0 million at
the end of the third 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
$15.0 million outstanding at the end of the third 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 $34.7 million for the first
nine months of fiscal 2022, as compared to a positive free
cash flow of $41.8 million for the same period in
fiscal 2021. The change in cash use was created by growing
operating assets for the growth of order activity and because of
increased investments of capital assets for capacity, loans to
affiliates and the share repurchase program. Net
investment in property and equipment
was $9.2 million for the first nine months of fiscal
2022, as compared to $6.5 million for the first nine
months of 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 Daktronics
Daktronics 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: |
|
|
Sheila M. Anderson, Chief
Financial Officer |
|
|
Tel (605) 692-0200 |
|
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Investor@daktronics.com |
|
|
Daktronics, Inc. and SubsidiariesCondensed
Consolidated Statements of Operations(in thousands, except
per share amounts)(unaudited) |
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
January 29, |
|
|
January 30, |
|
|
January 29, |
|
|
January 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Net sales |
|
$ |
139,558 |
|
|
$ |
94,139 |
|
|
$ |
448,767 |
|
|
$ |
365,150 |
|
Cost of sales |
|
|
117,250 |
|
|
|
70,198 |
|
|
|
362,007 |
|
|
|
272,134 |
|
Gross profit |
|
|
22,308 |
|
|
|
23,941 |
|
|
|
86,760 |
|
|
|
93,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling |
|
|
12,735 |
|
|
|
12,004 |
|
|
|
37,012 |
|
|
|
36,214 |
|
General and administrative |
|
|
8,328 |
|
|
|
6,389 |
|
|
|
24,100 |
|
|
|
20,777 |
|
Product design and development |
|
|
6,925 |
|
|
|
5,784 |
|
|
|
21,283 |
|
|
|
20,053 |
|
|
|
|
27,988 |
|
|
|
24,177 |
|
|
|
82,395 |
|
|
|
77,044 |
|
Operating (loss)income |
|
|
(5,680 |
) |
|
|
(236 |
) |
|
|
4,365 |
|
|
|
15,972 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonoperating (expense)
income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (expense), net |
|
|
56 |
|
|
|
(40 |
) |
|
|
134 |
|
|
|
(46 |
) |
Other (expense) income, net |
|
|
(793 |
) |
|
|
(913 |
) |
|
|
(2,613 |
) |
|
|
(2,377 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes |
|
|
(6,417 |
) |
|
|
(1,189 |
) |
|
|
1,886 |
|
|
|
13,549 |
|
Income tax (benefit) expense |
|
|
(2,067 |
) |
|
|
(975 |
) |
|
|
177 |
|
|
|
2,880 |
|
Net (loss) income |
|
$ |
(4,350 |
) |
|
$ |
(214 |
) |
|
$ |
1,709 |
|
|
$ |
10,669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
45,223 |
|
|
|
45,064 |
|
|
|
45,263 |
|
|
|
44,908 |
|
Diluted |
|
|
45,223 |
|
|
|
45,064 |
|
|
|
45,442 |
|
|
|
45,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.10 |
) |
|
$ |
(0.00 |
) |
|
$ |
0.04 |
|
|
$ |
0.24 |
|
Diluted |
|
$ |
(0.10 |
) |
|
$ |
(0.00 |
) |
|
$ |
0.04 |
|
|
$ |
0.24 |
|
Daktronics, Inc. and SubsidiariesCondensed
Consolidated Balance Sheets(in thousands) |
|
|
January 29, |
|
|
May 1, |
|
|
|
2022 |
|
|
2021 |
|
|
|
(unaudited) |
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
30,883 |
|
|
$ |
77,590 |
|
Restricted cash |
|
|
836 |
|
|
|
2,812 |
|
Marketable securities |
|
|
4,035 |
|
|
|
— |
|
Accounts receivable, net |
|
|
96,710 |
|
|
|
67,808 |
|
Inventories |
|
|
111,110 |
|
|
|
74,356 |
|
Contract assets |
|
|
39,874 |
|
|
|
32,799 |
|
Current maturities of long-term receivables |
|
|
1,550 |
|
|
|
1,462 |
|
Prepaid expenses and other current assets |
|
|
12,903 |
|
|
|
7,445 |
|
Income tax receivables |
|
|
2,426 |
|
|
|
731 |
|
Total current assets |
|
|
300,327 |
|
|
|
265,003 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
58,262 |
|
|
|
58,682 |
|
Long-term receivables, less current maturities |
|
|
7,655 |
|
|
|
1,635 |
|
Goodwill |
|
|
8,099 |
|
|
|
8,414 |
|
Intangibles, net |
|
|
1,579 |
|
|
|
2,083 |
|
Investment in affiliates and other assets |
|
|
27,398 |
|
|
|
27,403 |
|
Deferred income taxes |
|
|
11,731 |
|
|
|
11,944 |
|
Total non-current assets |
|
|
114,724 |
|
|
|
110,161 |
|
TOTAL ASSETS |
|
$ |
415,051 |
|
|
$ |
375,164 |
|
Daktronics, Inc. and SubsidiariesCondensed
Consolidated Balance Sheets (continued)(in thousands) |
|
|
January 29, |
|
|
May 1, |
|
|
|
2022 |
|
|
2021 |
|
|
|
(unaudited) |
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
62,835 |
|
|
$ |
40,251 |
|
Contract liabilities |
|
|
79,591 |
|
|
|
64,495 |
|
Accrued expenses |
|
|
32,031 |
|
|
|
30,672 |
|
Warranty obligations |
|
|
11,378 |
|
|
|
10,464 |
|
Income taxes payable |
|
|
545 |
|
|
|
738 |
|
Total current liabilities |
|
|
186,380 |
|
|
|
146,620 |
|
|
|
|
|
|
|
|
|
|
Long-term warranty obligations |
|
|
15,793 |
|
|
|
15,496 |
|
Long-term contract liabilities |
|
|
10,738 |
|
|
|
10,720 |
|
Other long-term obligations |
|
|
7,460 |
|
|
|
7,816 |
|
Long-term income taxes payable |
|
|
478 |
|
|
|
548 |
|
Deferred income taxes |
|
|
363 |
|
|
|
410 |
|
Total long-term liabilities |
|
|
34,832 |
|
|
|
34,990 |
|
TOTAL LIABILITIES |
|
|
221,212 |
|
|
|
181,610 |
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS' EQUITY: |
|
|
|
|
|
|
|
|
Common stock |
|
|
61,794 |
|
|
|
60,575 |
|
Additional paid-in capital |
|
|
47,903 |
|
|
|
46,595 |
|
Retained earnings |
|
|
97,725 |
|
|
|
96,016 |
|
Treasury stock, at cost |
|
|
(10,101 |
) |
|
|
(7,297 |
) |
Accumulated other comprehensive loss |
|
|
(3,482 |
) |
|
|
(2,335 |
) |
TOTAL SHAREHOLDERS'
EQUITY |
|
|
193,839 |
|
|
|
193,554 |
|
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
$ |
415,051 |
|
|
$ |
375,164 |
|
Daktronics, Inc. and SubsidiariesCondensed
Consolidated Statements of Cash Flows(in
thousands)(unaudited) |
|
|
|
Nine Months Ended |
|
|
|
January 29, |
|
|
January 30, |
|
|
|
2022 |
|
|
2021 |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,709 |
|
|
$ |
10,669 |
|
Adjustments to reconcile net income to net cash (used in) provided
by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
11,544 |
|
|
|
12,848 |
|
Gain on sale of property, equipment and other assets |
|
|
(737 |
) |
|
|
(244 |
) |
Share-based compensation |
|
|
1,503 |
|
|
|
1,563 |
|
Equity in loss of investees |
|
|
1,966 |
|
|
|
1,740 |
|
Provision for doubtful accounts |
|
|
(600 |
) |
|
|
1,551 |
|
Deferred income taxes, net |
|
|
151 |
|
|
|
(21 |
) |
Change in operating assets and liabilities |
|
|
(41,000 |
) |
|
|
20,115 |
|
Net cash (used in) provided by operating
activities |
|
|
(25,464 |
) |
|
|
48,221 |
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES: |
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(10,024 |
) |
|
|
(6,935 |
) |
Proceeds from sales of property, equipment and other assets |
|
|
838 |
|
|
|
470 |
|
Purchases of marketable securities |
|
|
(4,045 |
) |
|
|
— |
|
Proceeds from sales or maturities of marketable securities |
|
|
— |
|
|
|
982 |
|
Purchases of and loans to equity investees |
|
|
(6,695 |
) |
|
|
(1,328 |
) |
Net cash used in investing activities |
|
|
(19,926 |
) |
|
|
(6,811 |
) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
|
|
|
|
|
|
Principal payments on long-term obligations |
|
|
(200 |
) |
|
|
(431 |
) |
Payments for common shares repurchased |
|
|
(3,000 |
) |
|
|
— |
|
Proceed from exercise of stock options |
|
|
8 |
|
|
|
— |
|
Tax payments related to RSU issuances |
|
|
(199 |
) |
|
|
(125 |
) |
Net cash used in financing activities |
|
|
(3,391 |
) |
|
|
(556 |
) |
|
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATE
CHANGES ON CASH |
|
|
98 |
|
|
|
(505 |
) |
NET (DECREASE) INCREASE IN
CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
|
|
(48,683 |
) |
|
|
40,349 |
|
|
|
|
|
|
|
|
|
|
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH: |
|
|
|
|
|
|
|
|
Beginning of period |
|
|
80,402 |
|
|
|
40,412 |
|
End of period |
|
$ |
31,719 |
|
|
$ |
80,761 |
|
Daktronics, Inc. and SubsidiariesNet Sales
and Orders by Business Unit(in thousands)(unaudited) |
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
January 29, |
|
|
January 30, |
|
|
Dollar |
|
|
Percent |
|
|
January 29, |
|
|
January 30, |
|
|
Dollar |
|
|
Percent |
|
|
|
2022 |
|
|
2021 |
|
|
Change |
|
|
Change |
|
|
2022 |
|
|
2021 |
|
|
Change |
|
|
Change |
|
Net
Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
$ |
40,095 |
|
|
$ |
30,085 |
|
|
$ |
10,010 |
|
|
|
33.3 |
% |
|
$ |
107,339 |
|
|
$ |
94,947 |
|
|
$ |
12,392 |
|
|
|
13.1 |
% |
Live Events |
|
|
39,057 |
|
|
|
23,330 |
|
|
|
15,727 |
|
|
|
67.4 |
|
|
|
150,840 |
|
|
|
112,626 |
|
|
|
38,214 |
|
|
|
33.9 |
|
High School Park and Recreation |
|
|
23,721 |
|
|
|
14,644 |
|
|
|
9,077 |
|
|
|
62.0 |
|
|
|
84,362 |
|
|
|
71,165 |
|
|
|
13,197 |
|
|
|
18.5 |
|
Transportation |
|
|
15,823 |
|
|
|
11,769 |
|
|
|
4,054 |
|
|
|
34.4 |
|
|
|
42,434 |
|
|
|
41,590 |
|
|
|
844 |
|
|
|
2.0 |
|
International |
|
|
20,862 |
|
|
|
14,311 |
|
|
|
6,551 |
|
|
|
45.8 |
|
|
|
63,792 |
|
|
|
44,822 |
|
|
|
18,970 |
|
|
|
42.3 |
|
|
|
$ |
139,558 |
|
|
$ |
94,139 |
|
|
$ |
45,419 |
|
|
|
48.2 |
% |
|
$ |
448,767 |
|
|
$ |
365,150 |
|
|
$ |
83,617 |
|
|
|
22.9 |
% |
Orders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
$ |
47,012 |
|
|
$ |
34,806 |
|
|
$ |
12,206 |
|
|
|
35.1 |
% |
|
$ |
143,699 |
|
|
$ |
92,929 |
|
|
$ |
50,770 |
|
|
|
54.6 |
% |
Live Events |
|
|
79,478 |
|
|
|
11,075 |
|
|
|
68,403 |
|
|
|
617.6 |
|
|
|
169,665 |
|
|
|
93,619 |
|
|
|
76,046 |
|
|
|
81.2 |
|
High School Park and Recreation |
|
|
35,884 |
|
|
|
16,366 |
|
|
|
19,518 |
|
|
|
119.3 |
|
|
|
107,246 |
|
|
|
64,582 |
|
|
|
42,664 |
|
|
|
66.1 |
|
Transportation |
|
|
20,810 |
|
|
|
12,991 |
|
|
|
7,819 |
|
|
|
60.2 |
|
|
|
56,854 |
|
|
|
37,713 |
|
|
|
19,141 |
|
|
|
50.8 |
|
International |
|
|
31,605 |
|
|
|
11,650 |
|
|
|
19,955 |
|
|
|
171.3 |
|
|
|
82,778 |
|
|
|
55,864 |
|
|
|
26,914 |
|
|
|
48.2 |
|
|
|
$ |
214,789 |
|
|
$ |
86,888 |
|
|
$ |
127,901 |
|
|
|
147.2 |
% |
|
$ |
560,242 |
|
|
$ |
344,707 |
|
|
$ |
215,535 |
|
|
|
62.5 |
% |
Reconciliation of Free Cash
Flow*(in thousands)(unaudited) |
|
|
Nine Months Ended |
|
|
|
January 29, |
|
|
January 30, |
|
|
|
2022 |
|
|
2021 |
|
Net cash (used in) provided by
operating activities |
|
$ |
(25,464 |
) |
|
$ |
48,221 |
|
Purchases of property and
equipment |
|
|
(10,024 |
) |
|
|
(6,935 |
) |
Proceeds from sales of
property and equipment |
|
|
838 |
|
|
|
470 |
|
Free cash flow |
|
$ |
(34,650 |
) |
|
$ |
41,756 |
|
*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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