• Daktronics, Inc. Announces Third Quarter Fiscal 2022 Results

    Source: Nasdaq GlobeNewswire / 10 Mar 2022 15:00:00   America/Chicago

    BROOKINGS, S.D., March 10, 2022 (GLOBE NEWSWIRE) -- 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."

    Outlook
    Kurtenbach 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 Statement
    Cautionary 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  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 Subsidiaries
    Condensed 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 Subsidiaries
    Condensed 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 Subsidiaries
    Condensed 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 Subsidiaries
    Net 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.


    Primary Logo

Share on,