Daktronics, Inc. (NASDAQ - DAKT) today reported results for its
fiscal 2024 first quarter which ended July 29, 2023.
Q1 FY2024 financial highlights:
- Record first quarter net sales of
$232.5 million, a 35.3 percent increase from the first quarter of
fiscal 2023
- Gross profit
as a percentage of net sales of 30.6 percent as a result of record
sales volume, stable operations and prior strategic pricing
actions
- Operating
income rebounded to $40.2 million as compared to an operating loss
of $5.5 million in the first quarter of fiscal 2023
- Product order
backlog was $323.7 million(1) at July 29, 2023 compared to
$400.7 million at the end of the fourth quarter of fiscal 2023 and
$469.1 million in the year-earlier period. This change reflects a
more stable operating environment and an intentional focus to
reduce lead times.
Reece Kurtenbach, Daktronics' Chairman,
President and Chief Executive Officer, stated, "Our first quarter
of fiscal 2024 performance is a result of strong execution across
all business areas. Our teams strategically utilized our capacity
to complete the manufacturing and installation for the start of the
fall football season in our High School Park and Recreation
("HSPR") and Live Events business units and to bring lead times
back down toward pre-pandemic levels.
As we look ahead to the remainder of the current
fiscal year, our attention remains focused on our multi-year
journey to capture the market's expected growth and broaden our
leading market position by offering best in class technologies and
services to both our traditional customers as well as new and
adjacent markets. We have applied the experience of the preceding
two fiscal years to closely monitor the ever-evolving geopolitical
and global economic environment and as necessary quickly adjust our
resources and market approaches so that we can maintain
profitability and cash generation throughout various cycles.
Our teams remain focused on the following
priorities and strategies for fiscal year 2024 and beyond:
- Growing the
business profitably while generating cash through working capital
management, strategic pricing adjustments, product mix changes and
careful expense management
- Improving
operational efficiency to lower costs, reduce lead times and
improve the customer experience
- Developing
additional markets for new customer types and channels while
continuing to grow in traditional markets
- Developing
more robust integrated business planning systems to surface data
available for improved decision making
- Investing in
high-return projects and technologies, including digital
technologies for both internal and customer facing uses
First Quarter Income
Statement HighlightsOrders for the first quarter of fiscal
2024 decreased 6.8 percent as compared to the first quarter of
fiscal 2023. The change is primarily related to a decrease in the
Commercial business unit caused by volatility in bookings of larger
sized Spectacular LED video display projects.
Net sales for the first quarter of fiscal 2024
increased by 35.3 percent as compared to the first quarter of
fiscal 2023. Sales growth was driven by fulfilling orders in
backlog, especially in the HSPR business area. The increase is
attributable to a stable operating environment, increased
manufacturing capacity and realization of price increases. During
the first quarter of fiscal 2023, we experienced multiple material
supply chain disruptions, labor shortages and a pandemic related
shutdown of our facilities in Shanghai, China for a significant
portion of the quarter.
Gross profit as a percentage of net sales
increased to 30.6 percent for the first quarter of fiscal 2024 as
compared to 15.0 percent a year earlier. The increase in gross
profit percentage is attributable to the record sales volume over
our cost structure, strategic pricing actions, and fewer supply
chain and operational disruptions during the first quarter of
fiscal 2024 as compared to a year earlier.
Operating expenses decreased 1.2 percent to
$30.9 million in the first quarter of fiscal 2024 as compared to
$31.3 million for the first quarter of fiscal 2023. In the first
quarter of fiscal 2023, we had approximately $1.0 million of
professional fees related to shareholder engagement.
Operating income as a percent of sales for the
first quarter of fiscal 2024 was a positive 17.3 percent, compared
to a negative 3.2 percent for the first quarter of fiscal 2023 due
to the combined factors discussed above.
The increase in interest income and expense, net
for the first quarter of fiscal 2024 compared to the same period
one year ago was primarily due to closing in May 2023 on the
convertible debt, asset-based and mortgage financings at higher
values and interest rates than the utilization of our previous line
of credit during the 2023 first quarter and write-off of $3.4
million in debt issuance costs related to convertible debt carried
at fair value.
For the three months ended July 29, 2023,
we recorded a $7.3 million non-cash change in fair value of the
convertible note payable which is accounted for under the fair
value option.
Our effective tax rate for the three months
ended July 29, 2023, was 31.7 percent as compared to an
effective tax rate of 15.8 percent for the three months ended
July 30, 2022. The higher tax rate is caused by the fair value
adjustment to income that is not taxable. Absent any major tax
changes, we expect our full year effective tax rate to be in the
mid-twenties, before the impacts of fair value accounting for the
convertible debt.
Balance Sheet and Cash Flow At
the end of the fiscal 2024 first quarter, our working capital ratio
was 1.9 to 1. Inventory levels dropped slightly since the end of
the fiscal year ended April 29, 2023, and are expected to approach
more normalized levels as supply chain disruptions continue to ease
and order backlog is fulfilled. Cash, restricted cash and
marketable securities totaled $54.9 million, and $41.4 million of
long-term debt was outstanding. There were no draw-downs on our
line of credit. During the first quarter of fiscal 2024, we
generated $19.3 million from operations and used $4.5 million for
purchases of property and equipment.
Webcast Information The company
will host a conference call and webcast to discuss its financial
results today at 10:00 am (Central Time). This call will be
broadcast live at http://investor.daktronics.com and be 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 2023 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 OfficerTel (605)
692-0200Investor@daktronics.com
Daktronics, Inc. and Subsidiaries |
Consolidated Statements of Operations |
(in thousands, except per share amounts) |
(unaudited) |
|
|
Three Months Ended |
|
July 29,2023 |
|
July 30,2022 |
Net sales |
$ |
232,531 |
|
|
$ |
171,920 |
|
Cost of sales |
|
161,384 |
|
|
|
146,126 |
|
Gross profit |
|
71,147 |
|
|
|
25,794 |
|
|
|
|
|
Operating expenses: |
|
|
|
Selling |
|
12,929 |
|
|
|
14,433 |
|
General and administrative |
|
9,599 |
|
|
|
9,441 |
|
Product design and development |
|
8,403 |
|
|
|
7,439 |
|
|
|
30,931 |
|
|
|
31,313 |
|
Operating income (loss) |
|
40,216 |
|
|
|
(5,519 |
) |
|
|
|
|
Nonoperating (expense)
income: |
|
|
|
Interest (expense) income, net |
|
(4,234 |
) |
|
|
(60 |
) |
Change in fair value of convertible note |
|
(7,260 |
) |
|
|
— |
|
Other expense, net |
|
(626 |
) |
|
|
(747 |
) |
|
|
|
|
Income (loss) before income taxes |
|
28,096 |
|
|
|
(6,326 |
) |
Income tax expense (benefit) |
|
8,900 |
|
|
|
(1,000 |
) |
Net income (loss) |
$ |
19,196 |
|
|
$ |
(5,326 |
) |
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
Basic |
|
45,645 |
|
|
|
45,097 |
|
Diluted |
|
46,198 |
|
|
|
45,097 |
|
|
|
|
|
Earnings (loss) per
share: |
|
|
|
Basic |
$ |
0.42 |
|
|
$ |
(0.12 |
) |
Diluted |
$ |
0.42 |
|
|
$ |
(0.12 |
) |
Daktronics, Inc. and Subsidiaries |
Consolidated Balance Sheets |
(in thousands) |
(unaudited) |
|
|
July 29,2023 |
|
April 29,2023 |
ASSETS |
|
|
|
CURRENT ASSETS: |
|
|
|
Cash and cash equivalents |
$ |
45,775 |
|
$ |
23,982 |
Restricted cash |
|
8,575 |
|
|
708 |
Marketable securities |
|
539 |
|
|
534 |
Accounts receivable, net |
|
125,613 |
|
|
109,979 |
Inventories |
|
144,794 |
|
|
149,448 |
Contract assets |
|
50,539 |
|
|
46,789 |
Current maturities of long-term receivables |
|
970 |
|
|
1,215 |
Prepaid expenses and other current assets |
|
9,848 |
|
|
9,676 |
Income tax receivables |
|
5 |
|
|
326 |
Total current assets |
|
386,658 |
|
|
342,657 |
|
|
|
|
Property and equipment, net |
|
72,080 |
|
|
72,147 |
Long-term receivables, less current maturities |
|
153 |
|
|
264 |
Goodwill |
|
3,332 |
|
|
3,239 |
Intangibles, net |
|
1,090 |
|
|
1,136 |
Debt issuance costs |
|
— |
|
|
3,866 |
Investment in affiliates and other assets |
|
27,866 |
|
|
27,928 |
Deferred income taxes |
|
16,839 |
|
|
16,867 |
TOTAL ASSETS |
$ |
508,018 |
|
$ |
468,104 |
Daktronics, Inc. and Subsidiaries |
Consolidated Balance Sheets (continued) |
(in thousands) |
(unaudited) |
|
|
July 29,2023 |
|
April 29,2023 |
LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
|
|
CURRENT LIABILITIES: |
|
|
|
Current portion of long-term debt |
$ |
1,500 |
|
|
$ |
— |
|
Accounts payable |
|
62,449 |
|
|
|
67,522 |
|
Contract liabilities |
|
89,318 |
|
|
|
91,549 |
|
Accrued expenses |
|
31,992 |
|
|
|
36,005 |
|
Warranty obligations |
|
13,644 |
|
|
|
12,228 |
|
Income taxes payable |
|
5,514 |
|
|
|
2,859 |
|
Total current liabilities |
|
204,417 |
|
|
|
210,163 |
|
|
|
|
|
Long-term warranty obligations |
|
20,926 |
|
|
|
20,313 |
|
Long-term contract liabilities |
|
14,541 |
|
|
|
13,096 |
|
Other long-term obligations |
|
5,463 |
|
|
|
5,709 |
|
Long-term debt, net |
|
41,422 |
|
|
|
17,750 |
|
Deferred income taxes |
|
202 |
|
|
|
195 |
|
Total long-term liabilities |
|
82,554 |
|
|
|
57,063 |
|
|
|
|
|
SHAREHOLDERS' EQUITY: |
|
|
|
Preferred Shares, no par value, authorized 50,000 shares; no shares
issued and outstanding |
|
— |
|
|
|
— |
|
Common Stock, no par value, authorized 115,000,000 shares;
45,644,800 and 45,488,595 shares issued at July 29, 2023 and April
29, 2023, respectively |
|
63,684 |
|
|
|
63,023 |
|
Additional paid-in capital |
|
50,816 |
|
|
|
50,259 |
|
Retained earnings |
|
122,606 |
|
|
|
103,410 |
|
Treasury Stock, at cost, 1,907,445 shares at January 23, 2023 and
April 30, 2022, respectively |
|
(10,285 |
) |
|
|
(10,285 |
) |
Accumulated other comprehensive loss |
|
(5,774 |
) |
|
|
(5,529 |
) |
TOTAL SHAREHOLDERS'
EQUITY |
|
221,047 |
|
|
|
200,878 |
|
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY |
$ |
508,018 |
|
|
$ |
468,104 |
|
Daktronics, Inc. and Subsidiaries |
Consolidated Statements of Cash Flows |
(in thousands) |
(unaudited) |
|
|
Three Months Ended |
|
July 29,2023 |
|
July 30,2022 |
CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
|
Net income (loss) |
$ |
19,196 |
|
|
$ |
(5,326 |
) |
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities: |
|
|
|
Depreciation and amortization |
|
4,669 |
|
|
|
4,025 |
|
Loss (gain) on sale of property, equipment and other assets |
|
11 |
|
|
|
(361 |
) |
Share-based compensation |
|
557 |
|
|
|
511 |
|
Equity in loss of affiliates |
|
690 |
|
|
|
890 |
|
Provision (recovery) for doubtful accounts, net |
|
(65 |
) |
|
|
177 |
|
Deferred income taxes, net |
|
12 |
|
|
|
12 |
|
Non-cash impairment changes |
|
442 |
|
|
|
— |
|
Change in fair value of convertible note |
|
7,260 |
|
|
|
— |
|
Change in operating assets and liabilities |
|
(13,522 |
) |
|
|
(22,743 |
) |
Net cash provided by (used in) operating
activities |
|
19,250 |
|
|
|
(22,815 |
) |
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES: |
|
|
|
Purchases of property and equipment |
|
(4,547 |
) |
|
|
(10,655 |
) |
Proceeds from sales of property, equipment and other assets |
|
27 |
|
|
|
365 |
|
Proceeds from sales or maturities of marketable securities |
|
— |
|
|
|
999 |
|
Purchases of equity and loans to equity investees |
|
(1,186 |
) |
|
|
(1,081 |
) |
Net cash used in investing activities |
|
(5,706 |
) |
|
|
(10,372 |
) |
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
|
Borrowings on notes payable |
|
40,000 |
|
|
|
92,098 |
|
Payments on notes payable |
|
(17,750 |
) |
|
|
(67,970 |
) |
Principal payments on long-term obligations |
|
(102 |
) |
|
|
— |
|
Debt issuance cost |
|
(5,838 |
) |
|
|
— |
|
Proceed from exercise of stock options |
|
46 |
|
|
|
— |
|
Net cash provided by financing activities |
|
16,356 |
|
|
|
24,128 |
|
|
|
|
|
EFFECT OF EXCHANGE RATE
CHANGES ON CASH |
|
(240 |
) |
|
|
80 |
|
NET INCREASE (DECREASE) IN
CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
|
29,660 |
|
|
|
(8,979 |
) |
|
|
|
|
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH: |
|
|
|
Beginning of period |
|
24,690 |
|
|
|
18,008 |
|
End of period |
$ |
54,350 |
|
|
$ |
9,029 |
|
Daktronics, Inc. and Subsidiaries |
Net Sales and Orders by Business Unit |
(in thousands) |
(unaudited) |
|
|
Three Months Ended |
(in
thousands) |
July 29, 2023 |
|
July 30, 2022 |
|
Dollar Change |
|
Percent Change |
Net
Sales: |
|
|
|
|
|
|
|
Commercial |
$ |
46,883 |
|
$ |
40,118 |
|
$ |
6,765 |
|
|
16.9 |
% |
Live Events |
|
91,999 |
|
|
56,383 |
|
|
35,616 |
|
|
63.2 |
|
High School Park and
Recreation |
|
56,234 |
|
|
35,809 |
|
|
20,425 |
|
|
57.0 |
|
Transportation |
|
21,369 |
|
|
19,540 |
|
|
1,829 |
|
|
9.4 |
|
International |
|
16,046 |
|
|
20,070 |
|
|
(4,024 |
) |
|
(20.0 |
) |
|
$ |
232,531 |
|
$ |
171,920 |
|
$ |
60,611 |
|
|
35.3 |
% |
Orders:
(1) |
|
|
|
|
|
|
|
Commercial |
$ |
32,434 |
|
$ |
47,678 |
|
$ |
(15,244 |
) |
|
(32.0 |
)% |
Live Events |
|
52,203 |
|
|
51,753 |
|
|
450 |
|
|
0.9 |
|
High School Park and
Recreation |
|
35,739 |
|
|
37,579 |
|
|
(1,840 |
) |
|
(4.9 |
) |
Transportation |
|
18,985 |
|
|
15,704 |
|
|
3,281 |
|
|
20.9 |
|
International |
|
19,269 |
|
|
17,509 |
|
|
1,760 |
|
|
10.1 |
|
|
$ |
158,630 |
|
$ |
170,223 |
|
$ |
(11,593 |
) |
|
(6.8 |
)% |
Reconciliation of Free Cash
Flow* |
(in thousands) |
(unaudited) |
|
|
Three Months Ended |
|
July 29,2023 |
|
July 30,2022 |
Net cash provided by (used in) operating activities |
$ |
19,250 |
|
|
$ |
(22,815 |
) |
Purchases of property and
equipment |
|
(4,547 |
) |
|
|
(10,655 |
) |
Proceeds from sales of
property and equipment |
|
27 |
|
|
|
365 |
|
Free cash flow |
$ |
14,730 |
|
|
$ |
(33,105 |
) |
- 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.
Reconciliation of Adjusted Net Income (loss)* |
(in thousands) |
(unaudited) |
|
|
Three Months Ended |
|
July 29,2023 |
|
July 30,2022 |
Net income (loss) |
$ |
19,196 |
|
$ |
(5,326 |
) |
Change in fair value of
convertible note |
|
7,260 |
|
|
— |
|
Debt issuance costs expensed
due to fair value of convertible note, net of taxes |
|
2,290 |
|
|
— |
|
Adjusted net income
(loss) |
$ |
28,746 |
|
$ |
(5,326 |
) |
- Adjusted net
income. We disclose adjusted net income as a non-GAAP financial
measurement in order to report our results exclusive of items that
are non-recurring or not core to our operating business. We believe
presenting this non-GAAP financial measurements provides investors
with a consistent way to analyze our performance.
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