Daktronics, Inc. Announces First Quarter Fiscal 2022 Results
09/01/2021 - 07:30 AM
BROOKINGS, S.D., Sept. 01, 2021 (GLOBE NEWSWIRE) -- 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."
Outlook Kurtenbach 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 Results Orders 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 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
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.
