Daktronics, Inc. Announces Fiscal Year and Fourth Quarter 2020 Results

BROOKINGS, S.D., June 10, 2020 (GLOBE NEWSWIRE) -- Daktronics, Inc. (NASDAQ - DAKT) today reported fiscal year and fourth quarter 2020 results.  Daktronics reported fiscal year 2020 net sales of $608.9 million, operating loss of $0.2 million, net income of $0.5 million, and earnings per diluted share of $0.01.  This compares to net sales of $569.7 million, operating loss of $4.7 million, and net loss of $1.0 million, or $0.02 per diluted share for fiscal 2019.  Fiscal 2020 orders were $620.8 million compared to $608.9 million for fiscal 2019.

Daktronics reported fiscal 2020 fourth quarter net sales of $126.1 million, operating loss of $3.5 million, and net loss of $1.1 million, or $0.02 per diluted share, compared to net sales of $127.8 million, operating loss of $10.3 million, and net loss of $10.8 million, or $0.24 per diluted share, for the fourth quarter of fiscal 2019.  Fiscal 2020 fourth quarter orders were $147.2 million compared to $162.5 million for the fourth quarter of fiscal 2019.  Product backlog at the end of the fiscal 2020 fourth quarter was $212 million, compared to a backlog of $202 million a year earlier and $187 million at the end of the third quarter of fiscal 2020.

Cash flow provided by operating activities for the fiscal year ended May 2, 2020 was $10.8 million, compared to $29.5 million in fiscal 2019.  Free cash flow, defined as cash provided from or used in operating activities less net investment in property and equipment, was a negative $7.0 million for fiscal 2020, as compared to a positive free cash flow of $12.9 million for fiscal 2019.  Net investment in property and equipment was $17.8 million for fiscal 2020, as compared to $16.7 million for fiscal 2019.  Cash, restricted cash, and marketable securities at the end of the fourth quarter of fiscal 2020 were $41.6 million, which compares to $62.1 million at the end of the fourth quarter of fiscal 2019.  At the end of fiscal year 2020, we had $15 million borrowed on our line of credit.

Fourth Quarter Fiscal 2020 Consolidated Financial Results
Orders for the fourth quarter of fiscal 2020 decreased 9.4 percent as compared to the fourth quarter of fiscal 2019.  Orders increased in the Live Events, High School Park and Recreation, and Transportation business units and decreased in the Commercial and International business units.  The increase in the Live Events business unit was due to an increase in the number projects for professional sports stadiums and arena venues.  Transportation orders grew due to increased state procurement project activity.  The Commercial and International business units observed a decrease in orders mainly in the out-of-home ("OOH") market as advertising spend contracted due to the COVID-19 pandemic.  The volatility of order timing for large projects and global accounts varies according to the needs of the customer and is the primary cause of the change in order volume.

Net sales for the fourth quarter of fiscal 2020 decreased by 1.3 percent as compared to the fourth quarter of fiscal 2019.  Net sales increased in the Live Events, High School Park and Recreation, and Transportation business units and decreased in the Commercial and International business units.  The change in sales primarily relates to fluctuations in the timing of order bookings, and related conversion to sales, including some shipping and onsite delays caused by COVID-19.

Gross profit as a percentage of net sales was 22.7 percent for the fourth quarter of fiscal 2020 as compared to 19.1 percent a year earlier.  The increase in gross profit percentage was primarily due to lower personnel related costs as we adjusted for reduced demand during COVID-19 stay at home orders, the non-recurrence of a business combination charge in the fourth quarter of fiscal 2019 and lower warranty charges.  Warranty as a percent of sales improved to 1.6 percent of sales as compared to 2.2 percent last year.  Operating expense for the fourth quarter of 2020 was $32.1 million, compared to $34.7 million for the fourth quarter of fiscal 2019.  Operating loss as a percentage of sales was 2.7 percent for the fourth quarter of fiscal 2020 as compared to an operating loss as a percentage of sales of 8.0 percent for the fourth quarter of fiscal 2019.

The provision for income taxes during the fourth quarter of our fiscal reporting period is calculated based on actual results for the full fiscal year to income or loss, excluding unusual or infrequently occurring discrete items for the reporting period.  Our effective tax rate was 66.9 percent and negative 1.3 percent for the fourth quarter of fiscal 2020 and fiscal 2019, respectively.

Fiscal 2020 Consolidated Financial Results
Orders for fiscal 2020 increased by 2.0 percent as compared to fiscal 2019.  Orders increased in the Live Events, High School Park and Recreation, and Transportation business units and decreased in the Commercial and International business units.  Live Events orders increase was primarily due to the increase in the number of projects for college and university venues, minor league and professional sports stadiums, and arena venues.  Transportation orders grew as demand for intelligent transportation systems increased as state transportation departments and private public partnerships continue to invest in technology to better inform travelers, manage transport systems, and collect revenues.  Commercial orders decreased primarily due to a decrease of orders in our spectacular and OOH markets.  International business unit orders were down primarily due to timing of large orders and the delay of orders due to COVID-19.  Each business unit’s orders were impacted by the additional week in fiscal 2020.

Net sales for fiscal 2020 increased 6.9 percent as compared to fiscal 2019.  Net sales increased in the Commercial, Live Events, High School Park and Recreation, and Transportation business units and remained relatively flat in the International business unit.  This change in sales correlates to order levels noted above, the additional week in fiscal 2020, and to the timing of converting orders and backlog into sales.  The timing of order conversion is based on customer driven delivery schedules.

Gross profit as a percentage of net sales was 22.8 percent for fiscal 2020 as compared to 22.9 percent a year earlier.  Warranty as a percent of sales improved to 1.9 percent of sales as compared to 2.3 percent last year.  Operating expenses for fiscal 2020 were $138.9 million as compared to $135.0 million for fiscal 2019.  The increase in total operating expenses was primarily attributable to an increase in selling and product development expenses.  Operating margin improved to breakeven as a percent of sales for fiscal 2020 as compared to a loss of 0.8 percent for fiscal 2019.

Our fiscal 2020 tax benefit is the result of permanent tax credits exceeding a valuation allowance.  The effective tax rate  for fiscal 2019 was 80.6 percent and significantly different from the current year as the fiscal 2019 effective income tax rate was impacted by one-time discrete adjustments of $3.2 million for the release of valuation allowances and unrecognized tax benefits.

Reece Kurtenbach, chairman, president and chief executive officer, stated, "As we entered into fiscal 2020, we focused on winning more orders through existing and new markets and sales channels, developing and deploying newly designed solutions and advanced manufacturing techniques, and managing capacity and spend.  We achieved these goals.  Our investments in technology yielded additional features in our control systems and broadened our lineup of displays which contributed to the second highest level of order volume in our company's history.  This order level is a testament of our continued leadership in the marketplace as customers choose Daktronics for our broad range of solutions, the reliability of our products, and our commitment to serve them over the lifetime of their system.  Significant projects for fiscal 2020 included Texas Rangers where we provided a complete audiovisual control solution throughout the park and at the San Jose Airport where we provided displays for the nation’s first all-digital airport advertising network.

"To support our long-term technology advancement strategies, we participated in a Series A investment in X Display Company ("XDC").  XDC creates and owns leading intellectual property and capabilities in microLED mass transfer technology.  This investment supports our line of narrow pixel pitch LED displays and will enable solutions to move into the realm of less than 1-millmeter pixel spacing."

Outlook
Kurtenbach continued, "In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic, and in the following weeks, many countries and U.S. states and localities issued lock down orders impacting businesses globally.  Like many other companies, the pandemic and related social reactions have impacted our business and have created an unprecedented and challenging time.  Our growth-oriented focus of investing in the development of sales channels and new products for long-term success has turned to reacting to the new near-term realities of this uncertain business environment.  We have taken actions to reduce costs and to focus on key priorities to position ourselves for a strong recovery when the crisis is over.  However, the ensuing depth and length of impact to the economy and our customers reactions to the environment create uncertainties predicting fiscal 2021 opportunities.

“The market's increasing adoption and use of digital solutions, along with our new technology releases, cause us to remain positive on the overall future of our business and growth in the industry.”

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 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, fluctuations in margins, the introduction of new products and technology, the impact of adverse weather conditions, and other risks noted in the company's SEC filings, including its Annual Report on Form 10-K for its 2019 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 Anderson, Chief Financial Officer  
(605) 692-0200  
Investor@daktronics.com  
   


Daktronics, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share amounts) (unaudited)
    
 Three Months Ended Twelve Months Ended
 May 2,
 2020
 April 27,
 2019
 May 2,
 2020
 April 27,
 2019
Net sales$126,108  $127,755  $608,932  $569,704 
Cost of sales97,482  103,334  470,232  439,410 
Gross profit28,626  24,421  138,700  130,294 
        
Operating expenses:       
Selling14,876  16,608  65,902  64,648 
General and administrative8,495  9,132  35,193  34,817 
Product design and development8,709  8,946  37,772  35,557 
 32,080  34,686  138,867  135,022 
Operating loss(3,454) (10,265) (167) (4,728)
        
Nonoperating income (expense):       
Interest income141  318  805  1,031 
Interest expense(53) (74) (106) (160)
Other (expense) income, net111  (664) (541) (1,087)
        
Loss before income taxes(3,255) (10,685) (9) (4,944)
Income tax (benefit) expense(2,176) 134  (500) (3,986)
Net (loss) income$(1,079) $(10,819) $491  $(958)
        
Weighted average shares outstanding:       
Basic44,685  45,139  45,031  44,926 
Diluted44,685  45,139  45,316  44,926 
        
Earnings (loss) per share:       
Basic$(0.02) $(0.24) $0.01  $(0.02)
Diluted$(0.02) $(0.24) $0.01  $(0.02)
        
Cash dividends declared per share$0.05  $0.07  $0.20  $0.28 



Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands) (unaudited)
    
 May 2,
 2020
 April 27,
 2019
ASSETS   
CURRENT ASSETS:   
Cash and cash equivalents$40,398  $35,383 
Restricted cash14  359 
Marketable securities1,230  26,344 
Accounts receivable, net72,577  65,487 
Inventories86,803  78,832 
Contract assets35,467  33,704 
Current maturities of long-term receivables3,519  2,300 
Prepaid expenses and other current assets9,629  8,319 
Income tax receivables548  1,087 
Property and equipment and other assets available for sale1,817  1,858 
Total current assets252,002  253,673 
    
Property and equipment, net67,484  65,314 
Long-term receivables, less current maturities1,114  1,214 
Goodwill7,743  7,889 
Intangibles, net3,354  4,906 
Investment in affiliates and other assets27,683  5,052 
Deferred income taxes13,271  11,168 
TOTAL ASSETS372,651  349,216 
    
LIABILITIES AND SHAREHOLDERS' EQUITY   
CURRENT LIABILITIES:   
Accounts payable47,834  44,873 
Contract liabilities50,897  47,178 
Accrued expenses36,626  32,061 
Warranty obligations9,764  9,492 
Income taxes payable844  468 
Total current liabilities145,965  134,072 
    
Long-term warranty obligations15,860  14,978 
Long-term contract liabilities10,707  10,053 
Other long-term obligations22,105  1,339 
Long-term income tax payable582  578 
Deferred income taxes452  533 
Total long-term liabilities49,706  27,481 
TOTAL LIABILITIES195,671  161,553 
    
SHAREHOLDERS' EQUITY:   
Common stock60,010  57,699 
Additional paid-in capital44,627  42,561 
Retained earnings85,090  93,593 
Treasury stock, at cost(7,470) (1,834)
Accumulated other comprehensive loss(5,277) (4,356)
TOTAL SHAREHOLDERS' EQUITY176,980  187,663 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$372,651  $349,216 
    



Daktronics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands) (unaudited)
   
  Year Ended
  May 2,
 2020
 April 27,
 2019
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net income (loss) $491  $(958)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:    
Depreciation and amortization 17,718  18,635 
Gain on sale of property, equipment and other assets (35) (441)
Share-based compensation 2,265  2,479 
Contingent consideration adjustment   286 
Equity in loss of affiliate 741  844 
Provision for doubtful accounts (99) 194 
Deferred income taxes, net (2,183) (3,379)
Change in operating assets and liabilities (8,090) 11,886 
Net cash provided by operating activities 10,808  29,546 
     
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchases of property and equipment (18,091) (17,268)
Proceeds from sales of property, equipment and other assets 322  607 
Purchases of marketable securities   (25,337)
Proceeds from sales or maturities of marketable securities 25,162  33,706 
Purchases of and loans to equity investment (11,664) (1,300)
Acquisitions, net of cash acquired   (2,250)
Net cash used in investing activities (4,271) (11,842)
     
CASH FLOWS FROM FINANCING ACTIVITIES:    
Borrowings on notes payable 15,000   
Principal payments on long-term obligations (2,149) (450)
Dividends paid (8,994) (12,554)
Proceeds from exercise of stock options   1,318 
Payments for common shares repurchased (5,636)  
Tax payments related to RSU issuances (199) (246)
Net cash used in financing activities (1,978) (11,932)
     
EFFECT OF EXCHANGE RATE CHANGES ON CASH 111  215 
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 4,670  5,987 
     
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:    
Beginning of period 35,742  29,755 
End of period $40,412  $35,742 
     



Daktronics, Inc. and Subsidiaries
Net Sales and Orders by Business Unit
(in thousands) (unaudited)
    
 Three Months Ended Twelve Months Ended
 May 2,
 2020
 April 27,
 2019
 Dollar
Change
 Percent
Change
 May 2,
 2020
 April 27,
 2019
 Dollar
Change
 Percent
Change
Net sales:               
Commercial$32,061  $35,036  $(2,975) (8.5)% $152,627  $148,833  $3,794  2.5%
Live Events37,395  36,386  1,009  2.8  196,591  170,952  25,639  15.0 
High School Park and Recreation20,981  16,689  4,292  25.7  96,414  91,187  5,227  5.7 
Transportation16,875  13,767  3,108  22.6  70,139  64,391  5,748  8.9 
International18,796  25,877  (7,081) (27.4) 93,161  94,341  (1,180) (1.3)
 $126,108  $127,755  $(1,647) (1.3)% $608,932  $569,704  $39,228  6.9%
Orders:               
Commercial$27,123  $38,955  $(11,832) (30.4)% $146,182  $162,592  $(16,410) (10.1)%
Live Events54,373  50,414  3,959  7.9  203,834  179,217  24,617  13.7 
High School Park and Recreation26,236  24,211  2,025  8.4  100,088  98,139  1,949  2.0 
Transportation28,063  18,323  9,740  53.2  83,473  73,059  10,414  14.3 
International11,374  30,582  (19,208) (62.8) 87,201  95,873  (8,672) (9.0)
 $147,169  $162,485  $(15,316) (9.4)% $620,778  $608,880  $11,898  2.0%


Reconciliation of Cash Flow Provided by Operating Activities to Free Cash Flow
(in thousands) (unaudited)
  
 Twelve Months Ended
 May 2,
 2020
 April 27,
 2019
Net cash provided by operating activities$10,808  $29,546 
Purchases of property and equipment(18,091) (17,268)
Proceeds from sales of property, equipment and other assets322  607 
Free cash flow$(6,961) $12,885 

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 U.S. generally accepted accounting principles (“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.

 

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