Daktronics, Inc. Announces First Quarter Fiscal 2021 Results

BROOKINGS, S.D., Aug. 26, 2020 (GLOBE NEWSWIRE) -- Daktronics, Inc. (NASDAQ - DAKT) today reported fiscal 2021 first quarter results.  Daktronics reported fiscal 2021 first quarter net sales of $143.6 million, operating income of $9.5 million, and net income of $7.5 million, and earnings per diluted share of $0.17.  This compares to net sales of $180.3 million, operating income of $7.6 million, and net income of $7.0 million, or $0.16 per diluted share, for the first quarter of fiscal 2020.  Fiscal 2021 first quarter orders were $122.2 million, compared to $187.5 million for the first quarter of fiscal 2020.  Product order backlog at the end of the fiscal 2021 first quarter was $192 million, compared to $207 million a year earlier and $212 million at the end of the fourth quarter of fiscal 2021.(1)

Fiscal 2021 is a 52-week year and fiscal 2020 was a 53-week year; therefore, the three months ended August 1, 2020 contains operating results for 13 weeks while the three months ended August 3, 2019 contained operating results for 14 weeks.  Sales, orders, and other results of operations were impacted due to the additional week of operations.

Cash generated by operating activities in the first three months of fiscal 2021 was $8.5 million, compared to cash consumed of  $18.2 million in operating activities in the first three months of fiscal 2020.  During 2020, cash flow from operating activities fluctuated due to a rise in accounts receivable, contract assets, and inventories corresponding with the seasonality of our business.  Free cash flow, defined as cash provided by or used in operating activities less net investment in property and equipment, was a positive $5.5 million for the first three months of fiscal 2021, as compared to a negative $24.0 million for the same period of fiscal 2020.  Net investment in property and equipment was $3.1 million for the first three months of fiscal 2021, as compared to $5.8 million for the first three months of fiscal 2020.  Cash, restricted cash, and marketable securities at the end of the first quarter of fiscal 2021 were $45.9 million, which compares to $33.0 million at the end of the first quarter of fiscal 2020 and $41.6 million at the end of fiscal 2020.

Orders for the first quarter of fiscal 2021 decreased 34.8 percent as compared to the first quarter of fiscal 2020.  For comparison, orders paced at $9.4 million per week during the first quarter of fiscal 2021 as compared to $13.4 million during the same time last year.  Each business unit's order volume was lower in fiscal 2021 because of the additional week in first quarter of fiscal 2020, timing of large contract orders which cause lumpiness, and due to lower market activity in light of the COVID-19 pandemic.

Net sales decreased by 20.3 percent in the first quarter of fiscal 2021 as compared to the first quarter of fiscal 2020.  Net sales decreased in all business units.  The change in sales primarily relates to fluctuations in the timing of order bookings, and related conversion to sales.  Some shipping and on-site delays continue to be caused by COVID-19 related work restrictions or customer delays in readiness for their applications.

Gross profit as a percentage of net sales was 24.9 percent for the first quarter of fiscal 2021 as compared to 25.2 percent a year earlier.  Operating expenses for the first quarter of fiscal 2021 were $26.2 million, compared to $37.9 million for the first quarter of fiscal 2020, or a decrease of 30.8 percent.  Approximately $2.7 million of this decrease is due to the additional week during the first quarter of fiscal 2020.  The remaining declines are attributed to our focus on managing our expenses to expected order volumes.  Overall operating expenses were attributed to lower personnel costs offset by severance costs for reductions in force, lower travel and entertainment activities, and lowered marketing and convention events.  Operating income as a percent of sales for the quarter was 6.6 percent as compared to 4.2 percent during the first quarter of fiscal 2020.

The effective tax rate for the first quarter of fiscal 2021 was 16.4 percent compared to an effective tax rate of 12.6 percent for the first quarter of fiscal 2020.

Reece Kurtenbach, chairman, president and chief executive officer stated, "During the first quarter of fiscal 2021, our customers reduced their spend on audio-visual systems as they worked through the economic and business implications of COVID-19.  We took corresponding action to reduce our operating expenses to align with expected order and sales declines.  These actions along with reduced investments in capital assets and suspension of dividends and share repurchases helped us maintain stability in liquidity and our cash position."

Outlook
Kurtenbach added, "We believe the audio-visual industry fundamentals will drive long-term growth for our business, but the near-term outlook shows contraction and greater volatility overall.  We expect our customers will continue to have disruptions in revenues caused by COVID-19 throughout the current fiscal year.  We are focused on promoting our value to new and existing markets, while managing our cost structure to meet the uncertain demand.  Even though we face a challenging fiscal 2021, we intend to emerge as a stronger organization."

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 2020 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
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
 
 Three Months Ended
 August 1,
 2020
 August 3,
 2019
    
Net sales$143,644  $180,256 
Cost of sales107,883  134,751 
Gross profit35,761  45,505 
    
Operating expenses:   
Selling11,556  18,297 
General and administrative7,124  9,093 
Product design and development7,532  10,500 
 26,212  37,890 
Operating income9,549  7,615 
    
Nonoperating (expense) income:   
Interest income85  269 
Interest expense(73) (35)
Other (expense) income, net(627) 193 
    
Income before income taxes8,934  8,042 
Income tax expense1,467  1,012 
Net income$7,467  $7,030 
    
Weighted average shares outstanding:   
Basic44,654  45,089 
Diluted44,751  45,261 
    
Earnings per share:   
Basic$0.17  $0.16 
Diluted$0.17  $0.16 
    
Cash dividends declared per share$  $0.05 
        



 
Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands)
 
 August 1,
 2020
 May 2,
 2020
 (unaudited)  
ASSETS   
CURRENT ASSETS:   
Cash and cash equivalents$44,609  $40,398 
Restricted cash96  14 
Marketable securities1,230  1,230 
Accounts receivable, net88,608  72,577 
Inventories81,435  86,803 
Contract assets33,261  35,467 
Current maturities of long-term receivables3,306  3,519 
Prepaid expenses and other current assets7,595  9,629 
Income tax receivables260  548 
Property and equipment and other assets available for sale1,966  1,817 
Total current assets262,366  252,002 
    
Property and equipment, net66,059  67,484 
Long-term receivables, less current maturities739  1,114 
Goodwill8,048  7,743 
Intangibles, net3,070  3,354 
Investment in affiliates and other assets26,526  27,683 
Deferred income taxes13,312  13,271 
Total non-current assets117,754  120,649 
TOTAL ASSETS$380,120  $372,651 
    



 
Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
(in thousands)
 
 August 1,
 2020
 May 2,
 2020
 (unaudited)  
LIABILITIES AND SHAREHOLDERS' EQUITY   
CURRENT LIABILITIES:   
Accounts payable$48,255  $47,834 
Contract liabilities50,159  50,897 
Accrued expenses33,941  36,626 
Warranty obligations10,648  9,764 
Income taxes payable1,107  844 
Total current liabilities144,110  145,965 
    
Long-term warranty obligations16,412  15,860 
Long-term contract liabilities10,715  10,707 
Other long-term obligations21,469  22,105 
Long-term income taxes payable723  582 
Deferred income taxes469  452 
Total long-term liabilities49,788  49,706 
TOTAL LIABILITIES193,898  195,671 
    
SHAREHOLDERS' EQUITY:   
Common stock60,010  60,010 
Additional paid-in capital45,192  44,627 
Retained earnings92,557  85,090 
Treasury stock, at cost(7,297) (7,470)
Accumulated other comprehensive loss(4,240) (5,277)
TOTAL SHAREHOLDERS' EQUITY186,222  176,980 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$380,120  $372,651 
        



 
Daktronics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
 Three Months Ended
 August 1,
 2020
 August 3,
 2019
CASH FLOWS FROM OPERATING ACTIVITIES:   
Net income$7,467  $7,030 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:   
Depreciation and amortization4,337  4,383 
Loss on sale of property, equipment and other assets(53) (26)
Share-based compensation539  643 
Equity in loss of affiliates529  118 
Provision for doubtful accounts1  5 
Deferred income taxes, net(4) (40)
Change in operating assets and liabilities(4,271) (30,331)
Net cash provided by (used in) operating activities8,545  (18,218)
    
CASH FLOWS FROM INVESTING ACTIVITIES:   
Purchases of property and equipment(3,155) (5,856)
Proceeds from sales of property, equipment and other assets86  73 
Proceeds from sales or maturities of marketable securities  14,510 
Purchases of and loans to equity investment(492) (455)
Net cash (used in) provided by investing activities(3,561) 8,272 
    
CASH FLOWS FROM FINANCING ACTIVITIES:   
Principal payments on long-term obligations(210) (1,221)
Dividends paid  (2,250)
Payments for common shares repurchased  (1,187)
Net cash used in financing activities(210) (4,658)
    
EFFECT OF EXCHANGE RATE CHANGES ON CASH(481) (37)
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH4,293  (14,641)
    
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:   
Beginning of period40,412  35,742 
End of period$44,705  $21,101 
    


 
Daktronics, Inc. and Subsidiaries
Net Sales and Orders by Business Unit
(in thousands)
(unaudited)
 
 Three Months Ended
 August 1,
 2020
 August 3,
 2019
 Dollar Change Percent Change
Net Sales:       
Commercial$34,506  $44,035  $(9,529) (21.6)%
Live Events51,474  59,306  (7,832) (13.2)
High School Park and Recreation28,943  30,465  (1,522) (5.0)
Transportation14,498  19,018  (4,520) (23.8)
International14,223  27,432  (13,209) (48.2)
 $143,644  $180,256  $(36,612) (20.3)%
Orders:       
Commercial$25,533  $38,648  $(13,115) (33.9)%
Live Events41,860  66,969  (25,109) (37.5)
High School Park and Recreation28,099  30,552  (2,453) (8.0)
Transportation13,089  22,215  (9,126) (41.1)
International13,572  29,079  (15,507) (53.3)
 $122,153  $187,463  $(65,310) (34.8)%
               



Reconciliation of Free Cash Flow*
(in thousands)
(unaudited)
 Three Months Ended
 August 1,
 2020
 August 3,
 2019
Net cash provided by (used in) operating activities$8,545  $(18,218)
Purchases of property and equipment(3,155) (5,856)
Proceeds from sales of property and equipment86  73 
Free cash flow$5,476  $(24,001)

*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.



(1) Backlog is not a measure defined by U.S. generally accepted accounting principles ("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 2, 2020.

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