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Daktronics, Inc. Announces Second Quarter Fiscal 2022 Results

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BROOKINGS, S.D., Dec. 01, 2021 (GLOBE NEWSWIRE) -- Daktronics, Inc. (NASDAQ - DAKT) today reported results for fiscal 2022 second quarter which ended October 30, 2021.

Q2 FY2022 financial highlights:

  • Net sales increased to $164.5 million as compared to Q2 FY2021 net sales of $127.4 million as a result of strong demand and eased pandemic related site restrictions.

  • Operating income decreased to $4.4 million as compared to Q2 FY2021 operating income of $6.7 million due to inflation in materials and freight costs and increased personnel spend compared to prior year.

  • Net income of $2.4 million, and earnings per diluted share of $0.05 compared to net income of $3.4 million, and $0.08 earnings per diluted share, for Q2 FY2021.

  • Second quarter orders of $163.7 million, grew 20.7% year-over-year, driven by increased market activity as the pandemic restrictions eased and economic conditions improved, including record bookings in Commercial and High School Park and Recreation business units.

  • Product order backlog of $282 million compared to $201 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 Q2 FY2021.

Reece Kurtenbach, chairman, president and chief executive officer stated, "Market demand continued to return to pre-pandemic levels and our order bookings grew through the first half of the year. Our operating expenses have increased as we adjust our capacity to support increased demand levels and convert our record high backlog to sales. At the same time, material, labor, and freight availability constraints are creating headwinds in lead times and are causing inflationary cost pressures."

Outlook
Kurtenbach added, "We expect dynamic supply chain conditions to persist through next calendar year. As we continue to work through supply chain challenges, inflationary pressures, and evolving pandemic impacts, we expect volatility in our pricing, order and revenue cycles, and production costs in the near term. Over the long-term, we believe the fundamentals of the audiovisual industry are strong and are poised for continued growth. To position us to benefit from both near term growth and long-term trends, we are actively investing in capacity, in new technologies, and in different markets to make Daktronics and our solutions the preferred choice for new and existing customers."

Second Quarter and Year to Date Results
Orders for the second quarter of fiscal 2022 increased 20.7 percent as compared to the second quarter of fiscal 2021. Each business unit's order volume grew through the first half of fiscal 2022 reflecting the recovery from the impact of the global pandemic among our customers. Commercial business unit orders increase is due to strong demand from customers using systems for on-premise promotion and out-of-home advertising. High School Park and Recreation continued growth for the year and quarter is driven by the adoption of video displays for sporting and educational use. Transportation order levels increased as project planning and approval activities resumed and moved forward for displays used in intelligent transportation systems and mass transit venues. The International business unit orders for the quarter were less than last year, same quarter, but improved through the first half of the year. The pandemic recovery in regions around the world has varied. While some countries have eased travel restrictions and we have seen business in those locations increase, other countries still continue to deal with the ongoing challenges of the pandemic. Live Events business unit orders were similar to last year second quarter and increased on a year to date basis.

Net sales increased by 29.1 percent in the second quarter of fiscal 2022 as compared to the second quarter of fiscal 2021. Net sales for the six months ended Oct. 30, 2021 increased by 14.1 percent as compared to the same period one year ago. 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 created a larger than typical backlog, which we expect to fulfill in future quarters.

Gross profit as a percentage of net sales was 19.6 percent for the second quarter of fiscal 2022 as compared to 26.2 percent a year earlier and 20.8 percent for the six months ended Oct. 30, 2021 as compared to 25.5 percent for the six months ended 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. In addition, during the second quarter of fiscal 2022 we had more large project sales which generally have lower gross profit because of the competitive nature of large projects.

Operating expenses for the second quarter of fiscal 2022 were $27.9 million, compared to $26.7 million for the second quarter of fiscal 2021 or an increase of 4.5 percent and $54.4 million for the six months ended Oct. 30, 2021 as compared to $52.9 million for the six months ended a year prior. The increases were primarily associated with increases in personnel related expenses.

Operating income as a percent of sales for the quarter was 2.7 percent as compared to an operating income as a percent of sales of 5.2 percent during the second quarter of fiscal 2021 and 3.2 percent for six months ended Oct. 30, 2021 as compared to 6.0 percent for the six months ended a year prior.

The effective tax rate expense for the second quarter of fiscal 2022 was 29.6 percent compared to an effective tax rate expense of 41.1 percent for the second quarter of fiscal 2021. The effective tax rate expense for the six months ended Oct. 30, 2021 was 27.0 percent compared to an effective tax rate expense of 26.2 percent for the six months ended a year prior. The difference in tax rates is primarily driven by a decrease in estimated tax credits proportionate to an increase in estimated pre-tax earnings in the second quarter of fiscal 2021 compared to the second quarter of fiscal 2022.

Cash, restricted cash, and marketable securities at the end of the second quarter of fiscal 2022 were $61.6 million, which compares to $74.4 million at the end of the second 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 second 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 $12.3 million for the first six months of fiscal 2022, as compared to a positive free cash flow of $34.5 million for the same period in 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 $3.7 million for fiscal 2022, as compared to $5.4 million for 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

Six Months Ended

October 30,

October 31,

October 30,

October 31,

2021

2020

2021

2020

Net sales

$

164,477

$

127,367

$

309,209

$

271,011

Cost of sales

132,213

94,053

244,757

201,936

Gross profit

32,264

33,314

64,452

69,075

Operating expenses:

Selling

12,482

12,654

24,277

24,210

General and administrative

8,201

7,264

15,772

14,388

Product design and development

7,196

6,737

14,358

14,269

27,879

26,655

54,407

52,867

Operating income

4,385

6,659

10,045

16,208

Nonoperating (expense) income:

Interest (expense) income, net

(59

)

(18

)

78

(6

)

Other (expense) income, net

(952

)

(837

)

(1,820

)

(1,464

)

Income before income taxes

3,374

5,804

8,303

14,738

Income tax expense

1,000

2,388

2,244

3,855

Net income

$

2,374

$

3,416

$

6,059

$

10,883

Weighted average shares outstanding:

Basic

45,350

44,893

45,271

44,808

Diluted

45,499

44,977

45,490

44,947

Earnings per share:

Basic

$

0.05

$

0.08

$

0.13

$

0.24

Diluted

$

0.05

$

0.08

$

0.13

$

0.24


Daktronics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)

October 30,

May 1,

2021

2021

(unaudited)

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

59,727

$

77,590

Restricted cash

1,877

2,812

Accounts receivable, net

95,156

67,808

Inventories

94,790

74,356

Contract assets

40,231

32,799

Current maturities of long-term receivables

2,167

1,462

Prepaid expenses and other current assets

10,897

7,445

Income tax receivables

322

731

Total current assets

305,167

265,003

Property and equipment, net

56,084

58,682

Long-term receivables, less current maturities

6,357

1,635

Goodwill

8,293

8,414

Intangibles, net

1,706

2,083

Investment in affiliates and other assets

28,259

27,403

Deferred income taxes

11,940

11,944

Total non-current assets

112,639

110,161

TOTAL ASSETS

$

417,806

$

375,164


Daktronics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (continued)
(in thousands)

October 30,

May 1,

2021

2021

(unaudited)

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable

$

65,963

$

40,251

Contract liabilities

70,158

64,495

Accrued expenses

32,683

30,672

Warranty obligations

10,285

10,464

Income taxes payable

850

738

Total current liabilities

179,939

146,620

Long-term warranty obligations

15,493

15,496

Long-term contract liabilities

10,707

10,720

Other long-term obligations

9,809

7,816

Long-term income taxes payable

682

548

Deferred income taxes

373

410

Total long-term liabilities

37,064

34,990

TOTAL LIABILITIES

217,003

181,610

SHAREHOLDERS' EQUITY:

Common stock

61,175

60,575

Additional paid-in capital

47,412

46,595

Retained earnings

102,075

96,016

Treasury stock, at cost

(7,101

)

(7,297

)

Accumulated other comprehensive loss

(2,758

)

(2,335

)

TOTAL SHAREHOLDERS' EQUITY

200,803

193,554

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

417,806

$

375,164



Daktronics, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

Six Months Ended

October 30,

October 31,

2021

2020

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$

6,059

$

10,883

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Depreciation and amortization

7,789

8,564

Gain on sale of property, equipment and other assets

(676

)

(162

)

Share-based compensation

1,012

1,047

Equity in loss of investees

1,565

1,145

Provision for doubtful accounts

(588

)

153

Deferred income taxes, net

(41

)

2

Change in operating assets and liabilities

(23,654

)

18,343

Net cash (used in) provided by operating activities

(8,534

)

39,975

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment

(4,507

)

(5,776

)

Proceeds from sales of property, equipment and other assets

760

341

Proceeds from sales or maturities of marketable securities

247

Purchases of and loans to equity investees

(6,129

)

(903

)

Net cash used in investing activities

(9,876

)

(6,091

)

CASH FLOWS FROM FINANCING ACTIVITIES:

Principal payments on long-term obligations

(200

)

(220

)

Proceed from exercise of stock options

3

Tax payments related to RSU issuances

(199

)

(125

)

Net cash used in financing activities

(396

)

(345

)

EFFECT OF EXCHANGE RATE CHANGES ON CASH

8

(498

)

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

(18,798

)

33,041

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

Beginning of period

80,402

40,412

End of period

$

61,604

$

73,453


Daktronics, Inc. and Subsidiaries
Net Sales and Orders by Business Unit
(in thousands)
(unaudited)

Three Months Ended

Six Months Ended

October 30,

October 31,

Dollar

Percent

October 30,

October 31,

Dollar

Percent

2021

2020

Change

Change

2021

2020

Change

Change

Net Sales:

Commercial

$

34,463

$

30,356

$

4,107

13.5

%

$

67,244

$

64,862

$

2,382

3.7

%

Live Events

59,396

37,822

21,574

57.0

111,783

89,296

22,487

25.2

High School Park and Recreation

32,747

27,578

5,169

18.7

60,641

56,521

4,120

7.3

Transportation

14,053

15,323

(1,270

)

(8.3

)

26,611

29,821

(3,210

)

(10.8

)

International

23,818

16,288

7,530

46.2

42,930

30,511

12,419

40.7

$

164,477

$

127,367

$

37,110

29.1

%

$

309,209

$

271,011

$

38,198

14.1

%

Orders:

Commercial

$

58,358

$

32,590

$

25,768

79.1

%

$

96,687

$

58,123

$

38,564

66.3

%

Live Events

40,501

40,684

(183

)

(0.4

)

90,187

82,544

7,643

9.3

High School Park and Recreation

25,651

20,117

5,534

27.5

71,362

48,216

23,146

48.0

Transportation

14,699

11,633

3,066

26.4

36,044

24,722

11,322

45.8

International

24,498

30,642

(6,144

)

(20.1

)

51,173

44,214

6,959

15.7

$

163,707

$

135,666

$

28,041

20.7

%

$

345,453

$

257,819

$

87,634

34.0

%


Reconciliation of Free Cash Flow*
(in thousands)
(unaudited)

Six Months Ended

October 30,

October 31,

2021

2020

Net cash (used in) provided by operating activities

$

(8,534

)

$

39,975

Purchases of property and equipment

(4,507

)

(5,776

)

Proceeds from sales of property and equipment

760

341

Free cash flow

$

(12,281

)

$

34,540

*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.


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