Daktronics, Inc. Announces Third Quarter Fiscal 2021 Results

Rhea-AI Summary

Daktronics reported fiscal 2021 Q3 results with net sales of $94.1 million, down from $127.7 million in Q3 2020. The company posted a minor operating and net loss of $0.2 million, with earnings per diluted share at $0.00. Orders declined 35.6% to $86.9 million year-over-year, affecting all business units due to lower market activity amid COVID-19. However, gross profit margin improved to 25.4% from 19.2% due to favorable sales mix and a $2.1 million litigation claim reversal. Cash from operations increased significantly to $48.2 million from $6.2 million a year prior.

Positive

• Gross profit margin improved to 25.4%, up from 19.2% year-over-year.
• Cash generated by operating activities increased to $48.2 million from $6.2 million year-over-year.
• Free cash flow for the first nine months was positive at $41.8 million, compared to a negative $7.2 million in FY 2020.

Negative

• Net sales decreased by 26.3% in Q3 FY 2021 compared to Q3 FY 2020.
• Orders for Q3 FY 2021 decreased by 35.6% compared to Q3 FY 2020.
• Net loss of $0.2 million reported for Q3 FY 2021, a deterioration from prior year.

BROOKINGS, S.D., March 03, 2021 (GLOBE NEWSWIRE) -- Daktronics, Inc. (NASDAQ - DAKT) today reported fiscal 2021 third quarter results. Daktronics reported fiscal 2021 third quarter net sales of $94.1 million, operating loss of $0.2 million, net loss of $0.2 million, and earnings per diluted share of $0.00. This compares to net sales of $127.7 million, operating loss of $9.2 million, net loss of $12.7 million, and $0.28 per diluted share, for the third quarter of fiscal 2020. Fiscal 2021 third quarter orders were $86.9 million, compared to $135.0 million for the third quarter of fiscal 2020. Product order backlog at the end of the fiscal 2021 third quarter was $195 million, compared to $187 million a year earlier and $201 million at the end of the second quarter of fiscal 2021.₍₁₎

For the nine months ended January 30, 2021, net sales were $365.2 million, operating income was $16.0 million, net income was $10.7 million, and earnings per diluted share was $0.24 per diluted share. This compares to net sales of $482.8 million, operating income of $3.3 million, net income of $1.6 million, and $0.03 per diluted share for the same period in fiscal 2020.

Fiscal 2021 is a 52-week year and fiscal 2020 was a 53-week year; therefore, the nine months ended January 30, 2021 contains operating results for 39 weeks while the nine months ended February 1, 2020 contained operating results for 40 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 nine months of fiscal 2021 was $48.2 million, compared to cash generated of $6.2 million in the first nine months of fiscal 2020. Cash generated by operating activities is primarily derived from cash received from customers, offset by cash payments for inventories, subcontractors, employee related costs, and operating expense outflows. Year-to-date cash provided from operations differed as compared to last year primarily due to a focus on customer collections, decreasing inventory levels, lowering personnel and operating expense outflows as we manage operations through the uncertain COVID times. Cash generation and use can vary based on order timing and levels, varying contractual payment terms from customers, and payments for inventory to meet delivery and installation schedules. Free cash flow, defined as cash provided by or used in operating activities less net investment in property and equipment, was a positive $41.8 million for the first nine months of fiscal 2021, as compared to a negative $7.2 million for the same period of fiscal 2020. Net investment in property and equipment was $6.5 million for the first nine months of fiscal 2021, as compared to $13.4 million for the first nine months of fiscal 2020. Cash, restricted cash, and marketable securities at the end of the third quarter of fiscal 2021 were $81.0 million, which compares to $42.1 million at the end of the third quarter of fiscal 2020 and $41.6 million at the end of fiscal 2020. Borrowings on the line of credit were $15.0 million at the end of the third quarter of fiscal 2021 up from $0 at the end of the third quarter of fiscal 2020 and consistent with the $15.0 million at the end of fiscal 2020.

Orders for the third quarter of fiscal 2021 decreased 35.6 percent as compared to the third quarter of fiscal 2020. Orders for the nine months ended January 30, 2021 decreased 27.2 percent as compared to the same period one year ago. Each business unit's order volume was lower in fiscal 2021 due to lower market activity from the resulting economic and business impacts of the COVID-19 pandemic and related timing of large contract orders.

Net sales decreased by 26.3 percent in the third quarter of fiscal 2021 as compared to the third quarter of fiscal 2020. Net sales for the nine months ended January 30, 2021 decreased 24.4 percent as compared to the same period one year ago. Net sales decreased in all business units for the same reasons causing order booking declines and due to varied timing in the related conversion to sales based on customer project schedules.

Gross profit as a percentage of net sales was 25.4 percent for the third quarter of fiscal 2021 as compared to 19.2 percent a year earlier. The improved gross profit rate in the third quarter of fiscal 2021 is a result of the mix of service agreement and product sales and a $2.1 million litigation claim reversal. In comparison, during the third quarter of fiscal 2020, we experienced adverse impacts of a project with cost overruns and tariff related expenses.

Operating expenses for the third quarter of fiscal 2021 were $24.2 million, compared to $33.6 million for the third quarter of fiscal 2020, or a decrease of 28.0 percent. This decline is attributed to our focus on managing our expenses to expected order volumes. Declines in overall operating expenses were attributed to lower personnel related costs, reduced third-party contractor use, lower travel and entertainment activities, and lowered marketing and convention events offset by an increase in bad debt expense. Operating loss as a percent of sales for the quarter was 0.3 percent as compared to an operating loss as a percent of sales of 7.2 percent during the third quarter of fiscal 2020.

The effective tax rate expense for the third quarter of fiscal 2021 was 82.0 percent compared to an effective tax rate benefit of 37.9 percent for the third quarter of fiscal 2020. Our fiscal 2021 year-to-date effective rate expense was 21.3 percent compared to fiscal 2020 year-to-date effective rate expense of 51.6 percent. The change in the effective tax rate year-over-year was driven primarily by a decrease in tax credits and other permanent differences as a percentage of estimated current fiscal year pre-tax income.

Reece Kurtenbach, chairman, president and chief executive officer, stated, "Our third quarter orders, sales and profit levels are traditionally lighter than other quarters due to the seasonality of our sports business, construction cycles, and the reduced number of production dates due to holidays during the quarter. This year, our results have also been impacted by the pandemic. We continue to monitor the pandemic's impact on the markets we serve. Areas of our business that were impacted the most are those that serve customers in large gathering spaces which includes our sports and entertainment, mass transit, and airport markets. Our Out-of-Home advertising customers were impacted due to a reduction in national advertising spend and have chosen to delay orders. Customers using on-premise applications are less impacted and are continuing to utilize audio visual systems to inform and persuade their audiences during this time. We continue to strategically make choices on levels of capacity and investments in capital assets and development initiatives. We also continued the suspension of dividend and share repurchases to help us maintain stability in liquidity and our cash position."

_{(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.} 

Outlook
Kurtenbach added, "Our backlog going into the fourth quarter is strong and we believe the audiovisual industry fundamentals will drive long-term growth for our business. However, the near-term outlook shows areas of contraction and greater volatility. We are focused on promoting our value to new and core markets, while managing our cost structure to meet the uncertain demand. With the COVID-19 vaccine distribution underway, we remain focused on emerging as a stronger organization and to be positioned to capitalize on the recovery from this pandemic."

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								Nine Months Ended
		January 30,				February 1,				January 30,				February 1,
		2021				2020				2021				2020
Net sales		$	94,139			$	127,657			$	365,150			$	482,824
Cost of sales			70,198				103,175				272,134				372,750
Gross profit			23,941				24,482				93,016				110,074
Operating expenses:
Selling			12,004				16,552				36,214				51,026
General and administrative			6,389				8,640				20,777				26,698
Product design and development			5,784				8,442				20,053				29,063
			24,177				33,634				77,044				106,787
Operating (loss) income			(236	)			(9,152	)			15,972				3,287
Nonoperating (expense) income:
Interest income			52				233				203				664
Interest expense			(92	)			13				(249	)			(53	)
Other (expense) income, net			(913	)			(331	)			(2,377	)			(652	)
(Loss) income before income taxes			(1,189	)			(9,237	)			13,549				3,246
Income tax expense (benefit)			(975	)			3,497				2,880				1,676
Net (loss) income		$	(214	)		$	(12,734	)		$	10,669			$	1,570
Weighted average shares outstanding:
Basic			45,064				45,189				44,908				45,139
Diluted			45,064				45,189				45,061				45,412
(Loss) earnings per share:
Basic		$	0.00			$	(0.28	)		$	0.24			$	0.03
Diluted		$	0.00			$	(0.28	)		$	0.24			$	0.03
Cash dividends declared per share		$	—			$	0.05			$	—			$	0.15

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

		January 30,				May 2,
		2021				2020
		(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	76,877			$	40,398
Restricted cash			3,884				14
Marketable securities			248				1,230
Accounts receivable, net			63,212				72,577
Inventories			72,312				86,803
Contract assets			30,310				35,467
Current maturities of long-term receivables			1,736				3,519
Prepaid expenses and other current assets			7,554				9,629
Income tax receivables			87				548
Property and equipment and other assets available for sale			2,020				1,817
Total current assets			258,240				252,002
Property and equipment, net			61,805				67,484
Long-term receivables, less current maturities			754				1,114
Goodwill			8,262				7,743
Intangibles, net			2,396				3,354
Investment in affiliates and other assets			23,608				27,683
Deferred income taxes			13,382				13,271
Total non-current assets			110,207				120,649
TOTAL ASSETS		$	368,447			$	372,651

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

		January 30,				May 2,
		2021				2020
		(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable		$	32,692			$	47,834
Contract liabilities			53,292				50,897
Accrued expenses			26,664				36,626
Warranty obligations			10,766				9,764
Income taxes payable			2,079				844
Total current liabilities			125,493				145,965
Long-term warranty obligations			15,696				15,860
Long-term contract liabilities			10,587				10,707
Other long-term obligations			23,059				22,105
Long-term income taxes payable			554				582
Deferred income taxes			490				452
Total long-term liabilities			50,386				49,706
TOTAL LIABILITIES			175,879				195,671
SHAREHOLDERS' EQUITY:
Common stock			60,575				60,010
Additional paid-in capital			46,091				44,627
Retained earnings			95,759				85,090
Treasury stock, at cost			(7,297	)			(7,470	)
Accumulated other comprehensive loss			(2,560	)			(5,277	)
TOTAL SHAREHOLDERS' EQUITY			192,568				176,980
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	368,447			$	372,651

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

		Nine Months Ended
		January 30,				February 1,
		2021				2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	10,669			$	1,570
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			12,848				13,197
Gain on sale of property, equipment and other assets			(244	)			(6	)
Share-based compensation			1,563				1,734
Equity in loss of affiliates			1,740				430
Provision for doubtful accounts			1,551				(477	)
Deferred income taxes, net			(21	)			(223	)
Change in operating assets and liabilities			20,115				(10,035	)
Net cash provided by operating activities			48,221				6,190
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment			(6,935	)			(13,646	)
Proceeds from sales of property, equipment and other assets			470				244
Proceeds from sales or maturities of marketable securities			982				24,665
Purchases of and loans to equity investment			(1,328	)			(1,229	)
Net cash (used in) provided by investing activities			(6,811	)			10,034
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term obligations			(431	)			(2,140	)
Dividends paid			—				(6,756	)
Payments for common shares repurchased			—				(2,329	)
Tax payments related to RSU issuances			(125	)			(199	)
Net cash used in financing activities			(556	)			(11,424	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH			(505	)			(166	)
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH			40,349				4,634
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
Beginning of period			40,412				35,742
End of period		$	80,761			$	40,376

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

		Three Months Ended																Nine Months Ended
		January 30,				February 1,				Dollar				Percent				January 30,				February 1,				Dollar				Percent
		2021				2020				Change				Change				2021				2020				Change				Change
Net Sales:
Commercial		$	30,085			$	36,880			$	(6,795	)			(18.4	)%		$	94,947			$	120,566			$	(25,619	)			(21.2	)%
Live Events			23,330				40,571				(17,241	)			(42.5	)			112,626				159,196				(46,570	)			(29.3	)
High School Park and Recreation			14,644				14,775				(131	)			(0.9	)			71,165				75,433				(4,268	)			(5.7	)
Transportation			11,769				13,916				(2,147	)			(15.4	)			41,590				53,264				(11,674	)			(21.9	)
International			14,311				21,515				(7,204	)			(33.5	)			44,822				74,365				(29,543	)			(39.7	)
		$	94,139			$	127,657			$	(33,518	)			(26.3	)%		$	365,150			$	482,824			$	(117,674	)			(24.4	)%
Orders:
Commercial		$	34,806			$	36,898			$	(2,092	)			(5.7	)%		$	92,929			$	119,059			$	(26,130	)			(21.9	)%
Live Events			11,075				41,484				(30,409	)			(73.3	)			93,619				149,461				(55,842	)			(37.4	)
High School Park and Recreation			16,366				20,447				(4,081	)			(20.0	)			64,582				73,852				(9,270	)			(12.6	)
Transportation			12,991				16,203				(3,212	)			(19.8	)			37,713				55,410				(17,697	)			(31.9	)
International			11,650				19,992				(8,342	)			(41.7	)			55,864				75,827				(19,963	)			(26.3	)
		$	86,888			$	135,024			$	(48,136	)			(35.6	)%		$	344,707			$	473,609			$	(128,902	)			(27.2	)%

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

		Nine Months Ended
		January 30,				February 1,
		2021				2020
Net cash provided by operating activities		$	48,221			$	6,190
Purchases of property and equipment			(6,935	)			(13,646	)
Proceeds from sales of property and equipment			470				244
Free cash flow		$	41,756			$	(7,212	)

*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.

FAQ

What were Daktronics' sales results for Q3 fiscal 2021?

Daktronics reported net sales of $94.1 million for Q3 fiscal 2021, down from $127.7 million in Q3 fiscal 2020.

How did Daktronics perform in terms of net loss for the third quarter of fiscal 2021?

Daktronics reported a net loss of $0.2 million for the third quarter of fiscal 2021, compared to a net loss of $12.7 million for the same quarter in fiscal 2020.

What was the order backlog for Daktronics at the end of Q3 fiscal 2021?

At the end of Q3 fiscal 2021, Daktronics reported an order backlog of $195 million.

What were the earnings per share for Daktronics in Q3 fiscal 2021?

Earnings per diluted share for Daktronics in Q3 fiscal 2021 were $0.00.

How did the COVID-19 pandemic impact Daktronics' business?

The pandemic led to a decrease in orders and sales, particularly in sectors serving large gathering spaces like sports and entertainment.