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Daktronics, Inc. Announces 2025 Fiscal First Quarter Results
المصدر: Nasdaq GlobeNewswire / 04 سبتمبر 2024 06:30:00 America/Chicago
Solid Sequential GAAP Revenue Growth, Margin Expansion, and Cash Flow Generation
Earned $22.7 Million of Operating Income and Adjusted Net Income(1) of $16.6 Million
BROOKINGS, S.D., Sept. 04, 2024 (GLOBE NEWSWIRE) -- Daktronics, Inc. (NASDAQ-DAKT), the leading U.S.-based designer and manufacturer of best-in-class dynamic video communication displays and control systems for customers worldwide, today reported results for its fiscal 2025 first quarter which ended July 27, 2024.
Fiscal Q1 2025 financial highlights:
- Sales of $226.1 million, a 4.7 percent sequential increase from the fourth quarter of fiscal 2024, aligning with expected seasonal demand and driven by increased production and deliveries for sports and outdoor related seasonal business
- Gross profit as a percentage of net sales of 26.4 percent as compared to 25.7 percent for the fourth quarter of fiscal 2024
- Operating income of $22.7 million, a 16.9 percent increase as compared to $19.4 million for the fourth quarter of fiscal 2024
- Non-operating non-cash debt fair value adjustment created net loss of $4.9 million for the quarter, excluding the fair value adjustment, adjusted net income(1) was $16.6 million for the quarter
- Product order backlog was $267.2 million(2) at July 27, 2024 compared to $316.9 million at the end of the fourth quarter of fiscal 2024 and $323.7 million at the end of the first quarter of fiscal 2024 as past periods' overbuilt backlog continues to be worked down through reductions in manufacturing lead times
- Product and service orders were $176.2 million(2), a decrease of 14.4 percent as compared to $205.8 million in fourth quarter fiscal 2024 and an increase of 11.1 percent as compared to $158.6 million in the same period of fiscal 2024
Reece Kurtenbach, Daktronicsʹ Chairman, President and Chief Executive Officer, commented "We are off to a great start to the year against a record prior-year quarter. We built upon our fiscal 2024 accomplishments, focusing on efficient manufacturing and throughput and on-time deliveries for sports installs, especially in our Live Events and High School Parks and Recreation (HSPR) business units. We executed well to deliver year over year order growth, sequential revenue growth, and higher margins to generate returns above our cost of capital. Excluding a change in the fair value of our convertible note relating to our higher stock price, adjusted net income was $16.6 million, resulting in operating cash flow generation of $19.5 million against last year’s difficult comparison.”
Outlook
Kurtenbach added, “These results indicate significant progress during the first quarter along our roadmap of strategic priorities with respect to our digital transformation, product innovation, and penetration of our addressable markets and we are on track to achieve specific milestones in fiscal 2025. In a culmination of a multi-year effort, our information systems teams are preparing for releases to be completed before fiscal year-end of critical technologies to upgrade our service and systems maintenance solutions. These tools modernize our service operating systems and further automate tasks to improve productivity and customer satisfaction. We are also on track to upgrade to new enterprise performance management tools during fiscal Q3 and Q4 to improve and broaden the collection of data for business performance reporting and analysis. Following these back-office improvements, our next goal is to redesign our front-end quoting and sales processes, building in automation, efficiency, and effective customer reach – this is planned to launch across multiple phases, the first releasing early in fiscal 2026. On the control systems front, our Show Control solution is undergoing major advancements to enhance the live entertainment experience and improve workflow efficiencies. These enhancements will empower our customers to deliver dynamic cloud-based and locally stored presentations using cutting-edge scoring and timing software, 3D data visualizations, real-time rendering, and integrated data through sport-specific applications and are slated for release by fiscal year-end."We enter our second fiscal quarter with good momentum, expectations of higher orders in fiscal 2025, and with backlog at $267.2 million driven by strong sequential order flow across our businesses from our Commercial, Transportation, HSPR and International businesses and solid demand in Live Events. We expect seasonality to continue to normalize in fiscal 2025, with sales typically strongest in the first half of the fiscal year and lower in fiscal Q3. For the remainder of this fiscal year, we are investing in a wide-ranging transformation plan designed to cement and accelerate our progress to date and make further advancement in generating shareholder returns above our cost of capital."
First Quarter Results
Orders for the first quarter of fiscal 2025 increased by 11.1 percent from the first quarter of fiscal 2024 driven by rebounding demand in the On-Premise, Spectacular and Out‐of‐Home markets in our Commercial business unit, and solid growth in the High School Parks and Recreation and Transportation business units. These higher orders offset an order decrease in the Live Events and International business units. Variability in orders comparatively is natural in these large project business areas. Global geopolitical events and related macroeconomic trends created uncertainty in the market outside of the U.S. for digital display systems and large-sized projects, causing the decrease in International orders comparatively.Net sales for the first quarter of fiscal 2025 decreased by 2.8 percent as compared to the first quarter of fiscal 2024. The sales decrease was driven by comparatively lower volumes in the Commercial, High School Park and Recreation, and International business units. These lower sales were partially offset by order fulfillments in the Live Events and Transportation business units. Sales during the first quarter fiscal 2024 were atypical as supply chains normalized post pandemic and we reduced pent-up backlog during that period. Net sales increased 4.7 percent sequentially from the fourth quarter of fiscal 2024, as production and deliveries ramped up for sports installs, especially for Live Events and High School Park and Recreation.
Gross profit as a percentage of net sales decreased to 26.4 percent for the first quarter of fiscal 2025 as compared to 30.6 percent a year earlier primarily due to the record first quarter 2024 sales activity. On a sequential basis, gross margin expanded from 25.7 percent in the fourth quarter of fiscal 2024 as a result of volume and mix as well as some price improvement.
Operating expenses increased by 19.6 percent to $37.0 million in the first quarter of fiscal 2025 as compared to $30.9 million for the first quarter of fiscal 2024. Operating expenses reflect investments in staffing to support information technology and digital transformation as well as sales team expansion to support future growth.
The above changes resulted in an operating income percent for the first quarter of fiscal 2025 of 10.0 percent compared to 17.3 percent for the first quarter of fiscal 2024 and 9.0 percent for the fourth quarter of fiscal 2024.
The decrease in interest (expense) income, net for the first quarter of fiscal 2025 compared to the same period one year ago was primarily due to interest income earned on cash balances.
For the three months ended July 27, 2024, the Company recorded a non-cash charge of $21.6 million for the change in fair value of the convertible note payable, which is accounted for under the fair value option.
The effective income tax rate for the first quarter of fiscal 2025 produced an abnormal tax rate primarily due to the impact of the fair value adjustment to expense that is not deductible for tax purposes in proportion to the period's small pre-tax loss. The effective tax rate for the first quarter of fiscal 2024 was 31.7 percent.
Balance Sheet and Cash Flow
Cash, restricted cash and marketable securities totaled $97.2 million at July 27, 2024, and $76.0 million of total current and long-term debt was outstanding as of that date, which includes $38.5 million of face value, $38.1 million of adjustments to fair value, and is net of $0.6 million of debt issuance costs. There were no draw-downs on the asset-based revolving credit facility during the first three months of fiscal 2025 and $38.6 million available to draw at July 27, 2024. In the first three months of fiscal 2025, Daktronics generated $19.5 million of cash from operations and used $5.1 million for purchases of property and equipment. At the end of the fiscal 2025 first quarter, the working capital ratio was 2.2 to 1. Inventory levels dropped 2.2 percent since the end of the 2024 fiscal year on April 27, 2024. Management’s focus remains on managing working capital through expected growth of the company.
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 where related presentation materials will also be posted prior to the conference call. A webcast will 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.
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 2024 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.comLHA Investor Relations
Carolyn Capaccio / Jody Burfening
DAKTIRTeam@lhai.comDaktronics, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)Three Months Ended July 27,
2024July 29,
2023Net sales $ 226,088 $ 232,531 Cost of sales 166,390 161,384 Gross profit 59,698 71,147 Operating expenses: Selling 15,636 12,929 General and administrative 11,723 9,599 Product design and development 9,623 8,403 36,982 30,931 Operating income 22,716 40,216 Nonoperating (expense) income: Interest (expense) income, net (71 ) (881 ) Change in fair value of convertible note (21,590 ) (7,260 ) Other expense and debt issuance costs write-off, net (835 ) (3,979 ) Income before income taxes 220 28,096 Income tax expense 5,166 8,900 Net (loss) income $ (4,946 ) $ 19,196 Weighted average shares outstanding: Basic 46,311 45,645 Diluted 46,311 46,198 Earnings (loss) per share: Basic $ (0.11 ) $ 0.42 Diluted $ (0.11 ) $ 0.42 Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands)
(unaudited)July 27,
2024April 27,
2024ASSETS CURRENT ASSETS: Cash and cash equivalents $ 96,809 $ 81,299 Restricted cash 379 379 Accounts receivable, net 132,021 117,186 Inventories 134,949 138,008 Contract assets 54,129 55,800 Current maturities of long-term receivables 436 298 Prepaid expenses and other current assets 8,579 8,531 Income tax receivables 110 448 Total current assets 427,412 401,949 Property and equipment, net 73,613 71,752 Long-term receivables, less current maturities 119 562 Goodwill 3,197 3,226 Intangibles, net 767 840 Debt issuance costs, net 2,220 2,530 Investment in affiliates and other assets 20,708 21,163 Deferred income taxes 25,850 25,862 TOTAL ASSETS $ 553,886 $ 527,884 Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
(in thousands)
(unaudited)July 27,
2024April 27,
2024LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 1,500 $ 1,500 Accounts payable 67,265 60,757 Contract liabilities 71,782 65,524 Accrued expenses 39,448 43,028 Warranty obligations 16,408 16,540 Income taxes payable 543 4,947 Total current liabilities 196,946 192,296 Long-term warranty obligations 22,467 21,388 Long-term contract liabilities 17,378 16,342 Other long-term obligations 4,270 5,759 Long-term debt, net 74,472 53,164 Deferred income taxes 142 143 Total long-term liabilities 118,729 96,796 SHAREHOLDERS' EQUITY: Preferred Shares, no par value, authorized 50 shares; no shares issued and outstanding — — Common Stock, no par value, authorized 115,000 shares; 48,523 and 48,121 shares issued at July 27, 2024 and April 27, 2024, respectively 69,242 65,525 Additional paid-in capital 52,566 52,046 Retained earnings 133,085 138,031 Treasury Stock, at cost, 1,907 shares at July 27, 2024 and April 27, 2024, respectively (10,285 ) (10,285 ) Accumulated other comprehensive loss (6,397 ) (6,525 ) TOTAL SHAREHOLDERS' EQUITY 238,211 238,792 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 553,886 $ 527,884 Daktronics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)Three Months Ended July 27,
2024July 29,
2023CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income $ (4,946 ) $ 19,196 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization 4,893 4,669 (Gain) loss on sale of property, equipment and other assets (20 ) 11 Share-based compensation 520 557 Equity in loss of affiliates 931 690 Provision for doubtful accounts, net 265 (65 ) Deferred income taxes, net 13 12 Non-cash impairment charges — 442 Change in fair value of convertible note 21,590 7,260 Debt issuance costs write-off — 3,353 Change in operating assets and liabilities (3,765 ) (16,875 ) Net cash provided by operating activities 19,481 19,250 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (5,081 ) (4,547 ) Proceeds from sales of property, equipment and other assets 45 27 Purchases of equity and loans to equity investees (933 ) (1,186 ) Net cash used in investing activities (5,969 ) (5,706 ) CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings on notes payable — 40,000 Payments on notes payable (983 ) (17,750 ) Principal payments on long-term obligations (103 ) (102 ) Debt issuance costs — (5,838 ) Proceeds from exercise of stock options 3,148 46 Net cash provided by financing activities 2,062 16,356 EFFECT OF EXCHANGE RATE CHANGES ON CASH (64 ) (240 ) NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 15,510 29,660 CASH, CASH EQUIVALENTS AND RESTRICTED CASH: Beginning of period 81,678 24,690 End of period $ 97,188 $ 54,350 Daktronics, Inc. and Subsidiaries
Net Sales and Orders by Business Unit
(in thousands)
(unaudited)Three Months Ended (in thousands) July 27, 2024 July 29, 2023 Dollar Change Percent Change Net Sales: Commercial $ 34,199 $ 46,883 $ (12,684 ) (27.1 )% Live Events 108,608 91,999 16,609 18.1 High School Park and Recreation 48,006 56,234 (8,228 ) (14.6 ) Transportation 22,490 21,369 1,121 5.2 International 12,785 16,046 (3,261 ) (20.3 ) $ 226,088 $ 232,531 $ (6,443 ) (2.8 )% Orders: Commercial $ 42,122 $ 32,434 $ 9,688 29.9 % Live Events 50,899 52,203 (1,304 ) (2.5 ) High School Park and Recreation 46,447 35,739 10,708 30.0 Transportation 22,759 18,985 3,774 19.9 International 13,943 19,269 (5,326 ) (27.6 ) $ 176,170 $ 158,630 $ 17,540 11.1 % Reconciliation of Free Cash Flow*
(in thousands)
(unaudited)Three Months Ended July 27,
2024July 29,
2023Net cash provided by operating activities $ 19,481 $ 19,250 Purchases of property and equipment (5,081 ) (4,547 ) Proceeds from sales of property and equipment 45 27 Free cash flow $ 14,445 $ 14,730 *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.
Reconciliation of Adjusted Net Income*
(in thousands)
(unaudited)Three Months Ended July 27,
2024July 29,
2023Net (loss) income $ (4,946 ) $ 19,196 Change in fair value of convertible note 21,590 7,260 Debt issuance costs expensed due to fair value of convertible note, net of taxes — 2,290 Adjusted net income $ 16,644 $ 28,746 *Adjusted net income. We disclose adjusted net income as a non-GAAP financial measurement in order to report our results exclusive of items that are non-recurring or not core to our operating business. We believe presenting this non-GAAP financial measurement provides investors with a consistent way to analyze our performance.
Reconciliation of Long-term Debt
(in thousands)
(unaudited)Long-term debt consists of the following: July 27,
2024April 27,
2024Mortgage $ 13,500 $ 13,875 Convertible note 25,000 25,000 Long-term debt, gross 38,500 38,875 Debt issuance costs, net (668 ) (761 ) Change in fair value of convertible note 38,140 16,550 Current portion (1,500 ) (1,500 ) Long-term debt, net $ 74,472 $ 53,164 
