Daktronics, Inc. Announces 2025 Fiscal First Quarter Results

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.com

LHA Investor Relations
Carolyn Capaccio / Jody Burfening
DAKTIRTeam@lhai.com


Daktronics, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
 
 Three Months Ended
 July 27,
2024
 July 29,
2023
Net 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,
2024
 April 27,
2024
ASSETS   
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,
2024
 April 27,
2024
LIABILITIES 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,
2024
 July 29,
2023
CASH 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,
2024
 July 29,
2023
Net 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,
2024
 July 29,
2023
Net (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,
2024
 April 27,
2024
Mortgage$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 

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