Daktronics, Inc. Announces Third Quarter Fiscal 2021 Results

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.

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*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.