DAKT
$9.61
Daktronics
($.20)
(2.04%)
Earnings Details
2nd Quarter October 2017
Tuesday, November 21, 2017 7:30:20 AM
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Summary

Daktronics (DAKT) Reports 2nd Quarter Earnings

Daktronics (DAKT) reported 2nd Quarter October 2017 earnings of $0.16 per share on revenue of $169.3 million. The consensus earnings estimate was $0.14 per share on revenue of $170.0 million. Revenue fell 0.4% compared to the same quarter a year ago.

Daktronics Inc along with its subsidiaries is engaged in the design, manufacture and sale of electronic display systems and related products for Commercial, Live Events, Schools and Theatres, and Transportation.

Results
Reported Earnings
$0.16
Earnings Whisper
-
Consensus Estimate
$0.14
Reported Revenue
$169.3 Mil
Revenue Estimate
$170.0 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Daktronics, Inc. Announces Second Quarter Fiscal 2018 Results

Daktronics, Inc. (DAKT) today reported fiscal 2018 second quarter net sales of $169.3 million, operating income of $9.4 million, and net income of $7.1 million, or $0.16 per diluted share, compared to net sales of $170.0 million, operating income of $12.7 million, and net income of $9.0 million, or $0.20 per diluted share, for the second quarter of fiscal 2017. Fiscal 2018 second quarter orders were $142.3 million, compared to $116.9 million for the second quarter of fiscal 2017. Backlog at the end of the fiscal 2018 second quarter was $155 million, compared to a backlog of $142 million a year earlier and $184 million at the end of the first quarter of fiscal 2018.

Net sales, operating income, net income, and earnings per share for the six months ended October 28, 2017, were $342.0 million, $21.2 million, $15.6 million, and $0.35 per diluted share, respectively. This compares to $327.1 million, $20.6 million, $14.6 million, and $0.33 per diluted share, respectively, for the same period in fiscal 2017.

Cash provided by operating activities in the first six months of fiscal 2018 was $9.3 million, compared with cash provided by operating activities of $15.0 million in the same period last year. Free cash flow, defined as cash provided from or used in operating activities less net investment in property and equipment, was a positive $3.6 million for the first six months of fiscal 2018, as compared to a positive free cash flow of $10.5 million for the same period of fiscal 2017. Net investment in property and equipment was $5.7 million for the first six months of fiscal 2018, as compared to $4.6 million for the first six months of fiscal 2017. Cash, restricted cash, and marketable securities at the end of the second quarter of fiscal 2018 were $61.5 million, which compares to $52.2 million at the end of the second quarter of fiscal 2017 and $65.6 million at the end of fiscal 2017.

Orders for the second quarter of fiscal 2018 increased 21.7 percent as compared to the second quarter of fiscal 2017. Orders increased in the Commercial, Live Events and International business units and decreased in the High School Park and Recreation and Transportation business units. The timing of orders for large projects varies according to the needs of the customer and contributed to the increase in order volume.

Net sales were similar for the second quarter of fiscal 2018 as compared to the second quarter of fiscal 2017. Net sales increased in the Live Events business unit, decreased in the Commercial and International business units, and remained relatively flat in the High School Park and Recreation and Transportation business units. The increase in Live Events business unit was due to continued demand for upgraded or new solutions throughout venues for professional sports and colleges and universities. The decrease in the Commercial business unit was primarily due to lower order volumes in our on-premise and spectacular niches. The decline in net sales in the International business unit was primarily due to variability of project schedules.

Other financial comparables include, gross profit, as a percentage of net sales, was 25.2 percent for the second quarter of fiscal 2018 as compared to 26.1 percent a year earlier. The decrease in gross profit percentage was primarily due to an increase in warranty charges. Operating expenses for the second quarter of 2018 was $33.2 million, compared to $31.6 million for the second quarter of fiscal 2017. The increase in total operating expenses was primarily attributable to an increase in product development activities. Operating income as a percent of sales for the quarter decreased to 5.6 percent as compared to the second quarter of fiscal 2017 operating income of 7.5 percent.

Reece Kurtenbach, chairman, president and chief executive officer stated, "We capitalized on the strong backlog and pipeline of order opportunities coming into the second quarter of fiscal 2018. The second quarter is traditionally one of our busiest quarters. We were able to work through our backlog with a smooth flow through our factories, which facilitated successful on-site installations and commissioning of systems. We were pleased with our second quarter sales and operational performance; however, profitability levels were impacted by an increase in warranty and maintenance agreement expenses. During the quarter, we chose to provide additional coverage on product defects related to the issues previously discussed in fiscal 2016. As expected, operating margin was impacted due to the planned increase in product development expenses for activities to accelerate the release of new and enhanced customer solutions. Orders increased during the quarter as compared to a year earlier is not unusual due to the lumpy nature of our business. Projects in major league baseball stadiums and the billboard niche contributed to this increase."

Outlook

Kurtenbach added, "We remain optimistic about the continued growth in the video display business over the long-term. The use of digital canvases remains a cost viable method for businesses and organizations to entertain and inform audiences of their messages and brands. To serve these businesses, we invest in developing solutions and services to help our customers achieve their goals while managing the business for long-term profitable growth."

Webcast Information

The company will host a conference call and webcast to discuss its financial results today at 10:00 a.m. (CST). This call will be broadcast live at http://investor.daktronics.com and 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, 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, fluctuations in margins, the introduction of new products and technology, the impact of adverse weather conditions, and other risks noted in the company’s SEC filings, including its Annual Report on Form 10-K for its 2017 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 Anderson, Chief Financial Officer
(605) 692-0200
Investor@daktronics.com
Daktronics, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
Three Months Ended
Six Months Ended
October 28,
October 29,
October 28,
October 29,
2017
2016
2017
2016
Net sales
$
169,309
$
169,992
$
342,037
$
327,138
Cost of goods sold
126,705
125,684
254,787
243,763
Gross profit
42,604
44,308
87,250
83,375
Operating expenses:
Selling expense
15,350
15,891
30,289
31,150
General and administrative
8,868
8,625
17,803
17,408
Product design and development
8,948
7,126
17,995
14,169
33,166
31,642
66,087
62,727
Operating income
9,438
12,666
21,163
20,648
Nonoperating income (expense):
Interest income
151
171
362
376
Interest expense
(47
)
(76
)
(133
)
(118
)
Other (expense) income, net
(87
)
149
58
55
Income before income taxes
9,455
12,910
21,450
20,961
Income tax expense
2,323
3,889
5,889
6,401
Net income
$
7,132
$
9,021
$
15,561
$
14,560
Weighted average shares outstanding:
Basic
44,412
43,988
44,345
44,051
Diluted
44,679
44,098
44,696
44,168
Earnings per share:
Basic
$
0.16
$
0.21
$
0.35
$
0.33
Diluted
$
0.16
$
0.20
$
0.35
$
0.33
Cash dividends declared per share
$
0.07
$
0.07
$
0.14
$
0.17
Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands)
October 28,
April 29,
2017
2017
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
39,699
$
32,623
Restricted cash
27
216
Marketable securities
21,787
32,713
Accounts receivable, net
108,719
78,846
Inventories, net
70,436
66,486
Costs and estimated earnings in excess of billings 31,302
36,403
Current maturities of long-term receivables
1,964
2,274
Prepaid expenses and other assets
7,566
7,553
Income tax receivables
1,725
611
Total current assets
283,225
257,725
Long-term receivables, less current maturities
2,208
2,616
Goodwill
8,190
7,812
Intangibles, net
4,338
4,705
Investment in affiliates and other assets
4,730
4,534
Deferred income taxes
11,287
11,292
30,753
30,959
PROPERTY AND EQUIPMENT:
Land
2,134
2,099
Buildings
66,863
65,935
Machinery and equipment
86,875
84,189
Office furniture and equipment
5,642
5,604
Computer software and hardware
53,316
51,523
Equipment held for rental
287
374
Demonstration equipment
7,143
7,109
Transportation equipment
7,508
7,108
229,768
223,941
Less accumulated depreciation
164,549
157,192
65,219
66,749
TOTAL ASSETS
$
379,197
$
355,433
Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
(in thousands)
October 28,
April 29,
2017
2017
(unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable
$
49,005
$
51,499
Accrued expenses
27,399
25,033
Warranty obligations
15,400
13,578
Billings in excess of costs and estimated earnings 16,561
10,897
Customer deposits (billed or collected)
14,349
14,498
Deferred revenue (billed or collected)
14,046
12,137
Current portion of other long-term obligations
913
1,409
Income taxes payable
1,334
1,544
Total current liabilities
139,007
130,595
Long-term warranty obligations
15,740
14,321
Long-term deferred revenue (billed or collected)
6,835
5,434
Other long-term obligations
2,333
2,848
Long-term income tax payable
3,306
3,113
Deferred income taxes
937
836
Total long-term liabilities
29,151
26,552
TOTAL LIABILITIES
168,158
157,147
SHAREHOLDERS’ EQUITY:
Common stock
53,862
52,530
Additional paid-in capital
39,034
38,004
Retained earnings
123,330
113,967
Treasury stock, at cost
(1,834
)
(1,834
)
Accumulated other comprehensive loss
(3,353
)
(4,381
)
TOTAL SHAREHOLDERS’ EQUITY
211,039
198,286
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
379,197
$
355,433
Daktronics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Six Months Ended
October 28,
October 29,
2017
2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$
15,561
$
14,560
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization
8,902
9,242
Impairment of intangible assets
--
830
(Gain) loss on sale of property, equipment and other assets
(1,221
)
33
Share-based compensation
1,341
1,484
Equity in loss of affiliate
191
--
Provision for doubtful accounts
(21
)
962
Deferred income taxes, net
81
(48
)
Change in operating assets and liabilities
(15,496
)
(12,049
)
Net cash provided by operating activities
9,338
15,014
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment
(7,735
)
(4,625
)
Proceeds from sale of property, equipment and other assets
2,000
72
Purchases of marketable securities
--
(4,583
)
Proceeds from sales or maturities of marketable securities
10,802
11,328
Purchases of equity investment
(607
)
(562
)
Net cash provided by investing activities
4,460
1,630
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable
--
(6
)
Proceeds from exercise of stock options
511
102
Principal payments on long-term obligations
(1,027
)
(904
)
Dividends paid
(6,197
)
(7,482
)
Payments for common shares repurchased
--
(1,825
)
Tax payments related to RSU issuances
(311
)
(213
)
Net cash used in financing activities
(7,024
)
(10,328
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
113
(591
)
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
6,887
5,725
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
Beginning of period
32,839
28,526
End of period
$
39,726
$
34,251
Daktronics, Inc. and Subsidiaries
Net Sales and Orders by Business Unit
(in thousands)
(unaudited)
Three Months Ended
Six Months Ended
October 28,
October 29,
Dollar
Percent
October 28,
October 29,
Dollar
Percent
2017
2016
Change
Change
2017
2016
Change
Change
Net Sales:
Commercial
$
34,377
$
39,923
$
(5,546 )
(13.9 )%
$
67,240
$
76,177
$
(8,937
)
(11.7 )%
Live Events
68,653
55,363
13,290
24.0
146,265
115,996
$
30,269
26.1
%
High School Park and Recreation 29,660
28,707
953
3.3
58,139
56,324
$
1,815
3.2
%
Transportation
16,476
16,101
375
2.3
35,388
30,387
$
5,001
16.5
%
International
20,143
29,898
(9,755
)
(32.6 )
35,005
48,254
$
(13,249 )
(27.5 )%
$
169,309
$
169,992
$
(683
)
(0.4
)%
$
342,037
$
327,138
$
14,899
4.6
%
Orders:
Commercial
$
39,134
$
36,663
$
2,471
6.7
%
$
69,071
$
81,731
$
(12,660 )
(15.5 )%
Live Events
43,730
31,050
12,680
40.8
105,335
83,930
$
21,405
25.5
%
High School Park and Recreation 14,737
15,764
(1,027
)
(6.5
)
46,917
46,877
$
40
0.1
%
Transportation
14,245
14,754
(509
)
(3.4
)
23,514
26,669
$
(3,155
)
(11.8 )%
International
30,414
18,643
11,771
63.1
50,504
52,835
$
(2,331
)
(4.4
)%
$
142,260
$
116,874
$
25,386
21.7
%
$
295,341
$
292,042
$
3,299
1.1
%
Reconciliation of Free Cash Flow
(in thousands)
(unaudited)
Six Months Ended
October 28,
October 29,
2017
2016
Net cash provided by operating activities
$
9,338
$
15,014
Purchases of property and equipment
(7,735
)
(4,625
)
Proceeds from sales of property and equipment
2,000
72
Free cash flow
$
3,603
$
10,461
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.

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