GlobeNewswire Inc | Jun 9, 2021 07:30AM EDT

June 09, 2021

BROOKINGS, S.D., June 09, 2021 (GLOBE NEWSWIRE) -- Daktronics, Inc. (NASDAQ - DAKT) today reported fiscal year and fourth quarter2021 results. Daktronics reported fiscal year2021 net sales of $482.0 million, operating incomeof$17.1 million, net income of $10.9 million, and earnings per diluted share of $0.24. This compares to net sales of $608.9 million, operating lossof $0.2million, and net income of $0.5 million, or $0.01 earnings per diluted share for fiscal 2020. Fiscal2021 orders were $515.9 million compared to $620.8 million for fiscal 2020.

Daktronics reported fiscal2021 fourth quarter net sales of $116.9 million, operating incomeof $1.1million, and net income of $0.3 million, or $0.01earnings per diluted share, compared to net sales of $126.1 million, operating lossof $3.5million, and net loss of $1.1 million, or $0.02loss per diluted sharefor the fourth quarter of fiscal 2020.Fiscal2021 fourth quarter orders were $171.2 million compared to $147.2 million for the fourth quarter of fiscal 2020. Product backlog at the end of the fiscal2021 fourth quarter was $251 million, compared to a backlog of $212 million a year earlier and $195 million at the end of the third quarter of fiscal 2021.

Fiscal 2021 is a 52-week year and fiscal 2020 was a 53-week year. Sales, orders and other results of operations were impacted due to the additional week of operations.

Cash generatedby operating activities for the fiscal year endedMay 1, 2021 was $66.2 million, compared to cash generatedof $10.8 million in 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. Cash provided from operations differed as compared to last year primarily due to a focus on customer collections, decreasing inventory levels, and lowering personnel and operating expense outflows as we managed operations through the uncertain times created by the COVID-19 pandemic. 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 from or used in operating activities less net investment in property and equipment, was a positive$61.5 million for fiscal 2021, as compared to a negativefree cash flow of $7.0 million for fiscal 2020. Net investment in property and equipment was $4.7 million for fiscal 2021, as compared to $17.8 million for fiscal 2020. During fiscal 2021, the share repurchase and dividend programs were suspended with no related cash outflows. Cash, restricted cash, and marketable securities at the end of the fourth quarter of fiscal2021 were $80.4 million, which compares to $41.6 million at the end of the fourth quarter of fiscal 2020. At the end of fiscal year 2021, there were no advances under the loan portion of the line of credit compared to $15 million borrowed at the end of fiscal year 2020.

Fourth Quarter Fiscal2021 Consolidated Financial ResultsOrders for the fourth quarter of fiscal2021 increased16.3percent as compared to the fourth quarter of fiscal 2020. Orders increased in the Commercial, Live Events, High School Park and Recreation, and International business unitsand decreased in the Transportation business unit. Overall, market activity began increasing as COVID-19 restrictions were reduced which improved economic outlooks. Thisresulted in customerscommitting tolarge projectand placing global accountorders. The increase in the Live Events business unit was due to upgrades in universitysports stadiums, primarily for football venues. The Commercial and International business units experiencedan increase in orders mainly in the out-of-home ("OOH") market as advertising spend expanded. The Transportation business unit orders decreased due to a decline in state procurement project activity as compared to last year.

Net sales for the fourth quarter of fiscal2021 decreasedby 7.3percent as compared to the fourth quarter of fiscal 2020. Net sales decreased in Live Events and International business units. Live Events was impacted the most due to lower order activity earlier this fiscal year. Commercial, High School Park and Recreation, and Transportation businesses were relatively flat year over year.

Gross profit as a percentage of net sales was 23.6 percent for the fourth quarter of fiscal2021 as compared to 22.7 percent a year earlier. The increase in gross profit percentage was primarily due to the change in mix of project typesand lower warranty charges. Warranty as a percent of sales improved to 1.3 percent as compared to 1.6 percent last year. Operating expense for the fourth quarter of2021 was $26.4 million, compared to $32.1 million for the fourth quarter of fiscal 2020. This decreaseis attributable to our focus on managing our expenses to expected order volumes through the COVID-19 pandemic. Declines in overall operating expenses were attributable to lower personnel related costs, reduced third-party contract use, and lower travel and entertainment activities. Operating incomeas a percentage of sales was 1.0 percent for the fourth quarter of fiscal2021 as compared to an operating lossas a percentage of sales of 2.7 percent for the fourth quarter of fiscal 2020.

The provision for income taxes during the fourth quarter is calculated based on actual results for the full fiscal year to income or loss, excluding unusual or infrequently occurring discrete items for the reporting period. Our effective tax rate was49.7 percentfor the fourth quarter of fiscal 2021 as comparedto 66.9 percent for the fourth quarter of fiscal2020.

Fiscal2021 Consolidated Financial ResultsOrders for fiscal2021 decreasedby 16.9percent as compared to fiscal 2020. 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. Each business units orders were impacted by the additional week in fiscal 2020.

Net sales for fiscal2021 decreased20.8 percent as compared to fiscal 2020as a result of order booking declines and delayed conversions to sales based on customer project schedules.

Gross profit as a percentage of net sales improved to 25.0 percent for fiscal2021 as compared to 22.8 percent a year earlier. Warranty as a percent of sales was1.4 percentas compared to 1.9 percent last year. Operating expenses for fiscal2021 were $103.5 million as compared to $138.9 million for fiscal 2020. The decreasein total operating expenses was primarily attributable to our focus on managing our expenses to expected order volumes. Declines in overall operating expenses includedlower personnel related costs, reduced third-party contract use, lower travel and entertainment activities, and lowered marketing and convention events offset by an increase in bad debt expense. Operating margin improved to 3.5 percent as a percent of sales for fiscal2021 as compared to a breakeven as percent of sales for fiscal 2020.

The effective tax rate for fiscal2021 was 22.3 percent. The fiscal 2020 tax benefit was the result of permanent tax credits exceeding a valuation allowance.

Reece Kurtenbach, chairman, president and chief executive officer, stated, "As we entered into fiscal 2021, the impact of the COVID-19 pandemic created uncertainty, disruption, and volatility.To protect our liquidity, we reduced ouroperation's spend, capital investments, and returns to investors. While our orders and revenues were muted, we continued to market our solutions to customers and worked to strengthen our operations. These actions allowed us to generate cash, pay back our line of credit, and generate a profit through this uncertain pandemic year. I thank all of our stakeholders for your help in managing through this unique and unprecedented time our employees, customers, suppliers, investors, and communities.

OutlookKurtenbach added, "During the fourth quarter, order and quoting activities have increased creating a strong backlog and positive outlook going into fiscal 2022. We believe the movement of and the safe gathering of people will allow our customers markets to continue to recoverover the coming year.Over the long-term, we believe the fundamentals of the audiovisual industry are strong and are poised for growth.We are actively investing in new technologies and markets to meet that expected demand with world-leading solutions and value. As we work through the pandemic recovery, we remain disciplined in managing our operating expenses and strategic in our capacity additions for the elevated demand.We expect headwinds in material, labor, freight availability and inflationas the world economies recover, which may cause volatility in our revenue cycles and production costs.We look forward to the global recovery and long-term profitable growth."

Webcast InformationThe 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.comand 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, 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 StatementCautionary 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, raw material and component availability, and other risks noted in the company's SEC filings, including its Annual Report on Form 10-K for its2020 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 SubsidiariesConsolidated Statements of Operations(in thousands, except per share amounts) (unaudited)

Three Months Ended Twelve Months Ended May 1, May 2, May 1, May 2, 2021 2020 2021 2020 Net sales $ 116,883 $ 126,108 $ 482,033 $ 608,932 Cost of sales 89,316 97,482 361,450 470,232 Gross profit 27,567 28,626 120,583 138,700 Operating expenses: Selling 12,435 14,876 48,649 65,902 General and administrative 7,203 8,495 27,980 35,193 Product design and 6,793 8,709 26,846 37,772 development 26,431 32,080 103,475 138,867 Operating income (loss) 1,136 (3,454 ) 17,108 (167 ) Nonoperating income (expense):Interest income 27 141 230 805 Interest expense (46 ) (53 ) (295 ) (106 )Other (expense) income, net (606 ) 111 (2,983 ) (541 ) Income (loss) before income 511 (3,255 ) 14,060 (9 )taxesIncome tax (benefit) expense 254 (2,176 ) 3,134 (500 )Net income (loss) $ 257 $ (1,079 ) $ 10,926 $ 491 Weighted average shares outstanding:Basic 45,147 44,685 44,989 45,031 Diluted 45,360 44,685 45,202 45,316 Earnings (loss) per share: Basic $ 0.01 $ (0.02 ) $ 0.24 $ 0.01 Diluted $ 0.01 $ (0.02 ) $ 0.24 $ 0.01 Cash dividends declared per $ ? $ 0.05 $ ? $ 0.20 share

Daktronics, Inc. and SubsidiariesConsolidated Balance Sheets(in thousands) (unaudited)

May 1, May 2, 2021 2020 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 77,590 $ 40,398 Restricted cash 2,812 14 Marketable securities ? 1,230 Accounts receivable, net 67,808 72,577 Inventories 74,356 86,803 Contract assets 32,799 35,467 Current maturities of long-term receivables 1,462 3,519 Prepaid expenses and other current assets 7,445 9,629 Income tax receivables 731 548 Property and equipment and other assets available for ? 1,817 sale Total current assets 265,003 252,002 Property and equipment, net 58,682 67,484 Long-term receivables, less current maturities 1,635 1,114 Goodwill 8,414 7,743 Intangibles, net 2,083 3,354 Investment in affiliates and other assets 27,403 27,683 Deferred income taxes 11,944 13,271 TOTAL ASSETS 375,164 372,651 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable 40,251 47,834 Contract liabilities 64,495 50,897 Accrued expenses 30,672 36,626 Warranty obligations 10,464 9,764 Income taxes payable 738 844 Total current liabilities 146,620 145,965 Long-term warranty obligations 15,496 15,860 Long-term contract liabilities 10,720 10,707 Other long-term obligations 7,816 22,105 Long-term income tax payable 548 582 Deferred income taxes 410 452 Total long-term liabilities 34,990 49,706 SHAREHOLDERS' EQUITY: Common stock 60,575 60,010 Additional paid-in capital 46,595 44,627 Retained earnings 96,016 85,090 Treasury stock, at cost (7,297 ) (7,470 )Accumulated other comprehensive loss (2,335 ) (5,277 )TOTAL SHAREHOLDERS' EQUITY 193,554 176,980 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 375,164 $ 372,651

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

Year Ended May 1, May 2, 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 10,926 $ 491 Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization 17,077 17,718 Gain on sale of property, equipment and other assets (572 ) (35 )Share-based compensation 2,067 2,265 Equity in loss of affiliate 2,370 741 Provision for doubtful accounts, net of recovery 1,299 (99 )Deferred income taxes, net 1,314 (2,183 )Change in operating assets and liabilities 31,731 (8,090 ) Net cash provided by operating activities 66,212 10,808 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (7,891 ) (18,091 )Proceeds from sales of property, equipment and other 3,184 322 assetsProceeds from sales or maturities of marketable 1,230 25,162 securitiesPurchases of and loans to equity investment (6,744 ) (11,664 ) Net cash used in investing activities (10,221 ) (4,271 ) CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings on notes payable ? 15,000 Payments on notes payable (15,000 ) ? Principal payments on long-term obligations (460 ) (2,149 )Dividends paid ? (8,994 )Payments for common shares repurchased ? (5,636 )Tax payments related to RSU issuances (125 ) (199 ) Net cash used in financing activities (15,585 ) (1,978 ) EFFECT OF EXCHANGE RATE CHANGES ON CASH (416 ) 111 NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED 39,990 4,670 CASH CASH, CASH EQUIVALENTS AND RESTRICTED CASH: Beginning of period 40,412 35,742 End of period $ 80,402 $ 40,412

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

Three Months Ended Twelve Months Ended May 1, May 2, May 1, May 2, 2021 2020 Dollar Percent 2021 2020 Dollar Percent Change Change Change ChangeNet sales: Commercial $ 32,353 $ 32,061 $ 292 0.9 % $ 127,300 $ 152,627 $ (25,327 ) (16.6 )%Live Events 30,423 37,395 (6,972 ) (18.6 ) 143,049 196,591 (53,542 ) (27.2 )High SchoolPark and 20,392 20,981 (589 ) (2.8 ) 91,557 96,414 (4,857 ) (5.0 )RecreationTransportation 16,694 16,875 (181 ) (1.1 ) 58,284 70,139 (11,855 ) (16.9 )International 17,021 18,796 (1,775 ) (9.4 ) 61,843 93,161 (31,318 ) (33.6 ) $ 116,883 $ 126,108 $ (9,225 ) (7.3 )% $ 482,033 $ 608,932 $ (126,899 ) (20.8 )%Orders: Commercial $ 45,949 $ 27,123 $ 18,826 69.4 % $ 138,878 $ 146,182 $ (7,304 ) (5.0 )%Live Events 63,558 54,373 9,185 16.9 157,177 203,834 (46,657 ) (22.9 )High SchoolPark and 29,710 26,236 3,474 13.2 94,292 100,088 (5,796 ) (5.8 )RecreationTransportation 11,983 28,063 (16,080 ) (57.3 ) 49,696 83,473 (33,777 ) (40.5 )International 19,977 11,374 8,603 75.6 75,841 87,201 (11,360 ) (13.0 ) $ 171,177 $ 147,169 $ 24,008 16.3 % $ 515,884 $ 620,778 $ (104,894 ) (16.9 )%

Reconciliation of Cash Flow Provided by Operating Activities to Free Cash Flow(in thousands)(unaudited)

Twelve Months Ended May 1, May 2, 2021 2020 Net cash provided by operating activities $ 66,212 $ 10,808 Purchases of property and equipment (7,891 ) (18,091 )Proceeds from sales of property, equipment and 3,184 322 other assetsFree cash flow $ 61,505 $ (6,961 )

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.