GlobeNewswire Inc | Aug 26, 2020 07:30AM EDT

August 26, 2020

BROOKINGS, S.D., Aug. 26, 2020 (GLOBE NEWSWIRE) -- Daktronics, Inc. (NASDAQ - DAKT) today reported fiscal 2021 first quarter results. Daktronics reported fiscal 2021 first quarter net sales of $143.6 million, operating income of $9.5 million, and net income of $7.5 million, and earnings per diluted share of $0.17. This compares to net sales of $180.3 million, operating income of $7.6 million, and net income of $7.0 million, or $0.16 per diluted share, for the first quarter of fiscal 2020. Fiscal 2021 first quarter orders were $122.2 million, compared to $187.5 million for the first quarter of fiscal 2020. Product order backlog at the end of the fiscal 2021 first quarter was $192 million, compared to $207 million a year earlier and $212 million at the end of the fourth quarter of fiscal 2021.(1)

Fiscal 2021 is a 52-week year and fiscal 2020 was a 53-week year; therefore, the three months ended August1, 2020 contains operating results for 13 weeks while the three months ended August3, 2019 contained operating results for 14 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 three months of fiscal 2021 was $8.5 million, compared to cash consumed of $18.2 million in operating activities in the first three months of fiscal 2020. During 2020, cash flow from operating activities fluctuated due to a rise in accounts receivable, contract assets, and inventories corresponding with the seasonality of our business. Free cash flow, defined as cash provided by or used in operating activities less net investment in property and equipment, was a positive $5.5 million for the first three months of fiscal 2021, as compared to a negative $24.0 million for the same period of fiscal 2020. Net investment in property and equipment was $3.1 million for the first three months of fiscal 2021, as compared to $5.8 million for the first three months of fiscal 2020. Cash, restricted cash, and marketable securities at the end of the first quarter of fiscal 2021 were $45.9 million, which compares to $33.0 million at the end of the first quarter of fiscal 2020 and $41.6 million at the end of fiscal 2020.

Orders for the first quarter of fiscal 2021 decreased 34.8 percent as compared to the first quarter of fiscal 2020. For comparison, orders paced at $9.4 million per week during the first quarter of fiscal 2021 as compared to $13.4 million during the same time last year. Each business unit's order volume was lower in fiscal 2021 because of the additional week in first quarter of fiscal 2020, timing of large contract orders which cause lumpiness, and due to lower market activity in light of the COVID-19 pandemic.

Net sales decreased by 20.3 percent in the first quarter of fiscal 2021 as compared to the first quarter of fiscal 2020. Net sales decreased in all business units. The change in sales primarily relates to fluctuations in the timing of order bookings, and related conversion to sales. Some shipping and on-site delays continue to be caused by COVID-19 related work restrictions or customer delays in readiness for their applications.

Gross profit as a percentage of net sales was 24.9 percent for the first quarter of fiscal 2021 as compared to 25.2 percent a year earlier. Operating expenses for the first quarter of fiscal 2021 were $26.2 million, compared to $37.9 million for the first quarter of fiscal 2020, or a decrease of 30.8 percent. Approximately $2.7 million of this decrease is due to the additional week during the first quarter of fiscal 2020. The remaining declines are attributed to our focus on managing our expenses to expected order volumes. Overall operating expenses were attributed to lower personnel costs offset by severance costs for reductions in force, lower travel and entertainment activities, and lowered marketing and convention events. Operating income as a percent of sales for the quarter was 6.6 percent as compared to 4.2 percent during the first quarter of fiscal 2020.

The effective tax rate for the first quarter of fiscal 2021 was 16.4 percent compared to an effective tax rate of 12.6 percent for the first quarter of fiscal 2020.

Reece Kurtenbach, chairman, president and chief executive officer stated, "During the first quarter of fiscal 2021, our customers reduced their spend on audio-visual systems as they worked through the economic and business implications of COVID-19. We took corresponding action to reduce our operating expenses to align with expected order and sales declines. These actions along with reduced investments in capital assets and suspension of dividends and share repurchases helped us maintain stability in liquidity and our cash position."

OutlookKurtenbach added, "We believe the audio-visual industry fundamentals will drive long-term growth for our business, but the near-term outlook shows contraction and greater volatility overall. We expect our customers will continue to have disruptions in revenues caused by COVID-19 throughout the current fiscal year. We are focused on promoting our value to new and existing markets, while managing our cost structure to meet the uncertain demand. Even though we face a challenging fiscal 2021, we intend to emerge as a stronger organization."

About DaktronicsDaktronics 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 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.

For more information contact: INVESTOR RELATIONS: Sheila M. Anderson, Chief Financial Officer Tel (605) 692-0200 Investor@daktronics.com

Daktronics, Inc. and SubsidiariesConsolidated Statements of Operations(in thousands, except per share amounts)(unaudited)

Three Months Ended August 1, August 3, 2020 2019 Net sales $ 143,644 $ 180,256 Cost of sales 107,883 134,751 Gross profit 35,761 45,505 Operating expenses: Selling 11,556 18,297 General and administrative 7,124 9,093 Product design and development 7,532 10,500 26,212 37,890 Operating income 9,549 7,615 Nonoperating (expense) income: Interest income 85 269 Interest expense (73 ) (35 )Other (expense) income, net (627 ) 193 Income before income taxes 8,934 8,042 Income tax expense 1,467 1,012 Net income $ 7,467 $ 7,030 Weighted average shares outstanding: Basic 44,654 45,089 Diluted 44,751 45,261 Earnings per share: Basic $ 0.17 $ 0.16 Diluted $ 0.17 $ 0.16 Cash dividends declared per share $ ? $ 0.05

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

August 1, May 2, 2020 2020 (unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 44,609 $ 40,398 Restricted cash 96 14 Marketable securities 1,230 1,230 Accounts receivable, net 88,608 72,577 Inventories 81,435 86,803 Contract assets 33,261 35,467 Current maturities of long-term receivables 3,306 3,519 Prepaid expenses and other current assets 7,595 9,629 Income tax receivables 260 548 Property and equipment and other assets available 1,966 1,817 for saleTotal current assets 262,366 252,002 Property and equipment, net 66,059 67,484 Long-term receivables, less current maturities 739 1,114 Goodwill 8,048 7,743 Intangibles, net 3,070 3,354 Investment in affiliates and other assets 26,526 27,683 Deferred income taxes 13,312 13,271 Total non-current assets 117,754 120,649 TOTAL ASSETS $ 380,120 $ 372,651

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

August 1, May 2, 2020 2020 (unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 48,255 $ 47,834 Contract liabilities 50,159 50,897 Accrued expenses 33,941 36,626 Warranty obligations 10,648 9,764 Income taxes payable 1,107 844 Total current liabilities 144,110 145,965 Long-term warranty obligations 16,412 15,860 Long-term contract liabilities 10,715 10,707 Other long-term obligations 21,469 22,105 Long-term income taxes payable 723 582 Deferred income taxes 469 452 Total long-term liabilities 49,788 49,706 TOTAL LIABILITIES 193,898 195,671 SHAREHOLDERS' EQUITY: Common stock 60,010 60,010 Additional paid-in capital 45,192 44,627 Retained earnings 92,557 85,090 Treasury stock, at cost (7,297 ) (7,470 )Accumulated other comprehensive loss (4,240 ) (5,277 )TOTAL SHAREHOLDERS' EQUITY 186,222 176,980 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 380,120 $ 372,651

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

Three Months Ended August 1, August 3, 2020 2019CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 7,467 $ 7,030 Adjustments to reconcile net income to net cash provided by (used in) operating activities:Depreciation and amortization 4,337 4,383 Loss on sale of property, equipment and other assets (53 ) (26 )Share-based compensation 539 643 Equity in loss of affiliates 529 118 Provision for doubtful accounts 1 5 Deferred income taxes, net (4 ) (40 )Change in operating assets and liabilities (4,271 ) (30,331 )Net cash provided by (used in) operating activities 8,545 (18,218 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (3,155 ) (5,856 )Proceeds from sales of property, equipment and other 86 73 assetsProceeds from sales or maturities of marketable ? 14,510 securitiesPurchases of and loans to equity investment (492 ) (455 )Net cash (used in) provided by investing activities (3,561 ) 8,272 CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on long-term obligations (210 ) (1,221 )Dividends paid ? (2,250 )Payments for common shares repurchased (1,187 )Net cash used in financing activities (210 ) (4,658 ) EFFECT OF EXCHANGE RATE CHANGES ON CASH (481 ) (37 )NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED 4,293 (14,641 )CASH CASH, CASH EQUIVALENTS AND RESTRICTED CASH: Beginning of period 40,412 35,742 End of period $ 44,705 $ 21,101

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

Three Months Ended August 1, August 3, Dollar Change Percent 2020 2019 ChangeNet Sales: Commercial $ 34,506 $ 44,035 $ (9,529 ) (21.6 )%Live Events 51,474 59,306 (7,832 ) (13.2 )High School Park 28,943 30,465 (1,522 ) (5.0 )and RecreationTransportation 14,498 19,018 (4,520 ) (23.8 )International 14,223 27,432 (13,209 ) (48.2 ) $ 143,644 $ 180,256 $ (36,612 ) (20.3 )%Orders: Commercial $ 25,533 $ 38,648 $ (13,115 ) (33.9 )%Live Events 41,860 66,969 (25,109 ) (37.5 )High School Park 28,099 30,552 (2,453 ) (8.0 )and RecreationTransportation 13,089 22,215 (9,126 ) (41.1 )International 13,572 29,079 (15,507 ) (53.3 ) $ 122,153 $ 187,463 $ (65,310 ) (34.8 )%

Reconciliation of Free Cash Flow*(in thousands)(unaudited) Three Months Ended August 1, August 3, 2020 2019Net cash provided by (used in) operating activities $ 8,545 $ (18,218 )Purchases of property and equipment (3,155 ) (5,856 )Proceeds from sales of property and equipment 86 73 Free cash flow $ 5,476 $ (24,001 )

*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.

(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.