GlobeNewswire Inc | Dec 1, 2021 07:30AM EST

December 01, 2021

BROOKINGS, S.D., Dec. 01, 2021 (GLOBE NEWSWIRE) -- Daktronics, Inc. (NASDAQ - DAKT) today reported results for fiscal2022second quarter which ended October 30, 2021.

Q2FY2022financial highlights:

-- Net sales increased to$164.5million as compared to Q2FY2021 net sales of $127.4 million as a result of strong demand and easedpandemic relatedsite restrictions. -- Operating incomedecreased to $4.4 million as compared to Q2FY2021 operating income of $6.7 million due to inflation in materials and freight costsand increased personnel spend compared to prior year. -- Net income of $2.4 million, and earnings per diluted share of $0.05compared to net income of $3.4 million, and $0.08earnings per diluted share, for Q2FY2021. -- Second quarter orders of $163.7 million, grew 20.7%year-over-year, driven by increased market activity as the pandemic restrictions eased and economic conditions improved, including record bookings in Commercial and High School Parkand Recreation business units. -- Product order backlog of$282 million compared to $201 million a year earlier.(1) The increase was driven by strong order volume offset by muted conversion to sales due to supply chain challenges. -- Balance sheet remains strong. There were no advances under the loan portion of the line of credit compared to $15 million borrowed at the end of Q2FY2021.

Reece Kurtenbach, chairman, president and chief executive officer stated, "Market demand continued to return to pre-pandemic levels and our order bookings grew through the first half of the year. Our operating expenses have increased as we adjust our capacityto support increased demand levels and convert our record high backlog to sales. At the same time, material, labor, and freight availability constraints are creating headwinds in lead times and are causing inflationary cost pressures."

OutlookKurtenbach added, "We expect dynamic supply chain conditionsto persist through next calendar year. As we continue to work through supply chain challenges,inflationary pressures, and evolving pandemic impacts, we expectvolatility in our pricing, order and revenue cycles, and production costs in the near term.Over the long-term, we believe the fundamentals of the audiovisual industry are strong and are poised for continued growth. To position us to benefit from both near term growth and long-term trends, we are actively investingin capacity, in new technologies, and in different markets to make Daktronics and our solutions the preferred choice for new and existing customers."

Second Quarter and Year to DateResultsOrders for thesecond quarter of fiscal 2022increased20.7percent as compared to thesecond quarter of fiscal2021. Each business unit's order volume grew through the first half offiscal 2022reflecting the recovery from the impact of the global pandemic among our customers. Commercial business unit orders increase is due to strong demand from customers using systems for on-premise promotionand out-of-home advertising. High School Park and Recreationcontinued growth for the year and quarteris driven by the adoption of video displays for sporting and educational use. Transportation order levels increased as projectplanning and approval activities resumed and moved forward for displays used in intelligent transportation systems andmass transit venues. The International business unit orders for the quarter were less than last year, same quarter, but improved through the first half of the year. The pandemic recovery in regions around the world has varied. While some countries have eased travel restrictions and we have seen business in those locations increase, other countries still continue to deal with the ongoing challenges of the pandemic.Live Events business unit orders were similar to lastyear second quarter and increased on a year to date basis.

Net sales increasedby 29.1percent in thesecond quarter of fiscal 2022 as compared to thesecond quarter of fiscal2021. Net sales for the six months ended Oct.30, 2021 increasedby 14.1percent as compared to the same period one year ago.Material supply and labor shortages are creating an increaseinlead times and extending the timing of converting some orders to sales in the near-term. This has created a larger than typical backlog, which we expect to fulfillin future quarters.

Gross profit as a percentage of net sales was 19.6percent for thesecond quarter of fiscal 2022 as compared to 26.2percent a year earlier and 20.8percent for the sixmonths ended Oct.30, 2021 as compared to 25.5percentfor the six months ended a year earlier. The decrease in gross profit is primarily related to increased input costs including material, freight, and tariff costs and increased personnel spend compared to prior year during the pandemic. In addition, during the second quarter of fiscal 2022 we had more large project sales which generally have lower gross profit becauseof the competitive nature of large projects.

Operating expenses for thesecond quarter of fiscal2022 were $27.9million, compared to $26.7million for thesecond quarter of fiscal 2021or anincreaseof 4.5percent and $54.4million for the six months ended Oct.30, 2021 as compared to $52.9million for the six months ended a year prior. The increases were primarily associated with increases in personnel related expenses.

Operating incomeas a percent of sales for the quarter was 2.7percent as compared to an operatingincomeas a percent of sales of5.2percent during thesecond quarter of fiscal 2021and 3.2percent for six months ended Oct.30, 2021 as compared to 6.0percent for the six months ended a year prior.

The effective tax rate expense for thesecond quarter of fiscal2022 was 29.6percent compared to an effective tax rate expense of 41.1percent for thesecond quarter of fiscal 2021. The effective tax rate expense for the six months ended Oct. 30, 2021 was 27.0percent compared to an effective tax rate expense of 26.2percent for the six months ended a year prior.The difference in tax rates isprimarily driven by a decrease in estimated tax credits proportionate to an increase in estimated pre-tax earnings in the second quarter of fiscal 2021 compared to the second quarter of fiscal 2022.

Cash, restricted cash, and marketable securitiesat the end of thesecond quarter of fiscal 2022 were $61.6million, which compares to$74.4 million at the end of thesecond quarter of fiscal2021 and $80.4million at the end of fiscal 2021. There were no advances under the loan portion of the line of credit compared to $15 million borrowed at the end of the second quarter of fiscal 2021.Free cash flow, defined as cash provided from or used in operating activities less net investment in property and equipment, was a negative$12.3million for the first six months of fiscal 2022, as compared to a positivefree cash flow of$34.5millionfor the same period in fiscal 2021. Cash provided from or used in operating activities differed as compared to last year due to an increase in accounts receivable and inventory required to support the increased order volume.Net investment in property and equipment was$3.7millionfor fiscal 2022, as compared to$5.4millionfor fiscal 2021.

(1) Backlog is not a measure defined by accounting principles generally accepted in the United States of America ("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 1, 2021.

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 its2021 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 SubsidiariesCondensed Consolidated Statements of Operations(in thousands, except per share amounts)(unaudited)

Three Months Ended Six Months Ended October October October October 30, 31, 30, 31, 2021 2020 2021 2020 Net sales $ 164,477 $ 127,367 $ 309,209 $ 271,011 Cost of sales 132,213 94,053 244,757 201,936 Gross profit 32,264 33,314 64,452 69,075 Operating expenses:Selling 12,482 12,654 24,277 24,210 General and 8,201 7,264 15,772 14,388 administrativeProduct designand 7,196 6,737 14,358 14,269 development 27,879 26,655 54,407 52,867 Operating 4,385 6,659 10,045 16,208 income Nonoperating(expense) income:Interest(expense) (59 ) (18 ) 78 (6 )income, netOther(expense) (952 ) (837 ) (1,820 ) (1,464 )income, net Income before 3,374 5,804 8,303 14,738 income taxesIncome tax 1,000 2,388 2,244 3,855 expenseNet income $ 2,374 $ 3,416 $ 6,059 $ 10,883 Weightedaverage shares outstanding:Basic 45,350 44,893 45,271 44,808 Diluted 45,499 44,977 45,490 44,947 Earnings per share:Basic $ 0.05 $ 0.08 $ 0.13 $ 0.24 Diluted $ 0.05 $ 0.08 $ 0.13 $ 0.24

Daktronics, Inc. and SubsidiariesCondensed Consolidated Balance Sheets(in thousands)

October 30, May 1, 2021 2021 (unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 59,727 $ 77,590 Restricted cash 1,877 2,812 Accounts receivable, net 95,156 67,808 Inventories 94,790 74,356 Contract assets 40,231 32,799 Current maturities of long-term receivables 2,167 1,462 Prepaid expenses and other current assets 10,897 7,445 Income tax receivables 322 731 Total current assets 305,167 265,003 Property and equipment, net 56,084 58,682 Long-term receivables, less current 6,357 1,635 maturitiesGoodwill 8,293 8,414 Intangibles, net 1,706 2,083 Investment in affiliates and other assets 28,259 27,403 Deferred income taxes 11,940 11,944 Total non-current assets 112,639 110,161 TOTAL ASSETS $ 417,806 $ 375,164

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

October 30, May 1, 2021 2021 (unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 65,963 $ 40,251 Contract liabilities 70,158 64,495 Accrued expenses 32,683 30,672 Warranty obligations 10,285 10,464 Income taxes payable 850 738 Total current liabilities 179,939 146,620 Long-term warranty obligations 15,493 15,496 Long-term contract liabilities 10,707 10,720 Other long-term obligations 9,809 7,816 Long-term income taxes payable 682 548 Deferred income taxes 373 410 Total long-term liabilities 37,064 34,990 TOTAL LIABILITIES 217,003 181,610 SHAREHOLDERS' EQUITY: Common stock 61,175 60,575 Additional paid-in capital 47,412 46,595 Retained earnings 102,075 96,016 Treasury stock, at cost (7,101 ) (7,297 )Accumulated other comprehensive loss (2,758 ) (2,335 )TOTAL SHAREHOLDERS' EQUITY 200,803 193,554 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 417,806 $ 375,164



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

Six Months Ended October October 30, 31, 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 6,059 $ 10,883 Adjustments to reconcile net income to net cash (used in) provided by operating activities:Depreciation and amortization 7,789 8,564 Gain on sale of property, equipment and other assets (676 ) (162 )Share-based compensation 1,012 1,047 Equity in loss of investees 1,565 1,145 Provision for doubtful accounts (588 ) 153 Deferred income taxes, net (41 ) 2 Change in operating assets and liabilities (23,654 ) 18,343 Net cash (used in) provided by operating activities (8,534 ) 39,975 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (4,507 ) (5,776 )Proceeds from sales of property, equipment and other 760 341 assetsProceeds from sales or maturities of marketable ? 247 securitiesPurchases of and loans to equity investees (6,129 ) (903 )Net cash used in investing activities (9,876 ) (6,091 ) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on long-term obligations (200 ) (220 )Proceed from exercise of stock options 3 ? Tax payments related to RSU issuances (199 ) (125 )Net cash used in financing activities (396 ) (345 ) EFFECT OF EXCHANGE RATE CHANGES ON CASH 8 (498 )NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND (18,798 ) 33,041 RESTRICTED CASH CASH, CASH EQUIVALENTS AND RESTRICTED CASH: Beginning of period 80,402 40,412 End of period $ 61,604 $ 73,453

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

Three Months Ended Six Months Ended October October Dollar Percent October October Dollar Percent 30, 31, 30, 31, 2021 2020 Change Change 2021 2020 Change Change Net Sales: Commercial $ 34,463 $ 30,356 $ 4,107 13.5 % $ 67,244 $ 64,862 $ 2,382 3.7 %Live Events 59,396 37,822 21,574 57.0 111,783 89,296 22,487 25.2 High SchoolPark and 32,747 27,578 5,169 18.7 60,641 56,521 4,120 7.3 RecreationTransportation 14,053 15,323 (1,270 ) (8.3 ) 26,611 29,821 (3,210 ) (10.8 )International 23,818 16,288 7,530 46.2 42,930 30,511 12,419 40.7 $ 164,477 $ 127,367 $ 37,110 29.1 % $ 309,209 $ 271,011 $ 38,198 14.1 %Orders: Commercial $ 58,358 $ 32,590 $ 25,768 79.1 % $ 96,687 $ 58,123 $ 38,564 66.3 %Live Events 40,501 40,684 (183 ) (0.4 ) 90,187 82,544 7,643 9.3 High SchoolPark and 25,651 20,117 5,534 27.5 71,362 48,216 23,146 48.0 RecreationTransportation 14,699 11,633 3,066 26.4 36,044 24,722 11,322 45.8 International 24,498 30,642 (6,144 ) (20.1 ) 51,173 44,214 6,959 15.7 $ 163,707 $ 135,666 $ 28,041 20.7 % $ 345,453 $ 257,819 $ 87,634 34.0 %

Reconciliation of Free Cash Flow*(in thousands)(unaudited)

Six Months Ended October October 30, 31, 2021 2020 Net cash (used in) provided by operating $ (8,534 ) $ 39,975 activitiesPurchases of property and equipment (4,507 ) (5,776 )Proceeds from sales of property and equipment 760 341 Free cash flow $ (12,281 ) $ 34,540

*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.