SEC Filing | Daktronics, Inc.

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dakt20210910_8k.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 1, 2021

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Daktronics, Inc.

(Exact Name of Registrant as Specified in Charter)

South Dakota	0-23246	46-0306862
(State or Other Jurisdiction of	(Commission	(I.R.S. Employer
Incorporation)	File Number)	Identification No.)

201 Daktronics Drive

Brookings, SD 57006

(Address of Principal Executive Offices, and Zip Code)

(605) 692-0200

(Registrant's Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, No Par Value	DAKT	Nasdaq Global Select Market
Preferred Stock Purchase Rights	DAKT	Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Section 2 - Financial Information

Item 2.02 Results of Operations and Financial Condition.

On December 1, 2021 Daktronics Inc. (the “Registrant”) issued a press release announcing its financial results for the three and six months ended October 30, 2021 and six months ended October 30, 2021 of fiscal 2022. A copy of the press release is filed herewith as Exhibit 99.1 and is incorporated herein by reference.

The information furnished in this report, including the exhibit shall not be incorporated by reference into Daktronics’ filings with the Securities and Exchange Commission under the Securities Act of 1933 and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Securities Act of 1934.

Section 9 – Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits:

(d) Exhibits. The following exhibit is furnished as part of this Report:

99.1 Press Release dated December 1, 2021 issued by Registrant regarding second quarter fiscal 2022 results.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

		DAKTRONICS, INC.

		By: /s/ Sheila M. Anderson
		Sheila M. Anderson, Chief Financial Officer
Date:	December 1, 2021

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release dated December 1, 2021 issued by Registrant regarding second quarter fiscal 2022 results.
104	Cover page Interactive Data File (embedded within the Inline XBRL document)

ex_283129.htm

Exhibit 99.1

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Daktronics, Inc. Announces Second Quarter Fiscal 2022 Results

Brookings, S.D., December 1, 2021 (GLOBE NEWSWIRE) -- Daktronics, Inc. (NASDAQ - DAKT) today reported results for fiscal 2022 second quarter which ended October 30, 2021.

Q2 FY2022 financial highlights:

●	Net sales increased to $164.5 million as compared to Q2 FY2021 net sales of $127.4 million as a result of strong demand and eased pandemic related site restrictions.

●	Operating income decreased to $4.4 million as compared to Q2 FY2021 operating income of $6.7 million due to inflation in materials and freight costs and increased personnel spend compared to prior year.

●	Net income of $2.4 million, and earnings per diluted share of $0.05 compared to net income of $3.4 million, and $0.08 earnings per diluted share, for Q2 FY2021.

●	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 Park and 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 Q2 FY2021.

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 capacity to 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."

Outlook

Kurtenbach added, "We expect dynamic supply chain conditions to persist through next calendar year. As we continue to work through supply chain challenges, inflationary pressures, and evolving pandemic impacts, we expect volatility 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 investing in 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 Date Results

Orders for the second quarter of fiscal 2022 increased 20.7 percent as compared to the second quarter of fiscal 2021. Each business unit's order volume grew through the first half of fiscal 2022 reflecting 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 promotion and out-of-home advertising. High School Park and Recreation continued growth for the year and quarter is driven by the adoption of video displays for sporting and educational use. Transportation order levels increased as project planning and approval activities resumed and moved forward for displays used in intelligent transportation systems and mass 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 last year second quarter and increased on a year to date basis.

Net sales increased by 29.1 percent in the second quarter of fiscal 2022 as compared to the second quarter of fiscal 2021. Net sales for the six months ended Oct. 30, 2021 increased by 14.1 percent as compared to the same period one year ago. Material supply and labor shortages are creating an increase in lead 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 fulfill in future quarters.

Gross profit as a percentage of net sales was 19.6 percent for the second quarter of fiscal 2022 as compared to 26.2 percent a year earlier and 20.8 percent for the six months ended Oct. 30, 2021 as compared to 25.5 percent for 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 because of the competitive nature of large projects.

Operating expenses for the second quarter of fiscal 2022 were $27.9 million, compared to $26.7 million for the second quarter of fiscal 2021 or an increase of 4.5 percent and $54.4 million for the six months ended Oct. 30, 2021 as compared to $52.9 million for the six months ended a year prior. The increases were primarily associated with increases in personnel related expenses.

Operating income as a percent of sales for the quarter was 2.7 percent as compared to an operating income as a percent of sales of 5.2 percent during the second quarter of fiscal 2021 and 3.2 percent for six months ended Oct. 30, 2021 as compared to 6.0 percent for the six months ended a year prior.

The effective tax rate expense for the second quarter of fiscal 2022 was 29.6 percent compared to an effective tax rate expense of 41.1 percent for the second quarter of fiscal 2021. The effective tax rate expense for the six months ended Oct. 30, 2021 was 27.0 percent compared to an effective tax rate expense of 26.2 percent for the six months ended a year prior. The difference in tax rates is primarily 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 securities at the end of the second quarter of fiscal 2022 were $61.6 million, which compares to $74.4 million at the end of the second quarter of fiscal 2021 and $80.4 million 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 $12.3 million for the first six months of fiscal 2022, as compared to a positive free cash flow of $34.5 million for 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 $3.7 million for fiscal 2022, as compared to $5.4 million for 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 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 2021 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.

-- END --

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

Daktronics, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)

	Three Months Ended						Six Months Ended
	October 30,			October 31,			October 30,			October 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 administrative		8,201			7,264			15,772			14,388
Product design and development		7,196			6,737			14,358			14,269
		27,879			26,655			54,407			52,867
Operating income		4,385			6,659			10,045			16,208

Nonoperating (expense) income:
Interest (expense) income, net		(59	)		(18	)		78			(6	)
Other (expense) income, net		(952	)		(837	)		(1,820	)		(1,464	)

Income before income taxes		3,374			5,804			8,303			14,738
Income tax expense		1,000			2,388			2,244			3,855
Net income	$	2,374		$	3,416		$	6,059		$	10,883

Weighted average 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 Subsidiaries

Condensed 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 maturities		6,357		1,635
Goodwill		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 Subsidiaries

Condensed 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 Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Six Months Ended
	October 30,			October 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 assets		760			341
Proceeds from sales or maturities of marketable securities		—			247
Purchases 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 RESTRICTED CASH		(18,798	)		33,041

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
Beginning of period		80,402			40,412
End of period	$	61,604		$	73,453

Daktronics, Inc. and Subsidiaries

Net Sales and Orders by Business Unit

(in thousands)

(unaudited)

	Three Months Ended										Six Months Ended
	October 30,		October 31,		Dollar			Percent			October 30,		October 31,		Dollar			Percent
	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 School Park and Recreation		32,747		27,578		5,169			18.7			60,641		56,521		4,120			7.3
Transportation		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 School Park and Recreation		25,651		20,117		5,534			27.5			71,362		48,216		23,146			48.0
Transportation		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 30,			October 31,
	2021			2020
Net cash (used in) provided by operating activities	$	(8,534	)	$	39,975
Purchases 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.