Daktronics, Inc. Announces Third Quarter Fiscal 2018 Results

BROOKINGS, S.D., Feb. 20, 2018 (GLOBE NEWSWIRE) -- Daktronics, Inc. (NASDAQ:DAKT) today reported fiscal 2018 third quarter net sales of $130.3 million, operating loss of $3.3 million, and net loss of $6.2 million, or $0.14 per diluted share, compared to net sales of $115.7 million, operating loss of $6.9 million, and net loss of $5.1 million, or $0.12 per diluted share, for the third quarter of fiscal 2017. Fiscal 2018 third quarter orders were $126.2 million, compared to $143.3 million for the third quarter of fiscal 2017. Backlog at the end of the fiscal 2018 third quarter was $151 million, compared to a backlog of $170 million a year earlier and $155 million at the end of the second quarter of fiscal 2018.⁽¹⁾

^{(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 April 29, 2017.}

In December 2017, the U.S. enacted the Tax Cuts and Jobs Act that provided significant changes to the U.S. tax code. As a result, we have recorded a provisional reduction to our net deferred tax asset and impacts of deemed repatriation of foreign earnings of $4.3 million. This resulted in a corresponding increase to income tax expense and an impact to earnings per share of approximately $0.10 for the quarter ended January 27, 2018. We have accounted for the impacts of the Act to the extent a reasonable estimate could be made and will continue to refine our estimates throughout the measurement period or until the accounting is complete. We expect our effective tax rate for the fourth quarter to be approximately 30% and looking ahead to fiscal 2019, we estimate an effective tax rate of approximately 21%.

Net sales, operating income, net income, and earnings per share for the nine months ended January 27, 2018, were $472.4 million, $17.8 million, $9.4 million, and $0.21 per diluted share, respectively. This compares to $442.9 million, $13.7 million, $9.4 million, and $0.21 per diluted share, respectively, for the same period in fiscal 2017.

Cash provided by operating activities in the first nine months of fiscal 2018 was $27.0 million, compared with cash provided by operating activities of $45.4 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 $18.2 million for the first nine months of fiscal 2018, as compared to a positive free cash flow of $38.8 million for the same period of fiscal 2017. Net investment in property and equipment was $8.8 million for the first nine months of fiscal 2018, as compared to $6.5 million for the first nine months of fiscal 2017. Cash, restricted cash, and marketable securities at the end of the third quarter of fiscal 2018 were $73.0 million, which compares to $76.6 million at the end of the third quarter of fiscal 2017 and $65.6 million at the end of fiscal 2017.

Orders for the third quarter of fiscal 2018 decreased 12 percent as compared to the third quarter of fiscal 2017. Orders increased in the International business unit and decreased in the Commercial, Live Events, 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 decrease in order volume.

Net sales increased by 12.6 percent in the third quarter of fiscal 2018 as compared to the third quarter of fiscal 2017. Net sales increased in the Live Events, Transportation, and International business units, decreased in the High School Park and Recreation business unit, and remained relatively flat in the Commercial business unit. The increase in Live Events business unit was primarily impacted by projects for professional and spring baseball facilities renovation and construction project timeliness. The increase in the Transportation business unit was primarily due to higher delivery needs from state transportation authorities during the quarter this year as compared to last year. The increase in net sales in the International business unit was due to increased Out-of-Home market demand and timing of projects. The decrease in the High School Park and Recreation business unit was primarily due to the lower mix of large video project sales as compared to the same period last year.

Gross profit, as a percentage of net sales, was 21.9 percent for the third quarter of fiscal 2018 as compared to 20.1 percent a year earlier. The increase in gross profit percentage was primarily due to higher sales volumes and improved productivity. Operating expenses for the third quarter of 2018 were $31.9 million, compared to $30.2 million for the third quarter of fiscal 2017. The increase in total operating expenses was primarily attributable to an increase in product development activities. Operating loss as a percent of sales for the quarter decreased to 2.6 percent as compared to the third quarter of fiscal 2017 operating loss of 6.0 percent.

Reece Kurtenbach, chairman, president and chief executive officer stated, “We are having a successful year through the third quarter. Our sales, gross profit, and operating income have all increased year over year. The third quarter is historically lighter for sales and profits due to the seasonality of our sports business, construction cycles, and the decrease in production days due to holidays. We were able to capitalize on our backlog and other order opportunities which is reflected in our increase in sales, and gross profit; however, we experienced an operating loss for the quarter. Operating expenses continued to be impacted by the planned increase in product development expenses for activities to accelerate the release of new and enhanced customer solutions. Orders decreasing during the quarter as compared to a year earlier is not unusual due to the lumpy nature of our business.”

Outlook
Kurtenbach added, “We remain optimistic about the continued growth in the video display business over the long-term. The demand for digital canvases remains strong as a desirable method for businesses and organizations to entertain and inform audiences of their messages and brands. To serve these businesses, we continue to invest in developing a robust pipeline of innovative new products and technologies.”

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.