Yesterday the digital billboard maker Daktronics delayed the release of financial statements for the quarter ended October 29, 2022 until December 12. Here is the Daktronics 8k released in connection with the delay. Billboard Insider has highlighted two sections in bold.
On December 5, 2022, management of Daktronics, Inc. (the “Company”) determined to delay the release of its scheduled earnings press release and conference call and the filing of the Company’s Quarterly Report on Form 10-Q for the quarter ended October 29, 2022 (the “Form 10-Q”) in order to address the determination that there is substantial doubt about the Company’s ability to continue as a going concern and the discovery of a material weakness relating to the lack of adequate and appropriate financial reporting and disclosure related to such determination and the resultant accounting for income taxes. To permit additional time to properly complete the Company’s analysis, the Company will file a Form 12b-25 to extend the filing deadline for its Form 10-Q to December 13, 2022. In addition, the Company has postponed the release of its second fiscal quarter 2023 financial results and its conference call and webcast previously scheduled for Wednesday, December 7, 2022, at 10:00 a.m. Central Time. The Company will now release its second quarter fiscal 2023 financial results on Monday, December 12, 2022, before the market opens and will host a conference call and webcast for all interested parties at 10:00 AM Central Time that day.
Ongoing supply chain disruptions and inflationary challenges in materials, freight and personnel related costs have and will continue to cause volatility in our cash flow, pricing, order volumes, lead-times, competitiveness, revenue cycles, and production costs. Our ability to fund inventory levels, operations and capital expenditures in the future will be dependent on our ability to generate cash flow from operations in these conditions, to maintain or improve margins, to use funds from our credit facility, and to find other sources of liquidity.
Although supply chain disruptions have started to ease, and we expect our inventory levels to decline, we cannot be certain we will not experience future disruptions or need additional liquidity to fund inventory levels, operations, and capital expenditures. We will need additional liquidity to meet our obligations as they come due in the 12 months following the date of this Form 12b-25, and we cannot be assured that such liquidity will be available or the form of such liquidity, such as equity raises or debt financing. These conditions raise substantial doubt about our ability to continue as a going concern.
In response to these conditions, we are pursuing additional liquidity through various means, including but not limited to obtaining financing secured by a mortgage on our facilities, a sales-leaseback transaction, leasing property and equipment, and continued focus on reducing working capital. Since these plans are not finalized and are subject to market conditions that are not within our control, they cannot be deemed probable. As a result, we have concluded that our plans do not alleviate substantial doubt about our ability to continue as a going concern.
Insiders’ Take: A delay in an earnings release and a “going concern” caution is big news. You can expect to hear more on December 12th when the company releases financial statements and holds it earnings call. Daktronics provides quality hardware and software products to the OOH industry, but out of home accounted for only 26.5% of net sales in their last fiscal year. Daktronics has been making progress in some of their other business sectors including their largest segment, Live Events, which includes many large professional sport stadium installations.
The market was not pleased. Daktronics stock dropped 39% on a day when the S&P 500 fell 0.19%.
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