BROOKINGS, S.D., Aug. 31, 2022 (GLOBE NEWSWIRE) — Daktronics, Inc. (NASDAQ – DAKT) today reported results for fiscal 2023 first quarter which ended July 30, 2022.

Q1 FY2023 financial highlights:

• Net sales of $171.9 million, the highest quarterly conversion rate since the pandemic began
• Operating loss of $5.5 million attributable to inflation and extraordinary supply chain challenges
• Orders⁽¹⁾ of $170.2 million driven by increased activity in the Commercial market
• Product order backlog remains at historically high levels of $469.1 million⁽¹⁾

Reece Kurtenbach, chairman, president and chief executive officer stated, “Our markets continue to be active and show growing demand. Order bookings in the first quarter were strong for shopping centers, casinos, and out-of-home advertising display systems in the Commercial business and in multiple sports venues in Live Events. While orders were down in High School Park and Recreation and Transportation as compared to last year’s first quarter, quoting activity remains strong. International markets have seen some softening in demand due to the inflationary environment and geopolitical events. We were pleased we were able to increase our sales output during the first quarter, even though our capacity was constrained due to significant and unusual part shortages, a challenging labor environment, operating disruptions from COVID-19 related absences, and shutdown of our facilities in Shanghai, China due to a government mandated COVID-19 zero tolerance policy.”

Outlook
Kurtenbach added, “We anticipate a dynamic and volatile supply chain and tight labor market to persist throughout this fiscal year. This environment constrains our capacity and efficiency even though customer demand remains strong. To adapt to this situation, we are carefully aligning orders to our capacity to best serve our customers and improve profitability. We are carefully adjusting our production schedules, inventory levels, pricing, and capital investments to increase our capacity and predictability. As we work through the near-term challenges, we continue to strategically invest in new technologies and solutions, resilient supply chains, and serving our existing customers and growing key markets. These strategies position us for long-term growth and increasing value for stakeholders, while prudently managing costs.”

First Quarter
Orders for the first quarter of fiscal 2023 decreased 6.3 percent as compared to the first quarter of fiscal 2022. During fiscal 2022, we recorded a record level of orders due to pent up demand during the COVID-19 pandemic and customers placing orders sooner to secure capacity. Orders for fiscal 2023 first quarter remain strong across segments with some softening in International due to inflationary pressures and geopolitical events and some losses in the market because of pricing increases or long lead times.

Net sales for the first quarter of fiscal 2023 increased by 18.8 percent as compared to the first quarter of fiscal 2022. Sales growth was driven by the increased conversion of backlog to sales even while we experienced multiple material supply chain disruptions, labor shortages, and a shutdown of our facilities in Shanghai, China for a significant portion of the quarter. Supply chain disruptions like these are creating an increase in lead times by extending the timing of converting orders to sales. This coupled with strong demand has contributed to a larger than typical backlog.

Gross profit as a percentage of net sales was 15.0 percent for the first quarter of fiscal 2023 as compared to 22.2 percent a year earlier. This comparative decline in gross profit percentage was impacted by inflationary challenges in materials, freight, and personnel related costs. In addition, extraordinary supply chain disruptions, including the Shanghai factory closure, created intermittent work stoppages and factory inefficiencies, adding additional costs to meet customer commitments.

Operating expenses for the first quarter of fiscal 2023 were $31.3 million compared to $26.5 million for the first quarter of fiscal 2022 or an increase of 18.0 percent. The increases were primarily personnel related expenses, convention and travel related expenses, and approximately $1.0 million for professional fees related to shareholder engagement.

Operating margin for the first quarter of fiscal 2023 was a negative 3.2 percent, compared to a positive 3.9 percent for the first quarter of fiscal 2022.

The effective tax rate for first quarter fiscal 2023 was 15.8 percent compared to 25.2 percent for the first quarter of fiscal 2022.

Cash, restricted cash and marketable securities at the end of fiscal 2023 first quarter were $9.0 million, which compares to $77.2 million at the end of fiscal 2022 first quarter. We also had $24.1 million drawn on the line of credit. The change in cash was created by strategic inventory stocking and growth in accounts receivable, as well as in capital assets to increase manufacturing capacity. Free cash flow, defined as cash provided by or used in operating activities less net investment in property and equipment, was a negative $33.1 million for the first quarter of fiscal 2023, as compared to a negative free cash flow of $2.2 million for the same period in fiscal 2022. Net investment in property and equipment was $10.3 million for the first quarter fiscal 2023, as compared to $1.1 million for the first quarter fiscal 2022.

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 2022 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

^{(1) Orders and backlog are not measures defined by accounting principles generally accepted in the United States of America (“GAAP”), and our methodology for determining orders and backlog may vary from the methodology used by other companies in determining their orders and 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 30, 2022.}

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