Daktronics, Inc. Announces Record Fiscal Year and Fourth Quarter 2024 Revenue and Strong Expansion in Operating Profitability and Cash Flow

Daktronics, Inc.

BROOKINGS, S.D., June 26, 2024 (GLOBE NEWSWIRE) -- Daktronics, Inc. (NASDAQ - DAKT), the leading U.S.-based designer and manufacturer of best-in-class dynamic video communication displays and control systems for customers worldwide, today reported results for its fiscal year and fourth quarter 2024 ended on April 27, 2024.

Fiscal Q4 and full year 2024 financial highlights:

• Sales increased to a new record of $215.9 million for the fiscal fourth quarter, a 2.9 percent increase compared to the fiscal 2024 fourth quarter's record revenue; full-year sales were $818.1 million, an 8.5 percent increase from the prior year

• Gross margin for the fourth quarter improved 90 basis points to 25.7 percent from 24.8 percent in the year-earlier period; full year gross profit as a percentage of net sales increased 710 basis points to 27.2 percent as compared to 20.1 percent for fiscal 2023, the highest level since 2009

• Operating income for the fiscal fourth quarter grew 6.4 percent to $19.4 million as compared to the fourth quarter of fiscal 2023 and full-year operating income quadrupled to $87.1 million as compared to fiscal 2023

• Product order backlog was $316.9 million at April 27, 2024 compared to $400.7 million at the end of the fourth quarter of fiscal 2023 as past periods' overbuilt backlog continues to be worked down to market expected manufacturing lead times⁽¹⁾

• New product and service orders for the fourth quarter were $205.8 million, a 14.6 percent increase from $179.5 million in the year-earlier period; full-year product and service orders were $740.2 million⁽¹⁾, an increase of 8.7 percent as compared to $681.0 million in fiscal 2023;
  

Reece Kurtenbach, Daktronics' Chairman, President and Chief Executive Officer, commented, “We both started and finished fiscal 2024 strong, delivering results that demonstrate the impact of our more profitable business model across a range of key financial metrics. Throughout the year, our teams were laser focused on advancing and extending the operating improvements we introduced in fiscal 2023. We managed the fluctuations that come with the project-based and seasonal nature of our business to outperform even last year’s atypically high level of backorder fulfillment. Good order availability and a strong win rate from our demand creation teams across our product lines, combined with improved manufacturing efficiency and our strong on-time delivery to customer sites, resulted in expanded gross and operating profitability and a marked increase in cash flow generation.”

Mr. Kurtenbach added, "Our orders grew 14.6 percent in the fourth quarter and 8.7 percent for the year, and we have entered fiscal 2025 committed to capture growing market demand, leveraging our recognized leadership position and our strong balance sheet.”

Outlook

Kurtenbach added, “In fiscal 2024, we raised the baseline profitability of the business, strengthened our positioning with our customers, and reinforced our competitive differentiation, particularly against foreign competitors. Building upon these strengths, we are focused in fiscal 2025 on strategic priorities which will continue to transform and strengthen our business model to enhance our earnings power. These important drivers for our outlook are to prioritize among our end markets, attack structural cost and to improve our operating model. We are excited to share some early information about these initiatives today."

^{(1) Orders and backlog metrics 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 27, 2024.}

He continued, "Our critical priorities for fiscal 2025 are to execute a broad digital transformation to modernize our service systems for field service automation, to advance our enterprise performance planning capabilities, and to improve and automate quoting and sales processes. All three objectives are aligned with our goal of expanding growth and profitability. In the platform and product realm, where Daktronics has always been a market leader, our priorities for the year are to extend our market leadership and emphasize higher margin product areas that are key to winning more profitable business. As part of this effort, we are pursuing growth opportunities to further penetrate our serviceable addressable market – we recently launched our new Flip-Chip COB (Chip on Board) LED display family, the next step in evolving our narrow-pixel pitch (NPP) product for the fastest growing segment of the market. We are also working to add professional control system and other content-related services to drive monthly recurring revenue and help our customers derive higher return on investment and lower total cost of ownership from their hardware investments. At the same time, to lower overall costs, we are focused on increasing our operational effectiveness by improving our manufacturing utilization, aligning production schedules, and further improving installation methods. Together, all of these advancements are aligned to support our goals of increasing customer satisfaction and improving operational efficiencies to drive future profitable growth.

We believe these initiatives and investments in digital transformation priorities support our long-term growth and operating margin targets. Our teams remain focused on driving penetration in the most profitable segments and reducing the overall cost to deliver. We are committed to reallocating resources and capital investment toward end markets, and revenue opportunities within those markets, that generate returns meaningfully in excess of our cost of capital."

Fourth Quarter and Year to Date Results

Orders for the fourth quarter of fiscal 2024 increased 14.6 percent as compared to the fourth quarter of fiscal 2023 driven by strong demand in the Live Events and Transportation business units and solid growth in the International business unit. Orders for the full fiscal 2024 year increased 8.7 percent as compared to fiscal 2023 for the same reasons.

Net sales for the fourth quarter of fiscal 2024 increased by 2.9 percent as compared to the fourth quarter of fiscal 2023. Net sales for fiscal 2024 increased 8.5 percent as compared to fiscal 2023. Sales growth was driven by the conversion of our strong backlog, improved stabilization of supply chains, and increased manufacturing capacity.

Gross profit as a percentage of net sales increased to 25.7 percent for the fourth quarter of fiscal 2024 as compared to 24.8 percent in the fourth quarter of fiscal 2023. Gross profit as a percentage of net sales increased to 27.2 percent for fiscal 2024 as compared to 20.1 percent in the prior year. The gross profit improvement is due to strategic pricing, greater efficiency of sales volume generation over the cost structure, and a more stable operating environment.

Operating expenses for the fourth quarter of fiscal 2024 were $36.0 million compared to $33.9 million for the fourth quarter of fiscal 2023, an increase of 6.1 percent. Operating expenses were $135.3 million for the full fiscal 2024 year as compared to $130.0 million for the full fiscal 2023 year, an increase of 4.1 percent. Operating expenses for the year increased because of incentive compensation and due to staffing increases. During the third quarter of fiscal year 2023, we recorded a $4.6 million non-cash goodwill impairment charge, and we had no goodwill impairment charge in fiscal 2024.

The above changes resulted in an operating margin of 9.0 percent for the fourth quarter of fiscal 2024 compared to 8.7 percent for the fourth quarter of fiscal 2023 and an operating margin of 10.6 percent for fiscal 2024 as compared to 2.8 percent for fiscal 2023.

The increase in interest (expense) income, net for the fourth quarter of fiscal 2024 compared to the same period one year ago was primarily due to the closing in May 2023 on the financing transactions at higher values and interest rates than were in effect under our previous line of credit during the 2023 fourth quarter.

For the fourth quarter and for the fiscal 2024, the Company recorded a non-cash charge of $5.0 million and $16.6 million, respectively, for the change in fair value of a convertible note payable, which is accounted for under the fair value option. This convertible note was entered into during the first quarter of fiscal 2024 and no type of instrument was outstanding during fiscal 2023.

The Company recorded non-cash impairment charges for investments in affiliates of $5.3 million and $6.4 million in the fourth quarter and fiscal 2024, respectively, as compared to $4.5 million for the fourth quarter and fiscal 2023.

Our effective tax rate for fiscal 2024 was 35.9 percent. The effective income tax rate for fiscal 2024 was primarily impacted due to the fair value adjustment to expense that is not deductible for tax purposes. Additional other items impacting the rate were valuation allowances on equity investments, state taxes, as well as prior year provision to return adjustments reduced in part by tax benefits from permanent tax credits. Our effective tax rate for fiscal 2023 was 48.7 percent. The effective income tax rate for fiscal 2023 was impacted due to valuation allowances on equity investments and on foreign net operating losses in Ireland, goodwill impairment, state taxes, a mix of taxes in foreign countries where the tax rate is higher than in the United States, as well as a prior year provision to return adjustments reduced in part by tax benefits from permanent tax credits.

Balance Sheet and Cash Flow

Cash, restricted cash and marketable securities totaled $81.7 million at April 27, 2024, and $54.7 million of long-term debt was outstanding as of that date. The long-term debt includes the face value of the debt of $38.9 million, the $16.6 million adjustment to fair value, and $(0.8) million of debt issuance costs, net. There were no draw-downs on our asset-based revolving credit facility during fiscal year 2024 and $34.2 million was available to draw at April 27, 2024. In fiscal year 2024, we generated $63.2 million from operations and used $17.0 million for purchases of property and equipment. At the end of the fiscal 2024 fourth quarter, our working capital ratio was 2.1 to 1. Inventory levels dropped 7.7 percent since the end of the 2023 fiscal year on April 29, 2023. Management’s focus remains on managing working capital to fund the expected growth of the company with its current sources of liquidity.

Webcast Information

The company will host a conference call and webcast to discuss its financial results today at 10:00 a.m. (Central Time). This call will be broadcast live at http://investor.daktronics.com and be 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 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 2024 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

LHA Investor Relations
Carolyn Capaccio / Jody Burfening
DAKTIRTeam@lhai.com

Daktronics, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
	Three Months Ended								Year Ended
	April 27, 2024				April 29, 2023				April 27, 2024				April 29, 2023
Net sales	$	215,880			$	209,862			$	818,083			$	754,196
Cost of sales		160,501				157,718				595,640				602,841
Gross profit		55,379				52,144				222,443				151,355
Operating expenses:
Selling		15,114				14,789				56,954				56,655
General and administrative		11,555				10,758				42,632				38,747
Product design and development		9,283				8,334				35,742				29,989
Goodwill impairment		—				—				—				4,576
		35,952				33,881				135,328				129,967
Operating income		19,427				18,263				87,115				21,388
Nonoperating (expense) income:
Interest (expense) income, net		(466	)			(199	)			(3,418	)			(920	)
Change in fair value of convertible note		(4,980	)			—				(16,550	)			—
Other expense and debt issuance costs write-off, net		(6,814	)			(4,876	)			(13,096	)			(7,211	)
Income before income taxes		7,167				13,188				54,051				13,257
Income tax (benefit) expense		4,649				(8,211	)			19,430				6,455
Net income	$	2,518			$	21,399			$	34,621			$	6,802
Weighted average shares outstanding:
Basic		46,257				45,659				45,901				45,404
Diluted		46,872				45,910				46,543				45,521
Earnings per share:
Basic	$	0.05			$	0.47			$	0.75			$	0.15
Diluted	$	0.05			$	0.47			$	0.74			$	0.15

Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands)
(unaudited)
	April 27, 2024			April 29, 2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	81,299		$	23,982
Restricted cash		379			708
Marketable securities		—			534
Accounts receivable, net		117,186			109,979
Inventories		138,008			149,448
Contract assets		55,800			46,789
Current maturities of long-term receivables		298			1,215
Prepaid expenses and other current assets		8,531			9,676
Income tax receivables		448			326
Total current assets		401,949			342,657
Property and equipment, net		71,752			72,147
Long-term receivables, less current maturities		562			264
Goodwill		3,226			3,239
Intangibles, net		840			1,136
Debt issuance costs, net		2,530			3,866
Investment in affiliates and other assets		21,163			27,928
Deferred income taxes		25,862			16,867
TOTAL ASSETS	$	527,884		$	468,104

Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
(in thousands)
(unaudited)
	April 27, 2024				April 29, 2023
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt	$	1,500			$	—
Accounts payable		60,757				67,522
Contract liabilities		65,524				91,549
Accrued expenses		43,028				36,005
Warranty obligations		16,540				12,228
Income taxes payable		4,947				2,859
Total current liabilities		192,296				210,163
Long-term warranty obligations		21,388				20,313
Long-term contract liabilities		16,342				13,096
Other long-term obligations		5,759				5,709
Long-term debt, net		53,164				17,750
Deferred income taxes		143				195
Total long-term liabilities		96,796				57,063
SHAREHOLDERS' EQUITY:
Preferred Shares, no par value, authorized 50 shares; no shares issued and outstanding		—				—
Common stock, no par value, authorized 115,000 shares; 48,121 and 47,396 shares issued as of April 27, 2024 and April 29, 2023, respectively		65,525				63,023
Additional paid-in capital		52,046				50,259
Retained earnings		138,031				103,410
Treasury stock, at cost, 1,907 shares as of April 27, 2024 and April 29, 2023, respectively		(10,285	)			(10,285	)
Accumulated other comprehensive loss		(6,525	)			(5,529	)
TOTAL SHAREHOLDERS' EQUITY		238,792				200,878
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	527,884			$	468,104

Daktronics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
	Year Ended
	April 27, 2024				April 29, 2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	34,621			$	6,802
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		19,291				16,993
Loss (gain) on sale of property, equipment and other assets		44				(691	)
Share-based compensation		2,090				2,027
Equity in loss of affiliates		3,764				3,332
Provision for doubtful accounts, net		373				1,009
Deferred income taxes, net		(9,069	)			(3,633	)
Non-cash impairment charges		6,359				9,049
Change in fair value of convertible note		16,550				—
Debt issuance costs write-off		3,353				—
Change in operating assets and liabilities		(14,135	)			(19,864	)
Net cash provided by operating activities		63,241				15,024
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(16,980	)			(25,385	)
Proceeds from sales of property, equipment and other assets		174				822
Proceeds from sales or maturities of marketable securities		550				3,490
Purchases of equity and loans to equity investees		(5,050	)			(4,315	)
Net cash used in investing activities		(21,306	)			(25,388	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on notes payable		41,172				378,694
Payments on notes payable		(19,434	)			(360,944	)
Debt issuance costs		(7,205	)			(991	)
Borrowings on long-term obligations		—				1,233
Principal payments on long-term obligations		(410	)			(305	)
Proceeds from exercise of stock options		1,302				21
Tax payments related to RSU issuances		(303	)			(140	)
Net cash provided by financing activities		15,122				17,568
EFFECT OF EXCHANGE RATE CHANGES ON CASH		(69	)			(522	)
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		56,988				6,682
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
Beginning of period		24,690				18,008
End of period	$	81,678			$	24,690

Daktronics, Inc. and Subsidiaries
Net Sales and Orders by Business Unit
(in thousands)
(unaudited)
	Three Months Ended													Twelve Months Ended
	April 27, 2024			April 29, 2023			Dollar Change				Percent Change			April 27, 2024			April 29, 2023			Dollar Change				Percent Change
Net Sales:
Commercial	$	38,998		$	43,458		$	(4,460	)		(10.3	)%		$	161,626		$	170,590		$	(8,964	)		(5.3	)%
Live Events		104,906			91,530			13,376			14.6				338,508			284,900			53,608			18.8
High School Park and Recreation		36,409			35,621			788			2.2				170,349			141,748			28,601			20.2
Transportation		24,173			18,509			5,664			30.6				85,390			72,306			13,084			18.1
International		11,394			20,744			(9,350	)		(45.1	)			62,210			84,652			(22,442	)		(26.5	)
	$	215,880		$	209,862		$	6,018			2.9	%		$	818,083		$	754,196		$	63,887			8.5	%
Orders:
Commercial	$	34,084		$	38,902		$	(4,818	)		(12.4	)%		$	135,251		$	158,028		$	(22,777	)		(14.4	)%
Live Events		94,755			65,890			28,865			43.8				321,191			259,653			61,538			23.7
High School Park and Recreation		44,581			47,345			(2,764	)		(5.8	)			148,505			144,919			3,586			2.5
Transportation		20,698			20,939			(241	)		(1.2	)			80,107			66,751			13,356			20.0
International		11,667			6,473			5,194			80.2				55,117			51,603			3,514			6.8
	$	205,785		$	179,549		$	26,236			14.6	%		$	740,171		$	680,954		$	59,217			8.7	%

Reconciliation of Free Cash Flow*
(in thousands)
(unaudited)
	Twelve Months Ended
	April 27, 2024				April 29, 2023
Net cash provided by operating activities	$	63,241			$	15,024
Purchases of property and equipment		(16,980	)			(25,385	)
Proceeds from sales of property and equipment		174				822
Free cash flow	$	46,435			$	(9,539	)

* 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.

Reconciliation of Adjusted Operating Income*
(in thousands)
(unaudited)
	Three Months Ended						Twelve Months Ended
	April 27, 2024			April 29, 2023			April 27, 2024			April 29, 2023
Operating income (GAAP Measure)	$	19,427		$	18,263		$	87,115		$	21,388
Plus goodwill impairment		—			—			—			4,576
Adjusted operating income (non-GAAP measure)	$	19,427		$	18,263		$	87,115		$	25,964

* In evaluating its business, Daktronics considers and uses adjusted operating income as a key measure of its operating performance. The term adjusted operating income is not defined under 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. We define non-GAAP adjusted operating income as operating income plus asset impairments. Management believes non-GAAP adjusted operating income is a useful indicator of our financial performance and our ability to generate cash flows from operations. Our definition of non-GAAP adjusted operating income may not be comparable to similarly titled definitions used by other companies. The table above reconciles non-GAAP adjusted operating income to comparable GAAP financial measures.

Reconciliation of Adjusted Net Income*
(in thousands)
(unaudited)
	Three Months Ended						Twelve Months Ended
	April 27, 2024			April 29, 2023			April 27, 2024			April 29, 2023
Net income	$	2,518		$	21,399		$	34,621		$	6,802
Change in fair value of convertible note		4,980			—			16,550			—
Debt issuance costs expensed due to fair value of convertible note, net of taxes		—			—			2,149			—
Goodwill impairment		—			—			—			4,576
Equity method affiliates impairment		5,268			4,473			6,359			4,473
Adjusted net income	$	12,766		$	25,872		$	59,679		$	15,851

* Adjusted net income. We disclose adjusted net income as a non-GAAP financial measurement in order to report our results exclusive of items that are non-recurring or not core to our operating business. We believe presenting this non-GAAP financial measurements provides investors with a consistent way to analyze our performance.

Reconciliation of Long-term Debt
(in thousands)
(unaudited)
Long-term debt consists of the following:
	April 27, 2024				April 29, 2023
ABL credit facility/prior line of credit	$	—			$	17,750
Mortgage		13,875				—
Convertible note		25,000				—
Long-term debt, gross		38,875				17,750
Debt issuance costs, net		(761	)			—
Change in fair value of convertible note		16,550				—
Current portion		(1,500	)			—
Long-term debt, net	$	53,164			$	17,750