DAKT - Earnings call transcript Q1 2010

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Operator

Good morning ladies and gentlemen. At this time I would like to welcome everyone to the Daktronics’ First Quarter Fiscal Year 2010 Earnings Results Conference Call (Operator Instructions).

I would now like to turn the call over to Mr. Bill Retterath, Chief Financial Officer for Daktronics, for some introductory remarks. Please go ahead, sir.

Bill Retterath

you. Thank we in everyone, conference first your call. appreciate morning our participation quarter Good make the a comments future intend some We to about questions. we'll it for after open quarter up timeframe for limited which the and

future. you our I'd risks these market could like similar cautioning participants and results our timing and orders in and historical uncertainties, in of in and performance that filings, reflecting our of and noted future concerning our and materially SEC year-end to management events, statements actual contain We to this beliefs investors economic and which that our differ caution as forward-looking cause the statements and statements other magnitude addition facts, first to of offer affect disclosure materially. call which including News involve future the changes conditions, Release risks growth, in may expectations

the as no of information new are of available events made statements circumstances to or update us obligation call. in this statements or occur. revise unanticipated to to Forward-looking they such date reflect context We the as of undertake

highlights With the to that, over some it Jim quarter. our I'd Chief for Officer, turn Morgan, Executive to like on

Jim Morgan

first of season, I reducing we of certainly despite note the to top the Needless ongoing the under Thanks This morning and all the course the positive line might we football keep an all of that of conscientious football a Daktronics effort. efforts quarter Bill, to so bottom open toward beginning thank employees the stadiums news this good displays. everyone. were for line over costs creates The new I is I few declining past have the their top good say season thought is the challenge. is line the realized a able want Daktronics’ to declines.

their XXXX there; and time; since a part playing observe Golden display our existing the Gators upgrade opportunity the first completed we and Florida of in to City of are on an University on Minnesota, of have stadium; stadium of Chiefs the stadium Oklahoma that the St. long that very campus actually are ProStars with the they a displays; projects customer the Kansas Cowboys, Louisiana have installed enjoyed State back University Rams, major stadium recently. are time a Gators we some The ours: Gophers as in the new Those of Tech. of here renovation; larger new Louis these

We the fan displays. the you digital from had give stadium the their having elevate order to bar of fact to will experience is stadium. owners that then those Meadowland indicative and I place the some on the a on large orders. display components the continues importance good for significant new new change enlarge color displays for This of

of the of University the that for Thunder baseball, orders, Ford basketball; Birmingham are Tuscaloosa the recently is at of Oklahoma notable Alabama that Seattle; at Center are for some basketball, NBA orders. those football and from Oklahoma City, Other and in new moving Alabama team, University the home booked of softball;

On for that to internationally significant been months, displays increase the have encouraging. order for that over a million. exceeded in order six theatre eight the a Paris exceeded we we a so thing, $X that last nice fairly a displays mall an noted million international Australia had activity and in for $X for in front One shopping quoting has

Midwest a in displays time. things our We amount are this noted commercial the happen store over Galaxy the the and some convenience few On as for a could as business. positive accounts side, seeing were in selected to national release, in the news chain we upper we hundred vendor

extensions. national existing We some of contract from indications account in positive have our of had terms also customers

in coming what there, is a customers. in but we pick business we don’t months. There steady up next from nice expect area in billboard major business Tier typically is The that call some X the primarily XX

trend extremely pricing of some believe but from disruptive our it times is seeing is not aggressive One most competitors. in short We in term. business at can areas we of sustainable, the it be some are

On might in that the at going other appears their the term. in the competitors affect couple perform, short hand changes internal may it of least market to through a be our commercial some ability that

plays out. So, time tell how some will that of

of for I while. these our couple initiatives; been have will a strategic organizational comment on ongoing a

here redesign manufacturing those process. to been even get we thing product We more regard, We has more see and allows learn lean and we great interesting a think of of can the making really to products we at in is just the A consistent the more as degree about have manufacturing level. predictable accomplish to the product, Overall have better aggressively it less the pursuing standardization in made accomplish, the more area have we that a that that years a us of custom is strides Daktronics this three that work through, allow more than for a our techniques more in time. key at contracts we been process. the high

entire product even our way of much increase customers. to in pretty development display mentioned manufacturing the release, our revamp still standardization choice full level family have As the that news under at we outdoor for flexibility product and while degree offering strategic more this a will

that for so shipping deal start that the a in is design to fourth big new quarter, us. expect We

our will strategic the for revenues, will with us. we the development continue believe this release, term declining in revenue here is really development As we short noted the in because in The product development. invest to increase product in of news percent product

resources. past field is our progress for after we we standard of our have one our made beginning under have umbrella operation. service we in establishing field activities significant better the area the service discussed field Another At operating sales in in consolidated FYXX and operations utilizing procedures

software and that to a service sales addition our support in the phone field and areas area, and then service new center. the includes, implemented desk have processes repair of system in the business after improved help all to We procedures

us continue strategic be to to opportunities for our operations. to areas streamline these So continue

that will call the Bill. With to I over turn

Bill Retterath

to you, of comments of was will on I quarter with quarter, to and competitive still profit as on. alluded the going about spite projects which for the large some few are caused gross they gross quarter. few profit are nicely In than better Jim that our Thank during issues which together Jim. a start margin a came expected increase. There we last talked the

suggests for but headed we will environment, it we performance. in margin maintaining in The right and as be direction We are next stated, that are on currently margin. say on affect hard the the competitive quarter, certainly close that our us contract can in is to Jim still contracts how a to internal the backlog this

are the As going of noted first fourth assuming ’XX fiscal we quarter from It before we by we that to few our control. ’XX quarter both quarters under take have warranty and of and almost improved quarter down for is another start the costs the million. $X things

quarters and can in generally this issue through openers the it finishing football We move was as conclude issue have quarter, we hopefully talked about we had season the and we check. first insignificant we in in that the have prior

labor more to within manufacturing during go. On have consistently our costs still we cost this decreased but control payroll downturn,

time excludes manufacturing the an For down we than quarter additional personnel. which full more quarter, the of reduced we from materials, Total costs of for $X the X% quarter fiscal ’XX. raw million second are have

fixed non-payroll includes We related fair million $XX are costs. cost which base the amount a just below of of approximately

two costs quarters Manufacturing would we than and are move we still know sequential the of revenue declines improvement. go we and higher have we ways as still to showing we keep next a like will in to

development we XXXX little over see those talked bit on Jim expenses, rising XXXX. fiscal costs; operating product On a in

these selling now us. the other see hit likely of sales downturn and is be selling on Given but G&A In down from the the may we to of rate continue of this sales. almost ’XX G&A of when XX% it the quarter areas reductions, fiscal same. X% initiatives should second level and reductions not and like depending exceed will

down the and X%. G&A second selling almost XX% is from quarter

We will keep it on working though.

We move this as believe continue flow on pass we can to we still cash and focus forward. continue on

there, expecting cash $X product of $XX almost at million due included with hoping with We million. all get didn’t dividend $X this to CapEx some that for the about on some shareholders are $X in for is overall which but CapEx to quarter looking and so closed closes we $XX million issues, to looking For maintenance we our building the that approximately at the Also, are CapEx by almost grew development there. quarter. some year. this positions we strategic are range purchases the million

being primarily impact results tax this the effective increased created losses losses. and from for tax smaller rate This jurisdictions in by income quarter. again benefit those of Our foreign the

does effective income is Our that hope internationally down. improve the through and the out rate the goes year

that for will With the the turn questions. up call open over I operator it and to

Operator

Your first Instructions) Steve from question of (Operator Dyer Craig-Hallum. comes

Steve Dyer

the as Jim, give be to opportunities already that the or Would could the of more release can color quarter? sports in revenue some create is the fourth large be up fourth in quarter. that pick any the those you if alluded quarter, nature fourth in great. the on press would backlog a recognized in that Also, there of you

Jim Morgan

large sports some are just There opportunities.

in fourth quarter. could Some in the some baseball revenue world; be

Steve Dyer

lately wins Dallas I your rate arena. Okay thinking, has have time, the and win of your arena I a competitive has less or has of How am the that evolved couple over Mavericks is been? and competitors more and it than guess, Pittsburgh Penguins then announced that

Jim Morgan

slightly is very there pricing what rate setting I there. is are those indicative aggressive been. that mentioned been rate, down down but overall that general dramatically, we win pricing. It of has from win not example just In our are Our some this projects of aggressive is has seeing it some an maybe and

Steve Dyer

Is typical seen the market? it anyone have kind enter of you new players, or the

Jim Morgan

hasn’t other is been get case cases it in some been some time of US to In have effort In is both. in. an one making for a players market the that back is company It here. that

Steve Dyer

that opportunities sort next or pretty three you the but next the look to you of four? is relative over couple do revenue How there grows to expect sort Obviously what now? where tough quarters, last trend backlog? over or quarters scenario for the Okay. to down Is or four about the a of of that three to biddable

Jim Morgan

Well for it predict. to to There the of quarter you lot see economy is the next out it the are of quarters variables. a What get When fourth couple declining. harder we near to is one backlog going all in down. we see the do else is would going going but is the generally world of variables on in the term and what there,

that? to to do something Bill, want add you

Bill Retterath

end the our to going but is timing log, hard is it the of clarify, on third orders quarter what about, is back Yes, third to on these given affect back just of hope Jim fourth quarter the depending talks see could to log. quarter,

There uncertainty You is of see but… rising. there, obviously, could lot that a

Jim Morgan

is true. That

could be Some of third booked in those quarter, the orders possibly. by third quarter late

Bill Retterath

will Yes, to turns have out and we how so the [interposing]. see timing

Jim Morgan

best. out at that science is uncertain far things Predicting an

Steve Dyer

the sports a Then the Sure, to any the $XX+ size us kind it some assume of days in is you on magnitude color of over for okay. Can some of the these? million safe maybe of terms deals, of little these while? that give of of are deal

Jim Morgan

on $XX+. I we any some $XX+ horizon. The in the the think is There see don’t

Steve Dyer

this use color a quarters? be Okay to margin just should couple us to and little with other or gross next then think can going of is about Bill how think should about revenues, on give it a the lower how some did I forward? we decent or level you mean that any

Bill Retterath

uncertain, is sequentially warranty impact million the a quarter, $X think costs fourth $X I approximately from that that is million. big factor: are the the

you is plays there in quarter, on over maintain this that So, in. the improve hope have it levels that to variable. how We and will of that factor so

booking me, slip contract on and had down performance the so contracts going to are that the said will I plan bit. I we that these overall maintaining is got what extent backlog could some say. the little variables. of it do potentially two be here a tough maybe margin to contract we maintain margins, Then could better. that are of into might on to are out would that, high suggests that those it we a while, are great in is little If warranty play It time to this It hard but depends quarter, does running on we contracts now the we variables Those on close have that be margin. which

Steve Dyer

have Okay talked primarily you a and perspective, from you on headcount has us can about color that, any give as before? it attrition and been

Jim Morgan

correct. been that Primarily attrition it has is

Steve Dyer

to as sense any us quarters? how give headcount you has last Can the of couple trended over

Jim Morgan

numbers. will I give just you round

We the are quarter. probably XXX last in down about

Steve Dyer

thanks guys. Okay,

Operator

Jim Ricchiuti question comes & Company. next of Needham from Your

Jim Ricchiuti

projects the us bit year. the you could the more are professional again, part Are market: potential the the seen wondering that of order if large the go pick for comfortable toward from to pull color, back feel forward? any you a give either you on latter I going the university/college comment was sports in in these in activity market? market fairly little or Have customers up

Jim Morgan

or some we The don’t that we do as reason opportunity big a believe that go believe forward. might do seen your out thinking pull back, now, they the chance just is we they there up projects want for even second saying of good are be were maybe question, because as we pipeline, some To don’t will that have there it has they have is is want quite there that the there that pick been maybe an where we cases in our listed to decide the college/universities right have money if perception they it to the involved. it have we seen they

that lot of of still There well. we things that are in some is there forward some that seeing cases. So going a are are as

Jim Ricchiuti

Can some of made and markets? to commercial you think which potentially to with and some this something market is there is I the and you product environment talk and billboard related on customers. Galaxy, Okay terms comments that in shifts on it launch, elaborate the competitive

Jim Morgan

maybe would see changes that some the in It I would be the competitors mentioned Galaxy that in side. Galaxy there; that terms you is of the

Jim Ricchiuti

to business, the level sequentially. governments outlook this look business down business the was orders transportation the the I Okay, to very just lumpy. What of Jim for the little relating stimulus? that surprising they tends be given the transportation funding a came is the like

Jim Morgan

another been How long will happening stimulus come bit that well. some case that niche the a freed are or has competitors there are that believe least pricing be long of but that in of seeing are we we with disruption. but at go to there. has very things because has will that is Transportation low not caused is last activity up Well are new of we seeing and that where we little as some that short-term believe money the made available. been remains seeing some some sustainable, term that how We seen, on out

Jim Ricchiuti

the coming opportunity to the you the a do little sure I revenue the the for and bit you market? all. at it am about or see think you professional As look from market, year potential business upsides you of from market, that do see commercial internet

Jim Morgan

we additional is live everything. to with opportunity at there, some some some things is mentioned again activity may for the the on The up Australia. of in aggregate pick indications customer example. There events. International, that that of want mentioned I question the international. least order in move of for Mall what some for We kind there is with QX potentially quoting are that good seeing

talked Commercial, are as about the but or have things activity sign still there. as was we with there it happening still The is think I resaler there. two are that. year out fast a we not seeing ago, It companies,

high we that alluded the in Our to release. school press market,

had almost and enough in it fairly year. but interestingly of last as quarter quarter was the July we as the strong ended For orders of toward the down, end strong we

is encouraging quarter, comparisons July. a quick So, the that helps. kind whole again, recap see in but the around month don’t pretty it the decent by if came orders in of month story, tell to that was That

Operator

from & Ryan Dick Your LLC. Company, of next comes Dougherty question

Dick Ryan

we rate. catch should How commentary going that of think forward? didn’t the on tax your I Bill,

Bill Retterath

overall overall effective that rate your losses it in you year, the this quarter is it at give would finish on loss we significant will works rate. expect you I rather to a effective algebra there just if China it rate lower which for the the out with dependant: right, up the but for you had some XX%, we is combine when so rate tax color here first some do increases domestically, only

drive on opportunities income and low to China it through So, to dependent is there loss there the other is There rate, over a tax the is number over That there. transactions around lower where quarter in rate so we tax getting of first going what in income is the few China is at the places in are China. switch a had countries too. into like are

as over highest down and hope to the tax any so we line The it time I it is rate get US us. year the go is expect Our a income worldwide, bottom elsewhere helps whole.

Dick Ryan

Okay.

kind redesign redesign of product from development? impact you spending line? product the the on total be be How what On much of will the will the

Jim Morgan

a To of the that, modules so think as tend sure. millions to are installation like number our are of is have far for I cabinetry, of tooling. also a product whole redesigning what it what we as the of things there number and different the that, project, it of phases on all There includes is kind of Part guess and CapEx it we is as like more that things for just accounts to of dollars project phase rate so run development.

of $X product platform $X to think the within that potentially purchase for million CapEx having we we have so goes tooling is online: or once for sure. end I it dollars up millions this

Dick Ryan

Okay, thank you.

Operator

Capital Your from Partners comes last of question LP. David Dialectic Levine

David Levine

regarding segment? how out a the to cancellations to and of to coming speak seen have backlog, pricing backlog pressure function market market so essentially Is in just of Can of larger a individual is if My more conglomerate historical backlog, the gain trying in about that trends? compare second a each you little does lot a bit question share? you that

Jim Morgan

just I of as array in. pricing conglomerate in. of them certainly coming but companies, on companies no corporate I not number and is First It just different as coming It the is different not of describe would conglomerates. is a all, instances a huge it it corporate describe not an

don’t all. haven’t signed if cancellations, some until it backlog payments backlog have of at we we don’t is required down cases, consider We payment. put put backlog sealed. Regarding are In and it we in in that in had much until down it our there order an the and

typically we that have don’t So, situation.

David Levine

Thank you.

Jim Morgan

your appreciate shareholders appreciate and annual our I the to all for certainly time is that here. morning. note us invite in and I meeting area evening Thank I just questions, is anyone this your you that join will we participate this and who

We will event. are an before open forward tours house and we available, looking have that have that to so

you thank and you hope the again, for with that, we With being talk us future. to to in

Operator

and conference Instructions) call for (Operator that We your you participation. conclude thank Ladies the does gentlemen today. for

William R. Retterath	Chief Financial Officer and Treasurer
James B. Morgan	President and Chief Executive Officer
Steve Dyer	Craig-Hallum Capital Group LLC
Jim Ricchiuti	Needham & Company
Dick Ryan	Dougherty & Company, LLC
David Levine	Dialectic Capital Partners LP

Daktronics (DAKT) 19 Jan 382010 Q1 Earnings call transcript