DAKT - Earnings call transcript Q3 2018

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Operator

Good day ladies and gentlemen and welcome to the Daktronics Fiscal Year 2018 Third Quarter Earnings Results Conference Call.

As a reminder, this conference is being recorded today, Tuesday, February 20, 2018, and is available on the Company’s website at www.daktronics.com. At this time all participants are in a listen only mode. [Operator Instructions] I would now like to turn the conference over to Ms. Sheila Anderson, Chief Financial Officer for Daktronics, for some introductory remarks. Sheila. ahead, go Please

Sheila Anderson

of SEC of highlight important noted factors, products third of introduction margins, and contracts, for Orders our With as actual future addition XX-Q may quarter me for filings. results morning, our fluctuations earnings that, statements other you like involve conference cautioning of discussing and the the some XX-K that our uncertainties, and Good and which be our magnitude facts, of the risks of in our forward-looking of will future may financials differ and the technology include quarter. year’s and in we future and fiscal to last participating plans third growth, and detailed new as and disclosures Transportation risks to fluctuation in Commercial, be in timing quarter attributable $XXX participants quarter economic of Most International million in and quarter call. statements the investors the everyone. you. and compared to statements All for historical landscape, cause units. financial materially. Live this Such is condition, to $XXX account order timing reflecting large business business of based XXXX projects volatility opportunities. the Thank forward-looking of management of a performance in review business the to control were out and expectations Thank market our I Events, changes and competitive would million. changes the third about let

can project multimillion for and out-of-home be national sports orders advertising multimillion customers, in the Large or for due include of display impact global orders spectacular and colleges dollars in also orders both and As dollar a reminder, space. most fluctuate sales facilities, and Account-based projects the to of business. large size projects. account-based universities, systems professional our net

construction Transportation fiscal quarter seasonally, to million on Live cycles units market fluctuates million needs. third various to compared to in $XXX Park on the the projects last sales last business number increase specifically and is were units School Events the customers’ Recreation based and and on and Sales of baseball business schedules Live Commercial based XXXX sports [ph] High and dependent Events, year. quarter-over-quarter. year, the and increased up the professional was for in facilities. our business Our $XXX as of also for decreased compared as Sales International contributed for spring as sports projects

Gross control margin contributed order during Transportation displays, $X.X to demand the the fiscal compared of or delivery last basis. same due was due compared of Operating units. fiscal to X.X% for relatively also XXXX. in XXXX to sales year positively quarter-over-quarter by higher to Continued mostly sales a the million as increase increased warranty months to business business the sales up sales volumes as the the booked as and a to compared unit percentages impacted additional market resources year-to-date of mix. to product large decreased They focused during ended of and increases sales sales as timings during the on-premise compared and productivity, year, increased $X.X International to market. display of for business lower expenses. Commercial last declined the last warranty due Gross X.X% additional third development Selling XX.X% year, million improved percent on to development period on speeding degree which fiscal was compared to fiscal the from the last quarter increased to solutions to and quarter-over-quarter, customer and our in niche XXXX timing and delivery during and to mostly of cost and year increased third the of niche, expenses timing decreased Recreation partially personnel XX.X% the we XX.X% General compared was customer unit expenses, demand. offset to quarter related expenses. expenses, favorable expenses, to the projects as School spectacular a Total XX.X% second third quarter expenses decreases timing convention during increased of and and administrative last expenses profit quarter related were X.X% of commission nine quarter advertising in to due well entertainment volumes, due increase High flat year. the billboard personnel large an to compared as in demands remained expenses. Park quarter-over-quarter, by in and travel XXXX

income as effective of XX% tax to Tax corporations tax The XX% rate last was act statutory XX%. tax compared Act rate year. overall due tax federal a reduced Most the from XX.X% of to for our XXXX. expense primary effective U.S. to Cuts Jobs the rate factor benefit was impacting and notably, the Our

In of lower one-time estimated foreign tax for of tax addition provisional per on transition undistributed the certain subsidiaries earnings during XXXX. overall rate, share. of remeasurement impact tax the expense our tax for of $X.X effectively quarter our accounted and assets resulted This effect loss fiscal the $X.XX act the estimated million third tax a federal to of the one-time in net deferred

could be our to for We fourth impacted approximately for be new the changes assumptions rate provisional quarter but law. tax any expect effective by this our to XX%

future expect rate years, to than the be effective to XX%. tax ahead less fiscal we Looking

account, of quarter, third for all our income. noted, on fluctuate this third and year for due previously of the reasons of tax changes for depending into can legislation. have primarily in rate sales new because this seasonality the to tax a the the and we impact tax experienced the noted, legislation taxable As mix quarter that we the during effective Taking geographic loss

with monitor industry while our customers cost loss growth. serving leading foresee the generating continue to infrastructure to we focus opportunities undesirable, to we manage solutions profitable While on is and continue and the

quarter. at the XXXX. flow free technology of as of flow timing This increase was Our in XXXX uses compared products to assets tax cost. fluctuation differences $XX.X first new result positive the is million during year. and period cash fiscal cash facilities, positive flow income for the the demonstration our last liabilities, of to in $XX equipment, $XX.X We in end year testing and infrastructure to information included months. payable, cash operating as equipment for the in $X accounts securities manufacturing cash million free Capital of million recorded months of million $XX.X compared million development year and inventory marketable capital research free equipment this reduced and payments, the of same for and primarily position and $X.X expenditures of Primary and million capital increase last nine spending a as for compared fiscal were nine the same

first We We fiscal of the expect to than capital the stock no months expenditures year. be year. during made million for repurchases of less this nine $XX

this Our over projected coming backlog be $XXX million the few is realized Much going quarters. a backlog into is quarter. fourth to of the

the are fourth be we estimating comparable quarter, year. For currently to our to last sales

business. sales Reece call and now customer for changes. on President I’ll could our our to Kurtenbach, schedule project change However, CEO, bookings Chairman, over turn commentary the and pending

Reece Kurtenbach

basis operating you, reflected last overall compared a nine the fiscal in is This to Sheila. Order was of financial performance nature year-to-date $XXX Good first as We for our months a income. not profit for of XXXX bookings increases year. unusual lumpy sales, Thank Daktronics had on $XXX to morning, and million in positive everyone. gross due businesses. million the

installations in professional the throughout were including up into order the on a bookings the Live for business units, unit basis business year-to-date deeper MLB Looking or demand NBA. for new and continued upgraded Events sports

continued factor the using resolution experience facility using our display increasing to the entertainment in marketplace the We operators amounts demand of see to or products. solutions enhance fan from high

year are Orders where orders variability same as during the business on-premise unit niche. for opportunities environment time the to in this upgrades market business this year out-of-home caused last the in last We fewer year-over-year, competitive the compared the well we sports national sales primarily increase increased International inherent due our niche, environment both Commercial fluctuation down increased were as had and major as this new on-premise facilities difference sales. more spectacular year. contributing or projects. were Digital and this affect planning unit timeframe and compared in orders volatility as existing custom of seeing orders the in The by account-based to to projects can period, year-over-year. the This billboard venues. an in to competitive for both a factors and large refurbishment slightly

national account soft The of continuing opportunities to marketplace the months, business and technology our spectacular in applications, of and and the digital While as remained future. advertising orders well. in for first adopt active is the nine business pipeline on-premise we see this through third-party the area on-premise continues

the and for communicate systems, activities for through not new locations strong replacing, refurbishing levels for of the or with customer well on in continues is seen manufacturing as year-over-year. of well and towards to market High as of changes market productivity. existing outside needs visitors. across volatility overall and months segment. mass applications. unit relatively higher systems These year-over-year stabilization and Commercial refurbishing sophisticated systems this the in Transportation demand -- business Park new video funding of systems year basis. due Transportation average continued advertising improved transit our sports trend where nine-month systems a market our exist parents in due locations. to as for But, prices which have have selling timing The continue an higher decreased gross orders addition as indication placement venues have general comparative margin to when believe remained increased Opportunities School the activity more flat sales we Recreation orders students, first in decline share. This gains surface existing nine of the to to trends in We the to

price saw We in increases on margins selected markets. gross and large certain improvement also in projects

In fiscal selling second offset increases by non-digital addition, booked profitability partially higher XXXX. of the expenses these we in Unfortunately, business. warranty our by were improved quarter

and make product fiscal velocity release to XXXX. this We continue increasing continue progress into to expect on

interactive the narrow to latest months, our generation featuring pixel we and in features of our systems Over features. content technology coming control new continue pictures, release

modules continue for will chip-on-board using development technology. We also

this are new investment Rollouts development efforts drive our products the these appropriate control in While solutions of will global to display is expand to we sales and of coming needs forward and to term, believe as meet throughout market solutions the expenses including expected customer a near increase share. percent year.

continued for following success growing reasons. long the business our over in expect term the We

intended sectors continue that end-of-life known We will the throughout expanding of replacement installed across marketplace confident replace We digital of the leading the base. aligned adoption and we continued have systems use drive business from support serve. global natural digital refurbish initial planning repeat proactive to customers a this with to products or satisfied the through be the provide in system, These business project to cycle.

and of to each enhance in broad and needs. continue solutions specific and develop and markets product ups through downs lines comprehensive market This natural for base We allows success for customer segment. our

our needs today long and to to addition and investments performance committed In life, lines, driving we meet for other earning over customers quality, the reliability comprehensive customers’ enhancements continued to term. product in are our

While various and geopolitical, may growth. optimistic long-term our about impact factors future, competitive economic order

to be continue will business lumpy. Our

While to pursue our quarter remains beyond Overall, period, XXXX specific growth. continue for these outlook a a areas profitable fiscal ago. impact we from can similar and fiscal long-term

of as adoption our spectacular segments sport, unit increased business well to for out-of-home, in poised as share and systems International for continues Our focused digital through increase of Transportation. be market growth

the for In digital business federal our replacement mainly see Commercial and growth. continued new continued and orders growth School Park High opportunities U.S. to in activity due businesses, segment. of expansion expect in in growth, systems solutions the the and due we sporting national applications by continued market, in opportunities spectacular billboard has the and indoor video segment, driven for applications, of funding. Transportation investment account-based for Recreation for systems both allowing stability for the in size We large the our Transportation demand unit to opportunities and adoption

maintain order years. levels expect Events sales Live of We to prior

ask smooth, growing the to our believe While the for the to will be operator position questions. solutions always up and generate the long-term would line industry-leading growth. open we us profitable With please I not path market that,

Operator

the with Greg first question now from Sidoti, Instructions] of Our open. your line is [Operator Pendy line comes

Greg Pendy

my taking for Thanks guys. Hi, call.

is two that? that on the top I you it federal Just and sort going higher of little XX%, said state down, tax just be -- questions. the One, will a it of be due to quick think to just bit on will

Sheila Anderson

all-in that be will state. that expect We include rates

R&D get to continue credit we’ll -- also We tax as continue well.

So, all-in. that’s we’re effective overall optimistic about tax our rate

Greg Pendy

expense can at I been the -- I maybe range, hear can number, give Okay. was helped I did where Thank you volumes you. targeted And on gross basis. sales? inefficiencies you your us the you a or I within year-over-year your higher warranty I question, mentioned a X.X, us didn’t least guess, margins, think that see guess, X% which tell has of second

Sheila Anderson

We a we a QX over, as of compared bit X.X% but quarter. have were at the as percent actually of were year, during same sales last in sales a we to amount

Greg Pendy

it’s Did basically I percentage flat year-over-year, a the So, expense, sales. as catch right? warranty that of

Sheila Anderson

of we’re last bit X.X% year. compared to little year-to-date on a sales, just basis, percent X.X% a up As a as

Greg Pendy

you. Thank perfect. Okay,

Operator

to over at Kurtenbach you. time. I’m Thank the [Operator And in I closing queue Instructions] for this like no turn remarks. to back further would conference Reece questions showing

Reece Kurtenbach

call and our you’ve talking in June. you to this Hope to forward attending everybody nice appreciate look morning. had winter, a again We

Operator

you Ladies This thank today’s program. conference. today’s in for and participation your concludes gentlemen,

great disconnect. now Everyone, may You have day. a

Daktronics (DAKT) 20 Feb 182018 Q3 Earnings call transcript