DAKT - Earnings call transcript Q1 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen and welcome to the Daktronics Fiscal Year 2019 First Quarter Earnings Results Conference Call.

As a reminder, this conference is being recorded today, Tuesday, August 21, 2018 and is available on the company’s website at www.daktronics.com. I would now like to turn the conference over to Ms. Sheila Anderson, Chief Financial Officer for Daktronics for some introductory remarks. Please go ahead, Sheila.

Sheila Anderson

Rachel. you, Thank everyone. Good morning, for call. participating quarter you our in conference earnings Thank first I cautioning business we our that review financial expectations would to like our about disclosure forward-looking reflecting to future of and plans discussing and in statements investors historical be facts future will performance statements our opportunities. addition participants and differ of may cause and All involve and risks control forward-looking uncertainties, results our materially. to statements which maybe out actual landscape, including Such timing the as market and and risks factors contracts, noted important include SEC competitive and the discussions products conditions, in and margins, and of introduction XX-K future growth, XX-Q filings. of in changes impacts and policies, changes economic of fluctuations of detailed trade of other our technology new global and management magnitude in me the that, financials. highlight With of some let XXXX first Orders compared last year’s for the million. quarter of to quarter $XXX as $XXX of first million were fiscal quarter timing to and to order and Most attributable the is Recreation the video units. in increases business of variability High account-based in demand fluctuation School of the Park projects large and this in due due orders system Transportation’s investments Department of to and was continued Transportations. intelligent increase by in City transportation State higher Park increased Recreation School to for due High video larger systems. the and demand out-of-home for the was orders comparison Commercial’s increase to year. tape Spectacular and niche in orders with on-premise last in similar results orders across included the Internationally, multiple segments. Sports, out-of-home and segments Spectacular the are and Transportation internationally. largest than of due marketplace timing to year of approximately lower large order last same during the the orders projects time plus $X were in Live and Events orders, one million. cancellation

facilities, not large control. of outside for these the may and derive account-based spectacular fluctuations can difficult contracts repeatable applications large earnings. The their of Awards in and our timing sales to of out-of-home colleges material we niche market in and and predict, professional timing our portion orders, and be are sports are niche. sales and and from venues, amount and cause transportation a our amount contracts projects, a of significant entertainment for reminder, primarily orders business and dollar-sized As

cycles of based to Our customers’ million and $XXX business decreased the the fiscal relatively Events, dependent business seasonally quarter High flat also various Commercial on units, business fluctuates Live in needs. increased construction based the the sales Transportation on sports schedules Sales international Net first in for XXXX were and market last and compared million is quarter-over-quarter. and the remained Recreation unit and School $XXX year. units in business Park on

costs was profit partly quarter than XXXX quarter. expected to for decrease a quarter number fiscal quarter timing the sales of We net relatively we Other of result quarter projects million with expenses primarily increase lower the was first of personnel The XXXX. fixed quarter XXXX to XXXX. similar was compared less lower the of increased to had product sized percent to charges. stadiums a of quarter decreased large quarter-over-quarter. The the XXXX. General as the $XX.X quarter-over-quarter. $X.X for of gross and comparables fiscal earlier. quarter for XXXX to include be over the relatively million $XX.X of international million selling was in expect we projects design as in of increase infrastructure to first sales as at the percentage sales Operating sales warranty percent compared offset of in volume delivery compared total due expenses for operating X% be XXXX to X.X% as XXXX income completed Operating expenses first as expense in of sales for administrative Total our compared gross a of no for attributable the the commissions fiscal expenses percent XXXX profit to financial flat warranty a first year sales fiscal of a related first as which XX.X% XX.X% of first the income expected of as primarily X.X% total of costs and to by sales sales in of development an quarter unit. percentage for – in due to first operating in of was as fiscal and third-party for business NFL a remained the XXXX International X.X% first of

expense of to costs tax XX.X% tax last and market our estimated compared Lower by increase The global was by year. anticipated demand. expense. overall caused is discrete exceed effective Our to estimated expected tax due expense an caused our benefit XX.X% tax trade component was to benefit an credits in discussions

maintain benefits current change our to XX%. expect tax the in the tax during any rate year effective expect assumptions. of normalized pending We We would our

tax As we tax income. in mix our changes the our legislation geographic have depending discussed on can of taxable previously, effective rate fluctuate actual and

$XX.X at of end was million Our the cash position and the marketable securities quarter.

same lower $X.X cash difference operating fiscal flow an investments $XX.X in acquisitions income. receivables million for in and and first was result a fluctuation cash quarter free decrease as negative assets the cash With compared $X.X of and in caused liabilities flow the the contract timing free in for free reported by of and XXXX. million have caused We assets the period of by as net flow and capital used was increase million negative primarily accounts also to the inventory. cash in for

XXXX. less than year million We $XX to fiscal expenditures capital expect for the be

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

the second expect for to We quarter. similar second quarter last be year’s to XXXX of fiscal sales

pending few could Reece now over will Kurtenbach, CEO and the project Chairman, sales for changes. change turn I customer call to and course comments. bookings schedule Of President our a

Reece Kurtenbach

Thank you, Sheila. Good everyone. morning

results financial first will growth demonstrate smooth. to that Our always be our path profitable quarter

and is be lumpy. business continue to Our will

products for at demand Looking macro we continued view are business, our the globally. of the interest our with and pleased

are of industry with portfolio comprehensive is believe solutions. market to leading the positioned we continue growth capture We growing our and this market to

of of applications due adoption school video outlook demand we larger market. units the recreation highlights sporting high business our Some would the for sized sustained park to and growth expect by be and and orders in

During and higher the dollar continued areas Canada. share the Canada due stability market’s increasing U.S. our business transit adoption and digital quote of In for application commercial as promotional continued on needs and home, we advertising well driven believe growth international win investment opportunities the the both segment, account quarter expansion digital Billboard increased and projects. our to the in funding of see in by Spectacular mass sports, segments new replacement business, in transportation our systems systems our investment the video in has U.S. we in solutions for of segment. transportation in indoor out on-premise of transportation activity spectacular mainly and In increasing first and we opportunities of and national replacement of opportunities the growth the for our market U.S. continue continued in business applications facilities. unit, to Federal outside our The as unit, will growth systems, new business focus and

to of order sales events live levels expect years. previous We maintain

in on focused We customers segments. to our all bringing are solutions innovative

in technology continue we applications. growth also and this is globally acquired contributed to refurbishment need. needs. have their commercial pics such a to display driving as last will applications control assets demand is long-term or Other continued offerings. demand grow the narrow this projected choose systems example future installed sports, release Digital digital Systems quarter in continuing to pixel digital we in as expand product features known newer industry well trends For video Also the to to the that drive use serve the other AJT This the of entities our by end-of-life and of governmental expected and support as in replacement technological customers base. our to generations markets LED line system

digital downs capabilities global we ups make success provider base segment. as broad allows well product of and range new Our each targeted release in specific display This solutions experienced markets customer and solutions market comprehensive the as our for most lines natural of enhanced during industry’s to or and needs. continue towards us and

While by in we future, finished stage the in competes shipping growth. economic components of we order produce our uncertainties about world business of Daktronics today’s are long-term these trade both and goods impacted and sourcing the geopolitical, our in products factors various influence to environments and the are the competitive globally. optimistic on and

these we environment as governmental from volatility know, the by global trade has bodies is measures marketplace. actions As trade today’s very The on created including the dynamic. in various contemplated well being as bodies recent U.S. governmental

pricing all that seen in experienced aluminum as ultimate such the X and act intertwined over in our well chains type these products use Daktronics consider of availability intricate the changes For to Supply and difficult the as of are componentry This example, activities the making predict. and governments for different many commodities we on last volatility is being react. as and months. other has markets impact

instance, and For components seeing we well. in volatility pricing we other active use or components are of availability named some and are proposed directly as the while tariff changes, in of

closely in ongoing we watch to responding come It global better that as situation compete Daktronics our months. been in these in to on have business position challenging needed will the this the belief trade over monitoring markets. We the developments time of close through as our minimize and growing we will well a to and keep the continue as short-term coming stage the the impact is a on

see with XXXX, levels pixel So of continue months, systems. last to expansion In investment our control releases as the new year the the lines our we at of for and in similar expect invest of our product results this coming narrow fiscal area. picture we to will development

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

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

Operator

Thank of And from you. question Greg [Operator comes Instructions] Pendy our first Sidoti.

is open. now Your line

Greg Pendy

just you for warranty should My winding out still second, might that rate, tax going taking that that first question is expenses to on I missed forward where Thanks Is at correct? X.X%. something kind you down as apologize And about to with we I the just wanted you dig think we guys. came the I called have my Hey, into questions. XX% tax, sticking a down of and that are then in are that?

Sheila Anderson

rate for So rate, at expecting our the for year, XX%. fiscal we overall be but will are tax the benefit a

Greg Pendy

Okay.

Sheila Anderson

For a expecting the year, benefit. are we

Greg Pendy

Okay.

Reece Kurtenbach

things, unexpected to for reliability. striving that we been we Greg, cost to in down below control can warranty internal the investment vary based have That And get on quality our and the expense. warranty is then our but for and warranty, goal our in continue to try X%

Greg Pendy

just still understand, quarters, But that I couple warranty have outsized down? take seen that’s XXXX the so wind I to related which the of starting primarily it is that issue, was over to the past we expenses

Reece Kurtenbach

we Yes, believe so.

Greg Pendy

very one pass-through was now And on gave Okay. the just the on components then helpful about cost, you of from sourcing pricing it final we what the just of thinking are and you one seeing? be and just input how what environment overall, right kind should the the environment us

Reece Kurtenbach

won’t course prices that would not dramatic be down, but maybe hard The but may increase, see price predicted. continue we can cost once a of to fall we pricing we we drive have as Yes. as to globally environment we predict, believe see

Greg Pendy

lot. a Thanks helpful. that’s Okay,

Reece Kurtenbach

you. Thank

Operator

Thank you.

Our with next comes from question Lisa Research. Singular Springer

open. is line Your

Lisa Springer

order was may order give that Good more during $X that color we correctly, the on you subsequent and was something quarter. morning. If quarters? there a see mentioned a is you you canceled that us turn in that up little I Could if heard million

Reece Kurtenbach

Yes. quarters backed future It’s that we we to for highly see don’t a and that our unusual order have backlog don’t an this the think think for we in out sure. of will we see us will and near-term is of repeat in

Lisa Springer

You see happen this as is year a postponement this to at just all? not going or something that

Reece Kurtenbach

to at all. this happen going not It’s year

Lisa Springer

thank you. Okay,

Operator

the turn and Thank session. gentlemen, to Kurtenbach would question-and-answer you. Reece concludes today’s back remarks. I for to call closing any Ladies this like

Reece Kurtenbach

and participation call. your operator for you, everyone today’s thank Thank in

As September X, a Annual Meeting celebrating part our we evening. are XX for years business that Shareholders on in

in your Thank helpful. filing fill you are Brookings you in to very welcome stop be out will if by. would are if and you we you see everyone yet, if So area, quarter. haven’t you the proxy you could the that And

Operator

for you you thank conference. This gentlemen, may and today’s concludes great day. and disconnect. Ladies participating program now have Everyone in a today’s

Daktronics (DAKT) 21 Aug 182019 Q1 Earnings call transcript