Daktronics (DAKT) 28 Aug 192020 Q1 Earnings call transcript

Good day, ladies and gentlemen and welcome to the Daktronics Fiscal Year 2020 First Quarter Earnings Results Conference Call.

As a reminder, this conference call is being recorded today, Wednesday, August 28, 2019 and is available on the company’s website at www.daktronics.com. [Operator Instructions] 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.

Scalar. you, Thank everyone. Good morning, for call. participating quarter you our in conference earnings Thank first I cautioning and we our that review our reflecting would to like plans and disclosure opportunities. and forward-looking to about of our expectations disclosing financial in statements investors business historical be facts, performance will future discussing statements future addition participants and results which control and our forward-looking All to materially. out differ maybe statements involve risks of cause and actual uncertainties, may and conditions; SEC of introduction Such including contracts; market detailed magnitude risks competitive in and in our discussions landscape, management margins; economic and of of policies; changes of and and technologies; include in XX-K growth; other trade global the filings. and products fluctuations of impacts the factors changes important noted XX-Q new and future and orders timing as

and that, and quarter, first With Sales orders impacted this XX.X% areas park in of Fiscal a quarter the me resulting fiscal of recreation and week the XX-week international XXXX flat the week. decrease XX-week a of high to of in and year XXXX some XX-week XXXX operating let the units, in by quarter. is fell quarter. up first last versus fiscal financials business first for expenses within year. The highlight fiscal school the relatively XXXX when was and in Orders extra were are comparisons year’s a a related transportation XXXX XX-week to were Events, Live all additional compared units first comparison. increased quarter areas. Orders commercial and business

to and the was impacted projects Cincinnati arenas in upgrades number wins awarded for The the available. the of orders week projects Gardens, Military additional XXXX. the a for U.S. primarily replacements. time to professional sports, led we fiscal sports, and week of In by using looking professional unit in comparison. X% wins Examples $XX.X either TD these orders includes Each the last million year For colleges Bruins university for comparisons, million and Reds, fans XXXX fiscal name increase home college per to were Events due few. fan were are around orders Celtics increase attract Boston as the paced as customers campus increase business this or $XX.X venues on Live compared same and during or at include to also awarded – Example athletics to players and experience several Academy events. a their We and projects that

were We timing orders than general outside of a and including account-based in U.S., geographies different number customer contracts up to areas. International due variations governmental sports types business and the commercial and large business. unit worked transportation across of

These segments. quarter commercial country. spectacular for by the in the billboards due in orders digital unique were wins increases to timing Vegas orders We in demand. for during Las increase on-premise with across The – an out-of-home We increase global in account-based an was these for types. around and out-of-home their stations build with sports example, casinos, digital for out we networks this and regional quarter and Doha customer As continued in success customers have other all advertising success and complexes in orders malls had Riyadh continued transportation won projects Macau, projects and of market world. installs other the had they had and orders caused and as along

to projects larger orders and at transportation continued to video had and Florida departments last High roadside success our compared as with Colorado flat, we year the While variability decrease of order of continued this Park like for Recreation state signage School transportation in related was we was timing had relatively time. products. and fewer system use

entertainment in – significant out-of-home we reminder, the in contracts transportation sports and venues, large applications projects these customers This of sales market schedules business and niche. and of and needs spectacular in account-based amount amount sports dollar-sized earnings the our facilities, niche orders order, material various quarters. derived for from timing and these awards professional of on portions a college fluctuations As awards, our can sports seasonality contract cause across depends sales and our and the and and the and construction

Sales million year. first were to quarter increased XX.X% $XXX compared million for the of last and XXXX fiscal as $XXX

million Transportation per the sales to last or same correlates time Recreation $XX.X as School revenue the in in in million Commercial X% sales. The compared into quarter, to sales comparison Events, in order comparison. For increase XXXX using backlog and increase week at a year the sales increase international around $XX.X paced Live and timing as during fiscal this and well Net XX-week of business High the converting units. as to business decreased and units orders in Park change levels the

systems one busiest as install Our and outdoor the deliver first quarter quarters for during construction of summer venues the historically is season. other we outdoor sports produce, and

relatively million China. increase quarter. of tariff-related were and components percentage to sales of XX.X% as and U.S. last this for tariffs as on Offsetting was a sales steel being a due Gross year’s was just compared costs. infrastructure volumes expenses year aluminum net at this primarily with fixed time, and over imports from of the Last XX.X% profit introduced approximately to was higher $X.X

compared X.X% than to a lower X.X% slightly as decreased and XXXX’s fiscal sales. X.X% Our of warranty the is rate quarter-over-quarter percentage as to of sales of

as benefit third-party continue development XXXX million fiscal in causing last XX.X% enhanced compared $XX.X first was of compared increased or resellers to a XXXX. to expenses weekly was XX.X% related in for X.X% for invest quarter rate as quarter for first the as solutions effective was and quarter. first an the was this year. effective new our of commissions to development. tax of first the to tax first Selling the to to to we expenses income for increase of X.X% primarily quarter due some Operating due sales the run-rates quarter additional million the sales of to product This The fiscal increase and percentage $XX.X XXXX. Operating for quarter the compared of week

a first discrete XXXX, tax of recorded credits an which caused expected – we quarter caused which tax expense. During the tax exceeding by our was benefit,

We depending this taxable our rate rate tax approximately income. changes and for the in tax but of income on of credits fluctuate to actual can be actual effective mix its XXXX, XX% effective tax to fiscal estimate legislation, taxable levels as compared geographic

end million production which marketable correlating and and contracts of are with receivables $X.X million was capital and at in $XX.X new used cash related the quarter. of from increase for capabilities Our product in to of system the in that operations, position cash for inventory the and repurchases million used We also securities used million and $XX used information supports infrastructure $X.X for We production for progress backlog quarter. and stock and and million the development. investments $X.X dividends of $XX.X million

$XX and the in for right expenditures for out new accounting and of the new with capital Falls, asset assets information facilities sheet million investments lease and this Shanghai, new the related was of the lease and reliability offices liability related a requiring the quarter Dakota was of standard other year at The and a our at to China use leases. approximately leases end beginning along around Sioux the liability local adapted South world. between production and to One relates systems. and products of expect equipment, the the change during which We be and lab $XX year quarter, used primarily to our balance technology point million to in equipment million with we to $XX infrastructure related for will be along

sales Our over product backlog end three was the we $XXX quarters. coming million convert the to two which quarter, to at the to of expect

We depending and course, schedule on second quarter compared project changes. expect could sales change fiscal the up XXXX as to bookings and for slightly last to sales of year of be customer

I’ll few the CEO President Reece call our Kurtenbach now over turn comments. a Chairman, and for to

Good Thank you, Sheila. morning, everyone.

we had a fiscal start to highlighted, As strong XXXX. Sheila

Company serve into the customers, our line first to across the in teams Our line which and worked bottom performance quarter. translated top

as or the the the has outdoor winter customers our We’re is in world construction of year hemisphere many half before and facility uses months. fiscal this also to the our these of times busy the northern time much install historically season enhancements upgrades this of first and sports applications installing at

our over our offerings few customers. we to broadened past result the have As of years, development a and investments increased

displays new can corporate indoor like these being Especially adopted Narrow explore product centers continue new are our control products stores. offices, by through, locations Pixel Pitch that and like sell and into for lines, channels to the and with world. to Solutions we incorporate our integrators new around existing retail customers develop often

for have control system been Our enhanced, control upgrades both also creating new offerings demand purchases. and system

the have successful around We been globe.

the economic many global midst buyers see our concerns We and in other dynamic we Like are a companies, in making while linger. trade interested continue solutions decisions in to to of environment. volatile invest even

China on where import and to most rhetoric United the administration to business. tariffs are we Today do measures States impacted current and by the impose

continue and We competitive situation Daktronics, to at from and evaluate providing we multiple quality, sourcing will to to high our valued to minimize customers continue adjust and methodologies and to monitor price. solutions while production perspectives our impact this high a

expand million However, in for will beyond. predict year. components the our of fiscal than solutions of units. We business in of overall the industry us business in on for We digital remain and tariffs this XXXX growth to current view, could all the do and outlook grow in costs regarding we impose the positive more continue estimate $XX the and our applications

Sport, Specifically on outside and outlook growth areas in opportunities, in share, sales with International, and service Spectacular we Canada. our our U.S. channels our increasing focus on known localized market of and and current expect the Transportation establishment Out-of-homes,

expect Live Looking Events the into the growth some long-term. business, over we

driven business and primarily some business we which is lumpy, variation sized as from larger One competitive, similar cycles a will However, create new contracts, year-to-year. that of can by which replacement be product caveat highly this uses. years, existing previous is predict

orders the demand sized in sustained due for the School expect in High adoption Park and sporting market. video larger of applications We Recreation to

increasing as a cycle with in to see out-of- choices in includes that we ups advertising in replacement strive federal for markets and discretionary home today replacement. application are and of multi-million there can on-premise systems due to downs business the and The unit, U.S. and retail transit and business all Spectacular because their needs the customers promotional choice serve stability continued the segment, of growth future true is in and that Transportation needs our investment timings remain our Commercial which which and in and projects cause trends. strong solutions the our have customers, we new obvious Canada for by and in mass replacement In well facilities. in investment where as of opportunities It transportation applications, U.S. dollar in activity continued expansion and segments natural so the indoor funding, and opportunities

Narrow see indoor introduced recently Pitch Pixel our have units. we business offerings for across market receptive these We products and a

to so And indirect we out channels. continue foster sales and build

Our over our solutions most and to in provider; and range display and each our releasing to industry’s long term, on and of experienced global tailored we application the us of are developing services solutions make capabilities focused innovative support digital different customers the segment.

to second LEDs. up their These positive serving and technologies our XXXX, fiscal we us, fiscal enter a improve levels technologies to interact backlog with During a create XXXX in they with the investments and of and making the We continuing will of customers invest while outlook. and development the desiring open audiences. in markets at micro and are new techniques customers competitive higher advantages connect are the needs to using of strong and way quarter

as new we advancing our serve to Commercial, During manufacturing product focused to technologies plan XXXX, Sports base Government a growing invest orders global in techniques. for on continue in customer We we markets. and development activities increasing fiscal are and

long-term and Finally, our focused managing path carefully we on are profitable of growth. capacity spend on

that, With the questions. line to ask any please operator the would open for I

with question first [Operator Pendy our Instructions] Greg Sidoti. And comes from

line now is open. Your

year. just think to you impact impact you’re in I expecting the million throughout the at – said wanted I a this and tariffs $X.X million were quarter $XX

bit coming tariffs we impact, can of it year. where you step help throughout that? seems given be and Because So the us should $XX timing might the some the year, throughout maybe just ups expecting through there about increase to more you’re it little how a thinking be understand like a – million

– the so There a the it bit also announcement when million. $XX along then some that increase, would a And to create was there an recent that was of that utilize be with we goes increase of there just inventory.

there’s this pop-up in in that tariff our moment So quarters. we’ll future use some inventory at

to you Got kind guidance on be it. then Thanks. expecting up you quarter, moving – think wondering, of And know, you’re just slightly. just revenue next mentioned in for I the

you throughout color, Just you the kind it quarter of strong out trying very a out Events And can of the to understand maybe because helpful take comfortable it attendance the just understand to kind thinking Cincinnati problems was it. but in year, the bit NFL, professional and us the it sports balances environment [indiscernible] I maybe the a few this wise looked people attendance what some little maybe of and Live a you’re years more you’re trying back trends? of give in Reds, bit pointed that just the are little seeing of whether given

in teams venues. be to improving the without spaces to bowl, continue construction, the not customer stadium because We their a the across schedules but do We on next modern enhancements, that that in will in upgrades in with NFL big sports in-venue all to to just or different or believe investment an more time season and teams in can other predict happen a and priorities. other it the that this which personal see season investment board continue by tends today’s are sports investment pro and choose difficult associated to experience, the and

a Great, that’s helpful. lot. Thanks

Alright, next question.

Lisa Our from with next Research. Instructions] comes Springer Singular question [Operator

now line Your is open.

quarter And a you. by way. Thank good congratulations on the

Thank you.

I think recognize you – those little surge us you’re do and for in to International the orders? going you orders more revenues bit give color wanted a around the the how segment could from soon to

been and build we ups the to continuing the over the presence when I as the and but as overall years International grow think far to business business to has the timing of our has will its downs, turn continue sales.

I quarters, the the two out to mostly will relatively term in here. think next in three projects that near finish

be Okay. general, and in installations? replacement sales in would And and new from new what percentage quarter, percentage are customers given your sales just a what of

– of some to then or don’t league it choose parts a that that. consider at you fingertips, team major like replacement and so a the type so say cycles. have that I on will I America, upgrade – our has new. we Lisa, don’t and some thing of college, keep vary a depending know some system really upgrade replacement especially they of could is construction number every lot We from year-to-year if a whole video of that type when almost business our and would minor from North outside in figures almost

be And or college what sports replacement professional the a typical cycle for board? would

A but is XX-year we for most replacement nominal [correlates][ph] cycle what of that. everything not do a rule thumb with of

Okay, thank you.

worries. No

time, to this remarks. I’m further no to I’d closing at call questions, And for Reece any the showing turn like over back

I the like everybody thank to today. attending call would for

a all wish For summer of in holiday. those a look of great I of you day you to the in end I U.S., you to talking forward few three months.

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

have everyone now a great disconnect may You day.