Daktronics (DAKT) 10 Jun 202020 Q4 Earnings call transcript

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

As a reminder, this conference is being recorded today, Wednesday, June 10th, 2020 and is available on the company's website at www.daktronics.com. After the speakers' presentation, there will be a question-and-answer session. [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

and COVID-XX Good resulting economic global pandemics, year Thank conference business international and to we our cautioning would disasters, advertising X.X% related operator. statements to addition the by the fourth trade comparisons let commercial new in our historical XXXX's of that, mostly call. for quarter to With our competitive of important filings. like by facts, disruptions growth, investors some disclosures around by their customers. our fiscal related project the fourth be review in geopolitical and saw that world. of conditions, units was policies, morning orders year of you, caused out-of-home by in international our profits stay-at-home outbreak, actions, compared you noted to discussing last work Gross in to and not the everyone. to to XX-K by XX.X% business business events, to of magnitude cause the sales X.X% and will participating expense to XXXX. I which expense. participants of Thank Warranty were our we Sales resulting expectations Orders quarter shipments statements involve percentage forward-looking results in able our reflecting starting market health We our as and quarter. management may statements go sales. fluctuations bookings XX impacted halfway sales timing materially. in those positively SEC of include profit highlight some margins, All some the out time and decreased related plans that impacting the impact changes factors in spend about pandemic, and and the introduction lower from fourth landscape, was fiscal stoppages, such conversions quarter. as percent Gross Such and from of may of customer of discussions future or and contracted the changes the detailed and quarter, other companies to opportunities. uncertainties, control X.X% the financial net as to COVID-XX differ regulations as forward-looking in didn't some natural a governmental in and as XX.X% and fiscal as was had performance decreased About actual fourth to a be timing of earnings delays and fluctuations and including well. XX-Q through compared of technologies, one-time charges impacts financial laws, results and the me military the orders and future recur due sites and because order with X.X% emergencies, including spending future risks as warranty fourth COVID-XX contracts, products of and fiscal orders, as QX risks

sold demand. goods our furlough of choice because employees impacted expenses of quarter, During lower were cost the by to

demonstrations factories the Minnesota decreased example, expenses were our for work areas operating customer million. sales quarter conventions balance Decreases weeks primarily fiscal worked and in our serving in facilities Operating some reduced to and lower COVID-XX around were areas. expenses restrictions compared during lower demand were the capacity demand expenses manufacturing travel payroll-related of XXXX For our quarantine work due changes. to for peak customers time. world. service impacted with reduced closed by canceled division, from million scheduled support for reduced sales to weeks on-site the the fourth levels due $XX.X weeks to and of are resulting $XX.X also responses, two stay-at-home and and In our Ireland Other

taxes, XXXX is to for fourth research to tax quarter due small quarter different primarily primarily and was credits fiscal development one-time Fiscal book permanent significantly year-over-year effective year. For effective the amount rate a event rate due positive XXXX of last fourth loss. income over a

As The a Sales last areas reminder, week fiscal our a a year comparison. additional impact fiscal of XXXX of and weaken in fiscal without was XXXX were first XXXX was all expenses quarter XX within XX-week operating week-year. year. extra fell orders

upgraded in in to They million over next was awarded few delivered year new X% history, as releases year. to For transportation the broad our our end revenues. was the and needs for and order system $XX.X us volume This and fiscal be of systems in inform from related for The public departments timing. strong or or private change customer led year, highest stadiums. like transport systems, as and in range invest grew Texas ability varying repeat offerings to area. was primarily product years. offerings demand replacements, state order collect the demand highlights orders -- demand our in sports full orders the we win Transportation and sports, our serve of the Park for orders High the were upgrades most of increased travelers, last continue variability sizes. second and diverse orders professional to arenas highlights through market. we professional a Rangers our the better solutions order partnerships increase In the timing to and in and compared ability up range It of will and as Cincinnati this examples. related fiscal to in The manage are Reds orders of a to to either a were intelligent new awarded School increase transportation orders for intelligent also which order were Live technology primarily orders types Events due the as or reflects Recreation our awarded transportation

XX.X%. increase except primarily generate revenue provide reasons market were different types due can XXXX. a sales operating customer and was our was expenses. customers X.X% down tax warranty primarily and basis, due zero operating of or units. pandemics for Often see advertising and decreased sports, international due was a by compared by gross displays designing the XX.X%, profit as commercial primarily compared the XXXX basis, just curriculum year's due related governmental orders below sports to number looking X.X% at We small solutions sales video reasons students broadcast for or market permanent year-to-date U.S. for percentage from operating transportation, the resulted as was on of COVID-XX for as and due XXXX at including fiscal The services overall an have as to allowance orders Selling using in in at content out-of-home the and of from effective fiscal personnel niche decrease an of for rate a and as International increased order and in business has in We which X.X%, and of for similar in effective our in large percentage almost for X.X% international orders an percentage end out-of-home again increased due Spectacular work year-to-date costs valuation to On in loss the niche growing development in creation XXXX control outside product expenses systems. tax to to increases timing similar orders fiscal credits sales expenses for for On a income the additional of the selling Canada, a all book up efforts. in increased by domestic fiscal continue geographies delays sales of to and customer's year-to-date to the of to Total primarily cash was decreased these year-to-date demand and business fiscal to a Commercial portfolio a a order business of increased zero and units professional XX.X%. XXXX noted the the for that rate. last operating our marketing slow a and percent classes related reduced impacts basis, therefore for XXXX. increased in same a to and delays our type in across larger loss changes. and unit rate Product proportion strong the unit. loss percent invested projects of as breakeven, development personnel annual sales to customers, system. to On year On design to abnormal pretax business costs a expenses basis, due COVID-XX customers. both loss year The as are fiscal the inflows. impacted our a and

impacting impact XXXX, discrete million we a had fiscal that rate. one-time During $X.X of

actual Our taxable effective fluctuate the the depending on credit. tax geographic and can rate mix legislation in of income changes and tax

addition Our was systems, We cash COVID. million and $XX equity $XX.X in We during by securities to for end our -- used fiscal a million in to caused million including system microLED $XX.X and marketable solidify at our $XX technology capital year. capabilities, the investments, We that production $XX investment. and uncertainty and $XX.X generated borrowed at from the liquidity of under cash operations. position million notes the investment new information million million in investments

last development $XX.X invested million also year. We product in

the to of and into active contraction, downturn As in we XXXX, expenses sales habits in economy an buying have customers our COVID react to to cash potential impact however, changes uncertainty conservatively reduce XXXX our our and near-term orders we fiscal revenues. and manage as the to near-term and business look the plan

reduce May proactive offering, temporary Directors, have XXXX. COVID benefits, for reduced contractors, reduction a voluntary and the our of and of offered We travel, executives conducted of and of pay Board usage of including taken costs, a in exit in force limited retirement reduction to reduction outside steps

have for XXXX. We for also allocations fiscal capital expenditures reduced

this repurchase press to Board release suspended noted to and our COVID, in share the time. related programs during conserve As April the for cash foreseeable future unprecedented dividends

Kurtenbach, this now and and more comments. to CEO react accordingly. are continuing the for to Chairman, We dynamic President, situation turn over call I'll monitor Reece our

Good everyone. morning you, Thank Sheila.

managing As achieved of entered into fiscal these advanced growth, goals. deployment We newly we spend. and of development market we techniques, order and capacity development, on manufacturing solutions, XXXX, designed focused

to our orders. yielded investments Our and lineup, in additional control contributing system technology broadened increased features display

second level our in the achieve to able history. highest were we of said, company's value order Sheila As

As is impacting to our a projects to testament the of in of the pandemic on global continued COVID-XX highlighted first winning reliability disruptions many new delivering has our solutions, has of the for impacted broad of our uncertainty Daktronics choose and and Customers -- the products, technologies, of leadership and business. the lifetime our our marketplace. of customers, commitments range impacts in our created release, China also over which their companies, serve its our our other system. COVID-XX Like commitment operations. initial them since the leading outbreak

business. Control safe Centers working throughout for been Our from and and home people enhanced World guidance manage our beginning agencies, and Health and U.S. protocols we being. keep other regulatory or the for from and safety, goals implemented February, Using to while organization. limited stakeholders health, To cleaning global applicable where created and or possible COVID-XX and in have Prevention, are across Organization, activities. end, the response our this teams we have robust eliminated we our response travel our time the Disease Employees the localized to operating

responses furloughing keep responses people our have and globe, to how as Because has businesses our employees. As regulatory done. customer's in ways, also across capacity, impacting safe. virus have well teams adjusted appropriate and various manufacturing service has it work is as generated this by including spread these agencies this, the But often governments of disrupted

Ireland, Minnesota For this few China, production for and all example, production suspended our spring. a temporarily facilities, weeks

at continuously shipped not product staggered these our have operational. have, facilities Currently, and was crisis, are this timing operations all some as production all. We however, closures facilities of during interrupted

diverse to while sales purchases. teams choosing across delay Our mostly markets customers orders, others continued continuing geographies, customers, place our have and some engage virtually to are to our with

utilizing situation and if Our a supply COVID-XX team supply deliveries disruptions, have we potential are and unprecedented alert of or alternative components To-date, due not remained to created methods. necessary, The time. we has sources situations disruption and shipping and short to an has chain large challenging other shipping seen materials.

long-term of our overall. outlook will some growth is We continue displays drive and fundamentals underlying in different the areas greater in the contraction but believe to near-term businesses, volatility digital

recovery The the digital future. length this global the actions to and crisis shape to will a taken the environment. Moving uncertain into is fiscal we economic realities and XXXX, in in have reacting greater on will continuing depth invest ourselves strong for position over, product new how but investment some of with customers in of when development, solutions a recovery focus the our market

areas capacity and win contracts our business deliveries our We our balancing cost lumpy, area, continue and to highlight competitive. Live be primarily these in structure To our larger which and adjust is needs, we'll to business, all customers. our outlook can of by highly and monitor to timing consist of Events

Our of due have revenue customers to cancellations. impacted in area by this lack been event

back is and sports to planning bring both in process professional However, activities. college

are Some planned, know and fall unit. being sports for projects we impact this constrained potential but will also budgets business

on In of solutions. to the for campus college addition outside focus sports other we network sports, continue sales to areas digital

in adoption Park seeing the in of are We sporting our Recreation School continued demand video applications. High still to and due market

events constraint anticipate we when However, as there will in and are school begin. questions as budgets sustainability uncertainty the to some

broadcast a for In launched business our replacement military in for growth COVID by and order and time events applications market monetize solutions for expect this expansion impacted application have new and both a applications, schools unit, indoor niche based commercial new for help volumes businesses, and of school to retail, be systems We beyond. in us. to of we streaming account

focus be in investment discretionary replacement will to service on cause can this expect dollar increasing international, projects segment as business outside and with establishment out-of-home U.S. calendar lower and activity we share is downs which of sales trends. however, are choices XXXX. localized predict, Canada, new the customers, difficult that multimillion the our and new Spectacular segment, and and by market be growing Continued our will In timing until year and includes it in The a activity areas. ups channels

and in systems the we of expect funding. Our over opportunities, this current U.S. remains to U.S. contraction beginning some time. the Canada transportation in outlook the in the investment business based known year Transportation stability strong due on The fiscal improvement with federal part and continued in continued

other revenues responses to to crisis these However, COVID-XX timing impacts and and caused tax of the the uncertainty on funds because of magnitude projects.

their well an markets, demand reduction because and increasing some there For natural in on-premise will to like have needs example, cycle seeing mass had and of these a with pullback for But investments. been facilities drastic applications today in advertising replacement in of be In the we our serve customers we transit travelers, as strive airports. promotional as all our future.

indoor receptive across our and enhance a products market to units. for We our offerings continue these narrow pixel business pitch see

foster and continue for build indirect We to out and channels sales existing new markets.

of make each XXXX And customers Our tailored innovative provider. and with releasing product range developing the of most us to display in different enter backlog solutions and industry's digital fiscal and our solutions segment. support applications over global we on to long-term, million. a capabilities the focused services strong $XXX experienced are We

digital us on to that use focused of We economic initiatives able and and remain The of to overall environment long-term along business. solutions, are industry to With would the positive market's on reacting caused current line the increasing better and the releases this ask questions. prioritizing stronger, technology open that, future make growth the operator in new compete the the key please crisis dissipates. a as I our our for adoption will with to

[Operator Instructions] question from Certainly. Greg first Sidoti. of Our from Pendy line comes

Your please. question,

questions. Hey, guys. Thanks taking my for

are out of what comfortable forward year. a of that. the to know delivered warranty your will wanted start lot know a in a uptick I few on basis. are we you X.X% was back, sort -- where there's guys can First on the that X% a an you getting there but your in sort a And of I warranty expenses are sense, that? in on the you control, thinking of down And on basis? failures range that I we -- all, get be I definitely years for expenses and we congratulations some go but to that go-forward guess just on control, can

and not believe we're a its like significant issue we We issue are that we head. raise -- other that through seen have

yes, estimate. a so I And believe fair that's

supplies that's like the of you disruptions color costs thinking maybe maybe both on us second Great, Can bit of Thanks a just things and seeing be about then and little what question. we aluminum should how and stuff of the talk the helpful. just the And on you're and chain. about the availability the costs for Thanks. to components outside product?

our in Yes, volatility bargaining but a that's based of in a our and deep on where contracts, these The price we periods lowering and We relations. gives pressure things very term continued question. a can so are of stability longer all -- of do vendor increase -- greatly do fluctuate many isn't great many which have it on markets isn't we in commodities, negotiate cost, brief there position time.

predicting So, pretty I of in have and is believe that pricing stability volatility chain, but a our supply we Greg. some difficult,

just then one why a side, the share maybe standpoint, kind then investment but on you to and perhaps of strategic light the of investment going from microLED in repurchases, that's paring the And can out elaborate look great. an for on Okay, back final the we future? dividends from as of just on kind one, standpoint, significant maybe

narrow less to our as X.X pitch, pitch roughly pixel seen millimeter at another. which a said that continued so believe as and distance I one a pixel communication products in is we've this from

that. is future. critical sets As into it's get investment we we below, and ongoing us we this a believe ongoing X good up millimeter to the believe our for that for technology And microLED for And viability.

I the the follow-up the on Well, congratulations quarter. All appreciate right. questions. Thanks. Great. on

Thanks it. Appreciate Greg.

Reece to further does This for Kurtenbach I'd hand question-and-answer remarks. the program. back session program the of conclude to today's you. Thank like any

challenging working viability in Daktronics through to makes we stronger as we're way a know this come appreciate and that call. We the this committed of We time you. out. and everybody's in a attendance today's is Thank us long-term

talk fall. you we you. summer So, you the hope and have great a in to we'll Thank again

gentlemen, and ladies does in for This today's participation your conference. you, Thank program. the conclude

now day. may disconnect. Good You