Daktronics(DAKT) - 2022 Q1 - Quarterly Report

Financial Performance - Net sales for the three months ended July 31, 2021, were $144.7 million, a slight increase of 0.8% compared to $143.6 million for the same period in 2020[82]. - The contribution margin for the three months ended July 31, 2021, was $20.4 million, representing 14.1% of net sales, down from 16.9% in the same period last year[86]. - The effective tax rate for the first quarter of fiscal 2022 was 25.2%, up from 16.4% in the first quarter of fiscal 2021, primarily due to estimated tax credits and other permanent items[93]. Order Backlog and Sales Growth - As of July 31, 2021, the product order backlog was $285 million, up from $192 million on August 1, 2020, and $251 million at the end of the fourth quarter of fiscal 2021[79]. - Orders for the Commercial business unit increased by 50.1% to $38.3 million, and the International business unit's orders surged by 96.5% to $26.7 million[82]. - The International business unit saw a significant net sales increase of 34.4%, reaching $19.1 million, while the Commercial, High School Park and Recreation, and Transportation units experienced declines[81]. - The overall market recovery is reflected in increased order volumes across all business units, indicating a positive outlook for future sales[80]. Cost and Expenses - Gross profit margin decreased to 22.2% from 24.9% year-over-year, primarily due to increased input costs and a higher proportion of lower-margin large project sales[84]. - General and administrative expenses increased to $7.6 million, primarily due to higher personnel-related costs compared to the previous year[88]. Cash Flow and Investments - The company recorded a net cash used in operating activities of $1.0 million for the first three months of fiscal 2022, a decrease of $9.5 million compared to $8.5 million provided in the same period last year[97]. - Net cash used in investing activities totaled $1.9 million in the first three months of fiscal 2022, compared to $3.6 million in the same period last year, with property and equipment purchases amounting to $1.3 million[97]. - The company experienced a net decrease in cash of $3.2 million for the first three months of fiscal 2022, primarily due to increases in accounts receivable and inventory[96]. Future Outlook and Challenges - The company expects to fulfill the backlog within the next 24 months, although project delays may arise from COVID-19 and supply chain issues[79]. - The company continues to face supply chain disruptions, particularly in semiconductor availability, which may impact revenue cycles and production costs[74]. - The company anticipates that disruptions from COVID-19 may continue to affect customer spending on audiovisual systems and services[107]. - The company may need to utilize and possibly increase its credit facilities if the pandemic's impact extends beyond current expectations or if significant strategic investments are made[107]. Capital Expenditures and Financial Strategy - The company expects capital expenditures to be approximately $25 million for fiscal 2022, focusing on manufacturing equipment and investments in new technologies[106]. - Working capital was $127.1 million as of July 31, 2021, an increase from $118.4 million on May 1, 2021, influenced by changes in accounts receivable and inventory[100]. - The company had $2.5 million of bank guarantees outstanding as of July 31, 2021, related to display installations[104]. - The company suspended dividends and share repurchases as part of its COVID-19 response, with future reinstatement dependent on the Board of Directors' discretion[102].