Daktronics(DAKT) - 2022 Q3 - Quarterly Report

Financial Performance - For the third quarter of fiscal 2022, net sales reached $139.6 million, an increase of $45.4 million or 48.2% compared to the same period last year [87]. - Net sales for the nine months ended January 29, 2022, increased to $448,767, a 22.9% increase from $365,150 in the same period last year [103]. - The Live Events segment saw a significant sales increase of 33.9%, reaching $150,840 compared to $112,626 in the prior year [103]. - The total gross profit for the three months ended January 29, 2022, was $22.3 million, representing 16.0% of net sales, down from 25.4% in the same period last year [90]. - Gross profit margin decreased to 19.3% for the nine months ended January 29, 2022, down from 25.5% in the same period last year [106]. - Operating income for the nine months ended January 29, 2022, was $4,365, a decrease of 72.7% compared to $15,972 in the previous year [113]. - Contribution margin for the three months ended January 29, 2022, was $9.6 million, or 6.9% of net sales, a decrease from 12.7% in the prior year [93]. - Contribution margin for the nine months ended January 29, 2022, was $49,748, representing 11.1% of net sales, a decrease of 12.4% compared to the previous year [113]. - Contribution margin for the third quarter of fiscal 2022 was $9,573, representing 6.9% of net sales, down from 12.7% in the same quarter last year [95]. Orders and Backlog - As of January 29, 2022, the product order backlog was $353 million, up from $195 million on January 30, 2021, and $282 million at the end of the second quarter of fiscal 2022 [86]. - Orders across all business units increased significantly, with Live Events orders rising by 617.6% year-over-year [87]. - Orders for the nine months ended January 29, 2022, increased by 62.5% to $560,242, reflecting strong demand recovery across all markets [103]. Costs and Expenses - Warranty costs as a percentage of sales increased to 2.4% from 1.6% year-over-year [91]. - General and administrative expenses for the nine months ended January 29, 2022, increased by 16.0% to $24,100, primarily due to personnel-related expenses [114]. - Interest expense decreased significantly as there were no outstanding amounts due on the line of credit, compared to $15.0 million last year [99]. Cash Flow and Capital Expenditures - Net cash used in operating activities was $25.5 million for the first nine months of fiscal 2022, a decrease of $73.7 million compared to $48.2 million provided in the same period of fiscal 2021 [121]. - Cash decreased by $48.7 million primarily due to increases in accounts receivable, contract assets, and inventory to support increased order volume during supply chain disruptions [120]. - Net cash used in investing activities totaled $19.9 million in the first nine months of fiscal 2022, compared to $6.8 million in the same period of fiscal 2021 [122]. - The company plans to project total capital expenditures of approximately $25 million for fiscal 2022, focusing on manufacturing equipment and expanded capacity [131]. - The company expects to utilize a portion of its line of credit, which expires in November 2022, to support operations amid ongoing supply chain challenges [133]. Supply Chain and Inflation - The company anticipates continued supply chain disruptions and inflationary pressures affecting financial performance throughout fiscal 2022 and into fiscal 2023 [81]. - The company anticipates ongoing supply chain disruptions and inflationary challenges will impact profitability and cash flows [132]. - The company plans to carry higher inventory levels to mitigate supply chain volatility and expects cash flow impacts due to longer lead times and project delays [79]. - The company is exploring various strategies to manage cash flow, including increasing prices, reducing capital expenditures, and negotiating longer payment terms with suppliers [80]. Tax Rate - The company recorded an effective tax rate of 32.2% for the third quarter of fiscal 2022, a significant decrease from 82.0% in the same quarter of the previous year [101]. - The effective tax rate was 9.4% for the nine months ended January 29, 2022, down from 21.3% for the same period in the previous year [118]. Stock and Working Capital - The company repurchased 600 shares of common stock at a total cost of $3,000 during the nine months ended January 29, 2022 [128]. - Working capital was $113.9 million as of January 29, 2022, down from $118.4 million as of May 1, 2021 [124]. - The company recorded losses for equity method affiliates and foreign currency volatility, impacting other income and expenses [117].