Daktronics(DAKT) - 2023 Q1 - Quarterly Report

Financial Performance - Net sales for the first quarter of fiscal 2023 were $171.9 million, an increase of $27.2 million or 18.8% compared to the same period last year [84]. - The gross profit margin decreased to 15.0% in the first quarter of fiscal 2023 from 22.2% in the same period last year, primarily due to inflationary pressures and supply chain disruptions [86]. - The contribution margin for the first quarter of fiscal 2023 was $11.4 million, representing a decline of 44.3% compared to $20.4 million in the prior year [89]. - Contribution margin decreased to $11.4 million, representing 6.6% of net sales, down from 14.1% in the prior year, with a dollar change of $(9.0) million [91]. - Operating loss for the first quarter of fiscal 2023 was $(5.5) million, a significant decline from a profit of $5.7 million in the same period last year, reflecting a 197.5% change [91]. - Net cash used in operating activities was $(22.8) million, compared to $(1.0) million in the prior year, a difference of $(21.8) million attributed to changes in net operating assets and liabilities [98]. - Net cash used in investing activities totaled $(10.4) million, significantly higher than $(1.9) million in the same period last year, with property and equipment purchases amounting to $10.7 million [100]. - Effective tax rate decreased to 15.8% from 25.2% year-over-year, driven by increased estimated tax credits [96]. Order and Backlog - As of July 30, 2022, the product order backlog was $469.1 million, up from $285.3 million on July 31, 2021, and $471.6 million at the end of fiscal 2022 [82]. - Order volume decreased by 6.3% in the first quarter of fiscal 2023 compared to the previous year, with strong bookings in specific sectors like shopping centers and sports venues [85]. Costs and Expenses - Increased input costs have led the company to implement price increases in the latter half of fiscal 2022 and early fiscal 2023 [78]. - Warranty costs as a percentage of sales increased to 1.6% from 1.2% year-over-year [88]. - General and administrative expenses increased by 24.7% to $9.4 million, primarily due to personnel expenses and $1.0 million in professional fees related to shareholder engagement [91]. Capital Expenditures and Investments - Projected total capital expenditures for fiscal 2023 are approximately $30 million, aimed at enhancing manufacturing capacity and automation [112]. - Company plans to invest an additional $2.0 million in current affiliates over the next year [113]. - The company is planning additional cash use for capital spending to grow manufacturing capacity amid ongoing supply chain challenges [78]. Market Conditions - The international market has experienced softening demand due to inflationary pressures and geopolitical events [85]. - The company expects supply chain conditions to persist throughout fiscal 2023, impacting lead times and order fulfillment [84]. Working Capital and Financing - Working capital increased to $118.5 million as of July 30, 2022, up from $103.9 million as of April 30, 2022 [104]. - As of July 30, 2022, the company had $24.1 million advanced on its line of credit, with an agreement to temporarily expand it by $10 million [107]. Risk Exposure - The company has not reported any material changes in its exposure to interest rate, foreign currency, and commodity risks during the first three months of fiscal 2023 [118]. Accounting and Reporting - For a summary of recently issued accounting pronouncements and their effects on financial results, refer to the Notes to the Condensed Consolidated Financial Statements [117].