Daktronics(US:DAKT)2024-02-27 16:00Part I Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for the three and nine months ended January 27, 2024, including balance sheets, statements of operations, and cash flows Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Jan 27, 2024 (in thousands) | Apr 29, 2023 (in thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $76,764 | $23,982 | | Accounts receivable, net | $100,601 | $109,979 | | Inventories | $140,251 | $149,448 | | Total Assets | $499,206 | $468,104 | | Liabilities & Equity | | | | Accounts payable | $49,489 | $67,522 | | Long-term debt, net | $48,466 | $17,750 | | Total current liabilities | $170,261 | $210,163 | | Total Shareholders' Equity | $236,246 | $200,878 | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended Jan 27, 2024 (in thousands) | Three Months Ended Jan 28, 2023 (in thousands) | Nine Months Ended Jan 27, 2024 (in thousands) | Nine Months Ended Jan 28, 2023 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Net sales | $170,303 | $184,975 | $602,203 | $544,334 | | Gross profit | $41,718 | $41,713 | $167,064 | $99,211 | | Operating income | $8,036 | $7,118 | $67,688 | $3,125 | | Net income (loss) | $10,742 | $3,713 | $32,103 | $(14,597) | | Diluted EPS | $0.09 | $0.08 | $0.69 | $(0.32) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Nine Months Ended Jan 27, 2024 (in thousands) | Nine Months Ended Jan 28, 2023 (in thousands) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $53,789 | $(9,487) | | Net cash used in investing activities | $(17,055) | $(20,947) | | Net cash provided by financing activities | $15,689 | $23,498 | | Net increase (decrease) in cash | $52,503 | $(7,278) | Notes to the Condensed Consolidated Financial Statements The notes detail the company's accounting policies, revenue recognition, segment performance, financing agreements, and related party transactions - As of January 27, 2024, remaining performance obligations totaled $393.2 million, with approximately $328.5 million expected to be recognized as revenue within 12 months55 - On May 11, 2023, the company secured new financing, including a $75 million senior credit facility and a $25 million secured convertible note, with fair value changes recognized in operations646872 - The effective tax rate for the nine months ended January 27, 2024, was 31.5%, influenced by non-taxable fair value changes of the convertible note81 - The company entered a Securities Purchase Agreement with Alta Fox Opportunities Fund, LP for a $25 million convertible note, with Alta Fox being a related party owning 9.99% of common stock at the time88 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance for Q3 and the first nine months of fiscal 2024, covering operations, segment performance, liquidity, and capital resources - The product order backlog was $328.3 million as of January 27, 2024, a decrease from $429.1 million a year prior, reflecting improved production and fulfillment106 - The company anticipates long-term growth driven by audiovisual industry fundamentals, including LED display adoption and new technology, despite potential short-term impacts from project timing and global economic conditions103 Results of Operations - Three-Month Comparison Net sales for Q3 FY2024 decreased by 7.9% to $170.3 million, while gross profit remained stable at $41.7 million, and operating income increased to $8.0 million Net Sales by Segment (Q3 FY2024 vs Q3 FY2023, in thousands) | Segment | Q3 FY2024 (in thousands) | Q3 FY2023 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Commercial | $33,292 | $49,967 | (33.4)% | | Live Events | $73,393 | $67,748 | 8.3% | | High School Park and Recreation | $28,764 | $28,312 | 1.6% | | Transportation | $19,605 | $17,578 | 11.5% | | International | $15,249 | $21,370 | (28.6)% | | Total | $170,303 | $184,975 | (7.9)% | Gross Profit by Segment (Q3 FY2024 vs Q3 FY2023, in thousands) | Segment | Q3 FY2024 (in thousands) | Q3 FY2023 (in thousands) | Gross Margin % (FY24) | Gross Margin % (FY23) | | :--- | :--- | :--- | :--- | :--- | | Commercial | $5,546 | $10,547 | 16.7% | 21.1% | | Live Events | $21,102 | $14,405 | 28.8% | 21.3% | | High School Park and Recreation | $8,029 | $7,555 | 27.9% | 26.7% | | Transportation | $6,180 | $5,534 | 31.5% | 31.5% | | International | $861 | $3,672 | 5.6% | 17.2% | | Total | $41,718 | $41,713 | 24.5% | 22.6% | - Orders for Q3 FY2024 increased by 29.4% year-over-year, driven by strong demand in Live Events and rebounding Commercial business111 Results of Operations - Nine-Month Comparison Net sales for the first nine months of FY2024 grew 10.6% to $602.2 million, with gross profit surging 68.4% to $167.1 million and operating income increasing to $67.7 million Net Sales by Segment (Nine Months FY2024 vs FY2023, in thousands) | Segment | Nine Months FY2024 (in thousands) | Nine Months FY2023 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Commercial | $122,628 | $127,132 | (3.5)% | | Live Events | $233,602 | $193,370 | 20.8% | | High School Park and Recreation | $133,940 | $106,127 | 26.2% | | Transportation | $61,217 | $53,797 | 13.8% | | International | $50,816 | $63,908 | (20.5)% | | Total | $602,203 | $544,334 | 10.6% | Gross Profit by Segment (Nine Months FY2024 vs FY2023, in thousands) | Segment | Nine Months FY2024 (in thousands) | Nine Months FY2023 (in thousands) | Gross Margin % (FY24) | Gross Margin % (FY23) | | :--- | :--- | :--- | :--- | :--- | | Commercial | $25,546 | $21,565 | 20.8% | 17.0% | | Live Events | $68,276 | $26,174 | 29.2% | 13.5% | | High School Park and Recreation | $45,274 | $29,343 | 33.8% | 27.6% | | Transportation | $20,049 | $15,456 | 32.8% | 28.7% | | International | $7,919 | $6,673 | 15.6% | 10.4% | | Total | $167,064 | $99,211 | 27.7% | 18.2% | Liquidity and Capital Resources The company's liquidity strengthened in the first nine months of FY2024, with net cash from operating activities at $53.8 million and $76.8 million in cash as of January 27, 2024 - Net cash provided by operating activities was $53.8 million for the first nine months of fiscal 2024, a significant improvement from a $9.5 million use in the prior year140 - Working capital increased to $205.3 million as of January 27, 2024, from $132.5 million at the end of fiscal 2023147 - Total capital expenditures for fiscal 2024 are projected at approximately $19 million, with $13.6 million incurred in the first nine months149 Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes in market risk exposure, except for interest rate risks from new debt facilities in Q1 FY2024 - No material changes have occurred in the company's market risk exposure during the first nine months of fiscal 2024, except for interest rate risks from new credit facilities154155 Controls and Procedures Disclosure controls and procedures were deemed ineffective as of January 27, 2024, due to a material weakness in internal control over financial reporting, with a remediation plan underway - Disclosure controls and procedures were deemed not effective as of January 27, 2024, due to a material weakness in internal control over financial reporting156 - The material weakness stems from ineffective controls for revenue contracts recognized over time, due to insufficient training of control operators158 - A remediation plan is in progress, including additional training for revenue control operators to enhance control precision159 Part II. Other Information Legal Proceedings The company is involved in various legal proceedings in the normal course of business, not expected to materially impact financial condition or operations - The company is party to various legal proceedings in the ordinary course of business, not expected to result in a material adverse effect162 Risk Factors This section refers to the detailed risk factors in the Annual Report on Form 10-K for FY2023, with no material changes noted - No material changes have occurred to the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended April 29, 2023163 Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any shares of its common stock during the three months ended January 27, 2024 - No shares of common stock were repurchased during the third quarter of fiscal 2024164 Exhibits This section provides an index of all exhibits filed as part of the Quarterly Report on Form 10-Q