Daktronics(US:DAKT)2020-06-10 19:41Financial Data and Key Metrics Changes - Orders decreased by 9.4% primarily due to reduced advertising spend related to COVID-19, impacting commercial and international business units [5] - Sales decreased by 1.3% due to fluctuations in order bookings and delays in shipments caused by COVID-19 stay-at-home orders [6] - Gross profit as a percentage of net sales increased to 22.7% from 19.1% in the previous year, positively impacted by lower warranty expenses [7] - Operating expenses decreased to $32.1 million from $34.7 million, mainly due to reduced travel and payroll-related expenses [9] - Cash and marketable securities position was $41.6 million at the end of the fiscal year, with $10.8 million generated from operations [21] Business Line Data and Key Metrics Changes - Live Events orders increased due to demand for upgraded solutions in professional sports stadiums [12] - Transportation orders grew as demand for intelligent transportation systems increased, highlighted by a $16.5 million order from a repeat customer [13] - Commercial orders decreased due to a decline in large orders and slow market conditions in the out-of-home niche [15] - High School Park and Recreation orders increased due to variability in order timing and strong market demand for larger video systems [14] Market Data and Key Metrics Changes - Year-to-date sales increased in all business units except international, which faced order delays due to COVID-19 [17] - The Transportation business remains strong due to continued investment in U.S. transportation systems, although uncertainty exists due to COVID-19 impacts [41] - International business unit outlook indicates expected contraction initially, with gradual improvement over time [40] Company Strategy and Development Direction - The company is focused on order growth, market development, and deployment of new solutions while managing capacity and spending [26] - Proactive cost-reduction measures include limiting travel, reducing executive pay, and suspending dividends and share repurchase programs [24] - Investment in microLED technology is seen as critical for future viability and aligns with the company's strategy to enhance product offerings [51] Management's Comments on Operating Environment and Future Outlook - The COVID-19 pandemic has created unprecedented challenges, but the company believes in the long-term growth potential of digital displays [33] - The near-term outlook is expected to show contraction and greater volatility, with a focus on reacting to new market realities [34] - The company enters fiscal 2021 with a strong product backlog of $212 million and aims to prioritize key initiatives for future competitiveness [45] Other Important Information - The effective income tax rate for fiscal 2020 was impacted by permanent tax credits, resulting in an unusual rate compared to fiscal 2019 [19][20] - The company invested $37.8 million in product development and $10 million in microLED technology during the fiscal year [22] Q&A Session Summary Question: Warranty expenses outlook - Management is comfortable projecting warranty expenses to remain in the 1.5% to 2% range moving forward, having resolved previous issues [48] Question: Supply chain cost fluctuations - Management noted volatility in component costs and aluminum prices, emphasizing stability through long-term contracts and strong vendor relationships [50] Question: Significance of microLED investment - The investment in microLED technology is critical for future viability, particularly for products with a pixel pitch of 1 millimeter and below [51]