Daktronics, Inc. (DAKT) on Q4 2021 Results - Earnings Call Transcript
Operator: Good day, ladies and gentlemen and welcome to the Daktronics Fiscal Year 2021 Fourth Quarter Earnings Results Conference Call. As a reminder, this conference is being recorded today, Wednesday, June 9, 2021 and is available on the company’s website at www.daktronics.com. I would now like to turn the conference call over to Ms. Sheila Anderson, Chief Financial Officer for Daktronics, for some introductory remarks. Please go ahead, Sheila.
Sheila Anderson: Thank you, operator. Good morning, everyone. Thank you for participating in our fiscal year and fourth quarter earnings conference call. I would like to review our disclosures cautioning investors and participants that in addition to statements of historical facts, we will be discussing forward-looking statements reflecting our expectations and plans about our future financial performance and future business opportunities. All forward-looking statements involve risks and uncertainties, which maybe out of our control and may cause actual results to differ materially. Such risks include changes in economic conditions; changes in the competitive and market landscape, changes including impacts of global trade discussions and policies; the impacts of governmental laws, regulations and orders, including those resulting from pandemics; disruptions to our business caused by geopolitical events, military actions, work stoppages, natural disasters or international health emergencies, such as the COVID-19 pandemic; management of growth, timing and magnitude of future contracts, fluctuations of margins, availability of raw materials and components and shipping services; the introduction of new products and technology and other important risk factors as noted and detailed in our 10-K and 10-Q SEC filings.
Reece Kurtenbach: Thank you, Sheila. Good morning, everyone. The impact of the pandemic created uncertainty, disruption and volatility in our business during our fiscal ‘21. To weather this storm, we adjusted our capacity in anticipation of the lower order volumes we expected. These actions allowed us to generate cash, pay back our line of credit and generate a profit. We put a priority on keeping our employees safe, allowing people to work from home when they could and implementing and following safety protocols where this was not possible, such as in our manufacturing operations and for our employees who needed to be on a customer site. For Daktronics and our investors, I want to thank our employees, our customers, our suppliers and our different communities for your help in managing through this unique and unprecedented time. Even through these challenging times, we focused to strengthen our operations to come out stronger at the end of the pandemic. We continued our investment in development in micro LEDs and other technologies to bring world-leading solutions to our customers. We improved our use of digital technologies to enhance our interactions with our customers, and we enhanced our marketing focus to build new sales channels and relationships to grow our global market share and grow into new markets. As we look into our fiscal year ‘22 and beyond, it is encouraging to see the continued global distribution and the effectiveness of vaccines. This creates a safe environment for the reopening of economies and the gathering of people for activities around the world. We began to see order and quoting activities increased during the last part of our fiscal year ‘21 and are optimistic about fiscal ‘22 to return to a more normal time. As activities in our markets increase, we are planning our capacity to maximize production while prudently controlling costs through this time of growth. We will be strategically making investments in capital assets for capacity and product developments to meet the needs of our customers and in technology developments to be a market leader on into the future. We will also continue to invest in improving the strength and expertise of our internal operations to enhance our customers and employee experiences.
Operator: Our first question comes from the line of Greg Pendy from Sidoti & Company. Your question please.
Greg Pendy: Hi guys. Thanks for taking my questions. First of all, I just want to dig into the backlog. If I am not mistaken, typically that converts in 6 months to 9 months. Is there anything unusual that would maybe change the time frame on that? And how should we be thinking about that?
Reece Kurtenbach: Thanks, Greg. That’s a great question. We expect our backlog to be delivered within this fiscal year, augmented by the order production within the year. We do have some long-term construction contracts that will stretch beyond a fiscal year. I don’t have the percentage of long-term versus regular backlog, but we expect the majority of this to clear in this fiscal year.
Greg Pendy: Right. And then just – you touched on material, labor and transportation and inflationary pressures. And I was just curious did you see any of that in this quarter in the gross margins you put up? I know you got the benefit on the warranty side, but have we started to see those pressures or is that something that’s probably going to surface in the first quarter?
Reece Kurtenbach: We started to see those situations magnify in Q4 of FY ’21. And we believe that they will continue on throughout this fiscal year.
Greg Pendy: Okay, great. And then just one final one, just on the CapEx, it’s a pretty big bump up to $25 million and probably above the pre-COVID. So, just kind of wondering what some of the puts and takes in that number are? Is some of that a catch-up from the leaner CapEx this year? And just how to think about that, maybe that as a run rate long-term?
Reece Kurtenbach: Yes. I would say that there is some catch up. We really reduced our CapEx spending in FY ‘21. And so there would be some things that spilled into this fiscal year as well as we see growth within this fiscal year as well. What is the run rate on an ongoing basis? It seems like this might be – last year was quite low. This year might be high, and we will see how that will even out in future fiscal years.
Greg Pendy: That’s helpful. Thanks a lot.
Operator: Thank you. And this does conclude the question-and-answer session of today’s program. I would like to hand the program back to Reece Kurtenbach for any further remarks.
Reece Kurtenbach: I would like to thank everybody for joining us on today’s call. We will have our next call in 6 months. And I hope everybody has a great, healthy, pandemic-free summer. Thank you everyone.
Operator: Thank you, ladies and gentlemen, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.
