More Sales, Less Profit in Daktronics Fiscal 2015 2Q

BROOKINGS, S.D. – Bigger sales ended up costing Daktronics Inc. some profit margin in its fiscal 2015 second-quarter, although the company remained firmly in the black.

Reese Kurtenbach

Reese Kurtenbach

The large-format-display manufacturer’s $173.1 million in net sales, for the quarter ending on Nov. 1, showed a 7.1% gain from the same time last year … but the net income of $7.7 million in 2Q fiscal 2015 turned out to be 34.7% less for the same period.

The timing of 2Q fiscal 2015 sales, along with effects on manufacturing and delivery, impacted corporate profits, according to Reese Kurtenbach, Daktronics president/CEO.

“During the first half of the year, we have been successful in booking orders in the Live Events market which included over 30 college football and more than 15 center-hung indoor arena projects; however this work is time sensitive with critical event dates in August, September and October,” Kurtenbach explained. “While we could see the Live Events projects along with other projects in our International and Commercial markets in backlog and pipeline, we had not anticipated such a high win rate for the large video projects as a whole which created operational challenges.”

Variability in order timing, he said, stretched Daktronics’ capacity to deliver those products to meet customer deadlines.

“While we were successful in delivering customers high quality video systems, our realized gross profit margins were short of our expectations,” he noted. “Additional dollars were spent on overtime, expediting and shipping costs to meet critical event dates.

In addition, during the quarter, our mix of work was heavily weighted to large custom video systems which normally have a smaller gross profit margin due to the competitive nature of these bids and a high content of on-site installation. This higher-than-usual mix of business also lowered our overall gross margin for the quarter.

“Orders increased in the Commercial market, due to large video projects and the timing of billboard orders.”

Product demand remains strong, with the company’s backlog at the end of 2Q fiscal 2015 of $146 million sitting 10.6% larger than the same time last year. Kurtenbach noted project awards on two baseball stadium renovations since the end of the quarter

“Our balance sheet remains strong,” he said. “We utilize a conservative working-capital management approach and are debt-free. Our continued cash generation enables investment in our business and a quarterly return to our shareholders.”

The company declared a 10¢ per-share dividend for 2Q fiscal 2015, up from 9¢ for the same period in fiscal 2014.