Daktronics Inc (DAKT) Reports Mixed Q3 FY2024 Results Amidst Strong Order Growth
Year-to-date Orders: Increased by 6.6% to $534.4 million.
Q3 Sales: Decreased by 7.9% to $170.3 million compared to the same quarter last year.
Gross Profit Margin: Improved to 24.5% from 22.6% in Q3 FY2023.
Operating Income: Rose by 12.9% to $8.0 million in Q3 FY2024.
Backlog: Decreased to $328.3 million from $400.7 million at the end of Q4 FY2023.
Net Income: Increased to $10.7 million in Q3 FY2024 from $3.7 million in Q3 FY2023.
Cash Flow: Generated $53.8 million from operations in the first nine months of FY2024.
On February 28, 2024, Daktronics Inc (NASDAQ:DAKT) released its 8-K filing, detailing the financial results for its fiscal 2024 third quarter ended January 27, 2024. The company, a global leader in dynamic video communication displays and control systems, experienced a mixed quarter with a notable increase in product and service orders but a decline in sales compared to the record revenue of the previous year.
Financial Performance and Challenges
Daktronics Inc (NASDAQ:DAKT) reported a decrease in sales by 7.9% to $170.3 million in Q3 FY2024, attributed to the high backorder fulfillment from the previous year's pandemic recovery. Despite this, the company saw a significant improvement in its gross profit margin, which rose to 24.5% from 22.6% in the same quarter of the previous fiscal year. This increase is crucial as it indicates better efficiency and profitability per unit of sales, which is particularly important in the hardware industry where margins can be tight.
Operating income for the quarter increased by 12.9% to $8.0 million, reflecting the company's improved operational efficiency and strategic pricing. The product order backlog, however, decreased to $328.3 million, which the company attributes to the continued working down of the overbuilt backlog from past periods through reductions in manufacturing lead times.
Financial Achievements and Outlook
Reece Kurtenbach, Daktronics' Chairman, President, and CEO, commented on the company's performance, stating:
"Our teams strong execution of the manufacturing, operating, sourcing and pricing improvements that we put in place over the past two years drove efficiencies and raised the baseline profitability of the business. As a result, we delivered positive operating income in a seasonally low-volume period that is historically a loss quarter despite lower volume compared to last years high level of backorder fulfillment."
Looking ahead, Daktronics expects the fiscal fourth quarter seasonality to be similar to pre-pandemic patterns, with an anticipated sequential increase in net sales compared to the third quarter of FY2024 but a decrease from the year-ago period. The company also anticipates gross margin to be similar to the unique fourth quarter of FY2023, with operating margin and cash flows expected to be down compared to the same period.
Kurtenbach further emphasized the company's strategic focus, including capturing growth in addressable end markets, expanding customer spend, and leveraging new technologies to enter new markets such as the military sector.
Key Financial Metrics
Net income for the quarter was $10.7 million, a significant increase from $3.7 million in the third quarter of fiscal 2023. The effective tax rate for the quarter was 15.0%, resulting in $1.9 million of income tax expense. The company's cash position also strengthened, with cash, restricted cash, and marketable securities totaling $77.2 million at the end of the quarter.
From an operational cash flow perspective, Daktronics generated $53.8 million in the first nine months of FY2024, a positive shift from the previous year. This strong cash flow performance is indicative of the company's ability to efficiently manage its resources and maintain liquidity.
In summary, Daktronics Inc (NASDAQ:DAKT) has demonstrated resilience in its fiscal third quarter of 2024, with increased operating income and gross profit margin despite a decline in sales. The company's strategic improvements and focus on operational efficiency have positioned it to navigate the challenges of the market and capitalize on growth opportunities in the coming periods.
For more detailed information, investors are encouraged to review the full earnings report and financial statements available on the SEC website.
Explore the complete 8-K earnings release (here) from Daktronics Inc for further details.
This article first appeared on GuruFocus.
