Daktronics Inc. (NASDAQ:DAKT) Q2 2018 Earnings Conference Call Transcript

Nov 21, 2017 • 11:00 am ET

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Daktronics Inc. (NASDAQ:DAKT) Q2 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day, ladies and gentlemen, and welcome to the Daktronics Fiscal Year 2018 Second Quarter Earnings Results Conference Call. As a reminder, this conference is being recorded today, Tuesday, November 21, 2017, and is available on the company's website at www.daktronics.com. (Operator Instructions) I would now like to turn the conference over to Ms. Sheila Anderson, Chief Financial Officer for Daktronics, for some introductory remarks. Please go ahead, Sheila.

Executive
Sheila Anderson

Thank you, Candice. Good morning, everyone. Thank you for participating in our second quarter earnings conference call. (Forward-Looking Cautionary Statements) Orders for the second quarter of fiscal 2018 were $142 million as compared to last year's second quarter of $117 million. Most of this order fluctuation is attributable to the volatility in our large project and account-based business in Live Events, International and Commercial business units.

As a reminder, both orders and net sales fluctuate due to the impact of our large project and account-based business. Large projects include multimillion dollar orders of display systems for professional sports facilities, colleges and universities and Spectacular projects. Account-based orders can also be multimillion dollars for in size for national or global customers, mostly in our out-of-home advertising space.

Our business also fluctuates seasonally based on the sports market and construction cycle, and is dependent on various schedules based on our customers' needs. Orders also for the quarter were impacted by softer demand in the Commercial on-premise displays. For the year, orders are up slightly by 1.1%.

Sales for the second quarter of fiscal 2018 were relatively flat at $169 million as compared to $170 million last year for the second quarter. Sales increased in Live Events, High School, Park and Recreation and Transportation business units and decreased in the Commercial and International business units quarter-over-quarter. Live Events contributed to the sales increase as the number of projects for professional sports and colleges and universities work was up as compared to last year.

Continued market demand and deliveries timings also contributed to sales increases in the Transportation and High School, Park and Recreation business units. Commercial business unit sales declined compared to last year due to the softer demand in the on-premise display business, a reduction of shipments in orders in the Spectacular niche, which was partially offset by an increase in our billboard niche due to the timing of deliveries. International business unit sales followed the decline in orders.

Gross profit was 25.2% during the second quarter of fiscal 2018 as compared to 26.1% during the second quarter of fiscal 2017 and remained flat on a year-to-date basis. Gross margin percentages for the quarter were negatively impacted by the additional warranty expenses mentioned in the release, offset by a positive onetime $1.2 million gain from the sale of our nondigital operating business and also due to the improved productivity and sales mix.

Total warranty as a percent of sales was 3.9% during the second quarter of fiscal 2018 as compared to 2.7% last year during the same period.

Operating expenses increased $1.5 million or