Daktronics Inc (DAKT) 2023 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Daktronics Fiscal Year 2023 Third Quarter Earnings Conference Call. As a reminder, this conference is being recorded today, Wednesday, March 8, 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.

女士們先生們，美好的一天，歡迎來到 Daktronics 2023 財年第三季度收益電話會議。提醒一下，本次會議將於今天（3 月 8 日，星期三）進行錄製，並可在公司網站 www.daktronics.com 上查閱。 （操作員說明）我現在想將會議轉交給 Daktronics 首席財務官 Sheila Anderson 女士，請她做一些介紹性發言。請繼續，希拉。

Thank you, Michelle. Good morning, everyone. Thank you for participating in our third 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 may be out of our control and may cause actual results to differ materially. Such risks include, but not limited to, our ability to obtain additional financing on terms favorable to us or at all, changes in economic conditions, changes in the competitive and market landscape, 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.

謝謝你，米歇爾。大家，早安。感謝您參加我們的第三季度收益電話會議。我想回顧一下我們的披露，提醒投資者和參與者，除了歷史事實陳述外，我們還將討論反映我們對未來財務業績和未來商業機會的預期和計劃的前瞻性陳述。所有前瞻性陳述都涉及風險和不確定性，這些風險和不確定性可能超出我們的控制範圍，並可能導致實際結果出現重大差異。此類風險包括但不限於我們以對我們有利的條件或根本無法獲得額外融資的能力、經濟狀況的變化、競爭和市場格局的變化，包括全球貿易討論和政策的影響；政府法律、法規和命令的影響，包括流行病、地緣政治事件、軍事行動、停工、自然災害或 COVID-19 大流行病等國際衛生緊急事件對我們的業務造成的破壞。

Any future goodwill impairment charges, management of growth, timing and magnitude of future contracts, fluctuations of margins, availability of raw materials, components and shipping services, the introduction of new products and technologies and other important factors. These identified important factors could cause actual results to differ materially from those disclosed in this call in the company's third quarter 2023 earnings release and its most annual report on Form 10-K.

任何未來商譽減值費用、增長管理、未來合同的時間和規模、利潤波動、原材料、組件和運輸服務的可用性、新產品和技術的引入以及其他重要因素。這些已確定的重要因素可能導致實際結果與公司 2023 年第三季度收益報告及其 10-K 表年度報告中披露的結果存在重大差異。

We refer you to these documents. Our third quarter 2023 earnings release contain certain non-GAAP financial measures and was furnished to the SEC Securities and Exchange Commission on a Form 8-K this morning and is available on the Investors section at the Daktronics website at www.daktronics.com. I'll turn the call over to our CEO, Reece Kurtenbach.

我們建議您參考這些文件。我們的 2023 年第三季度收益發布包含某些非 GAAP 財務措施，並於今天上午以 8-K 表格的形式提交給美國證券交易委員會，可在達科網站 www.daktronics.com 的投資者部分獲取。我會將電話轉給我們的首席執行官 Reece Kurtenbach。

Thanks, Sheila. Good morning. Thank you for joining us today. Our past actions to carefully match our production schedules, inventory and labor to demand fulfillment were successful, as measured by the increase in sales and generation of operating income for the third quarter.

謝謝，希拉。早上好。感謝您今天加入我們。從第三季度銷售額和營業收入的增長來看，我們過去採取的仔細匹配生產計劃、庫存和勞動力以滿足需求的行動是成功的。

The pandemic recovery period was unprecedented. The last 24 months were marked by historically high demand while experiencing persistent instability of supply chains, a tight labor market and inflationary conditions. We are seeing supply chain conditions easing, which supports a more stable production schedule. We have also increased production capacity to match market demand which was achieved despite labor shortages and long cycle times for the technology and fixed assets necessary to increase output on an ROI positive basis.

大流行恢復期是前所未有的。過去 24 個月的特點是需求處於歷史高位，同時經歷了供應鏈持續不穩定、勞動力市場緊張和通脹狀況。我們看到供應鏈狀況有所緩和，這支持了更穩定的生產計劃。我們還增加了生產能力以滿足市場需求，儘管勞動力短缺且技術和固定資產的周期時間較長，但在投資回報率積極的基礎上增加產量是必要的。

Operating margin improvement was achieved because of a more stable environment, pricing actions that we took in light of supply chain conditions and inflationary pressures, product mix adjustments and prudent management of operating expenses. Quoting activity and sales opportunities remain active, resulting in an order volume of $148 million for the quarter. Fiscal year '22's levels were partially attributed to pent-up demand. As a comparison, orders for the fiscal 2020 third quarter. The last quarter prior to the onset of the pandemic were $135 million.

由於環境更加穩定、我們根據供應鏈狀況和通脹壓力採取定價行動、產品結構調整以及對運營費用的審慎管理，實現了營業利潤率的改善。報價活動和銷售機會依然活躍，導致本季度的訂單量達到 1.48 億美元。 22 財年的水平部分歸因於被壓抑的需求。作為對比，2020 財年第三季度的訂單。大流行爆發前的最後一個季度為 1.35 億美元。

During the past quarter, our team focused on our liquidity enhancement program and working capital improvements as evidenced by the lowering of inventory levels and their attention to billings and collections of accounts receivable and deposits. I appreciate the efforts of our teams across the company have made to come together to solve these challenges and to serve our customers. I will now turn it over to Sheila for some more details on the financial results.

在上個季度，我們的團隊專注於我們的流動性增強計劃和營運資本改善，庫存水平的降低以及他們對應收賬款和存款的開票和收款的關注就證明了這一點。我感謝我們整個公司的團隊齊心協力解決這些挑戰並為我們的客戶服務的努力。我現在將其轉交給 Sheila，以了解有關財務結果的更多詳細信息。

Thank you, Reece. As Reece mentioned, we experienced higher stability in our fulfillment areas in the third quarter after experiencing a challenging first half of the year. Operating income was $7.1 million or 3.8% of sales or using adjusted operating income, we generated $11.7 million or 6.3% of adjusted operating margin during the third quarter of fiscal 2023. Net sales for the third quarter of fiscal 2023 increased by 32.5% to $185 million compared to $140 million for the third quarter of fiscal 2022.

謝謝你，里斯。正如 Reece 所提到的，在經歷了充滿挑戰的上半年之後，我們在第三季度的履行領域實現了更高的穩定性。營業收入為 710 萬美元，佔銷售額的 3.8%，或者使用調整後的營業收入，我們在 2023 財年第三季度產生了 1170 萬美元，佔調整後營業利潤率的 6.3%。2023 財年第三季度的淨銷售額增長了 32.5%，達到 185 美元億美元，而 2022 財年第三季度為 1.4 億美元。

The $463 million of backlog coming into the quarter, coupled with easing in the supply chain, supported production stability and the third quarter's record level of net sales. Orders for the third quarter of fiscal 2023 decreased 30.9% as compared to the third quarter of fiscal 2022. As Reece noted, order volume levels declined after a record number of orders in fiscal 2022, driven from pent-up demand coming out of the pandemic shutdown and because of timing differences in bookings of large projects.

本季度 4.63 億美元的積壓訂單，加上供應鏈的放鬆，支持了生產穩定性和第三季度淨銷售額的創紀錄水平。與 2022 財年第三季度相比，2023 財年第三季度的訂單減少了 30.9%。正如 Reece 指出的那樣，在 2022 財年訂單數量創歷史新高之後，由於大流行病導致被壓抑的需求，訂單量水平有所下降關閉以及由於大型項目預訂的時間差異。

This high demand coupled with supply chain challenges led to historically high backlog, creating much longer lead times, which impacted order levels. At the same time, we utilize this opportunity to be selective in addressing demand. And so we prioritize our focus on winning only the most profitable opportunities. In addition, our International business unit orders were lower due to the softening market caused by exchange rates and geopolitical conditions in various regions.

這種高需求加上供應鏈挑戰導致積壓量創歷史新高，導致交貨時間更長，從而影響訂單水平。同時，我們利用這個機會有選擇地解決需求。因此，我們將重點放在只贏得最有利可圖的機會上。此外，由於各個地區的匯率和地緣政治條件導致市場疲軟，我們的國際業務部門訂單減少。

As a result of the relationship between past order bookings and the realization of sales, product order backlog remains historically high at $429 million at the end of the third quarter. Gross profit as a percentage of net sales was 22.6% for the third quarter of fiscal 2023 as compared to 16% a year earlier. The increase in gross profit for the third quarter of fiscal 2023 was primarily due to strategic changes in our prices beginning in late calendar year 2022 and throughout fiscal year 2023 and because of fewer disruptions during the third quarter of fiscal 2023.

由於過去的訂單預訂與銷售實現之間的關係，產品訂單積壓在第三季度末保持歷史高位 4.29 億美元。 2023 財年第三季度毛利潤占淨銷售額的百分比為 22.6%，而去年同期為 16%。 2023 財年第三季度毛利潤的增長主要是由於我們的價格從 2022 年末開始到整個 2023 財年發生戰略變化，以及 2023 財年第三季度的中斷減少。

The year-to-date comparative decline in gross profit for the 9 months was caused by inflation in materials, freight and personnel-related costs. In addition, extraordinary supply chain disruptions created intermittent work stoppages and factory inefficiencies, adding additional costs to meet customer commitments. These conditions are beginning to abate. Operating expenses increased 22.9% to $34.6 million in the third quarter of fiscal 2023 as compared to $28 million for the third quarter of fiscal 2022.

9 個月毛利潤同比下降是由於材料、運費和人員相關成本的上漲。此外，異常的供應鏈中斷導致間歇性停工和工廠效率低下，增加了額外的成本來滿足客戶的承諾。這些條件開始減弱。與 2022 財年第三季度的 2800 萬美元相比，2023 財年第三季度的運營支出增長 22.9% 至 3460 萬美元。

We performed our annual goodwill impairment test and concluded that the carrying value of the International and Live Events reporting units exceeded their respective fair values. Consequently, we recorded a $4.6 million noncash goodwill impairment charge, which attributed to the increase in operating expenses. The increase was also due to legal fees, accounting and auditing services and other personnel-related expenses. The $1.6 million tax expense for the third quarter of fiscal 2023 reflected a tax rate of 30.5%. Fiscal year 2023 year-to-date tax expense levels represent a deferred tax valuation charge relating to the growing concern condition in the second quarter.

我們進行了年度商譽減值測試，得出的結論是國際和現場活動報告單位的賬面價值超過了各自的公允價值。因此，我們記錄了 460 萬美元的非現金商譽減值費用，這歸因於運營費用的增加。增加的另一個原因是法律費用、會計和審計服務以及其他與人事相關的費用。 2023 財年第三季度 160 萬美元的稅收支出反映了 30.5% 的稅率。 2023 財年年初至今的稅收支出水平代表了與第二季度日益增長的擔憂狀況相關的遞延稅收估值費用。

Our balance sheet reflects the change in business levels and strategies we pursued in managing our supply chain and growing our capacity to meet customer commitments. This past year, supply chain disruptions created an increase in lead times by extending the timing of converting orders to sales. This coupled with stronger -- strong demand contributed to a larger than typical inventory level.

我們的資產負債表反映了我們在管理供應鍊和提高滿足客戶承諾的能力方面所追求的業務水平和戰略的變化。在過去的一年中，供應鏈中斷通過延長將訂單轉換為銷售的時間來增加交貨時間。這加上更強勁的需求導致庫存水平高於典型水平。

At the end of 2023 third quarter, our working capital ratio was 1.6:1. Inventory levels have dropped slightly since the end of the second quarter, yet are still elevated from the prior year-end. Supply chain disruptions has started to ease, and we expect inventory levels to begin to decline to a more normalized levels as order backlog is fulfilled and we reduced purchases. During Q3, we have increased our focus on cash management as a key pillar of our liquidity enhancement plan.

2023 年第三季度末，我們的營運資金比率為 1.6:1。自第二季度末以來庫存水平略有下降，但仍高於去年年底。供應鏈中斷已經開始緩解，我們預計庫存水平將開始下降到更正常的水平，因為訂單積壓已經完成並且我們減少了採購。在第三季度，我們更加關注現金管理，將其作為流動性增強計劃的關鍵支柱。

We have taken steps to move from a period of cash investment to cash generation, improving our liquidity and better positioning us for profitable growth. Our teams are focused on lowering inventory through increased production and reductions in purchases. We are collecting more deposits and progress payments ensuring timely billings and collecting accounts receivable on invoiced terms. We are completing capacity additions in our factory and reducing capital spend for fiscal 2024. We are maintaining our strategic pricing initiatives to improve profitability.

我們已採取措施從現金投資期轉向現金生成期，從而改善我們的流動性並更好地為我們實現盈利增長做好準備。我們的團隊專注於通過增加產量和減少採購來降低庫存。我們正在收取更多的押金和進度款，以確保及時開具賬單並按發票條款收取應收賬款。我們正在完成我們工廠的產能增加並減少 2024 財年的資本支出。我們正在維持我們的戰略定價計劃以提高盈利能力。

For the third quarter, we generated $12.4 million from operations. And for the 9 months of the fiscal year, we have used $9.5 million in cash, primarily to grow working capital, especially inventory. Supply chain disruptions have started to ease. And as mentioned, we expect our inventory levels to decline to more normalized levels over the coming quarters. We have invested $21.8 million in capital expenditures through the first 9 months of fiscal 2023, primarily focused on expanding manufacturing capacity, automation and productivity.

第三季度，我們從運營中產生了 1240 萬美元。在本財年的 9 個月中，我們使用了 950 萬美元現金，主要用於增加營運資金，尤其是庫存。供應鏈中斷已開始緩解。如前所述，我們預計我們的庫存水平將在未來幾個季度下降到更正常的水平。到 2023 財年的前 9 個月，我們已投資 2180 萬美元用於資本支出，主要側重於擴大製造能力、自動化和生產力。

To fund working capital and capital asset additions, we have borrowed $23.6 million in our credit facility as of January 28, 2023, and we amended our credit facility to extend the temporary $10 million increase and the commitment to $45 million until May 1, 2023, when the amount of the credit facility will revert to $35 million. This portion of the facility matures on April 29, 2025. Our Board's independent strategy and financing review committee retained financial advisers to explore additional ways to improve our long-term liquidity profile. This group and management is reviewing structure and financing options. While there can be no assurance that this process will result in any transaction or alternative outcome, indications from the market have been positive. I'll turn it back to you, Reece.

為為營運資金和資本資產增加提供資金，截至 2023 年 1 月 28 日，我們已在信貸額度中藉入 2360 萬美元，並且我們修改了信貸額度以將臨時增加的 1000 萬美元和承諾延長至 4500 萬美元，直至 2023 年 5 月 1 日，信貸額度何時恢復到 3500 萬美元。這部分貸款將於 2025 年 4 月 29 日到期。我們董事會的獨立戰略和融資審查委員會聘請了財務顧問，以探索其他方法來改善我們的長期流動性狀況。該小組和管理層正在審查結構和融資方案。雖然不能保證此過程會導致任何交易或替代結果，但市場的跡像是積極的。我會把它還給你，里斯。

Thank you, Sheila. As we emerge from the uncertainty of the pandemic and its response, we expect greater stability in our production and overall business. We began FY '23 Q4 with a $429.1 million backlog, and we'll enter FY '24 with a backlog that is unusually large for Daktronics, which will provide consistent use of our factory capacities. We are still focused on reducing backlog to improve lead times, which we believe will have a positive demand generation effects in most of our business areas.

謝謝你，希拉。隨著我們擺脫大流行及其應對措施的不確定性，我們預計我們的生產和整體業務將更加穩定。我們在 23 財年第四季度開始時積壓了 4.291 億美元，我們將進入 24 財年，積壓對於 Daktronics 來說異常大，這將持續使用我們的工廠產能。我們仍然專注於減少積壓以縮短交貨時間，我們相信這將在我們的大部分業務領域產生積極的需求生成效應。

In addition, we continue to selectively and carefully price projects and manage costs in all areas. Supply chains have been stabilizing which will allow us to reduce our component inventory levels in the coming months as our production levels continue to increase and we're able to purchase less safety stock. Our capacity to fulfill manufacturing and services work is dependent on plant automation and people.

此外，我們繼續有選擇地謹慎地為項目定價並管理所有領域的成本。供應鏈一直在穩定，這將使我們能夠在未來幾個月內降低我們的組件庫存水平，因為我們的生產水平將繼續提高，並且我們能夠購買更少的安全庫存。我們完成製造和服務工作的能力取決於工廠自動化和人員。

We have invested heavily in both areas over the past 24 months as many of our automation projects complete and are close to our desired staffing levels in most areas. We expect to complete the remaining factory automation projects by the end of fiscal year '24 Q1. These were delayed due to equipment lead times and are focused on increasing staffing levels at certain factories and in our technical services areas.

在過去的 24 個月裡，我們在這兩個領域進行了大量投資，因為我們的許多自動化項目已經完成，並且在大多數領域都接近我們期望的人員配置水平。我們預計將在 24 財年第一季度末完成剩餘的工廠自動化項目。由於設備交貨時間的原因，這些計劃被推遲，重點是增加某些工廠和我們技術服務領域的人員配備水平。

We believe these investments will carry us through expected demand growth through FY '24 and possibly into FY '25. The world has seen a lot of change over the past 2 years and Daktronics has navigated this as a recognized industry leader in quality, technology and reliability. Now in our 55th year of operation, customers continue to choose Daktronics as demonstrated by our strong order volume and backlog. We do not believe that the geopolitical situation is back to normal but we do believe that the levels of uncertainty and volatility will not be as great in the coming months and will continue to stabilize in the coming calendar year.

我們相信，這些投資將使我們通過 24 財年的預期需求增長，並可能進入 25 財年。在過去的 2 年裡，世界發生了很多變化，Daktronics 在質量、技術和可靠性方面作為公認的行業領導者駕馭了這一變化。現在是我們運營的第 55 個年頭，客戶繼續選擇 Daktronics，我們強勁的訂單量和積壓訂單就證明了這一點。我們認為地緣政治局勢不會恢復正常，但我們確實相信未來幾個月的不確定性和波動性不會那麼大，並將在下一個日曆年繼續穩定下來。

While macroeconomic factors continue to make it difficult to forecast the future, over the coming years, we currently see signs of the following: Our High School Park and Recreation business will continue to grow through the adoption of video displays for sporting and educational use. This trend toward deploying what began as professional-grade technology in new markets, grows the total addressable market while continuing to distinguish Daktronics as a technology leader. In addition, video displays also have a higher average selling price than the messaging and scoring equipment traditionally purchased in this segment. Commercial business unit out-of-home advertising customers continue to buy after the pandemic-related economic contractions. This is somewhat an effect of their natural replacement cycle.

雖然宏觀經濟因素繼續使預測未來變得困難，但在未來幾年，我們目前看到以下跡象： 我們的高中公園和娛樂業務將通過採用用於體育和教育的視頻顯示器繼續增長。這種在新市場部署專業級技術的趨勢在擴大潛在市場總量的同時繼續使達科成為技術領導者。此外，視頻顯示器的平均售價也高於該細分市場傳統上購買的消息傳遞和評分設備。在與大流行相關的經濟收縮之後，商業業務部門的戶外廣告客戶繼續購買。這在某種程度上是它們自然更替週期的影響。

Our on-premise business also remains strong as customers continued their purchase and use of digital messaging systems. Our spectaculars area, we are also focused on increasing sales channels with audiovisual integrators for use in government, military, health care and corporate applications. Our transportation demand continues to be strong as project planning and approval activities resumed to more prepandemic levels, and our customers move forward in purchasing displays used for intelligent transportation systems and for mass transit venues. Infrastructure spending should continue to benefit this segment as digital signage is often used in these projects. In the International business unit, we naturally are seeing some softening in the European market due to macroeconomic factors, and we expect to see this to impact sales in the coming year. We are watching developments closely and can adjust resources and commitments accordingly.

隨著客戶繼續購買和使用數字消息系統，我們的本地業務也保持強勁。在我們的壯觀領域，我們還專注於增加與視聽集成商的銷售渠道，用於政府、軍隊、醫療保健和企業應用。隨著項目規劃和審批活動恢復到大流行前的水平，我們的交通需求持續強勁，我們的客戶繼續採購用於智能交通系統和公共交通場所的顯示器。基礎設施支出應該會繼續使這一細分市場受益，因為這些項目中經常使用數字標牌。在國際業務部門，由於宏觀經濟因素，我們自然會看到歐洲市場有所疲軟，我們預計這將影響來年的銷售。我們正在密切關注事態發展，並可以相應地調整資源和承諾。

Over the longer term, outside the U.S., we continue to focus on and winning projects in transportation type orders, which are characterized by recurring contracts overtime. Out of home orders which rely on building customer relationship with providers in different regions and support venue projects in many areas. The Live Events segment outlook remained strong due to large stadium renovations continued replacement cycles and expansion of sales efforts beyond sports areas. We are a knowledge market leader in this segment, which allows us to be strategic in our pricing and contract terms while being very mindful about the profitability.

從長遠來看，在美國以外，我們繼續關注並贏得運輸類訂單的項目，這些訂單的特點是經常性加班合同。戶外訂單依賴於與不同地區的供應商建立客戶關係，並支持多個地區的場館項目。由於大型體育場翻新、更換週期持續和銷售工作擴展到體育領域以外，現場活動部門的前景依然強勁。我們是該領域的知識市場領導者，這使我們能夠在定價和合同條款方面具有戰略意義，同時非常關注盈利能力。

Overall, we believe we have adjusted our strategies to the market conditions, which enabled Daktronics emergence from this period, healthy, profitable and continuing to grow. I again want to thank our Daktronics team for increasing our capacity adjusting to the uncertain and volatile supply chain conditions and serving our customers. We appreciate our suppliers and vendors for also helping us through these challenging times. And thank you to our investors for your patience and support as we work through and emerge from these unprecedented times stronger and better positioned to meet the future.

總的來說，我們相信我們已經根據市場情況調整了我們的戰略，這使得 Daktronics 能夠從這段時期中脫穎而出，健康、盈利並繼續增長。我再次感謝我們的 Daktronics 團隊提高了我們的能力，以適應不確定和多變的供應鏈條件並為我們的客戶提供服務。我們感謝我們的供應商和供應商也幫助我們度過了這些充滿挑戰的時期。感謝我們的投資者的耐心和支持，因為我們正在努力度過這個前所未有的時代，並從中脫穎而出，變得更加強大，更有能力迎接未來。

Our management teams and employees are focused on long-term profitable growth and cash generation that we believe will create value for our shareholders now and into the future. With that, I would ask the operator to please open the line for questions.

我們的管理團隊和員工專注於長期盈利增長和現金產生，我們相信這將為我們的股東現在和未來創造價值。有了這個，我會請接線員打開問題熱線。

(Operator Instructions). I am showing no questions at this time. And I would like to turn the conference back over to Reece Kurtenbach for any closing remarks.

（操作員說明）。我現在沒有問題。我想將會議轉回給 Reece Kurtenbach 作閉幕詞。

Well, I'd like to thank everybody for attending today's conference call. We will see you in a few months as we have our next call to announce our year-end results, and I wish you all a happy spring.

好吧，我要感謝大家參加今天的電話會議。我們將在幾個月後與您見面，因為我們將在下一次電話會議上宣布我們的年終業績，祝大家春天快樂。

This concludes today's conference call. Thank you for participating. You may now disconnect.

今天的電話會議到此結束。感謝您的參與。您現在可以斷開連接。