Daktronics (DAKT)

Q3 2012 Earnings Call

February 21, 2012 11:00 am ET


James B. Morgan - Chief Executive Officer, President and Director


James Ricchiuti - Needham & Company, LLC, Research Division

Stephen Altebrando - Sidoti & Company, LLC

Steven L. Dyer - Craig-Hallum Capital Group LLC, Research Division

Richard A. Ryan - Dougherty & Company LLC, Research Division



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» Daktronics' CEO Discusses Q2 2012 Results - Earnings Call Transcript
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Good day, ladies and gentlemen, and welcome to the Daktronics Fiscal Year 2012 Third Quarter Earnings Result Conference Call. As a reminder, this conference is being recorded today, Tuesday, February 21, 2012, and is available on the company's website at www.daktronics.com [Operator Instructions] I will now turn the conference over to our host, Mr. Bill Retterath, Chief Financial Officer for Daktronics for some introductory remarks. Please go ahead, sir.

James B. Morgan

Good morning, everyone. Thanks for joining us this morning. We ended with a nice backlog and we delivered a relatively strong topline. The bottom line, however, was disappointing for us. We had a number of cost shift that added up to a couple percent reduction in margin from what we're expecting. We're also in a bit of a valley in terms of professional sports opportunities, which is compounding our situation at the moment by holding orders at a lower level than we would like to see. But overall, the pipeline for fall sports is strong, especially in the college area for the 3 months we'll set the stage for sales for this sports season for our first and second quarter.

Although we are typically positioned very strongly on these projects, we are seeing new competitors and tend to buy these projects that we have followed in the past is not something competitors like to do and can afford to do on an ongoing basis. And in the meantime it can sometimes when a project for them with a customer decided to take the risk, given the price.

There are a number of large projects i.e. that is in the $10 million range, both in Live Events and in Transportation that occur in the mid-stage. And we feel that position on at least a couple of these we've got a positive verbal indications on a couple of them. But they're not yet in our backlog. They're not yet firmed up. If we can close them a few of those things will get in order, sales picture with go back in the right direction. Our basic customers in the digital billboard business are still announcing intentions to continue rollout of digital and reporting good returns on those rollouts. We believe we are well-positioned to continue to participate in that business and certainly those customers.

Orders, first part of [indiscernible] have been a bit light, but this is not unusual, and we are anticipating an uptick in the coming months. We are also entering the replacement in some of our displays for some of our national account customers. These are displaced that were installed approximately 10 years ago and have reached the end-of-life. In some cases, these are competitors display. So we're excited about that. We're actually expecting to see a couple million dollars worth of replacement business here in the end of Q4 and early Q1. So that's something that we expect again that's just the beginning of the replacement phase. And that's also we expect that in the digital billboard area, we'll start to see some replacements here within the next couple of years. So that's -- we hopefully add new business for us.

The lower level of orders have brought us to give increase emphasis on cost containment. We are curtailing headcount growth and addressing other discretionary spending through this quarter.

With that, I'll turn it over to Bill for some more color on the numbers.

Question-and-Answer Session


[Operator Instructions] We have a question from the line of Jim Ricchiuti with Needham & Company

James Ricchiuti - Needham & Company, LLC, Research Division

The question I had relates to the pipeline. You talked about potentially some larger orders, $10 million or so in Live Events. I wonder if you could just give us a sense how many of those projects you see out there and when you might see bookings. Because you also talked about some quick turns business. And I wonder if you could just elaborate on that portion of the business, perhaps even sizing that. Do some of that relate to some of these projects you alluded to?

James Ricchiuti - Needham & Company, LLC, Research Division

And the quick turn business that you talked about, can you maybe expand on that, Jim?

James B. Morgan

In the national accounts side?

James Ricchiuti - Needham & Company, LLC, Research Division

Yes. Don't know is this the state you see possibly coming in Q4, and maybe you can just elaborate? Is it a national accounts business?

James B. Morgan

Yes, the one thing that looks like could start to turnaround in Q4 here is the replacement project that or 1 phase of replacement project 1 of our national accounts. In fact, there are 1 of the reasons there given us the businesses we've got the capacity to do the turn for them and meet their delivery expectations. And that's again -- how much of that will be in fourth quarter versus early Q1, that is very little hard to know for sure. But overall, it's a couple million dollar opportunity. So if we got that split half-in-half in the quarter, that might be a good guess at this time.

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