Daktronics (DAKT) Q1 2013 Earnings Call August 21, 2012 11:00 am ET Executives William R. Retterath - Chief Financial Officer, Principal Accounting Officer and Treasurer James B. Morgan - Chief Executive Officer, President and Director Analysts Stephen Altebrando - Sidoti & Company, LLC James Ricchiuti - Needham & Company, LLC, Research Division Richard A. Ryan - Dougherty & Company LLC, Research Division Morris Ajzenman - Griffin Securities, Inc., Research Division Robert Hoffman Presentation Operator
With that out of the way, I'll turn it over to Jim Morgan, our Chief Executive Officer, for some comments, after which I'll follow, and then, we'll open it up for some questions.James B. Morgan Good morning, everyone. Thanks for joining us. Our business operates somewhat like a 5-cylinder engine, with each business unit being one of the cylinders. And when we are hitting on all cylinders, we run really well. And we did that this quarter, not only in sales, but in orders as well and turned in some nice results. So hats off to all of our employees for their excellent work through the quarter. On the other hand, with the large contract component of some of our businesses -- so we do occasionally have a quarter where one of the business units is not so strong, and this is where the diversification of our business into the different market niches helps provide a more stable business overall over the long term. As we mentioned last quarter, we went into this quarter with a little pent-up demand in some areas. There were some orders that we were expecting that -- last quarter that got delayed and ended up in this first quarter. Likewise, we had some inventory built in the fourth quarter that converted to sales quickly when orders came in the first quarter. So to some degree, we set the stage for the good first quarter in the fourth quarter of last year. And this is an example of how our business tends to be a bit lumpy as well as seasonal. Our challenge on the operations side is to deal with this variability, and our people that fulfill orders for customers did a great job not only during this quarter, but in planning and preparing last quarter to execute this quarter. Again, the fact we had strong orders and ended with a strong backlog sets us up very well for a strong second quarter. Our factories are all very busy at this time, which is always a good indication. This quarter does tend to be our busiest quarter of the year, and we are prepared to execute well in the quarter and deliver against our backlog in meeting customer's needs.
Although we did have a nice improvement for the quarter and we were very pleased with the results, we have set a 3-year strategic goal for ourselves to significantly improve our operating margin. Our strategic plan includes continuing to grow the top line along with reduction of cost of sales as a percent of sales and continued focus on SG&A containment as we grow the top line.I'm going to leave my comments at that for now, and we look forward to responding to your questions after Bill gives a little more color on the numbers. William R. Retterath Thanks, Jim. As Jim noted, our orders and net sales are stronger than expected across our business units. Reaching the $132 million top line was driven primarily by better-than-expected results in our Live Events and Transportation business units. Live Events revenue was boosted by orders booked during the quarter that generated sales in the quarter. You can see by the comparisons to last year, we had a relatively weak first quarter last year on orders in Live Events, but made up for it in the second quarter. Typically, our first quarter order bookings in Live Events are higher than in the second quarter, so we're back to this year, where there's a more typical state. As Jim mentioned, our strong first quarter order bookings puts us in a good position for Q2, which should drive sales for the second quarter to levels higher than the second quarter of last fiscal year, which was $136 million. Read the rest of this transcript for free on seekingalpha.com