Daktronics Registers 14% Sales Growth In Q2; Margins Shrink Due To Inflation, Supply Chain Headwinds

Daktronics, Inc DAKT reported second-quarter FY23 net sales growth of 14% year-over-year to $187.4 million, beating the consensus of $184.2 million.
Orders for the quarter increased by 11.7% Y/Y.
Gross margin contracted 270 bps to 16.9% was caused by inflation in materials, freight, and personnel-related costs and supply chain disruptions.
Operating margin decreased by 190 bps to 0.8%.
Daktronics recognized a $14.0 million tax expense for Q2 due to a $13.0 million valuation allowance against its net deferred tax assets and the reversal of tax benefits recognized in Q1 due to its going concern assessment.
EPS loss was $(0.29) versus $0.05 profit a year earlier.
The product order backlog was $463.1 million. DAKT held $7.7 million in cash and equivalents.
Chair and CEO Reece Kurtenbach stated, "We achieved sales increases even though our capacity was constrained due to significant and unusual part shortages, a challenging labor environment, operating disruptions from COVID-19 related absences, and the first quarter COVID-19 mandated shutdown of our Shanghai production facilities."
The company also revealed that several conditions raise substantial doubt about its ability to continue as a going concern.
Price Action: DAKT shares closed higher by 13.1% at $1.98 on Friday.