Company Overview - Daktronics is the largest player in the North American LED Video Display market with a market share of approximately 46% [1] - The company differentiates itself through predominantly US-based manufacturing and comprehensive service offerings [1] - Daktronics has a significant international presence, excluding China [1] Financial Performance - FY24 marked a return to normal operations after pandemic-related challenges, with sales increasing by 2.9% in Q4 year-over-year [2] - Gross margin improved by 90 basis points to 25.7% in Q4, and for FY24, it was 27.2% compared to 20.1% in FY23 [2] - Operating margins were strong at 9% for Q4 and 10.6% for the full FY24 [2] - The company generated strong free cash flow, resulting in a balance sheet with $81.3 million in cash and $55 million in debt [2] Order Growth and Market Trends - Despite flat to declining order growth in H1 FY24, orders rebounded significantly in Q3 (29.4% growth) and Q4 (14.6% growth) [2][8] - Orders from the Live Events segment represented nearly 50% of total orders in Q4, driven by demand for enhanced entertainment facilities [14] - International order growth has accelerated, with significant investments made in sales, service, and fulfillment teams [14] Future Outlook - The company aims to reach $1 billion in revenue in the medium term, with FY25 revenue estimated at approximately $860 million, representing over 5% annual growth [8] - Operating income for FY25 is expected to be close to $85 million, with net income projected at $68 million or $1.47 per share [8] - The current P/E multiple is 9.2, which is attractive compared to industry peers trading at higher multiples [8][10] Strategic Initiatives - The company continues to invest in cloud-based software offerings, which yield higher margins and are less capital-intensive [6] - Management is focused on reducing operational costs and enhancing service capabilities to create recurring revenue streams [15] - The net cash position of $26 million provides flexibility for capital allocation, including share repurchases or acquisitions [7]

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Group 1: Stock Recommendations - EnerSys (ENS) is highlighted as a strong investment opportunity with a Zacks Rank 1 and a 3.9% increase in the Zacks Consensus Estimate for current year earnings over the last 60 days [1] - Brinker International, Inc. (EAT) also carries a Zacks Rank 1, with an 8.4% increase in the Zacks Consensus Estimate for current year earnings over the last 60 days [4] - Daktronics, Inc. (DAKT) is noted for its Zacks Rank 1 and a significant 34.5% increase in the Zacks Consensus Estimate for current year earnings over the last 60 days [6] Group 2: Financial Metrics - EnerSys has a PEG ratio of 0.66, which is lower than the industry average of 1.42, and possesses a Growth Score of B [7] - Brinker has a PEG ratio of 0.87 compared to the industry average of 2.72, and also has a Growth Score of B [2] - Daktronics has a PEG ratio of 0.41, which is lower than the industry average of 0.53, and holds a Growth Score of B [3]

Daktronics, Inc. (DAKT) : This electronic display systems company carries a Zacks Rank #1, and has witnessed the Zacks Consensus Estimate for its current year earnings increasing 34.5% over the last 60 days. Macy's, Inc. (M) : This omni-channel retail major carries a Zacks Rank #1, and has witnessed the Zacks Consensus Estimate for its current year earnings increasing 8.6% over the last 60 days. EnerSys (ENS) : This stored energy solutions company carries a Zacks Rank #1, and has witnessed the Zacks Consens ...

Financial Data and Key Metrics Changes - For fiscal Q4 2024, sales volume reached $216 million, a 2.9% increase from $210 million in the previous year, with full-year sales growing by 8.5% [42][44] - Operating income increased over four times compared to fiscal 2023, with operating margin at 10.6% for fiscal 2024, up from 2.8% the previous year [14][18] - Gross margin as a percentage of net sales improved to 25.7% in Q4 2024 from 24.8% in Q4 2023, driven by strategic focus on profitable markets and manufacturing efficiencies [16][70] - Cash position at year-end was $81.7 million, significantly up from $24.7 million, attributed to strong cash flow generation and efficient working capital management [47] Business Line Data and Key Metrics Changes - Orders increased by 14.6%, primarily due to growth in Live Events and International business units, with a year-over-year order increase of $59 million or 8.7% [7][8] - The commercial business unit experienced softness in large projects, while the Live Events segment saw strong demand, particularly from college and university projects [44][48] - The Transportation segment focused on intelligent transportation systems and secured orders from various state departments and airlines [71] Market Data and Key Metrics Changes - International orders began to rebound, indicating a recovery in customer demand as economic conditions stabilize [7][36] - The company noted a significant increase in sales in the high school market, growing from $112 million in fiscal 2022 to $170 million in fiscal 2024, indicating a trend towards full video conversion [50] Company Strategy and Development Direction - The company is focused on digital transformation, enhancing internal systems, and modernizing field service systems to improve operational efficiency and customer service [24][52] - There is a commitment to improving return on capital and consistently earning returns above the cost of capital, with initiatives aimed at capturing growth in existing markets and developing new opportunities [25][54] - The company aims to leverage its technology leadership and U.S. base to differentiate itself from competitors, focusing on high-quality solutions and customer service [54][75] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of international markets and the potential for growth in military business due to differentiated product offerings [30][63] - The company anticipates continued strong demand in Live Events as venues enhance facilities to attract audiences [48] - Management acknowledged the challenges posed by economic and geopolitical uncertainties but noted signs of increasing customer interest and order conversion [58] Other Important Information - The company has made significant investments in operational improvements and capacity utilization, which have contributed to increased profitability and cash flow generation [41][67] - The company is actively developing its e-sales channel to simplify purchasing processes and expand market reach [22] Q&A Session Summary Question: Are recurring revenue opportunities being marketed to new and existing customers? - Management confirmed that services are marketed to both new and existing customers, with expectations for these services to become a meaningful part of the business over time [28] Question: What is the outlook for military business expansion? - Management indicated that military business is promising, with a differentiated product line and partnerships with AV system integrators to meet specific requirements [30] Question: What are the expectations for international market recovery? - Management expressed hope for continued improvement in international markets, with indications that order flow is becoming easier [36][63] Question: What is the impact of new Flip-Chip technology on revenue and margins? - Management highlighted excitement about the Flip-Chip technology, noting its potential for enhancing product offerings, though it is too early to predict its full impact on profitability [57] Question: Is the recurring revenue from services at a higher margin than overall revenue? - Management confirmed that recurring revenue is at a higher margin and contributes significantly to customer satisfaction, indicating potential for future growth [61]

Financial Performance Highlights - Fiscal Year 2024 demonstrates the increased power of a more profitable business model[4] - Orders increased by 8.7% year-to-date and 14.6% in Fiscal Quarter 4[5] - Working capital increased by 58.2% from $132495 thousand to $209654 thousand[9] - Operating cash flow increased fourfold from $15025 thousand to $63240 thousand[9] - Sales were up 8.5% for the year[51] Profitability and Margins - Gross margin increased by 90 basis points to 25.7% in Fiscal Quarter 4 2024[7] - Operating margin increased by 780 basis points to 10.6% in Fiscal Quarter 4 2024[19] Strategic Focus and Achievements - The company has overcome past years' operational challenges[22] - The company is positioned for durable revenue, earnings, and cash flow[12] - The company further aligned its supply chain for stronger on-time delivery[15] Segment Performance (Orders) - Live Events orders increased by 24% year-to-date and 44% in Fiscal Quarter 4[20] - Commercial orders decreased by 14% year-to-date and 12% in Fiscal Quarter 4[20] - High School Park and Recreation orders increased by 3% year-to-date but decreased by 6% in Fiscal Quarter 4[20] - Transportation orders increased by 20% year-to-date but decreased by 1% in Fiscal Quarter 4[20] - International orders increased by 7% year-to-date and 80% in Fiscal Quarter 4[20]

FORM 10-K Filing Information [SEC Filing Header](index=1&type=section&id=UNITED%20STATES%20SECURITIES%20AND%20EXCHANGE%20COMMISSION) This document is an Annual Report on Form 10-K for the fiscal year ended April 27, 2024, filed by Daktronics, Inc - The document is an Annual Report on Form 10-K for the fiscal year ended **April 27, 2024**[19](index=19&type=chunk) [Registrant Details](index=1&type=section&id=Registrant%20Information) This section provides key identification details for Daktronics, Inc, including trading symbols and stock market value | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | |:---|:---|:---| | Common Stock, No Par Value | DAKT | Nasdaq Global Select Market | | Preferred Stock Purchase Rights | DAKT | Nasdaq Global Select Market | - The registrant is not a well-known seasoned issuer but has filed all required reports under the **Securities Exchange Act of 1934**[22](index=22&type=chunk) | Metric | Value (as of Oct 28, 2023 / June 3, 2024) | |:---|:---| | Aggregate market value of common stock (non-affiliates) | **~$445,961,756** | | Common stock outstanding (as of June 3, 2024) | **46,296,377 shares** | [Auditor Details](index=2&type=section&id=Auditor%20Information) This section identifies the independent registered public accounting firm for the company's financial statements - **Deloitte & Touche LLP**, located in Minneapolis, Minnesota (PCAOB No 34), serves as the auditor[24](index=24&type=chunk) [Forward-Looking Statements Disclaimer](index=4&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section provides a cautionary statement regarding forward-looking statements and associated risks - The report contains forward-looking statements regarding competition, financing, trends, growth, supply chain, and more[32](index=32&type=chunk) - Investors are cautioned that forward-looking statements are not guarantees of future performance and involve risks[32](index=32&type=chunk) PART I [ITEM 1. BUSINESS](index=4&type=section&id=ITEM%201.%20BUSINESS) This section overviews Daktronics, Inc's business, including its history, operations, products, and market segments [Business Overview](index=4&type=section&id=Business%20Overview) Daktronics, Inc is a global leader in designing and manufacturing electronic display and scoreboard systems - Daktronics is an industry leader in designing and manufacturing electronic scoreboards and video displays[33](index=33&type=chunk) - The company offers a complete line of products, from small scoreboards to multimillion-dollar video systems[33](index=33&type=chunk) - Founded in 1968, Daktronics employed **2,831 people globally** as of April 27, 2024[45](index=45&type=chunk)[108](index=108&type=chunk) [Available Information](index=5&type=section&id=Available%20Information) The company makes its financial reports freely available on its website and through the SEC - Annual, quarterly, and current reports are available in the 'Investor Relations' section of the company's website[39](index=39&type=chunk) [Industry Background](index=5&type=section&id=Industry%20Background) The visual display systems market is expanding due to technological advancements and decreasing system costs - Integrated visual display systems are increasingly used across diverse vertical markets like media, sports, and retail[42](index=42&type=chunk) - Advances in technologies and decreasing system costs have expanded the market size for visual display systems[42](index=42&type=chunk) - Product evolution has progressed from scoreboards to complex, integrated full-color LED video displays[48](index=48&type=chunk) [Description of Business Activities](index=5&type=section&id=Description%20of%20Business%20Activities) Daktronics engages in a full spectrum of activities from marketing and engineering to manufacturing and support [Marketing and Sales](index=5&type=section&id=Marketing%20and%20Sales) The company utilizes a combination of direct sales staff and resellers to support various customer types globally - The sales force includes direct staff and global resellers, supporting all customer types in sales and service[16](index=16&type=chunk) - Direct sales primarily target large integrated display systems for professional sports, commercial, and transportation[16](index=16&type=chunk) - Resellers mainly sell standard catalog products like video boards and dynamic message systems[16](index=16&type=chunk) [Engineering and Product Design and Development](index=5&type=section&id=Engineering%20and%20Product%20Design%20and%20Development) Daktronics invests heavily in engineering and partnerships to drive product innovation and new technologies - The company applies engineering resources to anticipate and rapidly respond to market system needs[49](index=49&type=chunk)[50](index=50&type=chunk) - Investments are made in development and affiliates to advance software, support customer needs, and develop new technologies[7](index=7&type=chunk)[50](index=50&type=chunk) [Manufacturing](index=6&type=section&id=Manufacturing) Daktronics manufactures most products in the US, focusing on in-house production and lean manufacturing - The majority of products are manufactured in the **United States** (South Dakota, Minnesota), with facilities in China and Ireland[58](index=58&type=chunk) - The company performs component, system, and testing in-house to control quality and improve response time[58](index=58&type=chunk) - Key strategies include standardization, supplier management programs, and lean manufacturing techniques[58](index=58&type=chunk) [Technical Contracting](index=6&type=section&id=Technical%20Contracting) Daktronics acts as a technical contractor for large display system installations, providing custom solutions - The company serves as a technical contractor for larger display system installations requiring custom designs[59](index=59&type=chunk) - Proposals often include site preparation and installation services, utilizing a network of subcontractors globally[59](index=59&type=chunk) [Professional Services](index=6&type=section&id=Professional%20Services) Daktronics offers a range of professional services including event support, content creation, and training - Professional services include event support, content creation, product maintenance, and hardware/software training[51](index=51&type=chunk) [Customer Service and Support](index=6&type=section&id=Customer%20Service%20and%20Support) The company provides comprehensive customer service, including warranties, help-desk access, and on-site support - Limited warranties range from **one to 10 years**, covering defective parts or workmanship[52](index=52&type=chunk) - Services include **24-hour help-desk access**, parts repair, display monitoring, and on-site support[52](index=52&type=chunk) [Products and Technologies](index=6&type=section&id=Products%20and%20Technologies) Daktronics offers a diverse portfolio of electronic display products and control systems for various applications - The company's product families include video displays, scoreboards, message signs, and sound systems[54](index=54&type=chunk)[62](index=62&type=chunk) - Products are customized based on customer design specifications and environmental conditions[53](index=53&type=chunk) [Video Displays/Video Walls](index=7&type=section&id=Video%20Displays/Video%20Walls) Daktronics offers a broad range of indoor and outdoor LED video displays with customizable features - Video displays are comprised of full-color pixels using red, green, and blue LEDs for a full color spectrum[62](index=62&type=chunk) - Key variables include pixel spacing (pitch), resolution, brightness (nits), color depth, and viewing angles[62](index=62&type=chunk) - Applications range from centerhung displays and digital billboards to corporate offices and retail stores[63](index=63&type=chunk)[64](index=64&type=chunk) [Scoreboards and Timing Systems](index=7&type=section&id=Scoreboards%20and%20Timing%20Systems) The company provides a comprehensive line of scoreboards and timing products for various sports - The product line includes indoor/outdoor scoreboards, digit displays, controllers, and statistics software[71](index=71&type=chunk) - Controllers range from handheld (All Sport® 100) to sophisticated systems (All Sport® Pro)[65](index=65&type=chunk) - **DakStats® software** is a leading application for sports statistics in collegiate and high school sports[66](index=66&type=chunk) [LED Message Displays and Signs](index=7&type=section&id=LED%20Message%20Displays%20and%20Signs) The Galaxy® product line offers full-matrix LED displays controlled by the Venus® Control Suite - **Galaxy® displays** are full-matrix, available in indoor and outdoor models, and controlled by the Venus® Control Suite[56](index=56&type=chunk) - They can display text, graphics, animation, and prerecorded video clips for information and advertising[56](index=56&type=chunk) - The **Venus® Control Suite** is user-friendly and scalable from single displays to large networks[57](index=57&type=chunk) [ITS Dynamic Message Signs ("DMS")](index=7&type=section&id=ITS%20Dynamic%20Message%20Signs%20%28%22DMS%22%29) The Vanguard® family of LED displays is designed for road management and traffic information applications - **Vanguard®** dynamic message displays are LED products used to direct traffic and inform motorists[72](index=72&type=chunk) - A Vanguard® control system helps transportation agencies manage large networks of these displays[72](index=72&type=chunk) [Mass Transit Displays](index=8&type=section&id=Mass%20Transit%20Displays) The company offers a wide range of LCD and LED display solutions for public transportation networks - Mass Transit products include LCD and LED display solutions for public transportation applications[67](index=67&type=chunk) - Installations typically involve a network of displays at railway platforms, bus stations, or concourses[67](index=67&type=chunk) [Sound Systems](index=8&type=section&id=Sound%20Systems) Daktronics provides standard and custom sound systems for various indoor and outdoor sports venues - Sound systems offer standard and custom options, designed for indoor and outdoor sports venues[68](index=68&type=chunk) - Custom systems are tailored for larger venues and often integrated into complete venue solutions[68](index=68&type=chunk) [Digital Billboards](index=8&type=section&id=Digital%20Billboards) The company's digital billboards provide a unique solution for the Out-of-Home (OOH) advertising industry - Digital billboards offer a unique display solution for the **Out-of-Home (OOH)** advertising industry[69](index=69&type=chunk) - Features include a patented mounting system, self-adjusting brightness, and enhanced network security[69](index=69&type=chunk) [Digital Street Furniture](index=8&type=section&id=Digital%20Street%20Furniture) Daktronics' digital street furniture provides bright, eye-level advertising content for urban environments - LED street furniture features bright imagery, built to withstand full-sun conditions for eye-level advertising[75](index=75&type=chunk) - This product line is described as the most flexible solution for digital OOH campaigns[75](index=75&type=chunk) [Digit and Price Displays](index=8&type=section&id=Digit%20and%20Price%20Displays) This product line includes DataTime® displays and Fuelight™ displays for the petroleum industry - The product line includes **DataTime®** time/temperature displays and **Fuelight™** digit displays for the petroleum industry[76](index=76&type=chunk) - Fuelight™ displays offer high visibility and quick fuel price updates using **Fuelink™** control software[76](index=76&type=chunk) [Indoor Dynamic Messaging Systems and LCD screens](index=8&type=section&id=Indoor%20Dynamic%20Messaging%20Systems%20and%20LCD%20screens) ADFLOW DMS™ systems provide indoor networked solutions for businesses like retailers and convenience stores - **ADFLOW DMS™** systems offer indoor networked solutions for retailers, convenience stores, and other businesses[77](index=77&type=chunk) - These solutions utilize LED or LCD technologies to broadcast advertising campaigns and information[77](index=77&type=chunk) [Software and Controllers](index=8&type=section&id=Software%20and%20Controllers) Daktronics offers the Venus® Control Suite for scheduled content and the Show Control Suite for live production - The **Venus® Control Suite** is a platform for scheduled control capability, available on-premise or cloud-based[82](index=82&type=chunk) - The **Show Control Suite** is an integrated solution for dynamic, seamless, and immersive game-day production[83](index=83&type=chunk) - Control solutions can combine Venus® and Show Control capabilities for managing scheduled and live content[82](index=82&type=chunk) [Raw Materials](index=8&type=section&id=Raw%20Materials) The company sources materials globally, exposing it to supply chain, price, and geopolitical risks - Materials like LEDs, integrated circuits, and metals are sourced globally[70](index=70&type=chunk) - Reliance on single-source or limited suppliers creates risks from supplier loss, price changes, or geopolitical impacts[70](index=70&type=chunk) - The sourcing group implements strategies to mitigate these risks, including pricing agreements and purchasing contracts[70](index=70&type=chunk) [Intellectual Property](index=8&type=section&id=Intellectual%20Property) Daktronics protects its competitive position through numerous global patents, copyrights, and trademarks - The company owns or holds licenses to numerous patents, copyrights, and trademarks globally[79](index=79&type=chunk)[86](index=86&type=chunk) - Reliance is also placed on nondisclosure agreements with employees and agents to protect intellectual property[86](index=86&type=chunk) - Despite protections, there is no assurance competitors will not copy product functions or features[86](index=86&type=chunk) [Customers](index=9&type=section&id=Customers) Daktronics serves a large and diverse worldwide customer base, emphasizing long-term relationships - The company has a large and diverse worldwide customer base, from local businesses to professional sports arenas[80](index=80&type=chunk) - The company strives to serve customers over the long-term, but the loss of customers could have an adverse effect[80](index=80&type=chunk) [Product Order Backlog](index=9&type=section&id=Product%20Order%20Backlog) Product order backlog decreased in fiscal 2024 due to faster order fulfillment and normalized order rates - Backlog represents the dollar value of orders expected to be recognized in future net sales[81](index=81&type=chunk) | Metric | April 27, 2024 | April 29, 2023 | |:---|:---|:---| | Product Order Backlog | **$316.9 million** | **$400.7 million** | - The decrease in backlog is attributed to faster order fulfillment, stabilized supply chains, and normalized order rates[2](index=2&type=chunk)[3](index=3&type=chunk) - The backlog as of April 27, 2024, is expected to be fulfilled within the next **24 months**[3](index=3&type=chunk) [Seasonality](index=9&type=section&id=Seasonality) Net sales and profitability fluctuate due to order types, sports market seasonality, and construction cycles - Net sales and profitability fluctuate due to uniquely configured orders and the seasonality of the sports market[87](index=87&type=chunk) - The **third fiscal quarter** typically sees lighter sales and profit levels due to seasonality and holidays[87](index=87&type=chunk) - Gross margins tend to fluctuate more on uniquely configured orders, which generally have lower margins[88](index=88&type=chunk) [Working Capital](index=9&type=section&id=Working%20Capital) The report refers to the MD&A section for detailed information regarding working capital items - Information regarding working capital is provided in 'Part II, Item 7 Management's Discussion and Analysis'[89](index=89&type=chunk) [Reportable Segments](index=5&type=section&id=Reportable%20Segments) Daktronics organizes its sales and marketing efforts into five business segments - The company focuses sales and marketing on markets, geographical regions, and products, with five business segments[40](index=40&type=chunk) - Segments include four domestic units (Commercial, Live Events, High School, Transportation) and one International unit[40](index=40&type=chunk) [Competition](index=10&type=section&id=Competition) Daktronics operates in a highly competitive market, facing diverse domestic and foreign competitors - The company faces a wide variety of domestic and foreign competitors that vary by product and geographic area[93](index=93&type=chunk) - Competitors may offer lower-cost products, charge lower prices, or provide different service offerings[93](index=93&type=chunk) - Some competitors have more capital, governmental funding, and resources, allowing them to adapt quickly[93](index=93&type=chunk) - Products also compete with other forms of advertising, such as television, print media, and digital signs[93](index=93&type=chunk) [Government and Other Regulation](index=10&type=section&id=Government%20and%20Other%20Regulation) Daktronics is subject to various global trade, environmental, safety, and operational regulations - The global supply chain subjects the company to trade compliance regulations, including tariffs and import/export rules[4](index=4&type=chunk) - The company is subject to regulations restricting movement and business operations, such as lockdown orders[5](index=5&type=chunk) - Products and facilities must comply with industry-specific requirements, including environmental and safety standards[91](index=91&type=chunk)[97](index=97&type=chunk) - Global operations also subject the company to laws on tax, anti-corruption, data privacy, and climate[92](index=92&type=chunk) [Employees and Human Capital Resource Management](index=11&type=section&id=Employees%20and%20Human%20Capital%20Resource%20Management) As of April 27, 2024, Daktronics employed 2,831 people, with a strong commitment to DEI and safety | Employee Type | Number (as of April 27, 2024) | |:---|:---| | Full-time employees | **2,520** | | Part-time/temporary employees | **311** | | Total employees | **2,831** | | Function | Number (as of April 27, 2024) | |:---|:---| | Manufacturing | **1,149** | | Sales and marketing | **482** | | Customer service | **570** | | Engineering | **387** | | General and administrative | **243** | - The company's core values support diversity, equity, and inclusion, aiming to recruit and develop its workforce[13](index=13&type=chunk) - Safety and well-being are top priorities, with training provided for job site and facility safety[103](index=103&type=chunk) [Research and Development](index=11&type=section&id=Research%20and%20Development) Fiscal 2024 design teams focused on enhancing video technology, advancing micro-LEDs, and sustainability - During fiscal 2024, design teams invested in product design to improve video and sustainable technologies[107](index=107&type=chunk) - Focus areas included advancing micro-LED devices, varied pixel density, and expanded product line offerings[107](index=107&type=chunk) - Experience in engineering and product development is crucial for creating up-to-date digital display solutions[102](index=102&type=chunk) [ITEM 1A. RISK FACTORS](index=11&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section outlines risks that could adversely affect Daktronics' business, operating results, and financial condition - Investing in common stock involves risks that could materially affect business and lead to a decline in stock price[14](index=14&type=chunk)[104](index=104&type=chunk) [Macroeconomic Risks](index=11&type=section&id=Macroeconomic%20Risks) Daktronics is sensitive to global economic conditions, inflation, geopolitical events, and health epidemics - The business is sensitive to global economic conditions, including recessions, inflation, and interest rate fluctuations[8](index=8&type=chunk) - Weakened global economic conditions can reduce customer willingness to purchase products or delay decisions[106](index=106&type=chunk) - Reliance on global supply chains and inflationary pressures can increase input costs faster than price increases[109](index=109&type=chunk) - Geopolitical issues, conflicts, and governmental actions can create trade restrictions and increase raw material prices[541](index=541&type=chunk)[542](index=542&type=chunk)[543](index=543&type=chunk) - Health epidemics, such as the COVID-19 pandemic, can disrupt operations and cause supply or labor shortages[547](index=547&type=chunk)[548](index=548&type=chunk) [Risks Related to Our Business and Industry](index=13&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) The company faces intense competition, supply chain vulnerabilities, and risks from large, fixed-price contracts - Operating in highly competitive markets, the company faces significant competition and pricing pressures[110](index=110&type=chunk)[579](index=579&type=chunk) - Dependence on single-source or limited suppliers makes the company vulnerable to supply chain disruptions[544](index=544&type=chunk)[545](index=545&type=chunk)[546](index=546&type=chunk) - The complex supply chain is vulnerable to risks like shortages, delays, and increased freight costs[113](index=113&type=chunk)[581](index=581&type=chunk) - Inability to efficiently utilize capacity or accurately plan requirements can decrease profitability[521](index=521&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk) - **Fixed-price contracts** carry risks of actual costs exceeding estimates, potentially reducing profits[561](index=561&type=chunk)[119](index=119&type=chunk) - Unanticipated warranty costs for defective products could adversely affect financial results and reputation[592](index=592&type=chunk) - Acquisitions, investments, and divestitures pose financial, management, and other risks[594](index=594&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk) - Impairment of goodwill could result in significant non-cash charges, as occurred in fiscal 2023 with a **$4.6 million** charge[569](index=569&type=chunk)[597](index=597&type=chunk) [Information Systems, Legal, and Regulatory Risks](index=19&type=section&id=Information%20Systems%2C%20Legal%2C%20and%20Regulatory%20Risks) The company is vulnerable to cybersecurity breaches and exposed to diverse global regulatory and legal risks - Dependence on complex information systems means any failure or data breach could adversely affect operations[572](index=572&type=chunk)[632](index=632&type=chunk) - Global operations expose the company to regulatory, geopolitical, and economic changes, with non-compliance risks[130](index=130&type=chunk)[600](index=600&type=chunk)[602](index=602&type=chunk)[634](index=634&type=chunk) - Increasing privacy and data protection laws (e.g., GDPR) can increase compliance costs and lead to fines[535](index=535&type=chunk)[576](index=576&type=chunk)[603](index=603&type=chunk) - Changes in global tax laws could materially adversely affect future income taxes and financial condition[160](index=160&type=chunk)[161](index=161&type=chunk)[605](index=605&type=chunk)[637](index=637&type=chunk) - Difficulty or expense in obtaining adequate insurance coverage could adversely affect financial condition[606](index=606&type=chunk)[162](index=162&type=chunk) - Compliance with environmental, health, and safety laws regarding hazardous materials can be expensive[131](index=131&type=chunk)[601](index=601&type=chunk) - ESG regulations and disclosures may impact reputation, expose the company to additional costs, or affect share price[134](index=134&type=chunk)[604](index=604&type=chunk) - Compliance with 'conflict minerals' disclosure requirements imposes costs and reputational challenges[137](index=137&type=chunk)[607](index=607&type=chunk) - Ineffective internal control over financial reporting could result in financial statement errors, as seen in fiscal 2023[525](index=525&type=chunk)[136](index=136&type=chunk)[638](index=638&type=chunk) [Risks Related to an Investment in Our Common Stock](index=23&type=section&id=Risks%20Related%20to%20an%20Investment%20in%20Our%20Common%20Stock) Investment in the company's common stock carries risks including anti-takeover provisions and price volatility - Anti-takeover provisions could discourage, delay, or prevent a change in control, depressing the market price[138](index=138&type=chunk)[164](index=164&type=chunk)[608](index=608&type=chunk)[640](index=640&type=chunk) - The common stock has at times been **thinly traded**, which may result in low liquidity and price volatility[536](index=536&type=chunk)[641](index=641&type=chunk) - Significant changes in the market price of common stock could lead to securities litigation claims[139](index=139&type=chunk)[609](index=609&type=chunk) - Actions by activist shareholders can be costly, time-consuming, and disrupt operations[166](index=166&type=chunk)[526](index=526&type=chunk) - Executive officers, directors, and principal shareholders have the ability to significantly influence shareholder matters[141](index=141&type=chunk)[643](index=643&type=chunk) [ITEM 1B. UNRESOLVED STAFF COMMENTS](index=24&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) This section states that there are no unresolved comments from the SEC staff - There are **no unresolved staff comments**[167](index=167&type=chunk)[611](index=611&type=chunk) [ITEM 1C. CYBERSECURITY](index=24&type=section&id=ITEM%201C.%20CYBERSECURITY) This section details Daktronics' cybersecurity program, governance structure, and risk management strategies [Cybersecurity Governance](index=25&type=section&id=Cybersecurity%20Governance) The cybersecurity program is overseen by the Board's Strategy and Risk Committee and led by the VP of IT - The **Strategy and Risk Committee** of the Board of Directors oversees the company's cybersecurity risks and strategy[614](index=614&type=chunk) - Management provides periodic reports on cybersecurity risks and mitigation efforts to the committee and the Board[614](index=614&type=chunk) - The program is led by the **Vice President of Information Technology** and utilizes internal and external technical experts[169](index=169&type=chunk) [Cybersecurity Risk Management and Strategy](index=24&type=section&id=Cybersecurity%20Risk%20Management%20and%20Strategy) The cybersecurity program is designed to prevent, detect, mitigate, and remediate cyber risks - The cybersecurity program is aligned with company strategy and designed to manage cyber risks and incidents[142](index=142&type=chunk)[168](index=168&type=chunk) - Measures include periodic use of independent advisors, penetration tests, an incident response plan, and employee training[537](index=537&type=chunk) - The company has not encountered cybersecurity incidents that have **materially impaired** operations or financial standing[646](index=646&type=chunk) [ITEM 2. PROPERTIES](index=25&type=section&id=ITEM%202.%20PROPERTIES) Daktronics' principal properties in the US, China, and Ireland are considered suitable and adequate for its needs - Principal properties include space for manufacturing, designing, testing, and employee collaboration[145](index=145&type=chunk) | Location | Ownership | Square Footage | Facility Activities | |:---|:---|:---|:---| | Brookings, SD, USA | Owned | **771,000** | Corporate Headquarters, Manufacturing, Sales, Service | | Redwood Falls, MN, USA | Owned | **151,000** | Manufacturing, Sales, Service, Office | | Ennistymon, Ireland | Owned | **62,000** | Manufacturing, Sales, Service, Office | | Sioux Falls, SD, USA | Leased | **296,000** | Manufacturing, Sales, Service, Office | | Shanghai, China | Leased | **157,000** | Manufacturing, Sales, Service, Office | - All properties are considered suitable and adequate, with owned real property encumbered under the Credit Facility[145](index=145&type=chunk)[616](index=616&type=chunk) [ITEM 3. LEGAL PROCEEDINGS](index=26&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company is involved in routine legal actions that are not expected to have a material adverse effect - The company is a party to legal proceedings and claims arising during the ordinary course of business[423](index=423&type=chunk) - Management believes the disposition of these matters will **not have a material adverse effect** on financial condition[649](index=649&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=26&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This section states that mine safety disclosures are not applicable to the company's operations - The information required for mine safety disclosures is **not applicable**[147](index=147&type=chunk)[739](index=739&type=chunk) PART II [ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES](index=26&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT'S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) This section provides information on the company's common stock, shareholder count, and repurchase program [Stock Performance](index=26&type=section&id=Stock%20Performance) Daktronics' common stock is quoted on The Nasdaq Global Select Market under the ticker symbol DAKT - Common stock is quoted on The Nasdaq Global Select Market under the ticker symbol **DAKT**[148](index=148&type=chunk) - As of June 3, 2024, there were **852 shareholders of record**[148](index=148&type=chunk) [Share Repurchases](index=27&type=section&id=Share%20Repurchases) The company made no stock repurchases in fiscal 2024 or 2023, with $29.4 million remaining in its program - A stock repurchase program for up to **$40.0 million** was reauthorized in December 2021[332](index=332&type=chunk)[361](index=361&type=chunk)[619](index=619&type=chunk) - **No repurchases** of common stock were made during fiscal years 2024 and 2023[333](index=333&type=chunk)[619](index=619&type=chunk) - As of April 27, 2024, **$29.4 million** of remaining capacity was available under the program[333](index=333&type=chunk)[619](index=619&type=chunk) [ITEM 6. [Reserved.]](index=24&type=section&id=ITEM%206.%20%5BReserved.%5D) This item is reserved and contains no information - This item is **reserved**[27](index=27&type=chunk) [ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=27&type=section&id=ITEM%207.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the company's financial condition and results of operations - The MD&A should be read in conjunction with the Consolidated Financial Statements and Notes[174](index=174&type=chunk) - Year-over-year comparisons are for fiscal years ended April 27, 2024, and April 29, 2023[621](index=621&type=chunk) [Overview](index=28&type=section&id=Overview) Daktronics, Inc is a leading designer and manufacturer of electronic display systems and integrated solutions - Daktronics is an industry leader in designing and manufacturing electronic display systems for various applications[209](index=209&type=chunk) - The company engages in a full range of activities from marketing and sales to manufacturing and customer support[209](index=209&type=chunk) - The fiscal year ended April 27, 2024, contained operating results for **52 weeks**[528](index=528&type=chunk) [Known Trends and Uncertainties](index=28&type=section&id=Known%20Trends%20and%20Uncertainties) The digital display market continues to expand, but customer purchasing is influenced by macroeconomic factors - The expansion of digital display systems in the global market continues post-pandemic[176](index=176&type=chunk) - Customer purchasing decisions depend on the macroeconomic environment, interest rates, and geopolitical events[176](index=176&type=chunk) - Audiovisual industry fundamentals, including increased use of LED systems, are expected to drive long-term growth[539](index=539&type=chunk) - Inflation in parts supply and labor stabilized in fiscal 2024[210](index=210&type=chunk) [Consolidated Performance Summary](index=29&type=section&id=Consolidated%20Performance%20Summary) Daktronics achieved significant financial improvements in fiscal 2024, with substantial growth in sales and income | Metric | FY2024 ($ thousands) | FY2023 ($ thousands) | Dollar Change ($ thousands) | Percent Change (%) | |:---|:---|:---|:---|:---| | Net sales | **818,083** | 754,196 | 63,887 | **8.5** | | Gross profit | **222,443** | 151,355 | 71,088 | **47.0** | | Operating income | **87,115** | 21,388 | 65,727 | **307.3** | | Net income | **34,621** | 6,802 | 27,819 | **409.0** | | Diluted earnings per share | **0.74** | 0.15 | 0.59 | **397.8** | | Orders | **740,171** | 680,954 | 59,217 | **8.7** | [Results of Operations (Fiscal Year 2024 vs. 2023)](index=29&type=section&id=Results%20of%20Operations%20%28Fiscal%20Year%202024%20vs.%202023%29) Fiscal 2024 saw significant improvements in net sales and profitability due to a stable operating environment [Net Sales](index=29&type=section&id=Net%20Sales) Net sales grew in fiscal 2024 due to a stable operating environment, improved supply chain, and strong orders - Net sales growth was driven by a stable operating environment, supply chain stabilization, and increased capacity[212](index=212&type=chunk) - Order volume growth is attributable to a stable macroeconomic environment and market adoption of digital displays[213](index=213&type=chunk) - Fewer large-sized projects were booked in Commercial and International segments during fiscal 2024[213](index=213&type=chunk) [Cost of Sales and Gross Profit](index=30&type=section&id=Cost%20of%20Sales%20and%20Gross%20Profit) Gross profit percentage increased significantly due to strategic pricing, record sales volume, and stabilized costs - Gross profit percentage increased due to strategic pricing, record sales volume, and fewer operational disruptions[626](index=626&type=chunk) - Total warranty expense as a percent of sales increased to **2.3%** in fiscal 2024 from 2.1% in fiscal 2023[626](index=626&type=chunk) - Operating income was positively impacted by **$4.1 million** of overtime revenue due to favorable project execution[529](index=529&type=chunk)[742](index=742&type=chunk) [Operating Expenses](index=30&type=section&id=Operating%20Expenses) Operating expenses increased in G&A and R&D, while selling expenses remained relatively flat - Selling expenses were relatively flat, with wage increases offset by less bad debt and commission costs[180](index=180&type=chunk) - General and administrative expenses increased due to additional personnel and digital transformation strategies[658](index=658&type=chunk) - Product design and development increased due to higher staffing levels and focus on new technologies[214](index=214&type=chunk) - All expense lines increased for variable compensation and profit sharing, totaling **$6.5 million** in fiscal 2024[657](index=657&type=chunk) [Nonoperating (Expense) Income](index=30&type=section&id=Nonoperating%20%28Expense%29%20Income) Nonoperating expenses increased significantly, driven by higher interest, a Convertible Note fair value change, and affiliate losses - Interest expense increased due to new financings at higher borrowed values and interest rates[627](index=627&type=chunk) - Change in fair value of the Convertible Note resulted in a **$16.55 million expense**[178](index=178&type=chunk)[688](index=688&type=chunk) - Other expense comprised **$10.1 million** of losses from equity method affiliates and **$3.4 million** in debt issuance costs[181](index=181&type=chunk) [Income Tax Expense](index=30&type=section&id=Income%20Tax%20Expense) Income tax expense increased significantly due to higher pre-tax income, with an effective tax rate of 35.9% - Income tax expense increased due to the year-over-year increase in Income before income taxes[659](index=659&type=chunk) - The effective tax rate for fiscal 2024 was **35.9%**, impacted by the non-deductible Convertible Note expense[659](index=659&type=chunk)[633](index=633&type=chunk) - Additional factors included valuation allowances on equity investments and state taxes[659](index=659&type=chunk)[633](index=633&type=chunk) - The effective tax rate for fiscal 2023 was **48.7%**, impacted by valuation allowances and goodwill impairment[659](index=659&type=chunk)[540](index=540&type=chunk) [Reportable Segment Performance Summary](index=32&type=section&id=Reportable%20Segment%20Performance%20Summary) All segments experienced improved contribution margins in fiscal 2024, driven by enhanced gross profit - All segments' improved contribution margin is mostly attributable to improved gross profit as a percentage of sales[691](index=691&type=chunk) - Gross profit improved due to strategic pricing, stabilized input costs, record sales volume, and fewer disruptions[691](index=691&type=chunk) - Improved operational efficiency and fulfillment of backlog resulted in increased sales[691](index=691&type=chunk) | Segment | Net Sales FY2024 ($ thousands) | Net Sales FY2023 ($ thousands) | Gross Profit FY2024 ($ thousands) | Gross Profit FY2023 ($ thousands) | Operating Income (Loss) FY2024 ($ thousands) | Operating Income (Loss) FY2023 ($ thousands) | |:---|:---|:---|:---|:---|:---|:---| | Commercial | 161,626 | 170,590 | 34,233 | 31,155 | 16,808 | 14,025 | | Live Events | 338,508 | 284,900 | 95,984 | 49,255 | 84,993 | 36,734 | | High School Park and Recreation | 170,349 | 141,748 | 57,364 | 41,145 | 43,088 | 27,621 | | Transportation | 85,390 | 72,306 | 26,021 | 19,825 | 21,894 | 15,901 | | International | 62,210 | 84,652 | 8,841 | 9,975 | (1,295) | (4,157) | | Total | **818,083** | **754,196** | **222,443** | **151,355** | **87,115** | **21,388** | [Commercial Segment](index=33&type=section&id=Commercial%20Segment) The Commercial segment saw decreased net sales and orders due to volatility in large projects - Net sales and orders decreased due to volatility in large Spectacular LED video display projects and fewer billboards[185](index=185&type=chunk) - Gross profit as a percentage of sales improved by **2.9 points**[185](index=185&type=chunk) - Selling expenses remained relatively flat in dollars but increased as a percentage of sales[185](index=185&type=chunk) [Live Events Segment](index=33&type=section&id=Live%20Events%20Segment) The Live Events segment saw increased net sales driven by fulfilling backlog and strong new order bookings - Net sales increased due to fulfilling pent-up order backlog and returning to market-acceptable lead times[662](index=662&type=chunk) - Order bookings increased due to an active market of upgrades in sports-related facilities[662](index=662&type=chunk) - Gross profit as a percentage of sales improved by **11.1 points**, offset by a $3.3 million warranty charge[662](index=662&type=chunk) - Selling expenses increased for personnel-related costs but declined as a percentage of sales[662](index=662&type=chunk) [High School Park and Recreation Segment](index=33&type=section&id=High%20School%20Park%20and%20Recreation%20Segment) This segment experienced increased net sales from fulfilling backlog and sustained demand for video products - Net sales increased due to fulfilling pent-up orders and market demand for video-related products in High Schools[219](index=219&type=chunk) - Video projects represent larger dollar-sized transactions than traditional scoreboard products[219](index=219&type=chunk) - Segment contribution margin profitability was primarily driven by improved gross profit[219](index=219&type=chunk) [Transportation Segment](index=33&type=section&id=Transportation%20Segment) Net sales increased due to fulfilling backlog and continued bookings for large transportation system projects - Net sales increased due to fulfilling orders in backlog and continued bookings for large transportation projects[692](index=692&type=chunk) - Gross profit as a percentage of sales increased by **3.1 points**, primarily due to strategic pricing[692](index=692&type=chunk) - Segment contribution margin improvements were offset by **$1.7 million** in warranty charges[692](index=692&type=chunk) [International Segment](index=33&type=section&id=International%20Segment) The International segment saw decreased net sales and orders due to lower backlog and reduced market activity - Net sales decreased due to lower backlog and lower orders[186](index=186&type=chunk) - Global geopolitical events reduced market activity for digital display systems, causing a decrease in orders[186](index=186&type=chunk) - Gross margin increased by **2.4 points** primarily due to strategic pricing actions[186](index=186&type=chunk) - International operated at a negative **$1.3 million** contribution margin[186](index=186&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity improved significantly in fiscal 2024, driven by increased cash from operations and new financing [Net Cash Flows](index=34&type=section&id=Net%20Cash%20Flows) Net cash from operating activities increased substantially due to improved profitability | Cash Flow Activity | FY2024 ($ thousands) | FY2023 ($ thousands) | Dollar Change ($ thousands) | |:---|:---|:---|:---| | Operating activities | **63,241** | 15,024 | 48,217 | | Investing activities | **(21,306)** | (25,388) | 4,082 | | Financing activities | **15,122** | 17,568 | (2,446) | | Effect of exchange rate changes | **(69)** | (522) | 453 | | Net increase in cash | **56,988** | 6,682 | 50,306 | - Net cash provided by operating activities increased to **$63.2 million**, driven by improved profitability[664](index=664&type=chunk) - Net cash used in investing activities was **$21.3 million**, with purchases of property and equipment totaling $17.0 million[221](index=221&type=chunk) - Net cash provided by financing activities was **$15.1 million**, resulting from new debt offset by payoff of a credit line[694](index=694&type=chunk) [Debt and Cash](index=34&type=section&id=Debt%20and%20Cash) As of April 27, 2024, the company held $81.3 million in cash and had $34.2 million available under its ABL facility - As of April 27, 2024, the company had **$81.3 million** in cash and **$34.2 million** in borrowing capacity[222](index=222&type=chunk)[665](index=665&type=chunk) - The Credit Facility includes a **$60.0 million ABL** and a **$15.0 million Delayed Draw Loan**[527](index=527&type=chunk)[665](index=665&type=chunk) - A **$25.0 million Convertible Note** (due May 2027) is secured by a second priority lien on ABL assets[665](index=665&type=chunk) - As of April 27, 2024, the company was in compliance with all financial covenants[222](index=222&type=chunk) [Working Capital](index=34&type=section&id=Working%20Capital) Working capital increased to $209.7 million, influenced by seasonality and the timing of large project payments | Metric | April 27, 2024 ($ thousands) | April 29, 2023 ($ thousands) | |:---|:---|:---| | Working Capital | **209,700** | **132,500** | - Changes in working capital are impacted by sports market seasonality and the timing of payments on large orders[223](index=223&type=chunk)[667](index=667&type=chunk) - The company had **$14.5 million** of retainage on long-term contracts included in receivables as of April 27, 2024[224](index=224&type=chunk) - An aggregate **$190.0 million** bonding line is available, with $44.5 million of bonded work outstanding[225](index=225&type=chunk) [Other Liquidity and Capital Uses](index=35&type=section&id=Other%20Liquidity%20and%20Capital%20Uses) The long-term capital allocation strategy prioritizes funding operations, growth, debt reduction, and shareholder returns - Long-term capital allocation strategy prioritizes funding operations, maintaining liquidity, and returning cash to shareholders[191](index=191&type=chunk) - Projected capital expenditures for fiscal 2025 are approximately **$27 million**[668](index=668&type=chunk) - Additional investments are planned for digital transformation strategies, including modernizing service systems[668](index=668&type=chunk) - The company is committed to investing an additional **$0.5 million** in current affiliates in fiscal 2025[668](index=668&type=chunk) [Critical Accounting Policies and Estimates](index=35&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Revenue recognition on uniquely configured contracts and warranty estimations are the most critical accounting policies - Critical accounting policies require management's most difficult, subjective, or complex judgments[669](index=669&type=chunk) - The estimation processes for uniquely configured contracts and warranties are considered most material and critical[669](index=669&type=chunk) - Estimates are based on historical experience, GAAP interpretation, and other reasonable assumptions[669](index=669&type=chunk) [Revenue Recognition on Uniquely Configured Contracts](index=35&type=section&id=Revenue%20Recognition%20on%20Uniquely%20Configured%20Contracts) Revenue for custom or integrated systems is recognized over time using the cost-to-cost input method - Revenue for uniquely configured systems is recognized over time using the **cost-to-cost input method**[226](index=226&type=chunk)[670](index=670&type=chunk) - This method is appropriate because the company has no alternative use for the system and an enforceable right to payment[670](index=670&type=chunk) - Costs to perform the contract include direct and indirect costs for design, production, and installation[670](index=670&type=chunk) [Warranties](index=36&type=section&id=Warranties) The company accrues a liability for estimated warranty obligations based on historical experience - An accrued liability for warranty obligations is recognized, equal to the estimate of actual costs to be incurred[700](index=700&type=chunk) - Estimates are based on historical experience and expectations of future conditions[700](index=700&type=chunk) - Ultimate remaining costs could differ materially from recorded liabilities due to changes in defect rates or repair costs[194](index=194&type=chunk)[700](index=700&type=chunk) [Recent Accounting Pronouncements](index=36&type=section&id=Recent%20Accounting%20Pronouncements) The report refers to Note 1 for a summary of recently issued accounting pronouncements - For a summary of recently issued accounting pronouncements, refer to 'Note 1 Nature of Business'[228](index=228&type=chunk) [ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=36&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section discusses exposure to market risks, primarily related to foreign currency, interest rates, and commodity prices [Foreign Currency Exchange Rates](index=36&type=section&id=Foreign%20Currency%20Exchange%20Rates) Operating results are affected by foreign currency fluctuations, as 9.0% of fiscal 2024 sales were non-USD - Operating results can be affected by changes in foreign currency rates or weak economic conditions in foreign markets[672](index=672&type=chunk) - For fiscal 2024, **9.0% of net sales** were derived in currencies other than United States dollars[672](index=672&type=chunk) - The company utilizes foreign exchange hedging contracts to manage exposure to currency fluctuations[229](index=229&type=chunk) - International markets are expected to increase as a percentage of total net sales, increasing exchange rate risk[673](index=673&type=chunk) - A **10% change** in all foreign exchange rates is estimated to impact income before taxes by approximately **$0.5 million**[229](index=229&type=chunk) [Interest Rate Risks](index=37&type=section&id=Interest%20Rate%20Risks) Exposure to market risks primarily relates to changes in interest rates on financing agreements and cash - Exposure to market risks primarily relates to changes in interest rates on financing agreements and cash[674](index=674&type=chunk) - The company does not expect its income or cash flows to be significantly impacted by interest rates[674](index=674&type=chunk) [Commodity Risk](index=37&type=section&id=Commodity%20Risk) The company is dependent on raw materials, making it vulnerable to changes in availability, prices, and tariffs - The company is dependent on basic raw materials, components, and other supplies for production[704](index=704&type=chunk) - Financial results can be affected by changes in availability, prices, and global tariff regulation of these materials[704](index=704&type=chunk) - Some materials are sourced from one or a limited number of suppliers globally, creating risk of cost increases[704](index=704&type=chunk) - Sourcing and material groups implement strategies to monitor and mitigate these risks[704](index=704&type=chunk) [ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA](index=38&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section presents the audited consolidated financial statements, independent auditor's report, and detailed notes [Report of Independent Registered Public Accounting Firm](index=38&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Deloitte & Touche LLP issued an unqualified opinion and identified revenue recognition as a critical audit matter [Opinion on the Financial Statements](index=38&type=section&id=Opinion%20on%20the%20Financial%20Statements) Deloitte & Touche LLP provided an unqualified opinion on the company's consolidated financial statements - Deloitte & Touche LLP issued an **unqualified opinion** on the consolidated financial statements for the three years ended April 27, 2024[232](index=232&type=chunk) - The financial statements are presented fairly, in all material respects, in conformity with US GAAP[232](index=232&type=chunk) [Critical Audit Matter: Revenue Recognition – Uniquely Configured Contracts](index=38&type=section&id=Critical%20Audit%20Matter%3A%20Revenue%20Recognition%20%E2%80%93%20Uniquely%20Configured%20Contracts) Revenue recognition for custom contracts was a critical audit matter due to significant management judgments - Revenue associated with uniquely configured contracts is a **critical audit matter** due to significant judgments in cost estimation[243](index=243&type=chunk) - Audit procedures included testing the mathematical accuracy of cost estimates and comparing costs incurred to estimates[235](index=235&type=chunk)[203](index=203&type=chunk)[244](index=244&type=chunk) - The auditor evaluated management's ability to accurately estimate total costs by comparing to historical estimates[710](index=710&type=chunk) [Consolidated Balance Sheets](index=40&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets present the company's financial position as of April 27, 2024, and April 29, 2023 | ASSETS (in thousands) | April 27, 2024 | April 29, 2023 | |:---|:---|:---| | Cash and cash equivalents | $81,299 | $23,982 | | Accounts receivable, net | 117,186 | 109,979 | | Inventories | 138,008 | 149,448 | | Contract assets | 55,800 | 46,789 | | **Total current assets** | **401,949** | **342,657** | | Property and equipment, net | 71,752 | 72,147 | | Investment in affiliates and other assets | 21,163 | 27,928 | | Deferred income taxes | 25,862 | 16,867 | | **TOTAL ASSETS** | **$527,884** | **$468,104** | | LIABILITIES AND SHAREHOLDERS' EQUITY (in thousands) | April 27, 2024 | April 29, 2023 | |:---|:---|:---| | Accounts payable | 60,757 | 67,522 | | Contract liabilities | 65,524 | 91,549 | | Accrued expenses | 43,028 | 36,005 | | **Total current liabilities** | **192,296** | **210,163** | | Long-term debt, net | 53,164 | 17,750 | | **Total long-term liabilities** | **96,796** | **57,063** | | Retained earnings | 138,031 | 103,410 | | **TOTAL SHAREHOLDERS' EQUITY** | **238,792** | **200,878** | | **TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY** | **$527,884** | **$468,104** | [Consolidated Statements of Operations](index=42&type=section&id=Consolidated%20Statements%20of%20Operations) The statements of operations present revenues, expenses, and net income for the past three fiscal years | (in thousands, except per share data) | April 27, 2024 | April 29, 2023 | April 30, 2022 | |:---|:---|:---|:---| | Net sales | **$818,083** | $754,196 | $610,970 | | Gross profit | **222,443** | 151,355 | 116,697 | | Operating income | **87,115** | 21,388 | 4,046 | | Income before income taxes | **54,051** | 13,257 | 1,108 | | Net income | **$34,621** | $6,802 | $592 | | Diluted earnings per share | **$0.74** | $0.15 | $0.01 | [Consolidated Statements of Comprehensive Income (Loss)](index=43&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) These statements present net income adjusted for other comprehensive income components | (in thousands) | April 27, 2024 | April 29, 2023 | April 30, 2022 | |:---|:---|:---|:---| | Net income | **$34,621** | $6,802 | $592 | | Total other comprehensive (loss), net of tax | **(996)** | (604) | (2,590) | | Comprehensive income (loss) | **$33,625** | $6,198 | $(1,998) | [Consolidated Statements of Shareholders' Equity](index=44&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity) These statements detail changes in common stock, retained earnings, and other equity components | (in thousands) | Common Stock (Amount) | Additional Paid-In Capital | Retained Earnings | Treasury Stock (Amount) | Accumulated Other Comprehensive Loss | Total | |:---|:---|:---|:---|:---|:---|:---| | Balance as of April 30, 2022 | 61,794 | 48,372 | 96,608 | (10,285) | (4,925) | **191,564** | | Net income | — | — | 6,802 | — | — | 6,802 | | **Balance as of April 29, 2023** | **63,023** | **50,259** | **103,410** | **(10,285)** | **(5,529)** | **200,878** | | Net income | — | — | 34,621 | — | — | 34,621 | | **Balance as of April 27, 2024** | **$65,525** | **$52,046** | **$138,031** | **$(10,285)** | **$(6,525)** | **$238,792** | [Consolidated Statements of Cash Flows](index=45&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) These statements detail cash generated from or used in operating, investing, and financing activities | (in thousands) | April 27, 2024 | April 29, 2023 | April 30, 2022 | |:---|:---|:---|:---| | Net cash provided by (used in) operating activities | **63,241** | 15,024 | (27,035) | | Net cash used in investing activities | **(21,306)** | (25,388) | (31,384) | | Net cash provided by (used in) financing activities | **15,122** | 17,568 | (3,576) | | NET INCREASE (DECREASE) IN CASH | **56,988** | 6,682 | (62,394) | | CASH, CASH EQUIVALENTS AND RESTRICTED CASH: | | | | | Beginning of period | 24,690 | 18,008 | 80,402 | | End of period | **$81,678** | $24,690 | $18,008 | [Notes to the Consolidated Financial Statements](index=46&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) This section provides detailed explanations of significant accounting policies and financial statement components [Note 1. Nature of Business and Summary of Significant Accounting Policies](index=46&type=section&id=Note%201.%20Nature%20of%20Business%20and%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the core business, fiscal year structure, and critical accounting estimates - Daktronics designs, markets, and manufactures integrated electronic display systems globally[736](index=736&type=chunk) - The fiscal year ends on the Saturday closest to April 30, with fiscal years 2024, 2023, and 2022 each containing **52 weeks**[719](index=719&type=chunk) - The company consolidates subsidiaries and uses the equity method for investments with significant influence[746](index=746&type=chunk)[747](index=747&type=chunk)[750](index=750&type=chunk) - Critical accounting estimates include costs on custom contracts, warranties, income taxes, and affiliate investments[726](index=726&type=chunk) - Revenue recognition policies follow **ASC 606**, with revenue recognized over time for custom systems[731](index=731&type=chunk)[734](index=734&type=chunk)[797](index=797&type=chunk) - Warranty obligations are accrued based on estimated costs, and long-lived assets are tested for impairment[252](index=252&type=chunk)[799](index=799&type=chunk)[273](index=273&type=chunk) [Note 2. Revenue Recognition](index=55&type=section&id=Note%202.%20Revenue%20Recognition) This note disaggregates revenue by segment and timing, and details changes in contract assets and liabilities - Revenue is disaggregated by type of performance obligation and timing of recognition[280](index=280&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) | Timing of Revenue Recognition | FY2024 ($ thousands) | FY2023 ($ thousands) | FY2022 ($ thousands) | |:---|:---|:---|:---| | Goods/services transferred at a point in time | **$343,825** | $356,449 | $307,807 | | Goods/services transferred over time | **$474,258** | $397,747 | $303,163 | - Contract assets represent revenue recognized in excess of amounts billed; contract liabilities are the inverse[780](index=780&type=chunk) - As of April 27, 2024, remaining performance obligations totaled **$382.9 million**[309](index=309&type=chunk) - During fiscal 2024, **$84.1 million** of revenue was recognized related to prior year contract liabilities[285](index=285&type=chunk) [Note 3. Segment Reporting](index=57&type=section&id=Note%203.%20Segment%20Reporting) This note provides financial information for the five reportable segments and geographic revenue data - The company organizes its business into five reportable segments based on customer type or geography[286](index=286&type=chunk) - The chief operating decision-maker (CEO) reviews consolidated and segment financial results[265](index=265&type=chunk) | Segment | Net Sales FY2024 ($ thousands) | Net Sales FY2023 ($ thousands) | Net Sales FY2022 ($ thousands) | |:---|:---|:---|:---| | Commercial | $161,626 | $170,590 | $154,211 | | Live Events | 338,508 | 284,900 | 199,106 | | High School Park and Recreation | 170,349 | 141,748 | 111,816 | | Transportation | 85,390 | 72,306 | 62,707 | | International | 62,210 | 84,652 | 83,130 | | **Total** | **818,083** | **754,196** | **610,970** | | Geographic Area | Net Sales FY2024 ($ thousands) | Net Sales FY2023 ($ thousands) | Net Sales FY2022 ($ thousands) | |:---|:---|:---|:---| | United States | **$744,419** | $661,312 | $513,740 | | Outside United States | **73,664** | 92,884 | 97,230 | | **Total** | **$818,083** | **$754,196** | **$610,970** | - No single geographic area comprises a material amount of net sales other than the United States[313](index=313&type=chunk) [Note 4. Goodwill and Intangible Assets](index=60&type=section&id=Note%204.%20Goodwill%20and%20Intangible%20Assets) This note details goodwill and intangible assets, noting no impairment in fiscal 2024 but a charge in 2023 - Goodwill is tested for impairment at least annually, with **no impairment** found in fiscal 2024[291](index=291&type=chunk)[314](index=314&type=chunk) - In fiscal 2023, a **$4.6 million impairment charge** was recorded for the Live Events and International reporting units[315](index=315&type=chunk) | Goodwill (in thousands) | Commercial | Transportation | Total | |:---|:---|:---|:---| | Balance as of April 29, 2023 | $3,198 | $41 | $3,239 | | Foreign currency translation | (10) | (3) | (13) | | Goodwill impairment | — | — | — | | Balance as of April 27, 2024 | **$3,188** | **$38** | **$3,226** | | Intangible Assets, Net (in thousands) | Weighted Average Life (years) | Gross Carrying Amount (April 27, 2024) | Accumulated Amortization (April 27, 2024) | Net Carrying Amount (April 27, 2024) | |:---|:---|:---|:---|:---| | Registered trademarks | 20.0 | $636 | $296 | $340 | | Customer relationships | 10.3 | 2,549 | 2,049 | 500 | | **Total** | **12.2** | **$3,185** | **$2,345** | **$840** | - Amortization expense was **$287 thousand** in fiscal 2024, $290 thousand in 2023, and $504 thousand in 2022[295](index=295&type=chunk) [Note 5. Selected Financial Statement Data](index=61&type=section&id=Note%205.%20Selected%20Financial%20Statement%20Data) This note provides a breakdown of inventories, property and equipment, and accrued expenses | Inventories (in thousands) | April 27, 2024 | April 29, 2023 | |:---|:---|:---| | Raw materials | $66,900 | $81,627 | | Work-in-process | 13,848 | 14,155 | | Finished goods | 57,260 | 53,666 | | **Total** | **$138,008** | **$149,448** | | Property and Equipment, Net (in thousands) | April 27, 2024 | April 29, 2023 | |:---|:---|:---| | Land | $2,895 | $1,996 | | Buildings | 71,670 | 71,222 | | Machinery and equipment | 131,983 | 126,164 | | Less accumulated depreciation | (204,521) | (193,341) | | **Total** | **$71,752** | **$72,147** | - Depreciation expense was **$17.45 million** in fiscal 2024, $16.70 million in 2023, and $14.89 million in 2022[298](index=298&type=chunk) | Accrued Expenses (in thousands) | April 27, 2024 | April 29, 2023 | |:---|:---|:---| | Compensation | $27,365 | $17,466 | | Taxes, other than income taxes | 3,410 | 3,390 | | Accrued employee benefits | 3,871 | 3,953 | | **Total** | **$43,028** | **$36,005** | [Note 6. Accounts Receivables, Net](index=63&type=section&id=Note%206.%20Accounts%20Receivables%2C%20Net) This note details interest income/expense, other non-operating expenses, and the composition of accounts receivable | Interest (expense) income, net (in thousands) | April 27, 2024 | April 29, 2023 | April 30, 2022 | |:---|:---|:---|:---| | Total interest expense | $(4,948) | $(1,127) | $(49) | | Interest income | 1,530 | 207 | 220 | | **Interest (expense) income, net** | **$(3,418)** | **$(920)** | **$171** | | Other expense and debt issuance costs write-off, net (in thousands) | April 27, 2024 | April 29, 2023 | April 30, 2022 | |:---|:---|:---|:---| | Foreign currency transaction gains (losses) | $284 | $479 | $(227) | | Equity in losses of affiliates | (3,764) | (3,332) | (2,970) | | Impairment of equity method investees | (6,359) | (4,473) | — | | Debt issuance costs write off | (3,353) | — | — | | **Total** | **$(13,096)** | **$(7,211)** | **$(3,109)** | - Accounts receivable are reported net of an allowance for credit losses of **$4.57 million** as of April 27, 2024[300](index=300&type=chunk) - Long-term contracts with installment payments had a present value of **$859 thousand** as of April 27, 2024[347](index=347&type=chunk) [Note 7. Financing Agreements](index=63&type=section&id=Note%207.%20Financing%20Agreements) This note details long-term debt, including a $75.0 million credit facility and a $25.0 million Convertible Note | Long-term debt (in thousands) | April 27, 2024 | April 29, 2023 | |:---|:---|:---| | ABL credit facility/prior line of credit | $— | $17,750 | | Mortgage | 13,875 | — | | Convertible note | 25,000 | — | | Long-term debt, gross | 38,875 | 17,750 | | Change in fair value of convertible note | 16,550 | — | | **Long-term debt, net** | **$53,164** | **$17,750** | - On May 11, 2023, the company closed on a **$75.0 million senior credit facility**[325](index=325&type=chunk) - The ABL interest rate ranges from **2.5% to 3.5% over SOFR**[350](index=350&type=chunk)[326](index=326&type=chunk) - A **$25.0 million secured Convertible Note** was issued on May 11, 2023, due May 11, 2027[351](index=351&type=chunk)[304](index=304&type=chunk)[355](index=355&type=chunk) - The Convertible Note is accounted for at fair value, which increased by **$16.55 million** in fiscal 2024[329](index=329&type=chunk)[330](index=330&type=chunk) - As of April 27, 2024, the company was in compliance with all financial covenants[330](index=330&type=chunk) - Debt issuance costs of **$8.195 million** were capitalized, with $3.353 million expensed in fiscal 2024[331](index=331&type=chunk) [Note 8. Share Repurchase Program](index=67&type=section&id=Note%208.%20Share%20Repurchase%20Program) This note reiterates details of the stock repurchase program, with $29.4 million of capacity remaining - The Board approved a stock repurchase program

Kurtenbach added, "In fiscal 2024, we raised the baseline profitability of the business, strengthened our positioning with our customers, and reinforced our competitive differentiation, particularly against foreign competitors. Building upon these strengths, we are focused in fiscal 2025 on strategic priorities which will continue to transform and strengthen our business model to enhance our earnings power. These important drivers for our outlook are to prioritize among our end markets, attack structural co ...

Mr. Kurtenbach added, "Our orders grew 14.6 percent in the fourth quarter and 8.7 percent for the year, and we have entered fiscal 2025 committed to capture growing market demand, leveraging our recognized leadership position and our strong balance sheet." He continued, "Our critical priorities for fiscal 2025 are to execute a broad digital transformation to modernize our service systems for field service automation, to advance our enterprise performance planning capabilities, and to improve and automate qu ...

Financial Performance - Net sales for Q4 fiscal 2024 reached $215.9 million, a 2.9% increase compared to Q4 fiscal 2023; full-year sales were $818.1 million, an 8.5% increase from the prior year[13] - Gross margin for Q4 improved by 90 basis points to 25.7% from 24.8% in the previous year; full-year gross profit margin increased by 710 basis points to 27.2%, the highest since 2009[13] - Operating income for Q4 grew 6.4% to $19.4 million, while full-year operating income quadrupled to $87.1 million compared to fiscal 2023[13] - Net income for Q4 was $2.5 million, a decrease from $21.4 million in Q4 fiscal 2023; full-year net income was $34.6 million compared to $6.8 million in the previous year[13] - Adjusted operating income for the fourth quarter of fiscal 2024 was $19,427 million, up from $18,263 million in the same quarter of fiscal 2023, representing a year-over-year increase of 6.4%[32] - Gross profit as a percentage of net sales increased to 25.7% in Q4 fiscal 2024 from 24.8% in Q4 fiscal 2023, and for the full fiscal year, it rose to 27.2% from 20.1%[38] - The operating margin for Q4 fiscal 2024 was 9.0%, compared to 8.7% in Q4 fiscal 2023, while the full fiscal year operating margin improved to 10.6% from 2.8%[52] - Adjusted net income for the three months ended April 27, 2024, was $12,766 million, down from $25,872 million in the same period last year[59] Orders and Backlog - Product order backlog was $316.9 million as of April 27, 2024, down from $400.7 million at the end of Q4 fiscal 2023[13] - New product and service orders for Q4 were $205.8 million, a 14.6% increase from $179.5 million in the prior year; full-year orders increased by 8.7% to $740.2 million[13] - Orders for Q4 fiscal 2024 increased by 14.6% compared to Q4 fiscal 2023, with full fiscal year orders up 8.7% driven by strong demand in Live Events and Transportation business units[51] - The Commercial segment's orders decreased by 12.4% to $34,084 million compared to $38,902 million in the prior year[57] Revenue by Segment - Live Events segment saw a revenue increase of 14.6%, reaching $104,906 million compared to $91,530 million in the prior year[57] - The International segment experienced a significant decline of 45.1%, with revenues dropping to $11,394 million from $20,744 million[57] - The Transportation segment reported a revenue increase of 30.6%, reaching $24,173 million from $18,509 million year-over-year[57] Expenses and Cash Flow - Operating expenses for Q4 were $36.0 million, a 6.1% increase from $33.9 million in Q4 fiscal 2023; full-year operating expenses rose to $135.3 million from $130.0 million[16] - Cash, restricted cash, and marketable securities totaled $81.7 million as of April 27, 2024, with long-term debt outstanding at $54.7 million[40] - The company generated $63.2 million from operations in fiscal 2024, significantly up from $15.0 million in fiscal 2023[44] - Total current liabilities decreased to $192,296 million from $210,163 million year-over-year[56] - Long-term debt, net, increased significantly to $53,164 million from $17,750 million in the previous year[60] - Free cash flow is emphasized as a key measure of operating performance, providing useful information for investors[58] Strategic Initiatives - The company launched a new Flip-Chip COB LED display family to enhance its product offerings in the growing narrow-pixel pitch market[2] - Daktronics aims to improve operational effectiveness by enhancing manufacturing utilization and aligning production schedules to lower overall costs[2] - The company is focused on strategic priorities for fiscal 2025 to enhance earnings power and improve its operating model[14] - The company plans to focus on digital transformation initiatives to modernize service systems and improve operational efficiency in fiscal 2025[50] - Management's strategy includes reallocating resources towards markets that generate returns significantly above the cost of capital[37] Tax and Valuation - The effective tax rate for fiscal 2024 was 35.9%, a decrease from 48.7% in fiscal 2023, primarily due to non-deductible expenses and valuation allowances[53] - The company reported a change in fair value of convertible notes amounting to $16,550 million, impacting long-term debt calculations[60] - Inventory levels decreased by 7.7% since the end of fiscal 2023, indicating improved inventory management[40]