Part I [Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for the three and nine months ended January 27, 2024, including balance sheets, statements of operations, and cash flows Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Jan 27, 2024 (in thousands) | Apr 29, 2023 (in thousands) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $76,764 | $23,982 | | Accounts receivable, net | $100,601 | $109,979 | | Inventories | $140,251 | $149,448 | | **Total Assets** | **$499,206** | **$468,104** | | **Liabilities & Equity** | | | | Accounts payable | $49,489 | $67,522 | | Long-term debt, net | $48,466 | $17,750 | | Total current liabilities | $170,261 | $210,163 | | **Total Shareholders' Equity** | **$236,246** | **$200,878** | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended Jan 27, 2024 (in thousands) | Three Months Ended Jan 28, 2023 (in thousands) | Nine Months Ended Jan 27, 2024 (in thousands) | Nine Months Ended Jan 28, 2023 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Net sales | $170,303 | $184,975 | $602,203 | $544,334 | | Gross profit | $41,718 | $41,713 | $167,064 | $99,211 | | Operating income | $8,036 | $7,118 | $67,688 | $3,125 | | Net income (loss) | $10,742 | $3,713 | $32,103 | $(14,597) | | Diluted EPS | $0.09 | $0.08 | $0.69 | $(0.32) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Nine Months Ended Jan 27, 2024 (in thousands) | Nine Months Ended Jan 28, 2023 (in thousands) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $53,789 | $(9,487) | | Net cash used in investing activities | $(17,055) | $(20,947) | | Net cash provided by financing activities | $15,689 | $23,498 | | **Net increase (decrease) in cash** | **$52,503** | **$(7,278)** | [Notes to the Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's accounting policies, revenue recognition, segment performance, financing agreements, and related party transactions - As of January 27, 2024, remaining performance obligations totaled **$393.2 million**, with approximately **$328.5 million** expected to be recognized as revenue within 12 months[55](index=55&type=chunk) - On May 11, 2023, the company secured new financing, including a **$75 million** senior credit facility and a **$25 million** secured convertible note, with fair value changes recognized in operations[64](index=64&type=chunk)[68](index=68&type=chunk)[72](index=72&type=chunk) - The effective tax rate for the nine months ended January 27, 2024, was **31.5%**, influenced by non-taxable fair value changes of the convertible note[81](index=81&type=chunk) - The company entered a Securities Purchase Agreement with Alta Fox Opportunities Fund, LP for a **$25 million** convertible note, with Alta Fox being a related party owning **9.99%** of common stock at the time[88](index=88&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance for Q3 and the first nine months of fiscal 2024, covering operations, segment performance, liquidity, and capital resources - The product order backlog was **$328.3 million** as of January 27, 2024, a decrease from **$429.1 million** a year prior, reflecting improved production and fulfillment[106](index=106&type=chunk) - The company anticipates long-term growth driven by audiovisual industry fundamentals, including LED display adoption and new technology, despite potential short-term impacts from project timing and global economic conditions[103](index=103&type=chunk) [Results of Operations - Three-Month Comparison](index=28&type=section&id=RESULTS%20OF%20OPERATIONS%20COMPARISON%20OF%20THE%20THREE%20MONTHS%20ENDED%20JANUARY%2027%2C%202024%20AND%20JANUARY%2028%2C%202023) Net sales for Q3 FY2024 decreased by **7.9%** to **$170.3 million**, while gross profit remained stable at **$41.7 million**, and operating income increased to **$8.0 million** Net Sales by Segment (Q3 FY2024 vs Q3 FY2023, in thousands) | Segment | Q3 FY2024 (in thousands) | Q3 FY2023 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Commercial | $33,292 | $49,967 | (33.4)% | | Live Events | $73,393 | $67,748 | 8.3% | | High School Park and Recreation | $28,764 | $28,312 | 1.6% | | Transportation | $19,605 | $17,578 | 11.5% | | International | $15,249 | $21,370 | (28.6)% | | **Total** | **$170,303** | **$184,975** | **(7.9)%** | Gross Profit by Segment (Q3 FY2024 vs Q3 FY2023, in thousands) | Segment | Q3 FY2024 (in thousands) | Q3 FY2023 (in thousands) | Gross Margin % (FY24) | Gross Margin % (FY23) | | :--- | :--- | :--- | :--- | :--- | | Commercial | $5,546 | $10,547 | 16.7% | 21.1% | | Live Events | $21,102 | $14,405 | 28.8% | 21.3% | | High School Park and Recreation | $8,029 | $7,555 | 27.9% | 26.7% | | Transportation | $6,180 | $5,534 | 31.5% | 31.5% | | International | $861 | $3,672 | 5.6% | 17.2% | | **Total** | **$41,718** | **$41,713** | **24.5%** | **22.6%** | - Orders for Q3 FY2024 increased by **29.4%** year-over-year, driven by strong demand in Live Events and rebounding Commercial business[111](index=111&type=chunk) [Results of Operations - Nine-Month Comparison](index=32&type=section&id=RESULTS%20OF%20OPERATIONS%20COMPARISON%20OF%20THE%20NINE%20MONTHS%20ENDED%20JANUARY%2027%2C%202024%20AND%20JANUARY%2028%2C%202023) Net sales for the first nine months of FY2024 grew **10.6%** to **$602.2 million**, with gross profit surging **68.4%** to **$167.1 million** and operating income increasing to **$67.7 million** Net Sales by Segment (Nine Months FY2024 vs FY2023, in thousands) | Segment | Nine Months FY2024 (in thousands) | Nine Months FY2023 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Commercial | $122,628 | $127,132 | (3.5)% | | Live Events | $233,602 | $193,370 | 20.8% | | High School Park and Recreation | $133,940 | $106,127 | 26.2% | | Transportation | $61,217 | $53,797 | 13.8% | | International | $50,816 | $63,908 | (20.5)% | | **Total** | **$602,203** | **$544,334** | **10.6%** | Gross Profit by Segment (Nine Months FY2024 vs FY2023, in thousands) | Segment | Nine Months FY2024 (in thousands) | Nine Months FY2023 (in thousands) | Gross Margin % (FY24) | Gross Margin % (FY23) | | :--- | :--- | :--- | :--- | :--- | | Commercial | $25,546 | $21,565 | 20.8% | 17.0% | | Live Events | $68,276 | $26,174 | 29.2% | 13.5% | | High School Park and Recreation | $45,274 | $29,343 | 33.8% | 27.6% | | Transportation | $20,049 | $15,456 | 32.8% | 28.7% | | International | $7,919 | $6,673 | 15.6% | 10.4% | | **Total** | **$167,064** | **$99,211** | **27.7%** | **18.2%** | [Liquidity and Capital Resources](index=35&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company's liquidity strengthened in the first nine months of FY2024, with net cash from operating activities at **$53.8 million** and **$76.8 million** in cash as of January 27, 2024 - Net cash provided by operating activities was **$53.8 million** for the first nine months of fiscal 2024, a significant improvement from a **$9.5 million** use in the prior year[140](index=140&type=chunk) - Working capital increased to **$205.3 million** as of January 27, 2024, from **$132.5 million** at the end of fiscal 2023[147](index=147&type=chunk) - Total capital expenditures for fiscal 2024 are projected at approximately **$19 million**, with **$13.6 million** incurred in the first nine months[149](index=149&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports no material changes in market risk exposure, except for interest rate risks from new debt facilities in Q1 FY2024 - No material changes have occurred in the company's market risk exposure during the first nine months of fiscal 2024, except for interest rate risks from new credit facilities[154](index=154&type=chunk)[155](index=155&type=chunk) [Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were deemed ineffective as of January 27, 2024, due to a material weakness in internal control over financial reporting, with a remediation plan underway - Disclosure controls and procedures were deemed **not effective** as of January 27, 2024, due to a material weakness in internal control over financial reporting[156](index=156&type=chunk) - The material weakness stems from ineffective controls for revenue contracts recognized over time, due to insufficient training of control operators[158](index=158&type=chunk) - A remediation plan is in progress, including additional training for revenue control operators to enhance control precision[159](index=159&type=chunk) Part II. Other Information [Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings in the normal course of business, not expected to materially impact financial condition or operations - The company is party to various legal proceedings in the ordinary course of business, not expected to result in a material adverse effect[162](index=162&type=chunk) [Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the detailed risk factors in the Annual Report on Form 10-K for FY2023, with no material changes noted - No material changes have occurred to the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended April 29, 2023[163](index=163&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not repurchase any shares of its common stock during the three months ended January 27, 2024 - No shares of common stock were repurchased during the third quarter of fiscal 2024[164](index=164&type=chunk) [Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section provides an index of all exhibits filed as part of the Quarterly Report on Form 10-Q

Everybody loves Nvidia (NASDAQ:NVDA) and company, but let’s be real – the concept of bargain tech stocks makes a lot of sense. At the end of the day, we all love a good deal.Listen, I’m not against buying NVDA for the long haul. However, I can also read numbers. With a trailing-earnings multiple of nearly 96X, it just seems a little rich. Yes, the company represents a juggernaut in the innovation space. As well, the underlying artificial intelligence narrative offers a massive addressable market. However, t ...

BROOKINGS, S.D., Feb. 20, 2024 (GLOBE NEWSWIRE) -- Daktronics, Inc. (Nasdaq – DAKT) announced today it will release its third quarter fiscal 2024 financial results on Wednesday, February 28, 2024 before the market opens. The Company will host a conference call and webcast for all interested parties at 10:00 AM CT that day. Reece A. Kurtenbach, Chief Executive Officer, and Sheila M. Anderson, Chief Financial Officer, will host the conference call, which will contain forward-looking statements and other mater ...

Daktronics, Inc. (NASDAQ:DAKT) Q2 2024 Earnings Conference Call December 5, 2023 11:00 AM ET Company Participants Sheila Anderson - Chief Financial Officer Reece Kurtenbach - President and Chief Executive Officer Conference Call Participants BJ Cook - Singular Research Operator Good day, ladies and gentlemen, and welcome to the Daktronics Fiscal Year 2024 Second Quarter Earnings Results Conference Call. As a reminder, this conference is being recorded today, Tuesday, December 5, 2023, and is available on th ...

[Part I. Financial Information](index=4&type=section&id=Part%20I.%20Financial%20Information) [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the company's unaudited condensed consolidated financial statements for the periods ended October 28, 2023 - The unaudited condensed consolidated financial statements contain all necessary adjustments for fair presentation, with estimates and assumptions made in accordance with GAAP[28](index=28&type=chunk)[29](index=29&type=chunk) - The company operates on a 52- or 53-week fiscal year, with the six months ended October 28, 2023, and October 29, 2022, each comprising 26 operating weeks[30](index=30&type=chunk) [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) **Total Assets:** | Metric | October 28, 2023 (in thousands) | April 29, 2023 (in thousands) | | :--- | :--- | :--- | | Total Assets | $510,948 | $468,104 | | Current Assets | $386,343 | $342,657 | | Cash and cash equivalents | $64,740 | $23,982 | | Restricted cash | $8,246 | $708 | | Inventories | $141,646 | $149,448 | | Accounts receivable, net | $115,052 | $109,979 | **Total Liabilities and Shareholders' Equity:** | Metric | October 28, 2023 (in thousands) | April 29, 2023 (in thousands) | | :--- | :--- | :--- | | Total Liabilities and Shareholders' Equity | $510,948 | $468,104 | | Total Current Liabilities | $189,936 | $210,163 | | Long-term debt, net | $55,087 | $17,750 | | Total Shareholders' Equity | $223,221 | $200,878 | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) **Three Months Ended October 28, 2023 vs. October 29, 2022:** | Metric | Oct 28, 2023 (in thousands) | Oct 29, 2022 (in thousands) | Change (in thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Net sales | $199,369 | $187,439 | $11,930 | 6.4% | | Gross profit | $54,199 | $31,704 | $22,495 | 70.9% | | Operating income (loss) | $19,436 | $1,526 | $17,910 | 1173.7% | | Net income (loss) | $2,165 | $(12,984) | $15,149 | N/A | | Basic EPS | $0.05 | $(0.29) | $0.34 | N/A | | Diluted EPS | $0.05 | $(0.29) | $0.34 | N/A | **Six Months Ended October 28, 2023 vs. October 29, 2022:** | Metric | Oct 28, 2023 (in thousands) | Oct 29, 2022 (in thousands) | Change (in thousands) | % Change | | :--- | :--- | :--- | :--- | :--- | | Net sales | $431,900 | $359,359 | $72,541 | 20.2% | | Gross profit | $125,346 | $57,498 | $67,848 | 118.0% | | Operating income (loss) | $59,652 | $(3,993) | $63,645 | N/A | | Net income (loss) | $21,361 | $(18,310) | $39,671 | N/A | | Basic EPS | $0.47 | $(0.40) | $0.87 | N/A | | Diluted EPS | $0.46 | $(0.40) | $0.86 | N/A | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) **Comprehensive Income (Loss) - Three Months Ended:** | Metric | October 28, 2023 (in thousands) | October 29, 2022 (in thousands) | | :--- | :--- | :--- | | Net income (loss) | $2,165 | $(12,984) | | Total other comprehensive (loss), net of tax | $(1,181) | $(1,522) | | Comprehensive income (loss) | $984 | $(14,506) | **Comprehensive Income (Loss) - Six Months Ended:** | Metric | October 28, 2023 (in thousands) | October 29, 2022 (in thousands) | | :--- | :--- | :--- | | Net income (loss) | $21,361 | $(18,310) | | Total other comprehensive (loss), net of tax | $(1,426) | $(2,163) | | Comprehensive income (loss) | $19,935 | $(20,473) | [Condensed Consolidated Statements of Shareholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) **Shareholders' Equity Changes (April 29, 2023 to October 28, 2023):** | Metric | April 29, 2023 (in thousands) | October 28, 2023 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Common Stock | $63,023 | $64,643 | $1,620 | | Additional Paid-In Capital | $50,259 | $51,047 | $788 | | Retained Earnings | $103,410 | $124,771 | $21,361 | | Treasury Stock | $(10,285) | $(10,285) | $0 | | Accumulated Other Comprehensive Loss | $(5,529) | $(6,955) | $(1,426) | | **Total Shareholders' Equity** | **$200,878** | **$223,221** | **$22,343** | - Key activities impacting equity for the six months ended October 28, 2023, include **net income contributing $21,361 thousand** to retained earnings, share-based compensation adding $1,091 thousand to additional paid-in capital, exercise of stock options increasing common stock by $1,005 thousand, and cumulative translation adjustments resulting in a loss of $1,442 thousand[20](index=20&type=chunk)[26](index=26&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) **Cash Flow Summary (Six Months Ended October 28, 2023 vs. October 29, 2022):** | Metric | Oct 28, 2023 (in thousands) | Oct 29, 2022 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $44,311 | $(21,938) | $66,249 | | Net cash used in investing activities | $(12,073) | $(15,192) | $3,119 | | Net cash provided by financing activities | $15,919 | $26,278 | $(10,359) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $48,296 | $(10,865) | $59,161 | | Cash, cash equivalents and restricted cash, end of period | $72,986 | $7,143 | $65,843 | - Operating activities generated **$44.3 million in cash**, a **$66.2 million improvement** year-over-year, driven by a $39.7 million increase in net income, a $17.9 million non-cash fair value change of the Convertible Note, and improved working capital positions, including a $7.1 million decrease in inventories[26](index=26&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk) - Investing activities used **$12.1 million**, with purchases of property and equipment decreasing to $9.2 million from $16.2 million in the prior year, and investments in convertible and promissory notes of affiliates totaling $2.9 million[26](index=26&type=chunk)[40](index=40&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk) - Financing activities provided **$15.9 million**, primarily from **$40.0 million in borrowings** on notes payable, offset by $18.1 million in payments on notes payable and $6.5 million in debt issuance costs[26](index=26&type=chunk)[137](index=137&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. Basis of Presentation](index=12&type=section&id=Note%201.%20Basis%20of%20Presentation) This note outlines the preparation basis for the financial statements, including key estimates and accounting policies - Daktronics, Inc. designs and manufactures electronic scoreboards, programmable display systems, and large screen video displays for sporting, commercial, and transportation applications[27](index=27&type=chunk) - Management uses estimates for revenue recognition, warranty expenses, fair value of long-term debt and investments, income tax expenses, and stock-based compensation[28](index=28&type=chunk) - In Q1 fiscal 2024, the company adopted ASU 2020-06, simplifying accounting for convertible debt instruments and requiring the if-converted method for diluted EPS calculation, specifically for the Convertible Note issued May 11, 2023[36](index=36&type=chunk) **Cash and Restricted Cash Reconciliation (October 28, 2023):** | Item | Amount (in thousands) | | :--- | :--- | | Cash and cash equivalents | $64,740 | | Restricted cash | $8,246 | | **Total cash, cash equivalents, and restricted cash** | **$72,986** | [Note 2. Investments in Affiliates](index=13&type=section&id=Note%202.%20Investments%20in%20Affiliates) This note details the company's investments in affiliates Xdisplay and Miortech and their accounting treatment - Daktronics invests in Xdisplay (micro-LED mass transfer) and Miortech (low power electrowetting technology), with Miortech accounted for under the equity method as a non-primary beneficiary VIE[38](index=38&type=chunk) **Aggregate Equity Method Investments:** | Metric | October 28, 2023 (in thousands) | April 29, 2023 (in thousands) | | :--- | :--- | :--- | | Aggregate equity method investments | $9,819 | $11,934 | **Share of Affiliate Losses:** | Period | October 28, 2023 (in thousands) | October 29, 2022 (in thousands) | | :--- | :--- | :--- | | Three months ended | $771 | $811 | | Six months ended | $1,461 | $1,701 | - During the six months ended October 28, 2023, the company invested **$2,250 thousand in convertible notes** and **$649 thousand in promissory notes** of affiliates, bringing the total Affiliate Notes to $11,663 thousand[40](index=40&type=chunk) [Note 3. Earnings Per Share ("EPS")](index=14&type=section&id=Note%203.%20Earnings%20Per%20Share%20(%22EPS%22)) This note explains the calculation of basic and diluted EPS, including the adoption of ASU 2020-06 - In the first quarter of fiscal 2024, the company adopted ASU 2020-06, prospectively utilizing the **if-converted method** to calculate the dilutive impact of its Convertible Note[42](index=42&type=chunk) **EPS Reconciliation (Three Months Ended October 28, 2023 vs. October 29, 2022):** | Metric | Oct 28, 2023 | Oct 29, 2022 | | :--- | :--- | :--- | | Net income (loss) | $2,165 | $(12,984) | | Basic EPS | $0.05 | $(0.29) | | Diluted EPS | $0.05 | $(0.29) | | Weighted average shares outstanding (basic) | 46,030 | 45,317 | | Weighted average shares outstanding (diluted) | 46,705 | 45,317 | **EPS Reconciliation (Six Months Ended October 28, 2023 vs. October 29, 2022):** | Metric | Oct 28, 2023 | Oct 29, 2022 | | :--- | :--- | :--- | | Net income (loss) | $21,361 | $(18,310) | | Basic EPS | $0.47 | $(0.40) | | Diluted EPS | $0.46 | $(0.40) | | Weighted average shares outstanding (basic) | 45,838 | 45,258 | | Weighted average shares outstanding (diluted) | 46,454 | 45,258 | - Options to purchase 521 shares (three months) and 1,039 shares (six months) were **anti-dilutive** and excluded from diluted EPS, as were shares from the Convertible Note[44](index=44&type=chunk)[45](index=45&type=chunk) [Note 4. Revenue Recognition](index=15&type=section&id=Note%204.%20Revenue%20Recognition) This note disaggregates revenue by segment and details contract balances and remaining performance obligations **Revenue Disaggregation (Three Months Ended October 28, 2023):** | Segment | Unique Configuration (in thousands) | Limited Configuration (in thousands) | Service and Other (in thousands) | Total (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Commercial | $9,511 | $28,752 | $4,190 | $42,453 | | Live Events | $47,496 | $13,771 | $6,943 | $68,210 | | High School Park and Recreation | $11,539 | $36,277 | $1,126 | $48,942 | | Transportation | $11,047 | $8,469 | $727 | $20,243 | | International | $9,993 | $7,302 | $2,226 | $19,521 | | **Total** | **$89,586** | **$94,571** | **$15,212** | **$199,369** | **Revenue Disaggregation (Six Months Ended October 28, 2023):** | Segment | Unique Configuration (in thousands) | Limited Configuration (in thousands) | Service and Other (in thousands) | Total (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Commercial | $22,429 | $58,665 | $8,242 | $89,336 | | Live Events | $124,043 | $23,732 | $12,434 | $160,209 | | High School Park and Recreation | $26,658 | $76,614 | $1,904 | $105,176 | | Transportation | $23,631 | $16,536 | $1,445 | $41,612 | | International | $18,783 | $12,541 | $4,243 | $35,567 | | **Total** | **$215,544** | **$188,088** | **$28,268** | **$431,900** | **Contract Balances (October 28, 2023 vs. April 29, 2023):** | Metric | October 28, 2023 (in thousands) | April 29, 2023 (in thousands) | Dollar Change (in thousands) | Percent Change | | :--- | :--- | :--- | :--- | :--- | | Contract assets | $45,210 | $46,789 | $(1,579) | (3.4)% | | Contract liabilities - current | $78,293 | $91,549 | $(13,256) | (14.5)% | | Contract liabilities - noncurrent | $15,390 | $13,096 | $2,294 | 17.5% | - As of October 28, 2023, the aggregate amount of remaining performance obligations was **$369,879 thousand**, with approximately **$310,470 thousand** expected to be recognized in the next 12 months[53](index=53&type=chunk) [Note 5. Segment Reporting](index=18&type=section&id=Note%205.%20Segment%20Reporting) This note provides detailed financial information for the company's five reporting segments and geographic areas **Net Sales by Segment (Three Months Ended October 28, 2023 vs. October 29, 2022):** | Segment | Oct 28, 2023 (in thousands) | Oct 29, 2022 (in thousands) | Dollar Change (in thousands) | Percent Change | | :--- | :--- | :--- | :--- | :--- | | Commercial | $42,453 | $37,047 | $5,406 | 14.6% | | Live Events | $68,210 | $69,239 | $(1,029) | (1.5)% | | High School Park and Recreation | $48,942 | $42,006 | $6,936 | 16.5% | | Transportation | $20,243 | $16,679 | $3,564 | 21.4% | | International | $19,521 | $22,468 | $(2,947) | (13.1)% | | **Total** | **$199,369** | **$187,439** | **$11,930** | **6.4%** | **Gross Profit by Segment (Three Months Ended October 28, 2023 vs. October 29, 2022):** | Segment | Oct 28, 2023 (in thousands) | Oct 29, 2022 (in thousands) | Dollar Change (in thousands) | Percent Change | | :--- | :--- | :--- | :--- | :--- | | Commercial | $7,231 | $6,197 | $1,034 | 16.7% | | Live Events | $19,234 | $7,983 | $11,251 | 140.9% | | High School Park and Recreation | $16,420 | $11,811 | $4,609 | 39.0% | | Transportation | $6,780 | $4,084 | $2,696 | 66.0% | | International | $4,534 | $1,629 | $2,905 | 178.3% | | **Total** | **$54,199** | **$31,704** | **$22,495** | **70.9%** | **Net Sales by Geography (Six Months Ended October 28, 2023 vs. October 29, 2022):** | Geography | Oct 28, 2023 (in thousands) | Oct 29, 2022 (in thousands) | Dollar Change (in thousands) | Percent Change | | :--- | :--- | :--- | :--- | :--- | | United States | $392,737 | $312,580 | $80,157 | 25.6% | | Outside United States | $39,163 | $46,779 | $(7,616) | (16.3)% | | **Total** | **$431,900** | **$359,359** | **$72,541** | **20.2%** | [Note 6. Financing Agreements](index=19&type=section&id=Note%206.%20Financing%20Agreements) This note details the company's financing structure, including a new senior credit facility and a secured Convertible Note **Long-term Debt (October 28, 2023 vs. April 29, 2023):** | Metric | October 28, 2023 (in thousands) | April 29, 2023 (in thousands) | | :--- | :--- | :--- | | ABL credit facility/prior line of credit | $0 | $17,750 | | Mortgage | $14,625 | $0 | | Convertible note | $25,000 | $0 | | **Long-term debt, gross** | **$39,625** | **$17,750** | | Debt issuance costs, net | $(948) | $0 | | Change in fair value of convertible note | $17,910 | $0 | | Current portion | $(1,500) | $0 | | **Long-term debt, net** | **$55,087** | **$17,750** | - On May 11, 2023, the company closed a **$75 million senior credit facility**, comprising a $60 million asset-based revolving credit facility (ABL) and a $15 million delayed draw loan (mortgage)[59](index=59&type=chunk)[62](index=62&type=chunk) - A **$25 million secured Convertible Note** was issued on May 11, 2023, due May 11, 2027, and is accounted for at fair value using a Level 3 binomial lattice model[63](index=63&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk) - As of October 28, 2023, the company had **$50.6 million in ABL borrowing capacity** and was in compliance with all financial covenants[60](index=60&type=chunk)[69](index=69&type=chunk) [Note 7. Commitments and Contingencies](index=22&type=section&id=Note%207.%20Commitments%20and%20Contingencies) This note addresses legal proceedings, warranty obligations, and performance guarantees - The company is a party to legal proceedings and claims in the ordinary course of business, but management believes there is **no reasonable probability of any material loss**[73](index=73&type=chunk)[74](index=74&type=chunk) **Warranty Obligations (Six Months Ended October 28, 2023):** | Metric | Amount (in thousands) | | :--- | :--- | | Balance as of April 29, 2023 | $32,541 | | Warranties issued during the period | $7,781 | | Settlements made during the period | $(6,209) | | Changes in accrued warranty obligations for pre-existing warranties | $700 | | **Balance as of October 28, 2023** | **$34,813** | - As of October 28, 2023, outstanding performance guarantees included **$5,875 thousand in letters of credit**, $558 thousand in bank guarantees, and $40,633 thousand in surety bonds[75](index=75&type=chunk) [Note 8. Income Taxes](index=23&type=section&id=Note%208.%20Income%20Taxes) This note discusses the company's effective tax rates and the impact of non-deductible fair value changes - The effective tax rate for the three and six months ended October 28, 2023, was **64.8% and 37.6%**, respectively, impacted by non-deductible fair value changes of the Convertible Note[76](index=76&type=chunk) - As of October 28, 2023, undistributed earnings of foreign subsidiaries were considered **indefinitely reinvested**, and there were $527 thousand of unrecognized tax benefits[77](index=77&type=chunk) [Note 9. Fair Value Measurement](index=23&type=section&id=Note%209.%20Fair%20Value%20Measurement) This note provides a fair value hierarchy for financial assets and liabilities, detailing the Convertible Note valuation **Fair Value Hierarchy (October 28, 2023):** | Item | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | Total (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $64,740 | — | — | $64,740 | | Restricted cash | $8,246 | — | — | $8,246 | | Convertible Note Payable | — | — | $42,910 | $42,910 | | US Government sponsored entities | — | $546 | — | $546 | | **Total** | **$72,986** | **$546** | **$42,910** | **$116,442** | - The Convertible Note is valued at fair value using a binomial lattice model, classified as **Level 3** due to significant unobservable inputs[79](index=79&type=chunk)[80](index=80&type=chunk) **Key Assumptions for Convertible Note Valuation:** | Metric | Value | | :--- | :--- | | Risk-Free Rate (Annual) | 4.76 % | | Implied Yield | 19.48 % | | Volatility (Annual) | 55.00 % | | Dividend Yield (Annual) | — % | [Note 10. Related Party Transactions](index=23&type=section&id=Note%2010.%20Related%20Party%20Transactions) This note describes the company's policy and procedures for related party transactions, including the Convertible Note agreement - The Audit Committee oversees a policy for related party transactions, generally defined as transactions **exceeding $120 thousand** involving a 'related person'[81](index=81&type=chunk)[82](index=82&type=chunk) - On May 11, 2023, the company issued a **$25 million Convertible Note** to Alta Fox Opportunities Fund, LP, which was a related party at the time[83](index=83&type=chunk) - On June 9, 2023, Alta Fox's beneficial ownership was **reduced to 4.99%**, ceasing its 'related party' status[87](index=87&type=chunk) - A **$150 thousand contract** for video display systems was entered into with Dakota State University, where a company board member serves as President[88](index=88&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, operational results, liquidity, and future outlook for the reported periods - Daktronics designs, markets, and manufactures integrated electronic display systems and related services globally, with five business segments: Commercial, Live Events, High School Park and Recreation, Transportation, and International[95](index=95&type=chunk) - The company benefits from a stable supply chain and efficient production due to past investments, with long-term growth expected from increased LED display use and new technologies[97](index=97&type=chunk)[98](index=98&type=chunk) [Forward-Looking Statements](index=25&type=section&id=FORWARD-LOOKING%20STATEMENTS) - This section contains forward-looking statements, identified by terms like 'expect' and 'estimate,' which reflect management's current views and are subject to uncertainties[91](index=91&type=chunk) - Actual results may differ materially due to factors such as market conditions, financing needs, and other risks detailed in the Annual Report on Form 10-K[91](index=91&type=chunk) - The company undertakes **no obligation** to publicly update or revise any forward-looking statements[93](index=93&type=chunk) [Overview](index=25&type=section&id=OVERVIEW) - Daktronics is a leader in designing, marketing, and manufacturing integrated electronic display systems and related products and services globally[95](index=95&type=chunk) - The company operates through five business segments: Commercial, Live Events, High School Park and Recreation, Transportation, and International[95](index=95&type=chunk) [Current Conditions](index=26&type=section&id=CURRENT%20CONDITIONS) - Past investments in capacity and a stable supply chain have enabled efficient production and order fulfillment[97](index=97&type=chunk) - The company anticipates **continued stabilization** in supply chain uncertainty and volatility during the current fiscal year[97](index=97&type=chunk) - Long-term growth is expected from the increased use of LED display systems across industries and the development of new technologies, services, and sales channels[98](index=98&type=chunk) [Results of Operations - Three Months Ended October 28, 2023 and October 29, 2022](index=26&type=section&id=COMPARISON%20OF%20THE%20THREE%20MONTHS%20ENDED%20OCTOBER%2028%2C%202023%20AND%20OCTOBER%2029%2C%202022) This section compares financial performance for the three months ended October 28, 2023, versus the prior-year period - Net sales increased by **$11.9 million (6.4%)** to $199.4 million, driven by fulfilling backlog, increased manufacturing capacity, and realization of price increases[105](index=105&type=chunk) - Gross profit improved significantly due to strategic pricing, efficient sales volume over cost structure, and fewer supply chain and operational disruptions[108](index=108&type=chunk) - Operating income dramatically increased to **$19.4 million** from $1.5 million in the prior year, and net income turned around to **$2.2 million** from a $13.0 million net loss[15](index=15&type=chunk) [Product Order Backlog](index=26&type=section&id=Product%20Order%20Backlog%20(3%20Months)) - Product order backlog decreased to **$306.9 million** as of October 28, 2023, from $463.1 million a year prior and $400.7 million at April 29, 2023[101](index=101&type=chunk) - The decrease in backlog is attributed to fulfilling orders at a greater pace due to stabilized supply chain conditions, improved production lead times, and increased capacity[101](index=101&type=chunk) - The current backlog as of October 28, 2023, is expected to be fulfilled within the next **24 months**[102](index=102&type=chunk) [Net Sales](index=27&type=section&id=Net%20Sales%20(3%20Months)) **Net Sales Performance (Three Months Ended October 28, 2023 vs. October 29, 2022):** | Segment | Oct 28, 2023 (in thousands) | Oct 29, 2022 (in thousands) | Dollar Change (in thousands) | Percent Change | | :--- | :--- | :--- | :--- | :--- | | Commercial | $42,453 | $37,047 | $5,406 | 14.6% | | Live Events | $68,210 | $69,239 | $(1,029) | (1.5)% | | High School Park and Recreation | $48,942 | $42,006 | $6,936 | 16.5% | | Transportation | $20,243 | $16,679 | $3,564 | 21.4% | | International | $19,521 | $22,468 | $(2,947) | (13.1)% | | **Total Net Sales** | **$199,369** | **$187,439** | **$11,930** | **6.4%** | **Order Performance (Three Months Ended October 28, 2023 vs. October 29, 2022):** | Segment | Oct 28, 2023 (in thousands) | Oct 29, 2022 (in thousands) | Dollar Change (in thousands) | Percent Change | | :--- | :--- | :--- | :--- | :--- | | Commercial | $34,209 | $42,711 | $(8,502) | (19.9)% | | Live Events | $79,016 | $80,999 | $(1,983) | (2.4)% | | High School Park and Recreation | $32,800 | $31,898 | $902 | 2.8% | | Transportation | $21,500 | $16,583 | $4,917 | 29.7% | | International | $16,168 | $10,616 | $5,552 | 52.3% | | **Total Orders** | **$183,693** | **$182,807** | **$886** | **0.5%** | - Sales growth was primarily driven by the High School Park and Recreation, Commercial, and Transportation business units[105](index=105&type=chunk) - Overall order volume was similar year-over-year, with higher orders in International and Transportation offsetting decreases in the Commercial business unit[106](index=106&type=chunk) [Gross Profit and Contribution Margin](index=28&type=section&id=Gross%20Profit%20and%20Contribution%20Margin%20(3%20Months)) **Gross Profit (Three Months Ended October 28, 2023 vs. October 29, 2022):** | Metric | Oct 28, 2023 (in thousands) | % of Net Sales | Oct 29, 2022 (in thousands) | % of Net Sales | | :--- | :--- | :--- | :--- | :--- | | Commercial | $7,231 | 17.0% | $6,197 | 16.7% | | Live Events | $19,234 | 28.2% | $7,983 | 11.5% | | High School Park and Recreation | $16,420 | 33.5% | $11,811 | 28.1% | | Transportation | $6,780 | 33.5% | $4,084 | 24.5% | | International | $4,534 | 23.2% | $1,629 | 7.3% | | **Total Gross Profit** | **$54,199** | **27.2%** | **$31,704** | **16.9%** | - Gross profit improvement was driven by strategic pricing, efficient generation of sales volume over the cost structure, and fewer supply chain and operational disruptions[108](index=108&type=chunk) - Total warranty costs as a percent of sales decreased to **2.2%** for the three months ended October 28, 2023, from 2.7% in the prior year[109](index=109&type=chunk) **Contribution Margin (Three Months Ended October 28, 2023 vs. October 29, 2022):** | Metric | Oct 28, 2023 (in thousands) | % of Net Sales | Oct 29, 2022 (in thousands) | % of Net Sales | Dollar Change (in thousands) | Percent Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Commercial | $2,403 | 5.7% | $484 | 1.3% | $1,919 | 396.5% | | Live Events | $16,572 | 24.3% | $5,214 | 7.5% | $11,358 | 217.8% | | High School Park and Recreation | $12,746 | 26.0% | $4,308 | 10.3% | $8,438 | 195.9% | | Transportation | $5,752 | 28.4% | $2,726 | 16.3% | $3,026 | 111.0% | | International | $2,073 | 10.6% | $(1,418) | (6.3)% | $3,491 | N/A | | **Total Contribution Margin** | **$39,546** | **19.8%** | **$17,179** | **9.2%** | **$22,367** | **130.2%** | [Operating Expenses](index=29&type=section&id=Operating%20Expenses%20(3%20Months)) **Operating Expenses (Three Months Ended October 28, 2023 vs. October 29, 2022):** | Metric | Oct 28, 2023 (in thousands) | % of Net Sales | Oct 29, 2022 (in thousands) | % of Net Sales | Dollar Change (in thousands) | Percent Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | General and administrative | $10,889 | 5.5% | $8,687 | 4.6% | $2,202 | 25.3% | | Product design and development | $9,221 | 4.6% | $6,966 | 3.7% | $2,255 | 32.4% | | **Total Operating Expenses** | **$20,110** | **10.1%** | **$15,653** | **8.3%** | **$4,457** | **28.5%** | - General and administrative expenses increased primarily due to higher personnel-related expenses and professional fees[114](index=114&type=chunk) - Product design and development expenses increased mainly due to higher personnel-related expenses[115](index=115&type=chunk) [Other Income and Expenses](index=29&type=section&id=Other%20Income%20and%20Expenses%20(3%20Months)) **Nonoperating (Expense) Income (Three Months Ended October 28, 2023 vs. October 29, 2022):** | Metric | Oct 28, 2023 (in thousands) | % of Net Sales | Oct 29, 2022 (in thousands) | % of Net Sales | Dollar Change (in thousands) | Percent Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Interest (expense) income, net | $(1,326) | (0.7)% | $(263) | (0.1)% | $(1,063) | 404.2% | | Change in fair value of convertible note | $(10,650) | (5.3)% | $0 | 0.0% | $(10,650) | N/A | | Other expense and debt issuance costs write-off, net | $(1,303) | (0.7)% | $(208) | (0.1)% | $(1,095) | 526.4% | - The increase in net interest expense was primarily due to new convertible note, asset-based, and mortgage financings[116](index=116&type=chunk) - A **$10.7 million expense** was recorded for the change in fair value of the Convertible Note, driven by an increase in stock price[117](index=117&type=chunk) - Other expense, net, increased primarily due to losses from equity method affiliates and foreign currency volatility[118](index=118&type=chunk) [Income Taxes](index=30&type=section&id=Income%20Taxes%20(3%20Months)) - The effective tax rate for Q2 fiscal 2024 was **64.8%**, impacted by the non-deductible fair value adjustment to income[119](index=119&type=chunk) [Results of Operations - Six Months Ended October 28, 2023 and October 29, 2022](index=30&type=section&id=COMPARISON%20OF%20THE%20SIX%20MONTHS%20ENDED%20OCTOBER%2028%2C%202023%20AND%20OCTOBER%2029%2C%202022) This section compares financial performance for the six months ended October 28, 2023, versus the prior-year period - Net sales increased by **$72.5 million (20.2%)** to $431.9 million, driven by higher throughput from capacity investments and a more stable operating environment[121](index=121&type=chunk) - Gross profit percentage rose to **29.0%** from 16.0%, attributed to record sales volume, strategic pricing, and fewer supply chain disruptions[123](index=123&type=chunk) - Operating income significantly improved to **$59.7 million** from a loss of $4.0 million, and the company achieved net income of **$21.4 million**[15](index=15&type=chunk) [Net Sales](index=30&type=section&id=Net%20Sales%20(6%20Months)) **Net Sales Performance (Six Months Ended October 28, 2023 vs. October 29, 2022):** | Segment | Oct 28, 2023 (in thousands) | Oct 29, 2022 (in thousands) | Dollar Change (in thousands) | Percent Change | | :--- | :--- | :--- | :--- | :--- | | Commercial | $89,336 | $77,165 | $12,171 | 15.8% | | Live Events | $160,209 | $125,622 | $34,587 | 27.5% | | High School Park and Recreation | $105,176 | $77,815 | $27,361 | 35.2% | | Transportation | $41,612 | $36,219 | $5,393 | 14.9% | | International | $35,567 | $42,538 | $(6,971) | (16.4)% | | **Total Net Sales** | **$431,900** | **$359,359** | **$72,541** | **20.2%** | **Order Performance (Six Months Ended October 28, 2023 vs. October 29, 2022):** | Segment | Oct 28, 2023 (in thousands) | Oct 29, 2022 (in thousands) | Dollar Change (in thousands) | Percent Change | | :--- | :--- | :--- | :--- | :--- | | Commercial | $66,643 | $90,389 | $(23,746) | (26.3)% | | Live Events | $131,219 | $132,752 | $(1,533) | (1.2)% | | High School Park and Recreation | $68,539 | $69,477 | $(938) | (1.4)% | | Transportation | $40,485 | $32,287 | $8,198 | 25.4% | | International | $35,437 | $28,125 | $7,312 | 26.0% | | **Total Orders** | **$342,323** | **$353,030** | **$(10,707)** | **(3.0)%** | - Net sales increased due to higher throughput from capacity investments and a more stable operating environment[121](index=121&type=chunk) - Overall order volume decreased, with higher orders in International and Transportation offsetting declines in Commercial markets[122](index=122&type=chunk) [Gross Profit and Contribution Margin](index=31&type=section&id=Gross%20Profit%20and%20Contribution%20Margin%20(6%20Months)) **Gross Profit (Six Months Ended October 28, 2023 vs. October 29, 2022):** | Metric | Oct 28, 2023 (in thousands) | % of Net Sales | Oct 29, 2022 (in thousands) | % of Net Sales | | :--- | :--- | :--- | :--- | :--- | | Commercial | $20,000 | 22.4% | $11,018 | 14.3% | | Live Events | $47,174 | 29.4% | $11,769 | 9.4% | | High School Park and Recreation | $37,245 | 35.4% | $21,788 | 28.0% | | Transportation | $13,869 | 33.3% | $9,922 | 27.4% | | International | $7,058 | 19.8% | $3,001 | 7.1% | | **Total Gross Profit** | **$125,346** | **29.0%** | **$57,498** | **16.0%** | - The increase in gross profit percentage is attributed to record sales volume over fixed manufacturing costs, strategic pricing actions, and stabilization of input costs[123](index=123&type=chunk) - Total warranty costs as a percent of sales remained consistent at **2.2%** for both periods[124](index=124&type=chunk) **Contribution Margin (Six Months Ended October 28, 2023 vs. October 29, 2022):** | Metric | Oct 28, 2023 (in thousands) | % of Net Sales | Oct 29, 2022 (in thousands) | % of Net Sales | Dollar Change (in thousands) | Percent Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Commercial | $11,124 | 12.5% | $2,119 | 2.7% | $9,005 | 425.0% | | Live Events | $41,987 | 26.2% | $6,188 | 4.9% | $35,799 | 578.5% | | High School Park and Recreation | $30,209 | 28.7% | $15,019 | 19.3% | $15,190 | 101.1% | | Transportation | $11,942 | 28.7% | $3,973 | 22.0% | $7,969 | 200.6% | | International | $2,502 | 7.0% | $(2,755) | (6.5)% | $5,257 | N/A | | **Total Contribution Margin** | **$97,764** | **22.6%** | **$28,540** | **7.9%** | **$69,224** | **242.6%** | [Operating Expenses](index=32&type=section&id=Operating%20Expenses%20(6%20Months)) **Operating Expenses (Six Months Ended October 28, 2023 vs. October 29, 2022):** | Metric | Oct 28, 2023 (in thousands) | % of Net Sales | Oct 29, 2022 (in thousands) | % of Net Sales | Dollar Change (in thousands) | Percent Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | General and administrative | $20,488 | 4.7% | $18,128 | 5.0% | $2,360 | 13.0% | | Product design and development | $17,624 | 4.1% | $14,405 | 4.0% | $3,219 | 22.3% | | **Total Operating Expenses** | **$38,112** | **8.8%** | **$32,533** | **9.0%** | **$5,579** | **17.1%** | - General and administrative expenses increased primarily due to higher personnel-related expenses[128](index=128&type=chunk) - Product design and development expenses increased mainly due to higher personnel-related expenses[129](index=129&type=chunk) [Other Income and Expenses](index=32&type=section&id=Other%20Income%20and%20Expenses%20(6%20Months)) **Nonoperating (Expense) Income (Six Months Ended October 28, 2023 vs. October 29, 2022):** | Metric | Oct 28, 2023 (in thousands) | % of Net Sales | Oct 29, 2022 (in thousands) | % of Net Sales | Dollar Change (in thousands) | Percent Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Interest (expense) income, net | $(2,207) | (0.5)% | $(323) | (0.1)% | $(1,884) | 583.3% | | Change in fair value of convertible note | $(17,910) | (4.1)% | $0 | 0.0% | $(17,910) | N/A | | Other expense, net | $(5,282) | (1.2)% | $(955) | (0.3)% | $(4,327) | 453.1% | - The increase in net interest expense was primarily due to new convertible note, asset-based, and mortgage financings[130](index=130&type=chunk) - A **$17.9 million expense** was recorded for the change in fair value of the Convertible Note, driven by an increase in stock price[131](index=131&type=chunk) - Other expense, net, increased primarily due to losses from equity method affiliates, foreign currency volatility, and expensing of **$3.4 million in debt issuance costs**[132](index=132&type=chunk) [Income Tax](index=32&type=section&id=Income%20Tax%20(6%20Months)) - The effective tax rate for the first six months of fiscal 2024 was **37.6%**, influenced by the non-deductible fair value adjustment to income[133](index=133&type=chunk) - The company expects its full-year effective tax rate to be in the **mid-twenties**, before the impacts of fair value accounting for the convertible note[133](index=133&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) **Cash Flow Summary (Six Months Ended October 28, 2023 vs. October 29, 2022):** | Metric | Oct 28, 2023 (in thousands) | Oct 29, 2022 (in thousands) | Dollar Change (in thousands) | | :--- | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $44,311 | $(21,938) | $66,249 | | Net cash used in investing activities | $(12,073) | $(15,192) | $3,119 | | Net cash provided by financing activities | $15,919 | $26,278 | $(10,359) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $48,296 | $(10,865) | $59,161 | - Net cash provided by operating activities improved by **$66.2 million**, driven by a $39.7 million increase in net income, the $17.9 million non-cash fair value change of the Convertible Note, and improved working capital positions[134](index=134&type=chunk) - As of October 28, 2023, the company had **$64.7 million in cash** and cash equivalents and **$50.6 million in borrowing capacity** under its ABL facility[138](index=138&type=chunk)[139](index=139&type=chunk) - Working capital increased to **$196.4 million** as of October 28, 2023, from $132.5 million at April 29, 2023[141](index=141&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk) [Significant Accounting Policies and Estimates](index=35&type=section&id=Significant%20Accounting%20Policies%20and%20Estimates) - For detailed information on significant accounting policies and critical accounting estimates, readers are referred to the company's Annual Report on Form 10-K for the fiscal year ended April 29, 2023[148](index=148&type=chunk) [New Accounting Pronouncements](index=35&type=section&id=New%20Accounting%20Pronouncements) - A summary of recently issued accounting pronouncements and their effects on financial results can be found in 'Note 1. Basis of Presentation' within this Report[149](index=149&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section notes the company's exposure to interest rate, foreign currency, and commodity risks - The company is exposed to certain interest rate, foreign currency, and commodity risks[150](index=150&type=chunk) - The new ABL and $15.0 million delayed draw loan, entered into during the first quarter of fiscal 2024, are subject to interest rate risks[150](index=150&type=chunk) - There have been **no other material changes** in the company's exposure to these risks during the first six months of fiscal 2024[151](index=151&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) This section addresses the effectiveness of disclosure controls, a material weakness in internal controls, and the remediation plan - As of October 28, 2023, management concluded that the company's disclosure controls and procedures were **not effective** due to a material weakness in internal control over financial reporting[152](index=152&type=chunk) - Despite the material weakness, the CEO and CFO believe the condensed consolidated financial statements **fairly represent** the financial condition, results of operations, and cash flows[153](index=153&type=chunk) [Evaluation of Disclosure Controls and Procedures](index=35&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - Management concluded that disclosure controls and procedures were **not effective** as of October 28, 2023, due to a material weakness in internal control over financial reporting[152](index=152&type=chunk) [Material Weakness in Internal Control Over Financial Reporting](index=35&type=section&id=Material%20Weakness%20in%20Internal%20Control%20Over%20Financial%20Reporting) - A material weakness was identified related to the ineffective operation of certain transactional level controls for **revenue contracts recognized over time**[154](index=154&type=chunk) - The root cause was **insufficient training** of control operators regarding the level of precision expected when executing revenue controls[154](index=154&type=chunk) [Remediation Plan](index=35&type=section&id=Remediation%20Plan) - The remediation plan involves providing **additional training** to revenue control operators on the expected precision level for executing these controls[155](index=155&type=chunk) - Additional training for control operators was conducted during the first six months of fiscal 2024[155](index=155&type=chunk) [Changes in Internal Control Over Financial Reporting](index=36&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) - During the quarter ended October 28, 2023, there were **no changes** in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[156](index=156&type=chunk) [Part II. Other Information](index=36&type=section&id=Part%20II.%20Other%20Information) [Item 1. Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The company believes that ongoing legal actions will not materially affect its financial condition or operations - The company is a party to legal proceedings and claims arising during the normal course of business[157](index=157&type=chunk) - Management's opinion is that the disposition of these matters will **not have a material adverse effect** on the company's financial condition or results of operations[157](index=157&type=chunk) - Further information is available in 'Note 7. Commitments and Contingencies' of the Notes to Condensed Consolidated Financial Statements[157](index=157&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) This section directs readers to the company's Annual Report on Form 10-K for a comprehensive discussion of risk factors - Readers should refer to Item 1A of Part I of the Annual Report on Form 10-K for the fiscal year ended April 29, 2023, for a full description of various risks and uncertainties[158](index=158&type=chunk) - New risks may emerge at any time, and the company cannot predict these risks or estimate their potential effect on its financial condition or results[158](index=158&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company did not repurchase any shares of its common stock during the three months ended October 28, 2023 - During the three months ended October 28, 2023, the company **did not repurchase any shares** of its common stock[159](index=159&type=chunk) [Item 3. Defaults Upon Senior Securities](index=36&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is marked as "Not applicable," indicating no defaults upon senior securities - This item is **not applicable**, indicating no defaults upon senior securities[160](index=160&type=chunk) [Item 4. Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is marked as "Not applicable," indicating no mine safety disclosures - This item is **not applicable**, indicating no mine safety disclosures[161](index=161&type=chunk) [Item 5. Other Information](index=36&type=section&id=Item%205.%20Other%20Information) This item is marked as "Not applicable," indicating no other information to disclose - This item is **not applicable**, indicating no other information to disclose[162](index=162&type=chunk) [Item 6. Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed as part of the report, including corporate and financing documents - A list of exhibits filed as part of this Report is provided, including corporate documents, financing agreements, and CEO/CFO certifications[163](index=163&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk) - Many of the exhibits are **incorporated by reference** from prior SEC filings[165](index=165&type=chunk)[166](index=166&type=chunk) [Signatures](index=39&type=section&id=Signatures) This section contains the required signatures for the Form 10-Q, confirming its submission by authorized personnel - The report is duly signed on behalf of Daktronics, Inc. by Sheila M. Anderson, Chief Financial Officer[167](index=167&type=chunk) - The signature date is **December 5, 2023**[167](index=167&type=chunk)

Daktronics, Inc. (NASDAQ:DAKT) Q1 2024 Earnings Conference Call September 6, 2023 11:00 AM ET Company Participants Sheila Anderson - Chief Financial Officer and Treasurer Reece Kurtenbach - President and Chief Executive Officer Conference Call Participants BJ Cook - Singular Research Operator Good day, ladies and gentlemen, and welcome to the Daktronics Fiscal Year 2024 First Quarter Earnings Results Conference Call. As a reminder, this conference is being recorded today, Wednesday, September 6, and is avai ...

[Part I. Financial Information](index=4&type=section&id=Part%20I.%20Financial%20Information) [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Daktronics reported a significant financial turnaround for Q1 FY2024, with record net sales of **$232.5 million**, a **35.3%** increase, leading to a **$19.2 million** net income and **$19.3 million** in operating cash flow [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$508.0 million** as of July 29, 2023, driven by higher cash and new long-term debt, while shareholders' equity improved to **$221.0 million** Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | July 29, 2023 | April 29, 2023 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $45,775 | $23,982 | | Accounts receivable, net | $125,613 | $109,979 | | Inventories | $144,794 | $149,448 | | Total current assets | $386,658 | $342,657 | | **Total Assets** | **$508,018** | **$468,104** | | **Liabilities & Equity** | | | | Total current liabilities | $204,417 | $210,163 | | Long-term debt, net | $41,422 | $17,750 | | Total liabilities | $286,971 | $267,226 | | **Total Shareholders' Equity** | **$221,047** | **$200,878** | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Net sales grew **35.3%** to **$232.5 million** for the three months ended July 29, 2023, with gross profit margin more than doubling to **30.6%**, yielding a **$19.2 million** net income Quarterly Statement of Operations (in thousands, except per share data) | Metric | Three Months Ended July 29, 2023 | Three Months Ended July 30, 2022 | | :--- | :--- | :--- | | Net sales | $232,531 | $171,920 | | Gross profit | $71,147 | $25,794 | | Gross Profit Margin | 30.6% | 15.0% | | Operating income (loss) | $40,216 | $(5,519) | | Net income (loss) | $19,196 | $(5,326) | | Diluted EPS | $0.42 | $(0.12) | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The company generated **$19.3 million** in cash from operating activities for Q1 FY2024, a significant improvement from the prior year, increasing total cash to **$54.4 million** Cash Flow Summary (in thousands) | Activity | Three Months Ended July 29, 2023 | Three Months Ended July 30, 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $19,250 | $(22,815) | | Net cash used in investing activities | $(5,706) | $(10,372) | | Net cash provided by financing activities | $16,356 | $24,128 | | **Net increase (decrease) in cash** | **$29,660** | **$(8,979)** | [Notes to the Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) Key notes detail new accounting standard adoption, strong revenue growth in Live Events and High School Park and Recreation, and new financing including a **$25 million** convertible note, which resulted in a **$7.3 million** non-cash charge and a **31.7%** effective tax rate - As of July 29, 2023, the company had remaining performance obligations of **$386.6 million**, with approximately **$320.9 million** expected to be recognized as revenue over the next 12 months[50](index=50&type=chunk) - On May 11, 2023, the company closed on a new **$75 million** senior credit facility and issued a **$25 million** convertible note, terminating its prior credit agreement[58](index=58&type=chunk)[62](index=62&type=chunk) - The convertible note is accounted for under the fair value option, and a **$7.3 million** non-cash expense was recorded due to the increase in its fair value, primarily driven by the rise in the company's stock price[66](index=66&type=chunk)[67](index=67&type=chunk)[115](index=115&type=chunk) - The effective tax rate for the quarter was **31.7%**, compared to **15.8%** in the prior year, with the increase attributed to the non-taxable fair value adjustment of the convertible note[75](index=75&type=chunk)[117](index=117&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes record quarterly net sales of **$232.5 million** and a gross profit margin surge to **30.6%** to higher production and a stable supply chain, with product order backlog decreasing to **$323.7 million** - Product order backlog was **$323.7 million** as of July 29, 2023, a decrease from **$469.1 million** a year prior, attributed to faster order fulfillment due to stabilized supply chains and increased capacity[102](index=102&type=chunk) Net Sales by Segment (in thousands) | Segment | Q1 FY2024 | Q1 FY2023 | % Change | | :--- | :--- | :--- | :--- | | Commercial | $46,883 | $40,118 | 16.9% | | Live Events | $91,999 | $56,383 | 63.2% | | High School Park and Recreation | $56,234 | $35,809 | 57.0% | | Transportation | $21,369 | $19,540 | 9.4% | | International | $16,046 | $20,070 | (20.0)% | | **Total** | **$232,531** | **$171,920** | **35.3%** | - The increase in gross profit percentage to **30.6%** is attributed to record sales volume over a fixed manufacturing cost structure, past strategic pricing actions, stabilization of input costs, and fewer operational disruptions compared to the prior year[107](index=107&type=chunk) - Cash flow from operations improved by **$42.1 million** year-over-year, driven by a **$24.5 million** increase in net income and a **$7.3 million** non-cash fair value charge on the convertible debt[118](index=118&type=chunk)[119](index=119&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's market risk profile remains largely unchanged, except for increased interest rate risk exposure from new ABL and Delayed Draw Loan facilities - The company entered into new credit facilities (ABL and Delayed Draw Loan) during the quarter, which are subject to interest rate risks, with no other material changes in exposure to interest rate, foreign currency, or commodity risks[133](index=133&type=chunk)[134](index=134&type=chunk) [Controls and Procedures](index=32&type=section&id=Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were not effective as of July 29, 2023, due to a material weakness in internal control over financial reporting related to revenue contracts - The CEO and CFO concluded that disclosure controls and procedures were not effective as of July 29, 2023, due to a material weakness in internal control over financial reporting[135](index=135&type=chunk) - The material weakness relates to the ineffective operation of transactional level controls for revenue contracts recognized over time, stemming from insufficient training of control operators[137](index=137&type=chunk) - A remediation plan is underway, which involves providing additional training to revenue control operators on the expected level of precision for executing these controls[138](index=138&type=chunk) [Part II. Other Information](index=32&type=section&id=Part%20II.%20Other%20Information) [Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal actions in the normal course of business, with no expected material adverse effect on its financial condition or operations - Management believes that the disposition of ongoing legal matters will not have a material adverse effect on the company's financial condition or results of operations[140](index=140&type=chunk) [Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K for FY2023 - Investors are referred to the risk factors described in the Annual Report on Form 10-K for the fiscal year ended April 29, 2023, as there have been no material updates[141](index=141&type=chunk) [Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=33&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities,%20Use%20of%20Proceeds,%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company did not repurchase any shares of its common stock during Q1 FY2024 - No shares of common stock were repurchased by the company during the first quarter of fiscal 2024[142](index=142&type=chunk)

Financial Data and Key Metrics Changes - The company reported record sales of $209.9 million for Q4 FY2023, a 29.4% increase from $162.2 million in Q4 FY2022, and total sales for the year reached $754.2 million, up 23.4% from $611 million in FY2022 [13] - Operating income for Q4 FY2023 was $18.3 million, or 8.7% of sales, compared to $4 million a year earlier, with annual operating income at $21.3 million [14] - Gross profit as a percentage of net sales increased to 24.8% in Q4 FY2023 from 18.5% in Q4 FY2022, and for the fiscal year, it rose to 20.1% from 19.1% [34] Business Line Data and Key Metrics Changes - The commercial area is focusing on increasing sales channels with audio-visual integrators, which is expected to drive growth in government, military, healthcare, and corporate applications [18] - The live events segment outlook remains strong due to large stadium renovations and continued replacement cycles, with the company being a market leader in this segment [19] Market Data and Key Metrics Changes - The international business unit is experiencing a softer market due to macro-economic and geopolitical factors, which are expected to continue impacting sales [39] - Transportation demand is strong as project planning resumes to pre-pandemic levels, benefiting from infrastructure spending [49] Company Strategy and Development Direction - The company plans to invest in high-return projects and technologies to support long-term profitability, focusing on new technologies like Narrow Pixel Pitch [40] - Investments will be made in digital transformation projects to improve customer and employee experiences [47] Management's Comments on Operating Environment and Future Outlook - Management highlighted that fiscal 2023 was a positive transition year, navigating challenges and positioning for long-term success [24] - The company expects to start FY2024 with a strong backlog of $101 million and anticipates sales growth next year [47] Other Important Information - The company ended the year with $26 million in adjusted operating income and a strong balance sheet, moving from cash investments to cash generation [24][15] - A tax benefit of $8.2 million in Q4 was primarily due to the reversal of a valuation allowance [35] Q&A Session Summary Question: How is the company positioned regarding pricing and backlog? - Management indicated that they are in a good position with pricing and backlog, having a better understanding of cost elements in a more stable operating environment [52] Question: What benefits does the company expect from the Infrastructure Bill? - Management believes that the ongoing projects from the Infrastructure Bill will provide long-term benefits, as these projects span months and years [43]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended April 29, 2023 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From ___ to ___. Commission File Number: 0-23246 Daktronics, Inc. Securities registered pursuant to Section 12(b) of the Act: | Title of each class | Trading Symbol ...

PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for the period ended January 28, 2023 [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements and related notes for the quarter ended January 28, 2023 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, including assets, liabilities, and equity, as of January 28, 2023 Condensed Consolidated Balance Sheets (in thousands) | Metric (in thousands) | January 28, 2023 | April 30, 2022 | Change | % Change | | :-------------------- | :--------------- | :------------- | :----- | :------- | | Total Assets | $453,652 | $440,876 | $12,776 | 2.9% | | Total Current Assets | $341,821 | $317,570 | $24,251 | 7.6% | | Total Liabilities | $274,311 | $249,312 | $24,999 | 10.0% | | Total Current Liabilities | $212,386 | $213,694 | $(1,308) | (0.6%) | | Total Shareholders' Equity | $179,341 | $191,564 | $(12,223) | (6.4%) | - Cash and cash equivalents **decreased** from **$17,143 thousand** at April 30, 2022, to **$10,022 thousand** at January 28, 2023, a **41.6% decrease**[9](index=9&type=chunk) - Inventories **increased** from **$134,392 thousand** at April 30, 2022, to **$164,879 thousand** at January 28, 2023, reflecting **increased investment**[9](index=9&type=chunk) - The Line of Credit balance **increased** from **$0** at April 30, 2022, to **$23,638 thousand** at January 28, 2023[9](index=9&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section details the company's revenues, expenses, and net income or loss for the three and nine months ended January 28, 2023 Condensed Consolidated Statements of Operations (in thousands) | Metric (in thousands) | Three Months Ended Jan 28, 2023 | Three Months Ended Jan 29, 2022 | Nine Months Ended Jan 28, 2023 | Nine Months Ended Jan 29, 2022 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net sales | $184,975 | $139,558 | $544,334 | $448,767 | | Gross profit | $41,713 | $22,308 | $99,211 | $86,760 | | Operating income (loss) | $7,118 | $(5,680) | $3,125 | $4,365 | | Net income (loss) | $3,713 | $(4,350) | $(14,597) | $1,709 | | Basic EPS | $0.08 | $(0.10) | $(0.32) | $0.04 | - **Net sales increased** by **32.5%** for the three months ended January 28, 2023, and by **21.3%** for the nine months ended January 28, 2023, compared to the prior year periods[12](index=12&type=chunk) - The company reported a **net income** of **$3,713 thousand** for the three months ended January 28, 2023, a **significant improvement** from a **net loss** of **$(4,350) thousand** in the prior year's comparable quarter. However, for the nine months, a **net loss** of **$(14,597) thousand** was recorded, compared to a **net income** of **$1,709 thousand** in the prior year[12](index=12&type=chunk) - A **goodwill impairment charge** of **$4,576 thousand** was recognized in both the three and nine months ended January 28, 2023[12](index=12&type=chunk) [Condensed Consolidated Statements of Comprehensive (Loss) Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20(Loss)%20Income) This section outlines the company's comprehensive income or loss, including other comprehensive income items, for the specified periods Condensed Consolidated Statements of Comprehensive (Loss) Income (in thousands) | Metric (in thousands) | Three Months Ended Jan 28, 2023 | Three Months Ended Jan 29, 2022 | Nine Months Ended Jan 28, 2023 | Nine Months Ended Jan 29, 2022 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income (loss) | $3,713 | $(4,350) | $(14,597) | $1,709 | | Total other comprehensive (loss), net of tax | $1,982 | $(724) | $(181) | $(1,147) | | Comprehensive income (loss) | $5,695 | $(5,074) | $(14,778) | $562 | - Comprehensive income for the three months ended January 28, 2023, was **$5,695 thousand**, a **significant improvement** from a comprehensive loss of **$(5,074) thousand** in the prior year's comparable quarter[15](index=15&type=chunk) - For the nine months ended January 28, 2023, the company reported a comprehensive loss of **$(14,778) thousand**, compared to a comprehensive income of **$562 thousand** in the prior year[15](index=15&type=chunk) [Condensed Consolidated Statements of Shareholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) This section details changes in the company's shareholders' equity, including common stock and retained earnings, over the period Condensed Consolidated Statements of Shareholders' Equity (in thousands) | Metric (in thousands) | Balance as of April 30, 2022 | Balance as of January 28, 2023 | Change | | :-------------------- | :--------------------------- | :----------------------------- | :----- | | Common Stock | $61,794 | $63,002 | $1,208 | | Additional Paid-In Capital | $48,372 | $49,719 | $1,347 | | Retained Earnings | $96,608 | $82,011 | $(14,597) | | Total Shareholders' Equity | $191,564 | $179,341 | $(12,223) | - Retained earnings **decreased** by **$14,597 thousand** from April 30, 2022, to January 28, 2023, primarily due to the **net loss** incurred during the nine-month period[18](index=18&type=chunk) - Total shareholders' equity **decreased** by **$12,223 thousand**, or **6.4%**, from **$191,564 thousand** at April 30, 2022, to **$179,341 thousand** at January 28, 2023[18](index=18&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the cash inflows and outflows from operating, investing, and financing activities for the nine months ended January 28, 2023 Condensed Consolidated Statements of Cash Flows (in thousands) | Metric (in thousands) | Nine Months Ended Jan 28, 2023 | Nine Months Ended Jan 29, 2022 | Dollar Change | | :-------------------- | :----------------------------- | :----------------------------- | :------------ | | Net cash used in operating activities | $(9,487) | $(25,464) | $15,977 | | Net cash used in investing activities | $(20,947) | $(19,926) | $(1,021) |\n| Net cash provided by (used in) financing activities | $23,498 | $(3,391) | $26,889 | | Net decrease in cash, cash equivalents and restricted cash | $(7,278) | $(48,683) | $41,405 | - **Net cash used in operating activities significantly decreased** from **$(25,464) thousand** in the prior year to **$(9,487) thousand** for the nine months ended January 28, 2023, primarily due to changes in net operating assets and liabilities[24](index=24&type=chunk)[129](index=129&type=chunk) - **Net cash provided by financing activities** was **$23,498 thousand** for the nine months ended January 28, 2023, driven by draws on the line of credit, a reversal from cash used in financing activities in the prior year[24](index=24&type=chunk)[132](index=132&type=chunk) - **Purchases of property and equipment increased** to **$21,809 thousand** for the nine months ended January 28, 2023, from **$10,024 thousand** in the prior year, indicating **increased capital investments**[24](index=24&type=chunk)[131](index=131&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [Note 1. Basis of Presentation](index=12&type=section&id=Note%201.%20Basis%20of%20Presentation) This note describes the company's business, basis of financial statement preparation, and going concern assessment - The company is an industry leader in designing and manufacturing electronic scoreboards, programmable display systems, and large screen video displays[25](index=25&type=chunk) - Management has concluded that there is **substantial doubt** about the company's ability to continue as a going concern due to global economic conditions, supply chain disruptions, and the need for additional liquidity, despite ongoing efforts to secure financing and improve cash flow[33](index=33&type=chunk)[34](index=34&type=chunk) - The Board of Directors formed an independent Strategy and Financing Review Committee in December 2022 to explore alternatives for strengthening the company's financial structure and liquidity profile[34](index=34&type=chunk) [Note 2. Investments in Affiliates](index=14&type=section&id=Note%202.%20Investments%20in%20Affiliates) This note details the company's investments in affiliates and their impact on financial results Investments in Affiliates (in thousands) | Metric (in thousands) | January 28, 2023 | April 30, 2022 | | :-------------------- | :--------------- | :------------- | | Aggregate investments accounted for under equity method | $17,145 | $16,916 | Share of Losses of Affiliates (in thousands) | Metric (in thousands) | Three Months Ended Jan 28, 2023 | Three Months Ended Jan 29, 2022 | Nine Months Ended Jan 28, 2023 | Nine Months Ended Jan 29, 2022 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Share of losses of affiliates | $895 | $401 | $2,596 | $1,966 | - The company's ownership in Miortech **increased** to **54.5%** after converting **$2,823 thousand** in notes to stock ownership during the nine months ended January 28, 2023[47](index=47&type=chunk)[48](index=48&type=chunk) [Note 3. Earnings Per Share ("EPS")](index=15&type=section&id=Note%203.%20Earnings%20Per%20Share%20(%22EPS%22)) This note provides the basic and diluted earnings per share calculations for the reporting periods Earnings Per Share | Metric | Three Months Ended Jan 28, 2023 | Three Months Ended Jan 29, 2022 | Nine Months Ended Jan 28, 2023 | Nine Months Ended Jan 29, 2022 | | :----- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Basic EPS | $0.08 | $(0.10) | $(0.32) | $0.04 | | Diluted EPS | $0.08 | $(0.10) | $(0.32) | $0.04 | - For the three months ended January 28, 2023, basic and diluted EPS improved to **$0.08** from **$(0.10)** in the prior year. However, for the nine months, EPS **declined** to **$(0.32)** from **$0.04** in the prior year[49](index=49&type=chunk) [Note 4. Revenue Recognition](index=16&type=section&id=Note%204.%20Revenue%20Recognition) This note outlines the company's revenue recognition policies and disaggregates net sales by segment Net Sales by Segment (in thousands) | Segment (in thousands) | 3 Months Ended Jan 28, 2023 | 3 Months Ended Jan 29, 2022 | 9 Months Ended Jan 28, 2023 | 9 Months Ended Jan 29, 2022 | | :--------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Commercial | $49,967 | $40,095 | $127,132 | $107,339 | | Live Events | $67,748 | $39,057 | $193,370 | $150,840 | | High School Park and Recreation | $28,312 | $23,721 | $106,127 | $84,362 | | Transportation | $17,578 | $15,823 | $53,797 | $42,434 | | International | $21,370 | $20,862 | $63,908 | $63,792 | | **Total Net Sales** | **$184,975** | **$139,558** | **$544,334** | **$448,767** | Contract Balances (in thousands) | Contract Balances (in thousands) | January 28, 2023 | April 30, 2022 | Dollar Change | Percent Change | | :------------------------------- | :--------------- | :------------- | :------------ | :------------- | | Contract assets | $36,098 | $41,687 | $(5,589) | (13.4)% | | Contract liabilities - current | $97,703 | $90,393 | $7,310 | 8.1% | | Contract liabilities - noncurrent | $12,674 | $10,998 | $1,676 | 15.2% | - The aggregate amount of transaction price allocated to remaining performance obligations was **$491,345 thousand** as of January 28, 2023, with **$430,602 thousand** expected to be recognized within the next **12 months**[60](index=60&type=chunk) [Note 5. Segment Reporting](index=19&type=section&id=Note%205.%20Segment%20Reporting) This note provides financial information by operating segment, including net sales and gross profit Net Sales by Segment (in thousands) | Segment (in thousands) | 3 Months Ended Jan 28, 2023 Net Sales | 3 Months Ended Jan 29, 2022 Net Sales | 9 Months Ended Jan 28, 2023 Net Sales | 9 Months Ended Jan 29, 2022 Net Sales | | :--------------------- | :------------------------------------ | :------------------------------------ | :------------------------------------ | :------------------------------------ | | Commercial | $49,967 | $40,095 | $127,132 | $107,339 | | Live Events | $67,748 | $39,057 | $193,370 | $150,840 | | High School Park and Recreation | $28,312 | $23,721 | $106,127 | $84,362 | | Transportation | $17,578 | $15,823 | $53,797 | $42,434 | | International | $21,370 | $20,862 | $63,908 | $63,792 | | **Total Net Sales** | **$184,975** | **$139,558** | **$544,334** | **$448,767** | Gross Profit by Segment (in thousands) | Segment (in thousands) | 3 Months Ended Jan 28, 2023 Gross Profit | 3 Months Ended Jan 29, 2022 Gross Profit | 9 Months Ended Jan 28, 2023 Gross Profit | 9 Months Ended Jan 29, 2022 Gross Profit | | :--------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Commercial | $10,547 | $8,239 | $21,565 | $22,862 | | Live Events | $14,405 | $3,094 | $26,174 | $17,261 | | High School Park and Recreation | $7,555 | $6,958 | $29,343 | $27,216 | | Transportation | $5,534 | $4,108 | $15,456 | $12,263 | | International | $3,672 | $(91) | $6,673 | $7,158 |\n| **Total Gross Profit** | **$41,713** | **$22,308** | **$99,211** | **$86,760** | - Live Events segment showed the **most significant growth** in net sales for both the three-month (**73.5%**) and nine-month (**28.2%**) periods, and a **substantial increase** in gross profit for the three-month period (from **$3,094 thousand** to **$14,405 thousand**)[61](index=61&type=chunk)[102](index=102&type=chunk) [Note 6. Goodwill](index=20&type=section&id=Note%206.%20Goodwill) This note details changes in goodwill, including impairment charges, for the reporting period Goodwill by Segment (in thousands) | Segment (in thousands) | Balance as of April 30, 2022 | Goodwill Impairment | Balance as of January 28, 2023 | | :--------------------- | :--------------------------- | :------------------ | :----------------------------- | | Live Events | $2,296 | $(2,281) | $0 | | Commercial | $3,349 | $0 | $3,240 | | Transportation | $68 | $0 | $53 | | International | $2,214 | $(2,295) | $0 | | **Total Goodwill** | **$7,927** | **$(4,576)** | **$3,293** | - A non-cash **goodwill impairment charge** of **$4,576 thousand** was recorded for the Live Events and International reporting units, primarily due to a higher weighted average cost of capital driven by **liquidity strains** from supply chain disruptions and geopolitical conditions[65](index=65&type=chunk) [Note 7. Financing Agreements](index=20&type=section&id=Note%207.%20Financing%20Agreements) This note describes the company's line of credit and compliance with financial covenants - The company has a **$35,000 thousand** line of credit expiring in April 2025, which was temporarily expanded by **$10,000 thousand** through May 1, 2023[66](index=66&type=chunk) - As of January 28, 2023, **$23,638 thousand** had been advanced under the line of credit, and the company was **in compliance with its financial covenants**[66](index=66&type=chunk)[67](index=67&type=chunk) [Note 8. Commitments and Contingencies](index=21&type=section&id=Note%208.%20Commitments%20and%20Contingencies) This note discloses legal proceedings, warranty obligations, and other contractual commitments - A putative class action lawsuit was filed on December 21, 2022, **alleging materially false and misleading statements**; the company believes the claims are **without merit** and the **likelihood of loss is remote**[70](index=70&type=chunk) Warranty Obligations (in thousands) | Warranty Obligations (in thousands) | January 28, 2023 | | :---------------------------------- | :--------------- | | Beginning accrued warranty obligations | $28,878 | | Warranties issued during the period | $9,423 | | Settlements made during the period | $(8,251) | | Ending accrued warranty obligations | $30,214 | - As of January 28, 2023, the company had outstanding letters of credit, bank guarantees, and surety bonds totaling **$7,516 thousand**, **$616 thousand**, and **$63,312 thousand**, respectively, related to performance guarantees on contracts[71](index=71&type=chunk) [Note 9. Income Taxes](index=21&type=section&id=Note%209.%20Income%20Taxes) This note explains the company's income tax expense, effective tax rates, and deferred tax assets Effective Tax Rate | Effective Tax Rate | Three Months Ended Jan 28, 2023 | Three Months Ended Jan 29, 2022 | Nine Months Ended Jan 28, 2023 | Nine Months Ended Jan 29, 2022 | | :----------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Effective Tax Rate | 30.5% | 32.2% | Significantly impacted by valuation allowance | 9.4% | - The effective tax rate for the nine months ended January 28, 2023, was **significantly impacted** by the recording of a full valuation allowance on deferred tax assets during the second quarter of fiscal 2023[74](index=74&type=chunk) [Note 10. Fair Value Measurement](index=23&type=section&id=Note%2010.%20Fair%20Value%20Measurement) This note provides fair value measurements for financial assets and liabilities Financial Assets and Liabilities Fair Value (in thousands) | Financial Assets/Liabilities (in thousands) | January 28, 2023 Total Fair Value | April 30, 2022 Total Fair Value | | :---------------------------------------- | :-------------------------------- | :------------------------------ | | Cash and cash equivalents | $10,022 | $17,143 | | Restricted cash | $708 | $865 | | Available-for-sale securities | $530 | $4,020 | | Derivatives - liability position | $(6) | $(311) | | Derivatives - asset position | $0 | $934 | - The **total fair value of financial assets and liabilities decreased** from **$22,651 thousand** at April 30, 2022, to **$11,254 thousand** at January 28, 2023, primarily due to a decrease in cash and marketable securities[79](index=79&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion and analysis of financial condition, operations, and liquidity, addressing challenges and plans [FORWARD-LOOKING STATEMENTS](index=24&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section cautions readers about forward-looking statements and the inherent risks and uncertainties that could affect future results - The report contains forward-looking statements subject to uncertainties that could cause actual results to differ materially, including market conditions, financing needs, ability to mitigate '**substantial doubt**' about going concern, and future goodwill impairment charges[82](index=82&type=chunk) [OVERVIEW](index=24&type=section&id=OVERVIEW) This section provides a general description of Daktronics' business, products, and operating segments - Daktronics designs, markets, and manufactures integrated electronic display systems and related products globally, operating through five business segments: Commercial, Live Events, High School Park and Recreation, Transportation (all domestic), and International[86](index=86&type=chunk) [CURRENT CONDITIONS](index=25&type=section&id=CURRENT%20CONDITIONS) This section discusses current market demand, operational challenges, macroeconomic impacts, and the company's risk mitigation strategies - The company experienced **increased demand** but faced **capacity constraints** due to part shortages, labor challenges, and COVID-19 disruptions, leading to **increased input costs**[88](index=88&type=chunk) - Macroeconomic events, including high inflation, tightening financial conditions, and geopolitical conflicts, are expected to cause **continued volatility** in cash flow, pricing, order volumes, and production costs through fiscal 2023 and into fiscal 2024[90](index=90&type=chunk) - To manage risks, the company **increased inventory**, **implemented price increases**, redesigned products for component flexibility, and initiated a **liquidity enhancement program** focusing on working capital reductions, productivity improvements, and seeking additional financing[92](index=92&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) - The Board of Directors formed an independent Strategy and Financing Review Committee in December 2022 to **explore alternatives** for **strengthening the company's financial structure** and liquidity profile, including mortgage-secured financing, sales-leaseback, and asset-based lending[96](index=96&type=chunk) [RESULTS OF OPERATIONS](index=26&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the company's financial performance, including net sales, gross profit, and net income, for the reporting periods [COMPARISON OF THE THREE MONTHS ENDED JANUARY 28, 2023 AND JANUARY 29, 2022](index=26&type=section&id=COMPARISON%20OF%20THE%20THREE%20MONTHS%20ENDED%20JANUARY%2028%2C%202023%20AND%20JANUARY%2029%2C%202022) This section compares the company's financial results for the three-month periods ended January 28, 2023, and January 29, 2022 Key Financial Metrics (in thousands) | Metric (in thousands) | Jan 28, 2023 | Jan 29, 2022 | Dollar Change | Percent Change | | :-------------------- | :----------- | :----------- | :------------ | :------------- | | Net Sales | $184,975 | $139,558 | $45,417 | 32.5% | | Gross Profit | $41,713 | $22,308 | $19,405 | 87.0% | | Operating Income (Loss) | $7,118 | $(5,680) | $12,798 | 225.3% | | Net Income (Loss) | $3,713 | $(4,350) | $8,063 | 185.4% | - **Product order backlog increased** by **$75.8 million** to **$429.1 million** as of January 28, 2023, compared to the prior year, driven by **record order volume** and softer conversion to sales due to supply challenges[100](index=100&type=chunk) - **Gross profit percentage increased** to **22.6%** from **16.0%** in the prior year, primarily due to **strategic pricing changes** and **fewer supply chain disruptions**[105](index=105&type=chunk)[106](index=106&type=chunk) - A **$4.6 million non-cash goodwill impairment charge** contributed to **increased operating expenses**[111](index=111&type=chunk) [COMPARISON OF THE NINE MONTHS ENDED JANUARY 28, 2023 AND JANUARY 29, 2022](index=30&type=section&id=COMPARISON%20OF%20THE%20NINE%20MONTHS%20ENDED%20JANUARY%2028%2C%202023%20AND%20JANUARY%2029%2C%202022) This section compares the company's financial results for the nine-month periods ended January 28, 2023, and January 29, 2022 Key Financial Metrics (in thousands) | Metric (in thousands) | Jan 28, 2023 | Jan 29, 2022 | Dollar Change | Percent Change | | :-------------------- | :----------- | :----------- | :------------ | :------------- |\n| Net Sales | $544,334 | $448,767 | $95,567 | 21.3% | | Gross Profit | $99,211 | $86,760 | $12,451 | 14.4% | | Operating Income | $3,125 | $4,365 | $(1,240) | (28.4)% | | Net Loss | $(14,597) | $1,709 | $(16,306) | (954.1)% | - **Order volume decreased** by **10.5%** for the first nine months of fiscal 2023 compared to the prior year, which saw **record orders** due to pent-up demand post-COVID[116](index=116&type=chunk)[118](index=118&type=chunk) - **Overall gross profit percentage declined** to **18.2%** from **19.3%** in the prior year, impacted by **inflationary challenges** in materials, freight, and personnel costs, and **extraordinary supply chain disruptions**[119](index=119&type=chunk) - **General and administrative expenses increased** by **$3.9 million**, primarily due to **$2.1 million** in **professional fees** for legal, accounting, and auditing services[123](index=123&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=33&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses the company's cash flows, working capital, financing arrangements, and capital expenditure plans Cash Flow Activities (in thousands) | Cash Flow Activity (in thousands) | Nine Months Ended Jan 28, 2023 | Nine Months Ended Jan 29, 2022 | Dollar Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :------------ | | Net cash used in operating activities | $(9,487) | $(25,464) | $15,977 | | Net cash used in investing activities | $(20,947) | $(19,926) | $(1,021) |\n| Net cash provided by (used in) financing activities | $23,498 | $(3,391) | $26,889 | | Net decrease in cash, cash equivalents and restricted cash | $(7,278) | $(48,683) | $41,405 | - The company's cash **decreased** by **$7.3 million** for the first nine months of fiscal 2023, primarily due to **investments in inventory** to support backlog conversion and **capital assets for capacity expansion**, funded by **utilizing its line of credit**[128](index=128&type=chunk) - **Working capital increased** to **$129.4 million** as of January 28, 2023, from **$103.9 million** at April 30, 2022, influenced by sports market and construction seasonality[137](index=137&type=chunk) - The company expects to be **in compliance with credit facility covenants** through the next fiscal year but acknowledges **uncertainty** due to supply chain volatility and its **going concern condition**[139](index=139&type=chunk) - Projected **capital expenditures** for fiscal 2023 are approximately **$28.8 million**, focusing on manufacturing equipment, capacity expansion, automation, and information infrastructure[143](index=143&type=chunk) [Significant Accounting Policies and Estimates](index=35&type=section&id=Significant%20Accounting%20Policies%20and%20Estimates) This section confirms no material changes in significant accounting policies or critical accounting estimates - There have been **no material changes** in significant accounting policies or critical accounting estimates since the end of fiscal 2022[146](index=146&type=chunk) [New Accounting Pronouncements](index=35&type=section&id=New%20Accounting%20Pronouncements) This section states there are no significant new accounting standards not yet adopted - There are **no significant new Accounting Standards Updates** that the Company has not yet adopted as of January 28, 2023[43](index=43&type=chunk)[147](index=147&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to interest rate, foreign currency, and commodity risks, with no material changes in exposure during the first nine months of fiscal 2023 - **No material changes in exposure** to interest rate, foreign currency, and commodity risks were reported during the first nine months of fiscal 2023[148](index=148&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were ineffective due to material weaknesses in internal control over financial reporting - **Disclosure controls and procedures were deemed ineffective** as of January 28, 2023, due to **material weaknesses** in internal control over financial reporting[149](index=149&type=chunk) - The **material weaknesses** involved the **failure to timely communicate** the going concern assessment to all appropriate internal parties and the **lack of appropriate design** in the going concern policy control to evaluate income tax implications[151](index=151&type=chunk) - Despite the **material weaknesses**, the unaudited condensed consolidated financial statements are concluded to **fairly present the financial position**, results of operations, and cash flows[150](index=150&type=chunk) - A **remediation plan is underway**, including **implementing policies** for communicating going concern analysis and considering its impact on deferred tax valuations, but full remediation is **not yet complete**[152](index=152&type=chunk)[153](index=153&type=chunk) PART II. OTHER INFORMATION This section includes legal proceedings, risk factors, equity sales, and other miscellaneous information [Item 1. Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) A class action lawsuit alleging false statements was filed, which the company believes is without merit - A class action lawsuit was filed on December 21, 2022, **alleging materially false and misleading statements**, which the company believes is **without merit** and has a **remote likelihood of loss**[154](index=154&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) This section refers readers to previous filings for a comprehensive discussion of risk factors, noting new risks - Readers are directed to previous filings for a **comprehensive discussion of risk factors**, noting that **new risks can emerge** and **materially affect the company**[155](index=155&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not repurchase any shares of its common stock during the three months ended January 28, 2023 - **No shares of common stock were repurchased** during the three months ended January 28, 2023[156](index=156&type=chunk) [Item 3. Defaults Upon Senior Securities](index=37&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the current report [Item 4. Mine Safety Disclosures](index=37&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the current report [Item 5. Other Information](index=37&type=section&id=Item%205.%20Other%20Information) This item is not applicable to the current report [Item 6. Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section provides an index to exhibits filed as part of the report, including corporate documents and certifications SIGNATURES This section contains the required signatures for the financial report - The report was signed by Sheila M. Anderson, **Chief Financial Officer** (**Principal Financial Officer** and **Principal Accounting Officer**) on March 13, 2023[165](index=165&type=chunk)