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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 27, 2024
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
https://cdn.kscope.io/663578780ba01da217915f9ab34fc332-dak.jpg
Daktronics, Inc.
(Exact Name of Registrant as Specified in its Charter)
South Dakota46-0306862
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer Identification No.)
201 Daktronics Drive
Brookings,
SD
57006
(Address of Principal Executive Offices) (Zip Code)
(605) 692-0200
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, No Par ValueDAKT
Nasdaq Global Select Market
Preferred Stock Purchase RightsDAKT
Nasdaq Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filero
Accelerated filerx
Non-accelerated filero
Smaller reporting companyo
Emerging growth companyo
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The number of shares of the registrant’s common stock outstanding as of February 19, 2024 was 46,189,311.


Table of Contents
DAKTRONICS, INC. AND SUBSIDIARIES
FORM 10-Q
For the Quarter Ended January 27, 2024
Table of Contents
Page


Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
DAKTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data) (unaudited)

January 27,
2024
April 29,
2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$76,764 $23,982 
Restricted cash429 708 
Marketable securities 534 
Accounts receivable, net100,601 109,979 
Inventories140,251 149,448 
Contract assets47,857 46,789 
Current maturities of long-term receivables271 1,215 
Prepaid expenses and other current assets7,853 9,676 
Income tax receivables1,504 326 
Total current assets375,530 342,657 
Property and equipment, net72,406 72,147 
Long-term receivables, less current maturities95 264 
Goodwill3,263 3,239 
Intangibles, net923 1,136 
Debt issuance costs, net2,840 3,866 
Investment in affiliates and other assets27,314 27,928 
Deferred income taxes16,835 16,867 
TOTAL ASSETS$499,206 $468,104 











1

Table of Contents
DAKTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(in thousands, except per share data) (unaudited)
January 27,
2024
April 29,
2023
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt$1,500 $ 
Accounts payable49,489 67,522 
Contract liabilities68,936 91,549 
Accrued expenses36,824 36,005 
Warranty obligations12,884 12,228 
Income taxes payable628 2,859 
Total current liabilities170,261 210,163 
Long-term warranty obligations21,806 20,313 
Long-term contract liabilities16,347 13,096 
Other long-term obligations5,882 5,709 
Long-term debt, net48,466 17,750 
Deferred income taxes198 195 
Total long-term liabilities92,699 57,063 
SHAREHOLDERS' EQUITY:
Preferred Shares, no par value, authorized 50,000 shares; no shares issued and outstanding
  
Common Stock, no par value, authorized 115,000,000 shares; 46,189,311 and 45,488,595 shares issued at January 27, 2024 and April 29, 2023, respectively
65,371 63,023 
Additional paid-in capital51,554 50,259 
Retained earnings135,513 103,410 
Treasury Stock, at cost, 1,907,445 shares at January 27, 2024 and April 29, 2023, respectively
(10,285)(10,285)
Accumulated other comprehensive loss(5,907)(5,529)
TOTAL SHAREHOLDERS' EQUITY236,246 200,878 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$499,206 $468,104 

See notes to condensed consolidated financial statements.
2

Table of Contents
DAKTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months EndedNine Months Ended
January 27,
2024
January 28,
2023
January 27,
2024
January 28,
2023
Net sales$170,303 $184,975 $602,203 $544,334 
Cost of sales128,585 143,262 435,139 445,123 
Gross profit41,718 41,713 167,064 99,211 
Operating expenses:
Selling14,258 12,908 41,840 41,866 
General and administrative10,589 9,861 31,077 27,989 
Product design and development8,835 7,250 26,459 21,655 
Goodwill impairment 4,576  4,576 
33,682 34,595 99,376 96,086 
Operating income8,036 7,118 67,688 3,125 
Nonoperating (expense) income:
Interest (expense) income, net(745)(398)(2,952)(721)
Change in fair value of convertible note6,340  (11,570) 
Other expense and debt issuance costs write-off, net(1,000)(1,380)(6,282)(2,335)
Income before income taxes12,631 5,340 46,884 69 
Income tax expense1,889 1,627 14,781 14,666 
Net income (loss)$10,742 $3,713 $32,103 $(14,597)
Weighted average shares outstanding:
Basic46,173 45,387 45,975 45,320 
Diluted50,837 45,448 46,608 45,320 
Earnings (loss) per share:
Basic$0.23 $0.08 $0.70 $(0.32)
Diluted$0.09 $0.08 $0.69 $(0.32)
See notes to condensed consolidated financial statements.
3

Table of Contents
DAKTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
Three Months EndedNine Months Ended
January 27,
2024
January 28,
2023
January 27,
2024
January 28,
2023
Net income (loss)$10,742 $3,713 $32,103 $(14,597)
Other comprehensive income (loss):
Cumulative translation adjustments1,041 1,976 (401)(187)
Unrealized gain on available-for-sale securities, net of tax7 6 23 6 
Total other comprehensive income (loss), net of tax1,048 1,982 (378)(181)
Comprehensive income (loss)$11,790 $5,695 $31,725 $(14,778)
See notes to condensed consolidated financial statements.
4

Table of Contents
DAKTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
(unaudited)
Common StockAdditional Paid-In CapitalRetained EarningsTreasury StockAccumulated Other Comprehensive
Loss
Total
Balance as of April 29, 2023$63,023 $50,259 $103,410 $(10,285)$(5,529)$200,878 
Net income— — 19,196 — — 19,196 
Cumulative translation adjustments— — — — (252)(252)
Unrealized gain (loss) on available-for-sale securities, net of tax— — — — 7 7 
Share-based compensation— 557 — — — 557 
Exercise of stock options46 — — — — 46 
Employee savings plan activity615 — — — — 615 
Balance as of July 29, 2023$63,684 $50,816 $122,606 $(10,285)$(5,774)$221,047 
Net income— — 2,165 — — 2,165 
Cumulative translation adjustments— — — — (1,190)(1,190)
Unrealized gain (loss) on available-for-sale securities, net of tax— — — — 9 9 
Share-based compensation— 534 — — — 534 
Exercise of stock options959 — — — — 959 
Tax payments related to RSU issuances— (303)— — — (303)
Balance as of October 28, 2023$64,643 $51,047 $124,771 $(10,285)$(6,955)$223,221 
Net income— — 10,742 — — 10,742 
Cumulative translation adjustments— — — — 1,041 1,041 
Unrealized gain (loss) on available-for-sale securities, net of tax— — — — 7 7 
Share-based compensation— 507 — — — 507 
Exercise of stock options142 — — — — 142 
Employee savings plan activity586 — — — — 586 
Balance as of January 27, 2024$65,371 $51,554 $135,513 $(10,285)$(5,907)$236,246 
See notes to condensed consolidated financial statements.
5

Table of Contents
DAKTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(continued)
(in thousands)
(unaudited)
Common StockAdditional Paid-In CapitalRetained EarningsTreasury StockAccumulated Other Comprehensive
Loss
Total
Balance as of April 30, 2022$61,794 $48,372 $96,608 $(10,285)$(4,925)$191,564 
Net loss— — (5,326)— — (5,326)
Cumulative translation adjustments— — — — (642)(642)
Unrealized gain (loss) on available-for-sale securities, net of tax— — — — 1 1 
Share-based compensation— 511 — — — 511 
Employee savings plan activity594 — — — — 594 
Balance as of July 30, 2022$62,388 $48,883 $91,282 $(10,285)$(5,566)$186,702 
Net loss— — (12,984)— — (12,984)
Cumulative translation adjustments— — — — (1,521)(1,521)
Unrealized gain (loss) on available-for-sale securities, net of tax— — — — (1)(1)
Share-based compensation— 474 — — — 474 
Tax payments related to RSU issuances— (140)— — — (140)
Balance as of October 29, 2022$62,388 $49,217 $78,298 $(10,285)$(7,088)$172,530 
Net income— — 3,713 — — 3,713 
Cumulative translation adjustments— — — — 1,976 1,976 
Unrealized gain (loss) on available-for-sale securities, net of tax— — — — 6 6 
Share-based compensation— 502 — — — 502 
Employee savings plan activity614 — — — — 614 
Balance as of January 28, 2023$63,002 $49,719 $82,011 $(10,285)$(5,106)$179,341 
See notes to condensed consolidated financial statements.
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DAKTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended
January 27,
2024
January 28,
2023
CASH FLOWS FROM OPERATING ACTIVITIES:  
Net income (loss)$32,103 $(14,597)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:  
Depreciation and amortization14,370 12,543 
Loss (gain) on sale of property, equipment and other assets98 (588)
Share-based compensation1,598 1,487 
Equity in loss of affiliates2,330 2,596 
Provision for doubtful accounts, net659 674 
Deferred income taxes, net23 13,028 
Non-cash impairment charges1,091 4,576 
Change in fair value of convertible note11,570  
Debt issuance costs write-off3,353  
Change in operating assets and liabilities(13,406)(29,206)
Net cash provided by (used in) operating activities53,789 (9,487)
   
CASH FLOWS FROM INVESTING ACTIVITIES:  
Purchases of property and equipment(13,628)(21,809)
Proceeds from sales of property, equipment and other assets107 612 
Proceeds from sales or maturities of marketable securities550 3,490 
Purchases of equity and loans to equity investees(4,084)(3,240)
Net cash used in investing activities(17,055)(20,947)
   
CASH FLOWS FROM FINANCING ACTIVITIES:  
Borrowings on notes payable40,485 283,115 
Payments on notes payable(18,500)(259,477)
Principal payments on long-term obligations(307) 
Debt issuance costs(6,833) 
Proceeds from exercise of stock options1,147  
Tax payments related to RSU issuances(303)(140)
Net cash provided by financing activities15,689 23,498 
   
EFFECT OF EXCHANGE RATE CHANGES ON CASH80 (342)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH52,503 (7,278)
   
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:  
Beginning of period24,690 18,008 
End of period$77,193 $10,730 
  
Supplemental disclosures of cash flow information:  
Cash paid for:  
Interest$1,959 $760 
Income taxes, net of refunds18,185 4,456 
   
Supplemental schedule of non-cash investing and financing activities:  
Purchases of property and equipment included in accounts payable1,050 1,538 
Contributions of common stock under the ESPP1,201 1,207 
See notes to condensed consolidated financial statements.
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands, except per share data)
(unaudited)
Note 1. Basis of Presentation
Daktronics, Inc. and its subsidiaries (the “Company”, “Daktronics”, “we”, “our”, or “us”) are industry leaders in designing and manufacturing electronic scoreboards, programmable display systems and large screen video displays for sporting, commercial and transportation applications.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to fairly present our financial position, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, revenues and expenses, and the disclosure of contingent liabilities. Estimates used in the preparation of the unaudited consolidated financial statements include, among others, revenue recognition, future warranty expenses, the fair value of long-term debt, the fair value of investments in affiliates, income tax expenses, and stock-based compensation. Due to the inherent uncertainty involved in making estimates, actual results in future periods may differ from those estimates.
Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The balance sheet at April 29, 2023 has been derived from the audited financial statements at that date, but it does not include all the information and disclosures required by GAAP for complete financial statements. These financial statements should be read in conjunction with our financial statements and notes thereto for the fiscal year ended April 29, 2023, which are contained in our Annual Report on Form 10-K previously filed with the Securities and Exchange Commission ("SEC"). The results of operations for the interim periods presented are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year.
Daktronics, Inc. operates on a 52- or 53-week fiscal year, with our fiscal year ending on the Saturday closest to April 30 of each year. When April 30 falls on a Wednesday, the fiscal year ends on the preceding Saturday. Within each fiscal year, each quarter is comprised of 13-week periods following the beginning of each fiscal year. In each 53-week fiscal year, an additional week is added to the first quarter, and each of the last three quarters is comprised of a 13-week period. The nine months ended January 27, 2024 and January 28, 2023 contained operating results for 39 weeks.
There have been no material changes to our significant accounting policies and estimates as described in our Annual Report on Form 10-K for the fiscal year ended April 29, 2023.
Cash and cash equivalents and restricted cash
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the totals of the same amounts shown in the condensed consolidated statements of cash flows. Restricted cash consists of cash and cash equivalents held in bank deposit accounts to secure certain issuances of foreign bank guarantees.
January 27,
2024
January 28,
2023
April 29,
2023
Cash and cash equivalents$76,764 $10,022 $23,982 
Restricted cash429 708 708 
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows$77,193 $10,730 $24,690 
We have foreign currency cash accounts to operate our global business. These accounts are impacted by changes in foreign currency rates. Of our $76,764 in cash and cash equivalent balances as of January 27, 2024, $63,179 were denominated in United States dollars, of which $1,568 were held by our foreign subsidiaries. As of January 27, 2024, we had an additional $13,585 in cash balances denominated in foreign currencies, of which $9,761 were maintained in accounts of our foreign subsidiaries.
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Recent Accounting Pronouncements
Accounting Standards Adopted
In August 2020, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). ASU 2020-06 simplified the accounting for certain financial instruments with characteristics of liabilities and equity. ASU 2020-06 (1) simplified the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in Accounting Standards Codification ("ASC") 470-20, Debt: Debt with Conversion and Other Options, that required entities to account for beneficial conversion features and cash conversion features in equity separately from the host convertible debt or preferred stock; (2) revised the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity by removing certain criteria required for equity classification; and (3) revised the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share ("EPS") for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares. For SEC filers, excluding smaller reporting companies, ASU 2020-06 was effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption was permitted, but no earlier than fiscal years beginning after December 15, 2020. For all other entities, ASU 2020-06 was effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. In the first quarter of fiscal 2024, we adopted ASU 2020-06 with no material impact to the Condensed Consolidated Financial Statements. On May 11, 2023, we borrowed $25,000 in aggregate principal amount evidenced by a secured convertible note due May 11, 2027 (the "Convertible Note"). See "Note 7. Financing Agreements" of the Notes to our Condensed Consolidated Financial Statements included in this Form 10-Q for further information on the Convertible Note.

Accounting Standards Not Yet Adopted
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures ("ASU 2023-07"). ASU 2023-07 requires enhanced disclosures about significant segment expenses. The Company is required to adopt ASU 2023-07 for its annual reporting in fiscal year 2025 and for interim period reporting beginning in the first quarter of fiscal year 2026 on a retrospective basis. Early adoption is permitted. We are currently evaluating the impact of ASU 2023-07 on our segment disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures ("ASU 2023-09"). ASU 2023-09 requires the disclosure of specified additional information in its income tax rate reconciliation and to provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 will also require disaggregation of income taxes paid disclosure by federal, state and foreign taxes, with further disaggregation required for significant individual jurisdictions. The Company is required to adopt this guidance for its annual reporting in fiscal year 2025 on a prospective basis. Early adoption and retroactive application are permitted. We are currently evaluating the impact of ASU 2023-09 on our income tax disclosures.
Note 2. Investments in Affiliates
We evaluated the nature of our investment in affiliates of XdisplayTM, which is developing micro-LED mass transfer expertise and technologies, and Miortech (dba Etulipa), which is developing low power outdoor electrowetting technology. We determined that Miortech is a variable interest entity (VIE), and, based on management's analysis, we determined that Daktronics is not the primary beneficiary; therefore, the investment in Miortech is accounted for under the equity method.
The aggregate amount of our investments accounted for under the equity method was $8,513 and $11,934 as of January 27, 2024 and April 29, 2023, respectively. Our proportional share of the respective affiliates' earnings or losses is included in the "Other expense and debt issuance costs write-off, net" line item in our condensed consolidated statements of operations. For the three and nine months ended January 27, 2024, our share of the losses of our affiliates was $869 and $2,330 as compared to $895 and $2,596 for the three and nine months ended January 28, 2023.
We purchased services for research and development activities from our equity method investees. The total of these related party transactions for the nine months ended January 27, 2024 and January 28, 2023 was $162 and $672, respectively, which is included in the "Product design and development" line item in our condensed consolidated statements of
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operations, and for the nine months ended January 27, 2024, $2 remains unpaid and is included in the "Accounts payable" line item in our condensed consolidated balance sheets.
During the nine months ended January 27, 2024, we invested $3,000 in convertible notes and $1,084 in promissory notes (collectively, the "Affiliate Notes") issued by our affiliates, which is included in the "Investment in affiliates and other assets" line item in our condensed consolidated balance sheets. During the nine months ended January 27, 2024, we did not convert any Affiliate Notes to stock ownership. Our ownership in Miortech was 55.9 percent and in XdisplayTM was 16.4 percent as of January 27, 2024. The total amount of Affiliate Notes as of January 27, 2024 was $13,134 and is included in the "Investments in affiliates and other assets" line item in our condensed consolidated balance sheets. The Affiliate Notes balance combined with the investment in affiliates balance totaled $21,647 and $24,836 as of January 27, 2024 and January 28, 2023, respectively.
Note 3. Earnings Per Share ("EPS")
Under the if-converted method, the Convertible Note is assumed to be converted into common stock at the beginning of the reporting period or at time of issuance, if later, and the resulting shares are included in the denominator of the calculation. In addition, interest charges, net of any income tax effects, and the change in fair value of Convertible Note are added back to the numerator of the calculation. See "Note 7. Financing Agreements" of the Notes to our Condensed Consolidated Financial Statements included in this Form 10-Q for further information on the Convertible Note.
The following is a reconciliation of the net income (loss) and common share amounts used in the calculation of basic and diluted EPS for the three and nine months ended January 27, 2024 and January 28, 2023:
Three Months EndedNine Months Ended
January 27,
2024
January 28,
2023
January 27,
2024
January 28,
2023
Earnings per share - basic
Net income (loss)$10,742 $3,713 $32,103 $(14,597)
Weighted average shares outstanding46,173 45,387 45,975 45,320 
Basic earnings (loss) per share$0.23 $0.08 $0.70 $(0.32)
Earnings per share - diluted
Net income (loss)$10,742 $3,713 $32,103 $(14,597)
Change in fair value of convertible note(6,340)   
Interest expense on convertible note, net of tax404  —  
Diluted net income (loss)$4,806 $3,713 $32,103 $(14,597)
Weighted average common shares outstanding46,173 45,387 45,975 45,320 
Dilution associated with stock compensation plans627 61 633  
Dilution associated with convertible note4,037    
Weighted average common shares outstanding, assuming dilution50,837 45,448 46,608 45,320 
Diluted earnings (loss) per share$0.09 $0.08 $0.69 $(0.32)
Options outstanding to purchase 484 shares of common stock with a weighted average exercise price of $10.73 for the three months ended January 27, 2024 and 2,102 shares of common stock with a weighted average exercise price of $7.13 for the three months ended January 28, 2023 were not included in the computation of diluted earnings per share because the effects would be anti-dilutive.
Options outstanding to purchase 695 shares of common stock with a weighted average exercise price of $10.30 for the nine months ended January 27, 2024 and 2,089 shares of common stock with a weighted average exercise price of $7.59 for the nine months ended January 28, 2023 were not included in the computation of diluted earnings per share because the effects would be anti-dilutive.
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During the nine months ended January 27, 2024, shares of common stock issuable upon conversion of the Convertible Note were not included in the computation of diluted earnings per share, as the effect would be anti-dilutive. For the nine months ended January 27, 2024, 3,875 potential common shares related to the Convertible Note were excluded from the calculation of diluted earnings per share. The debt evidenced by the Convertible Note was not outstanding during fiscal year 2023.
Note 4. Revenue Recognition
Disaggregation of revenue
In accordance with ASC 606-10-50, we disaggregate revenue from contracts with customers by the type of performance obligation and the timing of revenue recognition. We determine that disaggregating revenue in these categories achieves the disclosure objective to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors and to enable users of financial statements to understand the relationship to each reportable segment.
The following table presents our disaggregation of revenue by segments:
Three Months Ended January 27, 2024
CommercialLive Events
High School
Park and Recreation
TransportationInternationalTotal
Type of performance obligation
Unique configuration$5,802 $57,229 $5,021 $12,116 $6,508 $86,676 
Limited configuration22,157 8,395 20,900 5,646 6,702 63,800 
Service and other5,333 7,769 2,843 1,843 2,039 19,827 
$33,292 $73,393 $28,764 $19,605 $15,249 $170,303 
Timing of revenue recognition
Goods/services transferred at a point in time$24,361 $11,006 $20,819 $6,874 $7,473 $70,533 
Goods/services transferred over time8,931 62,387 7,945 12,731 7,776 99,770 
$33,292 $73,393 $28,764 $19,605 $15,249 $170,303 
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Nine Months Ended January 27, 2024
CommercialLive Events
High School
Park and Recreation
TransportationInternationalTotal
Type of performance obligation
Unique configuration$28,231 $181,272 $31,679 $35,747 $25,291 $302,220 
Limited configuration80,822 32,127 97,514 22,182 19,243 251,888 
Service and other13,575 20,203 4,747 3,288 6,282 48,095 
$122,628 $233,602 $133,940 $61,217 $50,816 $602,203 
Timing of revenue recognition
Goods/services transferred at a point in time$84,758 $37,173 $94,622 $23,733 $21,235 $261,521 
Goods/services transferred over time37,870 196,429 39,318 37,484 29,581 340,682 
$122,628 $233,602 $133,940 $61,217 $50,816 $602,203 
Three Months Ended January 28, 2023
CommercialLive Events
High School
Park and Recreation
TransportationInternationalTotal
Type of performance obligation
Unique configuration$9,929 $53,437 $3,380 $11,446 $8,138 $86,330 
Limited configuration35,864 7,858 23,865 5,328 11,040 83,955 
Service and other4,174 6,453 1,067 804 2,192 14,690 
$49,967 $67,748 $28,312 $17,578 $21,370 $184,975 
Timing of revenue recognition
Goods/services transferred at a point in time$36,746 $10,125 $22,716 $5,571 $11,861 $87,019 
Goods/services transferred over time13,221 57,623 5,596 12,007 9,509 97,956 
$49,967 $67,748 $28,312 $17,578 $21,370 $184,975 
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Nine Months Ended January 28, 2023
CommercialLive Events
High School
Park and Recreation
TransportationInternationalTotal
Type of performance obligation
Unique configuration$20,198 $148,467 $17,828 $35,330 $20,762 $242,585 
Limited configuration94,408 26,013 85,123 15,969 36,826 258,339 
Service and other12,526 18,890 3,176 2,498 6,320 43,410 
$127,132 $193,370 $106,127 $53,797 $63,908 $544,334 
Timing of revenue recognition
Goods/services transferred at a point in time$97,381 $31,029 $80,935 $16,702 $38,756 $264,803 
Goods/services transferred over time29,751 162,341 25,192 37,095 25,152 279,531 
$127,132 $193,370 $106,127 $53,797 $63,908 $544,334 
See "Note 5. Segment Reporting" for a disaggregation of revenue by geography.
Contract balances
Contract assets represent revenue recognized in excess of amounts billed and include unbilled receivables. Unbilled receivables, which represent an unconditional right to payment subject only to the passage of time, are reclassified to accounts receivable when they are billed according to the contract terms. Contract liabilities represent amounts billed to the customers in excess of revenue recognized to date.
The following table reflects the changes in our contract assets and liabilities:
January 27,
2024
April 29,
2023
Dollar
Change
Percent
Change
Contract assets$47,857 $46,789 $1,068 2.3 %
Contract liabilities - current68,936 91,549 (22,613)(24.7)
Contract liabilities - noncurrent16,347 13,096 3,251 24.8 
The changes in our contract assets and contract liabilities from April 29, 2023 to January 27, 2024 were due to the timing of billing schedules and revenue recognition, which can vary significantly depending on the contractual payment terms and the seasonality of the sports markets. We had immaterial impairments of contract assets for the nine months ended January 27, 2024.
For service-type warranty contracts, we allocate revenue to this performance obligation, recognize the revenue over time, and recognize costs as incurred. Earned and unearned revenues for these contracts are included in the "Contract assets" and "Contract liabilities" line items of our Condensed Consolidated Balance Sheets. Changes in unearned service-type warranty contracts, net were as follows:
January 27,
2024
Balance as of April 29, 2023$28,338 
New contracts sold38,943 
Less: reductions for revenue recognized(31,748)
Foreign currency translation and other(2,651)
Balance as of January 27, 2024$32,882 
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Contracts in progress identified as loss contracts as of January 27, 2024 and as of April 29, 2023 were immaterial. Loss provisions are recorded in the "Accrued expenses" line item in our Condensed Consolidated Balance Sheets.
During the nine months ended January 27, 2024, we recognized revenue of $82,938 related to our contract liabilities as of April 29, 2023.
Remaining performance obligations
As of January 27, 2024, the aggregate amount of the transaction price allocated to the remaining performance obligations was $393,203. Remaining performance obligations related to product and service agreements as of January 27, 2024 were $328,279 and $64,924, respectively. We expect approximately $328,491 of our remaining performance obligations to be recognized over the next 12 months, with the remainder recognized thereafter. Although remaining performance obligations reflect business that is considered to be legally binding, cancellations, deferrals or scope adjustments may occur. Any known project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations, and project deferrals are reflected or excluded in the remaining performance obligation balance, as appropriate. The amount of revenue recognized associated with performance obligations satisfied in prior years during the nine months ended January 27, 2024 and January 28, 2023 was immaterial.

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Note 5. Segment Reporting
The following table sets forth certain financial information for each of our five reporting segments for the periods indicated:
Three Months EndedNine Months Ended
January 27,
2024
January 28,
2023
January 27,
2024
January 28,
2023
Net sales:
Commercial$33,292 $49,967 $122,628 $127,132 
Live Events73,393 67,748 233,602 193,370 
High School Park and Recreation28,764 28,312 133,940 106,127 
Transportation19,605 17,578 61,217 53,797 
International15,249 21,370 50,816 63,908 
170,303 184,975 602,203 544,334 
Gross profit:
Commercial5,546 10,547 25,546 21,565 
Live Events21,102 14,405 68,276 26,174 
High School Park and Recreation8,029 7,555 45,274 29,343 
Transportation6,180 5,534 20,049 15,456 
International861 3,672 7,919 6,673 
41,718 41,713 167,064 99,211 
Operating expenses:
Selling14,258 12,908 41,840 41,866 
General and administrative10,589 9,861 31,077 27,989 
Product design and development8,835 7,250 26,459 21,655 
Goodwill impairment 4,576  4,576 
33,682 34,595 99,376 96,086 
Operating income8,036 7,118 67,688 3,125 
Nonoperating (expense) income:
Interest (expense) income, net(745)(398)(2,952)(721)
Change in fair value of convertible note6,340  (11,570) 
Other expense and debt issuance costs write-off, net(1,000)(1,380)(6,282)(2,335)
Income before income taxes$12,631 $5,340 $46,884 $69 
Depreciation and amortization:
Commercial$1,166 $927 $3,278 $2,564 
Live Events1,533 1,534 4,750 4,727 
High School Park and Recreation508 452 1,444 1,174 
Transportation181 163 523 416 
International563 608 1,701 1,719 
Unallocated corporate depreciation and amortization925 634 2,674 1,943 
$4,876 $4,318 $14,370 $12,543 
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No single geographic area comprises a material amount of our net sales or property and equipment, net of accumulated depreciation, other than the United States. The following table presents information about net sales and property and equipment, net of accumulated depreciation, in the United States and elsewhere:
Three Months EndedNine Months Ended
January 27,
2024
January 28,
2023
January 27,
2024
January 28,
2023
Net sales:    
United States$152,962 $161,467 $545,699 $474,048 
Outside United States17,341 23,508 56,504 70,286 
$170,303 $184,975 $602,203 $544,334 
January 27,
2024
April 29,
2023
Property and equipment, net of accumulated depreciation:  
United States$64,496 $63,786 
Outside United States7,910 8,361 
$72,406 $72,147 
We have numerous customers worldwide for sales of our products and services, and no customer accounted for 10 percent or more of net sales; therefore, we are not economically dependent on a limited number of customers for the sale of our products and services.
We have numerous raw material and component suppliers, and no supplier accounts for 10 percent or more of our cost of sales; however, we have a complex global supply chain subject to geopolitical and transportation risks and a number of single-source suppliers that could limit our supply or cause delays in obtaining raw materials and components needed in manufacturing.

Note 6. Goodwill

The changes in the carrying amount of goodwill related to each segment with a goodwill balance for the nine months ended January 27, 2024 were as follows:
CommercialTransportationTotal
Balance as of April 29, 2023$3,198 $41 $3,239 
Foreign currency translation19 5 24 
Balance as of January 27, 2024$3,217 $46 $3,263 
We perform an analysis of goodwill on an annual basis, and it is tested for impairment more frequently if events or changes in circumstances indicate that an asset might be impaired. Our annual analysis is performed during our third quarter of each fiscal year based on the goodwill amount as of the first business day of our third fiscal quarter. We performed our annual impairment test as of October 29, 2023 and concluded no goodwill impairment existed.
Accumulated impairments to goodwill as of January 27, 2024 and April 29, 2023 was $4,576.
Note 7. Financing Agreements

Long-term debt consists of the following:
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January 27,
2024
April 29,
2023
ABL credit facility/prior line of credit$ $17,750 
Mortgage14,250  
Convertible note25,000  
Long-term debt, gross39,250 17,750 
Debt issuance costs, net(854) 
Change in fair value of convertible note11,570  
Current portion(1,500) 
Long-term debt, net$48,466 $17,750 
Credit Agreements
On May 11, 2023, we closed on a $75,000 senior credit facility (the "Credit Facility"). The Credit Facility consists of a $60,000 asset-based revolving credit facility (the "ABL") maturing on May 11. 2026, which is secured by first priority lien on the Company's assets and is subject to certain factors that can impact our borrowing capacity, and a $15,000 delayed draw loan (the "Delayed Draw Loan") secured by a first priority mortgage on our Brookings, South Dakota real estate (the "Mortgage"). The ABL and Delayed Draw Loan are evidenced by a Credit Agreement dated as of May 11, 2023 (the "Credit Agreement") between the Company and JPMorgan Chase Bank, N.A., as the lender. On May 11, 2023, the Company paid all amounts outstanding on the prior credit agreement, and this prior credit agreement was terminated as of this date. No gain or loss was recognized upon termination, and the Company incurred no early termination penalties in connection with such termination.
Under the ABL, certain factors can impact our borrowing capacity. As of January 27, 2024, our borrowing capacity was $32,907, there were no borrowings outstanding, and there was $5,426 used to secure letters of credit outstanding.
The interest rate on the ABL is set on a sliding scale based on the trailing 12-month fixed charge coverage and ranges from 2.5 to 3.5 percent over the standard overnight financing rate (SOFR). The ABL is secured by a first priority lien on the Company's assets described in the Credit Agreement and the Pledge and Security Agreement dated as of May 11, 2023 by and among the Company, Daktronics Installation, Inc. and JPMorgan Chase Bank, N.A.
The $15,000 Delayed Draw Loan was funded on July 7, 2023 and is secured by the Mortgage on the Company's Brookings, South Dakota real estate. It amortizes over 10 years and has monthly payments of $125. The Delayed Draw Loan is subject to the terms of the Credit Agreement and matures on May 11, 2026. The interest rate on the Delayed Draw Loan is set on a sliding scale based on the trailing 12-month fixed charge coverage ratio and ranges between 1.0 and 2.0 percent over the Commercial Bank Floating Rate (CBFR). The interest rate as of January 27, 2024 for Delayed Draw Loan was 9.5 percent.
Convertible Note
On May 11, 2023, we borrowed $25,000 in aggregate principal amount evidenced by the secured Convertible Note due May 11, 2027. The Convertible Note holder (the "Holder") has a second priority lien on assets securing the ABL facility and a first priority lien on substantially all of the other assets of the Company, excluding all real property, subject to the Intercreditor Agreement dated as of May 11, 2023 by and among the Company, JPMorgan Chase Bank N.A., and the Holder of the Convertible Note.
Conversion Features
The Convertible Note allows the Holder and any of the Holder’s permitted transferees, donees, pledgees, assignees or successors-in-interest (collectively, the “Selling Shareholders”) to convert all or any portion of the principal amount of the Convertible Note, together with any accrued and unpaid interest and any other unpaid amounts, including late charges, if any (together, the “Conversion Amount”), into shares of the Company’s common stock at an initial conversion price of $6.31 per share, subject to adjustment in accordance with the terms of the Convertible Note (the “Conversion Price”).
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The Company also has a forced conversion right, which is exercisable on the occurrence of certain conditions set forth in the Convertible Note, pursuant to which it can cause all or any portion of the outstanding and unpaid Conversion Amount to be converted into shares of common stock at the Conversion Price.
Additionally, if the Company fails other than by reason of a failure by the Holder to comply with its obligations, the Holder is permitted to cash payments from the Company until such conversion failure is cured.

Redemption Features

If the Company were to have an "Event of Default", as defined by the Convertible Note, then the Holder may require the Company to redeem all or any portion of the Convertible Note.

If the Company has a "Change of Control", as defined by the Convertible Note, then the Holder is entitled to payment of the outstanding amount of the Convertible Note at the "Change in Control Redemption Price," as defined in the Convertible Note.

Interest

Interest accruing under the Convertible Note is payable, at the option of the Company, in either (i) cash or (ii) a combination of cash interest and capitalized interest; provided, however, that at least fifty percent (50%) of the interest paid on each interest date must be paid as cash interest. The Convertible Note accrues interest quarterly at an annual rate of 9.0 percent when interest is paid in cash or an annual rate of 10.0 percent if interest is paid in kind. Upon an event of default under the Convertible Note, the annual interest rate will increase to 12.0 percent. The annual rate of 9.0 percent was used to calculate the interest accrued as of January 27, 2024, as interest will be paid in cash.

We elected the fair value option to account for the Convertible Note as described in "Note 10. Fair Value Measurement" of the Notes to our Condensed Consolidated Financial Statements included in this Form 10-Q. The financial liability was initially measured at its issue-date fair value and is subsequently remeasured at fair value on a recurring basis at each reporting period date. We have elected to present the fair value and the accrued interest component separately in the Condensed Consolidated Statements of Operations. Therefore, interest will be recognized and accrued separately in interest expense, with changes in fair value of the Convertible Note presented in the "Change in fair value of convertible note" line item in our Condensed Consolidated Statements of Operations.

The changes in fair value of the Convertible Note during the nine months ended January 27, 2024 are as follows:

Liability Component
(in thousands)
Balance as of May 11, 2023$25,000 
Redemption of convertible promissory note 
Fair value change recognized11,570 
Balance as of January 27, 2024$36,570 

The estimated fair value of the Convertible Note upon its issuance date of May 11, 2023 and as of January 27, 2024 was computed using a binomial lattice model which incorporates significant inputs that are not observable in the market and thus represents a Level 3 measurement.

We determined the fair value by using the following key assumptions in the binomial lattice model:

Risk-Free Rate (Annual)4.09 %
Implied Yield17.24 %
Volatility (Annual)60.00 %
Dividend Yield (Annual) %
The Credit Agreement and the Convertible Note require a fixed charge coverage ratio of greater than 1.1 and include other customary non-financial covenants. As of January 27, 2024, we were in compliance with our financial covenants under the Credit Agreement and the Convertible Note.
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Debt Issuance Costs
Debt issuance costs incurred and capitalized are amortized on a straight-line basis over the term of the associated debt agreement. If early principal payments or conversions occur, a proportional amount of unamortized debt issuance costs is expensed. As part of these financings, we capitalized $8,195 in debt issuance costs. During the nine months ended January 27, 2024, due to the Convertible Note being accounted for at fair value, we expensed $3,353 of the related debt issuance costs which is included in the "Other expense and debt issuance costs write-off, net" line item in our Condensed Consolidated Statements of Operations. During the nine months ended January 27, 2024, we amortized $1,148 of debt issuance costs. The remaining debt issuance costs of $3,694 are being amortized over the three-year term of the Credit Facility.
Future Maturities
Aggregate contractual maturities of debt in future fiscal years are as follows:

Fiscal years endingAmount
Remainder of 2024$375 
20251,500 
20261,500 
202710,875 
202825,000 
2029 and beyond 
Total debt$39,250 

Note 8. Commitments and Contingencies
Litigation: We are a party to legal proceedings and claims which arise during the ordinary course of business. We review our legal proceedings and claims, regulatory reviews and inspections, and other legal matters on an ongoing basis and follow appropriate accounting guidance when making accrual and disclosure decisions. We establish accruals for those contingencies when the incurrence of a loss is probable and can be reasonably estimated, and we disclose the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued if such disclosure is necessary for our financial statements to not be misleading. We do not record an accrual when the likelihood of loss being incurred is probable, but the amount cannot be reasonably estimated, or when the loss is believed to be only reasonably possible or remote, although disclosures will be made for material matters as required by ASC 450-20, Contingencies - Loss Contingencies. Our assessment of whether a loss is reasonably possible or probable is based on our assessment and consultation with legal counsel regarding the ultimate outcome of the matter following all appeals.

For other unresolved legal proceedings or claims, we do not believe there is a reasonable probability that any material loss would be incurred. Accordingly, no material accrual or disclosure of a potential range of loss has been made related to these matters. We do not expect the ultimate liability of these unresolved legal proceedings or claims to have a material effect on our financial position, liquidity, or capital resources.
Warranties: Changes in our warranty obligation for the nine months ended January 27, 2024 consisted of the following:
January 27,
2024
Balance as of April 29, 2023$32,541 
Warranties issued during the period10,518 
Settlements made during the period(9,323)
Changes in accrued warranty obligations for pre-existing warranties during the period, including expirations954 
Balance as of January 27, 2024$34,690 
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Performance guarantees: We have entered into standby letters of credit, bank guarantees and surety bonds with financial institutions relating to the guarantee of our future performance on contracts, primarily construction-type contracts. As of January 27, 2024, we had outstanding letters of credit, bank guarantees and surety bonds in the amount of $5,426, $163 and $45,746, respectively. Performance guarantees are issued to certain customers to guarantee the operation and installation of the equipment and our ability to complete a contract. These performance guarantees have various terms but generally have a term of one year. We enter into written agreements with our customers, and those agreements often contain indemnification provisions that require us to make the customer whole if certain acts or omissions by us cause the customer financial loss. We make efforts to negotiate reasonable caps and limitations on the recovery of such damages. As of January 27, 2024, we were not aware of any material indemnification claims.
Note 9. Income Taxes
Our effective tax rate for the three and nine months ended January 27, 2024 was a tax rate of 15.0 and 31.5 percent, respectively. Income before tax includes the impacts of the change in the Convertible Note fair value; however, these changes are not deductible or taxable, which impacts the effective tax rate. Our effective tax rate for the three months ended January 28, 2023 was a tax rate of 30.5 percent. The rate for the nine months ended January 28, 2023 was skewed by the valuation allowance placed on deferred taxes during the second quarter of fiscal 2023.
We operate both domestically and internationally and, as of January 27, 2024, the undistributed earnings of our foreign subsidiaries were considered to be reinvested indefinitely. Additionally, as of January 27, 2024, we had $352 of unrecognized tax benefits which would reduce our effective tax rate if recognized.
Note 10. Fair Value Measurement
The following table sets forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis as of January 27, 2024 and April 29, 2023 according to the valuation techniques we used to determine their fair values. There have been no transfers of assets or liabilities among the fair value hierarchies presented.
Fair Value Measurements
Level 1Level 2Level 3Total
Balance as of January 27, 2024
Cash and cash equivalents$76,764 $ $ $76,764 
Restricted cash429   429 
Convertible note