What changed in this filing

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Item 1. Financial Statements

2022-12-13 compared with 2022-09-02 · 156 added, 80 removed, 328 unchanged (42% of the section changed)

41 unchanged sentences

Common Stock, no par value, authorized 115,000,000 shares;

46,942,070 and 46,733,544 shares issued at July 30, 2022 and April 30, 2022, respectively

47,158,442 and 46,733,544 shares issued at October 29, 2022 and April 30, 2022, respectively

62,388 61,794

1 unchanged sentence

Retained earnings 78,298 96,608

Treasury Stock, at cost, 1,907,445 shares at July 30, 2022 and April 30, 2022, respectively

Treasury Stock, at cost, 1,907,445 shares at October 29, 2022 and April 30, 2022, respectively

( 10,285 ) ( 10,285 )

7 unchanged sentences

(in thousands, except per share data)

Three Months Ended

2022 July 31,

Three Months Ended Six Months Ended

2022 October 30,

2021 October 29,

2022 October 30,

Net sales $ 187,439 $ 164,477 $ 359,359 $ 309,209

6 unchanged sentences

30,178 27,879 61,491 54,407

Operating (loss)income ( 5,519 ) 5,660

Operating income (loss) 1,526 4,385 ( 3,993 ) 10,045

Nonoperating (expense) income:

1 unchanged sentence

Other expense, net ( 208 ) ( 952 ) ( 955 ) ( 1,820 )

(Loss) income before income taxes ( 6,326 ) 4,929

Income tax (benefit) expense ( 1,000 ) 1,244

Income (loss) before income taxes 1,055 3,374 ( 5,271 ) 8,303

Income tax expense 14,039 1,000 13,039 2,244

Net (loss) income $ ( 12,984 ) $ 2,374 $ ( 18,310 ) $ 6,059

2 unchanged sentences

Diluted 45,317 45,499 45,258 45,490

(Loss) earnings per share:

Earnings (loss) per share:

Basic $ ( 0.29 ) $ 0.05 $ ( 0.40 ) $ 0.13

5 unchanged sentences

(in thousands)

Three Months Ended

2022 July 31,

Three Months Ended Six Months Ended

2022 October 30,

2021 October 29,

2022 October 30,

Net (loss) income $ ( 12,984 ) $ 2,374 $ ( 18,310 ) $ 6,059

17 unchanged sentences

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 (loss) gain 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

See notes to condensed consolidated financial statements.

11 unchanged sentences

Balance as of July 31, 2021 61,172 47,117 99,701 ( 7,101 ) ( 2,708 ) 198,181

Net income — — 2,374 — — 2,374

Cumulative translation adjustments — — — — ( 50 ) ( 50 )

Share-based compensation — 494 — — — 494

Exercise of stock options 3 — — — — 3

Tax payments related to RSU issuances — ( 199 ) — — — ( 199 )

Balance as of October 30, 2021 $ 61,175 $ 47,412 $ 102,075 $ ( 7,101 ) $ ( 2,758 ) $ 200,803

See notes to condensed consolidated financial statements .

3 unchanged sentences

(in thousands)

Three Months Ended

2022 July 31,

Six Months Ended

2022 October 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

19 unchanged sentences

Principal payments on long-term obligations — ( 200 )

Proceed from exercise of stock options — 3

Tax payments related to RSU issuances ( 140 ) ( 199 )

Net cash provided by (used in) financing activities 26,278 ( 396 )

30 unchanged sentences

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 three months ended July 30, 2022 and July 31, 2021, contained operating results for 13 weeks.

Other Developments

We continue to experience volatility in our business driven by global economic conditions and supply chain disruptions.

We anticipate needing to utilize a portion of our line of credit which expires in April 2025, and requires us to comply with certain covenants.

As described in "Note 7.

Financing Agreements", we did not comply with our debt covenants this quarter and obtained a waiver from the bank.

Based on our projections we expect to be in compliance with these covenants through the next year;

however, with the uncertainty and volatility in the supply chain and sensitivity of the covenants, we cannot be certain.

If we violate a covenant and cannot obtain a waiver from the bank, we may need to seek additional debt or equity financing.

The six months ended October 29, 2022 and October 30, 2021 contained operating results for 26 weeks.

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 issuances of foreign bank guarantees.

2022 July 31,

2022 October 30,

Cash and cash equivalents $ 6,431 $ 59,727

1 unchanged sentence

Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows $ 7,143 $ 61,604

Liquidity and Going Concern

The accompanying condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

We continue to experience volatility in our business driven by global economic conditions and supply chain disruptions.

All of these conditions have caused volatility in our cash flow, pricing, order volumes, lead-times, competitiveness, revenue cycles, and production costs.

We believe it is likely these conditions will continue to have negative impacts in fiscal 2023.

To improve operations and cash flows, we have increased prices of our goods and services.

We have also increased investment in inventory levels to add production stability.

To adapt, we used cash and line of credit borrowings to source inventory to add stability to our production processes to fulfill backlog.

We also continue to invest in property

and equipment to expand our capacity and add automation.

Our ability to fund inventory levels, operations and capital expenditures in the future will be dependent on our ability to generate cash flow from operations in these conditions, to maintain or improve margins, and to use funds from our credit facility.

Our credit facility expires in April 2025, and it requires us to comply with certain covenants.

Although supply chain disruptions have started to ease and we expect our inventory levels to decline, we cannot be certain we will not experience future disruptions or need additional liquidity to fund inventory levels, operations, and capital expenditures.

We will need additional liquidity to meet our obligations as they come due in the 12 months following the date of this Report and we cannot be assured that such liquidity will be available or the form of such liquidity, such as equity raises or debt financing.

These conditions raise substantial doubt about our ability to continue as a going concern.

In response to these conditions, we are pursuing additional liquidity through various means, including but not limited to obtaining financing secured by a mortgage on our facilities, a sales-leaseback transaction, leasing property and equipment, and continued focus on reducing working capital.

Since these plans are not finalized and are subject to market conditions and restrictions from our existing financing agreements that are not within our control, they cannot be deemed probable.

As a result, we have concluded that our plans do not alleviate substantial doubt about our ability to continue as a going concern.

Refer to Note 7 for additional considerations related to our financing agreements.

The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

Recent Accounting Pronouncements

1 unchanged sentence

Accounting Standards Adopted

In November 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2021-10, Government Assistance (Topic 832):

Disclosures by Business Entities About Government Assistance ("ASU 2021-10"), which requires business entities to disclose information about transactions with a government that are accounted for by applying a grant or contribution model by analogy.

For transactions covered by ASU 2021-10, the new standard requires the disclosure of information about the nature of the transaction, including significant terms and conditions, as well as the amounts and specific financial statement line items affected by the transaction.

ASU 2021-10 is effective for annual periods beginning after December 15, 2021.

The Company has adopted ASU 2021-10 effective May 1, 2022 and notes there is no impact of ASU 2021-10 on its accounting or disclosures for governmental assistance.

There were no standards adopted since the last quarterly report.

Accounting Standards Not Yet Adopted

There are no significant ASUs issued that the Company has not yet adopted as of July 30, 2022.

There are no significant ASUs issued that the Company has not yet adopted as of October 29, 2022.

Investments in Affiliates

The aggregate amount of our investments accounted for under the equity method was $ 16,026 and $ 16,916 as of July 30, 2022 and April 30, 2022, respectively.

The aggregate amount of our investments accounted for under the equity method was $ 18,040 and $ 16,916 as of October 29, 2022 and April 30, 2022, respectively.

Our proportional share of the respective affiliates' earnings or losses is included in the "Other expense, net" line item in our condensed consolidated statements of operations.

For the three months ended July 30, 2022, our share of the losses of our affiliates was $ 890 as compared to $ 746 for the three months ended July 31, 2021.

For the three and six months ended October 29, 2022, our share of the losses of our affiliates was $ 811 and $ 1,701 as compared to $ 819 and $ 1,565 for the three and six months ended October 30, 2021.

We purchased services for research and development activities from our equity method investees.

The total of these related party transactions for the three months ended July 30, 2022 and July 31, 2021 was $ 0 and $ 470 , respectively, which is included in the "Product design and development" line item in our condensed consolidated statements of operations, and for the three months ended July 30, 2022, $ 52 remains unpaid and is included in the "Accounts payable " line item in our condensed consolidated balance sheets.

During the three months ended July 30, 2022, we invested $ 1,081 of convertible notes ("Notes") which are included in the "Investment in affiliates and other assets" line item in our condensed consolidated balance sheets.

The total of these related party transactions for the six months ended October 29, 2022 and October 30, 2021 was $ 672 and $ 898 , respectively, which is included in the "Product design and development" line item in our condensed consolidated statements of operations, and for the six months ended October 29, 2022, $ 52 remains unpaid and is included in the "Accounts payable" line item in our condensed consolidated balance sheets.

During the six months ended October 29, 2022, we invested $ 2,882 of convertible notes ("Notes"), which are included in the "Investment in affiliates and other assets" line item in our condensed consolidated balance sheets.

During the six months ended October 29, 2022, we converted $ 2,824 from Notes to stock ownership.

Earnings Per Share ("EPS")

The following is a reconciliation of the net (loss) income and common share amounts used in the calculation of basic and diluted EPS for the three months ended July 30, 2022 and July 31, 2021:

The following is a reconciliation of the net (loss) income and common share amounts used in the calculation of basic and diluted EPS for the three and six months ended October 29, 2022 and October 30, 2021:

Net (loss) income Shares Per share (loss) income

For the three months ended July 30, 2022

Basic (loss) earnings per share $ ( 5,326 ) 45,097 $ ( 0.12 )

For the three months ended October 29, 2022

Basic and diluted (loss) earnings per share $ ( 12,984 ) 45,317 $ ( 0.29 )

Diluted (loss) earnings per share $ ( 12,984 ) 45,317 $ ( 0.29 )

For the three months ended October 30, 2021

Basic earnings per share $ 2,374 45,350 $ 0.05

Dilution associated with stock compensation plans — 149 —

Diluted earnings per share $ 2,374 45,499 $ 0.05

For the six months ended October 29, 2022

Basic and diluted (loss) earnings per share $ ( 18,310 ) 45,258 $ ( 0.40 )

Diluted (loss) earnings per share $ ( 18,310 ) 45,258 $ ( 0.40 )

For the three months ended July 31, 2021

For the six months ended October 30, 2021

Basic earnings per share $ 6,059 45,271 $ 0.13

1 unchanged sentence

Diluted earnings per share $ 6,059 45,490 $ 0.13

Options outstanding to purchase 2,102 shares of common stock with a weighted average exercise price of $ 8.12 for the three months ended July 30, 2022 and 1,810 shares of common stock with a weighted average exercise price of $ 9.52 for the three months ended July 31, 2021 were not included in the computation of diluted earnings per share because the effects would be anti-dilutive.

Options outstanding to purchase 2,063 shares of common stock with a weighted average exercise price of $ 7.51 for the three months ended October 29, 2022 and 1,943 shares of common stock with a weighted average exercise price of $ 9.22 for the three months ended October 30, 2021 were not included in the computation of diluted earnings per share because the effects would be anti-dilutive.

Options outstanding to purchase 2,082 shares of common stock with a weighted average exercise price of $ 7.82 for the six months ended October 29, 2022 and 1,877 shares of common stock with a weighted average exercise price of $ 9.37 for the six months ended October 30, 2021 were not included in the computation of diluted earnings per share because the effects would be anti-dilutive.

Revenue Recognition

1 unchanged sentence

The following table presents our disaggregation of revenue by segments:

Three Months Ended July 30, 2022

Three Months Ended October 29, 2022

Commercial Live Events High School

10 unchanged sentences

$ 37,047 $ 69,239 $ 42,006 $ 16,679 $ 22,468 $ 187,439

Three Months Ended July 31, 2021

Six Months Ended October 29, 2022

Commercial Live Events High School

10 unchanged sentences

$ 77,165 $ 125,622 $ 77,815 $ 36,219 $ 42,538 $ 359,359

Three Months Ended October 30, 2021

Commercial Live Events High School

Park and Recreation

Transportation International Total

Type of performance obligation

Unique configuration $ 4,559 $ 43,528 $ 6,908 $ 8,976 $ 11,562 $ 75,533

Limited configuration 25,977 8,825 24,916 4,552 10,466 74,736

Service and other 3,927 7,043 923 525 1,790 14,208

$ 34,463 $ 59,396 $ 32,747 $ 14,053 $ 23,818 $ 164,477

Timing of revenue recognition

Goods/services transferred at a point in time $ 26,362 $ 11,508 $ 23,115 $ 4,634 $ 10,815 $ 76,434

Goods/services transferred over time 8,101 47,888 9,632 9,419 13,003 88,043

$ 34,463 $ 59,396 $ 32,747 $ 14,053 $ 23,818 $ 164,477

Six Months Ended October 30, 2021

Commercial Live Events High School

Park and Recreation

Transportation International Total

Type of performance obligation

Unique configuration $ 8,146 $ 85,036 $ 11,074 $ 15,517 $ 17,445 $ 137,218

Limited configuration 51,884 14,667 47,873 9,904 22,011 146,339

Service and other 7,214 12,080 1,694 1,190 3,474 25,652

$ 67,244 $ 111,783 $ 60,641 $ 26,611 $ 42,930 $ 309,209

Timing of revenue recognition

Goods/services transferred at a point in time $ 52,741 $ 18,337 $ 45,056 $ 10,205 $ 22,834 $ 149,173

Goods/services transferred over time 14,503 93,446 15,585 16,406 20,096 160,036

$ 67,244 $ 111,783 $ 60,641 $ 26,611 $ 42,930 $ 309,209

Segment Reporting" for a disaggregation of revenue by geography.

9 unchanged sentences

Contract liabilities - noncurrent 12,303 10,998 1,305 11.9

The changes in our contract assets and contract liabilities from April 30, 2022 to July 30, 2022 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 no impairments of contract assets for the three months ended July 30, 2022.

The changes in our contract assets and contract liabilities from April 30, 2022 to October 29, 2022 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 no impairments of contract assets for the six months ended October 29, 2022.

For service-type warranty contracts, we allocate revenue to this performance obligation, recognize the revenue over time, and recognize costs as incurred.

6 unchanged sentences

Balance at end of period $ 30,555

Contracts in progress identified as loss contracts as of July 30, 2022 were $ 839 and as of April 30, 2022 were immaterial.

Contracts in progress identified as loss contracts as of October 29, 2022 were $ 482 and as of April 30, 2022 were immaterial.

Loss provisions are recorded in the "Accrued expenses" line item in our condensed consolidated balance sheets.

During the three months ended July 30, 2022, we recognized revenue of $ 46,041 related to our contract liabilities as of April 30, 2022.

During the six months ended October 29, 2022, we recognized revenue of $ 65,533 related to our contract liabilities as of April 30, 2022.

Remaining performance obligations

As of July 30, 2022, the aggregate amount of the transaction price allocated to the remaining performance obligations was $ 530,457 .

As of October 29, 2022, the aggregate amount of the transaction price allocated to the remaining performance obligations was $ 524,251 .

Remaining performance obligations related to product and service agreements at October 29, 2022 were $ 463,084 and $ 61,167 , respectively.

We expect approximately $ 467,498 of our remaining performance obligations to be recognized over the next 12 months, with the remainder recognized thereafter.

Remaining performance obligations related to product and service agreements at July 30, 2022 were $ 469,126 and $ 61,331 , respectively.

Although remaining performance obligations reflect business that is considered to be legally binding, cancellations, deferrals or scope adjustments may occur.

2 unchanged sentences

The following table sets forth certain financial information for each of our five reporting segments for the periods indicated:

Three Months Ended

2022 July 31,

Three Months Ended Six Months Ended

2022 October 30,

2021 October 29,

2022 October 30,

Commercial $ 37,047 $ 34,463 $ 77,165 $ 67,244

16 unchanged sentences

30,178 27,879 61,491 54,407

Operating (loss) income ( 5,519 ) 5,660

Operating income (loss) 1,526 4,385 ( 3,993 ) 10,045

Nonoperating (expense) income:

1 unchanged sentence

Other expense, net ( 208 ) ( 952 ) ( 955 ) ( 1,820 )

(Loss) income before income taxes $ ( 6,326 ) $ 4,929

Income (loss) before income taxes $ 1,055 $ 3,374 $ ( 5,271 ) $ 8,303

Depreciation and amortization:

8 unchanged sentences

The following table presents information about net sales and property and equipment, net of accumulated depreciation, in the United States and elsewhere:

Three Months Ended

2022 July 31,

Three Months Ended Six Months Ended

2022 October 30,

2021 October 29,

2022 October 30,

United States $ 163,142 $ 138,821 $ 312,580 $ 262,303

6 unchanged sentences

$ 74,271 $ 66,765

We have numerous customers worldwide for sales of our products and services, and no customer accounted for 10 percent or more of net sales for the three months ended July 30, 2022 and July 31, 2021;

We have numerous customers worldwide for sales of our products and services, and no customer accounted for 10 percent or more of net sales for the three and six months ended October 29, 2022 and October 30, 2021;

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 and a number of single-source suppliers that could limit our supply or cause delays in obtaining raw materials and components needed in manufacturing.

The changes in the carrying amount of goodwill related to each reportable segment for the three months ended July 30, 2022 were as follows:

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.

The changes in the carrying amount of goodwill related to each reportable segment for the six months ended October 29, 2022 were as follows:

Live Events Commercial Transportation International Total

1 unchanged sentence

Foreign currency translation ( 20 ) ( 146 ) ( 20 ) ( 104 ) ( 290 )

Balance as of July 30, 2022 $ 2,296 $ 3,349 $ 68 $ 2,144 $ 7,857

Balance as of October 29, 2022 $ 2,276 $ 3,203 $ 48 $ 2,110 $ 7,637

We perform an analysis of goodwill on an annual basis and test for impairment more frequently if events or changes in circumstances indicate that an asset might be impaired.

4 unchanged sentences

Financing Agreements

As of July 30, 2022, $ 24,128 had been advanced under the loan portion of our line of credit, and the balance of letters of credit outstanding was approximately $ 6,342 .

As of July 30, 2022, $ 4,530 of the credit facility was available for borrowing.

On August 16, 2022, we entered into an agreement to temporarily expand the line of credit by $ 10,000 through October 31, 2022.

In addition, certain financial covenants were modified to temporarily relax them through the second and third quarter of fiscal 2023.

As of July 30, 2022, we were not in compliance with our financial covenants and our bank provided a waiver for these covenants.

As of July 30, 2022, we had $ 616 of bank guarantees or other financial instruments for display installations issued by another bank and secured by a restricted cash deposit.

As of October 29, 2022, $ 26,418 had been advanced under the loan portion of our line of credit, and the balance of letters of credit outstanding was approximately $ 6,917 .

As of October 29, 2022, $ 11,665 of the credit facility was available for borrowing.

On October 31, 2022, we entered into an agreement to temporarily expand the line of credit by $ 10,000 through January 31, 2023.

As of October 29, 2022, we were in compliance with our financial covenants.

On December 9, 2022, we entered into the sixth amendment to our credit agreement.

The Amendment clarifies certain definitions related to the

deferred tax asset valuation allowance and adds additional financial reporting requirements and negative covenants.

It also requires Daktronics to obtain the current lender’s approval of any additional indebtedness and receive an audit report on our fiscal 2023 financial statements that does not express substantial doubt about the Company’s ability to continue as a going concern.

As of October 29, 2022, we had $ 616 of bank guarantees or other financial instruments for display installations issued by another bank and secured by a restricted cash deposit.

If we are unable to meet the terms of the arrangement, the bank would subrogate its loss by drawing on the secured cash deposit.

5 unchanged sentences

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.

Changes in our warranty obligation for the three months ended July 30, 2022 consisted of the following:

Changes in our warranty obligation for the six months ended October 29, 2022 consisted of the following:

Beginning accrued warranty obligations $ 28,878

5 unchanged sentences

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 July 30, 2022, we had outstanding letters of credit, bank guarantees and surety bonds in the amount of $ 6,342 , $ 616 and $ 82,528 , respectively.

As of October 29, 2022, we had outstanding letters of credit, bank guarantees and surety bonds in the amount of $ 6,917 , $ 616 and $ 72,777 , respectively.

Performance guarantees are issued to certain customers to guarantee the operation and installation of the equipment and our ability to complete a contract.

2 unchanged sentences

We make efforts to negotiate reasonable caps and limitations on the recovery of such damages.

As of July 30, 2022, we were not aware of any indemnification claim from a customer.

The provision for income taxes during interim reporting periods is calculated by applying an estimate of the annual effective tax rate to “ordinary” income or loss for the reporting period, adjusted for discrete items.

Due to various factors, including our estimate of annual income, our effective tax rate is subject to fluctuation.

Our effective tax rate for the three months ended July 30, 2022 was 15.8 percent, as compared to an effective tax rate of 25.2 percent tax for the three months ended July 31, 2021.

The decrease in tax rate is primarily driven by an increase in estimated tax credits and other permanent items less valuation allowances as a percentage of estimated pre-tax earnings for fiscal 2023 compared to the estimated value of tax credits and other permanent items less valuation allowances as a percentage to the estimated pre-tax earnings at the first quarter of fiscal 2022.

We operate both domestically and internationally and, as of July 30, 2022, undistributed earnings of our foreign subsidiaries were considered to be reinvested indefinitely.

Additionally, as of July 30, 2022, we had $ 610 of unrecognized tax benefits which would reduce our effective tax rate if recognized.

As of October 29, 2022, we were not aware of any indemnification claim from a customer.

The provision for income taxes during interim reporting periods is calculated by applying an estimate of the annual effective tax rate.

The computation of the annual estimated effective tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected operating income (or loss) for the year, projections of the proportion of income (or loss) earned and taxed in foreign jurisdictions, and permanent and temporary differences and the likelihood of recovering deferred tax assets, then adjusted for any discrete items.

The accounting estimates used to compute the provision for income taxes may change as new events occur, assumptions change, or additional information is obtained.

Under GAAP we are required to evaluate the recoverability of our deferred tax assets and establish a valuation allowance if necessary to reduce our deferred tax assets to an amount that is more likely than not to be realized.

Significant judgment is required in determining whether valuation allowances should be established, as well as the amount of such allowances.

We establish or adjust valuation allowances for deferred tax assets when we estimate that it is more likely than not that we will be able to realize the value of the deferred tax assets.

We evaluate all significant available positive and negative evidence as part of our analysis, including our past operating results, tax planning strategies, current and cumulative losses, and forecasts of future taxable income.

The underlying assumptions we use in forecasting future taxable income requires

significant judgment and takes into account our recent performance.

The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which temporary differences are deductible or creditable.

If actual experience differs from these estimates and assumptions, the recognized deferred tax asset value may not be fully realized, resulting in an increase to income tax expense in our results of operations.

Due to various factors, including our estimated of annual income, our effective tax rate is subject to fluctuation.

Our effective tax rate for the three and six months ended October 29, 2022 was a tax rate of 1330.7 and a tax rate of ( 247.3 ) percent, as compared to an effective tax rate of 29.6 and 27.0 percent tax for the three and six months ended October 30, 2021.

The increase in tax rate is primarily driven by the requirement to record a full valuation allowance on deferred tax assets during the second quarter of fiscal 2023 related to GAAP accounting for income taxes and related information.

Basis of Presentation - Liquidity and Going Concern" of the Notes to our Condensed Consolidated Financial Statements included in this Report.

If, in the future, we determine we can support the recoverability of all or a portion of the deferred tax assets under the guidance, the tax benefits relating to any reversal of the valuation allowance on net deferred tax assets will be accounted for as a reduction of income tax expense and result in an increase in equity.

Changes in tax laws and rates may affect recorded deferred tax assets and liabilities and our effective tax rate in the future.

We operate both domestically and internationally and, as of October 29, 2022, undistributed earnings of our foreign subsidiaries were considered to be reinvested indefinitely.

Additionally, as of October 29, 2022, we had $ 593 of unrecognized tax benefits which would reduce our effective tax rate if recognized.

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 at July 30, 2022 and April 30, 2022 according to the valuation techniques we used to determine their fair values.

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 at October 29, 2022 and April 30, 2022 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.

1 unchanged sentence

Level 1 Level 2 Level 3 Total

Balance as of July 30, 2022

Balance as of October 29, 2022

Cash and cash equivalents $ 6,431 $ — $ — $ 6,431

16 unchanged sentences

For additional information, see our Annual Report on Form 10-K for the fiscal year ended April 30, 2022 for the methods and assumptions used to estimate the fair value of each class of financial instrument.

Share Repurchase Program

On June 17, 2016, our Board of Directors approved a stock repurchase program under which we may purchase up to $ 40,000 of the Company's outstanding shares of common stock.

Under this program, we may repurchase shares from time to time in open market transactions and in privately negotiated transactions based on business, market, applicable legal requirements and other considerations.

The repurchase program does not require the repurchase of a specific number of shares and may be terminated at any time.

In April 2020, the Board had suspended the program.

On December 2, 2021, the Board of Directors of Daktronics voted to reauthorize the stock repurchase program.

During the three months ended July 30, 2022, we repurchased no shares of common stock.

As of July 30, 2022, we had $ 29,355 of remaining capacity under our current share repurchase program.

Subsequent Events

On December 9, 2022, we entered into the sixth amendment to our credit agreement as described in Note 7.

T here were no other material subsequent events.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements