What changed in this filing

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Item 1. Financial Statements

2023-12-05 compared with 2023-09-08 · 164 added, 127 removed, 432 unchanged (40% of the section changed)

20 unchanged sentences

Intangibles, net 970 1,136

Debt issuance costs — 3,866

Debt issuance costs, net 3,150 3,866

Investment in affiliates and other assets 27,705 27,928

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

45,644,800 and 45,488,595 shares issued at July 29, 2023 and April 29, 2023, respectively

46,022,885 and 45,488,595 shares issued at October 28, 2023 and April 29, 2023, respectively

64,643 63,023

1 unchanged sentence

Retained earnings 124,771 103,410

Treasury Stock, at cost, 1,907,445 shares at July 29, 2023 and April 29, 2023, respectively

Treasury Stock, at cost, 1,907,445 shares at October 28, 2023 and April 29, 2023, respectively

( 10,285 ) ( 10,285 )

7 unchanged sentences

(in thousands, except per share data)

Three Months Ended

2023 July 30,

Three Months Ended Six Months Ended

2023 October 29,

2022 October 28,

2023 October 29,

Net sales $ 199,369 $ 187,439 $ 431,900 $ 359,359

12 unchanged sentences

Income (loss) before income taxes 6,157 1,055 34,253 ( 5,271 )

Income tax expense (benefit) 8,900 ( 1,000 )

Income tax expense 3,992 14,039 12,892 13,039

Net income (loss) $ 2,165 $ ( 12,984 ) $ 21,361 $ ( 18,310 )

10 unchanged sentences

(in thousands)

Three Months Ended

2023 July 30,

Three Months Ended Six Months Ended

2023 October 29,

2022 October 28,

2023 October 29,

Net income (loss) $ 2,165 $ ( 12,984 ) $ 21,361 $ ( 18,310 )

1 unchanged sentence

Cumulative translation adjustments ( 1,190 ) ( 1,521 ) ( 1,442 ) ( 2,163 )

Unrealized gain on available-for-sale securities, net of tax 7 1

Total other comprehensive income (loss), net of tax ( 245 ) ( 641 )

Unrealized gain (loss) on available-for-sale securities, net of tax 9 ( 1 ) 16 —

Total other comprehensive (loss), net of tax ( 1,181 ) ( 1,522 ) ( 1,426 ) ( 2,163 )

Comprehensive income (loss) $ 984 $ ( 14,506 ) $ 19,935 $ ( 20,473 )

13 unchanged sentences

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 on available-for-sale securities, net of tax 9 9

Share-based compensation 534 534

Exercise of stock options 959 959

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

See notes to condensed consolidated financial statements.

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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

See notes to condensed consolidated financial statements.

3 unchanged sentences

(in thousands)

Three Months Ended

2023 July 30,

Six Months Ended

2023 October 29,

CASH FLOWS FROM OPERATING ACTIVITIES:

5 unchanged sentences

Equity in loss of affiliates 1,461 1,701

Provision (recovery) for doubtful accounts, net ( 65 ) 177

Provision for doubtful accounts, net 240 573

Deferred income taxes, net 20 13,037

Non-cash impairment changes 442 —

Non-cash impairment charges 654 —

Change in fair value of convertible note 17,910 —

12 unchanged sentences

Principal payments on long-term obligations ( 204 ) —

Debt issuance cost ( 5,838 ) —

Proceed from exercise of stock options 46 —

Debt issuance costs ( 6,454 ) —

Proceeds from exercise of stock options 1,005 —

Tax payments related to RSU issuances ( 303 ) ( 140 )

Net cash provided by financing activities 15,919 26,278

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 29, 2023 and July 30, 2022 contained operating results for 13 weeks.

The six months ended October 28, 2023 and October 29, 2022 contained operating results for 26 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

1 unchanged sentence

Restricted cash consists of cash and cash equivalents held in bank deposit accounts to secure issuances of foreign bank guarantees and letters of credit outstanding under a previous credit agreement.

2023 July 30,

2023 October 29,

Cash and cash equivalents $ 64,740 $ 6,431

4 unchanged sentences

These accounts are impacted by changes in foreign currency rates.

Of our $ 45,775 in cash and cash equivalent balances as of July 29, 2023, $ 36,426 were denominated in United States dollars, of which $ 941 were held by our foreign subsidiaries.

As of July 29, 2023, we had an additional $ 9,349 in cash balances denominated in foreign currencies, of which $ 8,513 were maintained in accounts of our foreign subsidiaries.

Of our $ 64,740 in cash and cash equivalent balances as of October 28, 2023, $ 54,245 were denominated in United States dollars, of which $ 737 were held by our foreign subsidiaries.

As of October 28, 2023, we had an additional

$ 10,495 in cash balances denominated in foreign currencies, of which $ 8,466 were maintained in accounts of our foreign subsidiaries.

Recent Accounting Pronouncements

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.

Accounting Standards Adopted

In July 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-03, “Presentation of Financial Statements (Topic 205), Income Statement - Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation - Stock Compensation (Topic 718) :

A mendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.

120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 - General Revision of Regulation S-X:

Income or Loss Applicable to Common Stock” (“ASU 2023-03”).

This ASU amends various paragraphs in the accounting codification pursuant to the issuance of Commission Staff Bulletin ("SAB") number 120.

ASU 2023-03 does not provide any new guidance, so there is no transition or effective date.

ASU 2023-03 did not have a material impact on our condensed consolidated financial statements.

In August 2020, the FASB issued 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):

In August 2020, the Financial Accounting Standards Board 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.

This ASU (1) simplified the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt:

This ASU (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;

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Accounting Standards Not Yet Adopted

There are no significant ASU's issued that the Company has not yet adopted as of July 29, 2023

We have reviewed all recently issued accounting pronouncements and concluded the standards were either not applicable or not expected to have a significant impact on our consolidated financial statements .

Investments in Affiliates

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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 $ 10,804 and $ 11,934 as of July 29, 2023 and April 29, 2023, respectively.

The aggregate amount of our investments accounted for under the equity method was $ 9,819 and $ 11,934 as of October 28, 2023 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 months ended July 29, 2023, our share of the losses of our affiliates was $ 690 as compared to $ 890 for the three months ended July 30, 2022.

For the three and six months ended October 28, 2023, our share of the losses of our affiliates was $ 771 and $ 1,461 as compared to $ 811 and $ 1,701 for the three and six months ended October 29, 2022.

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 29, 2023 and July 30, 2022 was $ 78 and $ 0 , 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 29, 2023, $ 2 remains unpaid and is included in the "Accounts payable" line item in our condensed consolidated balance sheets.

During the three months ended July 29, 2023, we invested $ 750 in convertible notes and $ 436 in promissory notes (collectively, "Notes") of our affiliates, which is included in the "Investment in affiliates and other assets" line item in our condensed consolidated balance sheets.

During the three months ended July 29, 2023, we did not convert any Notes to stock ownership.

Our ownership in Miortech was 55.9 percent and in Xdisplay TM was 16.4 percent as of July 29, 2023.

The total amount of Notes as of July 29, 2023 was $ 9,993 and is included in the "Investments in affiliates and other assets" line item in our condensed consolidated balance sheets.

The Notes balance combined with the investment in affiliates balance totaled $ 20,797 and $ 24,414 as of July 29, 2023 and July 30, 2022, respectively.

The total of these related party transactions for the six months ended October 28, 2023 and October 29, 2022 was $ 123 and $ 672 , 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 28, 2023, $ 14 remains unpaid and is included in the "Accounts payable" line item in our condensed consolidated balance sheets.

During the six months ended October 28, 2023, we invested $ 2,250 in convertible notes and $ 649 in promissory notes (collectively, the "Affiliate Notes") of our affiliates, which is included in the "Investment in affiliates and other assets" line item in our condensed consolidated balance sheets.

During the six months ended October 28, 2023, we did not convert any Affiliate Notes to stock ownership.

Our ownership in Miortech was 55.9 percent and in Xdisplay TM was 16.4 percent as of October 28, 2023.

The total amount of Affiliate Notes as of October 28, 2023 was $ 11,663 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 $ 21,483 and $ 25,343 as of October 28, 2023 and October 29, 2022, respectively.

Earnings Per Share ("EPS")

In the first quarter of fiscal 2024, we adopted ASU 2020-06.

Upon adoption, we prospectively utilized the if-converted method to calculate the dilutive impact of our convertible note issued on May 11, 2023 (the "Convertible Note").

Upon adoption, we prospectively utilized the if-converted method to calculate the dilutive impact of our Convertible Note.

Financing Agreements" of the Notes to our Condensed Consolidated Financial Statements included in this Form 10-Q for further information on the Convertible Note.

1 unchanged sentence

In addition, interest charges, net of any income tax effects, are added back to the numerator of the calculation.

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 months ended July 29, 2023 and July 30, 2022:

Three Months Ended

2023 July 30,

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 six months ended October 28, 2023 and October 29, 2022:

Three Months Ended Six Months Ended

2023 October 29,

2022 October 28,

2023 October 29,

Earnings per share - basic

7 unchanged sentences

Dilution associated with stock compensation plans 675 — 616 —

Dilution associated with convertible note — — — —

Weighted average common shares outstanding, assuming dilution 46,705 45,317 46,454 45,258

Diluted earnings (loss) per share $ 0.05 $ ( 0.29 ) $ 0.46 $ ( 0.40 )

Options outstanding to purchase 1,326 shares of common stock with a weighted average exercise price of $ 8.97 for the three months ended July 29, 2023 and 2,102 shares of common stock with a weighted average exercise price of $ 8.12 for the three months ended July 30, 2022 were not included in the computation of diluted earnings per share because the effects would be anti-dilutive.

Options outstanding to purchase 521 shares of common stock with a weighted average exercise price of $ 10.76 for the three months ended October 28, 2023 and 2,063 shares of common stock with a weighted average exercise price of $ 7.51 for the three months ended October 29, 2022 were not included in the computation of diluted earnings per share because the effects would be anti-dilutive.

Options outstanding to purchase 1,039 shares of common stock with a weighted average exercise price of $ 9.53 for the six months ended October 28, 2023 and 2,082 shares of common stock with a weighted average exercise price of $ 7.82 for the six months ended October 29, 2022 were not included in the computation of diluted earnings per share because the effects would be anti-dilutive.

During the three and six months ended October 28, 2023, respectively, shares of common stock issuable upon conversion of the Convertible Note have been excluded from the computation of diluted earnings per share as the effect would be anti-dilutive, as under the if-converted method, the income statement impact of the fair value adjustment and interest expense is added back to net income available to common shareholders, thereby increasing earnings per share.

For the three and six months ended October 28, 2023, 4,051 and 3,806 potential common shares related to the convertible note were excluded from the calculation of diluted earnings per share.

The convertible debt was not outstanding during fiscal year 2023.

Revenue Recognition

Disaggregation of revenue

In accordance with Accounting Standards Codification ("ASC") 606-10-50, we disaggregate revenue from contracts with customers by the type of performance obligation and the timing of revenue recognition.

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 July 29, 2023

Three Months Ended October 28, 2023

Commercial Live Events High School

10 unchanged sentences

$ 42,453 $ 68,210 $ 48,942 $ 20,243 $ 19,521 $ 199,369

Three Months Ended July 30, 2022

Six Months Ended October 28, 2023

Commercial Live Events High School

10 unchanged sentences

$ 89,336 $ 160,209 $ 105,176 $ 41,612 $ 35,567 $ 431,900

Three Months Ended October 29, 2022

Commercial Live Events High School

Park and Recreation

Transportation International Total

Type of performance obligation

Unique configuration $ 5,582 $ 52,862 $ 7,856 $ 11,398 $ 6,123 $ 83,821

Limited configuration 26,768 9,675 32,975 4,542 14,285 88,245

Service and other 4,697 6,702 1,175 739 2,060 15,373

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

Timing of revenue recognition

Goods/services transferred at a point in time $ 28,078 $ 11,682 $ 31,129 $ 4,749 $ 15,019 $ 90,657

Goods/services transferred over time 8,969 57,557 10,877 11,930 7,449 96,782

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

Six Months Ended October 29, 2022

Commercial Live Events High School

Park and Recreation

Transportation International Total

Type of performance obligation

Unique configuration $ 10,269 $ 95,030 $ 14,448 $ 23,884 $ 12,624 $ 156,255

Limited configuration 58,544 18,155 61,258 10,641 25,786 174,384

Service and other 8,352 12,437 2,109 1,694 4,128 28,720

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

Timing of revenue recognition

Goods/services transferred at a point in time $ 60,635 $ 20,904 $ 58,219 $ 11,131 $ 26,895 $ 177,784

Goods/services transferred over time 16,530 104,718 19,596 25,088 15,643 181,575

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

Segment Reporting" for a disaggregation of revenue by geography.

1 unchanged sentence

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.

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.

5 unchanged sentences

Contract liabilities - noncurrent 15,390 13,096 2,294 17.5

The changes in our contract assets and contract liabilities from April 29, 2023 to July 29, 2023 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 29, 2023.

The changes in our contract assets and contract liabilities from April 29, 2023 to October 28, 2023 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 28, 2023.

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

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Foreign currency translation and other ( 457 )

Balance as of July 29, 2023 $ 30,727

Contracts in progress identified as loss contracts as of July 29, 2023 and as of April 29, 2023 were immaterial.

Balance as of October 28, 2023 $ 34,000

Contracts in progress identified as loss contracts as of October 28, 2023 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 three months ended July 29, 2023, we recognized revenue of $ 59,506 related to our contract liabilities as of April 29, 2023.

During the six months ended October 28, 2023, we recognized revenue of $ 77,788 related to our contract liabilities as of April 29, 2023.

Remaining performance obligations

As of July 29, 2023, the aggregate amount of the transaction price allocated to the remaining performance obligations was $ 386,622 .

Remaining performance obligations related to product and service agreements as of July 29, 2023 were $ 323,725 and $ 62,897 , respectively.

As of October 28, 2023, the aggregate amount of the transaction price allocated to the remaining performance obligations was $ 369,879 .

Remaining performance obligations related to product and service agreements as of October 28, 2023 were $ 306,934 and $ 62,945 , respectively.

We expect approximately $ 310,470 of our remaining performance obligations to be recognized over the next 12 months, with the remainder recognized thereafter.

1 unchanged sentence

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 three months ended July 29, 2023 and July 30, 2022 was immaterial.

The amount of revenue recognized associated with performance obligations satisfied in prior years during the six months ended October 28, 2023 and October 29, 2022 was immaterial.

Segment Reporting

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

Three Months Ended

2023 July 30,

Three Months Ended Six Months Ended

2023 October 29,

2022 October 28,

2023 October 29,

Commercial $ 42,453 $ 37,047 $ 89,336 $ 77,165

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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

2023 July 30,

Three Months Ended Six Months Ended

2023 October 29,

2022 October 28,

2023 October 29,

United States $ 178,144 $ 163,142 $ 392,737 $ 312,580

10 unchanged sentences

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 three months ended July 29, 2023 were as follows:

Commercial Transportation Total

Balance as of April 29, 2023 $ 3,198 $ 41 $ 3,239

Foreign currency translation 72 21 93

Balance as of July 29, 2023 $ 3,270 $ 62 $ 3,332

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.

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.

Financing Agreements

1 unchanged sentence

2023 April 29,

ABL credit facility $ — $ —

Prior line of credit — 17,750

ABL credit facility/prior line of credit $ — $ 17,750

Mortgage 14,625 —

1 unchanged sentence

Long-term debt, gross 39,625 17,750

Debt issuance costs ( 4,338 ) —

Debt issuance costs, net ( 948 ) —

Change in fair value of convertible note 17,910 —

6 unchanged sentences

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.

On May 11, 2023 the Company paid all amounts outstanding on the prior credit agreement, and this prior credit agreement was terminated as of

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 July 29, 2023, our borrowing capacity was $ 47,596 , and there were no borrowings outstanding and $ 1,460 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 percent to 3.5 percent over the standard overnight financing rate (SOFR).

As of October 28, 2023, our borrowing capacity was $ 50,611 , there were no borrowings outstanding and there was $ 5,875 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 the Mortgage on the Company's Brookings, South Dakota real estate.

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 percent and 2.0 percent over the Commercial Bank Floating Rate (CBFR).

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).

Convertible Note

On May 11, 2023, we issued $ 25,000 in aggregate principal amount evidenced by the secured Convertible Note due May 11, 2027.

The Convertible Note 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.

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 Investor and any of the Investor’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”).

• 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”).

• 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 the Conversion Failure is cured.

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 Note.

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

Interest is payable in either (i) cash or (ii) in a combination of cash interest and capitalized interest at the option of the Company;

• 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 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.

1 unchanged sentence

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 July 29, 2023.

The annual rate of 9.0 percent was used to calculate the interest accrued as of October 28, 2023, as interest will be paid in cash.

We elected the fair value option to account for the Convertible Note as described in "Note 9.

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We have elected to present the fair value and the accrued interest component separately in the income statement.

Therefore, interest will be recognized and accrued separately in interest expense, with changes in fair value of the 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 quarter ended July 29, 2023 is as follows:

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 six months ended October 28, 2023 are as follows:

Liability Component

(in thousands)

As of May 11, 2023 $ 25,000

Balance as of May 11, 2023 $ 25,000

Redemption of convertible promissory note —

Fair Value Change Recognized 17,910

As of July 29, 2023 $ 32,260

The estimated fair value of the Convertible Note upon issuance date May 11, 2023 and as of July 29, 2023 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.

Balance as of October 28, 2023 $ 42,910

The estimated fair value of the Convertible Note upon its issuance date of May 11, 2023 and as of October 28, 2023 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:

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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 July 29, 2023, we were in compliance with our financial covenants under the Credit Agreement and the Convertible Note.

As of October 28, 2023, we were in compliance with our financial covenants under the Credit Agreement and the Convertible Note.

Debt Issuance Costs

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As part of these financings, we capitalized $ 8,195 in debt issuance costs.

During the first quarter, 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 first quarter, we have amortized $ 328 of debt issuance costs.

The remaining debt issuance costs of $ 4,338 is being amortized over the four-year term of the Credit Facility agreement.

During the six months ended October 28, 2023, 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 six months ended October 28, 2023, we amortized $ 744 of debt issuance costs.

The remaining debt issuance costs of $ 4,098 are being amortized over the three-year term of the Credit Facility agreement.

Fair Value and Future Maturities

As of July 29, 2023 and April 29, 2023, the fair value of long-term debt, gross was $ 47,260 and $ 17,750 , respectively.

The fair value of the Convertible Notes was $ 32,260 as of July 29, 2023.

As of October 28, 2023 and April 29, 2023, the fair value of long-term debt, gross was $ 57,535 and $ 17,750 , respectively.

The fair value of the Convertible Note was $ 42,910 as of October 28, 2023.

Aggregate contractual maturities of debt in future fiscal years are as follows:

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Total senior secured notes and convertible notes $ 39,625

As of July 29, 2023, we had $ 6,114 of bank guarantees or other financial instruments for display installations issued by other banks and secured by restricted cash deposits.

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

Commitments and Contingencies

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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 29, 2023 consisted of the following:

Beginning accrued warranty obligations $ 32,541

Changes in our warranty obligation for the six months ended October 28, 2023 consisted of the following:

Balance as of April 29, 2023 $ 32,541

Warranties issued during the period 7,781

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Changes in accrued warranty obligations for pre-existing warranties during the period, including expirations 700

Ending accrued warranty obligations $ 34,570

Balance as of October 28, 2023 $ 34,813

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 July 29, 2023, we had outstanding letters of credit, bank guarantees and surety bonds in the amount of $ 1,460 , $ 6,114 and $ 40,394 , respectively.

As of October 28, 2023, we had outstanding letters of credit, bank guarantees and surety bonds in the amount of $ 5,875 , $ 558 and $ 40,633 , respectively.

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

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

As of July 29, 2023, we were not aware of any material indemnification claims.

Our effective tax rate for the three months ended July 29, 2023 was a tax rate of 31.7 percent, as compared to an effective tax rate of 15.8 percent for the three months ended July 30, 2022.

The higher tax rate is caused by the fair value adjustment to income that is not taxable.

We operate both domestically and internationally and, as of July 29, 2023, undistributed earnings of our foreign subsidiaries were considered to be reinvested indefinitely.

Additionally, as of July 29, 2023, we had $ 521 of unrecognized tax benefits which would reduce our effective tax rate if recognized.

As of October 28, 2023, we were not aware of any material indemnification claims.

Our effective tax rate for the three and six months ended October 28, 2023 was a tax rate of 64.8 and 37.6 percent, respectively.

Income before tax includes the impacts of the change in the Convertible Note fair value;

however, these changes are not deductible, resulting in the high effective tax rate.

The rates for the three and six months ended October 29, 2022 were skewed by the valuation allowance placed on deferred taxes.

We operate both domestically and internationally and, as of October 28, 2023, undistributed earnings of our foreign subsidiaries were considered to be reinvested indefinitely.

Additionally, as of October 28, 2023, we had $ 527 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 as of July 29, 2023 and April 29, 2023 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 as of October 28, 2023 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.

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Level 1 Level 2 Level 3 Total

Balance as of July 29, 2023

Balance as of October 28, 2023

Cash and cash equivalents $ 64,740 $ — $ — $ 64,740

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US Government sponsored entities — 546 — 546

Derivatives - liability position — ( 542 ) — ( 542 )

$ 72,986 $ 546 $ 42,910 $ 116,442

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and in which any "related person" had, has or will have a direct or indirect material interest.

The policy generally defines a "related person" as a Director, executive officer or beneficial owner of more than five percent of any class of our voting securities and any immediate family member of any of the foregoing persons.

The policy generally defines a "related person"

as a Director, executive officer or beneficial owner of more than five percent of any class of our voting securities and any immediate family member of any of the foregoing persons.

The Audit Committee reviews and, if appropriate, approves related party transactions, including certain transactions which are deemed to be pre-approved under the policy.

On an annual basis, the Audit Committee reviews any previously approved related party transaction that is ongoing.

As reported in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the section entitled “Liquidity and Capital Resources” of Form 10-K, effective on May 11, 2023, the Company entered into the Securities Purchase Agreement with Alta Fox Opportunities Fund, LP (the “Investor”).

Under the Securities Purchase Agreement, the Company sold and issued to the Investor the Convertible Note in exchange for the payment by the Investor to the Company of $ 25,000 .

As reported in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the section entitled “Liquidity and Capital Resources” of our Annual Report on Form 10-K for the fiscal year ended April 29, 2023, effective on May 11, 2023, the Company entered into the Securities Purchase Agreement with Alta Fox Opportunities Fund, LP, as the Holder of the Convertible Note.

Under the Securities Purchase Agreement, the Company sold and issued to the Holder the Convertible Note in exchange for the payment by the Holder to the Company of $ 25,000 .

As of May 11, 2023, and based on Amendment No.

3 to the Schedule 13D filed

by the Investor and its affiliates named therein on May 15, 2023 with the SEC, the Investor and its affiliates beneficially owned 4,768 shares of common stock of the Company, representing 9.99 percent of the Company’s common stock, causing the Investor to be a “related party” of the Company under the Company’s written policy and procedures and the applicable definitions under the Securities Act of 1933.

The Securities Purchase Agreement, the Convertible Note, the Pledge and Security Agreement dated as of May 11, 2023 by and between the Investor and the Company, and the Registration Rights Agreement were approved in advance of their execution by the Company’s Strategy and Financing Review Committee, the members of which include all members of the Company’s Audit Committee.

Since May 11, 2023 the largest aggregate amount outstanding under the Convertible Note was $ 25,475 , consisting of $ 25,000 of principal and $ 475 of interest;

a total of $ 25,475 outstanding;

and, since May 11, 2023;

no payments of principal or interest had been made on the amounts due under the Convertible Note.

The description of the Securities Purchase Agreement, the Convertible Note, the Pledge and Security Agreement dated as of May 11, 2023 by and between the Investor and the Company, the Registration Rights Agreement, and their respective terms set forth in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the section entitled “Liquidity and Capital Resources” was hereby incorporated by reference into this Item 13 of the form 10-K.

3 to the Schedule 13D filed by the Investor and its affiliates named therein on May 15, 2023 with the SEC, the Holder and its affiliates beneficially owned 4,768 shares of common stock of the Company, representing 9.99 percent of the Company’s common stock, causing the Holder to be a “related party” of the Company under the Company’s written policy and procedures and the applicable definitions under the Securities Act of 1933.

The Securities Purchase Agreement, the Convertible Note, the Pledge and Security Agreement dated as of May 11, 2023 by and between the Holder and the Company, and the Registration Rights Agreement were approved in advance of their execution by the Company’s Strategy and Financing Review Committee, the members of which include all members of the Company’s Audit Committee.

Since May 11, 2023 the largest aggregate amount outstanding under the Convertible Note was $ 25,563 , consisting of $ 25,000 of principal and $ 563 of interest for a total of $ 25,563 outstanding.

In the first six months of fiscal 2024, we have made interest payments of $ 563 under the Convertible Note.

The description of the Securities Purchase Agreement, the Convertible Note, the Pledge and Security Agreement and the Registration Rights Agreement dated as of May 11, 2023 by and between the Holder and the Company and their respective terms set forth in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the section entitled “Liquidity and Capital Resources” of the Company's Annual Report on Form 10-K for the fiscal year ended April 29, 2023 is hereby incorporated by reference into this Report.

In addition, the Company is a party to the Standstill and Voting Agreement dated as of March 19, 2023 with Alta Fox Management, LLC and Connor Haley (the “Standstill Agreement”).

The Standstill Agreement is filed as Exhibit 10.13 to Form 10-K.

The Standstill Agreement is filed as Exhibit 10.13 to Company's Annual Report on Form 10-K for the fiscal year ended April 29, 2023.

As described in Amendment No.

3 (“Amendment No.

3”) to the Schedule 13D filed by the Investor and its affiliates named therein on June 9, 2023 with the SEC and based on other information provided by the Investor, the following persons may be deemed to be beneficial owners of the shares of the Company’s common stock owned by the Investor:

3”) to the Schedule 13D filed by the Holder and its affiliates named therein on June 9, 2023 with the SEC and based on other information provided by the Holder, the following persons may be deemed to be beneficial owners of the shares of the Company’s common stock beneficially owned by the Holder:

Alta Fox GenPar, LP, as the general partner of Alta Fox Opportunities Fund, LP;

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Connor Haley, as the sole owner, member and manager of each of Alta Fox Capital Management, LLC and Alta Fox Equity LLC.

On June 7, 2023, the Company received from the Investor written notice of a decrease in the “Percentage Cap” (as such term is defined in the Convertible Note) from 9.99 percent to 4.99 percent which decrease became effective immediately upon the Company’s receipt of such written notice.

The Percentage Cap generally represents the maximum percentage of shares of the Company’s common stock the Investor may own.

On June 7, 2023, the Company received from the Holder written notice of a decrease in the “Percentage Cap” (as such term is defined in the Convertible Note) from 9.99 percent to 4.99 percent which decrease became effective immediately upon the Company’s receipt of such written notice.

The Percentage Cap generally represents the maximum percentage of shares of the Company’s common stock the Holder may own.

Based on Amendment No.

3, the Investor and its affiliates identified in Amendment No.

3 owned 2,293 shares of common stock on June 9, 2023, representing 4.99 percent of the common stock of the Company, meaning the Investor and its affiliates are no longer “related parties” of the Company under the Company’s written policy and procedures and the applicable definitions under the Securities Act of 1933.

3, the Holder and its affiliates identified in Amendment No.

3 owned 2,293 shares of common stock on June 9, 2023, representing 4.99 percent of the common stock of the Company, meaning the Holder and its affiliates are no longer “related parties” of the Company under the Company’s written policy and procedures and the applicable definitions under the Securities Act of 1933.

During the first quarter of fiscal 2024, the Company and South Dakota Board of Regents entered into a contract for video display systems for Dakota State University.

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A member of the Company's Board of Directors is the President of Dakota State University.

See Note 2 for further details of related party transactions with our Investments in affiliates.

See Note 2 for further details of related party transactions with our investments in the affiliates Notes issued by our affiliates.

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