What changed in this filing

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Item 1. Financial Statements

2024-09-04 compared with 2024-02-28 · 116 added, 201 removed, 425 unchanged (43% of the section changed)

8 unchanged sentences

Restricted cash 379 379

Marketable securities — 534

Accounts receivable, net 132,021 117,186

37 unchanged sentences

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

46,189,311 and 45,488,595 shares issued at January 27, 2024 and April 29, 2023, respectively

48,523 and 48,121 shares issued as of July 27, 2024 and April 27, 2024, respectively

69,242 65,525

1 unchanged sentence

Retained earnings 133,085 138,031

Treasury Stock, at cost, 1,907,445 shares at January 27, 2024 and April 29, 2023, respectively

Treasury Stock, at cost, 1,907 shares as of July 27, 2024 and April 27, 2024, respectively

( 10,285 ) ( 10,285 )

7 unchanged sentences

(in thousands, except per share data)

Three Months Ended Nine Months Ended

2024 January 28,

2023 January 27,

2024 January 28,

Three Months Ended

2024 July 29,

Net sales $ 226,088 $ 232,531

5 unchanged sentences

Product design and development 9,623 8,403

Goodwill impairment — 4,576 — 4,576

36,982 30,931

6 unchanged sentences

Income tax expense 5,166 8,900

Net income (loss) $ 10,742 $ 3,713 $ 32,103 $ ( 14,597 )

Net (loss) income $ ( 4,946 ) $ 19,196

Weighted average shares outstanding:

9 unchanged sentences

(in thousands)

Three Months Ended Nine Months Ended

2024 January 28,

2023 January 27,

2024 January 28,

Net income (loss) $ 10,742 $ 3,713 $ 32,103 $ ( 14,597 )

Three Months Ended

2024 July 29,

Net (loss) income $ ( 4,946 ) $ 19,196

Other comprehensive income (loss):

2 unchanged sentences

Total other comprehensive income (loss), net of tax 128 ( 245 )

Comprehensive income (loss) $ 11,790 $ 5,695 $ 31,725 $ ( 14,778 )

Comprehensive (loss) income $ ( 4,818 ) $ 18,951

See notes to condensed consolidated financial statements.

3 unchanged sentences

(in thousands)

Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive

Common Stock Treasury Stock

Number Amount Additional Paid-In Capital Retained Earnings Number Amount Accumulated Other Comprehensive Loss Total

Balance as of April 27, 2024 48,121 $ 65,525 $ 52,046 $ 138,031 ( 1,907 ) $ ( 10,285 ) $ ( 6,525 ) $ 238,792

Net income — — 19,196 — — 19,196

Net loss — — — ( 4,946 ) — — — ( 4,946 )

Cumulative translation adjustments — — — — — — 128 128

Unrealized gain (loss) on available-for-sale securities, net of tax — — — — 7 7

Share-based compensation — — 520 — — — — 520

2 unchanged sentences

Balance as of July 27, 2024 48,523 $ 69,242 $ 52,566 $ 133,085 ( 1,907 ) $ ( 10,285 ) $ ( 6,397 ) $ 238,211

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 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

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 options 142 — — — — 142

Employee savings plan activity 586 — — — — 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.

3 unchanged sentences

(in thousands)

Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive

Common Stock Treasury Stock

Number Amount Additional Paid-In Capital Retained Earnings Number Amount Accumulated Other Comprehensive Loss Total

Balance as of April 29, 2023 47,396 $ 63,023 $ 50,259 $ 103,410 ( 1,907 ) $ ( 10,285 ) $ ( 5,529 ) $ 200,878

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 activity 594 — — — — 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 — — — 19,196 — — — 19,196

Cumulative translation adjustments — — — — — — ( 252 ) ( 252 )

Unrealized gain (loss) on available-for-sale securities, net of tax — — — — 6 6

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

Share-based compensation — — 557 — — — — 557

Exercise of stock options 11 46 — — — — — 46

Employee savings plan activity 211 615 — — — — — 615

Balance as of January 28, 2023 $ 63,002 $ 49,719 $ 82,011 $ ( 10,285 ) $ ( 5,106 ) $ 179,341

Balance as of July 29, 2023 47,618 $ 63,684 $ 50,816 $ 122,606 ( 1,907 ) $ ( 10,285 ) $ ( 5,774 ) $ 221,047

See notes to condensed consolidated financial statements.

3 unchanged sentences

(in thousands)

Nine Months Ended

2024 January 28,

Three Months Ended

2024 July 29,

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:

Net (loss) income $ ( 4,946 ) $ 19,196

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization 4,893 4,669

Loss (gain) on sale of property, equipment and other assets 98 ( 588 )

(Gain) loss on sale of property, equipment and other assets ( 20 ) 11

Share-based compensation 520 557

6 unchanged sentences

Change in operating assets and liabilities ( 3,765 ) ( 16,875 )

Net cash provided by (used in) operating activities 53,789 ( 9,487 )

Net cash provided by operating activities 19,481 19,250

CASH FLOWS FROM INVESTING ACTIVITIES:

10 unchanged sentences

Proceeds from exercise of stock options 3,148 46

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

Net cash provided by financing activities 2,062 16,356

EFFECT OF EXCHANGE RATE CHANGES ON CASH ( 64 ) ( 240 )

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 52,503 ( 7,278 )

NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 15,510 29,660

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

19 unchanged sentences

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.

The balance sheet as of April 27, 2024 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 27, 2024, which are contained in our Annual Report on Form 10-K previously filed with the Securities and Exchange Commission ("SEC").

5 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 nine months ended January 27, 2024 and January 28, 2023 contained operating results for 39 weeks.

The three months ended July 27, 2024 and July 29, 2023 contained operating results for 13 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 27, 2024.

2 unchanged sentences

Restricted cash consists of cash and cash equivalents held in bank deposit accounts to secure certain issuances of foreign bank guarantees.

2024 January 28,

2024 July 29,

2023 April 27,

4 unchanged sentences

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.

Of our $ 96,809 in cash and cash equivalent balances as of July 27, 2024, $ 81,246 were denominated in United States dollars, of which $ 1,649 were held by our foreign subsidiaries.

As of July 27, 2024, we had an additional $ 15,563 in cash balances denominated in foreign currencies, of which $ 10,922 were maintained in accounts of our foreign subsidiaries.

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").

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

There are no significant Accounting Standard Updates ("ASU") issued that were adopted in the three months ended July 27, 2024.

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").

In November 2023, the Financial Accounting Standards Board ("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.

9 unchanged sentences

Investments in Affiliates

We evaluated the nature of our investment in affiliates of Xdisplay TM , 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.

We use the equity method to account for investments in companies if our investment provides us with the ability to exercise significant influence over operating and financial policies of the investee.

Our consolidated net (loss) income includes our Company's proportionate share of the net income or loss of these companies.

Our judgment regarding the level of influence over each equity method investee includes considering key factors such as our ownership interest, representation on the board of directors, participation in policy-making decisions, other commercial arrangements, and material intercompany transactions.

We evaluated the nature of our investment in affiliates of Xdisplay TM ("XDC"), which is developing micro-LED mass transfer expertise and technologies, and Miortech (dba Etulipa), which is developing low power outdoor electrowetting technology.

Our ownership in Miortech was 55.9 percent and in XDC was 16.4 percent as of July 27, 2024.

The aggregate amount of our investments accounted for under the equity method was $ 893 and $ 1,813 as of July 27, 2024 and April 27, 2024, respectively.

We determined both entities are variable interest entities, and based on management's analysis, we determined that Daktronics is not the primary beneficiary because the power criterion was not met;

therefore, the investments in Miortech and XDC are accounted for under the equity method.

Our consolidated net (loss) income includes our Company's proportionate share of the net income or loss of each affiliates.

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.

For the three months ended July 27, 2024, our share of the losses of our affiliates was $ 931 as compared to $ 690 for the three months ended July 29, 2023.

We review our investments in affiliates for impairment indicators.

There were no impairments recorded during three months ended July 27, 2024 compared to an impairment of $ 442 the first quarter of fiscal 2024.

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

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 Xdisplay TM 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.

The total of these related party transactions for the three months ended July 27, 2024 and July 29, 2023 was $ 223 and $ 78 , 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 27, 2024 and July 29, 2023, $ 123 and $ 2 , respectively, remains unpaid and is included in the "Accounts payable" line item in our condensed consolidated balance sheets.

We also have advanced our affiliates convertible and promissory notes (collectively, the "Affiliate Notes").

We advanced $ 958 in the three months ended July 27, 2024 and $ 5,050 in fiscal year 2024 under the Affiliate Notes.

The total outstanding amount of the Affiliate Notes was $ 15,371 and $ 14,241 as of July 27, 2024 and April 27, 2024, respectively.

The balances of Affiliate Notes are included in the "Investments in affiliates and other assets" line item in our condensed consolidated balance sheets.

We evaluate the Affiliate Notes for impairment and credit losses.

As of July 27, 2024 and

April 27, 2024, no provision for losses was recorded as management's analysis concluded the Affiliate Notes were collectable or realizable based on the rights of these instruments and related valuation of each affiliate.

The Affiliate Notes balance combined with the investment in affiliates balance totaled $ 16,264 and $ 16,054 as of July 27, 2024 and April 27, 2024, respectively.

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.

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 Ended Nine Months Ended

2024 January 28,

2023 January 27,

2024 January 28,

We follow the provisions of Accounting Standards Codification ("ASC 260"), Earnings Per Share , where basic earnings per share ("EPS") is computed by dividing income attributable to common shareholders by the weighted average number of common shares outstanding for the period.

Diluted EPS reflects the potential dilution which may occur if securities or other obligations to issue common stock were exercised or converted into shares of common stock or resulted in the issuance of shares of common stock which share in our earnings.

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 27, 2024 and July 29, 2023:

Three Months Ended

2024 July 29,

Earnings per share - basic

Net income (loss) $ 10,742 $ 3,713 $ 32,103 $ ( 14,597 )

Net (loss) income $ ( 4,946 ) $ 19,196

Weighted average shares outstanding 46,311 45,645

1 unchanged sentence

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 tax 404 — — —

Diluted net income (loss) $ 4,806 $ 3,713 $ 32,103 $ ( 14,597 )

Net (loss) income $ ( 4,946 ) $ 19,196

Diluted net (loss) income $ ( 4,946 ) $ 19,196

Weighted average common shares outstanding 46,311 45,645

3 unchanged sentences

Diluted earnings (loss) per share $ ( 0.11 ) $ 0.42

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.

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.

Options outstanding to purchase 161 and 1,326 shares of common stock with a weighted average exercise price of $ 12.52 and $ 8.97 for the three months ended July 27, 2024 and July 29, 2023, respectively, were not included in the computation of diluted earnings per share because the effects would be anti-dilutive.

During the three months ended July 27, 2024 and July 29, 2023, shares of common stock issuable upon conversion of the secured convertible note in the original principal payment of $ 25,000 due on May 11, 2027 (the "Convertible Note") were not included in the computation of diluted EPS, as the effect would be anti-dilutive.

For the three months ended July 27, 2024 and July 29, 2023, 4,037 and 3,549 , respectively, potential common shares related to the convertible note issued by the Company to Alta Fox Opportunities Fund, LP, were excluded from the calculation of diluted EPS.

Revenue Recognition

1 unchanged sentence

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.

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

Commercial Live Events High School

Park and Recreation

Transportation International Total

Type of performance obligation

Unique configuration $ 5,802 $ 57,229 $ 5,021 $ 12,116 $ 6,508 $ 86,676

Limited configuration 22,157 8,395 20,900 5,646 6,702 63,800

Service and other 5,333 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 time 8,931 62,387 7,945 12,731 7,776 99,770

$ 33,292 $ 73,393 $ 28,764 $ 19,605 $ 15,249 $ 170,303

Nine Months Ended January 27, 2024

Commercial Live Events High School

Park and Recreation

Transportation International Total

Type of performance obligation

Unique configuration $ 28,231 $ 181,272 $ 31,679 $ 35,747 $ 25,291 $ 302,220

Limited configuration 80,822 32,127 97,514 22,182 19,243 251,888

Service and other 13,575 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 time 37,870 196,429 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

Three Months Ended July 27, 2024

Commercial Live Events High School

10 unchanged sentences

$ 34,199 $ 108,608 $ 48,006 $ 22,490 $ 12,785 $ 226,088

Nine Months Ended January 28, 2023

Three Months Ended July 29, 2023

Commercial Live Events High School

14 unchanged sentences

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.

Contract liabilities represent amounts billed to customers in excess of revenue recognized to date.

The following table reflects the changes in our contract assets and liabilities:

4 unchanged sentences

Contract liabilities - noncurrent 17,378 16,342 1,036 6.3

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.

The changes in our contract assets and contract liabilities from April 27, 2024 to July 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 no significant impairments of contract assets for the three months ended July 27, 2024.

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

5 unchanged sentences

Foreign currency translation and other ( 485 )

Balance as of January 27, 2024 $ 32,882

Contracts in progress identified as loss contracts as of January 27, 2024 and as of April 29, 2023 were immaterial.

Balance as of July 27, 2024 $ 33,755

Contracts in progress identified as loss contracts as of July 27, 2024 and April 27, 2024 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.

During the three months ended July 27, 2024, we recognized revenue of $ 39,918 related to our contract liabilities as of April 27, 2024.

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.

As of July 27, 2024, the aggregate amount of the transaction price allocated to the remaining performance obligations was $ 332,665 .

Remaining performance obligations related to product and service agreements as of July 27, 2024 were $ 267,207 and $ 65,458 , respectively.

We expect approximately $ 268,362 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 nine months ended January 27, 2024 and January 28, 2023 was immaterial.

The amount of revenue recognized associated with performance obligations satisfied in prior years during the three months ended July 27, 2024 and July 29, 2023 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 Nine Months Ended

2024 January 28,

2023 January 27,

2024 January 28,

Three Months Ended

2024 July 29,

Commercial $ 34,199 $ 46,883

15 unchanged sentences

Product design and development 9,623 8,403

Goodwill impairment — 4,576 — 4,576

36,982 30,931

15 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 Nine Months Ended

2024 January 28,

2023 January 27,

2024 January 28,

Three Months Ended

2024 July 29,

United States $ 207,219 $ 214,593

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 segment with a goodwill balance for the nine months ended January 27, 2024 were as follows:

The changes in the carrying amount of goodwill related to each segment with a goodwill balance for the three months ended July 27, 2024 were as follows:

Commercial Transportation Total

1 unchanged sentence

Foreign currency translation ( 23 ) ( 6 ) ( 29 )

Balance as of January 27, 2024 $ 3,217 $ 46 $ 3,263

Balance as of July 27, 2024 $ 3,165 $ 32 $ 3,197

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.

Accumulated impairments to goodwill as of July 27, 2024 were $ 4,576 .

Financing Agreements

1 unchanged sentence

2024 April 27,

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

Mortgage 13,500 13,875

7 unchanged sentences

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.

The Credit Facility consists of a $ 60,000 asset-based revolving credit facility (the "ABL") maturing on May 11, 2026, which is secured by a first priority lien on the Company's assets, 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").

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.

As of July 27, 2024, our borrowing capacity was $ 38,568 , there were no borrowings outstanding, and there was $ 5,343 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.

The $ 15,000 Delayed Draw Loan was funded on July 7, 2023.

It amortizes over 10 years and has monthly payments of $ 125 .

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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.

The interest rate as of July 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.

On May 11, 2023, we borrowed $ 25,000 in aggregate principal amount evidenced by the secured convertible note (the "Convertible Note") due May 11, 2027.

Alta Fox Opportunities Fund, LP, as the holder (the "Holder") of the Convertible Note 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.

Conversion Features

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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.

The annual rate of 9.0 percent was used to calculate the interest accrued as of July 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.

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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:

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

Liability Component

(in thousands)

Balance as of May 11, 2023 $ 25,000

Balance as of April 27, 2024 $ 41,550

Redemption of convertible promissory note —

Fair value change recognized 21,590

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.

Balance as of July 27, 2024 $ 63,140

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

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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 January 27, 2024, we were in compliance with our financial covenants under the Credit Agreement and the Convertible Note.

As of July 27, 2024, 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 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.

During the three months ended July 29, 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 three months ended July 27, 2024 and July 29, 2023, we amortized $ 403 and $ 328 , respectively, of debt issuance costs.

The remaining debt issuance costs of $ 2,888 are being amortized over the remaining two-year term of the Credit Facility.

Future Maturities

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Remainder of 2025 $ 1,125

2029 and beyond —

Total debt $ 38,500

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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 nine months ended January 27, 2024 consisted of the following:

Changes in our warranty obligation for the three months ended July 27, 2024 consisted of the following:

Balance as of April 27, 2024 $ 37,928

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Changes in accrued warranty obligations for pre-existing warranties during the period, including expirations 449

Balance as of January 27, 2024 $ 34,690

Balance as of July 27, 2024 $ 38,875

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.

As of July 27, 2024, we had outstanding letters of credit and surety bonds in the amount of $ 5,343 and $ 15,729 , 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 January 27, 2024, we were not aware of any material indemnification claims.

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.

As of July 27, 2024, we were not aware of any material indemnification claims.

Our effective tax rate for the first quarter of fiscal 2025 was skewed due to the impact of the fair value in the Convertible Note in proportion to the period's small pre-tax income.

The effective tax rate was 31.7 percent for the three months ended July 29, 2023.

Both periods' income before taxes included the impacts of the change in the Convertible Note fair value adjustment.

These changes are not deductible or taxable, which is the primary driver for each period's effective tax rate.

We operate both domestically and internationally and, as of July 27, 2024, the undistributed earnings of our foreign subsidiaries were considered to be reinvested indefinitely.

Additionally, as of July 27, 2024, we had $ 495 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 January 27, 2024 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 July 27, 2024 and April 27, 2024 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 January 27, 2024

Balance as of July 27, 2024

Cash and cash equivalents $ 96,809 $ — $ — $ 96,809

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Restricted cash 379 — — 379

Available-for-sale securities:

US Government sponsored entities — 534 — 534

Derivatives - liability position — ( 579 ) — ( 579 )

Convertible note — — ( 41,550 ) ( 41,550 )

$ 81,678 $ — $ ( 41,550 ) $ 40,128

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Binomial lattice allows for the examination of the value to a holder and understanding the investment decision that would occur at each node.

The fair value of the Convertible Note entered into during the first quarter of fiscal 2024 was classified as Level 3 because it does not have readily determinable or observable inputs for the valuation.

The fair value of the Convertible Note entered into during the first quarter of fiscal 2024 was classified as Level 3 because certain inputs for the valuation were not readily determinable or observable.

There have been no other changes in the valuation techniques used by us to value our financial instruments since the end of fiscal 2024.

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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 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 (the "Holder") of the Convertible Note.

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 27, 2024, effective on May 11, 2023, the Company entered into the Securities Purchase Agreement with 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 .

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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.

In the first nine months of fiscal 2024, we have made interest payments of $ 1,125 under the Convertible Note.

In the first three months of fiscal 2025, we have made interest payments of $ 375 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 27, 2024 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”), who are affiliates of the Holder.

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.

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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 nine months of fiscal 2024, the Company and the South Dakota Board of Regents entered into contracts for video display systems for Dakota State University.

The amount of the contracts was $ 1,178 .

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

The amount of the contract was $ 150 .

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

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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