What changed in this filing

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Item 1. Financial Statements

2024-12-04 compared with 2024-09-04 · 197 added, 106 removed, 435 unchanged (41% of the section changed)

47 unchanged sentences

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

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

48,810 and 48,121 shares issued as of October 26, 2024 and April 27, 2024, respectively

70,282 65,525

1 unchanged sentence

Retained earnings 154,491 138,031

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

Treasury Stock, at cost, 1,907 shares as of October 26, 2024 and April 27, 2024, respectively

( 10,285 ) ( 10,285 )

7 unchanged sentences

(in thousands, except per share data)

Three Months Ended

2024 July 29,

Three Months Ended Six Months Ended

2024 October 28,

2023 October 26,

2024 October 28,

Net sales $ 208,331 $ 199,369 $ 434,419 $ 431,900

13 unchanged sentences

Income tax expense 3,777 3,992 8,943 12,892

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

Net income $ 21,406 $ 2,165 $ 16,460 $ 21,361

Weighted average shares outstanding:

1 unchanged sentence

Diluted 51,715 46,705 47,507 46,454

Earnings (loss) per share:

Earnings per share:

Basic $ 0.46 $ 0.05 $ 0.35 $ 0.47

3 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

Three Months Ended

2024 July 29,

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

Three Months Ended Six Months Ended

2024 October 28,

2023 October 26,

2024 October 28,

Net income $ 21,406 $ 2,165 $ 16,460 $ 21,361

Other comprehensive income (loss):

2 unchanged sentences

Total other comprehensive income (loss), net of tax 334 ( 1,181 ) 462 ( 1,426 )

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

Comprehensive income $ 21,740 $ 984 $ 16,922 $ 19,935

See notes to condensed consolidated financial statements.

12 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 — — — 21,406 — — — 21,406

Cumulative translation adjustments — — — — — — 314 314

Unrealized gain on available-for-sale securities, net of tax — — — — — — 20 20

Share-based compensation — — 530 — — — — 530

Common stock issued upon vesting of Restricted Stock Units 141 — — — — — — —

Exercise of stock options 183 1,040 — — — — — 1,040

Shares withheld for taxes on Restricted Stock Unit issuances ( 37 ) — ( 591 ) — — — — ( 591 )

Balance as of October 26, 2024 48,810 $ 70,282 $ 52,505 $ 154,491 ( 1,907 ) $ ( 10,285 ) $ ( 6,063 ) $ 260,930

See notes to condensed consolidated financial statements.

13 unchanged sentences

Balance as of July 29, 2023 47,618 $ 63,684 $ 50,816 $ 122,606 ( 1,907 ) $ ( 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 161 959 — — — — — 959

Shares withheld for taxes on Restricted Stock Unit issuances ( 37 ) — ( 303 ) — — — — ( 303 )

Common stock issued upon vesting of Restricted Stock Units 188 — — — — — — —

Balance as of October 28, 2023 47,930 $ 64,643 $ 51,047 $ 124,771 ( 1,907 ) $ ( 10,285 ) $ ( 6,955 ) $ 223,221

See notes to condensed consolidated financial statements.

3 unchanged sentences

(in thousands)

Three Months Ended

2024 July 29,

Six Months Ended

2024 October 28,

CASH FLOWS FROM OPERATING ACTIVITIES:

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

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

Net income $ 16,460 $ 21,361

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 9,794 9,494

2 unchanged sentences

Equity in loss of affiliates 1,832 1,461

Provision for doubtful accounts, net 265 ( 65 )

(Recoveries of) provision for doubtful accounts, net ( 152 ) 240

Deferred income taxes, net 13 20

7 unchanged sentences

Proceeds from sales of property, equipment and other assets 124 52

Proceeds from sales or maturities of marketable securities — —

Purchases of equity and loans to equity investees ( 2,041 ) ( 2,899 )

6 unchanged sentences

Proceeds from exercise of stock options 4,188 1,005

Tax payments related to RSU issuances ( 591 ) ( 303 )

Net cash provided by financing activities 2,033 15,919

13 unchanged sentences

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollar amounts in thousands, except per share data)

(dollar and share amounts in thousands, except per share data)

Basis of Presentation

14 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 27, 2024 and July 29, 2023 contained operating results for 13 weeks.

The six months ended October 26, 2024 and October 28, 2023 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 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 July 29,

2024 October 28,

2023 April 27,

4 unchanged sentences

These accounts are impacted by changes in foreign currency rates.

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.

Of our $ 134,352 in cash and cash equivalent balances as of October 26, 2024, $ 123,981 were denominated in United States dollars, of which $ 5,947 were held by our foreign subsidiaries.

As of October 26, 2024, we had an additional $ 10,371 in cash balances denominated in foreign currencies, of which $ 9,495 were maintained in accounts of our foreign subsidiaries.

Recent Accounting Pronouncements

Accounting Standards Adopted

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

There are no significant Accounting Standard Updates ("ASU") issued that were adopted in the six months ended October 26, 2024.

Accounting Standards Not Yet Adopted

10 unchanged sentences

We are currently evaluating the impact of ASU 2023-09 on our income tax disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) ("ASU 2024-03"), requiring disclosure in the notes to the financial statements for specified information about certain costs and expenses.

ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027;

however early adoption is permitted and can be applied either prospectively or retrospectively.

We are currently evaluating the impact of ASU 2024-03 on our expense disaggregation disclosures.

Investments in Affiliates

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.

Our ownership in Miortech was 55.9 percent and in XDC was 16.4 percent as of October 26, 2024.

The aggregate amount of our investments accounted for under the equity method was $ 257 and $ 1,813 as of October 26, 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 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.

Therefore, as Daktronics does not have control, but is able to exercise significant influence, the investments in Miortech and XDC are accounted for under the equity method.

Our proportional share of the respective affiliates' 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 six months ended October 26, 2024, our share of the losses of our affiliates was $ 901 and $ 1,832 as compared to $ 771 and $ 1,461 for the three and six months ended October 28, 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.

There were no impairments recorded during the three and six months ended October 26, 2024 compared to an impairments of $ 212 and $ 654 during the three and six months ended October 28, 2023.

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 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.

The total of these related party transactions for the six months ended October 26, 2024 and October 28, 2023 was $ 497 and $ 123 , respectively, which is included in the "Product design and development" line item in our condensed consolidated statements of operations.

A portion of our activities remain unpaid those amounts were $ 134 and $ 14 for the six months ended

October 26, 2024 and October 28, 2023, respectively, which is included in the "Accounts payable" line item in our condensed consolidated balance sheets.

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

We advanced $ 2,049 in the six months ended October 26, 2024 and $ 5,050 in fiscal year 2024 under the Affiliate Notes.

The total outstanding amount of the Affiliate Notes was $ 16,396 and $ 14,241 as of October 26, 2024 and April 27, 2024, respectively.

The balances of the 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.

As of October 26, 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 $ 16,653 and $ 16,054 as of October 26, 2024 and April 27, 2024, respectively.

Earnings Per Share ("EPS")

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.

We follow the provisions of Accounting Standards Codification 260, Earnings Per Share ("ASC 260"), 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,

The following is a reconciliation of the net income and common share amounts used in the calculation of basic and diluted EPS for the three and six months ended October 26, 2024 and October 28, 2023:

Three Months Ended Six Months Ended

2024 October 28,

2023 October 26,

2024 October 28,

Earnings per share - basic

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

Net income $ 21,406 $ 2,165 $ 16,460 $ 21,361

Weighted average shares outstanding 46,796 46,030 46,576 45,838

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

Basic earnings per share $ 0.46 $ 0.05 $ 0.35 $ 0.47

Earnings per share - diluted

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

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

Net income $ 21,406 $ 2,165 $ 16,460 $ 21,361

Change in fair value of convertible note ( 10,304 ) — — —

Interest expense on convertible note, net of tax 418 — — —

Diluted net income $ 11,520 $ 2,165 $ 16,460 $ 21,361

Weighted average common shares outstanding 46,796 46,030 46,576 45,838

2 unchanged sentences

Weighted average common shares outstanding, assuming dilution 51,715 46,705 47,507 46,454

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

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.

Diluted earnings per share $ 0.22 $ 0.05 $ 0.35 $ 0.46

Options outstanding to purchase 51 and 521 shares of common stock with a weighted average exercise price of $ 10.44 and $ 10.76 for the three months ended October 26, 2024 and October 28, 2023, respectively, were not included in the computation of diluted EPS because the effects would be anti-dilutive.

Options outstanding to purchase 114 shares of common stock with a weighted average exercise price of $ 12.10 for the six months ended October 26, 2024 and 1,039 shares of common stock with a weighted average exercise price of $ 9.53 for the six months ended October 28, 2023 were excluded from the computation of diluted EPS because the effects would be anti-dilutive.

During the three months ended October 26, 2024, 4,037 potential 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 issued by the Company to Alta Fox Opportunities Fund, LP (the "Convertible Note"), were included in the computation of diluted EPS.

For the six months ended October 26, 2024, 4,037 potential common shares issuable upon conversion of the Convertible Note were not included in the computation of diluted EPS, as the effect would be anti-dilutive.

During the three and six months ended October 28, 2023, 4,051 and 3,806 , respectively, potential shares of common stock issuable upon conversion of the Convertible Note were not included in the computation of diluted EPS, as the effect would be anti-dilutive.

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 July 27, 2024

Three Months Ended October 26, 2024

Commercial Live Events High School

10 unchanged sentences

$ 43,439 $ 77,207 $ 48,071 $ 21,478 $ 18,136 $ 208,331

Three Months Ended July 29, 2023

Six Months Ended October 26, 2024

Commercial Live Events High School

10 unchanged sentences

$ 77,638 $ 185,815 $ 96,077 $ 43,968 $ 30,921 $ 434,419

Three Months Ended October 28, 2023

Commercial Live Events High School

Park and Recreation

Transportation International Total

Type of performance obligation

Unique configuration $ 9,511 $ 47,496 $ 11,539 $ 11,047 $ 9,993 $ 89,586

Limited configuration 28,752 13,771 36,277 8,469 7,302 94,571

Service and other 4,190 6,943 1,126 727 2,226 15,212

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

Timing of revenue recognition

Goods/services transferred at a point in time $ 29,379 $ 15,390 $ 34,722 $ 8,592 $ 7,919 $ 96,002

Goods/services transferred over time 13,074 52,820 14,220 11,651 11,602 103,367

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

Six Months Ended October 28, 2023

Commercial Live Events High School

Park and Recreation

Transportation International Total

Type of performance obligation

Unique configuration $ 22,429 $ 124,043 $ 26,658 $ 23,631 $ 18,783 $ 215,544

Limited configuration 58,665 23,732 76,614 16,536 12,541 188,088

Service and other 8,242 12,434 1,904 1,445 4,243 28,268

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

Timing of revenue recognition

Goods/services transferred at a point in time $ 60,397 $ 26,167 $ 73,803 $ 16,859 $ 13,762 $ 190,988

Goods/services transferred over time 28,939 134,042 31,373 24,753 21,805 240,912

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

Segment Reporting" for a disaggregation of revenue by geography.

9 unchanged sentences

Contract liabilities - noncurrent 18,330 16,342 1,988 12.2

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.

The changes in our contract assets and contract liabilities from April 27, 2024 to October 26, 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 six months ended October 26, 2024.

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

Earned and unearned revenues for these contracts are included in the "Contract assets" and "Contract liabilities" line items of our condensed consolidated balance sheets.

Earned and unearned revenues for these contracts are included in the "Contract assets" and

"Contract liabilities" line items of our condensed consolidated balance sheets.

Changes in unearned service-type warranty contracts, net were as follows:

3 unchanged sentences

Foreign currency translation and other ( 142 )

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.

Balance as of October 26, 2024 $ 36,287

Contracts in progress identified as loss contracts as of October 26, 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 three months ended July 27, 2024, we recognized revenue of $ 39,918 related to our contract liabilities as of April 27, 2024.

During the six months ended October 26, 2024, we recognized revenue of $ 52,024 related to our contract liabilities as of April 27, 2024.

Remaining performance obligations

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.

As of October 26, 2024, the aggregate amount of the transaction price allocated to the remaining performance obligations was $ 301,525 .

Remaining performance obligations related to product and service agreements as of October 26, 2024 were $ 235,982 and $ 65,543 , respectively.

We expect approximately $ 240,423 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 27, 2024 and July 29, 2023 was immaterial.

The amount of revenue recognized associated with performance obligations satisfied in prior years during the six months ended October 26, 2024 and October 28, 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

2024 July 29,

Three Months Ended Six Months Ended

2024 October 28,

2023 October 26,

2024 October 28,

Commercial $ 43,439 $ 42,453 $ 77,638 $ 89,336

32 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

2024 July 29,

Three Months Ended Six Months Ended

2024 October 28,

2023 October 26,

2024 October 28,

United States $ 184,438 $ 178,144 $ 391,657 $ 392,737

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 three months ended July 27, 2024 were as follows:

The changes in the carrying amount of goodwill related to each segment with a goodwill balance for the six months ended October 26, 2024 were as follows:

Commercial Transportation Total

1 unchanged sentence

Foreign currency translation ( 25 ) ( 7 ) ( 32 )

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

Balance as of October 26, 2024 $ 3,163 $ 31 $ 3,194

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.

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

Accumulated impairments to goodwill as of October 26, 2024 and April 27, 2024 was $ 4,576 .

Financing Agreements

12 unchanged sentences

Under the ABL, certain factors can impact our borrowing capacity.

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.

As of October 26, 2024, our borrowing capacity was $ 40,758 , there were no borrowings outstanding, and there was $ 5,363 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).

1 unchanged sentence

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 Delayed Draw Loan is subject to the terms of the Credit Agreement dated as of May 11, 2023 (the "Credit Agreement") and matures on May 11, 2026.

The interest rate on the Delayed Draw Loan is set on a sliding scale based on the trailing 12-month fixed charge coverage ratio and ranges between 1.0 and 2.0 percent over the Commercial Bank Floating Rate (CBFR).

The interest rate as of July 27, 2024 for Delayed Draw Loan was 9.5 percent.

The interest rate as of October 26, 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 (the "Convertible Note") due May 11, 2027.

On May 11, 2023, we borrowed $ 25,000 in aggregate principal amount evidenced by the secured 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.

10 unchanged sentences

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 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 October 26, 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.

3 unchanged sentences

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 three months ended July 27, 2024 are as follows:

The changes in fair value of the Convertible Note during the six months ended October 26, 2024 are as follows:

Liability Component

3 unchanged sentences

Fair value change recognized 11,286

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:

Balance as of October 26, 2024 $ 52,836

The estimated fair value of the Convertible Note upon its issuance date of May 11, 2023 was computed using the binomial lattice model.

Given the appreciation of the Company’s stock price since inception of the Convertible Note combined with our intent and expectation of settlement as soon as is feasible through exercise of its forced conversion right, we determined that the Monte Carlo simulation ("MCS") model was appropriately suited to determine the fair value of the Convertible Note as of October 26, 2024.

Both models incorporate 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 MCS and binomial lattice model as of October 26, 2024 and April 27, 2024, respectively:

2024 April 27,

Risk-Free Rate (Annual) 4.04 % 4.78 %

Implied Yield 15.98 %

Yield 15.81 % 16.28 %

Volatility (Annual) 55.00 % 40.00 %

1 unchanged sentence

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

As of October 26, 2024, we were in compliance with our financial covenants under the Credit Agreement and the Convertible Note.

Debt Issuance Costs

Debt issuance costs incurred and capitalized are amortized on a straight-line basis over the term of the associated debt agreement.

If early principal payments or conversions occur, a proportional amount of unamortized debt issuance costs is expensed.

If early principal payments or conversions occur, a proportional amount of unamortized debt issuance costs are expensed.

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

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.

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 26, 2024 and October 28, 2023, we amortized $ 807 and $ 744 , respectively, of debt issuance costs.

The remaining debt issuance costs of $ 2,484 are being amortized over the remaining two-year term of the Credit Facility.

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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 27, 2024 consisted of the following:

Changes in our warranty obligation for the six months ended October 26, 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 132

Balance as of July 27, 2024 $ 38,875

Balance as of October 26, 2024 $ 38,388

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 27, 2024, we had outstanding letters of credit and surety bonds in the amount of $ 5,343 and $ 15,729 , respectively.

As of October 26, 2024, we had outstanding letters of credit and surety bonds in the amount of $ 5,363 and $ 17,567 , respectively.

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

These performance guarantees have various terms but generally have a term of one year .

We enter into written agreements with our customers, and those agreements often contain indemnification provisions that require us to make the customer whole if certain acts or omissions by us cause the customer financial loss.

We enter into written agreements with our customers, and those agreements often contain indemnification provisions that

require us to make the customer whole if certain acts or omissions by us cause the customer financial loss.

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

As of 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.

As of October 26, 2024, we were not aware of any material indemnification claims.

Our effective tax rates for the three and six months ended October 26, 2024, were 15.0 percent and 35.2 percent, respectively.

Income before tax includes the impacts of the Convertible Note fair value adjustment, which is not deductible, in proportion to the period's increase in pre-tax income.

The effective tax rate for the three and six months ended October 28, 2023 were 64.8 percent and 37.6 percent, respectively, and were driven by the increase in the fair value adjustment to expense.

We operate both domestically and internationally and, as of October 26, 2024, the undistributed earnings of our foreign subsidiaries were considered to be reinvested indefinitely.

Additionally, as of October 26, 2024, we had $ 492 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 27, 2024 and April 27, 2024 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 26, 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 July 27, 2024

Balance as of October 26, 2024

Cash and cash equivalents $ 134,352 $ — $ — $ 134,352

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We elected to value the Convertible Note at fair value in accordance with ASC 825-10-15-4(a) because of the embedded derivatives contained in the Convertible Note.

The fair value of the Convertible Note was estimated using a binomial lattice model.

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 as of April 27, 2024 was estimated using the binomial lattice model.

The fair value of the Convertible Note as of October 26, 2024 was estimated using the MCS.

Both models allow 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 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.

For additional information, see our Annual Report on Form 10-K for the fiscal year ended April 27, 2024 for the methods and assumptions used to estimate the fair value of each class of financial instrument.

Financing Agreements" for the methods and assumptions used to estimate the fair value.

Share Repurchase Program

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

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

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

In April 2020, the Board had suspended the program.

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

During the six months ended October 26, 2024, we repurchased no shares of common stock.

As of October 26, 2024, we had $ 29,355 of remaining capacity under our current share repurchase program.

Related Party Transactions

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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 three months of fiscal 2025, we have made interest payments of $ 375 under the Convertible Note.

In the first six months of fiscal 2025, we made interest payments of $ 1,125 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.

In addition, the Company was 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, which expired in accordance with its terms on September 5, 2024.

As described in Amendment No.

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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 Holder a 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, and on October 21, 2024, the Company received from the Holder a written notice to further decrease the Percentage Cap to 3.00 percent, and on November 25, 2024, the Company received from the Holder a written notice to increase the Percentage Cap to 14.99 percent.

Each decrease became

effective immediately upon the Company’s receipt of such written notice and any increase becomes effective 61 days after 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.

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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 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.

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 the were 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.

However, according to information provided by the Holder to the Company in November 2024, the Holder owns 1,923 shares of the Company’s common stock.

With these shares, along with the 3,962 shares subject to the Convertible Note, the Holder beneficially owns 11.15 percent of the Company’s common stock.

This percentage assumes all of the shares subject to the Convertible Note are outstanding and thus are added to the denominator in determining the percentage.

Thus, the Holder is again subject to the Company’s policy and procedures with respect to related party transactions administered by the Audit Committee.

During the first six 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 .

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Investments in Affiliates" for further details of related party transactions with our investments in the Affiliate Notes issued by our affiliates.

Subsequent Events

On November 11, 2024, the Company issued notice to the Holder to force the conversion of $ 7.0 million of the principal balance on December 3, 2024 of the Convertible Note at the conversion price of $ 6.31 per share into 1,109 common shares.

We will issue the shares upon the Holder’s indicating the ability to take delivery of the shares under the maximum ownership provisions of the Convertible Note.

In addition, on November 25, 2024, the Company received from the Holder a written notice to increase the Percentage Cap to 14.99 percent.

This increase from the in-effect 3.00 percent maximum ownership takes effect 61 days after receipt of notice.

See "Note 12.

Related Party Transactions" and "Note 7.

Financing Agreements" for further information of the Convertible Note.

Effective on November 19, 2024, the Board approved a Second Amendment to Rights Agreement, dated as of November 19, 2024 (the "Second Amendment ").

The Second Amendment amends the Rights Agreements dated as of November 16, 2018 (the "Original Rights Agreement") between the Company and the Rights Agent, as amended by the First Amendment to Rights Agreement, dated as of November 19, 2021 (the "First Amendment," and collectively with the Original Right Agreement and the Second Amendment, the "Rights Agreement").

The Second Amendment extends the “Final Expiration Date” (as that term is defined in the Rights Agreement) of the rights (the “Rights”) from the close of business on November 19, 2024 to the close of business on November 19, 2025.

The Second Amendment also changes the “Exercise Price” (as that term is defined in the Rights Agreement) to $ 40.00 per Right.The Second Amendment provides for the addition of the defined terms “Triggering Percentage,” which is defined to mean 15.00 percent, and “13G Triggering Percentage,” which is defined to mean 20.00 percent.

The terms of the Rights are more fully described in Item 1.01 of the Company's Current Report 8-K filed with the Securities and Exchange Commission on November 19, 2024, including the First Amendment filed as Exhibit 4.3 to such Current Report on Form 8-K.

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