DAKTRONICS INC /SD/ 10-Q

Item 1. FINANCIAL STATEMENTS DAKTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) (unaudited) January 25, 2025 April 27, 2024 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 132,169 $ 81,299 Restricted cash — 379 Accounts receivable, net 95,523 117,186 Inventories 112,699 138,008 Contract assets 39,867 55,800 Current maturities of long-term receivables 1,780 298 Prepaid expenses and other current assets 7,338 8,531 Income tax receivables 5,038 448 Total current assets 394,414 401,949 Property and equipment, net 73,728 71,752 Long-term receivables, less current maturities 1,780 562 Goodwill 3,086 3,226 Intangibles, net 602 840 Debt issuance costs, net 1,599 2,530 Investment in affiliates and other assets 23,970 21,163 Deferred income taxes 24,977 25,862 TOTAL ASSETS $ 524,156 $ 527,884 1 Table of Contents DAKTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (continued) (in thousands, except per share data) (unaudited) January 25, 2025 April 27, 2024 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 1,500 $ 1,500 Accounts payable 44,627 60,757 Contract liabilities 65,977 65,524 Accrued expenses 37,154 43,028 Warranty obligations 12,966 16,540 Income taxes payable 214 4,947 Total current liabilities 162,438 192,296 Long-term warranty obligations 23,306 21,388 Long-term contract liabilities 18,056 16,342 Other long-term obligations 6,909 5,759 Long-term debt, net 41,019 53,164 Deferred income taxes 137 143 Total long-term liabilities 89,427 96,796 SHAREHOLDERS' EQUITY: Preferred Shares, no par value, authorized 50 shares; no shares issued and outstanding — — Common Stock, no par value, authorized 115,000 shares; 49,006 and 48,121 shares issued as of January 25, 2025 and April 27, 2024, respectively 71,774 65,525 Additional paid-in capital 89,875 52,046 Retained earnings 137,335 138,031 Treasury Stock, at cost, 2,443 and 1,907 shares as of January 25, 2025 and April 27, 2024, respectively ( 19,301 ) ( 10,285 ) Accumulated other comprehensive loss ( 7,392 ) ( 6,525 ) TOTAL SHAREHOLDERS' EQUITY 272,291 238,792 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 524,156 $ 527,884 See notes to Condensed Consolidated Financial Statements. 2 Table of Contents DAKTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) Three Months Ended Nine Months Ended January 25, 2025 January 27, 2024 January 25, 2025 January 27, 2024 Net sales $ 149,507 $ 170,303 $ 583,926 $ 602,203 Cost of sales 112,726 128,585 431,584 435,139 Gross profit 36,781 41,718 152,342 167,064 Operating expenses: Selling 14,471 14,258 44,811 41,840 General and administrative 16,498 10,589 43,771 31,077 Product design and development 9,440 8,835 28,902 26,459 40,409 33,682 117,484 99,376 Operating (loss) income ( 3,628 ) 8,036 34,858 67,688 Nonoperating (expense) income: Interest income (expense), net 508 ( 745 ) 710 ( 2,952 ) Change in fair value of convertible note ( 14,083 ) 6,340 ( 25,369 ) ( 11,570 ) Other expense and debt issuance costs write-off, net ( 613 ) ( 1,000 ) ( 2,612 ) ( 6,282 ) (Loss) income before income taxes ( 17,816 ) 12,631 7,587 46,884 Income tax (benefit) expense ( 660 ) 1,889 8,283 14,781 Net (loss) income $ ( 17,156 ) $ 10,742 $ ( 696 ) $ 32,103 Weighted average shares outstanding: Basic 47,764 46,173 46,944 45,975 Diluted 47,764 50,837 46,944 46,608 Earnings per share: Basic $ ( 0.36 ) $ 0.23 $ ( 0.01 ) $ 0.70 Diluted $ ( 0.36 ) $ 0.09 $ ( 0.01 ) $ 0.69 See notes to Condensed Consolidated Financial Statements. 3 Table of Contents DAKTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (in thousands) (unaudited) Three Months Ended Nine Months Ended January 25, 2025 January 27, 2024 January 25, 2025 January 27, 2024 Net (loss) income $ ( 17,156 ) $ 10,742 $ ( 696 ) $ 32,103 Other comprehensive income (loss): Cumulative translation adjustments ( 1,320 ) 1,041 ( 878 ) ( 401 ) Unrealized (loss) gain on available-for-sale securities, net of tax ( 9 ) 7 11 23 Total other comprehensive (loss) income, net of tax ( 1,329 ) 1,048 ( 867 ) ( 378 ) Comprehensive (loss) income $ ( 18,485 ) $ 11,790 $ ( 1,563 ) $ 31,725 See notes to Condensed Consolidated Financial Statements. 4 Table of Contents DAKTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in thousands) (unaudited) Common 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 loss — — — ( 4,946 ) — — — ( 4,946 ) Cumulative translation adjustments — — — — — — 128 128 Share-based compensation — — 520 — — — — 520 Exercise of stock options 331 3,148 — — — — — 3,148 Employee savings plan activity 71 569 — — — — — 569 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 Net loss — — — ( 17,156 ) — — — ( 17,156 ) Cumulative translation adjustments — — — — — — ( 1,320 ) ( 1,320 ) Unrealized loss on available-for-sale securities, net of tax — — — — — — ( 9 ) ( 9 ) Share-based compensation — — 573 — — — — 573 Exercise of stock options 118 868 — — — — — 868 Employee savings plan activity 78 624 — — — — — 624 Treasury stock purchase — — — — ( 536 ) ( 9,016 ) — ( 9,016 ) Settlement of convertible note — — 36,797 — — — — 36,797 Balance as of January 25, 2025 49,006 $ 71,774 $ 89,875 $ 137,335 ( 2,443 ) $ ( 19,301 ) $ ( 7,392 ) $ 272,291 See notes to Condensed Consolidated Financial Statements. 5 Table of Contents DAKTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (continued) (in thousands) (unaudited) Common 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 income — — — 19,196 — — — 19,196 Cumulative translation adjustments — — — — — — ( 252 ) ( 252 ) 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 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 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 23 142 — — — — — 142 Employee savings plan activity 143 586 — — — — — 586 Balance as of January 27, 2024 48,096 $ 65,371 $ 51,554 $ 135,513 ( 1,907 ) $ ( 10,285 ) $ ( 5,907 ) $ 236,246 See notes to Condensed Consolidated Financial Statements. 6 Table of Contents DAKTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Nine Months Ended January 25, 2025 January 27, 2024 CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income $ ( 696 ) $ 32,103 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization 14,707 14,370 (Gain) loss on sale of property, equipment and other assets ( 118 ) 98 Share-based compensation 1,623 1,598 Equity in loss of affiliates 2,594 2,330 (Recoveries of) provision for doubtful accounts, net ( 481 ) 659 Deferred income taxes, net 877 23 Non-cash impairment charges — 1,091 Change in fair value of convertible note 25,369 11,570 Debt issuance costs write-off — 3,353 Change in operating assets and liabilities 30,964 ( 13,406 ) Net cash provided by operating activities 74,839 53,789 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment ( 14,668 ) ( 13,628 ) Proceeds from sales of property, equipment and other assets 212 107 Proceeds from sales or maturities of marketable securities — 550 Purchases of equity and loans to equity investees ( 3,326 ) ( 4,084 ) Net cash used in investing activities ( 17,782 ) ( 17,055 ) CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings on notes payable — 40,485 Payments on notes payable ( 1,733 ) ( 18,500 ) Principal payments on long-term obligations ( 310 ) ( 307 ) Payments for common shares repurchased ( 9,016 ) — Debt issuance costs — ( 6,833 ) Proceeds from exercise of stock options 5,056 1,147 Tax payments related to RSU issuances ( 591 ) ( 303 ) Net cash (used in) provided by financing activities ( 6,594 ) 15,689 EFFECT OF EXCHANGE RATE CHANGES ON CASH 28 80 NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 50,491 52,503 CASH, CASH EQUIVALENTS AND RESTRICTED CASH: Beginning of period 81,678 24,690 End of period $ 132,169 $ 77,193 Supplemental disclosures of cash flow information: Cash paid for: Interest $ 2,657 $ 1,959 Income taxes, net of refunds 16,622 18,185 Supplemental schedule of non-cash investing and financing activities: Purchases of property and equipment included in accounts payable 2,890 1,050 Contributions of common stock under the employee stock purchase plan 1,192 1,201 Settlement of convertible note 36,797 — See notes to Condensed Consolidated Financial Statements. 7 Table of Contents NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollar and share amounts in thousands, except per share data) (unaudited) Note 1. Basis of Presentation Daktronics, Inc. and its subsidiaries (the “Company”, “Daktronics”, “we”, “our”, or “us”) are industry leaders in designing and manufacturing electronic scoreboards, programmable display systems, and large screen video displays for sporting, commercial, and transportation applications. In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments (consisting of normal recurring adjustments) necessary to fairly present our financial position, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, revenues and expenses, and the disclosure of contingent liabilities. Estimates used in the preparation of the unaudited consolidated financial statements include, among others, revenue recognition, future warranty expenses, the fair value of long-term debt, the fair value of investments in affiliates, income tax expenses, and stock-based compensation. Due to the inherent uncertainty involved in making estimates, actual results in future periods may differ from those estimates. Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The balance sheet 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. The financial statements and notes thereto contained in this Quarterly Report on Form 10-Q should be read in conjunction with our financial statements and notes thereto contained in our Annual Report on Form 10-K for the fiscal year ended April 27, 2024, (the "Form 10-K"). The results of operations for the interim periods presented are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year. Daktronics, Inc. operates on a 52- or 53-week fiscal year, with our fiscal year ending on the Saturday closest to April 30 of each year. When April 30 falls on a Wednesday, the fiscal year ends on the preceding Saturday. Within each fiscal year, each quarter is comprised of 13-week periods following the beginning of each fiscal year. In each 53-week fiscal year, an additional week is added to the first quarter, and each of the last three quarters is comprised of a 13-week period. The nine months ended January 25, 2025 and January 27, 2024 contained operating results for 39 weeks. There have been no material changes to our significant accounting policies and estimates as described in the Form 10-K. Cash and cash equivalents and restricted cash The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the totals of the same amounts shown in the Condensed Consolidated Statements of Cash Flows. Restricted cash consists of cash and cash equivalents held in bank deposit accounts to secure certain issuances of foreign bank guarantees. January 25, 2025 January 27, 2024 April 27, 2024 Cash and cash equivalents $ 132,169 $ 76,764 $ 81,299 Restricted cash — 429 379 Total cash, cash equivalents, and restricted cash shown in the Condensed Consolidated Statements of Cash Flows $ 132,169 $ 77,193 $ 81,678 We have foreign currency cash accounts to operate our global business. These accounts are impacted by changes in foreign currency rates. Of our $ 132,169 in cash and cash equivalent balances as of January 25, 2025, $ 117,833 were denominated in United States dollars, of which $ 1,887 were held by our foreign subsidiaries. As of January 25, 2025, we had an additional $ 14,336 in cash balances denominated in foreign currencies, of which $ 12,386 were maintained in accounts of our foreign subsidiaries. 8 Table of Contents Recent Accounting Pronouncements Accounting Standards Adopted There are no significant Accounting Standard Updates ("ASU") issued that were adopted in the nine months ended January 25, 2025. Accounting Standards Not Yet Adopted 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. The Company is required to adopt ASU 2023-07 for its annual reporting in fiscal year 2025 and for interim period reporting beginning in the first quarter of fiscal year 2026 on a retrospective basis. Early adoption is permitted. We are currently evaluating the impact of ASU 2023-07 on our segment disclosures. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures ("ASU 2023-09"). ASU 2023-09 requires the disclosure of specified additional information in its income tax rate reconciliation and to provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 will also require the disaggregation of the disclosures of income taxes paid by federal, state, and foreign taxes, with further disaggregation required for significant individual jurisdictions. The Company is required to adopt this guidance for its annual reporting in fiscal year 2026 on a prospective basis. Early adoption and retroactive application are permitted. We are currently evaluating the impact of ASU 2023-09 on our income tax disclosures. 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 for 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. Note 2. 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 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) ("Mirotech"), which is developing low power outdoor electrowetting technology. As of January 25, 2025, our ownership in Miortech and XDC was 55.9 percent and 16.4 percent, respectively. The aggregate amount of our investments accounted for under the equity method was $ 0 and $ 1,813 as of January 25, 2025 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, 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 nine months ended January 25, 2025, our share of the losses of our affiliates was $ 762 and $ 2,594 as compared to $ 869 and $ 2,330 for the three and nine months ended January 27, 2024. These losses were first applied to the equity balances, and upon the equity balances being reduced to zero, the losses then reduce the book value of the promissory notes with these entities. For the three and nine months ended January 25, 2025, the amount of losses reduced the book value of the notes by $ 505 and $ 781 , respectively. There was no reduction of the book value of the notes during the three and nine months ended January 27, 2024. We review our investments in affiliates for impairment indicators. There were no impairments recorded during the three and nine months ended January 25, 2025 compared to impairments of $ 437 and $ 1,091 during the three and nine months ended January 27, 2024. 9 Table of Contents 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 25, 2025 and January 27, 2024 was $ 593 and $ 162 , respectively, which is included in the "Product design and development" line item in our Condensed Consolidated Statements of Operations. The portions of our activities that remain unpaid were $ 109 and $ 2 as of the nine months ended January 25, 2025 and January 27, 2024, respectively, which are 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 $ 3,326 in the nine months ended January 25, 2025, which does not include the foreign currency translation adjustment of $ 97 , and $ 5,050 in fiscal year 2024 under the Affiliate Notes. We have accrued interest related to the Affiliate Notes of $ 587 and $ 449 as of January 25, 2025 and April 27, 2024, respectively. The total face value of the outstanding amount of the Affiliate Notes was $ 18,057 and $ 14,241 as of January 25, 2025 and April 27, 2024, respectively. After equity method losses were recorded, the net balances of the Affiliate Notes were $ 17,276 and $ 14,241 as of January 25, 2025 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 January 25, 2025 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 $ 17,276 and $ 16,054 as of January 25, 2025 and April 27, 2024, respectively. Note 3. Earnings Per Share 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 income and common share amounts used in the calculation of basic and diluted EPS for the three and nine months ended January 25, 2025 and January 27, 2024: Three Months Ended Nine Months Ended January 25, 2025 January 27, 2024 January 25, 2025 January 27, 2024 Earnings per share - basic Net (loss) income $ ( 17,156 ) $ 10,742 $ ( 696 ) $ 32,103 Weighted average shares outstanding 47,764 46,173 46,944 45,975 Basic earnings per share $ ( 0.36 ) $ 0.23 $ ( 0.01 ) $ 0.70 Earnings per share - diluted Net (loss) income $ ( 17,156 ) $ 10,742 $ ( 696 ) $ 32,103 Change in fair value of convertible note — ( 6,340 ) — — Interest expense on convertible note, net of tax — 404 — — Diluted net income $ ( 17,156 ) $ 4,806 $ ( 696 ) $ 32,103 Weighted average common shares outstanding 47,764 46,173 46,944 45,975 Dilution associated with stock compensation plans — 627 — 633 Dilution associated with convertible note — 4,037 — — Weighted average common shares outstanding, assuming dilution 47,764 50,837 46,944 46,608 Diluted earnings per share $ ( 0.36 ) $ 0.09 $ ( 0.01 ) $ 0.69 10 Table of Contents During the three months ended January 25, 2025, a total of 934 shares of potential common stock related to stock compensation plans were excluded from the computation of diluted EPS because the effects would be anti-dilutive. The excluded shares include options outstanding to purchase 29 shares of common stock with a weighted average exercise price of $ 11.87 . For the three months ended January 27, 2024, options outstanding to purchase 484 shares of common stock with a weighted average exercise price of $ 10.73 were not included in the computation of diluted EPS because the effects would be anti-dilutive. During the nine months ended January 25, 2025, a total of 992 shares of potential common stock relating to the stock compensation plan were excluded from the computation of diluted EPS because the effects would be anti-dilutive. The excluded shares include options outstanding to purchase 51 shares of common stock with a weighted average exercise price of $ 10.43 . For the nine months ended January 27, 2024, options outstanding to purchase 695 shares of common stock with a weighted average exercise price of $ 10.30 were not included in the computation of diluted EPS because the effects would be anti-dilutive. During the three months ended January 25, 2025, 3,079 potential shares of common stock issuable upon conversion of the senior secured convertible note dated May 11, 2023 issued to Alta Fox Opportunities Fund, LP (the Holder," and collectively with its affiliates, "Alta Fox") during fiscal 2024 (the "Convertible Note") were not included in the computation of diluted EPS, as the effect would be anti-dilutive. The 2,218 common shares attributed to settling a portion of the Convertible Note, but not yet been issued, were weighted for the number of days outstanding from the settlement date and included in the weighted average shares outstanding in the computation of diluted EPS. For the nine months ended January 25, 2025, 3,697 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. The 2,218 common shares attributed to settling a portion of the Convertible Note, but not yet been issued, were weighted for the number of days outstanding from the settlement date and included in the weighted average shares outstanding in the computation of diluted EPS. During the nine months ended January 27, 2024, 3,875 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. Note 4. Revenue Recognition Disaggregation of revenue In accordance with ASC 606-10-50, we disaggregate revenue from contracts with customers by the type of performance obligation and the timing of revenue recognition. We determined that disaggregating revenue in these categories achieves 11 Table of Contents 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 25, 2025 Commercial Live Events High School Park and Recreation Transportation International Total Type of performance obligation Unique configuration $ 7,361 $ 29,934 $ 5,970 $ 11,228 $ 7,494 $ 61,987 Limited configuration 24,997 8,227 20,534 5,974 7,909 67,641 Service and other 5,618 7,911 2,863 1,587 1,900 19,879 $ 37,976 $ 46,072 $ 29,367 $ 18,789 $ 17,303 $ 149,507 Timing of revenue recognition Goods/services transferred at a point in time $ 27,229 $ 11,184 $ 20,384 $ 6,921 $ 8,599 $ 74,317 Goods/services transferred over time 10,747 34,888 8,983 11,868 8,704 75,190 $ 37,976 $ 46,072 $ 29,367 $ 18,789 $ 17,303 $ 149,507 Nine Months Ended January 25, 2025 Commercial Live Events High School Park and Recreation Transportation International Total Type of performance obligation Unique configuration $ 19,129 $ 181,541 $ 24,888 $ 38,810 $ 14,500 $ 278,868 Limited configuration 79,135 28,161 91,928 19,507 27,436 246,167 Service and other 17,350 22,185 8,628 4,440 6,288 58,891 $ 115,614 $ 231,887 $ 125,444 $ 62,757 $ 48,224 $ 583,926 Timing of revenue recognition Goods/services transferred at a point in time $ 87,470 $ 37,101 $ 92,286 $ 22,302 $ 30,659 $ 269,818 Goods/services transferred over time 28,144 194,786 33,158 40,455 17,565 314,108 $ 115,614 $ 231,887 $ 125,444 $ 62,757 $ 48,224 $ 583,926 12 Table of Contents 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 See "Note 5. Segment Reporting" for a disaggregation of revenue by geography. Contract balances Contract assets represent revenue recognized in excess of amounts billed and include unbilled receivables. Unbilled receivables, which represent an unconditional right to payment subject only to the passage of time, are reclassified to accounts receivable when they are billed according to the contract terms. Contract liabilities represent amounts billed to customers in excess of revenue recognized to date. 13 Table of Contents The following table reflects the changes in our contract assets and liabilities: January 25, 2025 April 27, 2024 Dollar Change Percent Change Contract assets $ 39,867 $ 55,800 $ ( 15,933 ) ( 28.6 ) % Contract liabilities - current 65,977 65,524 453 0.7 Contract liabilities - noncurrent 18,056 16,342 1,714 10.5 The changes in our contract assets and contract liabilities from April 27, 2024 to January 25, 2025 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 nine months ended January 25, 2025. For service-type warranty contracts, we allocate revenue to this performance obligation, recognize the revenue over time, and recognize costs as incurred. Earned and unearned revenues for these contracts are included in the "Contract assets" and "Contract liabilities" line items of our Condensed Consolidated Balance Sheets. Changes in unearned service-type warranty contracts, net for the nine months ended January 25, 2025 were as follows: January 25, 2025 Balance as of April 27, 2024 $ 32,159 New contracts sold 41,295 Less: reductions for revenue recognized ( 37,687 ) Foreign currency translation and other ( 91 ) Balance as of January 25, 2025 $ 35,676 Contracts in progress identified as loss contracts as of January 25, 2025 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 25, 2025, we recognized revenue of $ 58,407 related to our contract liabilities as of April 27, 2024. Remaining performance obligations As of January 25, 2025, the aggregate amount of the transaction price allocated to the remaining performance obligations was $ 338,339 . Remaining performance obligations related to product and service agreements as of January 25, 2025 were $ 273,223 and $ 65,116 , respectively. We expect approximately $ 285,680 of our remaining performance obligations to be recognized over the next 12 months, with the remainder recognized thereafter. Although remaining performance obligations reflect business that is considered to be legally binding, cancellations, deferrals, or scope adjustments may occur. Any known project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations, and project deferrals are reflected or excluded in the remaining performance obligation balance, as appropriate. The amount of revenue recognized associated with performance obligations satisfied in prior years during the nine months ended January 25, 2025 and January 27, 2024 was immaterial. 14 Table of Contents Note 5. Segment Reporting The following table sets forth certain financial information for each of our five reporting segments for the periods indicated: Three Months Ended Nine Months Ended January 25, 2025 January 27, 2024 January 25, 2025 January 27, 2024 Net sales: Commercial $ 37,976 $ 33,292 $ 115,614 $ 122,628 Live Events 46,072 73,393 231,887 233,602 High School Park and Recreation 29,367 28,764 125,444 133,940 Transportation 18,789 19,605 62,757 61,217 International 17,303 15,249 48,224 50,816 149,507 170,303 583,926 602,203 Gross profit: Commercial 9,086 5,546 27,819 25,546 Live Events 8,794 21,102 49,792 68,276 High School Park and Recreation 9,292 8,029 44,412 45,274 Transportation 6,926 6,180 23,347 20,049 International 2,683 861 6,972 7,919 36,781 41,718 152,342 167,064 Operating expenses: Selling 14,471 14,258 44,811 41,840 General and administrative 16,498 10,589 43,771 31,077 Product design and development 9,440 8,835 28,902 26,459 40,409 33,682 117,484 99,376 Operating (loss) income ( 3,628 ) 8,036 34,858 67,688 Nonoperating (expense) income: Interest income (expense), net 508 ( 745 ) 710 ( 2,952 ) Change in fair value of convertible note ( 14,083 ) 6,340 ( 25,369 ) ( 11,570 ) Other expense and debt issuance costs write-off, net ( 613 ) ( 1,000 ) ( 2,612 ) ( 6,282 ) (Loss) Income before income taxes $ ( 17,816 ) $ 12,631 $ 7,587 $ 46,884 Depreciation and amortization: Commercial $ 1,060 $ 1,166 $ 3,217 $ 3,278 Live Events 1,456 1,533 4,297 4,750 High School Park and Recreation 522 508 1,588 1,444 Transportation 203 181 610 523 International 542 563 1,654 1,701 Unallocated corporate depreciation and amortization 1,130 925 3,341 2,674 $ 4,913 $ 4,876 $ 14,707 $ 14,370 15 Table of Contents No single geographic area comprises a material amount of our net sales or property and equipment, net of accumulated depreciation, other than the United States. The following table presents information about net sales and property and equipment, net of accumulated depreciation, in the United States and elsewhere: Three Months Ended Nine Months Ended January 25, 2025 January 27, 2024 January 25, 2025 January 27, 2024 Net sales: United States $ 127,159 $ 152,962 $ 518,816 $ 545,699 Outside United States 22,348 17,341 65,110 56,504 $ 149,507 $ 170,303 $ 583,926 $ 602,203 January 25, 2025 April 27, 2024 Property and equipment, net of accumulated depreciation: United States $ 66,944 $ 64,332 Outside United States 6,784 7,420 $ 73,728 $ 71,752 We have numerous customers worldwide for sales of our products and services, and no customer accounted for 10 percent or more of net sales; therefore, we are not economically dependent on a limited number of customers for the sale of our products and services. We have numerous raw material and component suppliers, and no supplier accounts for 10 percent or more of our cost of sales; however, we have a complex global supply chain subject to geopolitical and transportation risks and a number of single-source suppliers that could limit our supply or cause delays in obtaining raw materials and components needed in manufacturing. Note 6. Goodwill The changes in the carrying amount of goodwill related to each segment with a goodwill balance for the nine months ended January 25, 2025 were as follows: Commercial Transportation Total Balance as of April 27, 2024 $ 3,188 $ 38 $ 3,226 Foreign currency translation ( 109 ) ( 31 ) ( 140 ) Balance as of January 25, 2025 $ 3,079 $ 7 $ 3,086 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 27, 2024 and concluded no goodwill impairment existed. The amount of accumulated impairments to goodwill as of January 25, 2025 and April 27, 2024 was $ 4,576 . Note 7. Financing Agreements Long-term debt consists of the following: 16 Table of Contents January 25, 2025 April 27, 2024 Mortgage $ 12,750 $ 13,875 Convertible note 11,128 25,000 Long-term debt, gross 23,878 38,875 Debt issuance costs, net ( 481 ) ( 761 ) Change in fair value of convertible note 19,122 16,550 Current portion ( 1,500 ) ( 1,500 ) Long-term debt, net $ 41,019 $ 53,164 Credit Agreements On May 11, 2023, we closed on a $ 75,000 senior credit facility (the "Credit Facility"). The Credit Facility consists of a $ 60,000 asset-based revolving credit facility maturing on May 11, 2026 (the "ABL"), 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 25, 2025, our borrowing capacity was $ 33,397 , there were no borrowings outstanding, and there was $ 3,471 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 $ 15,000 Delayed Draw Loan was funded on July 7, 2023. It amortizes over 10 years and has monthly payments of $ 125 . 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 January 25, 2025 for the 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 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. Conversion Features • The Convertible Note allows the Holder and any of the Holder’s permitted transferees, donees, pledgees, assignees, or successors-in-interest (collectively, the “Selling Shareholders”) to convert all or any portion of the principal amount of the Convertible Note, together with any accrued and unpaid interest and any other unpaid amounts, including late charges, if any (together, the “Conversion Amount”), into shares of the Company’s common stock at an initial conversion price of $ 6.31 per share, subject to adjustment in accordance with the terms of the Convertible Note (the “Conversion Price”). • The Company also has a forced conversion right, which is exercisable on the occurrence of certain conditions set forth in the Convertible Note, pursuant to which it can cause all or any portion of the outstanding and unpaid Conversion Amount to be converted into shares of the Company's common stock at the Conversion Price. Additionally, if the Company fails other than by reason of a failure by the Holder to comply with its obligations, the Holder is permitted to cash payments from the Company until such conversion failure is cured. On November 11, 2024, the Company issued notice to the Holder that the Company would force the conversion of $ 7,000 of the principal balance and accrued interest of the Convertible Note on December 3, 2024 at the conversion price of $ 6.31 per share into 1,109 shares of the Company's common stock (the "December Conversion"). On December 11, 2024, the Company issued notice to the Holder that the Company would force the conversion of $ 7,000 of the principal balance and accrued interest of the Convertible Note on January 3, 2025 at the conversion price of $ 6.31 per share into 1,109 shares of the Company's common stock (the "January Conversion"). On January 27, 2025, in accordance with the terms of the 17 Table of Contents Convertible Note, the Company settled $ 14,000 of the principal balance and accrued interest of the Convertible Note in exchange for the issuance of 2,218 shares of the Company's common stock (based on the Conversion Price). On January 10, 2025, the Company issued notice to the Holder that the Company would force the conversion of $ 7,000 of the principal balance and accrued interest of the Convertible Note on February 3, 2025 at the conversion price of $ 6.31 per share into 1,109 shares of the Company's common stock (the "February Conversion"). On February 3, 2025, in accordance with the terms of the Convertible Note, the Company settled the February Conversion. The obligation to issue a fixed number of shares to the Holder was determined to be an equity contract that met the criteria for equity classification under ASC 815-40. See "Note 12. Related Party Transactions" and "Note 13. Subsequent Events" for further information on the Convertible Note. Redemption Features • If the Company were to have an "Event of Default," as defined by the Convertible Note, then the Holder may require the Company to redeem all or any portion of the Convertible Note. • If the Company has a "Change of Control," as defined by the Convertible Note, then the Holder is entitled to payment of the outstanding amount of the Convertible Note at the "Change in Control Redemption Price," as defined in the Convertible Note. Interest Interest accruing under the Convertible Note is payable, at the option of the Company, in either (i) cash or (ii) a combination of cash interest and capitalized interest; provided, however, that at least fifty percent (50%) of the interest paid on each interest date must be paid as cash interest. The Convertible Note accrues interest quarterly at an annual rate of 9.0 percent when interest is paid in cash or an annual rate of 10.0 percent if interest is paid in kind. Upon an Event of Default under the Convertible Note, the annual interest rate will increase to 12.0 percent. The annual rate of 9.0 percent was used to calculate the interest accrued as of January 25, 2025, as interest will be paid in cash. We elected the fair value option to account for the Convertible Note as described in "Note 10. Fair Value Measurement" of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. The financial liability was initially measured at its issue-date fair value and is subsequently remeasured at fair value on a recurring basis at each reporting period date. We have elected to present the fair value and the accrued interest component separately in the Condensed Consolidated Statements of Operations. Therefore, interest will be recognized and accrued separately in interest expense, with changes in fair value of the Convertible Note presented in the "Change in fair value of convertible note" line item in our Condensed Consolidated Statements of Operations. The 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 January 25, 2025. Both models incorporate significant inputs that are not observable in the market and thus represents a Level 3 measurement. The fair value of the two principal tranches of the Convertible Note that were force converted was $ 18,116 and $ 18,681 , resulting in an additional $ 499 in changes in fair value recognized in earnings for the period ended January 25, 2025. Upon conversion, the Company extinguished the debt at its then fair value and recorded the related settlement to equity, reflecting the obligation to deliver 2,218 shares of the Company's common stock to the Holder. The changes in fair value of the Convertible Note during the nine months ended January 25, 2025 are as follows: Liability Component (in thousands) Balance as of April 27, 2024 $ 41,550 Carrying value of note settled through conversion ( 36,797 ) Fair value change recognized 25,497 Balance as of January 25, 2025 $ 30,250 18 Table of Contents We determined the fair value by using the following key assumptions in the MCS and binomial lattice model as of January 25, 2025 and April 27, 2024, respectively: January 25, 2025 April 27, 2024 Risk-Free Rate (Annual) 4.24 % 4.78 % Yield 15.79 % 16.28 % Volatility (Annual) 40.00 % 40.00 % Dividend Yield (Annual) — % — % The Credit Agreement and the Convertible Note require a fixed charge coverage ratio of greater than 1.1 and include other customary non-financial covenants. As of January 25, 2025, 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 are expensed. As part of these financings, we capitalized $ 8,195 in debt issuance costs. During the nine months ended January 27, 2024, due to the Convertible Note being accounted for at fair value, we expensed $ 3,353 of the related debt issuance costs, which is included in the "Other expense and debt issuance costs write-off, net" line item in our Condensed Consolidated Statements of Operations and represented the full amount of such costs related to the Convertible Note. During the nine months ended January 25, 2025 and January 27, 2024, we amortized $ 1,211 and $ 1,148 , respectively, of debt issuance costs. The remaining debt issuance costs of $ 2,080 are being amortized over the remaining two-year term of the Credit Facility. Future Maturities Aggregate contractual maturities of debt in future fiscal years are as follows: Fiscal years ending Amount Remainder of 2025 $ 375 2026 1,500 2027 10,875 2028 11,128 2029 — Total debt $ 23,878 Note 8. Commitments and Contingencies Litigation: We are a party to legal proceedings and claims which arise during the ordinary course of business. We review our legal proceedings and claims, regulatory reviews and inspections, and other legal matters on an ongoing basis and follow appropriate accounting guidance when making accrual and disclosure decisions. We establish accruals for those contingencies when the incurrence of a loss is probable and can be reasonably estimated, and we disclose the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued if such disclosure is necessary for our financial statements to not be misleading. We do not record an accrual when the likelihood of loss being incurred is probable, but the amount cannot be reasonably estimated, or when the loss is believed to be only reasonably possible or remote, although disclosures will be made for material matters as required by ASC 450-20, Contingencies - Loss Contingencies . Our assessment of whether a loss is reasonably possible or probable is based on our assessment and consultation with legal counsel regarding the ultimate outcome of the matter following all appeals. See also “Note 13. Subsequent Events” for a description of litigation filed against the Company after the end of our third quarter of fiscal 2025. 19 Table of Contents For other unresolved legal proceedings or claims, we do not believe there is a reasonable probability that any material loss would be incurred. Accordingly, no material accrual or disclosure of a potential range of loss has been made related to these matters. We do not expect the ultimate liability of these unresolved legal proceedings or claims to have a material effect on our financial position, liquidity, or capital resources. Warranties: Changes in our warranty obligation for the nine months ended January 25, 2025 consisted of the following: January 25, 2025 Balance as of April 27, 2024 $ 37,928 Warranties issued during the period 10,796 Settlements made during the period ( 10,719 ) Changes in accrued warranty obligations for pre-existing warranties during the period, including expirations ( 1,733 ) Balance as of January 25, 2025 $ 36,272 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 25, 2025, we had outstanding letters of credit and surety bonds in the amount of $ 3,471 and $ 20,381 , respectively. Performance guarantees are issued to certain customers to guarantee the operation and installation of the equipment and our ability to complete a contract. These performance guarantees have various terms but generally have a term of one year . We enter into written agreements with our customers, and those agreements often contain indemnification provisions that require us to make the customer whole if certain acts or omissions by us cause the customer financial loss. We make efforts to negotiate reasonable caps and limitations on the recovery of such damages. As of January 25, 2025, we were not aware of any material indemnification claims. Note 9. Income Taxes Our effective tax rates for the three and nine months ended January 25, 2025 were 3.7 percent and 109.2 percent, respectively. Income before tax includes the tax impacts of the Convertible Note fair value adjustment, which is not deductible, in proportion to the period's decrease in pre-tax income. The effective tax rate for the three and nine months ended January 27, 2024 were 15.0 percent and 31.5 percent, respectively, and were driven by the decrease in the fair value adjustment to expense. We operate both domestically and internationally and, as of January 25, 2025, the undistributed earnings of our foreign subsidiaries were considered to be reinvested indefinitely. Additionally, as of January 25, 2025, we had $ 440 of unrecognized tax benefits which would reduce our effective tax rate if recognized. 20 Table of Contents Note 10. Fair Value Measurement The following table sets forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis as of January 25, 2025 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. Fair Value Measurements Level 1 Level 2 Level 3 Total Balance as of January 25, 2025 Cash and cash equivalents $ 132,169 $ — $ — $ 132,169 Restricted cash — — — — Convertible note — — ( 30,250 ) ( 30,250 ) $ 132,169 $ — $ ( 30,250 ) $ 101,919 Balance as of April 27, 2024 Cash and cash equivalents $ 81,299 $ — $ — $ 81,299 Restricted cash 379 — — 379 Convertible note — — ( 41,550 ) ( 41,550 ) $ 81,678 $ — $ ( 41,550 ) $ 40,128 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 as of April 27, 2024 was estimated using the binomial lattice model. The fair value of the Convertible Note as of January 25, 2025 was estimated using the MCS. Both models allow for the examination of the value to a holder and an understanding of 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. See "Note 7. Financing Agreements" and the Form 10-K for additional information on the methods and assumptions used to estimate the fair value of each class of financial instrument. Note 11. Share Repurchase Program On June 17, 2016, our Board of Directors (the "Board" or "Board of Directors") approved a share repurchase program (the "Repurchase Program") under which we may purchase up to $ 40,000 of the Company's outstanding shares of common stock. Under the Repurchase 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 suspended the Repurchase Program. On December 2, 2021, the Board voted to reauthorize the Repurchase Program. During the nine months ended January 25, 2025, we repurchased 536 shares of common stock at a total cost of $ 9,016 . As of January 25, 2025, we had $ 20,339 of remaining capacity under the Repurchase Program. Note 12. Related Party Transactions The Board of Directors has adopted a written policy and procedures with respect to related party transactions, which the Audit Committee of the Board (the "Audit Committee") oversees (the "Policy"). Under the Policy, a "related party transaction" is generally defined as a transaction, arrangement, or relationship in which the Company was, is, or will be a participant; the amount involved exceeds $ 120 ; and in which any "related person" had, has, or will have a direct or indirect material interest. The Policy generally defines a "related person" as a director, executive officer, or beneficial owner of 21 Table of Contents more than five percent of any class of our voting securities and any immediate family member of any of the foregoing persons. The Audit Committee reviews and, if appropriate, approves related party transactions, including certain transactions which are deemed to be pre-approved under the Policy. On an annual basis, the Audit Committee reviews any previously approved related party transaction that is ongoing. Related Party Transactions with Alta Fox: 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 the Form 10-K, effective May 11, 2023, the Company entered into a Securities Purchase Agreement with the Holder under which 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 (the "Securities Purchase Agreement"). As of May 11, 2023, and based on Amendment No. 2 to the Schedule 13D filed by Alta Fox on May 15, 2023 with the Securities and Exchange Commission ("SEC"), Alta Fox beneficially owned 4,768 shares of common stock of the Company, representing 9.99 percent of the Company’s common stock, causing the Holder to be a “related party” of the Company under the Policy and the applicable provisions of the Securities Act of 1933, as amended (the "Securities Act"), and the rules promulgated thereunder. The Securities Purchase Agreement, the Convertible Note, the Pledge and Security Agreement dated as of May 11, 2023 by and between the Holder and the Company (the "Pledge and Security Agreement"), and the Registration Rights Agreement dated as of May 11, 2023 (the "Registration Rights Agreement") were approved in advance of their execution by the Strategy and Financing Review Committee of the Board of Directors, the members of which include all members of the Audit Committee. 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. 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 2025, we made interest payments or settlements of interest through conversions of $ 1,816 under the Convertible Note. The description of the Securities Purchase Agreement, the Convertible Note, the Pledge and Security Agreement, and the Registration Rights Agreement and their respective terms set forth in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the section entitled “Liquidity and Capital Resources” of the Form 10-K. The Standstill Agreement filed as Exhibit 10.13 to the Form 10-K are hereby incorporated by reference into this Quarterly Report on Form 10-Q. As described in Amendment No. 3 (“Amendment No. 3”) to the Schedule 13D filed by Alta Fox on June 9, 2023 with the SEC, and based on other information provided by the Holder, the following persons may be deemed to be beneficial owners of the shares of the Company’s common stock beneficially owned by the Holder: Alta Fox GenPar, LP, as the general partner of Alta Fox Opportunities Fund, LP; Alta Fox Equity, LLC, as the general partner of Alta Fox GenPar, LP; Alta Fox Capital Management, LLC, as the investment manager of Alta Fox Opportunities Fund, LP; and P. 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 from 9.99 percent to 4.99 percent; 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 each increase became 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. In Amendment No. 3, Alta Fox owned 2,293 shares of the Company's common stock on June 9, 2023, representing 4.99 percent of the common stock of the Company, meaning Alta Fox was then no longer a “related party” of the Company under the Policy and the applicable provisions of the Securities Act and the rules promulgated thereunder. However, according to Schedule 13D filed by Alta Fox on December 11, 2024 with the SEC, Alta Fox owns 1,965 shares of the Company’s common stock. With these shares, along with the 4,009 shares subject to the Convertible Note and related interest accrual, Alta Fox beneficially owns 11.79 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, Alta Fox is again subject to the Policy and the applicable provisions of the Securities Act and the rules promulgated thereunder. 22 Table of Contents As stated in “Note 7. Financing Agreements,” the Company effected the December Conversion and January Conversion, resulting in settlement of $ 14,000 of the principal balance and accrued interest of the Convertible Note as of January 25, 2025. Other Related Party Transactions: During the first nine months of fiscal 2024, the Company and the South Dakota Board of Regents entered into contracts for a video display systems for Dakota State University. The amount of the contracts was $ 1,178 . A member of the Board of Directors is the President of Dakota State University. See "Note 2. Investments in Affiliates" for further details of related party transactions with our investments in the Affiliate Notes issued by our affiliates and "Note 13. Subsequent Events" for a discussion of other related party transactions with Alta Fox. Note 13. Subsequent Events Convertible Note. On January 27, 2025, the first trading day after the effective date of the Percentage Cap increase, the Company issued and delivered 2,218 common shares owed under the December Conversion and the January Conversion to the Holder. Alta Fox certified that the delivery of shares would not cause its ownership to exceed the allowable beneficial ownership of 14.99 percent. On January 10, 2025, the Company issued notice to the Holder that the Company would force the conversion of the third tranche of $ 7,000 of the principal balance and accrued interest of the Convertible Note on February 3, 2025 at the conversion price of $ 6.31 per share into 1,109 common shares. Subsequent to the end of the quarter, on February 3, 2025, the 1,109 common shares were issued to the Holder. On February 10, 2025, the Company issued notice to the Holder that the Company would force the conversion of the fourth and final tranche of $ 4,294 on March 4, 2025, representing the remaining principal and interest balance of the Convertible Note. 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. See "Note 12. Related Party Transactions" and "Note 7. Financing Agreements" for further information of the Convertible Note. Cooperation Agreement. On January 21, 2025, Daktronics filed a preliminary proxy statement with the SEC relating to a special meeting of shareholders (the "Special Meeting") to consider and vote on a proposal to change its legal domicile from South Dakota to Delaware (the "Reincorporation Proposal"). On January 31, 2025, the Holder filed a preliminary proxy statement with the SEC disclosing its intention to solicit proxies against the Reincorporation Proposal. On February 6, 2025, the Holder commenced an action in the United States District Court for the District of South Dakota, Southern Division (the “Court”). Named as defendants in the complaint filed in the action (the "Complaint") are the Company and Reece Kurtenbach. The Complaint asserts, among other things, that the defendants breached fiduciary duties in connection with the Reincorporation Proposal and Holder's own claimed intention to call a special meeting of shareholders. The Complaint seeks to preliminarily and permanently enjoin the Defendants from setting a record date and holding a special meeting to vote on the Reincorporation Proposal and from soliciting votes and proxies in connection with that meeting until after the Holder can call for and conduct a special meeting to consider and vote on de-classifying the Board of Directors and other governance changes, and for certain other declaratory and monetary relief. On February 25, 2025, the South Dakota District Court issued a memorandum to counsel indicating its intention to deny Alta Fox's preliminary injunction motion in a forthcoming written opinion and order. On March 3, 2025, the Company entered into a Cooperation Agreement with Alta Fox (the "Cooperation Agreement"). In connection with the Cooperation Agreement, among other things, Alta Fox agreed to dismiss with prejudice all claims against the Company and its directors and/or officers, including its pending litigation against the Company with the Court. Pursuant to the Cooperation Agreement, Alta Fox also agreed to vote all shares of the Company's common stock that it beneficially owns in favor of the Reincorporation Proposal at the Special Meeting. For further information on the Cooperation Agreement, please refer to Item 1.01 of the Current Report on Form 8-K filed with the SEC on March 3, 2025, which is incorporated herein by reference. Expiration of Rights Agreement: Pursuant to the Cooperation Agreement, the Company agreed to amend that certain Rights Agreement, dated as of November 16, 2018, by and between the Company and Equiniti Trust Company, LLC (the “Rights Agent”), as amended on November 19, 2021 and November 19, 2024 (as amended, the “Rights Agreement”) to accelerate its expiration. On March 3, 2025, the Company and the Rights Agent entered into the Third Amendment to Rights Agreement (the “Third Amendment”). The Third Amendment amends the Rights Agreement by accelerating the Final Expiration Date (as defined in the Rights Agreement) of the Company’s Series A Junior Participating Preferred Stock purchase rights (the “Rights”) from the Close of Business (as defined in the Rights Agreement) on November 19, 2025 to the Close of Business on March 3, 2025. As a result of the Third Amendment, effective as of the Close of Business on 23 Table of Contents March 3, 2025, all of the Rights, which were previously distributed to holders of the Company’s common stock pursuant to the Rights Agreement, have expired and cease to be outstanding. For further information on the Third Amendment and the expiration of the Rights Agreement, please refer to Items 1.01 and 3.03 of the Current Report on Form 8-K filed with the SEC on March 3, 2025, which is incorporated herein by reference. 24 Table of Contents