DAKTRONICS INC SD

Previous wording

This Quarterly Report on Form 10-Q, including the MD&A, contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect our current views with respect to future events and financial performance. The words "may," "would," "could," "should," "will," "expect," "estimate," "anticipate," "believe," "intend," "plan," "forecast," "project" and similar expressions are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any and all forecasts and projections in this document are “forward-looking statements” and are based on management’s current expectations or beliefs. From time to time, we may also provide oral and written forward-looking statements in other materials we release to the public, such as press releases, presentations to securities analysts or investors, or other communications by us. Any or all forward-looking statements in this report and in any public statements we make could be materially different from actual results. Accordingly, we wish to caution investors that any forward-looking statements made by or on behalf of us are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. Important factors that may cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, the uncertainties related to market conditions and entry into a financing transaction; the Company’s potential need to seek additional strategic alternatives, including seeking additional debt or equity capital or other strategic transactions and/or measures; the Company’s ability to finalize or fully execute actions and steps that would be probable of mitigating the existence of any “substantial doubt” regarding the Company’s ability to continue as a going concern; the Company’s ability to increase cash flow to support the Company’s operating activities and fund its obligations and working capital needs; our ability to obtain additional financing on terms favorable to us, or at all; any future goodwill impairment charges; and the other risk factors described more fully in the Company’s Annual Report on Form 10-K for the fiscal year ended April 27, 2024 filed with the SEC, as well as other publicly available information about the Company.

Current wording

This Quarterly Report on Form 10-Q, including the MD&A, contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect our current views with respect to future events and financial performance. The words "may," "would," "could," "should," "will," "expect," "estimate," "anticipate," "believe," "intend," "plan," "forecast," "project" and similar expressions are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any and all forecasts and projections in this document are “forward-looking statements” and are based on management’s current expectations or beliefs. From time to time, we may also provide oral and written forward-looking statements in other materials we release to the public, such as press releases, presentations to securities analysts or investors, or other communications by us. Any or all forward-looking statements in this report and in any public statements we make could be materially different from actual results. Accordingly, we wish to caution investors that any forward-looking statements made by or on behalf of us are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. Important factors that may cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, changes in economic and market conditions, management of growth, timing and magnitude of future contracts and orders, fluctuations in margins, the introduction of new products and technology, the impact of adverse weather conditions, increased regulation, and the other risk factors described more fully in the Company’s Annual Report on Form 10-K for the fiscal year ended April 27, 2024 filed with the SEC, as well as other publicly available information about the Company.

Previous wording

Our MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes included in Item 1 of Part 1 of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended April 27, 2024 (including the information presented therein under Risk Factors), as well as other publicly available information about our Company.

Current wording

Our MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes included in Item 1 of Part 1 of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended April 27, 2024 (including the information presented therein under "Item 1A. Risk Factors" of Part I), as well as other publicly available information about our Company.

Previous wording

Contribution margin is a non-GAAP measure and consists of gross profit less selling expenses. Selling expenses consist primarily of personnel related costs, travel and entertainment expenses, marketing related expenses (show rooms, product demonstration, depreciation and maintenance, conventions and trade show expenses), the cost of customer relationship management/marketing systems, bad debt expenses, third-party commissions, and other expenses. In addition to gross profit, management uses contribution margin as another measure of assessing segment profitability and allocating selling resources to each segment. Management believes that contribution margin is useful to investors because it permits investors to view and evaluate our segment financial performance through the same lens as management.

Current wording

Contribution margin is a non-GAAP measure we use and consists of gross profit less selling expenses. Selling expenses consist primarily of personnel related costs, travel and entertainment expenses, marketing related expenses (show rooms, product demonstration, depreciation and maintenance, conventions and trade show expenses), the cost of customer relationship management/marketing systems, bad debt expenses, third-party commissions, and other expenses. In addition to gross profit, management uses contribution margin as another measure of assessing segment profitability and allocating selling resources to each segment. Management believes that contribution margin is useful to investors because it permits investors to view and evaluate our segment financial performance through the same lens as management.

Previous wording

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

Current wording

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 six months ended October 26, 2024 and October 28, 2023 contained operating results for 26 weeks.

Previous wording

During fiscal 2024, we converted pandemic related pent-up backlog into record levels of sales and gross profit. In fiscal 2025, we will be more dependent on the timing, size, and profitability profile of the orders we win to be able to generate sales and gross profit levels at similar levels. We are investing in capacity and resources to grow the business and penetrate markets. As a result, we currently expect that our order volume and operating expenses in fiscal 2025 will exceed that of fiscal 2024. While the expansion of use of digital display systems in the global market is expected, actual market increases are uncertain and a number of factors can impact a customers timing to commit to a system. We carefully evaluate the capacity and resource levels, however, there can be periods sales and expenses can be misaligned and impact our sales and profitability levels.

Current wording

During fiscal 2024, we converted pandemic related pent-up backlog into record levels of sales and gross profit. In fiscal 2025 and beyond, we are more dependent on the timing, size, and profitability profile of the orders we win to be able to generate sales and gross profit at similar levels. We are investing in capacity and resources to grow the business and penetrate markets. As a result, we currently expect that our order volume and operating expenses in fiscal 2025 will exceed that of fiscal 2024. While the expansion of use of digital display systems in the global market is expected, actual market increases are uncertain, and a number of factors can impact customers' timing to commit to a system. We carefully evaluate our capacity and resource levels; however, there can be periods during which sales and expenses can be misaligned and impact our profitability levels.

Previous wording

Global investments have been made in manufacturing capacity and advancement in display and control technologies. A majority of digital displays are constructed using standard surface mount display technology. Chip on board technologies are advancing for narrow pixel pitch (NPP) applications. Micro-LED technologies (also referred to as narrow pixel pitch) are being used and advanced, especially for displays installed for short viewing distances. Advancements related to digital displays use continue related to professional services, including the use of artificial intelligence and other software which improve content creation, user interfaces, digital display monitoring systems, and security. We are adopting our manufacturing, sourcing capabilities, and product development priorities for these evolving changes in market and technology trends.

Current wording

Global investments have been made in manufacturing capacity and the advancement in display and control technologies. A majority of digital displays are constructed using standard surface mount display technology. Chip on board technologies are advancing for narrow pixel pitch (NPP) applications. Micro-LED technologies (also referred to as NPP) are being used and advanced, especially for displays installed for short viewing distances. Advancements continue in technologies related to digital displays used in professional services, including the use of artificial intelligence and other software which improve content creation, user interfaces, digital display monitoring systems, and security. We rely on a complex supply chain for raw material and component imports and the global distribution of our products. Governmental regulation changes, including recent announcements from the new US presidential administration about increased and expansive import tariffs and other geopolitical reactions could impact our costs and change the competitive landscape. We continue to monitor the evolving plans. We are adopting our manufacturing, sourcing capabilities, and product development priorities for these evolving changes in market and technology trends.

Previous wording

Overall, we have a unique leadership position in our target markets, which are large, growing, and enjoy resilient demand driven by our customers’ desire to improve their audience experience in sports, commercial, and transportation environments. To capitalize on this position, we are focused on digital and business transformation, improving our cost structure, and further growing our markets. To accelerate these initiatives, we are projecting to spend between $8 and $10 million for transformation efforts impacting fiscal 2025 profitability.

Current wording

Overall, we have a unique leadership position in our target markets, which are large, growing, and enjoy resilient demand driven by our customers’ desire to improve their audience experience in sports, commercial, and transportation environments. To capitalize on this position, we are focused on digital and business transformation, improving our cost structure, and further growing our markets. To accelerate these initiatives, we are projecting to spend between $8 and $10 million for transformation efforts in fiscal 2025. In addition, we formed a Business Transformation Office (BTO), which has undertaken a comprehensive review of the Company’s business, strategy and operations and is developing a set of strategic initiatives, enabled in part by the Company’s previously announced digital transformation, to provide even better outcomes for customers, deeper penetration of the Company's current and adjacent market verticals, above-market growth, and more efficient delivery, fulfillment, and service. The goal of these initiatives is to grow revenue faster than the Company’s addressable market, expand operating margins, and generate returns on capital in the mid-to-high-teens and consistently above the Company’s cost of capital.

Previous wording

Backlog represents the dollar value of orders for integrated electronic display systems and related products and services which are expected to be recognized in net sales in the future. Orders are contractually binding purchase commitments from customers. Orders are included in backlog when we are in receipt of an executed contract and any required deposits or security and have not yet been recognized into net sales. Certain orders for which we have received binding letters of intent or contracts will not be included in backlog until all required contractual documents and deposits are received. Orders and backlog are not metrics defined by accounting principles generally accepted in the United States of America ("GAAP"), and our methodology for determining orders and backlog may vary from the methodology used by other companies in determining their orders and backlog amounts.

Current wording

Backlog represents the dollar value of orders for integrated electronic display systems and related products and services which are expected to be recognized in net sales in the future. Orders are contractually binding purchase commitments from customers. Orders are included in backlog when we are in receipt of an executed contract and any required deposits or security and have not yet been recognized into net sales. Certain orders for which we have received binding letters of intent or contracts will not be included in backlog until all required contractual documents and deposits are received. Orders and backlog are not metrics defined by generally accepted accounting principles in the United States of America ("GAAP"), and our methodology for determining orders and backlog may vary from the methodology used by other companies in determining their orders and backlog amounts.

Previous wording

Our product order backlog as of July 27, 2024 was $267.2 million as compared to $323.7 million as of July 29, 2023 and $316.9 million as of April 27, 2024. The decrease in backlog, to more historical levels is a result of fulfilling orders at a greater pace as supply chain conditions stabilized and production lead times improved, utilizing our increased capacity, and order pace returning to more normalized rates.

Current wording

Our product order backlog as of October 26, 2024 was $236.0 million as compared to $306.9 million as of October 28, 2023 and $316.9 million as of April 27, 2024. The decrease in backlog to more historical levels is a result of fulfilling orders at a greater pace as supply chain conditions have stabilized and production lead times have improved, we have been utilizing our increased capacity, and our order pace has returned to more normalized rates.

Previous wording

Net Sales: The sales decrease was the result of comparatively lower volumes in the Commercial, High School Park and Recreation, and International business units, partially offset by order fulfillments in the Live Events and Transportation business units. During the first quarter of fiscal 2024, the operating environment and supply chain stabilized, and we were able to capitalize on our capacity investments to fulfill the overbuilt backlog and return to more normalized lead times, which led to a record net sales level. These more normalized conditions have continued since and through the fiscal first quarter 2025. 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.

Current wording

Net Sales: The sales increase in the second quarter of fiscal 2025 compared to the same period in fiscal 2024 was the result of comparatively higher volumes in the Live Events and Transportation business units offset by lower sales levels in the International business unit. Sales in our Commercial and High School Park Recreation business units were relatively flat. This sales mix difference is the result of variability of orders described below and because during fiscal 2024, the operating environment and supply chain stabilized. We were able to capitalize on our capacity investments to fulfill the overbuilt backlog and return to more normalized lead times, especially in the High School Park and Recreation market. These more normalized conditions have continued since and through the fiscal second quarter of 2025. The amount of revenue recognized associated with performance obligations satisfied in prior years during the three months ended October 26, 2024 and October 28, 2023 was immaterial.

Previous wording

Product design and development increased primarily due to personnel-related expenses and for increased staffing levels. Our focus has been to advance product features aligned with customer needs and to reduce product costs. We focused these efforts on both standard product and control offerings and in new emerging areas, including microLED products and new control capabilities.

Current wording

Product design and development expenses increased in the second quarter of fiscal 2025 primarily due to personnel-related expenses and for increased staffing levels. Our focus has been to advance product features aligned with customer needs and to reduce product costs. We focused these efforts on both standard product and control offerings and in new emerging areas, including micro-LED products and new control capabilities.

Previous wording

Other expense and debt issuance costs write-off, net: During fiscal 2024, we expensed $3.4 million of debt issuance costs related to the Convertible Note issuance.

Current wording

Other expense and debt issuance costs write-off, netwere relatively flat compared to the same period last year.

Previous wording

Income tax expense: Our effective tax rate for the first quarter of fiscal 2025 was skewed due to the impact of the fair value adjustment to the Convertible Note in proportion to the period's small pre-tax income. The effective tax rate was 31.7 percent for the first quarter of fiscal 2024. 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 impacts the effective tax rate.

Current wording

Income tax expense: For the three months ended October 26, 2024, our effective tax rate was 15.0 percent compared to an effective tax rate of 64.8 percent for the three months ended October 28, 2023. The lower tax rate is due to the reduction of the Convertible Note fair value adjustment to expense in proportion to the period's increase in pre-tax income, whereas the tax rate was higher in the prior period due to an increase in the fair value adjustment in proportion to the pre-tax income during the quarter.

Previous wording

Order volume growth was driven by rebounding demand in the On-Premise, Spectacular and Out‐of‐Home markets in our Commercial business unit, and solid growth in the High School Parks and Recreation and Transportation business units. These higher orders offset an order decrease in the Live Events and International business units. Variability in orders comparatively is natural in these large project business areas.

Current wording

Order volume growth was driven by rebounding demand in the On-Premise, Spectacular and Out‐of‐Home markets in our Commercial business unit and solid growth in the High School Parks and Recreation business unit. These higher orders offset an order decrease in the Live Events, Transportation, and International business units. Variability in orders comparatively is natural in these large project business areas.

Previous wording

Selling expenses increased because of personnel related wages and benefits expense, investments in staffing to support future growth; travel and entertainment; and marketing, conventions and advertising.

Current wording

Selling expenses increased because of increases in personnel related wages and benefits expenses for increased staffing levels to support future growth; travel and entertainment; and marketing, conventions and advertising.

Previous wording

General and administrative increased because of personnel related wages and benefits for increased staffing levels, increased professional fees, and increased expenses for technology resources for our digital transformation strategies.

Current wording

General and administrative expenses increased in the first six months of fiscal 2025 because of personnel related wages and benefits for increased staffing levels, increased professional fees, and increased expenses for technology resources for our digital transformation strategies. In addition, during the first six months of fiscal 2025, the Company incurred $4.3 million of consultant related expenses associated with the previously announced strategic and digital transformation initiatives.

Previous wording

Change in fair value of Convertible Note results from accounting for the convertible note (the "Convertible Note") we issued to Alta Fox Opportunities Fund, LP during fiscal 2024, under the fair value option. The fair value change was primarily caused by the increase in value of the embedded features of the Convertible Note, as our stock price has increased since April 27, 2024.

Current wording

Change in fair value of Convertible Note results from accounting for the Convertible Note we issued to Alta Fox Opportunities Fund, LP during fiscal 2024, under the fair value option. The fair value change was primarily caused by the increase in value of the embedded features of the Convertible Note, as our stock price has increased since April 27, 2024.

Previous wording

In the first quarter, both sales and gross profit levels declined comparatively because of the change in operating environments over the two periods. During the first quarter of fiscal 2024, there were fewer supply chain and operational disruptions paired with our investments to increase capacity allowed for improved operational efficiency and fulfillment of the built-up backlog. We returned to delivering at normalized lead times resulting in record sales and gross profit levels for the first quarter of fiscal 2024. These more normalized conditions have continued since and through the fiscal first quarter of 2025.

Current wording

In the first six months of fiscal 2025, sales were relatively flat, and gross profit levels declined because of the change in operating environments over the two periods.

Previous wording

Commercial: On-Premise digital signage sales were similar to last year, however, we fulfilled fewer larger sized Spectacular LED video display projects and digital billboards, causing a decline in sales. There were fewer large sized projects in the market as compared to prior years. Gross profit as a percentage of sales declined because of the factors noted above. Selling expenses remained relatively flat in dollars; however, increased as percent of sales primarily because of personnel related wages and benefit costs for investments in staffing to support future growth. Order bookings remained strong in On-Premise digital signage. Digital billboard order bookings increased as a result in our marketing efforts to independent billboard operators.

Current wording

Commercial: On-Premise digital signage sales and digital billboards for the first six months of fiscal 2025 were similar to the same period last year; however, we fulfilled fewer larger sized Spectacular LED video display projects in the first six months of fiscal 2025, causing a decline in sales. In the first six months of fiscal 2025, there were fewer large sized projects in the market as compared to prior years. Gross profit as a percentage of sales increased due to the market shift to more surface mount technology message centers and Spectaculars. Selling expenses remained relatively flat in dollars; however, they increased as percent of sales. Order bookings increased in our Spectacular LED video display projects. Digital billboard order bookings increased as a result in our marketing efforts to independent billboard operators.

Previous wording

Live Events: The increase in net sales was driven by fulfilling order backlog for upgrades in sports-related facilities, primarily in colleges and universities. Gross profit as a percentage of sales decline is partially attributable to the comparative period gross profit was generated in a unique period of record sales levels over the fixed manufacturing cost structure. Selling expenses remained relatively flat as a percent of sales and increased in dollar amounts primarily because of increases in personnel related wages and benefits. Order bookings remained relatively flat.

Current wording

Live Events: The increase in net sales for the first six months of fiscal 2025 was driven by fulfilling the order backlog for upgrades in sports-related facilities, primarily in colleges and universities. The decline in gross profit as a percentage of sales is partially attributable to the sales mix differences between periods. Selling expenses remained relatively flat in dollar amounts and decreased as a percent of sales. Order bookings decreased due to the variability of large project booking timing.

Previous wording

High School Park and Recreation: During fiscal 2024, we returned to normalized lead times which led to higher sales in that period as compared to fiscal 2025's more normalized levels. Gross profit as a percentage of sales declined because of the factors noted above. Selling expenses increased primarily because of personnel related wages and benefit costs for investments in staffing to support future growth. Order bookings increased as a result of the trends for schools to use video solutions which are larger dollar-sized transactions than traditional scoreboard projects.

Current wording

High School Park and Recreation: During fiscal 2024, we returned to normalized lead times, which led to higher sales in the first six months of fiscal 2024 as compared to fiscal 2025's more normalized levels. Gross profit as a percentage of sales increased due to the market shift to more video projects in addition to a more cost-effective video offering. Selling expenses increased primarily because of personnel related wages and benefit costs for investments in staffing to support future growth. Order bookings increased as a result of the trends for schools increasingly using video solutions which are larger dollar-sized transactions than traditional scoreboard projects.

Previous wording

Transportation: The increase in net sales was driven by fulfilling orders in backlog and continued order bookings, especially in large intelligent transportation system projects. Gross profit as a percentage of sales increased as a result of a change in product mix. Selling expenses increased primarily because of personnel related wages and benefit costs for investments in staffing to support future growth. Order bookings vary because of large project booking timing. During the first quarter of fiscal 2025, we booked a large transit agency project.

Current wording

Transportation: The increase in net sales during the first six months of fiscal 2025 was driven by fulfilling orders in backlog and continued order bookings, especially in large intelligent transportation system projects. Gross profit as a percentage of sales increased as a result of a change in product mix and the recognition of $1.0 million project related insurance reimbursement. Selling expenses increased primarily because of personnel related wages and benefit costs for investments in staffing to support future growth. The timing of large projects is uncertain which causes variability in large project order bookings.

Previous wording

International: The decrease in net sales was driven by lower backlog and lower orders. Global geopolitical events and related macroeconomic trends have driven down the amount of market activity for digital display systems and large-sized projects causing the decrease in orders. Gross margin decreased primarily because of underutilized factory capacity. Even with efforts to decrease selling and other operational costs, our International business unit operated at a negative $1.9 million contribution margin. Order bookings vary because of large project booking timing and have been impacted by general economic conditions.

Current wording

International: The decrease in net sales in the first six months of fiscal 2025 was driven by lower backlog and lower orders. Global geopolitical events and related macroeconomic trends have driven down the amount of market activity for digital display systems and large-sized projects, causing the decrease in orders. Gross margin decreased primarily because of underutilized factory capacity. Even with efforts to decrease selling and other operational costs, our International business unit operated at a negative $1.0 million contribution margin. Order bookings vary because of large project booking timing and have been impacted by general economic conditions.

Previous wording

The changes in net operating assets and liabilities consisted of the following:

Current wording

The changes in net operating assets and liabilities for the six months ended October 26, 2024 and October 28, 2023 consisted of the following:

Previous wording

Net cash used in investing activities: During the first quarter of fiscal 2025 and fiscal 2024, purchase of property and equipment totaled $5.1 million and $4.5 million, respectively, and investments in affiliates were $0.9 million and $1.2 million, respectively.

Current wording

Net cash used in investing activities: During the first six months of fiscal 2025 and fiscal 2024, purchases of property and equipment totaled $10.5 million and $9.2 million, respectively, and investments in affiliates were $2.0 million and $2.9 million, respectively.

Previous wording

Net cash provided by financing activities: During the fiscal 2025 first quarter, financing cash included the $3.1 million received for the exercise of stock options, partially offset by payments on notes payable. Fiscal 2024 first quarter cash inflow resulted from closing on the $25.0 million Convertible Note financing and the $15.0 million mortgage financing to add liquidity to the Company. These inflows were offset by the payoff of our previous credit line of $17.8 million, expending $5.8 million of debt issuance costs, and principal payments made on the mortgage loan described below.

Current wording

Net cash provided by financing activities: During the first six months of fiscal 2025, financing cash inflow included the $4.2 million received for the exercise of stock options, partially offset by payments on notes payable. Cash inflow from the first six months of fiscal 2024 resulted from closing on the $25.0 million Convertible Note financing and the $15.0 million mortgage financing to add liquidity to the Company in the first quarter of fiscal 2024. These inflows were offset by the payoff of our previous credit line of $18.1 million, expending $6.5 million of debt issuance costs, and principal payments made on the mortgage loan described below.

Previous wording

We maintain a $60.0 million asset-based revolving credit facility ("ABL") with a maturity date of May 11, 2026 subject to customary covenants and conditions. As of July 27, 2024, we had no borrowings against the ABL and $5.3 million used to secure letters of credit outstanding. We also have a loan of $13.5 million secured by a first priority mortgage lien on our Brookings, South Dakota real estate and $25.0 million evidenced by the Convertible Note secured by a second priority lien on the assets securing the ABL facility and a first priority lien on substantially all the other assets of the Company, excluding all real property.

Current wording

We maintain a $60.0 million asset-based revolving credit facility ("ABL") with a maturity date of May 11, 2026 subject to customary covenants and conditions. As of October 26, 2024, we had no borrowings against the ABL and $5.4 million used to secure letters of credit outstanding. We also have a loan of $13.1 million secured by a first priority mortgage lien on our Brookings, South Dakota real estate and $25.0 million evidenced by the Convertible Note secured by a second priority lien on the assets securing the ABL facility and a first priority lien on substantially all the other assets of the Company, excluding all real property.

Previous wording

As of July 27, 2024, we had $96.8 million in cash and cash equivalents and $38.6 million in borrowing capacity under our ABL. We believe cash flow from operations, existing lines of credit, and access to debt and capital markets will be sufficient to meet our current liquidity needs, and we have committed liquidity and cash reserves in excess of our anticipated funding requirements.

Current wording

As of October 26, 2024, we had $134.4 million in cash and cash equivalents and $40.8 million in borrowing capacity under our ABL. We believe cash flow from operations, existing line of credit, and access to debt and capital markets will be sufficient to meet our current liquidity needs, and we have committed liquidity and cash reserves in excess of our anticipated funding requirements.

Previous wording

Working capital was $230.5 million and $209.7 million as of July 27, 2024 and April 27, 2024, respectively. The changes in working capital, particularly changes in inventory, accounts payable, accounts receivable, and contract assets and liabilities, are impacted by the sports market and construction seasonality. These changes can have a significant impact on the amount of net cash provided by or used in operating activities largely due to the timing of payments for inventory and subcontractors and receipts from our customers. On multimillion-dollar orders, the time between order acceptance and project completion may extend up to or exceed 12 months depending on the amount of custom work and a customer’s delivery needs. We use cash to purchase inventory and services at the beginning of these orders and often receive down payments or progress payments on these orders to balance cash flows.

Current wording

Working capital was $242.7 million and $209.7 million as of October 26, 2024 and April 27, 2024, respectively. The changes in working capital, particularly changes in inventory, accounts payable, accounts receivable, and contract assets and liabilities, are impacted by the sports market and construction seasonality. These changes can have a significant impact on the amount of net cash provided by or used in operating activities largely due to the timing of payments for inventory and subcontractors and receipts from our customers. On multimillion-dollar orders, the time between order acceptance and project completion may extend up to or exceed 12 months depending on the amount of custom work and a customer’s delivery needs. We use cash to purchase inventory and services at the beginning of these orders and often receive down payments or progress payments on these orders to balance cash flows.

Previous wording

We had $12.3 million of retainage on long-term contracts included in receivables and contract assets as of July 27, 2024 which we expect to collect within one year.

Current wording

We had $8.7 million of retainage on long-term contracts included in receivables and contract assets as of October 26, 2024, which we expect to collect within one year.

Previous wording

Our business growth and profitability improvement strategies depend on investments in capital expenditures and strategic investments. We are projecting to spend between $8 and $10 million for these transformation efforts and our total capital expenditures to be approximately $27 million for fiscal 2025. Projected capital expenditures include purchasing manufacturing equipment for new or enhanced product production and expanded capacity and increased automation of processes; investments in quality and reliability equipment and demonstration and showroom assets; and continued information infrastructure investments.

Current wording

Our business growth and profitability improvement strategies depend on investments in capital expenditures and strategic investments. We are projecting to spend between $8 and $10 million for these transformation efforts and for our total capital expenditures to be approximately $27 million for fiscal 2025. Projected capital expenditures include purchasing manufacturing equipment for new or enhanced product production and expanded capacity and increased automation of processes; investments in quality and reliability equipment and demonstration and showroom assets; and continued information infrastructure investments.

Previous wording

We are sometimes required to obtain performance bonds for display installations, and we have an aggregate of $190.0 million bonding line available through surety companies. If we were unable to complete the installation work, and our customer would call upon the bond for payment, the surety company would subrogate its loss to Daktronics. As of July 27, 2024, we had $15.7 million of bonded work outstanding.

Current wording

We are sometimes required to obtain performance bonds for display installations, and we have an aggregate of $190.0 million bonding line available through surety companies. If we were unable to complete the installation work, and our customer would call upon the bond for payment, the surety company would subrogate its loss to Daktronics. As of October 26, 2024, we had $17.6 million of bonded work outstanding.

Previous wording

There have been no material changes in our contractual obligations since the end of fiscal 2024. See our Annual Report on Form 10-K for the fiscal year ended April 27, 2024 for additional information regarding our contractual obligations and commercial commitments.

Current wording

During the first six months of fiscal 2025, there have been no material changes in our contractual obligations. See our Annual Report on Form 10-K for the fiscal year ended April 27, 2024 for additional information regarding our contractual obligations and commercial commitments.

Previous wording

For a summary of recently issued accounting pronouncements and the effects of those pronouncements on our financial results, refer to "Note 1. Basis of Presentation" of the Notes to the Condensed Consolidated Financial Statements.

Current wording

For a summary of recently issued accounting pronouncements and the effects of those pronouncements on our financial results, refer to "Note 1. Basis of Presentation" of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.