DAKTRONICS INC SD
For the period ended Jan 25, 2025. Filed Mar 5, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jan 25, 2025 · Filed Mar 5, 2025
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-10-26; filed 2024-12-04.
0000915779-24-000152
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-01-25; filed 2025-03-05.
0000915779-25-000061
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 97 previous paragraphs and 100 current paragraphs.
38 unchanged; 53 reworded; 8 added; 5 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 6 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (8)
Current report
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 and market conditions to be able to generate sales and gross profit at similar levels. We expect the expansion of use of digital display systems in the global market over the coming years, however, recent governmental regulations and orders and related geopolitical reactions and changes to or uncertainty around federal funding priorities can impact customers willingness to invest in digital display systems which can impact the timing and levels of orders. For example, announcements from the new United States presidential administration about increased and expansive import tariffs and federal funding priorities has created near-term uncertainty about economic conditions. In recent months, we have observed an increasing number of extended quote times, which we believe is partially attributable to these conditions. As a result, while quoting activity is high, order volume timing in the near-term is more difficult to predict, making fiscal 2025 orders more difficult to predict than in fiscal 2024. In addition, the announced tariff changes are expected to increase our input costs for imports of electronic components from China and the costs of aluminum and steel in the market. Competitors importing products from China will also be impacted by the Chinese tariffs. We are monitoring and adjusting pricing for our products and services carefully to account for these dynamics.
Current report
As our business has grown and become more complex, we have come to recognize the importance of evolving our corporate governance structure. Delaware is the legal domicile for most large, publicly traded companies, and its corporate law is well understood, clear and predictable and provides strong shareholder rights and protections. We began the process to change our legal domicile to Delaware and enhance our governance frameworks in fiscal 2025. On January 21, 2025, Daktronics filed a preliminary proxy 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, one of our shareholders, Alta Fox Opportunities Fund, LP (the "Holder," and collectively with its affiliates, "Alta Fox") commenced an action in the United States District Court for the District of South Dakota, Southern Division. For the first nine months of the quarter, $2.1 million of legal and advisor related expenses were incurred for these matters.
Current report
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. The Company has agreed to pay Alta Fox $1.2 million, which will be expensed in the fourth quarter of 2025. To conclude these matters, including the litigation, we expect that additional costs will be incurred in future reporting periods. 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, and “Note 13. Subsequent Events” of this Quarterly Report on Form 10-Q.
Current report
Interest income (expense), net expenses increased in the third quarter of fiscal 2025 primarily due to higher cash levels invested in interest-bearing accounts offsetting interest expense.
Current report
Live Events: The decrease in net sales in the third quarter of fiscal 2025 was due to the absence of the fulfillment of a large project, which we had in the same quarter a year ago and because of order volume declines and the differences in expected timing to fulfill current backlog compared to last year's scheduling. The decline in gross profit as a percentage of sales in the quarter is attributable to lower sales volume over relatively fixed cost structure. Selling expense decreased quarter over quarter; however, selling expense as a percentage of sales increased due to the lower sales volume. Order bookings vary because of large project booking impacts and seasonal sports impacts. During the third quarter of fiscal 2025, we booked a large NFL stadium project but had lower orders for baseball facilities.
Current report
International: The increase in net sales in the third quarter of fiscal 2025 was driven by higher backlog and higher orders. Gross profit as a percentage of sales increased as a result of a higher sales volume. Selling expense remained relatively flat in the third quarter of fiscal 2025 compared to the same period in the prior year. The increase in order bookings is primarily driven by successful bookings in Europe and Middle East to out of home niche customers.
Current report
COMPARISON OF THE NINE MONTHS ENDED JANUARY 25, 2025 AND JANUARY 27, 2024
Current report
Commercial: Sales were down in the first nine months of fiscal 2025 primarily because we fulfilled fewer larger sized video display projects offset by increases in sales in the out of home segment. Larger projects cause inherent volatility in comparison and sales and orders because of the unique nature of each customer's timing and project needs. There were fewer large sized projects in the market and ordered early this year as compared to prior years, causing the change in sales volumes. Sales increases related to the out of home area follows the reasons for the increase in orders. Gross profit as a percentage of sales increased due to improved fulfillment costs and pricing strategies. Selling expenses remained relatively flat in dollars. Order bookings increased in the out of home areas as result in our marketing efforts to independent billboard operators and increased demand and availability of large sized video display projects.
Removed paragraphs (5)
Previous report
Interest (expense) income, net expenses increased in the second quarter of fiscal 2025 primarily due to interest income earned on cash balances.
Previous report
Live Events: The increase in net sales in the second quarter of fiscal 2025 was driven by fulfilling order backlog for upgrades in sports-related facilities, primarily in colleges and universities. The decline in gross profit as a percentage of sales in the quarter is partially attributable to sales mix differences between periods. Selling expenses decreased as a percent of sales and decreased in dollar amounts primarily because of a reduction in bad debt expense. Order bookings vary because of large project booking timing.
Previous report
International: The decrease in net sales in the second quarter 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. Order bookings vary because of large project booking timing and have been impacted by general economic conditions.
Previous report
COMPARISON OF THE SIX MONTHS ENDED OCTOBER 26, 2024 AND OCTOBER 28, 2023
Previous report
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.
Reworded paragraphs (53)
Previous wording
This section entitled "Management’s Discussion and Analysis of Financial Condition and Results of Operations" (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. The MD&A provides a narrative analysis explaining the reasons for material changes in the Company’s (i) financial condition during the period from the most recent fiscal year-end, April 27, 2024, to and including October 26, 2024 and (ii) results of operations during the current fiscal period(s) as compared to the corresponding period(s) of the preceding fiscal year.
Current wording
This section entitled "Management’s Discussion and Analysis of Financial Condition and Results of Operations" (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. The MD&A provides a narrative analysis explaining the reasons for material changes in the (i) financial condition of Daktronics, Inc. and its subsidiaries (the "Company", "Daktronics", "we", "our", or "us") during the period from the most recent fiscal year-end, April 27, 2024, to and including January 25, 2025; and (ii) results of operations of the Company during the current fiscal period(s) as compared to the corresponding period(s) of the preceding fiscal year.
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, 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.
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, the imposition of tariffs, trade wars, 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 (the "Form 10-K") filed with the Securities and Exchange Commission ("SEC"), as well as other publicly available information about the Company.
Previous wording
We also wish to caution investors that other factors might in the future prove to be important in affecting our results of operations. New factors emerge from time to time; it is not possible for management to predict all such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or a combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Current wording
We also wish to caution investors that other factors might in the future prove to be important in affecting our results of operations. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or a combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
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 "Item 1A. Risk Factors" of Part I), as well as other publicly available information about our Company.
Current wording
The 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 the Form 10-K (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
Daktronics, Inc. and its subsidiaries are industry leaders in designing and manufacturing electronic scoreboards, programmable display systems and large screen video displays for sporting, commercial and transportation applications. We serve our customers by providing high quality standard display products as well as custom-designed and integrated systems. We offer a complete line of products, from small scoreboards and electronic displays to large multimillion-dollar video display systems as well as related control, timing, and sound systems. We are recognized as a technical leader with the capabilities to design, market, manufacture, install and service complete integrated systems displaying real-time data, graphics, animation and video. We engage in a full range of activities: marketing and sales, engineering and product design and development, manufacturing, technical contracting, professional services and customer service and support.
Current wording
We are industry leaders in designing and manufacturing electronic scoreboards, programmable display systems and large screen video displays for sporting, commercial and transportation applications. We serve our customers by providing high quality standard display products as well as custom-designed and integrated systems. We offer a complete line of products, from small scoreboards and electronic displays to large multimillion-dollar video display systems as well as related control, timing, and sound systems. We are recognized as a technical leader with the capabilities to design, market, manufacture, install, and service complete integrated systems displaying real-time data, graphics, animation, and video. We engage in a full range of activities: marketing and sales, engineering and product design and development, manufacturing, technical contracting, professional services, and customer service and support.
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 six months ended October 26, 2024 and October 28, 2023 contained operating results for 26 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 nine months ended January 25, 2025 and January 27, 2024 contained operating results for 39 weeks.
Previous 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.
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. 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 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.
Current wording
In addition, to capitalize on this position, we are focused on digital and business transformation, improving our cost structure, and further growing our markets. During fiscal 2025, 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. These initiatives, overseen by the BTO, were designed and structured to support our ambitious targets to grow revenue faster than our addressable market, expand operating margins to 10-12 percent, and generate returns on capital in the 17-20 percent range consistently above the Company's cost of capital (the "Business Transformation Plan"). To accelerate these initiatives, we are projecting to spend between $8.0 million and $10.0 million for transformation efforts in fiscal 2025.
Previous 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.
Current wording
We carefully evaluate our capacity and resource levels to the conditions noted; however, there can be periods during which sales and expenses can be misaligned and periods we invest more in transformational and corporate governance activities, all impacting our profitability levels in the near-term.
Previous 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.
Current wording
Our product order backlog as of January 25, 2025 was $273.2 million as compared to $328.3 million as of January 27, 2024 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 faster, more normalized pace as supply chain conditions have stabilized, production lead times have improved, and we have been utilizing our increased capacity.
Previous wording
Net Sales: The net sales increase in the first six months of fiscal 2025 was the result of comparatively higher volumes in the Live Events and Transportation business units offset by lower sales levels in the Commercial, High School Park and Recreation, and International business units. The amount of revenue recognized associated with performance obligations satisfied in prior years during the six months ended October 26, 2024 and October 28, 2023 was immaterial.
Current wording
Net Sales: The sales decrease in the third quarter of fiscal 2025 compared to the same period in fiscal 2024 was the result primarily of lower volumes in the Live Events business unit, partially offset by increased sales in the Commercial and International business units. Sales in our High School Park and Recreation and Transportation business units were relatively flat. The amount of recognized revenue associated with performance obligations satisfied in prior years during the three months ended January 25, 2025 and January 27, 2024 was immaterial.
Previous wording
Order volume decline in the second quarter of fiscal 2025 compared to the same period in fiscal 2024 was primarily due to an order decrease in the Live Events, Transportation, and International business units. Variability in orders comparatively is natural in these large project business areas and during the time of year for sports projects. These declines were offset by large project bookings in the Spectacular niche and increases in the Out-of-Home niche and High School Parks and Recreation business unit. Digital billboard orders increased as a result of marketing efforts to independent billboard operators and the timing of a bulk order from a national Out-of-Home advertising company. The increase in order bookings in the High School Parks and Recreation business unit is attributable to sales of more higher selling priced video products versus fixed digit scoreboards.
Current wording
Order volume decline in the third quarter of fiscal 2025 compared to the same period in fiscal 2024 was primarily due to an order decrease in the Live Events, High School Park and Recreation, and Transportation business units. Variability in orders comparatively is typical in these large project business areas and during the time of year for sports projects. These declines were offset by large project bookings in the International and Commercial business units.
Previous wording
Gross profitas a percentage of net sales decreased slightly to 26.8 percent for the second quarter of fiscal 2025 as compared to 27.2 percent for the same period a year ago. Total warranty expense as a percentage of sales decreased to 1.7 percent for the second quarter of fiscal 2025 as compared to 2.2 percent for same period from a year ago.
Current wording
Gross profitas a percentage of net sales increased slightly to 24.6 percent for the third quarter of fiscal 2025 as compared to 24.5 percent for the same period a year ago. Total warranty expense as a percentage of sales decreased to 0.9 percent for the third quarter of fiscal 2025 as compared to 1.9 percent for the same period from a year ago.
Previous wording
Selling expenses in the second quarter of fiscal 2025 remained relatively flat compared to the same period last year.
Current wording
Selling expenses in the third quarter of fiscal 2025 remained relatively flat compared to the same period last year.
Previous wording
General and administrative expenses increased in the second quarter of fiscal 2025 compared to the same period in fiscal 2024 because of higher personnel related wages and benefits for increased staffing levels, increased professional fees, and increased expenses for technology resources related to digital transformation strategies. In addition, during the second quarter of fiscal 2025, the Company incurred $3.3 million of consultant related expenses associated with the previously announced strategic and digital transformation initiatives.
Current wording
General and administrative expenses increased in the third quarter of fiscal 2025 compared to the same period in fiscal 2024 because of higher personnel related wages and benefits for increased staffing levels primarily for our digital transformation strategies and increased professional fees. During the third quarter of fiscal 2025, additional professional fees included consultant, legal, and advisory related expenses associated with business transformation initiatives and corporate governance matters, which totaled $4.8 million.
Previous 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.
Current wording
Product design and development expenses increased in the third 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
Change in fair value of Convertible Note results from accounting for the convertible note (the "Convertible Note") dated May 11, 2023 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 decrease in value of the embedded features of the Convertible Note, as our stock price has decreased since July 27, 2024.
Current wording
Change in fair value of Convertible Note results from accounting for the senior secured convertible note dated May 11, 2023 we issued to Alta Fox Opportunities Fund, LP during fiscal 2024 (the "Convertible Note") under the fair value option. The fair value changed of the note increased due primarily due to the stock price increase and its effect on the valuation of the embedded features of the Convertible Note.
Previous wording
Other expense and debt issuance costs write-off, netwere relatively flat compared to the same period last year.
Current wording
Other expense and debt issuance costs write-off, netwas relatively flat compared to the same period last year.
Previous 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.
Current wording
Income tax expense: For the three months ended January 25, 2025, our effective tax rate was 3.7 percent compared to an effective tax rate of 15.0 percent for the three months ended January 27, 2024. The lower tax rate is due to the tax effect of the increase of the Convertible Note fair value adjustment to expense that is not deductible for tax purposes reduced by the tax effect of the period's decrease in pre-tax income, whereas the tax rate was higher in the prior period due to a decrease in the fair value adjustment in proportion to the increase in pre-tax income during the quarter.
Previous wording
In the second quarter of fiscal 2025, sales increased and gross profit percentage declined slightly due to the following:
Current wording
In the third quarter of fiscal 2025, total net sales and gross profit percentage declined due to the cumulative effects of the following:
Previous wording
On-Premise digital signage sales were similar to last year. Gross profit as a percentage of sales increased due to a shift in mix to products with higher margins. Selling expenses remained relatively flat in dollars but decreased as percent of sales primarily because of leveraging flat selling capacity over increased revenue. The increase in order bookings in our Spectacular niche was attributable to LED video display project orders with governmental and multi-use commercial and retail facilities during the second quarter of fiscal 2025. Digital billboard order bookings during the quarter increased as a result of marketing efforts to independent billboard operators and the timing of a bulk order from a national Out-of-Home advertising company.
Current wording
Commercial: The increase in net sales in the third quarter of fiscal 2025 compared to the same period one year ago was driven by fulfilling orders in our digital billboards niche and Spectacular LED video display projects. On-Premise digital signage sales were similar to last year. Gross profit as a percentage of sales increased due to a shift in mix to products with higher margins and higher sales volume over relatively fixed cost structure. Selling expense decreased as a percentage of sales primarily because of the increase in sales volume during the quarter. The increase in order bookings in our Spectacular niche was attributable to LED video display project orders with governmental and multi-use commercial and retail facilities. Digital billboard order bookings during the quarter increased as a result of marketing efforts to independent billboard operators and the timing of a bulk order from a national Out-of-Home advertising company.
Previous wording
High School Park and Recreation: Sales were relatively flat during second quarter of fiscal 2025 compared to the same period one year ago. 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 increase is attributable to more sales of video scoreboards versus fixed digit scoreboards.
Current wording
High School Park and Recreation: Sales were relatively flat during third quarter of fiscal 2025 compared to the same period one year ago. Gross profit as a percentage of sales increased due to a more cost-effective video offering in addition to efficient use of manufacturing expenses. Selling expenses increased primarily because of personnel related wages. Order bookings were down slightly to the prior year.
Previous wording
Transportation: Sales were relatively flat during the second quarter of fiscal 2025 compared to the same period one year ago. Gross profit as a percentage of sales increased as a result of a change in product mix and the recognition of a $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. Order bookings vary because of the timing of large project bookings which have inherent volatility.
Current wording
Transportation: Sales decreased slightly during the third quarter of fiscal 2025 compared to the same period one year ago due to lower order bookings which reduced the level of backlog available to build. Gross profit as a percentage of sales increased due to a change in product mix and a warranty estimate reduction. 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 the timing of large project bookings which have inherent volatility.
Previous wording
The following is an analysis of changes in key items included in the statements of operations for the six months ended October 26, 2024 and October 28, 2023:
Current wording
The following is an analysis of changes in key items included in the statements of operations for the nine months ended January 25, 2025 and January 27, 2024:
Previous 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.
Current wording
Net Sales: The net sales decrease in the first nine months of fiscal 2025 was the result of lower volumes in the Commercial, High School Parks and Recreation, and International business units offset by higher sales levels in the Transportation business unit. The net sales for the Live Events business unit remained relatively flat in the first nine months of fiscal 2025 compared to the same period a year prior. 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.
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 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.
Current wording
Order volume growth was driven by rebounding demand in the Spectacular and Out‐of‐Home markets in our Commercial business unit and solid growth in the High School Parks and Recreation and International business units. These higher orders offset an order decrease in the Live Events and Transportation business units. Variability in orders comparatively is typical in these large project business areas.
Previous wording
Gross profit as a percentage of sales decreased in the first six months of fiscal 2025 partially because of sales mix differences between periods. Total warranty expense as a percent of sales decreased to 1.9 percent for the first six months of fiscal 2025 as compared to 2.2 percent for same period from a year ago.
Current wording
Gross profit as a percentage of sales decreased in the first nine months of fiscal 2025 compared to the first nine months of fiscal 2024 partially because of sales mix differences between periods. Total warranty expense as a percent of sales decreased slightly to 1.6 percent for the first nine months of fiscal 2025 as compared to 2.1 percent for same period from a year ago.
Previous 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.
Current wording
General and administrative expenses increased in the first nine months of fiscal 2025 because of personnel related wages and benefits for increased staffing levels primarily for our digital transformation strategies and increased professional fees. During the first nine months of fiscal 2025, additional professional fees included consultant, legal, and advisory related expenses associated with business transformation initiatives and corporate governance matters, which totaled $9.0 million.
Previous wording
Product design and development expenses increased in the first six months 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.
Current wording
Product design and development expenses increased in the first nine months of fiscal 2025 compared to the same period a year ago 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
Interest (expense) income, net increased primarily due to interest income earned on cash balances.
Current wording
Interest income (expense), net increased primarily due to higher cash levels invested in interest-bearing accounts offsetting interest expense.
Previous 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.
Current wording
Change in fair value of Convertible Note results from accounting for the Convertible Note, under the fair value option. The fair value change was primarily caused by the two principal tranches that were force converted during the third quarter as well as an increase in value of the embedded features of the remaining portion of the Convertible Note as our stock price has increased since April 27, 2024.
Previous wording
Other expense and debt issuance costs write-off, net: The change in Other expense and debt issuance costs write-off, net for the first six months of fiscal 2025 as compared to the same period one year ago was primarily due to losses recorded for our equity method affiliates and foreign currency volatility. In addition, 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, net: The change in Other expense and debt issuance costs write-off, net for the first nine months of fiscal 2025 as compared to the same period one year ago was primarily due to expensing $3.4 million of debt issuance costs related to the Convertible Note issuance in fiscal 2024.
Previous wording
Income tax expense: For the six months ended October 26, 2024, we recorded an effective tax rate of 35.2 percent, as compared to 37.6 percent for the six months ended October 28, 2023. Both periods' income before taxes included the impacts of the change in Convertible Note fair value adjustment to expense which is not deductible and is the primary driver of the effective tax rate for both periods.
Current wording
Income tax expense: For the nine months ended January 25, 2025, we recorded an effective tax rate of 109.2 percent, as compared to 31.5 percent for the nine months ended January 27, 2024. Both periods' income before taxes included the impacts of the change in Convertible Note fair value adjustment to expense which is not deductible and is the primary driver of the effective tax rate for both periods.
Previous wording
The following table shows information regarding our contribution margin reconciled to GAAP operating income of our reportable segments for the six months ended October 26, 2024 and October 28, 2023:
Current wording
The following table shows information regarding our contribution margin reconciled to GAAP operating income of our reportable segments for the nine months ended January 25, 2025 and January 27, 2024:
Previous 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.
Current wording
In the first nine months of fiscal 2025, sales were slightly lower and gross profit levels declined because of the change in operating environments over the two periods.
Previous 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.
Current wording
Live Events: The decrease in net sales for the first nine months of fiscal 2025 was driven by timing of large projects and customer delivery schedules for these orders in the third quarter of fiscal 2025. 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. The change in orders was impacted by the timing of large contract orders which cause inherent lumpiness and volatility in comparisons.
Previous 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.
Current wording
High School Park and Recreation: The decrease in net sales for the first nine months of fiscal 2025 was driven by converting the high level of backlog related to supply chain disruptions from the first quarter of fiscal 2024 compared to the more normal level backlog at the beginning of fiscal 2025. Gross profit as a percentage of sales increased due to the market shift to more video projects and better utilization of manufacturing department expenses. Selling expenses increased primarily because of personnel related wages and benefits 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 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.
Current wording
Transportation: The increase in net sales during the first nine 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, the recognition of a $1.0 million project related insurance reimbursement, and a reduction in warranty reserves. Selling expenses increased primarily because of personnel related wages and benefit costs for investments in staffing to support future growth. Available orders in the market are smaller this year and uncertainty around federal funding has caused orders to decline.
Previous 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.
Current wording
International: The decrease in net sales in the first nine months of fiscal 2025 was driven by timing of conversion of orders due to lower backlog in the prior period. Gross profit decreased primarily because of lower sales volume over relatively fixed cost structure. Even with efforts to decrease selling and other operational costs, our International business unit operated at a negative contribution margin. We are seeing higher demand in International markets that were previously impacted by inflationary environment and geopolitical events which has driven the increase in orders.
Previous wording
Net cash provided by operating activities: The $62.8 million of cash provided by operating activities during the first six months of fiscal 2025 was the result of changes in net operating asset and liabilities. During the first six months of fiscal 2025, cash increased due to accounts receivable collection, reduction in inventory, and decreases in contract assets.
Current wording
Net cash provided by operating activities: The $74.8 million of cash provided by operating activities during the first nine months of fiscal 2025 was the result of business profitability (adjusting operating loss for non-cash expenses, primarily depreciation and amortization and loan fair value charges) and net positive changes in operating asset and liabilities primarily due the receivable and contract asset collections and our initiatives to lower inventory offset by payments of accounts payable and income taxes.
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Current report — wording carried from elsewhere
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. We are investing in capacity and resources to grow the business and penetrate markets.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Commercial: Sales were relatively flat during second quarter of fiscal 2025 compared to the same period one year ago. The slight increase was driven by fulfilling orders in our digital billboards niche. Spectacular LED video display projects and