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What changed in DAKTRONICS INC /SD/'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of DAKTRONICS INC /SD/'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+284 added−277 removedSource: 10-K (2023-07-12) vs 10-K (2022-06-16)

Top changes in DAKTRONICS INC /SD/'s 2023 10-K

284 paragraphs added · 277 removed · 200 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeManagement uses orders to evaluate market share and performance in the competitive environment. Management uses backlog information for capacity and resource planning. We believe order information is useful to investors because it provides an indication of our market share. We believe backlog information is useful to investors to provide an indication of future revenues.
Biggest changeOrder and backlog levels provide management and investors additional details surrounding the results of our business activities in the marketplace and highlight fluctuations caused by seasonality and multimillion dollar projects. Management uses orders to evaluate market share and performance in the competitive environment. Management uses backlog information for capacity and resource planning.
These reports and other reports, proxy statements, and electronic filings are also found on the SEC’s website at www.sec.gov. Information contained on our website is not deemed to be incorporated by reference into this Report or filed with the SEC. 1 Table of Contents We focus our sales and marketing efforts on markets, geographical regions and products.
These reports and other reports, proxy 1 Table of Contents statements, and electronic filings are also found on the SEC’s website at www.sec.gov. Information contained on our website is not deemed to be incorporated by reference into this Report or filed with the SEC. We focus our sales and marketing efforts on markets, geographical regions and products.
Video displays provide content to serve as a revenue generation source through advertising or as an information and communication medium (such as scoring, statistics, wayfinding, advertising, control center information), or to provide interior design elements to create luxurious space to feature digital art.
Video displays provide content to serve as a revenue generation source through advertising or as an information and communication medium (such as scoring, statistics, wayfinding, advertising, and control center information), or to provide interior design elements to create luxurious space to feature digital art.
The Show Control Software Suite can operate an entire network of displays within a venue from a single, intuitive control interface. Its features allow users to instantly deliver media clips, camera feeds, and streaming information to any display in a network. Scoreboards and Timing Systems.
The Show Control Software Suite can operate an entire network of displays within a venue from a single, intuitive control interface. Its features allow users to instantly deliver media clips, camera feeds, and streaming information to any display in a venue. Scoreboards and Timing Systems.
Mass Transit Displays. Our Mass Transit products include a wide range of LCD and LED display solutions for public transportation applications. Installations often involve a network of displays located on railway platforms, at bus stations, or on concourses within a transportation hub to guide travelers to their intended destination. Sound Systems. Our sound systems include both standard and custom options.
Our Mass Transit products include a wide range of LCD and LED display solutions for public transportation applications. Installations often involve a network of displays located on railway platforms, at bus stations, or on concourses within a transportation hub to guide travelers to their intended destination. Sound Systems. Our sound systems include both standard and custom options.
Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources” in this Form 10-K. Customers We have a large and diverse worldwide customer base, ranging from local main street business owners and out-of-home companies to the owners and operators of premier professional sports arenas.
Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources” in this Form 10-K. Customers We have a large and diverse worldwide customer base, ranging from local main street business owners, out-of-home companies, and schools to the owners and operators of premier professional sports arenas.
We have continued these investments and have supported our long-term customer relationships to grow from a small company operating out of a garage to a world leader in the display industry. We currently employ 2,477 people globally. We are headquartered at 201 Daktronics Dr., Brookings, SD 57006 telephone 605-692-4200. Our Internet address is https:// www.daktronics.com.
We have continued these investments and have supported our long-term customer relationships to grow from a small company operating out of a garage to a world leader in the display industry. We currently employ 2,734 people globally. We are headquartered at 201 Daktronics Dr., Brookings, SD 57006 telephone 605-692-4200. Our Internet address is https:// www.daktronics.com.
Some competitors have more capital, governmental funding, supply change access, and other resources, which may allow them to take advantage of acquisition opportunities or adapt more quickly to changes in customer requirements. Other competitors use sponsorships as a way to win business at a particular location or market.
Some competitors have more capital, governmental funding, supply chain access, and other resources, which may allow them to take advantage of acquisition opportunities or adapt more quickly to changes in customer requirements. Other competitors use sponsorships as a way to win business at a particular location or market.
Periodically, we enter into pricing agreements or purchasing contracts under which we agree to purchase a minimum amount of product in exchange for guaranteed price terms over the length of the contract, which generally does not exceed one year. We also periodically prepay for future supply.
Periodically, we enter into pricing agreements or purchasing contracts under which we agree to purchase a minimum amount of product in exchange for guaranteed price terms over the length of the contract, which generally does not exceed one year. We sometimes prepay for future supply.
Item 1. BUSINESS Business Overview Daktronics, Inc. and its subsidiaries (the “Company”, “Daktronics”, “we”, “our”, or “us”) are an industry leader 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.
Item 1. BUSINESS Business Overview Daktronics, Inc. and its subsidiaries (the “Company”, “Daktronics”, “we”, “our”, or “us”) are industry leaders in designing and manufacturing electronic scoreboards, programmable display systems and large screen video displays for sporting, commercial and transportation applications. We serve our customers by providing high quality standard display products as well as custom-designed and integrated systems.
Our products are comprised of the following product families: • Video displays/video walls • Scoreboards and timing systems • Message displays • ITS (intelligent transportation systems) dynamic message signs • Mass Transit displays • Sound systems • Digital billboards • Digital street furniture • Digit and price displays • Indoor dynamic messaging systems and indoor liquid crystal display ("LCD") signs • Software and controllers including Venus® Control Suite Each of these product families is described below: Video Displays/Video Walls.
Our products are comprised of the following product families: • Video displays/video walls • Scoreboards and timing systems • Message displays • ITS (intelligent transportation systems) dynamic message signs • Mass Transit displays • Sound systems • Digital billboards • Digital street furniture • Digit and price displays • Indoor dynamic messaging systems and indoor liquid crystal display ("LCD") signs • Software and controllers including Venus® Control Suite, Show Control Studio and Show Control Live Each of these product families is described below: Video Displays/Video Walls.
Since late fiscal 2021, we have been affected by supply chain disruptions and inflationary pressures stemming from the coronavirus pandemic ("COVID-19"), shipping container shortages, weather events, and the changes in global demand. Specifically, we are impacted by the global inflation and shortage of semiconductors and related electronic components, 5 Table of Contents other materials needed for production, and freight.
Since late fiscal 2021, we have been affected by supply chain disruptions and inflationary pressures stemming from the coronavirus pandemic ("COVID-19"), shipping container shortages, weather events, and the changes in global demand. Specifically, we are impacted by the global inflation and shortage of semiconductors and related electronic components, other materials needed for production, and freight.
Competition We encounter a wide variety of competitors that vary by product, geographic area, and business unit. Our competitors include both United States and foreign companies which range in size and product offerings. Our competitors may develop lower-cost or lower-featured products, may be willing to charge lower prices to increase their market share, or include different service and controller offerings.
Competition We encounter a wide variety of competitors that vary by product, geographic area, and business unit. Our competitors include both domestic and foreign companies which range in size and product offerings. Our competitors may develop lower-cost or lower-featured products, may be willing to charge lower prices to increase their market share, or include different service and controller offerings.
Given the cyclical nature of some parts of our business and dispersed sales geography, we balance and maintain our ability to manufacture the same products 2 Table of Contents across our plants so we can efficiently utilize our capacity and reduce costs.
Given the cyclical nature of some parts of our business and dispersed sales geography, we balance and maintain our ability to manufacture the same products across our plants so we can efficiently utilize our capacity and reduce costs.
We perform component manufacturing, system manufacturing (metal fabrication, electronic assembly, sub-assembly and final assembly) and testing in-house for most of our products to control quality, improve response time and maximize cost-effectiveness.
We perform component manufacturing, system 2 Table of Contents manufacturing (metal fabrication, electronic assembly, sub-assembly and final assembly) and testing in-house for most of our products to control quality, improve response time and maximize cost-effectiveness.
The electronic circuitry, which controls the pixels, allows for variances in the relative brightness of each LED to provide a full color spectrum, thereby displaying video images in striking, vibrant colors.
The electronic circuitry, which controls the pixels, allows for variances in the relative brightness of each LED to provide a full color spectrum, thereby displaying 3 Table of Contents video images in striking, vibrant colors.
The Vanguard® family of dynamic message displays is typically used to direct traffic and inform motorists. 4 Table of Contents These displays are used over freeways, on arterial roads, near bridges, at toll booths and in other locations. We have also developed a Vanguard® control system for these displays to help transportation agencies manage large networks of displays.
The Vanguard® family of dynamic message displays is typically used to direct traffic and inform motorists. These displays are used over freeways, on arterial roads, near bridges, at toll booths and in other locations. We have also developed a Vanguard® control system for these displays to help transportation agencies manage large networks of displays. Mass Transit Displays.
The loss of a key supplier, part unavailability, tariff changes, price changes, war or other geopolitical impacts to trade or transport, or defects in the supplied material or component could have an adverse impact on our business and operations. Our sourcing group works to implement strategies to mitigate these risks.
The loss of a key supplier, part unavailability, tariff changes, price changes, war or other geopolitical impacts to trade or transport, or defects in the supplied material or component could have an adverse impact on our business and operations. Our sourcing group is responsible to maintain and implement strategies to mitigate these evolving risks.
We expect to fulfill the backlog as of April 30, 2022 within the next 24 months . The timing of backlog may be impacted by project delays resulting from parts availability and other constraints stemming from the supply chain disruptions.
We expect to fulfill the backlog as of April 29, 2023 within the next 24 months . The timing of backlog may be impacted by project delays resulting from parts availability and other constraints stemming from the supply chain disruptions.
Products and Technologies The two principal components of our systems are the display and the controller, which manages the operation of the display. We produce displays varying in complexity, size and resolution.
Products and Technologies The two principal components of our systems are the display and the control system, which manages the operation of the display. We produce displays varying in complexity, size and resolution.
Examples of indoor offerings include centerhung displays, landmark displays, video walls, ribbon board displays, hanging banners, corporate office entrance displays, conference room displays, and video displays designed for retail stores, restaurants, malls, transportation hubs and other similar indoor facilities.
Examples of offerings include centerhung displays, landmark displays, video walls, ribbon board displays, hanging banners, roadside displays, digital billboards, corporate office entrance displays, conference room displays, control room displays, and video displays designed for arenas, stadiums, retail stores, restaurants, malls, transportation hubs and other similar indoor facilities.
We offer a variety of controllers complementing our scoreboards and displays. These controllers vary in complexity from the All Sport® 100, a handheld controller for portable scoreboards, to the All Sport® Pro, designed for more sophisticated scoring systems and allowing for more user-defined options. We also offer timing systems for sports events, primarily aquatics and track competitions.
We offer a variety of controllers complementing our scoreboards and displays. These controllers vary in complexity from the All Sport® 100, a handheld controller for portable scoreboards, to the All Sport® Pro, designed for more sophisticated scoring systems and allowing for more user-defined options.
Our ADFLOW DMS™ systems include indoor networked solutions for retailers, convenience stores and other businesses. These solutions, either using LED or LCD technologies, allow customers to broadcast advertising campaigns and other information through the software, media players and visual hardware. Software & Controllers including Venus ® Control Suite. The Venus® Control Suite is our platform for scheduled control capability.
These solutions, using either LED or LCD technologies, allow customers to broadcast advertising campaigns and other information through the software, media players and visual hardware. Software and Controllers including Venus ® Control Suite. The Venus® Control Suite is our platform for scheduled control capability.
During unprecedented times, such as during the duration of the COVID-19 pandemic, countries and the U.S. states and/or its localities can issue lock down orders impacting availability of employees, third parties, suppliers, customers, and other services we need to operate our business. We believe we are in material compliance with government and other regulatory requirements.
Countries and states and/or localities in the United States can issue lock down orders impacting the availability of employees, third parties, suppliers, customers, and other services we need to operate our business. We believe we are in material compliance with government and other regulatory requirements.
These displays are comprised of a large number of full-color pixels capable of showing various levels of video, graphics and animation. These displays include red, green and blue LEDs arranged in various combinations to form pixels.
These displays are comprised of a large number of full-color pixels capable of showing various levels of video feeds, pre-rendered graphics and animated content with Real Time Data capabilities. These displays include red, green and blue LEDs arranged in various combinations to form pixels.
Over the past years, we have invested in our development and our affiliates to increase our differentiated product platforms, advance our software architecture and offerings, support customer requirements, and advance new competitive narrow pixel and micro-electronic technologies.
We invest in our development and our affiliates to increase differentiated product platforms, advance our software architecture and offerings, support customer requirements, advance new competitive narrow pixel and micro-electronic technologies, and advance sustainable technologies and related products.
We facilitate company-wide groups and teamwork to inspire a more inclusive culture. We encourage each employee to proactively and continuously build self-awareness, understanding of aspects of diversity, and openness to others’ experiences and perspectives.
We facilitate company-wide teams to inspire a more inclusive culture and achieve company goals through teamwork. We encourage each employee to proactively and continuously build self-awareness, understanding of aspects of diversity, and openness to others’ experiences and perspectives. We also foster and encourage self development and a continuous learning environment to build talent.
Content includes media, scoring, timing, statistics, advertising, way-finding information, playback loops and entertainment type visualizations. Raw Materials Materials used in the production of our video display and control systems are sourced from around the world. Examples of the materials we use in production include LEDs, integrated circuits, printed circuit boards, power supplies, plastics, aluminum, and steel.
Raw Materials Materials used in the production of our video display and control systems are sourced from around the world. Examples of the materials we use in production include LEDs, integrated circuits, printed circuit boards, power supplies, plastics, aluminum, and steel.
Variables in video displays include the spacing of the pixels (pixel pitch), the resolution of the displays (number of pixels), the brightness of the displays (nits), the number of discrete colors the display is able to produce (color depth), the viewing angles, and the LED technology. 3 Table of Contents We offer a broad range of indoor and outdoor LED video displays with these varying features.
Variables in video displays include the spacing of the pixels (pixel pitch), the resolution of the displays (number of pixels), the brightness of the displays (nits), the number of discrete colors the display is able to produce (color depth), the viewing angles, and the LED technology.
Although we own a number of patents and possess rights under others to which we attach importance, we do not believe that our business as a whole is materially dependent upon any such patents or rights.
This will allow us to pursue infringement claims against competitors for protection due to patent violations. Although we own a number of patents and possess rights under others 5 Table of Contents to which we attach importance, we do not believe that our business as a whole is materially dependent upon any such patents or rights.
Research and Development Our experience in engineering, process design, and product and service design and development capabilities, and investments made in affiliates are very important factors in continuing to develop, produce, and offer the most up-to-date digital displays and control system solutions desired by the market.
We believe that our ability to compete depends upon customer centric product and service quality and features, technical expertise, service breadth, and cost-effective solutions. 7 Table of Contents Research and Development Our experience in engineering, process design, and product and service design and development capabilities and investments made in affiliates are very important factors in continuing to develop, produce, and offer the most up-to-date digital displays and control system solutions desired by the market.
Orders and backlog are not measures 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. 6 Table of Contents Order and backlog levels provide management and investors additional details surrounding the results of our business activities in the marketplace and highlight fluctuations caused by seasonality and our large project business.
Orders and backlog are not measures 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.
Our product order backlog as of April 30, 2022 was $471.6 million as compared to $250.7 million as of May 1, 2021. This increase in backlog is driven by record order volume and muted conversion to sales due to supply chain challenges. Our customers have also placed orders for future deliveries to secure our manufacturing capacity.
This decrease in backlog is driven by fulfilling orders from our April 30, 2022 backlog. During fiscal 2022 we had record order volume and muted conversion to sales due to supply chain challenges. Our customers had also placed orders for future deliveries to secure our manufacturing capacity during fiscal 2022.
The controller is comprised of computer hardware and software products designed to compile information provided by the operator and other integrated sources to display information, graphics or animation on the displays. We customize our products according to the design specifications of the customer and the conditions of the environment in which our products function.
The control system is comprised of various combinations of computer hardware, video processing hardware and software products designed to compile information provided by the operator and other integrated sources to display information, graphics, video or animation on the displays.
Standard systems are designed to meet the needs of a variety of indoor and outdoor sports venues based on the size and configuration of the facility. Custom indoor and outdoor systems are tailored for larger venues and venues with unique seating configurations and are often integrated into an overall venue solution for scoring, timing, message display and/or video capability.
Custom indoor and outdoor systems are tailored for larger venues and venues with unique seating configurations and are often integrated into an overall venue solution for scoring, timing, message display and/or video capability. 4 Table of Contents Digital Billboards. Our line of digital billboards offers a unique display solution for the Out-of-Home (“OOH”) advertising industry.
These systems include many features unique to the outdoor advertising market, such as our patented mounting system, self-adjusting brightness, improved energy consumption, and enhanced network security. Digital street furniture. Our LED street furniture features some of the brightest imagery in the industry and is built to withstand full-sun conditions.
The products are used to display images which change at regular intervals. These systems include many features unique to the outdoor advertising market, such as our patented mounting system, self-adjusting brightness, optimized energy consumption, and enhanced network security. Digital street furniture.
The DataTime® product line consists of outdoor time and temperature displays which use a remote sensor for temperature data. Fuelight™ digit displays are specifically designed for the petroleum industry, offering high visibility and quick fuel price updates using the Fuelink™ control software. Indoor Dynamic Messaging Systems and LCD screens.
Fuelight™ digit displays are specifically designed for the petroleum industry, offering high visibility and quick fuel price updates using the Fuelink™ control software. Indoor Dynamic Messaging Systems and LCD screens. Our ADFLOW DMS™ systems include indoor networked solutions for retailers, convenience stores and other businesses.
Our line of digital street furniture engages people with advertising content at eye level as they walk through campuses, cityscapes, and malls. This design enhances the message and complements surrounding architecture. These street furniture displays are our most flexible solution for digital OOH campaigns. Digit and Price Displays. This product line includes our DataTime® and Fuelight™ displays.
Our LED street furniture features some of the brightest imagery in the industry and is built to withstand full-sun conditions. Our line of digital street furniture engages people with advertising content at eye level as they walk through campuses, cityscapes, and malls. This design enhances the message and complements surrounding architecture.
As of April 30, 2022, we employed approximately 2,246 full-time employees and 231 part-time and temporary employees. Of these employees, approximately 937 were in manufacturing, 468 were in sales and marketing, 503 were in customer service, 354 were in engineering and 215 were in general and administrative. None of our employees are represented by a collective bargaining agreement.
Of these employees, approximately 1,121 were in manufacturing, 451 were in sales and marketing, 561 were in customer service, 378 were in engineering and 223 were in general and administrative. None of our employees are represented by a collective bargaining agreement. We believe employee relations are good.
We provide our employees and their families with access to a variety of health programs, including benefits that support their physical and mental health. In response to the COVID-19 pandemic, we implemented changes that we consider to be in the best interest of our employees.
We provide our employees and their families with access to a variety of health programs, including benefits that support their physical and mental health. As of April 29, 2023, we employed approximately 2,441 full-time employees and 293 part-time and temporary employees.
We are unable to predict the supply chain recovery or the impact to our business. Intellectual Property We own or hold licenses to use numerous patents, copyrights, and trademarks on a global basis.
Intellectual Property We own or hold licenses to use numerous patents, copyrights, and trademarks on a global basis. Our policy is to protect our competitive position by filing United States and international patent applications to protect technology and improvements that we consider important to the development of our business.
In addition, our products compete with other forms of advertising, such as television, print media and fixed display signs. 7 Table of Contents We believe that our ability to compete depends upon customer centric product and service quality and features, technical expertise, service breadth, and cost-effective solutions.
In addition, our products compete with other forms of advertising, such as television, print media, digital and mobile, and fixed display signs.
Product design and development investments in the near term are focused on developing or improving our video technology over a wide range of pixel pitches for both indoor and outdoor applications.
During fiscal 2024, we will continue to invest in product design and development to improve our video technology over a wide range of pixel pitches and sustainable technologies for both indoor and outdoor applications and to advance micro-LED devices and placement processes.
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Our mobile and modular display systems are transportable and are comprised of lightweight individual LED video panels less than a square meter in size and are assembled together to form a display in a customizable size. These displays are used for both indoor and outdoor touring shows and for other live events.
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We customize our products according to the design specifications of the customer and the conditions of the environment in which our products function.
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Our display technology may be integrated with architectural mesh to deliver a dynamic communication medium that provides a semi-transparent viewing experience within a building. These displays can be mounted over a solid facade or in front of windows, resulting in a finished solution that is free from visible cabling and delivers a clean, semi-transparent view.
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We offer a broad range of indoor and outdoor LED video displays with these varying features.
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These displays are less than one inch in depth and provide an elegant, refined structural appearance. Our line of freeform LED displays is architectural lighting and display products. The ProPixel® freeform products use mountable LED elements to transform ordinary structures into stunning visual landmarks. A flexible mounting platform allows designers to transform any structure into a full-motion video display.
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Standard systems are designed to meet the needs of a variety of indoor and outdoor sports venues based on the size and configuration of the facility.
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A component of these systems is our OmniSport® timing console. The system has the capability to time and rank the competitors and to interface with event management software to facilitate the sporting event. Other timing system components include swimming touchpads, race start systems, and relay take-off platforms.
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These street furniture displays are our most flexible solution for digital OOH campaigns. Digit and Price Displays. This product line includes our DataTime® and Fuelight™ displays. The DataTime® product line consists of outdoor time and temperature displays which use a remote sensor for temperature data.
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Our audio systems also complement our video display systems used in mall applications. Digital Billboards. Our line of digital billboards offers a unique display solution for the Out-of-Home (“OOH”) advertising industry. The products are used to display images which change at regular intervals.
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Content includes media, scoring, timing, statistics, advertising, way-finding information, playback loops and entertainment type visualizations. Our Show Control Suite is an easy-to-use and powerful integrated solution to achieve a dynamic, seamless and fully immersive game-day production. Show Control Studio offers products designed for display control, while Show Control Live is designed for video production.
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Our policy is to protect our competitive position by filing U.S. and international patent applications to protect technology and improvements that we consider important to the development of our business. This will allow us to pursue infringement claims against competitors for protection due to patent violations.
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While supply chain disruptions from these factors have subsided over the last half of fiscal 2023 and we expect infrequent disruptions going forward from these factors, it is reasonably possible that future disruptions could occur that would have a material impact on our business.
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We implemented additional safety measures for employees continuing critical on-site work and allowed employees to work from home when able. We believe we have been able to preserve our business continuity without sacrificing our commitment to keeping our employees safe during the COVID-19 pandemic.
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We believe order information is useful to investors because it provides an indication of our market share and future revenues. 6 Table of Contents Our product order backlog as of April 29, 2023 was $400.7 million as compared to $471.6 million as of April 30, 2022.
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During the first half of fiscal 2023, our design teams focused on adjusting designs to utilize available components as a strategy to gain stability in our production levels.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur suppliers are subject to the fluctuations in global economic cycles and conditions and other business risk factors which may impact their ability to operate their businesses. The performance and financial condition of a supplier may cause us to alter our business terms, cease doing business with a particular supplier, or change our sourcing practices.
Biggest changeThe performance and financial condition of a supplier may cause us to alter our business terms, cease doing business with a particular supplier, or change our sourcing practices. Our suppliers are subject to the fluctuations in global economic cycles and conditions and other business risk factors which may impact their ability to operate their businesses.
Any misappropriation, loss or other unauthorized disclosure of confidential or personally identifiable information, whether by us or by our third-party service providers, could adversely affect our business and operations. We could face significant fines and penalties under various global laws revolving around data loss, lack of adequate date protection or lack of required reporting.
Any misappropriation, loss or other unauthorized disclosure of confidential or personally identifiable information, whether by us or by our third-party service providers, could adversely affect our business and operations. We could face significant fines and penalties under various global laws revolving around data loss, lack of adequate data protection or lack of required reporting.
We cannot provide assurance that all necessary or appropriate insurances will be available, cover every type of loss incurred, or be able to be economically secured. For example, some insurers limit coverages, increase premium costs or increase deductibles when global catastrophic events occur.
We cannot provide assurance that all necessary or appropriate insurances will be available, cover every type of loss incurred, or be able to be economically secured. For example, some insurers limit or refuse coverages, increase premium costs or increase deductibles when global catastrophic events occur.
The following factors are among those that could complicate capacity planning for market demand: • changes in the demand for and mix of products that our customers buy; • our ability to add and train our manufacturing staff in advance of demand; • the market’s pace of technological change; • variability in our manufacturing or services productivity; • long lead times for and availability of raw materials and components used in production; • our ability to engage qualified third parties; • geography of the order and related shipping methods; and • long lead times for our plant and equipment expenditures.
The following factors are among those that could complicate capacity planning for market demand: • changes in the demand for and mix of products that our customers buy; • our ability scale down or to add and train our manufacturing and services staff in advance of demand changes; • the market’s pace of technological change; • variability in our manufacturing or services productivity; • long lead times for and availability of raw materials and components used in production; • our ability to engage qualified third parties; • geography of the order and related shipping methods; and • long lead times for our plant and equipment expenditures.
Despite the security measures we have in place, our facilities and systems and those of our third-party service providers may be vulnerable to cybersecurity breaches, acts of vandalism, computer viruses, misplaced or lost data, programming issues, and/or human errors or other similar events.
Despite the security measures we have in place, our facilities and systems and those of our third-party service providers may be vulnerable to cybersecurity breaches, acts of vandalism, computer viruses, misplaced or lost data, ransomware attacks, programming issues, and/or human errors or other similar events.
These events could result in damage to, and a complete or partial closure of, one or more of our manufacturing facilities, which could make it difficult to supply our customers with product and provide our employees with work, thereby adversely affecting our business, operating results or financial condition.
Unexpected events could result in damage to, and a complete or partial closure of, one or more of our manufacturing facilities, which could make it difficult to supply our customers with product and provide our employees with work, thereby adversely affecting our business, operating results or financial condition.
As part of our business, we deal with state-owned business enterprises, the employees of which are considered to be foreign officials for purposes of the FCPA's prohibition on United States companies from engaging in bribery, providing 15 Table of Contents anything of value, or making other prohibited payments to foreign officials for the purpose of obtaining or retaining business, and other similar regulations in other areas of the world.
As part of our business, we deal with state-owned business enterprises, the employees of which are considered to be foreign officials for purposes of the FCPA's prohibition on United States companies from engaging in bribery, providing anything of value, or making other prohibited payments to foreign officials for the purpose of obtaining or retaining business, and other similar regulations in other areas of the world.
Awards of large contracts and their timing and amounts are difficult to predict, may not be repeatable, and are outside of our control. Market demand has not always developed as expected or remained at a 12 Table of Contents consistent level. Adjusting supply chain material planning and production and services capacity to meet this varied demand can increase costs.
Awards of large contracts and their timing and amounts are difficult to predict, may not be repeatable, and are outside of our control. Market demand has not always developed as expected or remained at a consistent level. Adjusting supply chain material planning and production and services capacity to meet this varied demand can increase costs.
Violations of anti-corruption, anti-bribery and trade control laws and sanctions regulations are punishable by civil penalties, including fines, denial of export privileges, injunctions, asset seizures, debarment from government contracts and revocations or restrictions of licenses, as well as criminal fines and imprisonment, and could harm our reputation, create negative shareholder sentiment and affect our share value.
Violations of anti-corruption, anti-bribery and trade control laws and sanctions regulations are punishable by civil penalties, including fines; the denial of export privileges; injunctions; asset seizures; debarment from government contracts and revocations or restrictions of license; as well as criminal fines and imprisonment, and could harm our reputation, create negative shareholder sentiment and affect our share value.
Our articles of incorporation, by-laws and other corporate governance documents and the South Dakota Business Corporation Act ("SD Act") contain provisions that could have an anti-takeover effect and discourage, delay or prevent a 19 Table of Contents change in control or an acquisition that many shareholders may find attractive.
Our articles of incorporation, by-laws and other corporate governance documents and the South Dakota Business Corporation Act ("SD Act") contain provisions that could have an anti-takeover effect and discourage, delay or prevent a change in control or an acquisition that many shareholders may find attractive.
We also contractually require subcontractors and others working on our behalf to carry common insurance coverages for the types of work they perform to mitigate any risk of our loss. Our failure to obtain adequate insurance coverage could adversely affect our financial condition or results of operations.
We also contractually require subcontractors and others working on our behalf to carry common insurance coverages for the types of work they perform to mitigate any risk of our loss. Our failure to obtain adequate insurance coverage at reasonable costs could adversely affect our financial condition or results of operations.
Our ability to pay dividends will depend upon, among other factors, our cash balances and potential future capital requirements for strategic transactions, including acquisitions, results of operations, financial condition and other factors that our Board of Directors may deem relevant.
Our ability to pay dividends will depend upon, among other factors, our cash balances and potential future capital requirements for strategic transactions, including acquisitions, results of operations, financial condition and other factors 20 Table of Contents that our Board of Directors may deem relevant.
Such changes has and could result in extended lead times or supply changes, which could disrupt or delay our scheduled product deliveries to our end user customers and may result in the loss of sales and end user customers and cause harm to our sales, financial condition, and results of operations.
Such changes have and could continue to result in extended lead times or supply changes, which could disrupt or delay our scheduled product deliveries to our end user customers and may result in the loss of sales and end user customers and cause harm to our sales, financial condition, and results of operations.
The United States and other key international economies have experienced downturns and recessions, including the COVID-19 related downturn, from time to time during which economic activity was impacted by falling demand for a variety of goods and services; restricted credit; poor liquidity; reduced corporate profitability; volatility in credit, equity and foreign exchange markets; increased unemployment; bankruptcies; and overall uncertainty with respect to the economy.
The United States and other key international economies have experienced downturns and recessions from time to time during which economic activity was impacted by falling demand for a variety of goods and services; restricted credit; poor liquidity; reduced corporate profitability; volatility in credit, equity and foreign exchange markets; increased unemployment; bankruptcies; and overall uncertainty with respect to the economy.
In addition, our products compete with other forms of advertising, such as television, print media and fixed display signs. To remain competitive, we must anticipate and respond quickly to provide products and services our customers’ needs, enhance our existing products, introduce new products and features, and continue to price our products competitively.
In addition, our products compete with other forms of advertising, such as television, print media, digital and mobile, and fixed display signs. To remain competitive, we must anticipate and respond quickly to provide products and services that meet our customers’ needs, enhance our existing products, introduce new products and features, and continue to price our products competitively.
If we are not able to meet customer requirements, customers may choose to disqualify us as a supplier. Risks Related to an Investment in Our Common Stock The protections we have adopted and to which we are subject may discourage takeover offers favored by our shareholders.
If we are not able to meet customer requirements, customers may choose to disqualify us as a supplier. 19 Table of Contents Risks Related to an Investment in Our Common Stock The protections we have adopted and to which we are subject may discourage takeover offers favored by our shareholders.
In addition, state and federal legislators and/or regulators in the U.S. and other countries in which we operate are increasingly adopting or revising privacy, data protection and information security laws that potentially could have significant impact on our current and planned privacy, data protection and information security-related practices; our collection, use, sharing, retention and safeguarding of consumer and/or employee information; and some of our current or planned business activities.
In addition, state and federal legislators and/or regulators in the United States and other countries in which we operate are increasingly adopting or revising privacy, data protection and information security laws that potentially could have a significant impact on our current and planned privacy, data protection and information security-related practices; our collection, use, sharing, retention and safeguarding of consumer and/or employee information; and some of our current or planned business activities.
Global conditions include political developments; economic changes; unfavorable trading policies; difficulties in staffing and managing global operations; changes in foreign and domestic governmental regulations or requirements, treaty and trade relationships; the imposition of government orders that differ among jurisdictions, including mandatory closures, work-from-home and lock-down orders and social distancing protocols, or other restrictions related to the COVID-19 pandemic; changes in monetary and fiscal policies; changes in laws and regulations; or other activities of the United States and other foreign governments, agencies, and similar organizations.
Global conditions include political developments; economic changes; unfavorable trading policies; difficulties in staffing and managing global operations; changes in foreign and domestic governmental regulations or requirements, treaty and trade relationships; the imposition of government orders that differ among jurisdictions, including mandatory closures, work-from-home and lock-down orders and social distancing protocols; changes in monetary and fiscal policies; changes in laws and regulations; or other activities of the United States and other foreign governments, agencies, and similar organizations.
Our other executive officers and directors, in the aggregate, beneficially owned an additional 4.0 percent of our outstanding common stock as of June 2, 2022, assuming the exercise by them of all of their options currently exercisable or that vest within 60 days of June 2, 2022.
Our other executive officers and directors, in the aggregate, beneficially owned an additional 4.2 percent of our outstanding common stock as of June 30, 2023, assuming the exercise by them of all of their options currently exercisable or that vest within 60 days of June 30, 2023.
COVID-19 created constraints on supply chain operations and resulted in component part shortages due to global capacity constraints, such as the current global capacity constraint we are facing in the supply of component parts, particularly of semiconductor components. In addition, transportation availability has disrupted timeless of raw material and component shipments and customer shipments.
COVID-19 created constraints on supply chain operations and resulted in component part shortages due to global capacity constraints, such as the current global capacity constraint we have been facing in the supply of component parts, particularly of semiconductor components. In addition, transportation availability has disrupted the timeliness of raw material and component shipments and customer shipments.
Although we believe these estimates and assumptions are reasonable under the circumstances, they are subject to significant uncertainties, some of which are beyond our control. If management's estimates and assumptions change or are not correct, our financial condition or results of operation could be adversely affected.
Although we believe these estimates and assumptions are reasonable under the circumstances, they 13 Table of Contents are subject to significant uncertainties, some of which are beyond our control. If management's estimates and assumptions change or are not correct, our financial condition or results of operations could be adversely affected.
In addition, various state and municipal governments, universities and other investors maintain prohibitions or restrictions on investments in companies that do business with sanctioned countries, persons and entities, which could adversely affect our reputation, business, financial condition and results of operations. Global tax law changes may adversely affect our business, financial condition and results of operations.
In addition, various state and municipal governments, universities and other investors maintain prohibitions or restrictions on investments in companies that do business with sanctioned countries, persons and entities, which could adversely affect our reputation, business, financial condition and results of operations.
Further trade disputes could make us subject to additional regulatory costs and challenges, affect global economic and market conditions, and contribute to volatility in foreign exchange markets, which we may be unable to effectively manage through our foreign exchange risk management program.
Trade disruptions between countries could make us subject to additional regulatory costs and challenges, affect global economic and market conditions, and contribute to volatility in foreign exchange markets, which we may be unable to effectively manage through our foreign exchange risk management program.
Large contracts or customer awards include projects for college and professional sports facilities markets, the OOH niche, the transportation market, and the large spectacular niche. These projects can have short delivery time frames.
Large contracts or customer awards include projects for college and professional sports facilities 12 Table of Contents markets, the OOH niche, the transportation market, and the large spectacular niche. These projects can have short delivery time frames.
If we experience shortages or increases in the prices we pay for raw materials and components and are unable to pass on those increases to our customers or are unable to manufacture our products at all or on a timely basis, it has and could negatively affect our business, financial condition or results of operations.
If we experience shortages or increases in the prices we pay for raw materials and components and are unable to pass on those increases to our customers or are unable to manufacture our products at all or on a timely basis, it could negatively affect our business, financial condition or results of operations as such conditions have in the past.
Such determinations are subject to capital availability, compliance with all respective laws and our agreements applicable to the declaration and payment of cash dividends, our strategic investment cash needs, our business outlook and other factors balancing our long-term needs of our business and the interests of our shareholders.
Such determinations are subject to capital availability, compliance with all respective laws and agreements applicable to the declaration and payment of cash dividends, our strategic investment cash needs, our business outlook, and other factors the board uses to balance long-term business needs, credit availability, and the interests of our shareholders.
In addition, our backlog is subject to order cancellations and delays. Orders normally contain cancellation provisions to permit our recovery of costs expended as well as a pro-rata portion of the profit. If projects are delayed, revenue recognition can occur over longer periods of time, and projects may remain in backlog for extended periods of time.
Orders normally contain cancellation provisions to permit our recovery of costs expended as well as a pro-rata portion of the profit. If projects are delayed, revenue recognition can occur over longer periods of time, and projects may remain in backlog for extended periods of time.
In recent years, there have been increasing regulatory enforcement and litigation activities in the areas of privacy, data protection and information security in the U.S. and in various countries in which we operate.
In recent years, there have been increasing regulatory enforcement and litigation activities in the areas of privacy, data protection and information security in the United States and in various countries in which we operate.
Our business involves the blending, controlled storage, use and disposal of hazardous materials. We and our suppliers are subject to federal, state, local and foreign laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials.
We and our suppliers are subject to federal, state, local and foreign laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials.
Periodically, we may also consider disposing of these businesses, partial investments, assets, or other lines of business. 16 Table of Contents The financial, management and other risks and challenges associated with these activities include, but are not limited to, the following: • diversion of management attention; • difficulty with integrating acquired businesses; • adverse impact on overall profitability if the expanded operations do not achieve the strategic benefits forecasted; • potential loss or adverse relationship with or a change of key employees, customers, or suppliers of the acquired business; • inability to effectively manage our expanded operations; • difficulty with the integration of different corporate cultures; • personnel issues; • increased expenses; • assumption of unknown liabilities and indemnification obligations; • potential disputes with the buyers or sellers; • the time involved in evaluating or modifying the financial systems of an acquired business and the establishment of appropriate internal controls; and • incorrect estimates made in the accounting for the transaction that cause misstatements of acquisition assets and liabilities.
The financial, management and other risks and challenges associated with these activities include, but are not limited to, the following: • diversion of management attention; • difficulty with integrating acquired businesses; • adverse impact on overall profitability if the expanded operations or investments in affiliates do not achieve the strategic benefits forecasted; • potential loss or adverse relationship with or a change of key employees, customers, or suppliers of the acquired business; • inability to effectively manage our expanded operations; • difficulty with the integration of different corporate cultures; • personnel issues; • increased expenses; • assumption of unknown liabilities and indemnification obligations; • potential disputes with the buyers or sellers; • the time involved in evaluating or modifying the financial systems of an acquired business and the establishment of appropriate internal controls; • incorrect estimates made in the accounting for the transaction that cause misstatements of acquisition assets and liabilities; and • incorrect assumptions and estimates made in accounting for the value of such asset.
Together, these individuals, in the aggregate, beneficially owned 9.8 percent of our outstanding common stock as of June 2, 2022, assuming the exercise by them of all of their options that were currently exercisable or that vest within 60 days of June 2, 2022.
Together, these individuals, in the aggregate, beneficially owned 10.2 percent of our outstanding common stock as of June 30, 2023, assuming the exercise by them of all of their options that were currently exercisable or that vest within 60 days of June 30, 2023.
We depend on third parties to complete some of our contracts. Depending on a contract's scope of work, we may hire third-party subcontractors to perform on-site installation and service-related activities, hire manufacturers of structures or elements of structures related to on-site installation, hire contract manufacturers for certain product lines, or purchase specialty non-display related system elements from other companies.
Depending on a contract's scope of work, we may hire third-party subcontractors to perform on-site installation and service-related activities, hire manufacturers of structures or elements of structures related to on-site installations, hire contract manufacturers for certain product lines, or purchase specialty non-display related system elements from other companies.
For example, the recent and continuing conflict arising from the invasion of Ukraine by Russia could adversely impact macroeconomic conditions, give rise to regional instability and result in heightened economic tariffs, sanctions and import-export restrictions from the U.S. and the international community in a manner that adversely affects our Company, including to the extent that any such actions cause material business interruptions or restrict our ability in this region to conduct business with certain suppliers or vendors.
For example, the continuing conflict arising from the invasion of Ukraine by Russia, or tensions between Taiwan, China, the United States or other countries, could adversely impact macroeconomic conditions, give rise to regional instability and result in heightened economic tariffs, sanctions and import-export restrictions from the United States and the international community in a manner that adversely affects our Company, including to the extent that any such actions cause material business interruptions or restrict our ability in these regions to conduct business with certain suppliers or vendors.
Both the United States tax reform and the OECD proposed recommendations, in some cases, would make substantial changes to numerous long-standing tax positions and principles. These contemplated changes could increase tax uncertainty and may adversely affect our business, financial condition and results of operations. Acquisitions, partial investments, and divestitures pose financial, management and other risks and challenges.
Both the United States tax reform and the OECD proposed recommendations which, in some cases, would make substantial changes to numerous long-standing tax positions and principles. These contemplated changes could increase tax uncertainty and may adversely affect our business, financial condition and results of operations.
These estimates and assumptions affect the timing of net sales, costs, and profits or losses in applying the principles to contracts with customers under the cost incurred input method; credit losses for accounts receivables and contract assets; the valuation of inventory; estimated amounts for warranty costs; the calculation and valuation of our investments and deferred tax assets; the valuation of our investment in unconsolidated subsidiaries; fair value estimates used in goodwill and long-term assets testing; and estimating the impact of uncertainties in the application of complex tax laws.
These estimates and assumptions affect the timing and amount of net sales, costs, and profits or losses in applying the principles to contracts with customers under over time method of recording revenue using the cost-to-cost input method; credit losses for accounts receivables and contract assets; the valuation of inventory; estimated amounts for warranty and product maintenance agreement costs; the calculation and valuation of our investments and deferred tax assets; the valuation of our investment in affiliates or unconsolidated subsidiaries; fair value estimates used in goodwill and long-term assets testing; estimating the impact of uncertainties in the application of complex tax laws; and calculating share-based compensation expense.
The electronic display industry is characterized by ongoing product improvement, innovations and development. We compete against products produced in foreign countries and the United States. Our competitors may develop lower-cost or lower-featured products, may be willing to charge lower prices to increase their market share, or market new and unique product, service and controller offerings.
We compete against products produced in foreign countries and the United States. Our competitors may develop lower-cost or lower-featured products, may be willing to charge lower prices to increase their market share, or market new and unique product, service and controller offerings.
We enter into fixed-price contracts, which could reduce our profits if actual costs exceed estimated costs. Because of the complexity of many of our client contracts, accurately estimating the cost, scope and duration of a particular contract can be a difficult task. Unanticipated costs that exceed our original estimates may not be recoverable under fixed price contracts.
Because of the complexity of many of our client contracts, accurately estimating the cost, scope and duration of a particular contract can be a difficult task. Unanticipated costs that exceed our original estimates may not be recoverable under fixed price contracts.
Any infringement or claimed infringement by us of the intellectual property rights of others could result in litigation and adversely affect our ability to continue to provide, or could increase the cost of providing, products and services. Geopolitical issues, conflicts and other global events could adversely affect our results of operations and financial condition.
Any infringement or claimed infringement by us of the intellectual property rights of others could result in litigation and adversely affect our ability to continue to provide, or could increase the cost of providing, products and services.
The loss, an interruption, or a material change in our business relationships with our suppliers has and could cause a disruption in supply and a substantial increase in the costs of such materials.
The loss, an interruption, or a material change in our business relationships with our suppliers or in global supply chain conditions has had and could continue to cause a disruption in our supply chains and a substantial increase in the costs of such raw materials and components.
A serious global pandemic, including the current pandemic caused by COVID-19 and variants of COVID-19, can adversely impact, shock and weaken the global economy. These impacts can amplify other risk factors and could have a material impact on our operations, liquidity, financial conditions, and financial results.
A serious global pandemic can adversely impact, shock and weaken the global economy. These impacts can amplify other risk factors and could have a material impact on our operations, liquidity, financial conditions, and financial results. Our business, operations, and financial results have been, and may continue to be, impacted by the COVID-19 pandemic.
Cost inflation in, and shortages of, raw materials, components, and related transportation and tariff costs has and can have a significant impact on our price competitiveness and/or ability to produce our products, which has and could cause harm to our sales, financial condition and results of operations.
Such a constraint could cause and has caused lead times for our products to increase. 10 Table of Contents Cost inflation in, and shortages of, raw materials, components, and related transportation and tariff costs have had and may continue to have a significant impact on our price competitiveness and/or ability to produce our products, which have caused and could continue to cause harm to our sales, financial condition and results of operations.
These conditions affect consumer and entertainment spending and could adversely affect our customers’ ability or willingness to purchase our products, delay prospective customers’ purchasing decisions, reduce the value of their contracts, or affect attrition rates, all of which could adversely affect our operating results.
These conditions affect consumer and entertainment spending and could adversely affect our customers’ ability or willingness to purchase our products, delay prospective customers’ purchasing decisions, reduce the value of their contracts, or affect attrition rates, all of which could adversely affect our operating results. 8 Table of Contents These demand fluctuations and various factors may reduce our ability to effectively utilize our capacity and impact our results of operations.
Any disruption in our digital technologies could affect our business and operations, causing potentially significant expenses to recover and modify the 17 Table of Contents data systems, to reimburse customers' losses, and to investigate and remediate any vulnerabilities, which could severely damage our reputation with customers, suppliers, employees and investors and expose us to risk of litigation and liability.
Any disruption in our digital technologies could affect our business and operations, causing potentially significant expenses to recover and modify the data systems, to reimburse customers' losses, and to investigate and remediate any vulnerabilities, which could severely damage our reputation with customers, suppliers, employees and investors and expose us to risk of litigation and liability. 16 Table of Contents Our global operations expose us to global regulatory, geopolitical, economic and social changes and add additional risks and uncertainties which can harm our business, operating results, and financial condition.
Financing Agreements" of the Notes to our Consolidated Financial Statements included in this Form 10-K. 13 Table of Contents For the foreseeable future, it is anticipated that our cash on hand, marketable securities, cash provided by operating activities, and borrowings under our existing credit facilities should provide sufficient funds to finance our capital expenditures and working capital needs and otherwise meet operating expenses and debt service requirements.
For the foreseeable future, it is anticipated that our cash on hand, marketable securities, cash provided by operating activities, and borrowings under our credit facilities should provide sufficient funds to finance our capital expenditures and working capital needs and otherwise meet operating expenses and debt service requirements.
In particular, we and our operations are subject to U.S. and foreign anti-corruption and trade control laws and regulations, such as the United States Foreign Corrupt Practices Act (the “FCPA”); the United Kingdom Bribery Act (the “Bribery Act”); and export controls and economic sanctions programs, including those administered by the U.S.
In particular, we and our operations are subject to United States and foreign anti-corruption and trade control laws and regulations, such as the United States Foreign Corrupt Practices Act (the “FCPA”); the United Kingdom Bribery Act (the “Bribery Act”); and export controls and economic sanctions programs, including those administered by the United States Treasury Department’s Office of Foreign Assets Control (“OFAC”), the State Department’s Directorate of Defense Trade Controls (the “DDTC”), and the Bureau of Industry and Security of the United States Department of Commerce.
If we are unable to use all of the components we have purchased, we may have excess inventory or obsolescence, or increased inventory or carrying costs, which could have an adverse impact on our results of operation or financial condition.
If we are unable to use all of the components we have purchased, we may have excess inventory or obsolescence, or increased inventory or carrying costs, which could have an adverse impact on our results of operation or financial condition. 11 Table of Contents We may fail to continue to attract, develop and retain personnel throughout our business areas, which could negatively impact our operating results.
Cost inflation and shortages of any raw materials and components used to manufacture our products has and can occur due to various factors (such as worldwide demand, natural disasters, logistic disruptions, war, and trade regulations). Electronic and other components and materials used in our products are sometimes in short supply, which may impact our ability to meet customer demand.
Cost inflation and shortages of any raw materials and components used to manufacture our products have and may continue to occur due to various factors, such as worldwide demand, natural disasters, logistic disruptions, war and other conflicts, and trade regulations.
Operating results in one or more quarters or a fiscal year may not be indicative of future operating results. Our actual results could differ from the estimates and assumptions we make to prepare our financial statements, which could have a material impact on our financial condition and results of operations.
Our actual results could differ from the estimates and assumptions we make to prepare our financial statements, which could have a material impact on our financial condition and results of operations.
We rely heavily on digital technologies for the successful operation of our business, for the support of our controller offerings, and for the collection and retention of business data. Any failure of our digital systems, or any breach of our systems’ security measures, could adversely affect our operations, at least until our data can be restored and/or the breaches remediated.
Any failure of our digital systems, or any breach of our systems’ security measures, could adversely affect our operations, at least until our data can be restored and/or the breaches remediated.
We are subject to the income tax laws of the United States and its various state and local governments as well as several foreign tax jurisdictions.
Global tax law changes may adversely affect our business, financial condition and results of operations. We are subject to the income tax laws of the United States and its various state and local governments as well as several foreign tax jurisdictions.
Our business is subject to global political issues and conflicts. Such political issues and conflicts could have a material adverse effect on our results of operations and financial condition if they escalate into geographies in which we do business or obtain materials for production.
These impacts could reduce profitability and could have a material adverse effect on our results of operations and financial condition if they escalate into geographies in which we do business, manufacture our products, or obtain raw materials and components for production.
As an exporter, we must comply with various laws and regulations relating to the export of products and technology from the U.S. and other countries having jurisdiction over our operations and trade sanctions against embargoed countries and destinations administered by OFAC. Before shipping certain items, we must obtain an export license or verify that license exemptions are available.
As an exporter, we must comply with various laws and regulations relating to the export of products and technology from the United States and other countries having jurisdiction over our operations and trade sanctions against embargoed 17 Table of Contents countries and destinations administered by OFAC.
Further changes in the tax laws of the United States and foreign jurisdictions could arise, including additional tax reform in the United States and the base erosion and profit shifting project undertaken by the Organization for Economic Co-operation and Development (“OECD”).
The United States Tax Cuts and Jobs Act of 2017 is one such example of legislation that has impacted our effective tax rate. 18 Table of Contents Further changes in the tax laws of the United States and foreign jurisdictions could arise, including additional tax reform in the United States and the base erosion and profit shifting project undertaken by the Organization for Economic Co-operation and Development (“OECD”).
A breach of any of these covenants could result in an event of default under our credit facilities. Upon the occurrence of an event of default, the lender could elect to declare any and all amounts outstanding under such facilities to be immediately due and payable and terminate all commitments to extend further credit.
Upon the occurrence of an event of default, the lender could elect to declare any and all amounts outstanding under such facilities to be immediately due and payable and terminate all commitments to extend further credit. For additional information on financing agreements, see "Note 7. Financing Agreements" and "Note 17.
We operate in highly competitive markets and face significant competition and pricing pressures. If we are unable to keep up with the rapidly changing product developments and new technologies or if we cannot compete effectively, we could lose market share and orders, which would negatively impact our results of operations.
If we are unable to keep up with the rapidly changing product developments and new technologies or if we cannot compete effectively, we could lose market share and orders, which would negatively impact our results of operations. The electronic display industry is characterized by ongoing product improvement, innovations and development.
Also, market conditions can negatively impact our customers' ability to fund their projects and can impact our vendors, suppliers, and subcontractors and may not allow them to meet their obligations to us. Unanticipated events resulting in credit losses to us could have a material adverse impact on our financial results.
Also, market conditions can negatively impact our customers' ability to fund their projects and can impact our vendors, suppliers, and subcontractors and may not allow them to meet their obligations to us and impact our liquidity.
If we receive relatively large orders in any given quarter, fluctuations in the levels of the quarterly backlog can result because the backlog may reach levels which may not be sustained in subsequent quarters.
If we receive relatively large orders in any given quarter, fluctuations in the levels of the quarterly backlog can result because the backlog may reach levels which may not be sustained in subsequent quarters. Unanticipated events resulting in credit losses to us could have a material adverse impact on our financial results.
We routinely explore investing in or acquiring other businesses and related assets to complement or enhance our business strategies. These investments are often made to increase customer relations and market base, expand geographically, or obtain technological advances to support our solution portfolio.
These investments are often made to increase customer relations and market base, expand geographically, or obtain technological advances to support our solution portfolio. Periodically, we may also consider disposing of these businesses, partial investments, assets, or other lines of business.
Aelred Kurtenbach served as our Chairman of the Board until September 3, 2014. Dr. Aelred Kurtenbach's family members currently serve as executive officers of the Company. His son, Mr.
Our executive officers, directors and principal shareholders have the ability to significantly influence all matters submitted to our shareholders for approval. Co-founder Dr. Aelred Kurtenbach served as our Chairman of the Board until September 3, 2014. Dr. Aelred Kurtenbach's family members currently serve as executive officers of the Company. His son, Mr.
The occurrence of one or more unexpected events, including war, terrorist acts, pandemics, fires, tornadoes, floods, severe weather and natural disasters in the United States or in other countries in which we operate may disrupt our operations as well as the operations of our customers.
The occurrence of one or more unexpected events in the United States or in other countries in which we operate may disrupt our operations and the operations of our customers and suppliers.
Specifically, we are impacted by the global inflation and shortage of semiconductors and related electronic components, other materials needed for production, and freight. We are unable to predict the supply chain recovery or the impact to our business. As a result of U.S.
Specifically, we are impacted by the global inflation and shortage of semiconductors and related electronic components, other materials needed for production, and freight.
We may fail to continue to attract, develop and retain personnel throughout our business areas, which could negatively impact our operating results. We depend on qualified employees, including experienced and skilled technical personnel, to design, market, fulfill, and serve our customers. Qualified employees can be in high demand and limited in availability.
We depend on qualified employees, including experienced and skilled technical personnel, to design, market, fulfill, and serve our customers. Qualified employees can be in high demand and limited in availability. Our future success and operating results will also depend upon our ability to attract, train, motivate and retain qualified personnel to maintain and grow capacity.
If our internal control over financial reporting is found to be ineffective, our financial statements may not be fairly stated, raising concerns for investors and potentially adversely affecting our stock price. Under Section 404 of the Sarbanes-Oxley Act of 2002, we are required to evaluate and determine the effectiveness of our internal controls over financial reporting.
Ineffective internal control over financial reporting could result in errors in our financial statements, reduce investor confidence, and adversely impact our stock price. Under Section 404 of the Sarbanes-Oxley Act of 2002, we are required to evaluate and determine the effectiveness of our internal controls over financial reporting.
We maintain insurance both as a corporate risk management strategy and to satisfy the requirements of many of our contracts with customers.
Insurance coverage can be difficult or expensive to obtain, and our failure to obtain adequate insurance coverage could adversely affect our financial condition or results of operations. We maintain insurance both as a corporate risk management strategy and to satisfy the requirements of many of our contracts with customers.
These third parties are subject to fluctuations in global economic cycles and conditions and other business risk factors which may adversely impact their ability to operate their businesses.
These third parties are subject to fluctuations in global economic cycles and conditions and other business risk factors which may adversely impact their ability to operate their businesses. The performance and financial condition of the third parties may cause us to alter our business terms or to cease doing business with a particular third party or change our sourcing practices.
Any reduction or impairment of the value of an investment and related acquired assets, goodwill, or investments in affiliates would result in charges against earnings, which would adversely affect our results of operations in future periods. If goodwill or other intangible assets in connection with our acquisitions become impaired, we could take significant non-cash charges against earnings.
Our financial results are impacted negatively or positively from our proportionate share of our affiliates' financial performance. Any reduction or impairment of the value of an investment and related acquired assets, goodwill, or investments in affiliates would result in charges against earnings, which would adversely affect our results of operations in future periods.
Our future success and operating results will also depend upon our ability to attract, train, motivate and retain qualified personnel to maintain and grow capacity. Although we intend to continue to provide competitive compensation packages to attract and retain qualified personnel, market conditions for pay levels and availability may impact our operations.
Although we intend to continue to provide competitive compensation packages to attract and retain qualified personnel, market conditions for pay levels and availability may negatively impact our operations. We depend on third parties to complete some of our contracts.
There can be no assurance that we will engage in any acquisitions or divestitures or that we will be able to do so on terms that will result in any expected benefits. Our financial results are impacted negatively or positively from our proportionate share of our affiliates financial performance.
There can be no assurance that we will engage in any acquisitions or divestitures or that we will be able to do so on terms that will result in any expected benefits. We have $20.7 million, net invested in affiliates as of April 29, 2023.
We increase our production and services capacity and the overhead supporting order fulfillment based on anticipated market demand. Market demand, however, has not always developed as expected or remained at a consistent level. This underutilization risk can potentially decrease our profitability and result in the impairment of certain assets.
We may not be able to utilize our capacity efficiently or accurately plan our capacity requirements, which may negatively affect our business and operating results. We increase and decrease our production and services capacity and the overhead supporting order fulfillment based on anticipated market demand. Market demand, however, has not always developed as expected or remained at a consistent level.
Risks Relating to the COVID-19 Pandemic We face risks related to actual or threatened health epidemics and other outbreaks, including the COVID-19 pandemic, which have and could have a material adverse effect on our operations, liquidity, financial conditions, and financial results.
Additionally, such conflict or sanctions may significantly devalue various global currencies and have a negative impact on economies in geographies in which we do business. We face risks related to actual or threatened health epidemics and other outbreaks, which have had and could have a material adverse effect on our operations, liquidity, financial conditions, and financial results.
The terms and conditions of our credit facilities impose restrictions limiting our ability to incur debt, contingent liabilities, lease obligations or liens; make a substantial change of ownership; or acquire or purchase a business or its assets. Our credit facilities also impose certain financial covenants on us which restrict the level of cash dividends and capital expenditures.
The terms and conditions of our credit facilities impose restrictions limiting our ability to incur debt, contingent liabilities, lease obligations or liens; to merge or consolidate with another company; to dispose substantially all our assets ; to acquire or purchase a business or its assets; or to sell our assets.
Transportation costs and availability can fluctuate due to fluctuations in oil prices and other social, economic, and geopolitical factors.
Electronic and other components and materials used in our products are sometimes in short supply, which may impact our ability to meet customer demand. Transportation costs and availability can fluctuate due to fluctuations in oil prices and other social, economic, and geopolitical factors.
Our global operations expose us to global regulatory, geopolitical, economic and social changes and add additional risks and uncertainties which can harm our business, operating results, and financial condition. Our United States and foreign operations, sales, earnings, and strategies for profitable growth can be adversely affected by global conditions and compliance with global regulations and governmental orders.
Our domestic and foreign operations, sales, earnings, and strategies for profitable growth can be adversely affected by global conditions and compliance with global regulations and governmental orders.
Any failures to comply with these laws and regulations could result in fines, adverse publicity, and restrictions on our ability to export our products. Repeat failures could carry more significant penalties. Bribery, corruption, and trade laws and regulations, and the enforcement thereof, are increasing in frequency, complexity and severity on a global basis.
Before shipping certain items, we must obtain an export license or verify that license exemptions are available. Any failures to comply with these laws and regulations could result in fines, adverse publicity, and restrictions on our ability to export our products. Repeat failures could carry more significant penalties.
Commitments and Contingencies" of the Notes to our Consolidated Financial Statements included in this Form 10-K for further information on litigation obligations. 18 Table of Contents Our business involves the use of hazardous materials, and we must comply with environmental, health and safety laws and regulations, which can be expensive and restrict how we do business.
Our business involves the use of hazardous materials, and we must comply with environmental, health and safety laws and regulations, which can be expensive and restrict how we do business. Our business involves the blending, controlled storage, use and disposal of hazardous materials.
Also, a well-publicized actual or perceived threat of litigation could adversely affect our reputation and reduce the demand for our products. See "Note 16.
Also, a well-publicized actual or perceived threat of litigation could adversely affect our reputation and reduce the demand for our products. See "Note 16. Commitments and Contingencies" of the Notes to our Consolidated Financial Statements included in this Form 10-K for further information on litigation obligations. Information Systems, Legal, and Regulatory Risks Our business depends on numerous complex information systems.
In addition to increased costs, these factors could delay delivery of products, which may result in the assessment of liquidated damages or other contractual damages which would negatively impact our profits. Backlog may not be indicative of future revenue or profitability. Many of our products have long sales, delivery and acceptance cycles.
In addition to increased costs, these factors could delay delivery of products, which may result in the assessment of liquidated damages or other contractual damages which would negatively impact our profits. We evaluate changes in estimates on a contract-by-contract basis and disclose significant changes, if material, in the Notes to Consolidated Financial Statements.
We cannot at this time quantify or forecast the business impact of COVID-19, and there can be no assurance that the COVID-19 pandemic or any other health crisis will not have a material and adverse effect on our business, financial results and financial condition. 9 Table of Contents Risks Related to Our Business If we fail to timely and effectively obtain shipments of raw materials and components from our suppliers or to send shipments of our manufactured product to our customers, our business and operating results could be adversely affected.
If we fail to timely and effectively obtain shipments of raw materials and components from our suppliers or to send shipments of our manufactured product to our customers, our business and operating results could be adversely affected.
We continue to monitor the situation and evaluate ways to minimize these impacts through vendor negotiations, alternative sources, and potential price adjustments.
We monitor for these types of situations and evaluate ways to minimize these impacts through vendor negotiations, alternative sources, and potential price adjustments. We depend on a single-source or a limited number of suppliers for our raw materials and components from countries around the world.
A reduction in or elimination of our dividend payments and/or our dividend program could have a material negative effect on our stock price. On April 1, 2020, our Board of Directors announced the suspension of dividends for the foreseeable future.
A reduction in or elimination of our dividend payments and/or our dividend program could have a material negative effect on our stock price. Our business could be negatively affected as a result of actions of activist shareholders, and such activism could impact the trading value of our securities.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur principal properties consist of the following: Facilities Owned or Leased Square Footage Facility Activities Brookings, SD, USA Owned 765,000 Corporate Office, Manufacturing, Sales, Service Redwood Falls, MN, USA Owned 151,000 Manufacturing, Sales, Service, Office Ennistymon, Ireland Owned 62,000 Manufacturing, Sales, Service, Office Sioux Falls, SD, USA Leased 277,000 Manufacturing, Sales, Service, Office Shanghai, China Leased 152,000 Manufacturing, Sales, Service, Office We also utilize sales and service offices located throughout the United States, Canada, Europe, and the Asia-Pacific region.
Biggest changeOur principal properties consist of the following: Facilities Owned or Leased Square Footage Facility Activities Brookings, SD, USA Owned 771,000 Corporate Office, Manufacturing, Sales, Service Redwood Falls, MN, USA Owned 151,000 Manufacturing, Sales, Service, Office Ennistymon, Ireland Owned 62,000 Manufacturing, Sales, Service, Office Sioux Falls, SD, USA Leased 296,000 Manufacturing, Sales, Service, Office Shanghai, China Leased 152,000 Manufacturing, Sales, Service, Office 21 Table of Contents We also utilize sales and service offices located throughout the United States, Canada, Europe, and the Asia-Pacific region.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeCommitments and Contingencies" of the Notes to our Consolidated Financial Statements included in this Form 10-K for further information on any legal proceedings and claims. 21 Table of Contents Item 4. MINE SAFETY DISCLOSURES Not applicable. PART II
Biggest changeCommitments and Contingencies" of the Notes to our Consolidated Financial Statements included in this Form 10-K for further information on any legal proceedings and claims. Item 4. MINE SAFETY DISCLOSURES Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOn December 2, 2021, the Board of Directors of Daktronics voted to reauthorize the stock repurchase program. During fiscal 2021, we had no repurchases of shares of our outstanding common stock. During fiscal 2022 and 2020, we repurchased 0.6 million and 1.0 million, respectively, shares of common stock at a total cost of $3.2 million and $5.6 million, respectively.
Biggest changeOn December 2, 2021, the Board of Directors of Daktronics voted to reauthorize the stock repurchase program. During fiscal 2023 and 2021, we had no repurchases of shares of our outstanding common stock. During fiscal 2022, we repurchased 0.6 million shares of common stock at a total cost of $3.2 million.
Share Repurchases On June 17, 2016, our Board of Directors approved a stock repurchase program under which Daktronics may purchase up to $40 million of its outstanding shares of common stock.
As of June 30, 2023, we had 930 shareholders of record. Share Repurchases On June 17, 2016, our Board of Directors approved a stock repurchase program under which Daktronics may purchase up to $40.0 million of its outstanding shares of common stock.
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As of June 2, 2022, we had 948 shareholders of record. The following graph shows changes during the period from April 29, 2017 to April 30, 2022 in the value of $100 invested in: (1) our common stock; (2) The Nasdaq Composite; and (3) the Standard and Poor's 600 Index for Electronic Equipment Manufacturers.
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As of April 29, 2023, we had $29.4 million of remaining capacity under our current share repurchase program.
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The values of each investment as of the dates indicated are based on share prices plus any cash dividends, with the dividends reinvested on the date they were paid. The calculations exclude trading commissions and taxes.
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As of April 30, 2022, we had $29.4 million of remaining capacity under our current share repurchase program. 22 Table of Contents The following table provides information about share repurchases of common stock during the fourth quarter of fiscal 2022: Period Total number of shares purchased Average price paid per share (including fees) Total number of shares purchased as part of publicly announces plans or programs Approximate dollar value of shares may yet be purchased under the share repurchase program (1) January 30, 2022 - February 26, 2022 — — — $ 29,539,079 February 27, 2022 - March 26, 2022 40,919 $ 4.50 40,919 29,354,956 March 27, 2022 - April 30, 2022 — — — 29,354,956 Total 40,919 40,919 (1) The share repurchases described in the above table were made pursuant to the $40.0 million share repurchase program authorized by the Board of Directors on June 17, 2016 and reinstated on December 2, 2021.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFor the long-term, we believe the International business unit has the potential for sales growth as we penetrate markets with our established sales networks to increase our International market share, continue to enhance our tailored portfolio of product and control solution offerings, invest in additional distribution methods, and expect the trend of increased use and adoption of our technology globally to continue. 29 Table of Contents Gross Profit and Contribution Margin Year Ended April 30, 2022 May 1, 2021 (in thousands) Amount As a Percent of Net Sales Amount As a Percent of Net Sales Gross Profit: Commercial $ 31,851 20.7 % $ 33,072 26.0 % Live Events 21,787 10.9 24,397 17.1 High School Park and Recreation 35,477 31.7 31,472 34.4 Transportation 18,172 29.0 20,329 34.9 International 9,410 11.3 11,313 18.3 $ 116,697 19.1 % $ 120,583 25.0 % Fiscal Year 2022 as compared to Fiscal Year 2021 The decline in gross profit percentage in fiscal 2022 is primarily related to the ongoing supply chain disruptions and inflationary challenges in materials, freight, tariff, and personnel related costs; the difference in sales mix between periods; other factors experienced during fiscal 2021 which had a positive impact on fiscal 2021 margins; and an increase in warranty expense in fiscal 2022.
Biggest changeGross Profit and Contribution Margin Year Ended April 29, 2023 April 30, 2022 (in thousands) Amount As a Percent of Net Sales Amount As a Percent of Net Sales Gross Profit: Commercial $ 31,155 18.3 % $ 31,851 20.7 % Live Events 49,255 17.3 21,787 10.9 High School Park and Recreation 41,145 29.0 35,477 31.7 Transportation 19,825 27.4 18,172 29.0 International 9,975 11.8 9,410 11.3 $ 151,355 20.1 % $ 116,697 19.1 % Fiscal Year 2023 as compared to Fiscal Year 2022 The increase in gross profit percentage in fiscal 2023 was primarily due to strategic pricing actions implemented in late fiscal year 2022 and the beginning of fiscal year 2023 and increased productivity starting late in the second quarter of fiscal 28 Table of Contents 2023 because of fewer supply chain and operational disruptions and investments in capacity.
Over the long-term, we believe growth in the High School Park and Recreation business unit will result from a number of factors, including: • Increased demand for video systems in high schools as school districts realize the revenue generating potential of these displays compared to traditional scoreboards and these systems' ability to provide or enhance academic curriculum offerings for students. 25 Table of Contents • Increased demand for different types of displays and dynamic messaging systems, such as message centers at schools to communicate to students, parents and the broader community. • Lower system costs driving the use of more sophisticated displays in school athletic facilities, such as large integrated video systems. • Expanding control system options tailored for the markets' needs. • Certain display requirements for sporting events.
High School Park and Recreation Business Unit: Over the long-term, we believe growth in the High School Park and Recreation business unit will result from a number of factors, including: • Increased demand for video systems in high schools as school districts realize the revenue generating potential of these displays compared to traditional scoreboards and these systems' ability to provide or enhance academic curriculum offerings for students. 24 Table of Contents • Increased demand for different types of displays and dynamic messaging systems, such as message centers at schools to communicate to students, parents and the broader community. • Lower system costs driving the use of more sophisticated displays in school athletic facilities, such as large integrated video systems. • Expanding control system options tailored for the markets' needs. • Certain display requirements for sporting events.
Over the long-term, we believe growth in the Live Events business unit will result from a number of factors, including: • Facilities spending more on larger display systems to enhance the game-day and event experience for attendees. • Lower product costs, driving an expansion of the marketplace. • Our product and service offerings, including additional micro-LED offerings which remain the most integrated and comprehensive offerings in the industry. • The competitive nature of sports teams, which strive to out-perform their competitors with display systems. • The desire for high-definition video displays, which typically drive larger displays or higher resolution displays, both of which increase the average transaction size. • Dynamic messaging system needs throughout a sports facility. • Increasing use of LED technologies replacing signage previously using LCD technology in and surrounding live events facilities. • Replacement cycles within each of these areas.
Live Events Business Unit: We believe growth in the Live Events business unit will result from a number of factors, including: • Facilities spending more on larger display systems to enhance the game-day and event experience for attendees. • Lower product costs, driving an expansion of the marketplace. • Our product and service offerings, including additional micro-LED offerings which remain the most integrated and comprehensive offerings in the industry. • The competitive nature of sports teams, which strive to out-perform their competitors with display systems. • The desire for high-definition video displays, which typically drive larger displays or higher resolution displays, both of which increase the average transaction size. • Dynamic messaging system needs throughout a sports facility. • Increasing use of LED technologies replacing signage previously using LCD technology in and surrounding live events facilities. • Replacement cycles within each of these areas.
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), customer relationship management/marketing systems, bad debt expenses, third-party commissions, and other 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.
A critical accounting policy is defined as a policy that is both very important to the portrayal of a company's financial condition and results and requires management's most difficult, subjective or complex judgments. We regularly review our critical accounting policies and evaluate them based on these factors.
A critical accounting policy is defined as a policy that is both very important to the portrayal of a company's financial condition and results and requires management's most difficult, subjective or complex judgments. We regularly review our 25 Table of Contents critical accounting policies and evaluate them based on these factors.
We expect this business unit's size to remain stable over the long-term, assuming favorable economic condition, and success in maintaining market share by counteracting competitive pressures.
We expect this business unit's size to remain stable over the long-term, assuming favorable economic conditions, and success in maintaining market share by counteracting competitive pressures.
Increased demand is possible from national retailers, quick-serve restaurants, petroleum retailers, and other nationwide organizations. • Additional standard display offerings using micro-LED designs. • Increasing use of LED technologies replacing signage previously using LCD technology by existing and new customers. • Increasing interest in spectaculars, which include very large and sometimes highly customized displays as part of entertainment venues such as casinos, shopping centers, cruise ships and Times Square type locations. • New market adoption and expansion for use of LED in government and military and corporate campuses. • Dynamic messaging systems demand growth due to market adoption and expanded use of this technology. • The use of architectural lighting products for commercial buildings, which real estate owners use to add accents or effects to an entire side or circumference of a building to communicate messages or to decorate the building. • The continued deployment of digital billboards as OOH advertising companies continue developing new sites and replacing digital billboards reaching end of life.
Increased demand is possible from national retailers, quick-serve restaurants, petroleum retailers, and other nationwide organizations. • Additional standard display offerings using micro-LED designs. • Increasing use of LED technologies replacing signage previously using LCD technology by existing and new customers. • Development and marketing alternative low-power and sustainable solutions for installations in power constrained areas or for customers desiring these types of products. • Increasing interest in spectaculars, which include very large and sometimes highly customized displays as part of entertainment venues such as casinos, shopping centers, cruise ships and Times Square type locations. • New market adoption and expansion for use of LED in government and military and corporate campuses. • Dynamic messaging systems demand growth due to market adoption and expanded use of this technology. • The use of architectural lighting products for commercial buildings, which real estate owners use to add accents or effects to an entire side or circumference of a building to communicate messages or to decorate the building. • The continued deployment of digital billboards as OOH advertising companies continue developing new sites and replacing digital billboards reaching end of life.
We continue to broaden our product offerings into the transportation segment in Europe and the Middle East. • Continued focus on sports facility, spectacular-type, OOH advertising products, and architectural lighting market opportunities and the factors listed in each of the other business units to the extent they apply outside of the United States and Canada. • Increasing interest in spectaculars, which include very large and sometimes highly customized displays as part of entertainment venues such as casinos, shopping centers, cruise ships and city-center locations. • New market adoption and expansion of use of LED in government and military and corporate campuses. • Additional opportunities exist with expanded market usage of LED technology due to price considerations, usage of LED technology replacing prior LCD installations and additional display offerings using micro-LEDs. • Our product and service offerings, including additional micro-LED offerings which remain the most integrated and comprehensive offerings in the industry. • Growing our reseller channels to promote our products and gain market share.
We continue to broaden our product offerings into the transportation segment in Europe and the Middle East. • Continued focus on sports facility, spectacular-type, OOH advertising products, and architectural lighting market opportunities and the factors listed in each of the other business units to the extent they apply outside of the United States and Canada. • Increasing interest in spectaculars, which include very large and sometimes highly customized displays as part of entertainment venues such as casinos, shopping centers, cruise ships and city-center locations. • New market adoption and expansion of use of LED in government and military and corporate campuses. • Additional opportunities exist with expanded market usage of LED technology due to price considerations, usage of LED technology replacing prior LCD installations and additional display offerings using micro-LEDs. • Development and marketing alternative low-power and sustainable solutions for installations in power constrained areas or for customers desiring these types of products. • Our product and service offerings, including additional micro-LED offerings, which remain the most integrated and comprehensive offerings in the industry. • Growing our reseller channels to promote our products and gain market share.
It is difficult to project gross profit levels for fiscal 2023 because of the uncertainty regarding the level of sales, the sales mix, price strategy and timing of sales generation, the COVID-19 impact, potential inflation and the availability of materials, labor, and freight, and the competitive factors in our business.
It is difficult to project gross profit levels for fiscal 2024 because of the uncertainty regarding the level of sales, the sales mix, price strategy and timing of sales generation, potential inflation, the availability of materials, labor, and freight, and the competitive factors in our business.
We are sometimes required to obtain performance bonds for display installations, and we have a bonding line available through a surety company for an aggregate of $150.0 million in bonded work outstanding. If we were unable to complete the work, and our customer would call upon the bond for payment, the surety company would subrogate its loss to Daktronics.
We are sometimes required to obtain performance bonds for display installations, and we have bonding capacity available through surety companies for an aggregate of $165.0 million in bonded work outstanding. 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 April 30, 2022 and May 1, 2021, we had approximately $28.9 million and $26.0 million accrued for these warranty obligations, respectively. Due to the difficulty in estimating probable costs related to certain warranty obligations, there is a reasonable likelihood that the ultimate remaining costs to remediate the warranty claims could differ materially from the recorded accrued liabilities.
As of April 29, 2023 and April 30, 2022, we had approximately $32.5 million and $28.9 million accrued for these warranty obligations, respectively. Due to the difficulty in estimating probable costs related to certain warranty obligations, there is a reasonable likelihood that the ultimate remaining costs to remediate the warranty claims could differ materially from the recorded accrued liabilities.
Total warranty expense as a percent of sales increased to 1.9 percent for fiscal 2022 as compared to 1.4 percent during fiscal 2021.
Total warranty expense as a percent of sales increased to 2.1 percent for fiscal 2023 as compared to 1.9 percent during fiscal 2022.
We had $7.1 million of retainage on long-term contracts included in receivables and contract assets as of April 30, 2022, which has an impact on our liquidity. We expect to collect these amounts within one year.
We had $10.4 million of retainage on long-term contracts included in receivables and contract assets as of April 29, 2023, which has an impact on our liquidity. We expect to collect these amounts within one year.
We believe the estimation process for uniquely configured contracts and warranties are most material and critical. These areas contain estimates with a reasonable 26 Table of Contents likelihood to change, and those changes could have a material impact on our financial condition and reported results of operations.
We believe the estimation process for uniquely configured contracts and warranties are most material and critical. These areas contain estimates with a reasonable likelihood to change, and those changes could have a material impact on our financial condition and reported results of operations. The estimation processes for these areas are also difficult, subjective and use complex judgments.
The effects of an adverse economy are generally less severe on our sports related business as compared to our other businesses, although in severe economic downturns with social changes causing decreases in sporting event revenues, the sports business can also be seriously impacted.
The effects of an adverse economy are generally less severe on our sports related business as compared to our other businesses, although in severe economic downturns with social changes causing decreases in sporting event revenues, the sports business can also be seriously impacted. Outlook: Daktronics endured a dynamic operating environment through the pandemic years.
These strategies align us to effectively deliver value to our varied customers and their market needs, while serving our stakeholders over the long-term. We focus on creating local capabilities for sales, service, and manufacturing in geographies with expected digital market opportunities.
These strategies align us to effectively deliver value to our varied customers and their market needs, while serving our stakeholders over the long-term. We focus on creating local capabilities for sales, service, and manufacturing in geographies with expected digital market opportunities. We believe consistently generating profitable growth will provide value to our stakeholders (customers, employees, shareholders, suppliers, and communities).
We believe consistently generating profitable growth will provide value to our stakeholders (customers, employees, shareholders, suppliers, and communities). 23 Table of Contents We measure our success using a variety of measures including: • our percentage of market share by comparing our estimated revenue to the total estimated global digital display revenue; • our order growth compared to the overall digital market order change; • financial metrics such as annual order volume and profit change as compared to our previous financial results; • customer retention and expansion rates; and • our ability to generate profits over the long-term to provide a shareholder return.
We measure our success using a variety of measures including: • our percentage of market share by comparing our estimated revenue to the total estimated global digital display revenue; • our order growth compared to the overall digital market order change; • financial metrics such as annual order volume and profit change as compared to our previous financial results; • customer retention and expansion rates; and • our ability to generate profits over the long-term to provide a shareholder return.
Competitors' offerings, actions and reactions also can vary and change over time or in certain customer situations. Projects with multimillion-dollar revenue potential attract competition, and competitors can use marketing or other tactics to win business. Each business unit's long-term performance can be impacted by economic conditions in different ways and to different degrees.
Projects with multimillion-dollar revenue potential attract competition, and competitors can use marketing or other tactics to win business. Each business unit's long-term performance can be impacted by economic conditions in different ways and to different degrees.
Proceeds from the sales of property and equipment totaled $0.9 million in fiscal 2022 compared to $3.2 million in fiscal 2021. Purchase of marketable securities totaled $4.0 million in fiscal 2022 compared to no purchases of marketable securities in fiscal 2021.
Proceeds from the sales of property and equipment totaled $0.8 million in fiscal 2023 compared to $0.9 million in fiscal 2022. Purchases of marketable securities totaled $4.0 million in fiscal 2022 compared to the sale of $3.5 million of marketable securities in fiscal 2023.
Macroeconomic factors, the discretionary nature of customers committing to new systems or replacements, the pace of market growth, and the uncertainty of the impacts of the supply chain constraints, may impact order bookings and timing, making it difficult to predict order and sales levels for fiscal 2023.
Macroeconomic factors, the discretionary nature of customers committing to new systems or replacements, and the pace of market growth, have impacted order bookings and timing, making it difficult to predict order and sales levels for fiscal 2024.
Product design and development expenses in fiscal 2022 increased as compared to fiscal 2021 primarily due to an increase in personnel related expenses. We expect product design and development expenses to increase for fiscal 2023 as compared to fiscal 2022 due to continued increases in labor costs.
Product design and development expenses in fiscal 2023 increased as compared to fiscal 2022 primarily due to an increase in personnel related expenses.
Over the long-term, we believe growth in the Transportation business unit will result from a number of factors, including: • Increasing applications and acceptance of electronic displays to manage transportation systems, including roadway, airport, parking, transit and other applications. • Effective use of the United States transportation infrastructure requires intelligent transportation systems.
Over the long-term, we believe growth in the Transportation business unit will result from a number of factors, including: • Increasing applications and acceptance of electronic displays to manage transportation systems, including roadway, airport, parking, transit and other applications. • Development and marketing alternative low-power and sustainable solutions for installations in power constrained areas or for customers desiring these types of products. • Effective use of the United States transportation infrastructure requires intelligent transportation systems.
International Business Unit: As most restrictions on gathering are reduced across geographies, more customers are choosing to invest in their digital needs. Over the long-term, we believe growth in the International business unit will result from a number of factors, including: • Achieving greater penetration in various geographies and building products more suited to individual markets.
International Business Unit: Over the long-term, we believe growth in the International business unit will result from a number of factors, including: • Achieving greater penetration in various geographies and building products more suited to individual markets.
Pricing and economic conditions are the principal factors that impact our success in this business unit. We utilize a reseller network to distribute our standard products. • National accounts standard display market opportunities due to customers' desire to communicate their message, advertising and content consistently across the country.
We utilize a reseller network to distribute our standard products. • National accounts standard display market opportunities due to customers' desire to communicate their message, advertising and content consistently across the country.
Our consolidated effective tax rate is impacted by the statutory income tax rates applicable to each of the jurisdictions in which we operate. Due to various factors, and because we operate in multiple state and foreign jurisdictions, our effective tax rate is subject to fluctuation. See "Note 12.
Due to various factors, and because we operate in multiple state and foreign jurisdictions, our effective tax rate is subject to fluctuation. See "Note 12.
On multimillion-dollar orders, the time between order acceptance and project completion may extend up to or exceed 12 months or more depending on the amount of custom work and a customer’s delivery needs. We often receive down payments or progress payments on these orders. We expect to use cash in operations as our business returns and exceeds pre-pandemic levels.
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.
The cost incurred input method measures cost incurred to date compared to estimated total costs for each contract. This method is the most faithful depiction of our performance because it measures the value of the contract transferred to the customer. Costs to perform the contract include direct and indirect costs for contract design, production, integration, installation, and assurance-type warranty reserve.
This method is the most faithful depiction of our performance because it measures the value of the contract transferred to the customer. Costs to perform the contract include direct and indirect costs for contract design, production, integration, installation, and assurance-type warranty reserve. Direct costs include material and components; manufacturing, project management and engineering labor; and subcontracting expenses.
We may have multiple performance obligations in these types of contracts; however, a majority are treated as a combined single performance obligation. In our judgment, this accounting treatment is most appropriate because the substantial part of our promise to our customer is to provide significant integration services and incorporate individual goods and services into a combined output or system.
In our judgment, this accounting treatment is most appropriate because the substantial part of our promise to our customer is to provide significant integration services and incorporate individual goods and services into a combined output or system.
Contribution margin in fiscal 2022 was impacted by the previously discussed sales levels and impacts on gross profit, as well as a 5.0% increase in selling expenses in fiscal 2022 compared to fiscal 2021. Since the beginning of fiscal 2022, we have adjusted our sales and marketing activities and staffing levels to achieve current and expected future sales levels.
Contribution margin in fiscal 2023 was positively impacted by the previously discussed sales levels and impacts on gross profit. We have adjusted our sales and marketing activities and staffing levels to achieve current and expected future sales levels.
Year Ended April 30, 2022 May 1, 2021 (in thousands) Amount As a Percent of Net Sales Dollar Change Percent Change Amount As a Percent of Net Sales Contribution Margin: Commercial $ 16,073 10.4 % $ (2,903) (15.3) % $ 18,976 14.9 % Live Events 11,903 6.0 (3,295) (21.7) 15,198 10.6 High School Park and Recreation 23,587 21.1 2,178 10.2 21,409 23.4 Transportation 14,553 23.2 (2,695) (15.6) 17,248 29.6 International (494) (0.6) 403 (44.9) (897) (1.5) $ 65,622 10.7 % $ (6,312) (8.8) % $ 71,934 14.9 % 30 Table of Contents Fiscal Year 2022 as compared to Fiscal Year 2021 Contribution margin is a non-GAAP measure and consists of gross profit less selling expenses.
Year Ended April 29, 2023 April 30, 2022 (in thousands) Amount As a Percent of Net Sales Dollar Change Percent Change Amount As a Percent of Net Sales Contribution Margin: Commercial $ 14,025 8.2 % $ (2,048) (12.7) % $ 16,073 10.4 % Live Events 39,015 13.7 27,112 227.8 11,903 6.0 High School Park and Recreation 27,621 19.5 4,034 17.1 23,587 21.1 Transportation 15,901 22.0 1,348 9.3 14,553 23.2 International (1,862) (2.2) (1,368) 276.6 (494) (0.6) $ 94,700 12.6 % $ 29,078 44.3 % $ 65,622 10.7 % Fiscal Year 2023 as compared to Fiscal Year 2022 Contribution margin is a non-GAAP measure and consists of gross profit less selling expenses.
Due to a number of factors, such as the discretionary nature of customers committing to a system, economic dependencies, regulatory environments, competitive factors, and supply chain constraints, it is difficult to predict orders and net sales for fiscal 2023.
Due to a number of factors, such as the discretionary nature of customers committing to a system, long replacement cycles, the limited number of large custom projects and competitive factors, advertising revenues during macroeconomic changes, economic dependencies, regulatory environments, and competitive factors, it is difficult to predict orders and net sales for fiscal 2024.
Management's Discussion and Analysis - Fiscal 2021 compared to Fiscal 2020 The comparison of fiscal 2021 with fiscal 2020, including the results of operations and liquidity, can be found in the "Management's Discussion and Analysis" section of our Annual Report on Form 10-K for fiscal 2021, which comparison is incorporated by reference herein.
Risk Factors." This discussion should be read in conjunction with the accompanying Consolidated Financial Statements and Notes to the Consolidated Financial Statements included in this Form 10-K. 22 Table of Contents Management's Discussion and Analysis - Fiscal 2022 compared to Fiscal 2021 The comparison of fiscal 2022 with fiscal 2021, including the results of operations and liquidity, can be found in the "Management's Discussion and Analysis" section of our Annual Report on Form 10-K for fiscal 2022 filed with the SEC on June 16, 2022, which comparison is incorporated by reference herein.
Over the long-term, we believe growth in the Commercial business unit will result from a number of factors, including: • Standard display product market growth due to market adoption and lower product costs, which drive marketplace expansion. Standard display products are used to attract or communicate with customers and potential customers of retail, commercial, and other establishments.
The outlook and unique key growth drivers and challenges by our business units include the following: Commercial Business Unit: Over the long-term, we believe growth in the Commercial business unit will result from a number of factors, including: • Standard display product market growth due to market adoption and lower product costs, which drive marketplace expansion.
We expect growth in the Commercial business unit over the long-term, assuming favorable economic conditions and our success in counteracting competitive pressures. Live Events : The increase in net sales and orders for fiscal 2022 compared to fiscal 2021 was primarily due to high demand for upgraded or new solutions for arenas, university venues, and sports stadiums.
We expect growth in the Commercial business unit over the long-term, assuming favorable economic conditions and our success in counteracting competitive pressures. Live Events : The increase in net sales for fiscal 2023 compared to fiscal 2022 was driven by fulfilling orders in backlog and continued order bookings.
We continue to see ongoing interest from venues at all levels in increasing the size and capabilities of their display systems and in the usage of dynamic messaging systems throughout their facilities in our Live Events business unit marketplace.
Sales growth was driven by strong market demand, increased capacity, and realization of price increases implemented beginning in late fiscal year 2022. 27 Table of Contents We continue to see ongoing interest from venues at all levels in increasing the size and capabilities of their display systems and in the usage of dynamic messaging systems throughout their facilities in our Live Events business unit marketplace.
International : The increase in net sales and orders for fiscal 2022 compared to fiscal 2021 was primarily due to the economic recovery from the COVID-19 pandemic in OOH, transportation, and sport stadium projects. We expect demand for larger video systems for commercial and sports applications, indoor and outdoor OOH applications, and transportation applications to remain strong over the long-term.
International : Net sales were relatively flat for fiscal 2023 compared to fiscal 2022. We expect demand for larger video systems for commercial and sports applications, indoor and outdoor OOH applications, and transportation applications to remain strong over the long-term.
The changes in working capital, particularly changes in accounts receivable, accounts payable, inventory, and contract assets and liabilities, and the sports market seasonality, can have a significant impact on the amount of net cash provided by operating activities largely due to the timing of payments and receipts.
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.
Other expense, net: The change in other income and expense, net for fiscal 2022 as compared to fiscal 2021 , was primarily due to a $0.6 million increase in losses from affiliates accounted for under the equity method of accounting. Income Taxes Our effective tax rate was approximately 46.6 percent for fiscal year 2022.
Other expense, net: The change in other expense, net for fiscal 2023 as compared to fiscal 2022 was primarily due to losses and impairments recorded for equity method affiliates and foreign currency volatility. Income Taxes Our effective tax rate for fiscal 2023 was 48.7 percent.
Direct costs include material and components; manufacturing, project management and engineering labor; and subcontracting expenses. Indirect costs include allocated charges for such items as facilities and equipment depreciation and general overhead. Provisions of estimated losses on uncompleted contracts are made in the period when such losses are capable of being estimated.
Indirect costs include allocated charges for such items as facilities and equipment depreciation and general overhead. Provisions of estimated losses on uncompleted contracts are made in the period when such losses are capable of being estimated. We may have multiple performance obligations in these types of contracts; however, a majority are treated as a combined single performance obligation.
As a result, additional competitors have entered the market, and each year we must sell more product to generate the same or greater level of net sales as in previous fiscal years. However, the decline of digital solution pricing over the years and increased user adoption and applications have increased the size of the global market.
We must sell more products to generate the same or a greater level of net sales as in previous fiscal years. However, the increased user adoption and number of applications available have increased the size of the global market. Competitors' offerings, actions and reactions also can vary and change over time or in certain customer situations.
Cash Flow Information" of the Notes to our Consolidated Financial Statements included in this Form 10-K. Net cash used in investing activities: Net cash used in investing activities totaled $31.4 million for fiscal 2022 compared to $10.2 million in fiscal 2021. Purchases of property and equipment totaled $20.4 million in fiscal 2022 compared to $7.9 million in fiscal 2021.
Net cash used in investing activities: Net cash used in investing activities totaled $25.4 million for fiscal 2023 compared to $31.4 million in fiscal 2022. Purchases of property and equipment totaled $25.4 million in fiscal 2023 compared to $20.4 million in fiscal 2022.
Actual results may differ from these estimates. Revenue recognition on uniquely configured contracts. Revenue for uniquely configured (custom) or integrated systems is recognized over time using the cost incurred input method. Over time revenue recognition is appropriate because we have no alternative use for the uniquely configured system and have an enforceable right to payment for work performed.
Actual results may differ from these estimates. Revenue recognition on uniquely configured contracts. Revenue for uniquely configured (custom) or integrated systems is recognized over time using the cost-to-cost input method by comparing cumulative costs incurred to the total estimated costs and applying that percentage of completion to the transaction price to recognize revenue.
Reconciliation from non-GAAP contribution margin to operating income (loss) GAAP measure is as follows: Year Ended April 30, 2022 May 1, 2021 (in thousands) Amount As a Percent of Net Sales Dollar Change Percent Change Amount As a Percent of Net Sales Contribution margin $ 65,622 10.7 % $ (6,312) (8.8) % $ 71,934 14.9 % General and administrative 32,563 5.3 4,583 16.4 27,980 5.8 Product design and development 29,013 4.7 2,167 8.1 26,846 5.6 Operating income $ 4,046 0.7 % $ (13,062) (76.4) % $ 17,108 3.5 % Fiscal Year 2022 as compared to Fiscal Year 2021 General and administrative expenses for fiscal 2022 increased as compared to the same period one year ago primarily due to increases in personnel related expenses.
Reconciliation from non-GAAP contribution margin to operating income GAAP measure is as follows: Year Ended April 29, 2023 April 30, 2022 (in thousands) Amount As a Percent of Net Sales Dollar Change Percent Change Amount As a Percent of Net Sales Contribution margin $ 94,700 12.6 % $ 29,078 44.3 % $ 65,622 10.7 % General and administrative 38,747 5.1 6,184 19.0 32,563 5.3 Product design and development 29,989 4.0 976 3.4 29,013 4.7 Goodwill Impairment 4,576 0.6 4,576 — — — Operating income $ 21,388 2.8 % $ 17,342 428.6 % $ 4,046 0.7 % 29 Table of Contents Fiscal Year 2023 as compared to Fiscal Year 2022 General and administrative expenses for fiscal 2023 increased as compared to the same period one year ago due to compensation and staffing, marketing expenses, other expense growth, and approximately $4.5 million of discrete professional fees related to the going concern and internal control consultation and shareholder engagement fees.
We will continue to actively invest in new technologies. 31 Table of Contents Other Income and Expenses Year Ended April 30, 2022 May 1, 2021 (in thousands) Amount As a Percent of Net Sales Dollar Change Percent Change Amount As a Percent of Net Sales Interest income (expense), net $ 171 — % $ 236 (363.1) % $ (65) — % Other expense, net $ (3,109) (0.5) % $ (126) 4.2 % $ (2,983) (0.6) % Fiscal Year 2022 as compared to Fiscal Year 2021 The change in interest (expense) income, net for fiscal 2022 as compared to fiscal 2021 was primarily due to the change in investment levels and interest expense for our drawings on the line of credit.
Other Income and Expenses Year Ended April 29, 2023 April 30, 2022 (in thousands) Amount As a Percent of Net Sales Dollar Change Percent Change Amount As a Percent of Net Sales Interest income (expense), net $ (920) (0.1) % $ (1,091) (638.0) % $ 171 — % Other expense, net $ (7,211) (1.0) % $ (4,102) 131.9 % $ (3,109) (0.5) % Fiscal Year 2023 as compared to Fiscal Year 2022 The change in interest income and expense, net for fiscal 2023 as compared to fiscal 2022 was primarily due to utilizing our previous bank line of credit during fiscal 2023 for our strategic investments in inventory.
Several factors, such as transportation funding, the competitive environment, customer delivery changes, and the uncertainty of the impacts of supply chain constraints, make forecasting orders and net sales difficult for fiscal 2023.
Sales growth was driven by strong market demand, increased capacity, and realization of price increases implemented in late fiscal year 2022 and the beginning of fiscal year 2023. Several factors, such as transportation funding, the competitive environment, and customer delivery changes, make forecasting orders and net sales difficult for fiscal 2024.
At April 30, 2022, we had $88.3 million of bonded work outstanding against this line. Our business growth and profitability improvement strategies depend on investments in capital expenditures and strategic investments. We projected capital expenditures to be approximately $30 million for fiscal 2023.
Our business growth and profitability improvement strategies depend on investments in capital expenditures and strategic investments. We are projecting total capital expenditures to be approximately $19.0 million for fiscal 2024.
The effective income tax rate for fiscal 2022 was impacted due to tax benefits from permanent tax credits offset by valuation allowances as well as other various permanent tax adjustments and state taxes with additional expense for prior year provision to return adjustments.
Our effective tax rate for fiscal 2022 was 46.6 percent resulting from the tax benefit of permanent tax credits reduced by valuation allowances, various permanent tax adjustments and state taxes and prior year provision to return adjustments. Our consolidated effective tax rate is impacted by the statutory income tax rates applicable to each of the jurisdictions in which we operate.
LIQUIDITY AND CAPITAL RESOURCES Year Ended (in thousands) April 30, 2022 May 1, 2021 Dollar Change Net cash (used in) provided by: Operating activities $ (27,035) $ 66,212 $ (93,247) Investing activities (31,384) (10,221) (21,163) Financing activities (3,576) (15,585) 12,009 Effect of exchange rate changes on cash (399) (416) 17 Net (decrease) increase in cash, cash equivalents and restricted cash $ (62,394) $ 39,990 $ (102,384) Cash decreased by $62.4 million in fiscal 2022 as compared to an increase of $40.0 million in fiscal 2021.
Income Taxes" of the Notes to our Consolidated Financial Statements included in this Form 10-K for further information. 30 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Year Ended (in thousands) April 29, 2023 April 30, 2022 Dollar Change Net cash (used in) provided by: Operating activities $ 15,024 $ (27,035) $ 42,059 Investing activities (25,388) (31,384) 5,996 Financing activities 17,568 (3,576) 21,144 Effect of exchange rate changes on cash (522) (399) (123) Net (decrease) increase in cash, cash equivalents and restricted cash $ 6,682 $ (62,394) $ 69,076 Net cash (used in) provided by operating activities: Net cash provided by operating activities was $15.0 million for fiscal 2023 compared to $27.0 million net cash used in operating activities in fiscal 2022.
The $93.2 million decrease in cash from operating activities was primarily the result of changes in net operating assets and liabilities and a decrease of $10.3 million in net 32 Table of Contents income. For specific quantitative changes in operating assets and liabilities, see "Note 13.
The $42.0 million increase in cash provided by operating activities was primarily the result of changes in net operating assets and liabilities and an increase of $6.2 million in net income. For specific quantitative changes in operating assets and liabilities, see "Note 13. Cash Flow Information" of the Notes to our Consolidated Financial Statements included in this Form 10-K.
In each 53-week year, an additional week is added to the first quarter, and each of the last three quarters is comprised of a 13-week period. 27 Table of Contents Net Sales The following table shows information regarding net sales for the fiscal years ended April 30, 2022 and May 1, 2021: Year Ended (in thousands) April 30, 2022 May 1, 2021 Dollar Change Percent Change Net Sales: Commercial $ 154,211 $ 127,300 $ 26,911 21.1 % Live Events 199,106 143,049 56,057 39.2 High School Park and Recreation 111,816 91,557 20,259 22.1 Transportation 62,707 58,284 4,423 7.6 International 83,130 61,843 21,287 34.4 $ 610,970 $ 482,033 $ 128,937 26.7 % Orders: Commercial $ 192,917 $ 138,878 $ 54,039 38.9 % Live Events 313,940 157,177 156,763 99.7 High School Park and Recreation 156,305 94,292 62,013 65.8 Transportation 77,993 49,696 28,297 56.9 International 104,916 75,841 29,075 38.3 $ 846,071 $ 515,884 $ 330,187 64.0 % Fiscal Year 2022 as compared to Fiscal Year 2021 During fiscal year 2022, sales and orders increased, as demand was up across all markets compared to fiscal 2021 as the world economies recovered from the economic downturn caused by the COVID-19 pandemic.
In each 53-week year, an additional week is added to the first quarter, and each of the last three quarters is comprised of a 13-week period. 26 Table of Contents Net Sales The following table shows information regarding net sales for the fiscal years ended April 29, 2023 and April 30, 2022: Year Ended (in thousands) April 29, 2023 April 30, 2022 Dollar Change Percent Change Net Sales: Commercial $ 170,590 $ 154,211 $ 16,379 10.6 % Live Events 284,900 199,106 85,794 43.1 High School Park and Recreation 141,748 111,816 29,932 26.8 Transportation 72,306 62,707 9,599 15.3 International 84,652 83,130 1,522 1.8 $ 754,196 $ 610,970 $ 143,226 23.4 % Orders: Commercial $ 158,028 $ 192,917 $ (34,889) (18.1) % Live Events 259,653 313,940 (54,287) (17.3) High School Park and Recreation 144,919 156,305 (11,386) (7.3) Transportation 66,751 77,993 (11,242) (14.4) International 51,603 104,916 (53,313) (50.8) $ 680,954 $ 846,071 $ (165,117) (19.5) % Fiscal Year 2023 as compared to Fiscal Year 2022 For fiscal year 2023, net sales were $754.2 million, an increase of $143.2 million from fiscal year 2022.
We expect larger video systems and our classic scoring and message centers to remain in demand in fiscal 2023, primarily in high school facilities, which benefit from our sports marketing services that generate advertising revenue to fund the display systems and because of schools' desire to communicate with students and parents using these systems.
These facilities benefit from our sports marketing services that generate advertising revenue to fund the display systems, from our curriculum program designed to increase educational use, and because of schools' desire to communicate with students and parents using these systems. Some growth is also expected because of regulatory requirements for certain display types for sports events.
Fiscal 2021 had an overall low market activity in these two particular niches due to the pandemic, and their recovery was strong. The increase in orders for fiscal 2022 compared to fiscal 2021 was primarily due to overall higher market activity in all commercial niches. We continue to see increased adoption of video solutions in our Commercial business unit marketplace.
Commercial : The increase in net sales for fiscal 2023 compared to fiscal 2022 was driven by fulfilling orders in backlog and continued order bookings. We continued to see increased adoption of video solutions in our Commercial business unit marketplace.
Certain factors impact our ability to succeed in these strategies and impact our business units to varying degrees. For example, the overall manufacturing costs and the selling prices of our products impact profitability.
Certain factors impact our ability to succeed in these strategies and impact our business units to varying degrees. For example, due to volatility in our supply chain and labor conditions through the last two years, our lead times and manufacturing and fulfillment costs increased. We deployed various pricing strategies and redesigned products to utilize available raw materials and components.
Net cash used in operating activities: Net cash used in operating activities was $27.0 million for fiscal 2022 compared to $66.2 million net cash provided by operating activities in fiscal 2021.
Net cash (used in) provided by financing activities: Net cash provided by financing activities was $17.6 million for fiscal 2023 due to draws on our previous bank line of credit compared to $3.6 million of net cash used by financing activities for other investing activities in fiscal 2022.
Our fiscal 2021 effective tax rate was approximately 22.3 percent resulting from the tax benefit of permanent tax credits and previous year provision to return adjustments offset by valuation allowances as well as other various permanent tax adjustments and state taxes.
The effective income tax rate for fiscal 2023 was impacted due to valuation allowances on equity investments and on foreign net operating losses in Ireland, goodwill impairment, state taxes, a mix of taxes in foreign countries where the tax rate is higher than the United States, as well as prior year provision to return adjustments reduced in part by tax benefits from permanent tax credits.
Projected capital expenditures include manufacturing equipment for new or enhanced product production, expanded capacity, investments in quality and reliability equipment, and continued information infrastructure investments. The Board of Directors authorized reinstatement of the share repurchase program in December of 2021. Shares may be repurchased from time to time in open market purchases, private transactions or other transactions.
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. We also evaluated and may make strategic investments in new technologies or in our affiliates or acquire companies aligned with our business strategy.
Removed
Risk Factors." This discussion should be read in conjunction with the accompanying Consolidated Financial Statements and Notes to the Consolidated Financial Statements included in this Form 10-K.
Added
However, not all of our competitors were impacted to the same degree in accessibility to parts and components or reacted similarly with pricing. As a result, in some instances, competitors were awarded more business. The cost to produce digital solutions has declined, which has caused a decline of digital solution pricing over the years.
Removed
Due to volatility in our supply chain and labor conditions, our manufacturing costs and selling prices of our products have increased during the 2022 fiscal year and may continue to increase for some time into the future.
Added
At the beginning of the pandemic, orders pulled back swiftly and abruptly, and we lowered capacity. Then order volumes recovered sharply while supply chain disruptions coupled with a tight labor market constrained our ability to deliver efficiently at traditional lead times and service levels. Inflation in parts, components, and labor increased our operating costs and decreased gross margins.
Removed
Our competitors outside the U.S. are impacted differently by the global trade environment allowing them to avoid tariff costs and have access to parts supplies and lower costs of doing business, which may allow them to maintain lower prices or reduce prices.
Added
To adapt to these conditions, our teams came together to take decisive and deliberate actions to improve our customers' experience while implementing strategies to improve our profitability and working capital levels.
Removed
Outlook: Impacts to and changes in global economic conditions are expected as the world economies recover from and react to the COVID-19 pandemic, adjust to changing supply chain conditions and disruptions, and react to the evolving war and geopolitical environment.
Added
Supply chains have gradually been stabilizing, which should allow reduced inventory levels in the coming months as our production levels continue to increase and we are able to purchase less safety stock.
Removed
Supply chain disruptions continue as a result of several factors, including the pandemic lockdowns, shipping container shortages, labor shortages, war and other conflicts, and changes in global demand. We are specifically impacted by the global shortage of semiconductors and related electronic components.
Added
Although the post-pandemic 23 Table of Contents geopolitical situation and global trade patterns continue to evolve, we believe that the levels of uncertainty and volatility will not be as great in the coming months and will continue to stabilize in the coming fiscal year.
Removed
Our production schedules were disrupted because of supply shortages, and we experienced increased input costs in many areas including material, commodity, freight, and tariff costs. Personnel spend also increased throughout the 2022 fiscal year.
Added
We believe the audiovisual industry fundamentals and the development of new technologies and services will drive long-term growth for our business; however, our customers may reduce their spend on audiovisual systems and related services because of the impacts of global economic conditions, war and geopolitical situations, or other factors outside of our control.
Removed
We have responded to input cost increases by increasing pricing, and we began quoting at the new price levels across the business areas in the third quarter of fiscal 2022. Certain areas will see additional increases at the beginning of fiscal 2023. We also use pricing policies and opportunity evaluations across markets to manage price levels.
Added
Standard display products are used to attract or communicate with customers and potential customers of retail, commercial, and other establishments. Pricing and economic conditions are the principal factors that impact our success in this business unit.
Removed
We will continue to monitor our supply chains and our marketplaces and adapt our pricing methodologies as we see appropriate. Although we cannot predict the length or severity of these conditions, we expect continued disruptions in obtaining material, commodities, labor, and freight availability and an increase in inflation.
Added
Over time revenue recognition is appropriate because we have no alternative use for the uniquely configured system and have an enforceable right to payment for work performed, including a reasonable profit margin. The cost-to-cost input method measures cost incurred to date compared to estimated total costs for each contract.
Removed
We also expect impacts to the global economic conditions in reaction to the evolving war and geopolitical environment.
Added
The year-over-year growth was driven by fulfilling orders in backlog and continued order bookings. Sales growth was driven by strong market demand, increased capacity, and realization of price increases implemented beginning in late fiscal year 2022.
Removed
Due to longer planning horizons and volatility in supply chains, we plan to carry higher quantities of inventory and anticipate changes in the timing of payments from our customers as we work through different disruptions and fulfill our backlog, all likely creating a consumption of cash.
Added
We have seen stabilizing and improving supply chain conditions and have invested in automated machinery and equipment and in labor capacity to increase the rate of conversion of orders into sales, creating more throughput in our factories. Order volume decreased in fiscal year 2023 from fiscal year 2022.
Removed
We are also planning additional cash use for capital spending to grow our manufacturing capacity. All of these conditions have and will continue to cause volatility in our cash flow, pricing, order volumes, lead-times, competitiveness, revenue cycles, and production costs, and it is likely these conditions will have some negative impact in fiscal 2023.
Added
Fiscal 2022 saw a record number of orders from pent-up demand after COVID, though orders for fiscal 2023 continued to be strong. Macroeconomic and geopolitical conditions caused the decline in orders in the International business unit.
Removed
However, the full impact to our financial condition, results of operations and cash flows cannot be determined at this time.
Added
High School Park and Recreation : The increase in net sales for fiscal 2023 compared to fiscal 2022 was driven by fulfilling orders in backlog and strong market demand, increased capacity, and realization of price increases implemented beginning in late fiscal year 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

13 edited+3 added−3 removed1 unchanged
Biggest changeWe do not expect our income or cash flows to be significantly impacted by interest rates. Commodity Risk We are dependent on basic raw materials, sub-assemblies, components, and other supplies used in our production operations. Our financial results have been and could continue to be affected by changes in the availability, prices, and global tariff regulation of these materials.
Biggest changeInterest Rate Risks Our exposure to market risks relate primarily to changes in interest rates on our financing agreements, cash, and marketable securities. We do not expect our income or cash flows to be significantly impacted by interest rates. Commodity Risk We are dependent on basic raw materials, sub-assemblies, components, and other supplies used in our production operations.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Foreign Currency Exchange Rates Our results of operations could be affected by factors such as changes in foreign currency rates or weak economic conditions in foreign markets. We derive net sales in U.S. dollars and other currencies including Canadian dollars, Euros, Chinese renminbi, British pounds, Australian dollars, or other currencies.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Foreign Currency Exchange Rates Our results of operations could be affected by factors such as changes in foreign currency rates or weak economic conditions in foreign markets. We derive net sales in United States dollars and other currencies including Canadian dollars, Euros, Chinese renminbi, British pounds, Australian dollars, or other currencies.
As a result, operating results may become more subject to fluctuations based upon changes in the exchange rates of certain currencies in relation to the U.S. dollar.
As a result, operating results may become more subject to fluctuations based upon changes in the exchange rates of certain currencies in relation to the United States dollar.
Our sourcing and material groups work to implement strategies to monitor and mitigate these risks. Periodically, we enter into pricing agreements or purchasing contracts under which we agree to purchase a minimum amount of product in exchange for guaranteed price terms over the length of the contract, which generally does not exceed one year.
Periodically, we enter into pricing agreements or purchasing contracts under which we agree to purchase a minimum amount of product in exchange for guaranteed price terms over the length of the contract, which generally does not exceed one year. 34 Table of Contents
Any of these factors may cause a sudden increase in costs and/or limited or unavailable supplies. As a result, we may not be able to acquire key production materials on a timely basis, which could adversely impact our ability to produce products and satisfy incoming sales orders on a timely basis.
As a result, we may not be able to acquire key production materials on a timely basis, which could adversely impact our ability to produce products and satisfy incoming sales orders on a timely basis. Our sourcing and material groups work to implement strategies to monitor and mitigate these risks.
Some of these materials are sourced from one or a limited number of suppliers in countries around the world. Some of these materials are also key source materials for our competitors and for other technology companies. Some of these materials are sourced outside of the countries in which we manufacture our products and are subject to transportation delays.
Our financial results have been and could continue to be affected by changes in the availability, prices, and global tariff regulation of these materials. Some of these materials are sourced from one or a limited number of suppliers in countries around the world. Some of these materials are also key source materials for our competitors and for other technology companies.
We estimate that a 10 percent change in all foreign exchange rates would impact our reported income before taxes by approximately $0.8 million. This sensitivity analysis disregards the possibilities that rates can move in opposite directions and that losses from one geographic area may be offset by gains from another geographic area.
This sensitivity analysis disregards the possibilities that rates can move in opposite directions and that losses from one geographic area may be offset by gains from another geographic area.
To the extent we engage in international sales denominated in U.S. dollars, an increase in the value of the U.S. dollar relative to foreign currencies could make our products less competitive in international markets. This effect is also impacted by sources of raw materials from international sources and costs of our sales, service, and manufacturing locations outside the U.S.
To the extent we engage in international sales denominated in United States dollars, an increase in the value of the United States dollar relative to foreign currencies could make our products less competitive in international markets.
We will continue to monitor and minimize our exposure to currency fluctuations and, when appropriate, use financial hedging techniques to minimize the effect of these fluctuations. However, exchange rate fluctuations as well as differing economic conditions, changes in political climates, and other rules and regulations could adversely affect our ability to effectively hedge exchange rate fluctuations in the future.
However, exchange rate fluctuations as well as differing economic conditions, changes in political climates, and other rules and regulations could adversely affect our ability to effectively hedge exchange rate fluctuations in the future. We have foreign currency cash accounts to operate our global business. These accounts are impacted by changes in foreign currency rates.
If we believe currency risk in any foreign location or with respect to specific sales or purchase transaction is significant, we utilize foreign exchange hedging contracts to manage our exposure to the currency fluctuations. The notional amount of the foreign currency agreements as of April 30, 2022 was $11.3 million, and all contracts mature within ten months.
We incur expenses in currencies other than United States dollars relating to specific contracts with customers and for our operations outside the United States If we believe currency risk in any foreign location or with respect to specific sales or purchase transaction is significant, we utilize foreign exchange hedging contracts to manage our exposure to the currency fluctuations.
We have foreign currency cash accounts to operate our global business. These accounts are impacted by changes in foreign currency rates. Of our $17.1 million in cash balances at April 30, 2022, $11.7 million were denominated in U.S. dollars, of which $3.9 million were held by our foreign subsidiaries.
Of our $24.0 million in cash balances as of April 29, 2023, $15.9 million were denominated in United States dollars, of which $1.3 million were held by our foreign subsidiaries. As of April 29, 2023, we had an additional $8.1 million in cash balances denominated in foreign currencies, of which $7.7 million were maintained in accounts of our foreign subsidiaries.
These contracts are marked to market each balance sheet date and are not designated as hedges. See "Note 15. Derivative Financial Instruments" of the Notes to our Consolidated Financial Statements included in this Form 10-K for further details.
The notional amount of the foreign currency agreements as of April 29, 2023 was $7.8 million, and all contracts mature within six months. These contracts are marked to market each balance sheet date and are not designated as hedges. See "Note 15.
For fiscal 2022, 15.9 percent of net sales were derived in currencies other than U.S. dollars. We incur expenses in currencies other than U.S. dollars relating to specific contracts with customers and for our operations outside the U.S.
For fiscal 2023, 12.3 percent of net sales were derived in currencies other than United States dollars.
Removed
As of April 30, 2022, we had an additional $5.4 million in cash balances denominated in foreign currencies, of which $4.7 million were maintained in accounts of our foreign subsidiaries. Interest Rate Risks Our exposure to market risks relate primarily to changes in interest rates on cash and marketable securities.
Added
Derivative Financial Instruments" of the Notes to our Consolidated Financial Statements included in this Form 10-K for further details. We estimate that a 10 percent change in all foreign exchange rates would impact our reported income before taxes by approximately $0.4 million.
Removed
Over the years, we have been impacted by the factors noted. During late fiscal 2021 and through fiscal 2022, supply chain disruptions began to emerge because of the COVID-19 pandemic, shipping container shortages, and the changes in global demand.
Added
This effect is also impacted by sources of raw materials from international sources and costs of our sales, service, and manufacturing locations outside the United States We will continue to monitor and minimize our exposure to currency fluctuations and, when appropriate, use financial hedging techniques to minimize the effect of these fluctuations.
Removed
Specifically, we are impacted by the global inflation and shortage of semiconductors and related electronic components, other materials needed for production, and freight. We are unable to predict the supply chain recovery or the impact to our business. 34 Table of Contents
Added
Some of these materials are sourced outside of the countries in which we manufacture our products and are subject to transportation delays. Any of these factors may cause a sudden increase in costs and/or limited or 33 Table of Contents unavailable supplies.

Other DAKT 10-K year-over-year comparisons