The number of shares of the Registrant’s Common Stock outstanding as of June 3, 20212, 2022 was 45,146,408.

45,033,839.

SPECIAL NOTE REGARDING FORWARD–LOOKING STATEMENTS

Description of Business

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. Fuelight™ digit displays are specifically designed for the petroleum industry, offering high visibility and quick fuel price updates using the Fuelink™ control software.

As of May 1, 2021,April 30, 2022, we employed approximately 1,9812,246 full-time employees and 136231 part-time and temporary employees. Of these employees, approximately 695937 were in manufacturing, 426468 were in sales and marketing, 473503 were in customer service, 331354 were in engineering and 192215 were in general and administrative. None of our employees are represented by a collective bargaining agreement. We believe employee relations are good.

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 cannot control all the various factors that might affect our suppliers' timely and effective delivery of raw materials and components to our manufacturing facilities or the availability of freight capacity for us to deliver products to our customers.

Our utilization of a complex supply chain for raw material and component imports and the global distribution of our products makes us vulnerable to many risks, including, among other things, risks of damage, destruction or confiscation of products while in transit to and from our manufacturing facilities; organized labor strikes and work stoppages, such as labor disputes or related employee worker unavailability, that could disrupt operations at ports-of-entry; transportation and other delays in shipments as a result of heightened security screening and inspection processes or other port-of-entry limitations or restrictions; unexpected or significant port congestion; lack of freight availability; and freight cost increases. In addition, we may be required to arrange for products to be delivered through airfreight, which is significantly more expensive than standard shipping by sea. We may not be able to obtain sufficient freight capacity on a timely basis or at favorable shipping rates and, therefore, may not be able to timely receive shipments of raw materials and components or deliver products to customers.

Price fluctuations in, and shortages of, raw materials, components, and related transportation costs and tariffs can have a significant impact on our price competitiveness and/or ability to produce our products, which could cause harm to our sales, financial condition and results of operations.

Price fluctuations and shortages of any raw materials and components used to manufacture our products can occur due to various factors (such as worldwide demand, natural disasters, logistic disruptions, and trade regulations). Electronic components 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 and economic factors. If we experience shortages or increases in the price of 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. 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 that could negatively impact our profits.

During late fiscal 2021, supply chain disruptions began to emerge because of COVID-19, shipping container shortages, winter weather, and the changes in global demand. Specifically, we are impacted by the global shortage of semiconductors and related electronic components, other materials needed for production, and freight availability. We are unable to predict the supply chain recovery or the impact to our business.

As a result of U.S. Administrative trade actions in 2019, we experienced volatility in supply and increases in the prices of aluminum, electrical, and other components we use in our production. 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. We continue to monitor the situation and evaluate ways to minimize these impacts through vendor negotiations, alternative sources, and potential price adjustments. We estimate our financial results were adversely impacted by approximately $2.9 million, $4.9 million, and $2.5 million of additional costs for tariffs in fiscal 2021, 2020 and 2019, respectively. Additionally in 2019, we incurred $3.8 million in costs due to extended lead-times and price volatility.

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.

Backlog may not be indicative of future revenue or profitability.

Many of our products have long sales, delivery and acceptance cycles. 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. 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.

We depend on a single-source or a limited number of suppliers for our raw materials and components from countries around the world. The loss, an interruption, or a material change in our business relationships with our suppliers could cause a disruption in supply and a substantial increase in the costs of such materials. Such changes could cause harm to our sales, financial condition, and results of operations.

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. 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.

An interruption from our suppliers of raw materials or components could affect our ability to manufacture our products until a new source of supply is located and, therefore, could have a material adverse effect on our business, financial condition or results of operations. Although we believe our supply of raw materials and components generally is adequate for the needs of our business, we cannot assure that new sources of supply will be available if needed.

We may depend on third parties to complete 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. If we are unable to hire qualified subcontractors, find qualified manufacturers for on-site elements, find qualified contract manufacturers, or purchase specialty non-display system elements, our ability to successfully complete a project could be impaired. If we are not able to locate qualified third-party subcontractors or manufacturers, the amount we are required to pay may exceed what we have estimated, and we may suffer losses on these contracts. If the subcontractor or manufacturer fails to perform, we may be required to source these services to other third parties on a delayed basis or on less favorable terms, which could impact contract profitability. There is a risk that we may have disputes with our subcontractors relating to, among other things, the quality and timeliness of work performed, customer concerns about the subcontractor, or faulty workmanship resulting in claims against us for failure to meet required project specifications and negatively impacting our financial condition and results of operations.

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.

Unanticipated events resulting in credit losses to us could have a material adverse impact on our financial results.

Significant portions of our sales are to customers who place large orders for custom products. We closely monitor the creditworthiness of our customers and have not, to date, experienced significant credit losses. We mitigate our exposure to credit risk, to some extent, by requiring deposits, payments prior to shipment, progress payments and letters of credit. However, because some of our exposure to credit losses is outside of our control, unanticipated events resulting in credit losses could have a material adverse impact on our operating results.

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 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.

The following factors are among those that could complicate capacity planning for market demand:

The terms and conditions of our credit facilities impose restrictions on our operations, and if we default on our credit facilities, it could have a material adverse effect on our results of operations and financial condition and make us vulnerable to adverse economic or industry conditions and cause liquidity issues.

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

If goodwill or other intangible assets in connection with our acquisitions become impaired, we could take significant non-cash charges against earnings.

Significant changes in the market price of our common stock could result in securities litigation claims against us.

The following graph shows changes during the period from April 29, 2017 to April 30, 2016 to May 1, 20212022 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. 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.

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. Under this program, we may repurchase shares from time to time in open market transactions and in privately negotiated transactions based on business, market, applicable legal requirements and other considerations. The repurchase program does not require the repurchase of a specific number of shares and may be terminated at any time. In April 2020, the Board suspended the program. On December 2, 2021, the Board of Directors of Daktronics voted to reauthorize the stock repurchase program. During fiscal 20192021, we had no repurchases inof 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, and the program has been suspended since April 1, 2020 as part of the Company's COVID response.respectively. As of May 1, 2021,April 30, 2022, we had $32.5$29.4 million of remaining capacity under our current share repurchase program.

Item 6. SELECTED FINANCIAL DATA

Not applicable.

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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.

Repurchases of shares are treated as dividends under the South Dakota Business Corporation Act (which is codified as Chapter 47-1A to the South Dakota statutes), so our repurchases of shares could be affected by the limitations imposed on dividends in our credit facility, as further described in "Note 7. Financing Agreements" of the Notes to our Consolidated Financial Statements included in this Form 10-K.

Item 6. [Reserved]

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion provides our highlights and commentary related to factors impacting our financial conditions and further describes the results of operations. The most significant risks and uncertainties are discussed in "Item 1A. 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.

Management's Discussion and Analysis - Fiscal 20202021 compared to Fiscal 2019

2020

The comparison of fiscal 20202021 with fiscal 2019,2020, including the results of operations and liquidity, can be found in the "Management's Discussion and Analysis" section of our Annual Report on 2020 Form 10-K, for fiscal 2021, which comparison is incorporated by reference herein.

EXECUTIVE OVERVIEW

Our mission is to be thea world leader at informing and entertaining audiences through dynamic audio-visual communication systems. We organize into business units to focus on customer loyalty over time and earn new and replacement business as our products have a finite lifetime. See "Note 3. Segment Reporting" of the Notes to our Consolidated Financial Statements included in this Form 10-K for further information. Our strategies include the creation of a comprehensive line of innovative solutions and systems and our ability to create and leverage platform designs and technologies. 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).

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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.

•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.

Certain factors impact our ability to succeed in these strategies and impact our business units to varying degrees. For example, the overall manufacturing costcosts and the selling prices of our products impact profitability. Due to volatility in our supply chain and labor conditions, our manufacturing costs and selling prices of our products have decreased overincreased during the years2022 fiscal year and are expected tomay continue to decrease inincrease for some time into the future. 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. 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.

Competitor

Competitors' offerings, actions and reactions also can vary and change over time or in certain customer situations. Projects with multimillion-dollar revenue potential attractsattract 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. 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: The Impacts to and changes in global economic conditions are expected as the world economies recover from and react to the COVID-19 pandemic, has created global disruptions since its initial outbreak and our reactionadjust to it continue to evolve. The future extent to which COVID-19 will impact our business will depend on future developments that are uncertain and cannot be predicted with confidence. Developments include the ultimate severity, spread, and containment of the disease, the duration of the pandemic or any strain reemergence, the global availability and effectiveness of vaccines, global travel restrictions and social distancing requirements, the pace and extent of the economic recovery, and any change in trends and practices in how people gather. Our customer reduced their spend on audiovisual systems and related services in fiscal 2021 as they worked through the economic and business implications of COVID-19. As economies and restrictions ease, we believe our markets will recover and we will be poised to grow over the long-term. 

During fiscal 2021, we lowered overall staffing and benefit levels and temporarily furloughed employees to achieve lower operating costs to align with the uncertainties created by the COVID-19 pandemic. These reductions vary in permanency and some will not be sustainable through fiscal 2022 as our order and sales volumes begin to recover towards pre-pandemic levels.

Late in our fiscal 2021,changing supply chain conditions and disruptions, beganand react to emergethe evolving war and geopolitical environment.

Supply chain disruptions continue as a result of several factors, including the pandemic lockdowns, shipping container shortages, winter weather,labor shortages, war and theother conflicts, and changes in global demand. Specifically, weWe are specifically impacted by the global shortage of semiconductors and related electronic components, other materials needed forcomponents. Our production schedules were disrupted because of supply shortages, and we experienced increased input costs in many areas including material, commodity, freight, availability. and tariff costs. Personnel spend also increased throughout the 2022 fiscal year.

We expect headwindshave responded to input cost increases by increasing pricing, and we began quoting at the new price levels across the business areas in material, labor, freight availabilitythe third quarter of fiscal 2022. Certain areas will see additional increases at the beginning of fiscal 2023. We also use pricing policies and inflationopportunity evaluations across markets to manage price levels. We will continue to monitor our supply chains and our marketplaces and adapt our pricing methodologies as the world economies recover, which may cause volatility in our revenue cycles and production costs. Whilewe 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. We also expect impacts to the global economic conditions in reaction to the evolving war and geopolitical environment. 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. 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 reasonably possible theylikely these conditions will have some negative impact onin fiscal 2023. However, the full impact to our financial condition, results of operations during fiscal 2022.and cash flows cannot be determined at this time.

During late fiscal 2021, order and quoting activities have increased creating a strong backlog and positive outlook; however, there is no assurance that this trend will continue in future quarters. 

In addition to the COVID-19 and supply chain impacts described above, the outlook and unique key growth drivers and challenges by our business units include:

include the following:

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Commercial Business Unit: Our customers who rely on advertising revenues for Out-of-Home ("OOH") advertising or who are reliantrely on customer foot-traffic to drive sales are beginning to increase their capital spending through the COVID-19 economic recovery. Businesses using our displays for self-promotion or on-premise advertising may have reduced budgets for the foreseeable future or choose to utilize displays as part of their recovery, both actions creating an impact to the Commercial near-term outlook.

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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. 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. 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 liquid crystal display ("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.

•

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. This is dependent on no adverse changes occurring in the digital billboard regulatory environment restricting future billboard deployments, as well as maintaining our current market share in a business that is concentrated in a few large OOH companies.

•

Replacement cycles within each of these areas.

•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. 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. 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. This is dependent on no adverse changes occurring in the digital billboard regulatory environment restricting future billboard deployments, as well as maintaining our current market share in a business that is concentrated in a few large OOH companies.

•Replacement cycles within each of these areas.

Live Events Business Unit: Our During fiscal year 2022, as the restrictions on gathering started to decrease, more customers have been adversely impacted by governmental limitations onchose to invest or upgrade current audiovisual systems in their locations. Some live events customers took advantage of the number of people alloweddowntime during the COVID-19 pandemic to gather in certain spaces as part of COVID-19 safety measures since March 2020 with variedbuild new or no published expiration. In the near-term, our customers who rely on advertisingrenovate existing arenas and event revenuessport stadiums. This created large orders being booked during fiscal year 2022 that are expected to delay spending on projects because of the COVID-19 pandemic. Changes to the ways and willingness of how people gather may change the demand for our systems. As the restrictions of gathering start to decrease, we believe more customers may choose to begin to investbe recognized as sales in their locations.

future fiscal years.

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.

•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.

High School Park and Recreation Business Unit: In the near-term, our customers who rely onare upgrading their equipment as the pandemic eases and advertising revenue for sports installations or who may be impacted by governmental tax revenue availability may choose to delay spending on projects because of the COVID-19 pandemic.

is available.

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.

•

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.

•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.

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•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.

Transportation Business Unit: Daktronics has experienced governmental agencies placing orders as a way to spend their allocated budgets for their fiscal years. In addition, the near term, customersInfrastructure Investment and Jobs Act signed into law in the mass-transit and airport part of the market areNovember 2021, is expected to delay spending ashave a resultpositive impact on all segments of the limited use of this infrastructure during the COVID-19 pandemic. In the long-term, roadway projects may be impacted due to reduced tax revenues. That impact will increase as the duration of the reduction in infrastructure usage continues.

United States transportation terminals and public transit facilities.

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. This growth is highly dependent on government spending, primarily by state and federal governments, along with the continuing acceptance of private/public partnerships as an alternative funding source.

•

Expanded use of dynamic messaging systems for advertising and wayfinding use in public transport and airport terminals due to expanded market usage and displays, with LED technology replacing prior LCD installations and additional display offerings using micro-LEDs.

•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. This growth is highly dependent on government spending, primarily by state and federal governments, along with the continuing acceptance of private/public partnerships as an alternative funding source.

•Expanded use of dynamic messaging systems for advertising and wayfinding use in public transport and airport terminals due to expanded market usage and displays, with LED technology replacing prior LCD installations and additional display offerings using micro-LEDs.

International Business Unit: In the near-term, our customers who relyAs most restrictions on advertising, retail, event revenues and governmental tax revenue availabilitygathering are expected to delay spending on projects due to the COVID-19 pandemic. Changes to the ways and willingness of how people gather may change the demand for our systems. As the restrictions of gathering start to decrease, we believereduced across geographies, more customers may choose to beginare choosing to invest in their locations. Customers who rely on advertising revenues for OOH advertising or who are reliant on customer foot-traffic to drive sales are beginning to increase their capital spending.

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. We continue to broaden our product offerings into the transportation segment in Europe and the Middle East.

•

•Achieving greater penetration in various geographies and building products more suited to individual markets. 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 out of the United States and Canada.

	•	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.

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•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.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") are based upon, and should be read in conjunction with, our consolidated financial statements,Consolidated Financial Statements and Notes to the Consolidated Financial Statements included in this Form 10-K, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). 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. The preparation of these financial statements requires us to make estimates and judgments affecting the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Although our significant accounting policies are described in "Note 1. Nature of Business and Summary of Significant Accounting Policies", of the Notes to our Consolidated Financial Statements included in this Form 10-K, the following discussion is intended to highlight and describe those accounting policies that are especially critical to the preparation of our consolidated financial statements.

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. We believe the estimation process for uniquely configured contracts and warranties are most material and critical. These areas contain estimates with a reasonable

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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. Our critical accounting estimates are based on historical experience; on our interpretation of GAAP, current laws and regulations; and on various other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities not readily apparent from other sources. 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. 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. 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.

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. Often times the system is customized or significantly modified to the customer's desired configurations and location, and the interrelated goods and services provide utility to the customer as a package. See "Note 1. Nature of Business and Summary of Significant Accounting Policies" of the Notes to our Consolidated Financial Statements included in this Form 10-K for further information on our revenue recognition policies.

Warranties. We have recognized an accrued liability for warranty obligations equal to our estimate of the actual costs to be incurred in connection with our performance under contractual warranties. Warranty estimates include the cost of direct material and labor estimates to repair products over their warranty coverage period. Generally, estimates are based on historical experience considering known or expected changes. If we would become aware of an increase in our estimated warranty costs, additional accruals may become necessary, resulting in an increase in cost of sales. Although prior estimates have been materially correct, estimates for warranty liabilities can change based on actual versus estimated defect rates over the lifetime of the warranty coverage, a difference in actual to estimated costs to conduct repairs for the components and related labor needed, and other site related actual to estimated cost changes.

As of April 30, 2022 and May 1, 2021, and May 2, 2020, we had approximately $26.0$28.9 million and $25.6$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. See "Note 16. Commitments and Contingencies" of the Notes to our Consolidated Financial Statements included in this Form 10-K for further information on warranties.

RECENT ACCOUNTING PRONOUNCEMENTS

For a summary of recently issued accounting pronouncements and the effects those pronouncements have on our financial results, refer to "Note 1. Nature of Business and Summary of Significant Accounting Policies" of the Notes to our Consolidated Financial Statements included elsewhere in this Form 10-K.

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RESULTS OF OPERATIONS

Daktronics, Inc. operates on a 52- or 53-week fiscal year, with our fiscal year ending on the Saturday closest to April 30 of each year. When April 30 falls on a Wednesday, the fiscal year ends on the preceding Saturday. Within each fiscal year, each quarter is comprised of 13-week periods following the beginning of each fiscal year. In each 53-week year, an additional week is added to the first quarter, and each of the last three quarters is comprised of a 13-week period. The fiscal year ended May 1, 2021 contained operating results for 52 weeks, while the fiscal year ended May 2, 2020 contained operating results for 53 weeks.

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Net Sales

The following table shows information regarding net sales for the fiscal years ended April 30, 2022 and May 1, 2021 and May 2, 2020:

		Year Ended
(in thousands)		May 1, 2021				May 2, 2020				Dollar Change				Percent Change
Net Sales:
Commercial		$	127,300			$	152,627			$	(25,327	)			(16.6	)%
Live Events			143,049				196,591				(53,542	)			(27.2	)
High School Park and Recreation			91,557				96,414				(4,857	)			(5.0	)
Transportation			58,284				70,139				(11,855	)			(16.9	)
International			61,843				93,161				(31,318	)			(33.6	)
		$	482,033			$	608,932			$	(126,899	)			(20.8	)%
Orders:
Commercial		$	138,878			$	146,182			$	(7,304	)			(5.0	)%
Live Events			157,177				203,834				(46,657	)			(22.9	)
High School Park and Recreation			94,292				100,088				(5,796	)			(5.8	)
Transportation			49,696				83,473				(33,777	)			(40.5	)
International			75,841				87,201				(11,360	)			(13.0	)
		$	515,884			$	620,778			$	(104,894	)			(16.9	)%

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 20212022 as compared to Fiscal Year 2020

Sales2021

During fiscal year 2022, sales and orders inincreased, as demand was up across all business units were impactedmarkets compared to fiscal 2021 as a result ofthe world economies recovered from the economic downturn caused by the COVID-19 pandemic as well as fiscal 2020 including 53 weeks compared topandemic. We reached record order levels because of the more common 52 weeks. Fiscal 2021 contained 52 weeks.

For netrecovery, multi-million dollar orders for sport facilities, and bulk orders for OOH displays. These orders are in the Live Events, Commercial, and International business segments.

Net sales during fiscal 2021, we achieved a $9.3 million per week average run rate as comparedyear 2022 increased due to a $11.5 million per week run rate during fiscal 2020, orthe conversion of the higher order volume. Throughout the year however, material supply and labor shortages created an approximate 19.1% decrease. The changeincrease in sales was also related to fluctuations inlead times, extending the timing of order bookings and related conversionconverting some orders to sales and caused by delays in project sites caused by COVID-19 restrictions. 

For orders, during fiscal 2021, we achieved a $9.9 million per week average run rate as compared to a $11.7 million per week run rate during fiscal 2020, or an approximate 15.4% decrease.sales.

Commercial: The change in orders was caused by the economic impacts of COVID-19 on our customers and the fluctuations caused by the timing of large contract orders, which causes lumpiness.

Commercial: The decreaseincrease in net sales for fiscal 20212022 compared to fiscal 20202021 was primarily due to an increase in OOH niche and spectaculars orders. 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 lowhigher market activity in the spectacular and OOH niches, which was partly offset by an increase in net sales in the on-premise niche.

The decrease in orders for fiscal 2021 compared to fiscal 2020 was primarily due to overall low market activity in the spectacular niche, which was partly offset by an increase in orders in the on-premise niche.

all commercial niches.

We continue to see increased adoption of video solutions in our Commercial business unit marketplace. Depending on the duration of the current economic conditions, we see opportunities for orders and sales over the coming years in our OOH, on-premise, and spectacular focused niches due to replacement cycles, expansion of dynamic messaging systems usage, our releases of new solutions, additional distribution methods, and increased market size due to the decline of digital pricing over the years as well as the desire for higher resolution technology. Due to a number of factors, such as the discretionary nature of customers committing to a system, economic dependencies, regulatory environments, competitive factors, and the uncertainty of the impacts of the COVID-19 pandemic,supply chain constraints, it is difficult to predict orders and net sales for fiscal 2022.2023. 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: Events: The decreaseincrease in net sales and orders for fiscal 20212022 compared to fiscal 20202021 was primarily due to lowhigh demand for upgraded or new solutions for arenas, university venues, and sports stadiums. This declineincrease was due to the economic concerns and various other factors associated withrecovery from the COVID-19 pandemic, causing customersseveral large projects including in the bowl and other immersive displays through

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the sports facilities, and replacement orders due to delaysystems' ages. Bookings of large expenditures.

Overall, we believe that these orders are not lost but only delayed.

multi-million dollar projects also contributed to the order increases and a record order year for Live Events.

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. A number of factors, such as the discretionary nature of customers committing to upgrade systems, long replacement cycles, the limited number of large custom projects, competitive factors, and the uncertainty of when venues will be allowed to seat at full capacity and other impactsthe overall impact of the COVID-19 pandemic,supply chain constraints, make forecasting fiscal 20222023 orders and net sales difficult. We expect continued growth in this business unitunit's size to remain stable over the long-term, assuming favorable economic conditionscondition, and success in maintaining market share by counteracting competitive pressures.

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High School Park and Recreation: Recreation: The decreaseincrease in net sales and orders for fiscal 20212022 compared to fiscal 20202021 was primarily due to slightly lowerhigher market activity as schools held back spend during theare upgrading to video equipment systems and have COVID-19 pandemic.

related funding to invest in their facilities.

We expect larger video systems and our classic scoring and message centers to remain in demand in fiscal 2022,2023, 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' desiresdesire to communicate with students and parents using these systems. Some growth is also expected for regulatory requirements of certain display types for sports events. Several factors, such as the potential reduction in the availability of advertising revenues, the discretionary nature of customers committing to upgrade systems, replacement cycles, competitive factors, and the uncertainty of the impactsoverall impact of the COVID-19 pandemic,supply chain constraints, make forecasting fiscal 20222023 orders and net sales difficult. We expect growth in this business unit over the long-term, assuming favorable economic conditions.

Transportation: 

Transportation: Thedecreaseincrease in net sales and orders for fiscal 20212022 compared to fiscal 20202021 was primarily due to lowpent up demand from fiscal 2021 for mass-transit and airport information displays projectsIntelligent Transportation Systems ("ITS") which had been delayed due to the low level of use of these facilities during COVID-19 and the general slow-down of business activity for agencies working remotely. 

pandemic.

Several factors, such as transportation funding, the competitive environment, customer delivery changes, and the uncertainty of the impacts of the COVID-19 pandemic,supply chain constraints, make forecasting orders and net sales difficult for fiscal 2022.2023. However, the stability of long-term federal transportation funding and the number of capital projects for highways and public transit that include dynamic message signs and for advertising and wayfinding use in public transport and airport terminals continue to rise. We expect continued growth in this business unit over the long-term, assuming favorable economic conditions and continued transportation funding.

International: 

International: The decreaseincrease in net sales and orders for fiscal 20212022 compared to fiscal 20202021 was primarily due to the result of low demand of large spectacular,economic recovery from the COVID-19 pandemic in OOH, transportation, and sport stadium projects because of reduced advertising spending and limited events held during the COVID-19 pandemic.

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. 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 COVID-19 pandemic,supply chain constraints, may impact order bookings and timing, making it difficult to predict order and sales levels for fiscal 2022.2023. For 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 increaseexpect the trend of increased use and adoption of our technology globally.

globally to continue.

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Gross Profit and Contribution Margin

		Year Ended
		May 1, 2021								May 2, 2020
(in thousands)		Amount				As a Percent of Net Sales				Amount				As a Percent of Net Sales
Gross Profit:
Commercial		$	33,072				26.0	%		$	29,246				19.2	%
Live Events			24,397				17.1				39,518				20.1
High School Park and Recreation			31,472				34.4				28,874				29.9
Transportation			20,329				34.9				23,910				34.1
International			11,313				18.3				17,152				18.4
		$	120,583				25.0	%		$	138,700				22.8	%

			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 20212022 as compared to Fiscal Year 2020

Gross profit is net sales less cost of sales. Cost of sales consists primarily of inventory, logistics related costs including tariffs and duties, consumables, personnel related costs, facilities-related costs for manufacturing locations, machinery and equipment maintenance and depreciation, site sub-contractors, warranty costs, and other service delivery expenses.

2021

The increasedecline in our 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. Total warranty expense as a percent of sales increased to 1.9 percent for fiscal 20212022 as compared to 1.4 percent during fiscal 2020 was2021.

Factors impacting the result of agross profit in fiscal 2021 included the positive $2.1 million litigation claim reversal in the High School Park and Recreation business unit and in all business units, a change$1.8 million of mix between service agreements and product sales and a reduction in capacity through temporary furloughs and reductions in force. In all business units, we lowered overall staffing and benefit levels and temporarily furloughed employees to achieve lower operatingCOVID relief governmental subsidies offset by $2.8 million of severance costs to align withreduce our workforce to adjust to the uncertainties created byimpacts of the COVID-19 pandemic. In addition, we received $1.8 million of COVID-19 relief governmental subsidies partially offsetting the $2.8 million of severance costs incurred to reduce our workforce. Even with the cost cutting measures, we maintained more capacity aligned to Live Events at levels that exceeded the revenue changes causing gross profit to decline in this business unit. During fiscal 2020, we experienced additional expenses of approximately $3.3 million for project delivery costs and $2.0 million in tariff related expenses, decreasing the gross profit rate for that year.

We earned a higher rate of gross profit on our service agreements in fiscal 2021 due to reduced stand ready services conducted during the year because of the pandemic. During fiscal year ended May 1, 2021. This was due to2022, we had more large project sales which generally have lower on-site demand as events were not being held. We believe this higher gross profit level will not be sustained in future fiscal years. Total warranty as a percentbecause of sales decreased to 1.4 percent for fiscal 2021 as compared to 1.9 percent during fiscal 2020.

their competitive nature.

It is difficult to project gross profit levels for fiscal 20222023 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. We are focused on improving our gross profit margins as we execute our strategies for improved profitability, which include selectively increasing pricing, releasing new product designs to lower overall costs of the product; improving reliability to reduce warranty expenses; expanding our global capacity and planning; meeting customer solution expectations; and continued improvements in operational effectiveness in manufacturing, installation, and service delivery areas. Cost reductions made during the pandemic vary in permanency and may not be sustainable in future periods as orders and sales volumes recover.

			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		%

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		Year Ended
		May 1, 2021																May 2, 2020
(in thousands)		Amount				As a Percent of Net Sales				Dollar Change				Percent Change				Amount				As a Percent of Net Sales
Contribution Margin:
Commercial		$	18,976				14.9	%		$	9,079				91.7	%		$	9,897				6.5	%
Live Events			15,198				10.6				(10,876	)			(41.7	)			26,074				13.3
High School Park and Recreation			21,409				23.4				6,068				39.6				15,341				15.9
Transportation			17,248				29.6				(2,318	)			(11.8	)			19,566				27.9
International			(897	)			(1.5	)			(2,817	)			(146.7	)			1,920				2.1
		$	71,934				14.9	%		$	(864	)			(1.2	)%		$	72,798				12.0	%

Fiscal Year 20212022 as compared to Fiscal Year 2020

2021

Contribution margin is a non-GAAP measure and consists of gross profit less selling expenses. Selling expenses consist primarily of personnel related costs, travel and entertainment expenses, facility-related costs for salesmarketing related expenses (show rooms, product demonstration, depreciation and service offices,maintenance, conventions and trade show expenses), customer relationship management/marketing systems, bad debt expenses, third-party commissions, and expenditures for marketing efforts, including the costs of collateral materials, conventions and trade shows, product demonstrations, customer relationship management systems, and supplies.

other expenses.

Contribution margin isin fiscal 2022 was impacted by the previously discussed sales levels and impacts on gross margin for each business unit. Each business unit's contribution margin was impacted as a result of the economic downturn caused by the COVID-19 pandemic,profit, as well as a 5.0% increase in selling expenses in fiscal 2020 including 53 weeks2022 compared to fiscal 2021.

Since the more common 52 weeks. Fiscalbeginning of fiscal 2022, we have adjusted our sales and marketing activities and staffing levels to achieve current and expected future sales levels. During fiscal 2021, contained 52 weeks. In addition, each business unit's contribution marginwe had a decrease in personnel related expenses offset by severance costs for reductions in force, as well as reductions in travel and entertainment, marketing, and convention related expenses. This was partially offset by a $1.4 million increase in bad debt expenses. We have reducedlowered overall staffing and furloughed employees to achieve lower operating costs to align with the uncertainties created by the COVID-19 pandemic. These reductions made during the pandemic varyfiscal 2021 savings were partially offset by a $1.4 million increase in permanency and may change in future periods in future periods as orders and sales volumes recover.

bad debt expenses.

Reconciliation from non-GAAP contribution margin to operating income (loss) GAAP measure is as follows:

		Year Ended
		May 1, 2021																May 2, 2020
(in thousands)		Amount				As a Percent of Net Sales				Dollar Change				Percent Change				Amount				As a Percent of Net Sales
Contribution margin		$	71,934				14.9	%		$	(864	)			(1.2	)%		$	72,798				12.0	%
General and administrative			27,980				5.8				(7,213	)			(20.5	)			35,193				5.8
Product design and development			26,846				5.6				(10,926	)			(28.9	)			37,772				6.2
Operating income (loss)		$	17,108				3.5	%		$	17,275				*			$	(167	)			(0.0	)%

* Percentage is not meaningful due to prior year operating loss.

			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 20212022 as compared to Fiscal Year 2020

General and administrative expenses consist primarily of salaries, other employee-related costs, professional fees, shareholder relations costs, facilities and equipment-related costs for administrative departments, training costs, and the cost of supplies.

2021

General and administrative expenses infor fiscal 2021 decreased2022 increased as compared to the same period one year ago primarily due to decreasesincreases in personnel related expenses and professional fees. We have reduced overall staffing and furloughed employees to achieve lower operating costs to align with the uncertainties created by the COVID-19 pandemic.

expenses.

We expect general and administrative expenses to increase for fiscal 20222023 as compared to fiscal 20212022 as labor rates continue to rise and further increase in personnel may be needed to keep up with the cost reductions made during the pandemic vary in permanency and may change in future periods in future periods as orders and sales volumes recover.

Product design and development expenses consist primarily of salaries, other employee-related costs, professional services, facilities costs and equipment-related costs and supplies. 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. These new or improved technologies are focused on varied pixel density for image quality and use, expanded product line offerings for our various markets and geographies, improved quality and reliability, and improved cost points. 

increased demand.

Our costs for product design and development represent an allocated amount of costs based on time charges, professional services, material costs and the overhead of our engineering departments. Generally, a significant portion of our engineering time is spent on product design and development, while the rest is allocated to large contract work and included in cost of sales.

Product design and development expenses in fiscal 2021compared to fiscal 2020decreased primarily due to decreased labor costs and professional services assigned to product design and development projects offset by severance costs for the reduction in force. We have reduced overall staffing and furloughed employees to achieve lower operating costs to align with the uncertainties created by the COVID-19 pandemic. We expect an increase in expenditures for product design and development for fiscal 2022 increased as compared to fiscal 2021 primarily due to an anticipated gradual returnincrease in personnel related expenses.

We expect product design and development expenses to pre-pandemic levels. Duringincrease for fiscal 2023 as compared to fiscal 2022 we plandue to make continued investmentsincreases in our software and controller options and narrow pixel pitch LED displays throughout our various product offerings.

labor costs. We will continue to actively invest in new technologies.

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Other Income and Expenses

		Year Ended
		May 1, 2021																May 2, 2020
(in thousands)		Amount				As a Percent of Net Sales				Dollar Change				Percent Change				Amount				As a Percent of Net Sales
Interest (expense) income, net		$	(65	)			(0.0	)%		$	(764	)			(109.3	)%		$	699				0.1	%
Other (expense) income, net		$	(2,983	)			(0.6	)%		$	(2,442	)			451.4	%		$	(541	)			(0.1	)%

			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 20212022 as compared to Fiscal Year 2020

Interest (expense) income, net: We generate interest income through short-term cash investments, marketable securities, and product sales on an installment basis or in exchange for the rights to sell and retain advertising revenues from displays, which result in long-term receivables. Interest expense is comprised primarily of interest costs on long-term obligations.

2021

The change in interest (expense) income, net for fiscal 20212022 as compared to fiscal 2020,2021 was primarily due to the change in investment levels caused by the volatility of working capital needs and interest expense for our drawings on the line of credit.

Other (expense) income,expense, net: The change in other income and expense, net for fiscal 20212022 as compared to fiscal 2020,2021, was primarily due to foreign currency volatility anda $0.6 million increase in losses from affiliates accounted for under the increases in the losses recorded for equity method affiliates. During fiscal 2021, we recorded equity method affiliate losses of $2.4 million as compared to $0.7 million during fiscal 2020.

accounting.

Income Taxes

Our effective tax rate was approximately 22.346.6 percent for fiscal year 2021.2022. The effective income tax rate for fiscal 20212022 was impacted due to tax benefits from permanent tax credits and prior year provision to return adjustments offset by and valuation allowances as well as other various permanent tax adjustments and state taxes.

taxes with additional expense for prior year provision to return adjustments.

Our fiscal 2020 income2021 effective tax benefitrate was approximately 22.3 percent resulting from the resulttax benefit of permanent tax credits reducedand previous year provision to return adjustments offset by valuation allowances as well as other various permanent tax adjustments and minor pre-tax book loss creating a meaningless effective tax rate.

state taxes.

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. Income Taxes" of the Notes to our Consolidated Financial Statements included in this Form 10-K for further information.

LIQUIDITY AND CAPITAL RESOURCES

		Year Ended
(in thousands)		May 1, 2021				May 2, 2020				Percent Change
Net cash provided by (used in):
Operating activities		$	66,212			$	10,808				512.6	%
Investing activities			(10,221	)			(4,271	)			139.3
Financing activities			(15,585	)			(1,978	)			687.9
Effect of exchange rate changes on cash			(416	)			111				(474.8	)
Net increase in cash, cash equivalents and restricted cash		$	39,990			$	4,670				756.3	%

			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 increaseddecreased by $40.0$62.4 million in fiscal 20212022 as compared to an increase of $4.7$40.0 million in fiscal 2020, which is primarily due2021. Operating assets and liabilities decreased cash flow by $45.4 million during fiscal 2022 as the business expanded compared to a $31.7 million increase in cash generated by operations, a decreaseflow during fiscal 2021 as the business contracted and management conserved the Company's cash.

Net cash used in capital expenditures, and suspending our dividends and share repurchase program, offset by a $15operating activities: Net cash used in operating activities was $27.0 million outflow for financing activities which resulted from repayment of borrowings under our line of credit.

Netfiscal 2022 compared to $66.2 million net cash provided by operating activities: Cash generated byactivities in fiscal 2021. The $93.2 million decrease in cash from operating activities iswas primarily derived from cash received from customers, offset by cash payments for inventories, subcontractors, employee related costs, and operating expense outflows. Operating cash flows consist primarilythe result of net income adjusted for non-cash items, including depreciation and amortization, stock-based compensation, deferred income taxes, and the effect of changes in operating assets and liabilities. Overall, changes in net operating assets and liabilities can be impacted by the timingand a decrease of cash flows on large orders, which can cause significant short-term and seasonal fluctuations$10.3 million in inventory, accounts receivables, accounts payable, contract assets and liabilities, and various other operating assets and liabilities. Variability in contract assets and liabilities relates to the timingnet

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Table of billings on construction-type contracts and revenue recognition, which can vary significantly depending on contractual payment terms and build and installation schedules. Balances are also impacted by the seasonality of the sports market.Contents

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.

Net cash provided by operating activities was $66.2 million for fiscal 2021 compared to $10.8 million in fiscal 2020. The $55.4 million increase in cash provided by operating activities was primarily the result of changes in net operating assets and liabilities and an of increase of $10.4 million in net income.

Net cash used in investing activities: Net cash used in investing activities totaled $10.2$31.4 million for fiscal 20212022 compared to $4.3$10.2 million in fiscal 2020. During fiscal 2021, we had $1.2 million of proceeds from sales or maturities of marketable securities compared to $25.2 million in fiscal 2020. Net proceeds of marketable securities in fiscal 2020 were utilized to cover working capital needs for changes in operating assets and liabilities.2021. Purchases of property and equipment totaled $20.4 million in fiscal 2022 compared to $7.9 million in fiscal 2021 compared to $18.1 million in fiscal 2020.2021. Proceeds from the sales of property and equipment totaled $0.9 million in fiscal 2022 compared to $3.2 million in fiscal 2021 compared to $0.32021. Purchase of marketable securities totaled $4.0 million in fiscal 2020. Purchases2022 compared to no purchases of and loans to equity investments totaled $6.7 millionmarketable securities in fiscal 2021 as compared to $11.7 million in fiscal 2020. 

2021.

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Net cash used in financing activities: Net cash used in financing activities was $15.6$3.6 million for fiscal 20212022 compared to $2.0$15.6 million in fiscal 2020. Principal payments on long-term obligations for fiscal 2021 was $0.5 million compared to $2.1 million in fiscal 2020, which was mostly related to contingent liability payments.2021. During fiscal 2021, we paid $15.0 million on notes payable compared to borrowing on notes payable of $15.0 million in fiscal 2020. Dividends of $9.0 million, or $0.20 per share, were paid to Daktronics shareholders during fiscal 2020, while there were no dividends paid during fiscal 2021.payable. During fiscal 2021, there were no share repurchases compared to $5.6$3.2 million of share repurchases in fiscal 2020. As part of our COVID-19 response, as announced on April 1, 2020, our Board of Directors suspended dividends and stock repurchases for the foreseeable future.

2022.

Other Liquidity and Capital Resources Discussion: The timing and amounts of working capital changes, dividend payments,profitability, capital spending, investments in affiliates, repurchases of stock in our stock repurchase program, and capital spendingdividend payments impact our liquidity.

Working capital was $103.9 million at April 30, 2022 and $118.4 million at May 1, 2021 and $106.0 million at May 2, 2020.2021. 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. 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 fluctuationsto use cash in working capital to continue during the pandemic recovery.

operations as our business returns and exceeds pre-pandemic levels.

We had $5.6$7.1 million of retainage on long-term contracts included in receivables and contract assets as of May 1, 2021,April 30, 2022, which has an impact on our liquidity. We expect to collect these amounts within one year. When working capital is needed, we have historically financed our cash needs through a combination of cash flow from operations and borrowings under bank credit agreements. As of May 1, 2021, we were in compliance with all applicable bank loan covenants. For additional information on financing agreements, see "Note 7. Financing Agreements" of the Notes to our Consolidated Financial Statements included in this Form 10-K.

As part of our COVID-19 response, our Board of Directors suspended dividends and share repurchases for the foreseeable future. The future reinstatement of dividends and share repurchases cannot be predicted and is at the discretion of the Board of Directors. Future dividends are also impacted by the limitations imposed in our credit facility as further described in "Note 7. Financing Agreements" of the Notes to our Consolidated Financial Statements included in this Form 10-K.

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. At May 1, 2021,April 30, 2022, we had $59.2$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 are projectingprojected capital expenditures to be approximately $25$30 million for fiscal 2022.2023. 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. During

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. The timing, volume, and nature of share repurchases will be at the sole discretion of management and will be dependent on market conditions, applicable securities laws and other factors, and share repurchases may be suspended or discontinued at any time.

The Board of Directors suspended dividends during fiscal 2022, we may choose to invest additional capital2020 as part of our cash conservation measures through the pandemic. The timing and future reinstatement of dividends is at the discretion of the Board of Directors. Future dividends are also impacted by the limitations imposed in our investments in affiliates to support further development in microLED and other technologies. We also evaluate and may invest in new technologies or acquire companies aligned with our business strategy.

credit facility.

We believe the audiovisual industry fundamentals will drive long-term growth for our business; however, for the near-term outlook, we expect our customers mayto continue to have disruptions from our supply chain and may continuelogistics. Due to reduce or increase their spend on audiovisual systemslonger planning horizons and related servicesvolatility in supply chains, we plan to carry higher quantities of inventory and anticipate changes in the timing of payments from our customers as theywe work through the economicdifferent disruptions and business implicationsfulfill backlog. We also plan to use cash for capital spending to grow our manufacturing capacity. When cash is needed, we expect to use borrowings under our bank credit agreement. As of COVID-19. While it is difficult to estimate the longevity and severityApril 30, 2022, we were in compliance with all applicable bank loan covenants. For additional information on financing agreements, see "Note 7. Financing Agreements" of the COVID-19 pandemic impact to the economy andNotes to our financial position, operating results, and cash flows, we believe our working capital available from all sources will be adequate to meet the cash requirements of our operations and strategiesConsolidated Financial Statements included in the foreseeable future. If the pandemic impact or long-term growth extends beyond current expectations, or if we make significant strategic investments, we may need to utilize and possibly increase our credit facilities or seek other means of financing. 

this Form 10-K.

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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. For fiscal 2021, 14.32022, 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.

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 May 1, 2021April 30, 2022 was $2.8$11.3 million, and all contracts mature within eightten months. 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. We estimate that a 10 percent change in all foreign exchange rates would impact our reported income before taxes by approximately $1.0$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.

Over the long term, net sales to international markets are expected to increase as a percentage of total net sales and, consequently, a greater portion of our business could be denominated in foreign 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. 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.

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, the effects of the COVID-19 pandemic, 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. Of our $77.6$17.1 million in cash balances at May 1, 2021, $60.8April 30, 2022, $11.7 million were denominated in U.S. dollars, of which $1.9$3.9 million were held by our foreign subsidiaries. As of May 1, 2021,April 30, 2022, we had an additional $16.8$5.4 million in cash balances denominated in foreign currencies, of which $14.2$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. 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. 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. 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 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. 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. Over the years, we have been impacted by the factors noted; however, we believe that we have adequate sources of supply for most of our key materials in the near-term.noted. During late fiscal 2021 and through fiscal 2022, supply chain disruptions began to emerge because of the COVID-19 pandemic, shipping container shortages, winter weather, 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 availability.freight. We are unable to predict the supply chain recovery or the impact to our business.

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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Daktronics, Inc.

Opinions

Opinion on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Daktronics, Inc.Inc and subsidiaries (the "Company") as of April 30, 2022 and May 1, 2021, and May 2, 2020, the related consolidated statements of operations, comprehensive (loss) income, shareholders' equity, and cash flows, for each of the three years in the period ended May 1, 2021,April 30, 2022, and the related notes (collectively referred to as the "financial statements"). We have also have audited the Company’sCompany's internal control over financial reporting as of May 1, 2021,April 30, 2022, based on criteria established in Internal Control — Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of April 30, 2022 and May 1, 2021, and May 2, 2020, and the results of its operations and its cash flows for each of the three years in the period ended May 1, 2021,April 30, 2022, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of May 1, 2021,April 30, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition – Uniquely Configured Contracts — Refer to Notes 1 and 2 to the financial statements

Critical Audit Matter Description

The Company recognizes revenue as its contractual performance obligations are satisfied, which may be at a point in time or over time. Certain of the Company’s contracts are for the delivery, installation, and integration of uniquely configured audio-visual communication systems. Revenue for these uniquely configured systems is recognized over time using the cost incurred input method. This input method requires management to make estimates of the costs that will ultimately be incurred at the completion of each contract. Revenue is recognized based on the transaction price and the percentage of cost incurred as of the balance sheet date in relation to the total estimated inputs at completion.

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We identified revenue associated with uniquely configured contracts as a critical audit matter because of the significant judgments necessary for management to estimate total costs to be incurred to recognize revenue under these contracts. Changes in estimated costs could have a significant impact on the timing and amount of revenue recognized. This required an increased level of auditor judgment due to the complexity of uniquely configured contracts and extent of effort when performing audit procedures to audit management’s estimate of total costs and evaluating the reasonableness of the underlying estimates.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to estimates of total cost used to recognize revenue for uniquely configured contracts included the following, among others:

●

We tested the effectiveness of controls over uniquely configured contracts, including management’s controls over the estimates of total costs.

●

We selected a sample of uniquely configured contracts and performed the following:

●

Compared costs incurred to date to the costs management estimated to be incurred to date.

●

Evaluated management’s ability to achieve the estimates of total cost by performing corroborating inquiries with the Company’s project managers and engineers, and compared the estimates to management’s work plans, engineering specifications, and supplier contracts.

●

Confirmed contractual terms with third parties.

●

Tested the mathematical accuracy of management’s estimate of total costs.

●

We evaluated management’s ability to accurately estimate total costs by comparing actual costs to management’s historical estimates for uniquely configured contracts that have been fulfilled.

•We tested the effectiveness of controls over uniquely configured contracts, including management’s controls over the estimates of total costs.

•We selected a sample of uniquely configured contracts and performed the following:

•Compared costs incurred to date to the costs management estimated to be incurred to date.

•Evaluated management’s ability to achieve the estimates of total cost by performing corroborating inquiries with the Company’s project managers and engineers, and compared the estimates to management’s work plans, engineering specifications, and supplier contracts.

•Confirmed contractual terms with third parties.

•Tested the mathematical accuracy of management’s estimate of total costs.

•We evaluated management’s ability to accurately estimate total costs by comparing actual costs to management’s historical estimates for uniquely configured contracts that have been fulfilled.

/s/ Deloitte & Touche LLP

Minneapolis, Minnesota

June 11, 2021

16, 2022

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We have served as the Company's auditor since 2017.

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DAKTRONICS, INC. AND SUBSIDIARIES

DAKTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except per share data)

		May 1, 2021				May 2, 2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	77,590			$	40,398
Restricted cash			2,812				14
Marketable securities			0				1,230
Accounts receivable, net			67,808				72,577
Inventories			74,356				86,803
Contract assets			32,799				35,467
Current maturities of long-term receivables			1,462				3,519
Prepaid expenses and other current assets			7,445				9,629
Income tax receivables			731				548
Property and equipment and other assets available for sale			0				1,817
Total current assets			265,003				252,002
Property and equipment, net			58,682				67,484
Long-term receivables, less current maturities			1,635				1,114
Goodwill			8,414				7,743
Intangibles, net			2,083				3,354
Investment in affiliates and other assets			27,403				27,683
Deferred income taxes			11,944				13,271
TOTAL ASSETS		$	375,164			$	372,651
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable			40,251				47,834
Contract liabilities			64,495				50,897
Accrued expenses			30,672				36,626
Warranty obligations			10,464				9,764
Income taxes payable			738				844
Total current liabilities			146,620				145,965
Long-term warranty obligations			15,496				15,860
Long-term contract liabilities			10,720				10,707
Other long-term obligations			7,816				22,105
Long-term income tax payable			548				582
Deferred income taxes			410				452
Total long-term liabilities			34,990				49,706
SHAREHOLDERS' EQUITY:
Common stock, no par value, authorized 115,000,000 shares; 46,264,576 and 45,913,209 shares issued at May 1, 2021 and May 2, 2020, respectively			60,575				60,010
Additional paid-in capital			46,595				44,627
Retained earnings			96,016				85,090
Treasury stock, at cost, 1,297,409 and 1,343,281 shares at May 1, 2021 and May 2, 2020, respectively			(7,297	)			(7,470	)
Accumulated other comprehensive loss			(2,335	)			(5,277	)
TOTAL SHAREHOLDERS' EQUITY			193,554				176,980
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	375,164			$	372,651

See notes to consolidated financial statements.

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DAKTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)

		Year Ended
		May 1, 2021				May 2, 2020				April 27, 2019
Net sales		$	482,033			$	608,932			$	569,704
Cost of sales			361,450				470,232				439,410
Gross profit			120,583				138,700				130,294
Operating expenses:
Selling			48,649				65,902				64,648
General and administrative			27,980				35,193				34,817
Product design and development			26,846				37,772				35,557
			103,475				138,867				135,022
Operating income (loss)			17,108				(167	)			(4,728	)
Nonoperating income (expense):
Interest income			230				805				1,031
Interest expense			(295	)			(106	)			(160	)
Other (expense) income, net			(2,983	)			(541	)			(1,087	)
Income (loss) before income taxes			14,060				(9	)			(4,944	)
Income tax expense (benefit)			3,134				(500	)			(3,986	)
Net income (loss)		$	10,926			$	491			$	(958	)
Weighted average shares outstanding:
Basic			44,989				45,031				44,926
Diluted			45,202				45,316				44,926
Earnings (loss) per share:
Basic		$	0.24			$	0.01			$	(0.02	)
Diluted		$	0.24			$	0.01			$	(0.02	)

See notes to consolidated financial statements.

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DAKTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands)

		Year Ended
		May 1, 2021				May 2, 2020				April 27, 2019
Net income (loss)		$	10,926			$	491			$	(958	)
Other comprehensive income (loss):
Cumulative translation adjustments			2,942				(965	)			(1,749	)
Unrealized gain (loss) on available-for-sale securities, net of tax			0				44				107
Total other comprehensive income (loss), net of tax			2,942				(921	)			(1,642	)
Comprehensive income (loss)		$	13,868			$	(430	)		$	(2,600	)

See notes to consolidated financial statements.

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DAKTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (in thousands)

		Common Stock				Additional Paid-In Capital				Retained Earnings				Treasury Stock				Accumulated Other Comprehensive Loss				Total
Balance as of April 28, 2018:		$	54,731			$	40,328			$	107,105			$	(1,834	)		$	(2,714	)		$	197,616
Net loss			0				0				(958	)			0				0				(958	)
Cumulative translation adjustments			0				0				0				0				(1,749	)			(1,749	)
Unrealized gain (loss) on available-for-sale securities, net of tax			0				0				0				0				107				107
Share-based compensation			0				2,479				0				0				0				2,479
Exercise of stock options			1,318				0				0				0				0				1,318
Tax payments related to RSU issuances			0				(246	)			0				0				0				(246	)
Employee savings plan activity			1,650				0				0				0				0				1,650
Dividends paid ($0.28 per share)			0				0				(12,554	)			0				0				(12,554	)
Balance as of April 27, 2019:			57,699				42,561				93,593				(1,834	)			(4,356	)			187,663
Net income			0				0				491				0				0				491
Cumulative translation adjustments			0				0				0				0				(965	)			(965	)
Unrealized gain (loss) on available-for-sale securities, net of tax			0				0				0				0				44				44
Share-based compensation			0				2,265				0				0				0				2,265
Tax payments related to RSU issuances			0				(199	)			0				0				0				(199	)
Employee savings plan activity			2,311				0				0				0				0				2,311
Dividends paid ($0.20 per share)			0				0				(8,994	)			0				0				(8,994	)
Treasury stock purchase			0				0				0				(5,636	)			0				(5,636	)
Balance as of May 2, 2020:			60,010				44,627				85,090				(7,470	)			(5,277	)			176,980
Net income			0				0				10,926				0				0				10,926
Cumulative translation adjustments			0				0				0				0				2,942				2,942
Share-based compensation			0				2,067				0				0				0				2,067
Tax payments related to RSU issuances			0				(125	)			0				0				0				(125	)
Employee savings plan activity			565				0				0				0				0				565
Treasury stock reissued			0				26				0				173				0				199
Balance as of May 1, 2021:		$	60,575			$	46,595			$	96,016			$	(7,297	)		$	(2,335	)		$	193,554

See notes to consolidated financial statements.

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DAKTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)

		Year Ended
		May 1, 2021				May 2, 2020				April 27, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)		$	10,926			$	491			$	(958	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization			17,077				17,718				18,635
(Gain) loss on sale of property, equipment and other assets			(572	)			(35	)			(441	)
Share-based compensation			2,067				2,265				2,479
Contingent consideration adjustment			0				0				286
Equity in loss of affiliate			2,370				741				844
Provision for doubtful accounts, net of recovery			1,299				(99	)			194
Deferred income taxes, net			1,314				(2,183	)			(3,379	)
Change in operating assets and liabilities			31,731				(8,090	)			11,886
Net cash provided by operating activities			66,212				10,808				29,546
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment			(7,891	)			(18,091	)			(17,268	)
Proceeds from sales of property, equipment and other assets			3,184				322				607
Purchases of marketable securities			0				0				(25,337	)
Proceeds from sales or maturities of marketable securities			1,230				25,162				33,706
Purchases of and loans to equity investment			(6,744	)			(11,664	)			(1,300	)
Acquisitions, net of cash acquired			0				0				(2,250	)
Net cash used in investing activities			(10,221	)			(4,271	)			(11,842	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on notes payable			0				15,000				0
Payments on notes payable			(15,000	)			0				0
Principal payments on long-term obligations			(460	)			(2,149	)			(450	)
Dividends paid			0				(8,994	)			(12,554	)
Proceeds from exercise of stock options			0				0				1,318
Payments for common shares repurchased			0				(5,636	)			0
Tax payments related to RSU issuances			(125	)			(199	)			(246	)
Net cash used in financing activities			(15,585	)			(1,978	)			(11,932	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH			(416	)			111				215
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH			39,990				4,670				5,987
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
Beginning of period			40,412				35,742				29,755
End of period		$	80,402			$	40,412			$	35,742

See notes to consolidated financial statements.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

BALANCE SHEETS

(in thousands, except per share data)

			April 30, 2022						May 1, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents			$	17,143					$	77,590
Restricted cash			865						2,812
Marketable securities			4,020						—
Accounts receivable, net			101,099						67,808
Inventories			134,392						74,356
Contract assets			41,687						32,799
Current maturities of long-term receivables			2,798						1,462
Prepaid expenses and other current assets			14,963						7,445
Income tax receivables			603						731
Total current assets			317,570						265,003
Property and equipment, net			66,765						58,682
Long-term receivables, less current maturities			1,490						1,635
Goodwill			7,927						8,414
Intangibles, net			1,472						2,083
Investment in affiliates and other assets			32,321						27,403
Deferred income taxes			13,331						11,944
TOTAL ASSETS			$	440,876					$	375,164
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable			$	76,313					$	40,251
Contract liabilities			90,393						64,495
Accrued expenses			34,959						30,672
Warranty obligations			11,621						10,464
Income taxes payable			408						738
Total current liabilities			213,694						146,620
Long-term warranty obligations			17,257						15,496
Long-term contract liabilities			10,998						10,720
Other long-term obligations			6,599						7,816
Long-term income tax payable			477						548
Deferred income taxes			287						410
Total long-term liabilities			35,618						34,990
SHAREHOLDERS' EQUITY:
Preferred Shares, no par value, authorized 50,000 shares; no shares issued and outstanding			—						—
Common stock, no par value, authorized 115,000,000 shares; 46,733,544 and 46,264,576 shares issued at April 30, 2022 and May 1, 2021, respectively			61,794						60,575
Additional paid-in capital			48,372						46,595
Retained earnings			96,608						96,016
Treasury stock, at cost, 1,907,445 and 1,297,409 shares at April 30, 2022 and May 1, 2021, respectively			(10,285)						(7,297)
Accumulated other comprehensive loss			(4,925)						(2,335)
TOTAL SHAREHOLDERS' EQUITY			191,564						193,554
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY			$	440,876					$	375,164

See notes to consolidated financial statements.

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DAKTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

			Year Ended
			April 30, 2022						May 1, 2021						May 2, 2020
Net sales			$	610,970					$	482,033					$	608,932
Cost of sales			494,273						361,450						470,232
Gross profit			116,697						120,583						138,700
Operating expenses:
Selling			51,075						48,649						65,902
General and administrative			32,563						27,980						35,193
Product design and development			29,013						26,846						37,772
			112,651						103,475						138,867
Operating income (loss)			4,046						17,108						(167)
Nonoperating income (expense):
Interest income (expense), net			171						(65)						699
Other expense, net			(3,109)						(2,983)						(541)
Income (loss) before income taxes			1,108						14,060						(9)
Income tax expense (benefit)			516						3,134						(500)
Net income			$	592					$	10,926					$	491
Weighted average shares outstanding:
Basic			45,188						44,989						45,031
Diluted			45,326						45,202						45,316
Earnings per share:
Basic			$	0.01					$	0.24					$	0.01
Diluted			$	0.01					$	0.24					$	0.01

See notes to consolidated financial statements.

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DAKTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME

(in thousands)

			Year Ended
			April 30, 2022						May 1, 2021						May 2, 2020
Net income			$	592					$	10,926					$	491
Other comprehensive (loss) income:
Cumulative translation adjustments			(2,556)						2,942						(965)
Unrealized (loss) gain on available-for-sale securities, net of tax			(34)						—						44
Total other comprehensive (loss) income, net of tax			(2,590)						2,942						(921)
Comprehensive (loss) income			$	(1,998)					$	13,868					$	(430)

See notes to consolidated financial statements.

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DAKTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands)

			Common Stock						Additional Paid-In Capital						Retained Earnings						Treasury Stock						Accumulated Other Comprehensive Loss						Total
Balance as of April 27, 2019:			$	57,699					$	42,561					$	93,593					$	(1,834)					$	(4,356)					$	187,663
Net income			—						—						491						—						—						491
Cumulative translation adjustments			—						—						—						—						(965)						(965)
Unrealized gain (loss) on available-for-sale securities, net of tax			—						—						—						—						44						44
Share-based compensation			—						2,265						—						—						—						2,265
Tax payments related to RSU issuances			—						(199)						—						—						—						(199)
Employee savings plan activity			2,311						—						—						—						—						2,311
Dividends paid ($0.20 per share)			—						—						(8,994)						—						—						(8,994)
Treasury stock purchase			—						—						—						(5,636)						—						(5,636)
Balance as of May 2, 2020:			60,010						44,627						85,090						(7,470)						(5,277)						176,980
Net income			—						—						10,926						—						—						10,926
Cumulative translation adjustments			—						—						—						—						2,942						2,942
Share-based compensation			—						2,067						—						—						—						2,067
Tax payments related to RSU issuances			—						(125)						—						—						—						(125)
Employee savings plan activity			565						—						—						—						—						565
Treasury stock reissued			—						26						—						173						—						199
Balance as of May 1, 2021:			60,575						46,595						96,016						(7,297)						(2,335)						193,554
Net income			—						—						592						—						—						592
Cumulative translation adjustments			—						—						—						—						(2,556)						(2,556)
Unrealized gain (loss) on available-for-sale securities, net of tax			—						—						—						—						(34)						(34)
Share-based compensation			—						1,973						—						—						—						1,973
Exercise of stock options			8						—						—						—						—						8
Tax payments related to RSU issuances			—						(200)						—						—						—						(200)
Employee savings plan activity			1,211						—						—						—						—						1,211
Treasury stock purchase			—						—						—						(3,184)						—						(3,184)
Treasury stock reissued			—						4						—						196						—						200
Balance as of April 30, 2022:			$	61,794					$	48,372					$	96,608					$	(10,285)					$	(4,925)					$	191,564

See notes to consolidated financial statements.

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DAKTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

			Year Ended
			April 30, 2022						May 1, 2021						May 2, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income			$	592					$	10,926					$	491
Adjustments to reconcile net income to net cash (used) provided by operating activities:
Depreciation and amortization			15,394						17,077						17,718
Gain on sale of property, equipment and other assets			(743)						(572)						(35)
Share-based compensation			1,973						2,067						2,265
Equity in loss of affiliates			2,970						2,370						741
Provision for doubtful accounts, net of recovery			(286)						1,299						(99)
Deferred income taxes, net			(1,555)						1,314						(2,183)
Change in operating assets and liabilities			(45,380)						31,731						(8,090)
Net cash (used)/provided by operating activities			(27,035)						66,212						10,808
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment			(20,376)						(7,891)						(18,091)
Proceeds from sales of property, equipment and other assets			885						3,184						322
Purchases of marketable securities			(4,045)						—						—
Proceeds from sales or maturities of marketable securities			—						1,230						25,162
Purchases of and loans to equity investees			(7,848)						(6,744)						(11,664)
Net cash used in investing activities			(31,384)						(10,221)						(4,271)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on notes payable			46,801						—						15,000
Payments on notes payable			(46,801)						(15,000)						—
Principal payments on long-term obligations			(200)						(460)						(2,149)
Dividends paid			—						—						(8,994)
Proceeds from exercise of stock options			8						—						—
Payments for common shares repurchased			(3,184)						—						(5,636)
Tax payments related to RSU issuances			(200)						(125)						(199)
Net cash used in financing activities			(3,576)						(15,585)						(1,978)
EFFECT OF EXCHANGE RATE CHANGES ON CASH			(399)						(416)						111
NET (DECREASE)/ INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH			(62,394)						39,990						4,670
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
Beginning of period			80,402						40,412						35,742
End of period			$	18,008					$	80,402					$	40,412

See notes to consolidated financial statements.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share data)

Note 1. Nature of Business and Summary of Significant Accounting Policies

Nature of business: Daktronics, Inc. and its subsidiaries are engaged principally in the design, market, and manufacture of a wide range of integrated electronic display systems and related products which are sold in a variety of markets throughout the world and the rendering of related maintenance and professional services. Our products are designed primarily to inform and entertain people through the communication of content.

Fiscal year: We operate on a 52-52- or 53-week53-week fiscal year, with our fiscal year ending on the Saturday closest to April 30 of each year. When April 30 falls on a Wednesday, the fiscal year ends on the preceding Saturday. Within each fiscal year, each quarter is comprised of 13-week13-week periods following the beginning of each fiscal year. In each 53-week53-week year, an additional week is added to the first quarter, and each of the last three quarters is comprised of a 13-week13-week period. The fiscal years ended April 30, 2022 and May 1, 2021 and April 27, 2019 contained operating results for 52 weeks, while the fiscal year ended May 2, 2020 contained operating results for 53 weeks.

Principles of consolidation: The consolidated financial statements include Daktronics, Inc. and its subsidiaries. All intercompany accounts and transactions are eliminated in consolidation.

Investments in affiliates: Investments in affiliates over which we have significant influence are accounted for under the equity method of accounting, recording the investment at cost and then subsequently adjusting to account for our share of the affiliates' profit or losses, in accordance with the provisions of Accounting Standards Codification ("ASC") 323,Investments - Equity Method and Joint Ventures. Investments in affiliates over which we do not have the ability to exert significant influence over the affiliates' operating and financing activities are accounted for under the cost method of accounting, recording the investment at cost and then subsequently adjusting for any changes in ownership or dividends in accordance with the provisions of ASC 321,Investments - Equity Securities. We have evaluated our relationships with our affiliates and have determined that these entities are not variable interest entities. Cash paid for investments in affiliates and loans to affiliates are included in the "Purchases of and loans to equity investment" line item in our consolidated statements of cash flows. Equity method investments as a whole are assessed for other-than-temporary impairments whenever events or changes in circumstances indicate that the carrying amount of the investment may not be recoverable.

During the fourth quarter of fiscal 2020, we participated in a Series A investment in X Display Company ("XDC"). XDC creates and owns leading intellectual property (IP) and capabilities in microLED mass transfer technology. This investment will support XDC’s further development in microLED capabilities and applications. MicroLED technologies support Daktronics’ line of narrow pixel pitch LED displays and will enable solutions to move into the realm of less than 1-millimeter pixel spacing. During the fourth quarter of fiscal 2021, we invested an additional $5,000, which resulted in a 16.4 percent ownership in XDC. XDC is accounted for under the equity method of accounting.

The aggregate amount of our investments in affiliates accounted for under the equity method was $16,916 and $19,887 as of April 30, 2022 and $17,257 at May 1, 2021 and May 2, 2020, respectively. Our proportional share of the respective affiliates' earnings or losses is included in the "Other (expense) income, net" line item in our consolidated statements of operations. For the fiscal years 2022, 2021, 2020, and 2019,2020, our share of the losses of our affiliates was $2,970, $2,370 and $741, respectively. During fiscal 2022, we purchased $7,488 of convertible notes (“Notes”) which are included in the “Investment in affiliates and $844, respectively. other assets" and "Current maturities of long-term receivables" line items in our consolidated balance sheet. There were no convertible notes as of May 1, 2021.

We purchased services for research and development activities from our equity method investments.investees. The total of these related party transactions for fiscal year 2022, 2021 and 2020 was $1,520, $460, and $1,113, respectively, which wasis included in the "Product design and development" line item in in our condensed consolidated statement of operations, and $470for fiscal 2022, $296 of this remains unpaid and is included in the "Accounts payable " line item in our consolidated balance sheet. Fiscal 2021 had $470 unpaid and included in the "Accounts payable" line item in our condensed consolidated balance sheet. The total

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Table of these related party transactions for fiscal 2020 and 2019 was $1,113 and $0, respectively. 

Contents

Summarized financial information for equity method investments consist of the following:

		Year Ended
		May 1, 2021				May 2, 2020				April 27, 2019
Balance sheet data:
Current assets		$	7,534			$	10,593			$	192
Non-current assets			4,637				4,266				2,626
Current liabilities			2,807				2,755				839
Non-current liabilities			1,793				4,086				2,599
Income statement data:
Net loss			(13,436	)			(1,383	)			(2,168	)

			Year Ended
			April 30, 2022						May 1, 2021						May 2, 2020
Balance sheet data:
Current assets			$	6,672					$	7,534					$	10,593
Non-current assets			4,491						4,637						4,266
Current liabilities			13,938						2,807						2,755
Non-current liabilities			1,738						1,793						4,086
Income statement data:
Net loss			$	(11,928)					$	(13,436)					$	(1,383)

Use of estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities; the disclosure of contingent assets and liabilities at the date of the financial statements; the reported amounts of revenues and expenses during the reporting period; and our ability to continue as a going concern. Due to the inherent uncertainty involved in making estimates, actual results in future periods maydiffer from those estimates. Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the estimated total costs on uniquely configured contracts and estimated costs to be incurred for product warranties and income taxes. Estimation processes are also used in inventory valuation and determining, the allowance for doubtful accounts, share-based compensation, goodwill impairment, and extended warranty and product maintenance agreements. Changes in estimates are reflected in the periods in which they become known.

Cash and cash equivalents: All highly liquid investments with maturities of three months or less at the date of purchase are considered to be cash equivalents and consist primarily of government repurchase agreements, savings accounts and money market accounts that are carried at cost, which approximates fair value. We maintain our cash in bank deposit accounts, the balances of which at times mayexceed federally insured limits. We have not experienced any losses in such accounts.

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Restricted cash: Restricted cash consists of cash and cash equivalents held in bank deposit accounts to secure issuances of foreign bank guarantees.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sum to the totals of the same amounts shown in the consolidated statementstatements of cash flows:

		May 1, 2021				May 2, 2020				April 27, 2019
Cash and cash equivalents		$	77,590			$	40,398			$	35,383
Restricted cash			2,812				14				359
Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows		$	80,402			$	40,412			$	35,742

flows. Restricted cash consists of cash and cash equivalents held in bank deposit accounts to secure issuances of foreign bank guarantees.

			April 30, 2022						May 1, 2021						May 2, 2020
Cash and cash equivalents			$	17,143					$	77,590					$	40,398
Restricted cash			865						2,812						14
Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows			$	18,008					$	80,402					$	40,412

Inventories: In accordance with ASC 330,Inventory, our inventories are stated at the lower of cost (first-in, first-out(first-in, first-out method) and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Cost is measured as the price of the components and allocated expenses for production or betterment of the inventory item. When we estimate net realizable value to be lower than cost, any necessary adjustments are charged to cost of sales in that period. In determining net realizable value, we review various factors such as current inventory levels, forecasted demand, costs of completion, and technological obsolescence.

Allowance for doubtful accounts: We make estimates regarding the collectability of our accounts receivable, long-term receivables, contract assets and other receivables. In evaluating the adequacy of our allowance for doubtful accounts, we analyze specific balances, customer creditworthiness, changes in customer payment cycles, and current economic trends. If

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the financial condition of any customer were to deteriorate, resulting in an impairment of its ability to make payments, additional allowances may be required. We charge off receivables at such time it is determined collection will not occur in accordance with ASC 310,Receivables.

Revenue recognition: Our accounting policies and estimates are in accordance with ASC 606,Revenue from Contracts with Customers, and are as follows:

Contracts are identified and follow the revenue recognition policies when all of the following occur: we have evidence that all parties to the contract have approved the contract and are committed to perform their respective obligations, we can identify each party’s rights regarding the goods or services to be transferred, we can identify the payment terms for the goods or services to be transferred, the contract has commercial substance, and it is probable we will collect substantially all of the consideration to which we would be entitled in exchange for the goods or services.

Pre-contract costs are generally expensed as incurred, unless they are directly associated with an anticipated contract and recoverability from that contract is probable. Pre-contract costs directly associated with anticipated contracts expected to be recoverable include $492$117 and $1,582$492 as of April 30, 2022 and May 1, 2021, and May 2, 2020, respectively. These are included in the "Inventories" line item in our consolidated balance sheets.

At contract inception, we identify performance obligations by reviewing the agreement for material distinct goods and services. Goods and services are distinct when the customer can benefit from them on its own and our promises to transfer these items are identifiable from other promises within the contract. When we are contracted to provide a single promise (an integrated system), we often treat it as a single performance obligation if we are providing goods and services with the same pattern of transfer that are highly integrated or interdependent, that are modified or customized by other goods or services promised, or that provide a combined outcome for which the customer has contracted. When less interdependency or integration is necessary, or when the customer can benefit from distinct items, we separate the contract into multiple performance obligations. We account for extended warranties and other services ("service-type warranties") that represent a distinct service as a separate performance obligation.

Our contracts can contain multiple components of transaction price. We evaluate each contract for these components and include fixed consideration, variable consideration, financing components, and non-cash consideration and exclude consideration payable to a customer and sales taxes in the transaction price. When we are responsible for site installations which include subcontracted work, we maintain the contractual responsibilities and risks and include the consideration for these services in the transaction price. When our contract contains variable consideration, including return rights, discounts, claims, unpriced change orders, and liquidated damages, we estimate the transaction price using the expected value (i.e., the sum of the probability-weighted amount) or the most likely amount method, whichever is expected to better predict revenue for that contract situation. We also constrain the revenue to the extent that it is probable that a significant reversal of the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. We consider the following factors in determining revenue associated with variable consideration: (a) the contract or other evidence providing the legal basis, (b) additional costs caused by unforeseen circumstances, (c) evidence supporting the claim, and (d) historical evidence and patterns of customers. We adjust the contract price for the effects of a significant financing component if we expect, at contract inception, that the period between when we transfer goods and services to a customer will exceed one year from the time the customer pays and represents financing. If the payment structures exceed a year but are structured to account for risks with a contract or correspond to payments on milestones or are scheduled for performance, we do not adjust the contract price for a financing component. See "Note 6.6. Receivables" for amounts recorded in long-term receivables.

When separate performance obligations are identified, we allocate the transaction price to the individual performance obligation based on the best method we judge as faithfully depicting the value of the performance obligation. Many of our contracts are bundled, and we do not have separate selling prices for each performance obligation; therefore, for these contracts, we primarily use the cost plus a margin approach to allocate the relative transaction price to identified performance obligations, as it is the best representative of our pricing methods.

Revenue is recognized when we satisfy a performance obligation. We receive payments from customers based on a billing schedule as established in our contracts. Billing schedules include down payments and progress billings over time; set milestone payments that are specific to the project are scheduled for performance-based payments or are set time-based payment(s). Variability in contract assets and contract liabilities relates to the timing of billings and revenue recognition, which can vary significantly depending on contractual payment terms, build and installation schedules and the related timing differences in transfer of control. Balances are also impacted by the seasonality in our business.

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Significant judgments and estimates are used in our revenue policies. Throughout the revenue cycle, we evaluate contractual evidence, monitor our performance, evaluate variable consideration changes, update estimated costsIn order to complete cost-to-cost projects, and obtain evidence of deliveries or other control change evidence forassure appropriate and consistent revenue recognition.recognition, we regularly evaluate available project related information and update estimates accordingly. We maintain internal policies and procedures to provide guidance for those involved in recording revenue. We monitor for changes in our business sales practices and customer interactions to capture the appropriate types of performance obligations and adjust for any change in control terms and conditions.

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Our material performance obligation types include: