UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x ☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~November 2, 2019~~August 1, 2020

o ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___ to ___.

Commission File Number: 0-23246

Daktronics, Inc.

(Exact Name of Registrant as Specified in its Charter)



South Dakota			46-0306862
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)

201 Daktronics Drive	Brookings,	SD		57006
(Address of Principal Executive Offices)					~~(Zip Code)~~

~~(605)~~ (605) 692-0200

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, No Par Value	DAKT	NASDAQ Global Select Market
Preferred Stock Purchase Rights	DAKT	NASDAQ Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yesx No ¨☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filero	☐	Accelerated filer	x
Non-accelerated filero	☐	Smaller reporting companyo	☐
		Emerging growth companyo	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐ No x

The number of shares of the registrant’s common stock outstanding as of ~~November 25, 2019~~August 24, 2020 was ~~45,147,549.~~44,615,015.

DAKTRONICS, INC. AND SUBSIDIARIES

FORM 10-Q

For the Quarter Ended ~~November 2, 2019~~August 1, 2020

Table of Contents



		Page
Part I.	Financial Information	1
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as of ~~November~~August 1, 2020 and May 2, ~~2019 and April 27, 2019~~2020	1
	Condensed Consolidated Statements of Operations for the Three ~~and Six~~ Months Ended ~~November 2,~~August 1, 2020 and August 3, 2019 ~~and October 27, 2018~~	3
	Condensed Consolidated Statements of Comprehensive Income for the Three ~~and Six~~ Months Ended ~~November 2,~~August 1, 2020 and August 3, 2019 ~~and October 27, 2018~~	4
	Condensed Consolidated Statements of Shareholders' Equity for the Three ~~and Six~~ Months Ended ~~November 2,~~August 1, 2020 and August 3, 2019 ~~and October 27, 2018~~	5
	Condensed Consolidated Statements of Cash Flows for the ~~Six~~Three Months Ended ~~November 2,~~August 1, 2020 and August 3, 2019 ~~and October 27, 2018~~	7
	Notes to the Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2119
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3329
Item 4.	Controls and Procedures	3329

Part II.	Other Information	3329
Item 1.	Legal Proceedings	3329
Item 1A.	Risk Factors	3329
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3329
Item 3.	Defaults Upon Senior Securities	3429
Item 4.	Mine Safety Disclosures	3430
Item 5.	Other Information	3430
Item 6.	Exhibits	3430

Signatures		3531
Index to Exhibits		3632

Table of contents

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

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

		November 2, 2019		April 27, 2019			August 1, 2020		May 2, 2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	29,265	$	35,383		$	44,609	$	40,398
Restricted cash		59		359			96		14
Marketable securities		3,618		26,344			1,230		1,230
Accounts receivable, net		103,417		65,487			88,608		72,577
Inventories		79,237		78,832			81,435		86,803
Contract assets		34,395		33,704			33,261		35,467
Current maturities of long-term receivables		4,567		2,300			3,306		3,519
Prepaid expenses and other current assets		9,943		8,319			7,595		9,629
Income tax receivables		4,301		1,087			260		548
Property and equipment and other assets available for sale		1,860		1,858			1,966		1,817
Total current assets		270,662		253,673			262,366		252,002

Property and equipment, net		67,163		65,314			66,059		67,484
Long-term receivables, less current maturities		1,758		1,214			739		1,114
Goodwill		7,974		7,889			8,048		7,743
Intangibles, net		4,204		4,906			3,070		3,354
Investment in affiliates and other assets		15,458		5,052			26,526		27,683
Deferred income taxes		11,190		11,168			13,312		13,271
TOTAL ASSETS		$	378,409	$	349,216		$	380,120	$	372,651

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable		$	48,432	$	44,873		$	48,255	$	47,834
Contract liabilities		48,387		47,178			50,159		50,897
Accrued expenses		36,817		32,061			33,941		36,626
Warranty obligations		9,837		9,492			10,648		9,764
Income taxes payable		638		468			1,107		844
Total current liabilities		144,111		134,072			144,110		145,965

Long-term warranty obligations		16,148		14,978			16,412		15,860
Long-term contract liabilities		10,578		10,053			10,715		10,707
Other long-term obligations		8,295		1,339			21,469		22,105
Long-term income taxes payable		735		578			723		582
Deferred income taxes		531		533			469		452
Total long-term liabilities		36,287		27,481			49,788		49,706

DAKTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

DAKTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

DAKTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

DAKTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

DAKTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

DAKTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

DAKTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

DAKTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

DAKTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

DAKTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

See notes to condensed consolidated financial statements.

DAKTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

See notes to condensed consolidated financial statements.

DAKTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

DAKTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

DAKTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

See notes to condensed consolidated financial statements.

DAKTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

DAKTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

DAKTRONICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

Daktronics, Inc. and its subsidiaries (the “Company”, “Daktronics”, “we”, “our”, or “us”) are the world's industry leader in designing and manufacturing electronic scoreboards, programmable display systems and large screen video displays for sporting, commercial and transportation applications.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to fairly present our financial position, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with generally accepted accounting principles in the United States ("GAAP") requires management to make estimates and assumptions affecting the reported amounts therein. Due to the inherent uncertainty involved in making estimates, actual results in future periods may differ from those estimates.

Certain information and ~~footnote~~ disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The balance sheet at ~~April 27, 2019,~~May 2, 2020, has been derived from the audited financial statements at that date, but it does not include all the information and ~~footnotes~~disclosures required by GAAP for complete financial statements.These financial statements should be read in conjunction with our financial statements and notes thereto for the year ended ~~April 27, 2019,~~May 2, 2020, which are contained in our Annual Report on Form 10-K previously filed with the Securities and Exchange Commission ("SEC"). The results of operations for the interim periods presented are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year.

Daktronics, Inc. operates on a 52- or 53-week fiscal year, with our fiscal year ending on the Saturday closest to April 30 of each year. When April 30 falls on a Wednesday, the fiscal year ends on the preceding Saturday. Within each fiscal year, each quarter is comprised of 13-week periods following the beginning of each fiscal year. In each 53-week 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 ~~April 27, 2019 consisted~~May 1, 2021 will consist of 52 ~~weeks. Fiscal~~weeks and the fiscal year ended May 2, 2020 ~~will be~~was a 53-week year; therefore, the ~~six~~three months ended ~~November 2,~~August 1, 2020 contains operating results for 13 weeks while the three months ended August 3, 2019 contains operating results for ~~27 weeks while the six months ended October 27, 2018 contains operating results for 26~~14 weeks.

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

Other Business Developments - Coronavirus Pandemic

During the first quarter of fiscal 2021, we continued to see the global spread of the coronavirus pandemic ("COVID-19"), which grew to create significant volatility, uncertainty and global economic disruption. As disclosed in our Current Report on Form 8-K filed on April 1, 2020, we are taking proactive steps to solidify our financial position and mitigate any adverse consequences. These steps include preserving liquidity by drawing down $15,000 of our existing line of credit, which is included in the "Other long-term obligations" line item in our condensed consolidated balance sheets. In addition, we are pursuing other sources of financing, reducing investments in capital assets, reducing executive pay and board member compensation, and instituting initiatives to reduce other costs in the business. Our board of directors voted to suspend stock repurchases under our share repurchase program and to suspend dividends for the foreseeable future. We believe these measures are necessary to help preserve our ability to borrow for liquidity needs and help us be well positioned when the pandemic passes and economies begin to recover.

During fiscal 2020, we offered special voluntary retirement and voluntary exit incentive program ("Offering") and during the first quarter of fiscal 2021, we conducted a reduction in force ("RIF") to adjust our capacity and reduce on-going expenses due to the uncertainties created by the COVID-19 pandemic. Under the Offering, employees had until June 2020 to choose to participate. During the first quarter of fiscal 2021, 60 employees agreed to participate and completed employment in June 2020. The approximate cost of this Offering was $931. Under the RIF, employment was terminated with 108 employees with severance totaling $1,426.

November 2,
2019 October 27,
2018
Cash and cash equivalents $ 29,265
$ 35,557
Restricted cash 59
26
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statement of cash flows $ 29,324
$ 35,583

Various government programs have been announced which provide financial relief for affected businesses that suffered reductions in revenue resulting from the COVID-19 pandemic including the Canada Emergency Wage Subsidy ("CEWS") under the COVID-19 Economic Response Plan in Canada, the Australian JobKeeper subsidy in Australia, the Temporary COVID-19 Wage Subsidy in Ireland, and the Job Retention Program in the United Kingdom. During the first quarter of fiscal 2021, we received $812 in total governmental wage subsidies and recorded such as a reduction of compensation expense, which is mostly included in the "Costs of sales" line item in our condensed consolidated statements of operations.

Recent Accounting Pronouncements

There have been no material changes to our significant accounting policies and estimates as described in our Annual Report on Form 10-K for the fiscal year ended ~~April 27, 2019,~~May 2, 2020, other than described in the Accounting Standards Adopted section below.

Accounting Standards Adopted

In ~~February 2016,~~January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ~~2016-02,~~ ~~Leases (Topic 842)~~, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (that is, lessees and lessors). ASU 2016-02 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term greater than 12 months regardless of their classification. ASU 2016-02 requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. In July 2018, the FASB issued ASU 2018-10, ~~Codification Improvements to Topic 842 (Leases)~~ ~~and ASU 2018-11,~~ ~~Leases (Topic 842), Targeted Improvements~~, which provide (i) narrow amendments to clarify how to apply certain aspects of the new lease standard, (ii) entities with an additional transition method to adopt the new standard, and (iii) lessors with a practical expedient for separating components of a contract.

We adopted ASU 2016-02 and its related guidance during the first quarter of fiscal 2020 for all agreements existing as of April 28, 2019. We elected the "comparatives under Accounting Standards Codification ("ASC") 840 option" as a transitional method, which allows us to initially apply the new lease requirements at the effective date. Comparative periods were not adjusted and will continue to be reported in accordance with prior lease guidance under ASC 840. We elected the package of practical expedients, which permits us not to reassess our prior conclusions about lease identification, lease classification and initial direct costs. In addition, we have elected the short-term lease recognition whereby we will not recognize operating leases related assets or liabilities for leases with a lease term of less than one year. We have also elected the practical expedient to not separate lease and non-lease components in the lease payments for all asset classes. This adoption did not have an impact on our condensed consolidated statements of operations, shareholders' equity and cash flows, and there was no adjustment to retained earnings. As of April 28, 2019, we recognized a right of use asset for operating leases of $11,101 and a current and non-current lease liability for operating leases of $2,745 and $8,356, respectively. The right of use operating assets are included in the "Investment in affiliates and other assets" line item, the current lease liabilities are included in the "Accrued expenses" line item, and the non-current lease liabilities are included in the "Other long-term obligations" line item in our condensed consolidated balance sheet. See "Note 12. Leases" for more information.

~~Accounting Standards Not Yet Adopted~~

~~In January 2017, the FASB issued ASU~~ 2017-04, Intangibles-Goodwill and Other (Topic 350), which simplifies the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The amendment requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. A goodwill impairment will be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for interim and annual periods beginning after December 15, 2019 and will require adoption on a prospective basis. We ~~are currently evaluating the effect that adopting~~adopted ASU 2017-04 ~~will~~during the first quarter of fiscal 2021 and the adoption did not have an impact on our condensed consolidated financial ~~statements and related disclosures.~~statements.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which provides guidance regarding the measurement and recognition of credit impairment for certain financial assets. ASU 2016-13 improves financial reporting by requiring more timely recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. Under the new guidance, the ASU requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. ASU 2016-13 is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted, and will require adoption on a modified retrospective basis. We ~~are currently evaluating the effect that adopting~~adopted ASU 2016-13 ~~including all subsequent amendments~~ and ~~improvements to ASC Topic 326 issued by FASB, will~~its related guidance during the first quarter of fiscal 2021 and the adoption did not have a material impact on our condensed consolidated financial ~~statements~~statements.

We estimate an allowance for doubtful accounts using a loss rate method. We measure all expected credit losses for financial assets held

at the reporting date based on historical experience, current conditions, and ~~related disclosures.~~reasonable supportable forecasts.

A reconciliation of the beginning and ending allowance for doubtful accounts is as follows:

(1) Includes accounts determined to be uncollectible and charged against reserves.

Accounting Standards Not Yet Adopted

There are no significant ASU's issued not yet adopted as of August 1, 2020.

Note 2. 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 ~~ASC~~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 affiliate's 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.

The aggregate amount of investments accounted for under the equity method was $3,415 and $3,657 at November 2, 2019 and April 27, 2019, respectively. The equity method requires us to report our share of losses up to our equity investment amount. 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 condensed 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.

The aggregate amount of investments accounted for under the equity method was $16,728 and $17,257 at August 1, 2020 and May 2, 2020, respectively. Our proportional share of the respective affiliates' earnings or losses is included in the "Other (expense) income, ~~(expense),~~ net" line item in our condensed consolidated statements of operations. For the ~~six~~three months ended ~~November 2,~~August 1, 2020 and August 3, 2019, ~~and October 27, 2018,~~ our share of the losses of our affiliates was ~~$241~~$529 and ~~$265,~~$118, respectively.

The aggregate amount of investments without readily determinable fair values was $42 at November 2, 2019 and April 27, 2019. There have not been any identified events or changes in circumstances that may have a significant adverse effect on their fair value, and it is not practical to estimate their fair value. We record equity investments without readily determinable fair values at cost, less any impairment, adjusted for observable price changes. During the six months ended November 2, 2019, we did not record any changes in the measurement of such investments.

Note 3. Earnings Per Share ("EPS")

We follow the provisions of ASC 260, Earnings Per Share, where basic EPS is computed by dividing income attributable to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution which may occur if securities or other obligations to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock which share in our earnings.

The following is a reconciliation of the net income and common share amounts used in the calculation of basic and diluted EPS for the three ~~and six~~ months ended ~~November 2, 2019~~August 1, 2020 and ~~October 27, 2018:~~August 3, 2019:



	Net income		Shares	Per share income
For the three months ended August 1, 2020
Basic earnings per share	$	7,467	44,654	$	0.17
Dilution associated with stock compensation plans	—		97	—
Diluted earnings per share	$	7,467	44,751	$	0.17
For the three months ended August 3, 2019
Basic earnings per share	$	7,030	45,089	$	0.16
Dilution associated with stock compensation plans	—		172	—
Diluted earnings per share	$	7,030	45,261	$	0.16

Options outstanding to purchase ~~2,282~~2,119 shares of common stock with a weighted average exercise price of $~~9.90~~9.96 for the three months ended ~~November 2, 2019~~August 1, 2020 and ~~2,377~~2,197 shares of common stock with a weighted average exercise price of $~~9.94~~10.03 for the three months ended ~~October 27, 2018~~August 3, 2019 were not included in the computation of diluted earnings per share because the effects would be anti-dilutive.

Options outstanding to purchase 2,238 shares of common stock with a weighted average exercise price of $9.97 for the six months ended November 2, 2019 and 2,129 shares of common stock with a weighted average exercise price of $10.15 for the six months ended October 27, 2018 were not included in the computation of diluted earnings per share because the effects would be anti-dilutive.

Note 4. Revenue Recognition

Disaggregation of revenue

In accordance with ASC 606-10-50, we disaggregate revenue from contracts with customers by the type of performance obligation and the timing of revenue recognition. We determine that disaggregating revenue in these categories achieves the disclosure objective to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors and to enable users of financial statements to understand the relationship to each reportable segment.

The following table presents our disaggregation of revenue by segments:

See "Note 5. Segment Reporting" for a disaggregation of revenue by geography.

Contract assets represent revenue recognized in excess of amounts billed and include unbilled receivables. Unbilled receivables, which represent an unconditional right to payment subject only to the passage of time, are reclassified to accounts receivable when they are billed according to the contract terms. Contract liabilities represent amounts billed to the clients in excess of revenue recognized to date.

The following table reflects the changes in our contract assets and liabilities:



	August 1, 2020		May 2, 2020		Dollar Change			Percent Change
Contract assets	$	33,261	$	35,467	$	(2,206	)	(6.2	)%
Contract liabilities - current	50,159		50,897		(738		)	(1.4	)
Contract liabilities - noncurrent	10,715		10,707		8			0.1

The changes in our contract assets and contract liabilities from ~~April 27, 2019~~May 2, 2020 to ~~November 2, 2019~~August 1, 2020 were due to the timing of billing schedules and revenue recognition, which can vary significantly depending on the contractual payment terms and the seasonality of the sports markets. We had no material impairments of contract assets for the ~~six~~three months ended ~~November 2, 2019.~~August 1, 2020.

For service-type warranty contracts, we allocate revenue to this performance obligation, recognize the revenue over time, and recognize costs as incurred. Earned and unearned revenues for these contracts are included in the "Contract assets" and "Contract liabilities" line items in our condensed consolidated balance sheets. Changes in unearned service-type warranty contracts, net were as follows:



	August 1, 2020
Balance at beginning of period	$	24,490
New contracts sold	8,188
Less: reductions for revenue recognized	(9,115		)
Foreign currency translation and other	250
Balance at end of period	$	23,813

As of ~~April 27, 2019, we had six~~August 1, 2020 and May 2, 2020, our contracts in progress that were identified as loss contracts ~~for which we recorded a~~were immaterial. For these contracts, the provision for losses ~~of $2,353 and two remaining contracts with loss estimates of $360 as of November 2, 2019. These were~~are included in the "Accrued expenses" line item in our condensed consolidated balance sheets.

During the ~~six~~three months ended ~~November 2, 2019,~~August 1, 2020, we recognized revenue of ~~$39,352~~$30,358 related to our contract liabilities as of ~~April 27, 2019.~~May 2, 2020.

Remaining performance obligations

As of ~~November 2, 2019,~~August 1, 2020, the aggregate amount of the transaction price allocated to the remaining performance obligations was ~~$239,902.~~$245,756. We expect approximately ~~$202,745~~$204,878 of our remaining performance obligations to be recognized over the next 12 months, with the remainder recognized thereafter. Remaining performance obligations related to product and service agreements at August 1, 2020 are ~~$182,050~~$191,717 and ~~$57,852,~~$54,039, respectively. Although remaining performance obligations reflect business that is considered to be legally binding, cancellations, deferrals or scope adjustments may occur. Any known project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations and project deferrals are reflected or excluded in the remaining performance obligation balance, as appropriate.

Note 5. Segment Reporting

We organize and manage our business by the following ~~five~~5 segments which meet the definition of reportable segments under ASC 280-10, Segment Reporting: Commercial, Live Events, High School Park and Recreation, Transportation, and International. These segments are based on the customer type or geography and are the same as our business units. We evaluate segment performance based on operating results through contribution margin, which is comprised of gross profit less selling expense. We exclude general and administration expense, product design and development expense, non-operating income and expense, and income tax expense in the segment analysis. Separate financial information is available and regularly evaluated by our chief operating decision-maker (CODM), who is our president and chief executive officer, in making resource allocation decisions for our segments.

The following table sets forth certain financial information for each of our five reporting segments for the periods indicated:



	Three Months Ended
	August 1, 2020			August 3, 2019
Net sales:
Commercial	$	34,506		$	44,035
Live Events	51,474			59,306
High School Park and Recreation	28,943			30,465
Transportation	14,498			19,018
International	14,223			27,432
	143,644			180,256

Gross profit:
Commercial	7,742			9,218
Live Events	9,354			12,737
High School Park and Recreation	10,476			10,187
Transportation	5,143			6,754
International	3,046			6,609
	35,761			45,505

Contribution margin: (1)
Commercial	4,441			4,084
Live Events	7,138			8,872
High School Park and Recreation	7,915			6,592
Transportation	4,381			5,452
International	330			2,208
	24,205			27,208

Non-allocated operating expenses:
General and administrative	7,124			9,093
Product design and development	7,532			10,500
Operating income	9,549			7,615

Nonoperating income (expense):
Interest income	85			269
Interest expense	(73		)	(35		)
Other (expense) income, net	(627		)	193

Income before income taxes	8,934			8,042
Income tax expense	1,467			1,012
Net income	$	7,467		$	7,030

Depreciation and amortization:
Commercial	$	772		$	974
Live Events	1,451			1,398
High School Park and Recreation	496			512
Transportation	237			264
International	693			524
Unallocated corporate depreciation	688			711
	$	4,337		$	4,383

(1) Contribution margin consists of gross profit less selling expense.

No single geographic area comprises a material amount of our net sales or property and equipment, net of accumulated depreciation, other than the United States. The following table presents information about net sales and property and equipment, net of accumulated depreciation, in the United States and elsewhere:



	Three Months Ended
	August 1, 2020		August 3, 2019
Net sales:
United States	$	128,069	$	149,460
Outside United States	15,575		30,796
	$	143,644	$	180,256


	August 1, 2020		May 2, 2020
Property and equipment, net of accumulated depreciation:
United States	$	56,822	$	58,422
Outside United States	9,237		9,062
	$	66,059	$	67,484

We have numerous customers worldwide for sales of our products and services, and no customer accounted for 10% or more of net sales; therefore, we are not economically dependent on a limited number of customers for the sale of our products and services.

We have numerous raw material and component suppliers, and no supplier accounts for 10% or more of our cost of sales; however, we have a number of single-source suppliers that could limit our supply or cause delays in obtaining raw material and components needed in manufacturing.

Note 6. Marketable Securities

We have a cash management program which provides for the investment of cash balances not used in current operations. We classify our investments in marketable securities as available-for-sale in accordance with the provisions of ASC 320, Investments – Debt and Equity Securities. Marketable securities classified as available-for-sale are reported at fair value with unrealized gains or losses, net of tax, reported in accumulated other comprehensive loss in the condensed consolidated balance sheets. As it relates to fixed income marketable securities, it is not likely we will be required to sell any of these investments before recovery of the entire amortized cost basis. In addition, as of ~~November 2, 2019,~~August 1, 2020, we anticipate we will recover the entire amortized cost basis of such fixed income securities, and we have determined no other-than-temporary impairments associated with credit losses were required to be recognized. The cost of securities sold is based on the specific identification method. Where quoted market prices are not available, we use the market price of similar types of securities traded in the market to estimate fair value.

As of ~~November~~August 1, 2020 and May 2, ~~2019 and April 27, 2019,~~2020, our available-for-sale securities consisted of the following:



	Amortized Cost		Unrealized Losses		Fair Value
Balance as of August 1, 2020
Certificates of deposit	$	1,230	$	—	$	1,230
	$	1,230	$	—	$	1,230
Balance as of May 2, 2020
Certificates of deposit	$	1,230	$	—	$	1,230
	$	1,230	$	—	$	1,230

Amortized Cost Unrealized Losses Fair Value
Balance as of November 2, 2019
Certificates of deposit $ 2,717
$ —
$ 2,717
U.S. Government sponsored entities 745
—
745
Municipal bonds 156
—
156
$ 3,618
$ —
$ 3,618
Balance as of April 27, 2019

Certificates of deposit $ 3,464
$ —
$ 3,464
U.S. Government securities 10,779
(5 ) 10,774
U.S. Government sponsored entities 10,510
(28 ) 10,482
Municipal bonds 1,626
(2 ) 1,624
$ 26,379
$ (35 ) $ 26,344

Realized gains or losses on investments are recorded in our condensed consolidated statements of operations as "Other (expense) income, ~~(expense),~~ net." Upon the sale of a security classified as available-for-sale, the security’s specific unrealized gain (loss) is reclassified out of

accumulated other comprehensive loss into earnings based on the specific identification method. In the ~~six~~three months ended ~~November 2,~~August 1, 2020 and August 3, 2019, ~~and October 27, 2018,~~ the reclassifications from accumulated other comprehensive loss to net earnings were immaterial.

All available-for-sale securities are classified as current assets, as they are readily available to support our current operating needs. The contractual maturities of available-for-sale debt securities as of ~~November 2, 2019~~August 1, 2020 were as follows:



	Less than 12 months		Total
Certificates of deposit	$	1,230	$	1,230
	$	1,230	$	1,230

Less than 12 months 1-5 Years Total
Certificates of deposit $ 1,734
$ 983
$ 2,717
U.S. Government sponsored entities 745
—
745
Municipal bonds 156
—
156
$ 2,635
$ 983
$ 3,618

Note 7. ~~Business Combinations~~

~~AJT Systems, Inc. Acquisition~~

We acquired the net assets of AJT Systems, Inc. ("AJT"), a Florida-based company, on June 21, 2018. The results of its operations have been included in our condensed consolidated financial statements since the date of acquisition. We have not made pro forma disclosures about our acquisition of AJT because the results of its operations are not material to our condensed consolidated financial statements.

AJT is a developer of real-time live to air graphics rendering and video server systems for the broadcast TV industry. This acquisition will allow our organization to grow and strengthen our solution offerings to the market. This acquisition was primarily funded with cash on hand and with payments made over a three-year period.

~~Note 8.~~ Goodwill

The changes in the carrying amount of goodwill related to each reportable segment for the ~~six~~three months ended ~~November 2, 2019~~August 1, 2020 were as follows:



	Live Events		Commercial		Transportation		International		Total
Balance as of May 2, 2020	$	2,266	$	3,144	$	38	$	2,295	$	7,743
Foreign currency translation	13		91		13		188		305
Balance as of August 1, 2020	$	2,279	$	3,235	$	51	$	2,483	$	8,048

We perform an analysis of goodwill on an annual basis, and it is tested for impairment more frequently if events or changes in circumstances indicate that an asset might be impaired. ~~We perform our~~Our annual analysis is performed during our third quarter of each fiscal year, based on the goodwill amount as of the first business day of our third fiscal quarter.

In conducting our impairment testing, we compare the fair value of each of our business units to the related carrying value of the allocated assets. We utilize the income approach based on discounted projected cash flows to estimate the fair value of each unit. The projected cash flows use many estimates including market conditions and expected market demand; our ability to grow or maintain market share and gross profit; and our expected expenditures for capital and operating expenses. Assets shared or not directly attributed to a reportable segment's activities are allocated to the reportable segment based on sales and other measures.

We performed our annual impairment test ~~for our third quarter in fiscal~~on November 4, 2019 ~~which began on October 29, 2018~~ and concluded no goodwill impairment existed. We ~~are currently in the process of completing~~plan to complete our annual analysis as of the first business day of our third quarter of fiscal ~~2020,~~2021, which ~~began~~will begin on November ~~4, 2019.~~2, 2020.

In March 2020, we began to see the impacts from the COVID-19 pandemic that could have a negative impact on our forecasted revenue and profitability and stock price declines. This, along with other market conditions, led us to perform an interim goodwill impairment analysis in the fourth quarter of fiscal 2020. After evaluating our results, events and circumstances, we determined no goodwill impairment was necessary. Although the COVID-19 pandemic continues to cause uncertainty, in the first quarter of fiscal 2021, we considered if any new events had occurred or if circumstances had changed such that it was more likely than not that the fair value of any of our reporting units was below its carrying amount, and we did not identify any further impairment indicators; therefore, we did not perform an additional interim impairment analysis.

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Note 9.8. Selected Financial Statement Data

Inventories consisted of the following:



	August 1, 2020		May 2, 2020
Raw materials	$	33,076	$	35,306
Work-in-process	9,943		12,102
Finished goods	38,416		39,395
	$	81,435	$	86,803

November 2,
2019 April 27,
2019
Raw materials $ 33,203
$ 30,789
Work-in-process 9,104
8,239
Finished goods 36,930
39,804
$ 79,237
$ 78,832

Property and equipment, net consisted of the following:



	August 1, 2020		May 2, 2020
Land	$	2,183	$	2,183
Buildings	69,967		68,804
Machinery and equipment	105,188		104,157
Office furniture and equipment	6,174		6,151
Computer software and hardware	53,691		53,441
Equipment held for rental	287		287
Demonstration equipment	8,368		8,473
Transportation equipment	7,783		7,944
	253,641		251,440
Less accumulated depreciation	187,582		183,956
	$	66,059	$	67,484

November 2,
2019 April 27,
2019
Land $ 2,176
$ 1,738
Buildings 67,561
66,403
Machinery and equipment 99,811
96,486
Office furniture and equipment 6,157
6,195
Computer software and hardware 52,735
55,460
Equipment held for rental 287
287
Demonstration equipment 7,547
7,422
Transportation equipment 7,993
7,715
244,267
241,706
Less accumulated depreciation 177,104
176,392
$ 67,163
$ 65,314

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Note ~~10.~~9. Receivables

We invoice customers based on a billing schedule as established in our contracts. We sometimes have the ability to file a contractor’s lien against the product installed as collateral and to file claims against surety bonds to protect our interest in receivables. Foreign sales are at times secured by irrevocable letters of credit or bank guarantees. Accounts receivable are reported net of an allowance for doubtful accounts of ~~$2,516~~$3,322 and ~~$2,208~~$2,828 at ~~November~~August 1, 2020 and May 2, ~~2019 and April 27, 2019,~~2020, respectively. Included in accounts receivable as of ~~November~~August 1, 2020 and May 2, ~~2019~~2020 was $741 and ~~April 27, 2019 was $717 and $440,~~$687, respectively, of retainage on construction-type contracts, all of which is expected to be collected within one year.

In some contracts with customers, we agree to installment payments exceeding 12 months. The present value of these contracts ~~and leases are~~is recorded as a receivable as the revenue is recognized in accordance with GAAP, and profit is recognized to the extent the present value is in excess of cost. We generally retain a security interest in the equipment or in the cash flow generated by the equipment until the contract is paid. The present value of long-term contracts, ~~and lease receivables,~~ including accrued interest and current maturities, was ~~$6,325~~$4,045 and ~~$3,514~~$4,633 as of ~~November~~August 1, 2020 and May 2, ~~2019 and April 27, 2019,~~2020, respectively. Contract ~~and lease~~ receivables bearing annual interest rates of 5.0 to 9.0 percent are due in varying annual installments through 2024. The face value of long-term receivables was ~~$5,234~~$4,327 as of ~~November 2, 2019~~August 1, 2020 and ~~$3,271~~$5,166 as of ~~April 27, 2019.~~May 2, 2020.

We evaluated our receivable and contract assets as of August 1, 2020 and reserved for anticipated losses. Due to the uncertainty created by the COVID-19 pandemic, this loss may materially change from this estimate.

Note ~~11.~~10. Share Repurchase Program

On June 17, 2016, our Board of Directors approved a stock repurchase program under which we may purchase up to $40,000 of the Company's 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.

During the ~~six~~three months ended ~~October 27, 2018,~~August 1, 2020, we had no0 repurchases of shares of our outstanding common stock. During the ~~six~~three months ended ~~November 2,~~August 3, 2019, we repurchased ~~270~~187 shares of common stock at a total cost of ~~$1,682.~~$1,187. As of ~~November 2, 2019,~~August 1, 2020, we had ~~$36,493~~$32,539 of remaining capacity under our current share repurchase program.

As part of our COVID-19 response, on April 1, 2020, our Board of Directors voted to suspend stock repurchases under our share repurchase program for the foreseeable future.

~~Note 12. Leases~~

We lease facilities and various equipment to manufacture products and provide employee collaboration space and tools. These are all classified as operating leases and have initial lease terms ranging from one to five years. These operating leases do not contain material

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~~residual value guarantees or material restrictive covenants. Our lease in Sioux Falls, SD has a purchase option. We do not have any financing leases.~~

We determine if an arrangement is a lease at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As our leases do not provide an implicit rate, we use the incremental borrowing rate based on the information available at commencement date in determining the present value of future lease payments. The operating lease right-of-use asset includes any prepaid lease payments and initial direct costs and excludes any lease incentives and impairments. Some of our leases include options to extend the term, which is only included in the right-of-use assets and lease liability calculation when it is reasonably certain that we will exercise that option. We have lease agreements with lease and non-lease components, and we have elected to account for all asset classes as a single lease component. Our operating leases also typically require payment of real estate taxes, insurance, and common area maintenance. These components comprise the majority of our variable lease cost and are excluded from the present value of our lease obligations. In instances where they are fixed, they are included due to our election to combine lease and non-lease components. Our total variable lease costs are immaterial.

Operating lease cost is recognized on a straight-line basis over the lease term, and short-term lease cost is recognized when paid. Both are recognized in cost of sales and operating expenses in the condensed consolidated statements of operations. The lease cost was as follows:

Three Months Ended November 2, 2019 Six Months Ended November 2, 2019
Operating lease cost⁽¹⁾
$ 1,010
$ 1,862

~~(1) Includes short-term leases, which are immaterial.~~

~~The weighted average remaining lease term and discount rate related to operating leases include:~~



	~~November 2, 2019~~
~~Weighted average remaining lease term~~	~~5.3 years~~
~~Weighted average discount rate~~	~~3.5~~	%

~~Supplemental unaudited cash flow information related to operating leases include:~~

Three Months Ended November 2, 2019 Six Months Ended November 2, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 787
$ 1,603

~~Future minimum operating lease payments as of, and subsequent to, November 2, 2019 under ASC 842 are as follows:~~

Operating Leases⁽¹⁾
Fiscal years ending
2020 $ 1,536
2021 2,711
2022 1,993
2023 1,206
2024 1,085
Thereafter 2,398
Total lease payments 10,929
Less imputed interest (944 )
Total lease liabilities $ 9,985

~~(1) Includes $3,879 to extend the term of our Sioux Falls, South Dakota manufacturing facility.~~

Note ~~13.~~11. Commitments and Contingencies

Litigation: We are a party to legal proceedings and claims which arise during the ordinary course of business.

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As of ~~April 27, 2019~~August 1, 2020 and ~~November~~May 2, ~~2019, $1,072~~2020, $2,118 and ~~$1,981,~~$2,072, respectively, were included in the "Accrued expenses" line item in our condensed consolidated balance sheets for a probable and reasonably estimated cost to settle a patent litigation claim. ~~The costs are included in cost of sales in the High School Park and Recreation business unit.~~

For other unresolved legal proceedings or claims, we do not believe there is a reasonable probability that any material loss ~~will~~would be incurred. Accordingly, no material accrual or disclosure of a potential range of loss has been made related to these matters. We do not expect the ultimate liability of these unresolved legal proceedings or claims to have a material effect on our financial position, liquidity or capital resources.

Warranties: Changes in our warranty obligation for the ~~six~~three months ended ~~November 2, 2019~~August 1, 2020 consisted of the following:



	August 1, 2020
Beginning accrued warranty obligations	$	25,624
Warranties issued during the period	2,800
Settlements made during the period	(1,056		)
Changes in accrued warranty obligations for pre-existing warranties during the period, including expirations	(308		)
Ending accrued warranty obligations	$	27,060

November 2, 2019
Beginning accrued warranty obligations $ 24,470
      Warranties issued during the period 6,425
      Settlements made during the period (5,355 )
      Changes in accrued warranty obligations for pre-existing warranties during the period, including expirations 445
Ending accrued warranty obligations $ 25,985

Performance guarantees: We have entered into standby letters of credit and surety bonds with financial institutions relating to the guarantee of our future performance on contracts, primarily construction-type contracts. As of ~~November 2, 2019,~~August 1, 2020, we had outstanding letters of credit and surety bonds in the amount of $~~15,184~~14,788 and $~~8,372~~35,079, respectively. Performance guarantees are issued to certain customers

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to guarantee the operation and installation of the equipment and our ability to complete a contract. These performance guarantees have various terms but are generally one year. We enter into written agreements with our customers, and those agreements often contain indemnification provisions that require us to make the customer whole if certain acts or omissions by us cause the customer financial loss. We make efforts to negotiate reasonable caps and limitations on the recovery of such damages. As of ~~November 2, 2019,~~August 1, 2020, we were not aware of any indemnification claim from a customer.

Purchase commitments: From time to time, we commit to purchase inventory, advertising, cloud-based information systems, information technology maintenance and support services, and various other products and services over periods that extend beyond one year. As of ~~November 2, 2019,~~August 1, 2020, we were obligated under the following unconditional purchase commitments:



Fiscal years ending	Amount
2021	$	2,831
2022	2,750
2023	1,755
2024	148
2025	113
Thereafter	40
	$	7,637

Fiscal years ending Amount
2020 $ 3,161
2021 4,644
2022 2,692
2023 1,820
2024 113
Thereafter 153
$ 12,583

Note ~~14.~~12. Income Taxes

We calculate the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate for the full fiscal year to “ordinary” income or loss (pre-tax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. Due to various factors and operating in multiple state and foreign jurisdictions, our effective tax rate is subject to fluctuation. ~~We recorded an~~

Our effective tax rate ~~benefit of 63.8~~for the three months ended August 1, 2020 was 16.4 percent ~~and 14.6~~as compared to 12.6 percent for the three ~~and six~~ months ended ~~November 2, 2019, respectively, and an~~August 3, 2019. The quarterly effective tax rate ~~expense of 5.8 percent and 0.0 percent for the three and six months ended October 27, 2018. The changes in the effective tax rates are~~was primarily driven by ~~differences in~~the benefit of estimated tax credits proportionate to estimated pre-tax ~~book income for each~~earnings similar to the previous period.

We are subject to U.S. federal income tax as well as income taxes of multiple state and foreign jurisdictions. Fiscal years ~~2016,~~ 2017, 2018, 2019 and ~~2019~~2020 remain open to federal tax examinations, and fiscal years ~~2015,~~ 2016, 2017, 2018, 2019 and ~~2019~~2020 remain open for various state income tax examinations. Certain subsidiaries are also subject to income tax in several foreign jurisdictions which have open tax years varying by jurisdiction beginning in fiscal 2009. In the event of any future tax assessments, we have elected to record the income taxes and any related interest and penalties as income tax expense in our condensed consolidated statement of operations.

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As of ~~November 2, 2019,~~August 1, 2020, undistributed earnings of our foreign subsidiaries ~~were~~are considered to be reinvested indefinitely. Additionally, we had ~~$735~~$723 of unrecognized tax benefits which would reduce our effective tax rate if recognized.

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Note ~~15.~~13. Fair Value Measurement

The following table sets forth by Level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis at ~~November~~August 1, 2020 and May 2, ~~2019 and April 27, 2019~~2020 according to the valuation techniques we used to determine their fair values. There have been no transfers of assets or liabilities among the fair value hierarchies presented.



	Fair Value Measurements
	Level 1		Level 2			Level 3			Total
Balance as of August 1, 2020
Cash and cash equivalents	$	44,609	$	—		$	—		$	44,609
Restricted cash	96		—			—			96
Available-for-sale securities:
Certificates of deposit	—		1,230			—			1,230
Derivatives - asset position	—		36			—			36
Derivatives - liability position	—		(242		)	—			(242		)
Acquisition-related contingent consideration	—		—			(401		)	(401		)
	$	44,705	$	1,024		$	(401	)	$	45,328
Balance as of May 2, 2020
Cash and cash equivalents	$	40,398	$	—		$	—		$	40,398
Restricted cash	14		—			—			14
Available-for-sale securities:
Certificates of deposit	—		1,230			—			1,230
Derivatives - asset position	—		261			—			261
Derivatives - liability position	—		(17		)	—			(17		)
Acquisition-related contingent consideration	—		—			(761		)	(761		)
	$	40,412	$	1,474		$	(761	)	$	41,125

Fair Value Measurements
Level 1 Level 2 Level 3 Total
Balance as of November 2, 2019
Cash and cash equivalents $ 29,265
$ —
$ —
$ 29,265
Restricted cash 59
—
—
59
Available-for-sale securities:

Certificates of deposit —
2,717
—
2,717
U.S. Government sponsored entities —
745
—
745
Municipal bonds —
156
—
156
Derivatives - asset position —
70
—
70
Derivatives - liability position —
(233 ) —
(233 )
Acquisition-related contingency consideration —
—
(895 ) (895 )
$ 29,324
$ 3,455
$ (895 ) $ 31,884
Balance as of April 27, 2019

Cash and cash equivalents $ 35,383
$ —
$ —
$ 35,383
Restricted cash 359
—
—
359
Available-for-sale securities:

Certificates of deposit —
3,464
—
3,464
U.S. Government securities 10,774
—
—
10,774
U.S. Government sponsored entities —
10,482
—
10,482
Municipal bonds —
1,624
—
1,624
Derivatives - asset position —
91
—
91
Derivatives - liability position —
(4 ) —
(4 )
Acquisition-related contingency consideration —
—
(3,065 ) (3,065 )
$ 46,516
$ 15,657
$ (3,065 ) $ 59,108

A roll forward of the Level 3 contingent liabilities, both short- and long-term, for the ~~six~~three months ended ~~November 2, 2019~~August 1, 2020 is as follows:



Acquisition-related contingent consideration as of May 2, 2020	$	761
Additions	33
Settlements	(400		)
Interest	7
Acquisition-related contingent consideration as of August 1, 2020	$	401

Acquisition-related contingency consideration as of April 27, 2019 $ 3,065
Additions 50
Settlements (2,291 )
Interest 34
Foreign currency translation 37
Acquisition-related contingency consideration as of November 2, 2019 $ 895

There have been no changes in the valuation techniques used by us to value our financial instruments since the end of fiscal ~~2019.~~2020. For additional information, see our Annual Report on Form 10-K for the fiscal year ended ~~April 27, 2019~~May 2, 2020 for the methods and assumptions used to estimate the fair value of each class of financial instrument.

Note ~~16.~~14. Derivative Financial Instruments

We utilize derivative financial instruments to manage the economic impact of fluctuations in currency exchange rates on those transactions denominated in currencies other than our functional currency, which is the U.S. dollar. We enter into currency forward contracts to manage these economic risks. We account for all derivatives in the condensed consolidated balance sheets within accounts receivable or accounts payable measured at fair value, and changes in fair values are recognized in earnings unless specific hedge accounting criteria are met for cash flow or net investment hedges. As of ~~November~~August 1, 2020 and May 2, ~~2019 and April 27, 2019,~~2020, we had not designated any of our derivative instruments as accounting hedges, and thus we recorded the changes in fair value in the "Other (expense) income, ~~(expense),~~ net" line item in the condensed consolidated statements of operations.

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The foreign currency exchange contracts in aggregated notional amounts in place to exchange U.S. dollars at ~~November~~August 1, 2020 and May 2, ~~2019 and April 27, 2019~~2020 were as follows:

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November 2, 2019 April 27, 2019
U.S. Dollars Foreign
Currency U.S.
Dollars Foreign
Currency
Foreign Currency Exchange Forward Contracts:
U.S. Dollars/Australian Dollars 1,611
2,322
2,688
3,772
U.S. Dollars/Canadian Dollars 750
998
625
821
U.S. Dollars/British Pounds 5,874
4,585
3,547
2,680
U.S. Dollars/Euros 3,755
3,377
—
—
U.S. Dollars/Swiss Franc —
—
927
925
U.S. Dollars/Malaysian Ringgit —
—
60
246



	August 1, 2020		May 2, 2020
	U.S. Dollars	Foreign Currency	U.S. Dollars	Foreign Currency
Foreign Currency Exchange Forward Contracts:
U.S. Dollars/Australian Dollars	5,406	7,839	2,235	3,323
U.S. Dollars/Canadian Dollars	—	—	452	648
U.S. Dollars/British Pounds	2,149	1,650	3,160	2,424
U.S. Dollars/Euros	—	—	1,881	1,689

As of ~~November 2, 2019,~~August 1, 2020, there was an asset and liability of ~~$70~~$36 and $~~233~~242, respectively; and as of ~~April 27, 2019,~~May 2, 2020, there was an asset and liability of ~~$91~~$261 and $417, respectively, representing the fair value of foreign currency exchange forward contracts, which were determined using Level 2 inputs from a third-party bank. As of ~~November 2, 2019,~~August 1, 2020, all contracts mature within 1617 months.

Note ~~17.~~15. Subsequent Events

On ~~November 15, 2019,~~August 28, 2020, we entered into anthe third amendment to ~~extend the maturity date of~~ our credit agreement and a ~~related revolving bank note from November 15, 2019 to November 15, 2022~~security agreement over certain assets. The third amendment adds a liquidity covenant and ~~to modify certain~~revises other ~~terms and~~ financial covenants.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (including exhibits and any information incorporated by reference herein) contains both historical and forward-looking statements that involve risks, uncertainties and assumptions. The statements contained in this Report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21B of the Securities Exchange Act of 1934, as amended, including statements regarding our expectations, beliefs, intentions and strategies for the future. These statements appear in a number of places in this Report and include all statements that are not historical statements of fact regarding the intent, belief or current expectations with respect to, among other things: (i.) our competition; (ii.) our financing ~~plans;~~plans and ability to maintain adequate liquidity; (iii.) trends affecting our financial condition or results of operations; (iv.) our growth and operating strategies; (v.) the declaration and payment of dividends; (vi.) the timing and magnitude of future contracts; (vii.) raw material shortages and lead times; (viii.) fluctuations in margins; (ix.) the seasonality of our business; (x.) the introduction of new products and technology; (xi.) the amount and frequency of warranty claims; (xii.) our ability to manage the impact that new or adjusted tariffs may have on the cost of raw materials and components and our ability to sell product internationally; (xiii.) the resolution of litigation contingencies; ~~and~~ (xiv.) the timing and magnitude of any acquisitions or ~~dispositions.~~dispositions; (xv.) the impact of governmental laws, regulations, and orders, including as a result of the COVID-19 pandemic caused by the coronavirus; and (xvi.) disruptions to our business caused by geopolitical events, military actions, work stoppages, natural disasters, or international health emergencies, such as the COVID-19 pandemic. The words “may,” “would,” “could,” “should,” “will,” “expect,” “estimate,” “anticipate,” “believe,” “intend,” “plan” and similar expressions and variations thereof are intended to identify forward-looking statements. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, many of which are beyond our ability to control, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors discussed herein, including those discussed in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended ~~April 27, 2019~~May 2, 2020 in the section entitled “Part I, Item 1A. Risk Factors” and “Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations,” and those factors discussed in detail in our other filings with the Securities and Exchange Commission.

The following discussion and analysis of financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP"). This discussion should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes to the Condensed Consolidated Financial Statements included in this Report. The preparation of these condensed 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. On a regular basis, we evaluate our estimates, including those related to total costs on long-term construction-type contracts, costs to be incurred for product warranties and extended maintenance contracts, bad debts, excess and obsolete inventory, income taxes, share-based compensation, goodwill impairment and contingencies. Our estimates are based on historical experience and on various other assumptions believed to be reasonable under the circumstances, the results of which form the basis for

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making judgments about the carrying values of assets and liabilities not readily apparent from other sources. Actual results may differ from these estimates.

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OVERVIEW

We design, manufacture and sell a wide range of display systems to customers throughout the world. We focus our sales and marketing efforts on markets, geographical regions and products. Our five business segments consist of four domestic business units and the International business unit. The four domestic business units consist of Commercial, Live Events, High School Park and Recreation, and Transportation, all of which include the geographic territories of the United States and Canada. Disclosures related to our business segments are provided in "Note 5. Segment Reporting" of the Notes to the Condensed Consolidated Financial Statements included elsewhere in this Report.

Our net sales and profitability historically have fluctuated due to the impact of uniquely configured orders, such as display systems for professional sports facilities, colleges and universities, and spectacular projects in the commercial area, as well as the seasonality of the sports market. Uniquely configured orders can include several displays, controllers, and subcontracted structure builds, each of which can occur on varied schedules per the customer's needs. ~~Outdoor installation sales can be impacted by outdoor weather conditions and the construction season.~~ Our third fiscal quarter ~~tends to be a slower quarter because it includes two holidays, it is affected by sports seasonality,~~sales and ~~generally less outdoor construction work occurs~~profit levels are lighter than other quarters due to ~~weather conditions.~~the seasonality of our sports business, construction cycles, and the reduced number of production days due to holidays in the quarter.

Our gross margins tend to fluctuate more on uniquely configured orders than on limited configured orders. Uniquely configured orders involving competitive bidding and substantial ~~subcontract~~subcontracting work for product installation generally have lower gross margins. Although we follow the over time method of recognizing revenues for uniquely configured orders, we nevertheless have experienced fluctuations in operating results and expect our future results of operations will be subject to similar fluctuations.

Our remaining performance obligations ("backlog") consist of contractually binding sales agreements or purchase orders for integrated electronic display systems and related products and service. Orders are included in backlog when we are in receipt of an executed contract and any required deposits or security. As a result, certain orders for which we have received binding letters of intent or contracts will not be included in backlog until all required contractual documents and deposits are received. Backlog can fluctuate due to large order bookings and the timing and seasonality of net sales. Because order backlog fluctuates and may be subject to extended delivery schedules, orders may be canceled and have varied estimated profitability. Our backlog is not necessarily indicative of future net sales or net income. Backlog is not a measure defined by GAAP, and our methodology for determining backlog may vary from the methodology used by other companies in determining their backlog amounts.

GENERAL

Our mission is to be the 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 to earn new and replacement business because our products have a finite lifetime. See "Note 5. Segment Reporting" of the Notes to the Condensed Consolidated Financial Statements included elsewhere in this Report 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).

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.

Certain factors impact our ability to succeed in these strategies and impact our business units to varying degrees. For example, the overall cost to manufacture and the selling prices of our products have decreased over the years and are expected to continue to decrease in the future. Our competitors outside the U.S. are impacted differently by the global trade environment allowing them to avoid tariff costs 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 offerings, actions and reactions also can vary and change over time or in certain customer situations. Projects with multimillion-dollar revenue potential attracts competition, and competitors can use marketing or other tactics to win business.

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Each ~~of our~~ 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

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severe economic downturns with social changes causing decreases in sporting event revenues, the sports business can also be seriously impacted.

Outlook: The COVID-19 pandemic has created disruptions since its initial outbreak, first impacting our China operations. Beginning in February, we created COVID-19 response teams to manage our local and global response activities. Using the guidance from the U.S. Centers for Disease Control and Prevention, the World Health Organization, and other applicable regulatory agencies, we enhanced or implemented robust health, safety, and cleaning protocols across our organization.

Throughout the first quarter of fiscal 2021, employees are working from home where possible, and we have limited travel for the time being. When unable to work safely or within the various regulations in certain geographies and locations and because demand decreased, our sales, manufacturing and field service teams have reduced capacity and furloughed employees.

Our sales teams have continued to engage our customers to promote our value, mostly virtually, across our diverse markets and geographies. However, our customers reduced their spend on audio-visual systems and related services during the first quarter as they work through the economic and business implications of COVID-19. We took corresponding actions to reduce all operating expenses to align with expected order and sales declines expected through the year. These expense reductions vary in permanency and may change throughout the fiscal year.

Our supply chain team has remained alert to potential short supply situations and shipping disruptions, and, if necessary, we are utilizing alternative sources and shipping methods.

We ~~can~~expect the COVID-19 pandemic to have an adverse impact on our revenue and our results of operations, the size and duration of which we are currently unable to predict. The global impact of COVID-19 continues to rapidly evolve. The extent to which COVID-19 will impact our business will depend on future developments, which are highly uncertain and cannot be ~~impacted by short-term events like~~predicted with confidence, such as the ~~U.S. Administrative trade~~ultimate severity and spread of the disease, the duration of the pandemic, travel restrictions and social distancing requirements in the United States and other countries, the pace and extent of the economic recovery, and any change in trends and practices in how people gather. Given the speed and frequency of continuously evolving developments with respect to this pandemic, we cannot reasonably estimate the magnitude of the impact to our business.

As we continue through fiscal 2021, our operating results are going to be challenged due this crisis. We continue to manage our cost structure to meet the uncertain demand, while taking additional cost reductions actions as needed. Our customers' businesses are subject to the fluctuations in ~~2018~~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 our customers may cause us to alter our business terms or to cease doing business with a ~~number~~particular customer. Further, the potential impact of ~~other factors that are disclosed in "Item 1A. Risk Factors" included in~~the COVID-19 pandemic on their businesses could adversely impact our ~~Annual Report on Form 10-K~~customers' ability to pay us for work performed and increase our future estimate of credit losses.

In addition to the ~~fiscal year ended April 27, 2019.~~

~~The~~COVID-19 impacts noted above, the outlook and unique key growth drivers and challenges by our business units include:

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Commercial Business Unit: In the near-term, our customers who rely on advertising revenues for Out-of-Home ("OOH") advertising or who are reliant on customer foot-traffic to drive sales have been adversely impacted by stay-at-home or quarantine orders which started in March 2020 with varied or no published expiration. These customers are expected to delay their discretionary capital spending through the COVID-19 economic recovery. Business 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. We cannot reasonably estimate the magnitude or length of time our Commercial business will be adversely impacted.

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-light emitting diode ("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 ~~Out-of-Home ("OOH")~~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: In the near-term, our customers who rely on advertising and event revenues are expected to delay spending on projects because of the COVID-19 pandemic. Changes to the way people gather may change the long-term usage of our systems.

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 drives 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 on 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.

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.

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Transportation Business Unit: In the near term, customers in the mass-transit and airport part of the market are expected to delay spending as a result 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.

Over the long-term, we believe growth in the Transportation business unit will result from 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. Growth is also expected in dynamic messaging systems for advertising and ~~way-finding~~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 rely on advertising, retail, event revenues and governmental tax revenue availability are expected to delay spending on projects due to the COVID-19 pandemic. Changes to the ways people gather may change the long-term usage of our systems.

Over the long-term, we believe growth in the International business unit will result from 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. We also focus on sports facility, spectacular-type, OOH advertising products, and architectural lighting market opportunities and the factors listed in each of the other business units to the extent they apply outside of the United States and Canada. 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.

RESULTS OF OPERATIONS

COMPARISON OF THE THREE MONTHS ENDED ~~NOVEMBER 2,~~AUGUST 1, 2020 AND AUGUST 3, 2019 ~~AND OCTOBER 27, 2018~~

Net Sales


	Three Months Ended									Three Months Ended
(in thousands)	November 2, 2019		October 27, 2018		Dollar Change			Percent Change		August 1, 2020		August 3, 2019		Dollar Change			Percent Change
Net sales:
Commercial	$	39,651	$	46,069	$	(6,418	)	(13.9	)%	$	34,506	$	44,035	$	(9,529	)	(21.6	)%
Live Events	59,319		55,099		4,220			7.7		51,474		59,306		(7,832		)	(13.2	)
High School Park and Recreation	30,193		31,580		(1,387		)	(4.4	)	28,943		30,465		(1,522		)	(5.0	)
Transportation	20,330		18,077		2,253			12.5		14,498		19,018		(4,520		)	(23.8	)
International	25,418		21,867		3,551			16.2		14,223		27,432		(13,209		)	(48.2	)
	$	174,911	$	172,692	$	2,219		1.3	%	$	143,644	$	180,256	$	(36,612	)	(20.3	)%
Orders:
Commercial	$	43,513	$	46,731	$	(3,218	)	(6.9	)%	$	25,533	$	38,648	$	(13,115	)	(33.9	)%
Live Events	41,008		43,641		(2,633		)	(6.0	)	41,860		66,969		(25,109		)	(37.5	)
High School Park and Recreation	22,853		18,445		4,408			23.9		28,099		30,552		(2,453		)	(8.0	)
Transportation	16,992		21,279		(4,287		)	(20.1	)	13,089		22,215		(9,126		)	(41.1	)
International	26,756		21,260		5,496			25.9		13,572		29,079		(15,507		)	(53.3	)
	$	151,122	$	151,356	$	(234	)	(0.2	)%	$	122,153	$	187,463	$	(65,310	)	(34.8	)%

~~Commercial:~~ ~~The decrease~~Sales and orders in ~~net sales for~~all business units were impacted as a result of the economic downturn caused by the COVID-19 pandemic as well as the three months ended ~~November 2,~~August 3, 2019 included 14 weeks compared to the same period one year ago was primarily due to the timing of large custom projects in the spectacular niche and lighter demand in the on-premise niche, while the OOH niche remained relatively flat compared to the same period last year.

more common 13 weeks. The ~~decrease in orders for the~~ three months ended November 2, 2019 compared to the same period one year ago was primarily due to the softer market in the on-premise and OOH niches, partially offset by an increase in large orders in the spectacular niche.August 1, 2020 contained 13 weeks.

~~Live Events:~~ ~~The increase in~~

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For net sales, ~~for~~during the first three months ended ~~November 2, 2019~~August 1, 2020, we achieved a $11.1 million per week average run rate as compared to $12.9 million per week during the ~~same period one year ago was primarily due to the timing of the demand for upgraded or new solutions for arenas and professional sports stadiums.~~

~~Orders decreased for the~~first three months ended ~~November 2,~~August 3, 2019, ~~compared~~or an approximate 14% decrease. The change in sales primarily relates to ~~the same period one year ago due to a decrease in the number of projects for college and universities venues.~~

~~High School Park and Recreation:~~ ~~The decrease in net sales for the three months ended November 2, 2019 compared to the same period one year ago was primarily due to the variability in timing of order delivery.~~

~~Orders increased for the three months ended November 2, 2019 compared to the same period one year ago due to the variability in order timing.~~

~~Transportation:~~ The increase in net sales for the three months ended November 2, 2019 compared to the same period one year ago was primarily due to the variability of large order production timing caused by customer project schedules.

~~Orders decreased for the three months ended November 2, 2019 compared to the same period one year ago was due to the variability of timing caused by large projects.~~

~~International:~~ Net sales for the three months ended November 2, 2019 compared to the same period one year ago increased primarily due to the variability of timing caused by large spectacular and sports stadium projects.

~~Orders increased for the three months ended November 2, 2019 compared to the same period one year ago primarily due to general variations~~fluctuations in the timing of ~~account-based~~ order ~~placements.~~bookings, and related conversion to sales.

For orders, during the first three months ended August 1, 2020, we achieved a $9.4 million per week average run rate as compared to $13.4 million per week during the first three months ended August 3, 2019, or an approximate 30% decrease. The change in orders primarily relates to timing of large contract orders which cause lumpiness, and due to lower market activity in light of the COVID-19 pandemic.

Product Order Backlog

The product order backlog as of ~~November 2, 2019~~August 1, 2020 was ~~$182~~$192 million as compared to ~~$150~~$207 million as of ~~October 27, 2018~~August 3, 2019 and ~~$207~~$212 million at the end of the ~~first~~fourth quarter of fiscal 2020. Historically, our product order backlog varies due to the seasonality of our business, the timing of large projects, and customer delivery schedules for these orders. The product order backlog as of ~~November 2, 2019~~August 1, 2020 increased in ~~all~~the High School Park and Recreation and Transportation business units and decreased in the Commercial, Live Events, and International business units from ~~October 27, 2018.~~August 3, 2019.

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

The decrease in our gross profit percentage for the three months ended ~~November 2, 2019~~August 1, 2020 compared to the same period one year ago was ~~primarily~~mostly related to lower sales volumes over relatively fixed infrastructure costs. We continued to see the global spread of the coronavirus pandemic (COVID-19) impact order volumes and took various steps to solidify our financial position and reduce expenses. During the first quarter of fiscal 2021, we completed a special voluntary retirement and voluntary exit offering with 60 employees and we conducted a reduction in force of 108 employees to adjust our capacity and reduce on-going expenses due to ~~an increase~~the uncertainties created by the COVID-19 pandemic. The approximate cost of these programs included in ~~tariff related expenses~~the "Costs of ~~approximately $1.1~~sales" line item in our condensed consolidated statements of operations was $1.2 million, orwhich was offset by $0.6 million of governmental wage subsidies.

We earned a ~~0.6% impact to~~higher rate of gross profit on our service agreements due to reduced stand ready services conducted during the quarter. This was due to lower on-site demand as ~~last year at~~events were not being held. We believe this time tariffs were just being introduced on US imports of aluminum, steel, and components from China. We also experienced additional expenses of approximately $3.0 million for project delivery costs and for an existing litigation claim estimate.higher gross profit level will not be sustained in future quarters. Total warranty as a percent of sales ~~decreased to 2.2%~~ for the three months ended ~~November 2, 2019 as~~August 1, 2020 compared to ~~2.5% during~~ the ~~three months ended October 27, 2018.~~same period one year ago remained relatively flat. The following describes the overall impact by business unit for the three months ended ~~November 2, 2019~~August 1, 2020 compared to the same period one year ago:

The gross profit percent decreased in our Commercial, Live Events, and High School Park and Recreation business units for the reasons described above. Additionally, the Commercial business unit experienced increased costs related to products covered under long-term service agreements. The gross profit percent increased in the ~~Transportation~~High School Park and Recreation business unit primarily due to ~~higher~~product mix, which was partially offset by lower sales volumes over relatively fixed infrastructure costs. The gross profit percent increased in the Commercial business unit primarily due to lower warranty expense and product mix. The gross profit percent decreased in the Live Events business unit primarily due to lower sales volumes over relatively fixed infrastructure costs, which was partially offset by ~~an increase in~~lower warranty expense. The gross profit percent ~~increased~~decreased in the International business unit primarily due to ~~lower~~higher warranty expense and ~~higher~~lower sales volumes over relatively fixed infrastructure ~~costs.~~costs, which was partially offset by governmental wage subsidy. The gross profit percent remained relatively flat in the Transportation business unit compared to the same period one year ago.

Contribution margin consists of gross profit less selling expenses. Selling expenses consist primarily of salaries, other employee-related costs, travel and entertainment expenses, facility-related costs for sales and service offices, 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.

All areas of selling expenses were impacted as a result of the economic downturn caused by the COVID-19 pandemic as well as the three months ended August 3, 2019 included 14 weeks compared to the more common 13 weeks. The three months ended August 1, 2020 contained 13 weeks. Contribution margin is impacted by the previously discussed sales and gross margin for each business unit. ~~The impact of changes in selling expenses on each~~Each business unit's contribution margin ~~are as follows:~~

~~Selling expense~~was impacted by a decrease in ~~our Commercial and High School Park and Recreation business units increased~~selling expenses in the ~~second~~first quarter of fiscal ~~2020~~2021 compared to the same quarter a year ago due to a decrease in personnel related expenses offset by severance costs for reductions in force, as well as reductions in travel and ~~increased~~entertainment and in marketing ~~efforts. Selling expense in our International business unit decreased in the second quarter of fiscal 2020 compared to the same quarter a year ago due to bad debt recovery~~ and a decrease in third-party commissions. Selling expense in our Live Events and Transportation business units for the second quarter of fiscal 2020 remained relatively flat compared to the same quarter a year ago.convention related expenses.

Other Operating Expenses

All areas of operating expenses were impacted as a result of the economic downturn caused by the COVID-19 pandemic as well as the three months ended August 3, 2019 included 14 weeks compared to the more common 13 weeks. The three months ended August 1, 2020 contained 13 weeks.

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.

General and administrative expensesin the ~~second~~first quarter of fiscal ~~2020 increased~~2021 decreased as compared to the same period one year ago primarily due to ~~an increase~~a decrease in ~~professional fees and~~ personnel related ~~expenses.~~expenses offset by severance costs for reductions in force.

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. We plan to make continued investments in our software and controller capabilities throughout our various product offerings. Through our design efforts, we focus on standardizing display components and control systems for both single site and network displays.

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 the ~~second~~first quarter of fiscal ~~2020 increased~~2021 decreased as compared to the same period one year ago primarily due to ~~increased~~decreased labor costs and professional services assigned to product design and development ~~projects. To deliver value~~projects as a result of our response to ~~our customers and meet the markets' needs, we expect an increase in expenditures for new or enhanced customer solutions and to develop leading production technologies in the evolving micro-LED space.~~COVID-19.

Other Income and Expenses

Interest 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.

The change in interest income, net for the ~~second~~first quarter of fiscal ~~2020~~2021 compared to the same period one year ago was primarily due to the change in investment levels caused by the volatility of working capital ~~needs.~~needs and interest payments from our existing line of credit.

Other (expense) income, ~~(expense),~~ net: The change in other income and expense, net for the ~~second~~first quarter of fiscal ~~2020~~2021 as compared to the same period one year ago was primarily due to foreign currency ~~volatility.~~volatility and the losses recorded from equity method affiliates.

We calculate the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate for the full fiscal year to “ordinary” income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. Due to various factors, including operations in multiple jurisdictions worldwide, our effective tax rate is subject to fluctuation.

We have recorded an effective tax rate ~~benefit~~ of ~~63.8~~16.4 percent for the ~~second~~first quarter of fiscal 2020 as compared to an effective tax rate expense of 5.8 percent for the second quarter of fiscal 2019. The change in the effective tax rate, as compared to the same period one year ago, is primarily driven by differences in estimated tax credits proportionate to estimated pre-tax book income for the period.

~~COMPARISON OF THE SIX MONTHS ENDED NOVEMBER 2, 2019 AND OCTOBER 27, 2018~~

Sales and orders in all business units were impacted as a result of the six months ended November 2, 2019 including 27 weeks compared to the more common 26 weeks. The six months ended October 27, 2018 contained 26 weeks.

For net sales, during the first six months ended November 2, 2019, we achieved a $13.2 million per week average run rate as compared to $12.6 million per week during the first six months ended October 27, 2018, or an approximate 4.6% increase. This change was driven by the order volume reasons described below and the timing of conversion related to the seasonality in our business.

For orders, during the first six months ended November 2, 2019, we achieved a $12.5 million per week average run rate as compared to $12.0 million per week during the first six months ended October 27, 2018, or an approximate 4.8% increase. We had an increase in orders placed during the first six months ended November 2, 2019 related to new releases of our product offerings.

~~Commercial:~~ Net sales for the six months ended November 2, 2019 compared to the same period one year ago increased as a result of the timing of projects in the spectacular and OOH niches, while the on-premise niche remained relatively flat compared to the same period last year.

~~Orders for the six months ended November 2, 2019 compared to the same period one year ago remained relatively flat compared to the same period last year.~~

~~Live Events:~~ The increase in net sales for the six months ended November 2, 2019 compared to the same period one year ago was primarily due to the timing of the demand for upgraded or new solutions for arenas and professional sports stadiums.

~~Orders increased for the six months ended November 2, 2019 compared to the same period one year ago due to an increase in the number of projects for professional sports and arena venues.~~

~~High School Park and Recreation:~~ ~~The increase in net sales for the six months ended November 2, 2019 compared to the same period one year ago was primarily due to the timing of converting orders and backlog into sales.~~

Orders decreased for the six months ended November 2, 2019 compared to the same period one year ago due to the variability in order timing and a decrease in large video projects compared to the same period last year.

~~Transportation:~~ The increase in net sales for the six months ended November 2, 2019 compared to the same period one year ago was related to the variability caused by large order timing and continued demand for intelligent transportation systems.

~~Orders decreased for the six months ended November 2, 2019 compared to the same period one year ago primarily due to the variability of timing caused by large projects.~~

~~International:~~ Net sales increased in our International business unit for the six months ended November 2, 2019 compared to the same period one year ago mainly due to the variability of timing caused by large spectacular and sports stadium projects.

Orders increased for the six months ended November 2, 2019 compared to the same period one year ago primarily due to general variations in the timing of large contracts in professional sports stadium and account-based order placements.

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

~~The decrease in our gross profit~~percentage for the six months ended November 2, 2019 compared to the same period one year ago was primarily due to an increase in tariff related expenses of approximately $2.6 million, or a 0.7% impact to gross profit, as last year at this time tariffs were just being introduced on US imports of aluminum, steel, and components from China. We also experienced additional expenses of approximately $3.0 million for project delivery costs and for an existing litigation claim estimate. Total warranty as a percent of sales decreased to 2.2% for the three months ended November 2, 2019 as compared to 2.5% during the six months ended October 27,

~~2018. The following describes the overall impact by business unit for the six months ended November 2, 2019 compared to the same period one year ago:~~

The gross profit percent decreased in our Commercial, Live Events, and High School Park and Recreation business units for the reasons described above, which was partially offset by higher sales volumes over relatively fixed infrastructure costs. The gross profit percent increased in the Transportation and International business units primarily due to higher sales volumes over relatively fixed infrastructure costs.

~~Contribution Margin~~

~~Contribution margin~~ consists of gross profit less selling expenses. Selling expenses consist primarily of salaries, other employee-related costs, travel and entertainment expenses, facility-related costs for sales and service offices, 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.

Contribution margin is impacted by the previously discussed sales and gross margin for each business unit. The impact of changes in selling expenses on each business unit's contribution margin are as follows:

All areas of selling expenses were impacted as a result of the six months ended November 2, 2019 including 27 weeks compared to the more common 26 weeks. The six months ended October 27, 2018 contained 26 weeks. Selling expense in our Commercial, Live Events, and High School Park and Recreation business units increased in the six months ended November 2, 2019 compared to the same period a year ago primarily due to personnel related expenses and increased marketing efforts. Selling expenses in our International business unit decreased in the six months ended November 2, 2019 compared to the same period one year ago primarily due to bad debt recovery and a decrease in third-party commissions. Selling expenses in our Transportation business unit remained relatively flat in the six months ended November 2, 2019 compared to the same period one year ago.

~~Other Operating Expenses~~

All areas of operating expenses were impacted as a result of the six months ended November 2, 2019 including 27 weeks compared to the more common 26 weeks. The six months ended October 27, 2018 contained 26 weeks.

~~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.

~~General and administrative expensesin the six months ended November 2, 2019 increased as compared to the same period one year ago primarily due to an increase in professional fees and personnel related expenses.~~

~~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. We plan to make continued investments in our software and controller capabilities throughout our various product offerings. Through our design efforts, we focus on standardizing display components and control systems for both single site and network displays.

Product design and development expenses in the six months ended November 2, 2019 as compared to the same period one year ago increased primarily due to increased labor costs and professional services assigned to product design and development projects. To deliver value to our customers and meet the markets' needs, we expect an increase in expenditures for new or enhanced customer solutions.

~~Other Income and Expenses~~

~~Interest 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.

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

		November 2, 2019			April 27, 2019				August 1, 2020			May 2, 2020
SHAREHOLDERS' EQUITY:
Common Stock, no par value, authorized 115,000,000 shares; 45,722,110 and 45,317,267 shares issued at November 2, 2019 and April 27, 2019, respectively		59,276			57,699
Common Stock, no par value, authorized 115,000,000 shares; 45,913,210 and 45,913,209 shares issued at August 1, 2020 and May 2, 2020, respectively									60,010			60,010
Additional paid-in capital		43,546			42,561				45,192			44,627
Retained earnings		103,397			93,593				92,557			85,090
Treasury Stock, at cost, 573,775 and 303,957 shares at November 2, 2019 and April 27, 2019, respectively		(3,516		)	(1,834		)
Treasury Stock, at cost, 1,343,281 and 1,343,281 shares at August 1, 2020 and May 2, 2020, respectively									(7,297		)	(7,470		)
Accumulated other comprehensive loss		(4,692		)	(4,356		)		(4,240		)	(5,277		)
TOTAL SHAREHOLDERS' EQUITY		198,011			187,663				186,222			176,980
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	378,409		$	349,216			$	380,120		$	372,651

See notes to condensed consolidated financial statements.

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

	Three Months Ended						Six Months Ended						Three Months Ended
	November 2, 2019			October 27, 2018			November 2, 2019			October 27, 2018			August 1, 2020			August 3, 2019
Net sales	$	174,911		$	172,692		$	355,167		$	326,880		$	143,644		$	180,256
Cost of sales	134,824			129,935			269,575			245,876			107,883			134,751
Gross profit	40,087			42,757			85,592			81,004			35,761			45,505

Operating expenses:
Selling	16,177			16,125			34,474			32,503			11,556			18,297
General and administrative	8,965			8,574			18,058			17,111			7,124			9,093
Product design and development	10,121			9,039			20,621			18,331			7,532			10,500
	35,263			33,738			73,153			67,945			26,212			37,890
Operating income	4,824			9,019			12,439			13,059			9,549			7,615

Nonoperating (expense) income:
Interest income	162			188			431			385			85			269
Interest expense	(31		)	(2		)	(66		)	(41		)	(73		)	(35		)
Other income (expense), net	(514		)	(66		)	(321		)	(220		)
Other (expense) income, net													(627		)	193

Income before income taxes	4,441			9,139			12,483			13,183			8,934			8,042
Income tax (benefit) expense	(2,833		)	533			(1,821		)	3
Income tax expense													1,467			1,012
Net income	$	7,274		$	8,606		$	14,304		$	13,180		$	7,467		$	7,030

Weighted average shares outstanding:
Basic	45,115			44,780			45,114			44,717			44,654			45,089
Diluted	45,267			44,950			45,361			44,994			44,751			45,261

Earnings per share:
Basic	$	0.16		$	0.19		$	0.32		$	0.29		$	0.17		$	0.16
Diluted	$	0.16		$	0.19		$	0.32		$	0.29		$	0.17		$	0.16

See notes to condensed consolidated financial statements.

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

		Three Months Ended					Six Months Ended							Three Months Ended
		November 2, 2019		October 27, 2018			November 2, 2019			October 27, 2018				August 1, 2020		August 3, 2019

Net income		$	7,274	$	8,606		$	14,304		$	13,180			$	7,467	$	7,030

Other comprehensive income (loss):
Cumulative translation adjustments		146		(555		)	(380		)	(1,694		)		1,037		(526		)
Unrealized gain (loss) on available-for-sale securities, net of tax		3		6			44			(7		)		—		41
Total other comprehensive income (loss), net of tax		149		(549		)	(336		)	(1,701		)		1,037		(485		)
Comprehensive income		$	7,423	$	8,057		$	13,968		$	11,479			$	8,504	$	6,545

See notes to condensed consolidated financial statements.

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

	Six Months Ended						Three Months Ended
	November 2, 2019			October 27, 2018			August 1, 2020			August 3, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	14,304		$	13,180		$	7,467		$	7,030
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	8,724			9,300			4,337			4,383
Gain (loss) on sale of property, equipment and other assets	30			(93		)
Loss on sale of property, equipment and other assets							(53		)	(26		)
Share-based compensation	1,184			1,263			539			643
Contingent consideration adjustment	—			(956		)
Equity in loss of affiliate	241			265
Equity in loss of affiliates							529			118
Provision for doubtful accounts	(535		)	51			1			5
Deferred income taxes, net	(64		)	(85		)	(4		)	(40		)
Change in operating assets and liabilities	(34,156		)	(368		)	(4,271		)	(30,331		)
Net cash (used in) provided by operating activities	(10,272		)	22,557
Net cash provided by (used in) operating activities							8,545			(18,218		)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(9,768		)	(9,833		)	(3,155		)	(5,856		)
Proceeds from sales of property, equipment and other assets	149			182			86			73
Purchases of marketable securities	—			(9,209		)
Proceeds from sales or maturities of marketable securities	22,775			12,034			—			14,510
Purchases of and loans to equity investment	(896		)	(854		)	(492		)	(455		)
Acquisitions, net of cash acquired	—			(2,250		)
Net cash provided by (used in) investing activities	12,260			(9,930		)
Net cash (used in) provided by investing activities							(3,561		)	8,272

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term obligations	(1,931		)	(431		)	(210		)	(1,221		)
Dividends paid	(4,500		)	(6,252		)	—			(2,250		)
Proceeds from exercise of stock options	—			57
Payments for common shares repurchased	(1,682		)	—						(1,187		)
Tax payments related to RSU issuances	(199		)	(246		)
Net cash used in financing activities	(8,312		)	(6,872		)	(210		)	(4,658		)

EFFECT OF EXCHANGE RATE CHANGES ON CASH	(94		)	73			(481		)	(37		)
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(6,418		)	5,828
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH							4,293			(14,641		)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
Beginning of period	35,742			29,755			40,412			35,742
End of period	$	29,324		$	35,583		$	44,705		$	21,101

Supplemental disclosures of cash flow information:
Cash payments for:
Cash paid (received) for:
Interest	$	117		$	84		$	43		$	33
Income taxes, net of refunds	1,051			954			786			491

Supplemental schedule of non-cash investing and financing activities:
Demonstration equipment transferred to inventory	$	—		$	97
Purchases of property and equipment included in accounts payable	1,469			2,348			969			786
Contributions of common stock under the ESPP	1,577			820			—			779

See notes to condensed consolidated financial statements.



	Net income		Shares	Per share income
For the three months ended November 2, 2019
Basic earnings per share	$	7,274	45,115	$	0.16
Dilution associated with stock compensation plans	—		152	—
Diluted earnings per share	$	7,274	45,267	$	0.16
For the three months ended October 27, 2018
Basic earnings per share	$	8,606	44,780	$	0.19
Dilution associated with stock compensation plans	—		170	—
Diluted earnings per share	$	8,606	44,950	$	0.19
For the six months ended November 2, 2019
Basic earnings per share	$	14,304	45,114	$	0.32
Dilution associated with stock compensation plans	—		247	—
Diluted earnings per share	$	14,304	45,361	$	0.32
For the six months ended October 27, 2018
Basic earnings per share	$	13,180	44,717	$	0.29
Dilution associated with stock compensation plans	—		277	—
Diluted earnings per share	$	13,180	44,994	$	0.29

DAKTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in thousands) (unaudited)

	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	—		—			7,030			—			—			7,030
Cumulative translation adjustments	—		—			—			—			(526		)	(526		)
Unrealized gain (loss) on available-for-sale securities, net of tax	—		—			—			—			41			41
Share-based compensation	—		643			—			—			—			643
Employee savings plan activity	779		—			—			—			—			779
Dividends declared ($0.05 per share)	—		—			(2,250		)	—			—			(2,250		)
Treasury stock purchase	—		—			—			(1,187		)	—			(1,187		)
Balance as of August 3, 2019	58,478		43,204			98,373			(3,021		)	(4,841		)	192,193
Net income	—		—			7,274			—			—			7,274
Cumulative translation adjustments	—		—			—			—			146			146
Unrealized gain (loss) on available-for-sale securities, net of tax	—		—			—			—			3			3
Share-based compensation	—		541			—			—			—			541
Tax payments related to RSU issuances	—		(199		)	—			—			—			(199		)
Employee savings plan activity	798		—			—			—			—			798
Dividends declared ($0.05 per share)	—		—			(2,250		)	—			—			(2,250		)
Treasury stock purchase	—		—			—			(495		)	—			(495		)
Balance as of November 2, 2019	$	59,276	$	43,546		$	103,397		$	(3,516	)	$	(4,692	)	$	198,011

See notes to condensed consolidated financial statements.



	Allowance for Doubtful Accounts:
Balance as of May 2, 2020	$	2,828
Charged to costs and expenses	735
Deductions (1)	(241		)
Balance as of August 1, 2020	$	3,322



	Three Months Ended August 1, 2020
	Commercial		Live Events		High School Park and Recreation		Transportation		International		Total
Type of performance obligation
Unique configuration	$	8,727	$	41,975	$	7,668	$	7,724	$	4,012	$	70,106
Limited configuration	22,555		5,419		20,688		6,266		8,653		63,581
Service and other	3,224		4,080		587		508		1,558		9,957
	$	34,506	$	51,474	$	28,943	$	14,498	$	14,223	$	143,644
Timing of revenue recognition
Goods/services transferred at a point in time	$	22,892	$	6,214	$	19,368	$	6,374	$	9,179	$	64,027
Goods/services transferred over time	11,614		45,260		9,575		8,124		5,044		79,617
	$	34,506	$	51,474	$	28,943	$	14,498	$	14,223	$	143,644



	Three Months Ended November 2, 2019
	Commercial		Live Events		High School Park and Recreation		Transportation		International		Total
Type of performance obligation
Unique configuration	$	9,007	$	41,413	$	5,186	$	12,419	$	10,542	$	78,567
Limited configuration	26,654		11,513		24,127		7,383		13,124		82,801
Service and other	3,990		6,393		880		528		1,752		13,543
	$	39,651	$	59,319	$	30,193	$	20,330	$	25,418	$	174,911
Timing of revenue recognition
Goods/services transferred at a point in time	$	27,304	$	13,169	$	22,112	$	7,521	$	13,500	$	83,606
Goods/services transferred over time	12,347		46,150		8,081		12,809		11,918		91,305
	$	39,651	$	59,319	$	30,193	$	20,330	$	25,418	$	174,911

	Six Months Ended November 2, 2019
	Commercial		Live Events		High School Park and Recreation		Transportation		International		Total
Type of performance obligation
Unique configuration	$	21,972	$	87,000	$	11,216	$	24,316	$	26,220	$	170,724
Limited configuration	53,889		19,226		47,927		13,970		23,054		158,066
Service and other	7,825		12,399		1,515		1,062		3,576		26,377
	$	83,686	$	118,625	$	60,658	$	39,348	$	52,850	$	355,167
Timing of revenue recognition
Goods/services transferred at a point in time	$	55,007	$	22,289	$	44,711	$	14,218	$	23,688	$	159,913
Goods/services transferred over time	28,679		96,336		15,947		25,130		29,162		195,254
	$	83,686	$	118,625	$	60,658	$	39,348	$	52,850	$	355,167



	Three Months Ended August 3, 2019
	Commercial		Live Events		High School Park and Recreation		Transportation		International		Total
Type of performance obligation
Unique configuration	$	12,965	$	45,587	$	6,030	$	11,897	$	15,678	$	92,157
Limited configuration	27,235		7,713		23,800		6,587		9,930		75,265
Service and other	3,835		6,006		635		534		1,824		12,834
	$	44,035	$	59,306	$	30,465	$	19,018	$	27,432	$	180,256
Timing of revenue recognition
Goods/services transferred at a point in time	$	27,703	$	9,120	$	22,599	$	6,697	$	10,188	$	76,307
Goods/services transferred over time	16,332		50,186		7,866		12,321		17,244		103,949
	$	44,035	$	59,306	$	30,465	$	19,018	$	27,432	$	180,256



	Three Months Ended October 27, 2018
	Commercial		Live Events		High School Park and Recreation		Transportation		International		Total
Type of performance obligation
Unique configuration	$	11,426	$	38,283	$	6,671	$	10,427	$	10,776	$	77,583
Limited configuration	31,385		11,467		24,381		7,195		9,851		84,279
Service and other	3,258		5,349		528		455		1,240		10,830
	$	46,069	$	55,099	$	31,580	$	18,077	$	21,867	$	172,692
Timing of revenue recognition
Goods/services transferred at a point in time	$	31,896	$	12,558	$	22,060	$	7,267	$	10,126	$	83,907
Goods/services transferred over time	14,173		42,541		9,520		10,810		11,741		88,785
	$	46,069	$	55,099	$	31,580	$	18,077	$	21,867	$	172,692

	Six Months Ended October 27, 2018
	Commercial		Live Events		High School Park and Recreation		Transportation		International		Total
Type of performance obligation
Unique configuration	$	14,475	$	77,204	$	15,614	$	20,045	$	26,992	$	154,330
Limited configuration	55,252		17,285		42,928		14,278		20,629		150,372
Service and other	6,911		10,082		1,158		911		3,116		22,178
	$	76,638	$	104,571	$	59,700	$	35,234	$	50,737	$	326,880
Timing of revenue recognition
Goods/services transferred at a point in time	$	56,479	$	19,360	$	39,058	$	14,499	$	21,662	$	151,058
Goods/services transferred over time	20,159		85,211		20,642		20,735		29,075		175,822
	$	76,638	$	104,571	$	59,700	$	35,234	$	50,737	$	326,880



	November 2, 2019		April 27, 2019		Dollar Change		Percent Change
Contract assets	$	34,395	$	33,704	$	691	2.1	%
Contract liabilities - current	48,387		47,178		1,209		2.6
Contract liabilities - noncurrent	10,578		10,053		525		5.2



	Less than 12 months		1-5 Years		Total
Certificates of deposit	$	1,734	$	983	$	2,717
U.S. Government sponsored entities	745		—		745
Municipal bonds	156		—		156
	$	2,635	$	983	$	3,618



	Three Months Ended November 2, 2019		Six Months Ended November 2, 2019
Operating lease cost⁽¹⁾	$	1,010	$	1,862



	Three Months Ended November 2, 2019		Six Months Ended November 2, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	787	$	1,603



	Operating Leases⁽¹⁾
Fiscal years ending
2020	$	1,536
2021	2,711
2022	1,993
2023	1,206
2024	1,085
Thereafter	2,398
Total lease payments	10,929
Less imputed interest	(944		)
Total lease liabilities	$	9,985



	November 2, 2019
Beginning accrued warranty obligations	$	24,470
Warranties issued during the period	6,425
Settlements made during the period	(5,355		)
Changes in accrued warranty obligations for pre-existing warranties during the period, including expirations	445
Ending accrued warranty obligations	$	25,985



Acquisition-related contingency consideration as of April 27, 2019	$	3,065
Additions	50
Settlements	(2,291		)
Interest	34
Foreign currency translation	37
Acquisition-related contingency consideration as of November 2, 2019	$	895



	Six Months Ended
	November 2, 2019				October 27, 2018
	Amount		As a Percent of Net Sales		Amount		As a Percent of Net Sales
(in thousands)	Amount		As a Percent of Net Sales		Amount		As a Percent of Net Sales
Commercial	$	17,080	20.4	%	$	18,651	24.3	%
Live Events	24,671		20.8		22,545		21.6
High School Park and Recreation	19,411		32.0		19,261		32.3
Transportation	13,757		35.0		11,591		32.9
International	10,673		20.2		8,956		17.7
	$	85,592	24.1	%	$	81,004	24.8	%



Period	Total number of shares purchased	Average price paid per share (including fees)		Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under the share repurchase program(1)
August 4, 2019 - August 31, 2019	83,158	$	5.95	83,158	$	36,492,884
Total	83,158			83,158



		/s/ Sheila M. Anderson
		Daktronics, Inc.
		Sheila M. Anderson
		Chief Financial Officer
		(Principal Financial Officer and
		Principal Accounting Officer)

Date:	~~November 27, 2019~~August 28, 2020



3.1	Amended and Restated Articles of Incorporation of the Company. (Incorporated by reference to Exhibit 3.1 of the Current Report on Form 10-Q/A (Amendment No. 1) of Daktronics, Inc. filed on December 21, 2018).
3.2	Amended and Restated Bylaws of the Company (Incorporated by reference to Exhibit 3.4 filed with our Annual Report on Form 10-K on June 12, 2013).
4.1	Rights Agreement dated as of November 16, 2018 between Daktronics, Inc. and Equiniti Trust Company, as Rights Agent (Incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K of Daktronics, Inc. filed on November 16, 2018).
10.1	Credit Agreement dated November 15, 2016 by and between the Company and U.S. Bank National Association (Incorporated by reference to Exhibit 10.1 filed with our Current Report on Form 8-K filed on November 16, 2016).
10.2	Revolving Note dated November 15, 2016 issued by the Company to U.S. Bank National Association (Incorporated by reference to Exhibit 10.2 filed with our Current Report on Form 8-K filed on November 16, 2016).
10.3	Second Amendment to Credit Agreement dated as of November 15, 2019 by and between the Company and U.S. Bank National Association (Incorporated by reference to Exhibit 10.1 filed with our Current Report on Form 8-K filed on November 15, 2019).
10.4	Third Amendment to Credit Agreement dated as of August 28, 2020 by and between the Company and U.S. Bank National Association (1).
10.5	Security Agreement dated as of August 28, 2020 by and between the Company and U.S. Bank National Association (1).
10.6	Daktronics, Inc. 2015 Stock Incentive Plan ("2015 Plan"). (Incorporated by reference to Exhibit A to the Company's Definitive Proxy Statement on Schedule 14A filed on July 14, 2015).
~~10.5~~10.7	Form of Restricted Stock Award Agreement under the 2015 Plan (Incorporated by reference to Exhibit 10.2 filed with our Current Report on Form 8-K on September 3, 2015).
~~10.6~~10.8	Form of Non-Qualified Stock Option Agreement Terms and Conditions under the 2015 Plan (Incorporated by reference to Exhibit 10.3 filed with our Current Report on Form 8-K on September 3, 2015).
~~10.7~~10.9	Form of Incentive Stock Option Terms and Conditions under the 2015 Plan (Incorporated by reference to Exhibit 10.4 filed with our Current Report on Form 8-K on September 3, 2015).
~~10.8~~10.10	Form of Restricted Stock Unit Terms and Conditions under the 2015 Plan (Incorporated by reference to Exhibit 10.5 filed with our Current Report on Form 8-K on September 3, 2015).
31.1	Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (1)
31.2	Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (1)
32.1	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350). (1)
32.2	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350). (1)
101	The following financial information from our Quarterly Report on Form 10-Q for the period ended ~~November 2, 2019~~August 1, 2020 formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Cash Flows, (v) Notes to Condensed Consolidated Financial Statements, and (vii) document and entity information. (1)
	(1)	Filed herewith electronically.