Good day, ladies and gentlemen, and welcome to the Daktronics First Quarter Fiscal Year 2013 Earnings Result Conference Call. As a reminder, this call is being recorded today, Tuesday, August 21, 2012, and is available on the company's website at www.daktronics.com. [Operator Instructions] I would now like to turn the conference over to Mr. Bill Retterath, Chief Financial Officer for Daktronics, for some introductory remarks. Please go ahead, sir.

Thank you. Good morning. We appreciate everyone's participation on our first quarter conference call. I'd like to first offer our forward-looking disclosure statement. We caution investors and participants that, in addition to statements of historical facts, this call and our news release contain forward-looking statements reflecting expectations and beliefs on future events which could materially affect our performance in the future. We caution you that these and similar statements involve risks and uncertainties, including changes in economic and market conditions, management of growth, timing and magnitude of future orders and other risks, as mentioned during this call, in our press release and our SEC filings. Forward-looking statements are made in the context available to us as of the date of this call. We undertake no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur. With that out of the way, I'll turn it over to Jim Morgan, our Chief Executive Officer, for some comments, after which I'll follow, and then, we'll open it up for some questions.

Good morning, everyone. Thanks for joining us. Our business operates somewhat like a 5-cylinder engine, with each business unit being one of the cylinders. And when we are hitting on all cylinders, we run really well. And we did that this quarter, not only in sales, but in orders as well and turned in some nice results. So hats off to all of our employees for their excellent work through the quarter. On the other hand, with the large contract component of some of our businesses -- so we do occasionally have a quarter where one of the business units is not so strong, and this is where the diversification of our business into the different market niches helps provide a more stable business overall over the long term. As we mentioned last quarter, we went into this quarter with a little pent-up demand in some areas. There were some orders that we were expecting that -- last quarter that got delayed and ended up in this first quarter. Likewise, we had some inventory built in the fourth quarter that converted to sales quickly when orders came in the first quarter. So to some degree, we set the stage for the good first quarter in the fourth quarter of last year. And this is an example of how our business tends to be a bit lumpy as well as seasonal. Our challenge on the operations side is to deal with this variability, and our people that fulfill orders for customers did a great job not only during this quarter, but in planning and preparing last quarter to execute this quarter. Again, the fact we had strong orders and ended with a strong backlog sets us up very well for a strong second quarter. Our factories are all very busy at this time, which is always a good indication. This quarter does tend to be our busiest quarter of the year, and we are prepared to execute well in the quarter and deliver against our backlog in meeting customer's needs. Although we did have a nice improvement for the quarter and we were very pleased with the results, we have set a 3-year strategic goal for ourselves to significantly improve our operating margin. Our strategic plan includes continuing to grow the top line along with reduction of cost of sales as a percent of sales and continued focus on SG&A containment as we grow the top line. I'm going to leave my comments at that for now, and we look forward to responding to your questions after Bill gives a little more color on the numbers.

Thanks, Jim. As Jim noted, our orders and net sales are stronger than expected across our business units. Reaching the $132 million top line was driven primarily by better-than-expected results in our Live Events and Transportation business units. Live Events revenue was boosted by orders booked during the quarter that generated sales in the quarter. You can see by the comparisons to last year, we had a relatively weak first quarter last year on orders in Live Events, but made up for it in the second quarter. Typically, our first quarter order bookings in Live Events are higher than in the second quarter, so we're back to this year, where there's a more typical state. As Jim mentioned, our strong first quarter order bookings puts us in a good position for Q2, which should drive sales for the second quarter to levels higher than the second quarter of last fiscal year, which was $136 million. In our Transportation business, we had an unusual gain of more than $1.7 million in net sales and gross profit as we adjusted cost estimates to complete orders related to a large procurement contract that we had booked in the previous year. This change was primarily due to a reduction of previous estimates for a rework cost by a component issue from a supplier. Related to our billboard business, we had a very successful order -- quarter for orders at over $18 million. This level is not a run rate. It's more about the volatility of orders in that niche. There were some reports in the public comments by one of the billboard companies on their digital performance and the potential to get more selective on their deployment of digital. Our view remains the same that we won't see much growth this year in the…

[Operator Instructions] And your first question is from Steve Altebrando of Sidoti & Company. Stephen Altebrando - Sidoti & Company, LLC: Can you, again -- I think you touched on this, Bill, but, I guess, quantifying the one-time upside from the contract and the gross margin, was it 130 basis points, essentially?

$1.7 million, so yes. Stephen Altebrando - Sidoti & Company, LLC: Okay. So I guess if you can provide any color, I guess, on the sustainability of, I guess, even let's say it was a 26 margin looking out for the balance of the year. I guess, particularly in context that with the 10% operating margin target that you guys have put out for 3 years, which you're not that far from hitting now, it looks like.

Well, Steve, what I said earlier on gross profit, we'll exceed the 23%. You're back down, as you mentioned, from 27% to sub -- to 26%, roughly. We're in that range. The most important thing that we can do in the near term is to execute on our contracts and drive margin in that area. And this quarter, we were very successful at that. And if we can continue to do that and control the rest of our cost infrastructure, we'll be in good shape moving gross profit up. How it actually turns out for Q2, it's tough to say at this point. We're certainly going in the right direction, though. Stephen Altebrando - Sidoti & Company, LLC: What's that, I'm sorry?

We're certainly going in the right direction, though. Stephen Altebrando - Sidoti & Company, LLC: Right, okay. And I know off of like a 23% baseline gross margin, I think you guys thought there will be upside from, I guess, 3 key factors, I think, services, sourcing and warranty. Where are you making the most progress in this quarter? Or is it more of a volume factor?

Well, I think this past quarter, certainly, the volume helped a lot. If you look sequentially, our manufacturing infrastructure costs stayed relatively flat quarter-to-quarter. So the increase in sales did not add manufacturing expenses, which is a testament to what we've done in that area. So from a near-term -- and then the other thing I should mention is we did well on contracts this quarter. We did not have misses like we experienced in Q4. So if we can keep -- our goal is to -- well, it's more about those things getting controlled than the longer-term things that we've talked about on sourcing. Sourcing will be a long-term thing to drive margin. Warranty, we've made progress. We've got a track record of improvement in that area. So those things you mentioned were more longer term. Short-term things really helped us this last quarter. Stephen Altebrando - Sidoti & Company, LLC: Okay. That's helpful. And then just last one, do you have the billboard revenue for the quarter?

Billboard revenue for the quarter was roughly $13 million-plus. We don't pack much [ph].

Our next question is from Jim Ricchiuti of Needham & Company. James Ricchiuti - Needham & Company, LLC, Research Division: A question on with respect to backlog, Bill. Can you talk a little bit about the overall profitability of that backlog? How does it look versus recent quarters?

Well, I think overall, it's a little bit better because we don't have any exceptionally large contracts in there other than the -- this airport contract. And so generally, I think it looks a little bit better than it did, say, a quarter or 2 ago. Now we've got to execute on that, but with the smaller orders in Live Events, which is why we emphasized that. And hopefully, we're in good shape to have a good second quarter. James Ricchiuti - Needham & Company, LLC, Research Division: Got it. And just looking at the orders that you booked in the quarter, it stayed pretty strong across the board. Would you expect revenues to be up in Q2 year-over-year in each of these 5 major segments?

Jim, I don't -- I'd have to get back to you on each segment individually to go through all 5. I'm sorry, I don't have that. James Ricchiuti - Needham & Company, LLC, Research Division: So just given the strength that you saw, it looks like it is fairly broad-based. And so are you seeing any signs of any pullback from any customers in either -- you mentioned the national accounts business was a little bit slower. Where are you seeing any signs, if any, from cautiousness just on the -- as a result of the economy?

Jim, this is Jim Morgan. I would say we are not seeing any signs of a pullback. And to answer your question or respond to your comment, we -- certainly, the orders were strong across the board, so generally, we're expecting a strong second quarter in terms of revenue on all fronts. The only business unit that was down a little bit for orders in the quarter, even though they were up nicely in sales, was Commercial. And orders are more volatile than sales, and you understand that. So generally, that's the only thing I think -- and as Bill mentioned, we have to maybe check up how -- to see how things can compare quarter-to-quarter, and things can be a little bit noisy that way. But in general, we're expecting a strong quarter on all fronts in the second quarter and at the top line. James Ricchiuti - Needham & Company, LLC, Research Division: Okay. And one final question, how does the pipeline look in Live Events as you look out over the next 1 to 2 quarters just in terms of the visibility in the business, potential activity on maybe larger contracts? Bill, I think you mentioned you don't see many large deals. But just how would you characterize the pipeline of business in that area?

I'd like to respond to that again. This is Jim. Certainly, there's a -- we have a good pipeline out there. There's a few -- there's some question as to what's all going to happen in baseball and who's going to pull the trigger for some upgrades in that area. And we'll know more about that here over the next few months, who's really going to go forward on that. But that's one of the, I guess, one of the unknowns there. But generally, we're seeing a strong pipeline out there. And I might add also, in terms of International, both International and Live Events tend to be the 2 that focus the most on large contracts and, therefore, can be a little more volatile for us. But our Live Events -- I'm sorry, our International pipeline also has some nice projects that are queued up there. So we're optimistic on both of those fronts. James Ricchiuti - Needham & Company, LLC, Research Division: Jim, just as a follow-up, your International orders were typically strong in the quarter. So you feel pretty good about the outlook for that business in the near term? Can you talk a little bit about what contributed to the strength in Q1 in International?

Well, the one kind of underlying, I would say, maybe if there's a trend there, is that we're seeing increased interest in the third-party advertising segment of the business internationally. And certainly, overall, Commercial is the -- is the more consistent performer there as opposed to the sports and entertainment side of things. And we do see that growing. And again, the biggest part of Commercial is really the third-party advertising part of that. So yes, we're seeing some nice outlook there.

Jim, if I could get back to your question, I said I didn't have the data. While Jim was answering, I did gather some data points. Clearly, it was the orders, and it's probably a good question you brought up. Our Schools and Theatres business unit in Q2 should be up. With how that market's been, that looks like it's in good shape. Transportation is certainly up because of the airport order. And as you were just talking, International is looking fairly strong for Q2. The other 2 are a little bit tougher to predict, and that's the biggest part of our business. So whether or not those turn out exceeding last year or not is yet to be determined.

Our next question is from Dick Ryan of Dougherty & Company. Richard A. Ryan - Dougherty & Company LLC, Research Division: So with respect to replacement cycles, you mentioned it briefly in for billboards, and I think you also mentioned it in national accounts. What's driving the replacement cycle for national accounts? And has the replacement cycle for billboards, are you starting to see that kick in? Or where should we start seeing that contribution come into play?

Yes, Dick. We are seeing that -- I mean, it's just a fact that some of the first product that was put out there as part of some of the -- our national accounts programs are reaching end-of-life. They're getting that 10-year point. And so we did have a -- as we mentioned, there is a nice little chunk of business of a replacement cycle for one of our customers that saw most of the revenue in Q1. They're regrouping and determining how they want to move forward on the next round of that, so to speak. So there -- that's we're seeing in this quarter, and in Q2, we're not going to see in that particular upgrade a lot of activity, but we expect that there will be activity in the future, because there are many hundreds of these displays out there. So that's just one example. In the national accounts, we're talking about our Galaxy product, which is the smaller displays that go in front of a retail store. That's what I'm talking about in there. And then if we go to the billboards, the larger roadside billboard, third-party advertising business, they're, again -- the first units that we put out in the field are getting to the end-of-life. Now that -- those would tend to be more in that 7-, 8-year range. But again, they either full color, they're run 24/7. And so, they're getting to that point where it's time to consider the replacement. So exactly how fast that will come along, I guess, is can be determined, but we're at the beginning of it at this point, and it's just a matter of how fast the customer decides to ramp up and proceed with that. Richard A. Ryan - Dougherty & Company LLC, Research Division: Is -- competition as fierce when you kind of go for the replacement business as it is for kind of a new project going forward? Or is there some legacy relationship there that improves the batting average, if you will?

Well, there are 2 parts to that answer. One is certainly, we have relationships with our customers, and if we are working to replace existing installations of our own, that is -- and it certainly gives us a nice position to talk to the customer about that. In the case of the national accounts business that we just did a lot of replacement on this last quarter, a lot of that actually was competitor's product, and that competitor's no longer really active in the business. The other factor, if you ask our customers and the third-party advertise and digital billboard business, they'll say that a big consideration on this is how cost effective we can be in doing that so that it gives them the ROI they're looking for. So I think that's the other part of it, and so we're in discussions with them on how we do that most cost effectively so that it works for them as well. Richard A. Ryan - Dougherty & Company LLC, Research Division: Jim, on the Schools -- on the School business, you'd set up a division to help show that this can be supported -- these displays can be supported with the advertising dollars. Is that helping that segment? Or are you seeing any easing in the budget problems that, that sector is having?

So you're talking about High Schools in particular, I assume, right? Richard A. Ryan - Dougherty & Company LLC, Research Division: Yes, yes.

So -- but the displays -- scoreboards for high schools have never have been -- for the most part, have never really been funded out of the school budgets, the state budgets that go to schools. It's -- almost all of the funding over the years has been from other sources, be it booster clubs or some combination of advertising. We have a very small group at Daktronics that helps the catalysts to -- for these schools to go about -- to help them go about setting up an advertising or sponsorship programs to help facilitate those, and so that is a factor. It's a relatively small group at Daktronics, but they are a catalyst in helping the business in that niche.

Our next question is from Morris Ajzenman from Griffin Securities.

You've touched on the Live Events, professional sports, baseball, and uncertainty of timing this quarter 2. Any color you can give us on the other major professional sports, whether it's football, baseball, hockey? Excuse me, basketball, hockey? Any color on how things might unfold over the next couple of quarters there?

Well, as far as the upcoming opportunity, it's going to be now in professional baseball that we'll start our sales. People will start be move -- start moving towards that. There's certainly a number of opportunities out there in baseball, but it's too early to have much visibility at all in terms of whether the deals come to market in the end and whether we're successful. But there are a number of transactions out there. It's just too early to know where they will go.

Anything in any other professional sport that's out there as opportunities at this point?

Yes, there's -- in some of the -- I think in professional hockey, there may be a little bit of question on how things are going to go forward as far as the -- some of the labor discussions. Other than that, and that's a particular -- stands out. There's the general upgrade opportunities that come along that are there. But no -- so we're just completing the installation for the new Brooklyn Nets arena out in New York, so that's -- and there's no other major facilities, new construction like that on the -- in the very near horizon.

Okay. Switching gears, a question earlier, Bill, there's a question to you on the warranty. You spoken about in the past how getting that under control can really help gross margin going forward. And you touched on it, but you didn't give any specificity. Was there anything that's really helping margins at this point or can help margins, by getting a better handle on the warranty?

Well, getting a better handle on the warranty certainly helps margins, and that is one area where over the last 12-plus months, we have demonstrated success at that. Now this quarter, our warranty was just over 3%. We want to get it down to 2%. And 1 quarter is not a trend. We had 1 project in particular that had some issues, but I think with everything we're doing on product development, how we're testing products before they go to market, how we're going about the design and all that, I think we've proven we're on the right track on warranty our expense. It's a matter of just getting through the products from the past, moving on with the current products. I think we'll find we'll get there sooner rather than later.

Okay. Last question, again, just switching fields here completely, free cash flow. First quarter, $15 million, any conjecture, any feel for what is the view for the full year versus last year at this point?

Well, when you look at a point in time with a snapshot, it's always hard to know for the full year. But we're focused on this. Our working capital can be volatile. For example, at the end of this quarter, we had $5 million tied up with a procurement contract, as an example, that winds out this next quarter. And so there is a wide range that it's hard to even give an estimate for the year. But I think with everything we're doing in terms of cost containment and management of CapEx and working capital, I think we'll be in good shape. But I hesitate to throw in a number. It depends on what contracts we're working on. It could swing a lot.

Our next question is from Mark Hannemann [ph] of Marks and Power [ph].

I was wondering if I could get some additional color on the High Schools business. You mentioned some states this time. I was wondering did you do that because you're seeing extraordinarily large individual projects? Or are you seeing multiple projects from those states?

The reason for mentioning that is that the way that we've seen the business grow in High Schools is that when a school in a conference decides to -- the first school that decides to upgrade to a video board of whatever size, that sets a new standard in that area. And so the fact that -- I guess we see this as kind of seed being planted in those other states that can grow, so that's why we see that as significant. It's a reference point. In fact, we're expecting our first video display to go into the Twin Cities here in the not-too-distant future, which could be the trend up there [ph].

Would you characterize kind of the level of activity as rising, then, within the high school area beyond just what you've already booked in the backlog?

I mean, it's seasonal, of course. But -- so it's a kind of a year-over-year type of thing in terms of rising. But in general, we see it rising, yes. And then -- and it's -- to us, it's encouraging to see that it's -- we're seeing it in more states. And a few years ago, we had a tremendous amount of activity, but it was almost all in Texas. And so it's good to see that that's -- as we expected, that it would -- this would become more common. And of course, our product is very cost effective, so these orders, they're not $1 million orders. They're -- a $200,000 order in the High School market is a very nice-size order for us, as an example.

Okay. So the overall size of the High School individual contracts really isn't rising dramatically here?

I think it's -- maybe not dramatically, but it's -- I would say, we see as a steady uptick over time.

Our next question is from Robert Hoffman of Princeton Opportunity Partners.

You mentioned a little bit about kind of corporate, private-owned [ph] -- one of the reasons why the gross margins are better is because of the lack of the real large orders, with most of the orders or all the orders being under $4 million. Does that tell us anything about how -- is it more these days that the large market is not just there? Or are you being more price-sensitive? And I guess a follow-on to that is do you need those large orders to get the small ones, meaning, how much of your business is driven by, oh, a school outside of Philadelphia, wants to have the same manufacturer as the Philly Stadium has?

Well, certainly, the professional sports market is very important to us. I think what we're seeing is that -- and we've already said that generally, the larger the project, the tighter the gross profit margin typically because you just -- it gets -- the bidding -- the competition gets very, just more keen on those really big projects. And some of our competitors don't have that big of a sales force, so that's all they can focus on, so that's -- they make it or break it on the big ones. And so they tend to be competitive. We've continued to be successful in that market. And certainly, our -- we -- our salespeople in the high school level certainly do reference the professional sports facilities in their area as certainly as a selling point. So they're important, but in general, the margins on the large projects tend to be a little tighter.

Do you have any feedback on the large projects that you do win? Are you winning on price? Or are you also -- I mean, will you be able to find out that, okay, you bid $7.3 million and somebody else bid $7.1 million, or maybe that's -- maybe it's not that big of a difference, but $7.25 million, and you've got the business because of your reputation or your service and your sales effort?

So we are recognized as being a leader in the industry, and we're the safe choice for customers. Typically, that's what our customers view us. So then it's a question of how much a -- if a competitor comes in with a really low price, then how much is a customer willing to pay for a differential is really what it comes down to. So -- and that varies by customer, it varies by situation what the exact product is that's going into the particular project. So there's a lot of variety in how these things come together and who the players are. And so...

I think my question is do you -- when -- especially when you win it, do you know what the other guy's deal or proposal has been?

Yes, we typically, yes. Yes, we typically do understand it afterward. We learn after the fact kind of how the final proposals came in, typically. So for most part, these are open. We have good rapports with the customer and good relationships with them.

And at the moment, I'm showing no further questions. I'd like to turn it back to Jim Morgan for any further remarks.

Well, thank you, everyone, for being with us this morning. Thanks, again, to all of the Daktronics employees for the great quarter. And we have our annual meeting tomorrow night here at Daktronics. I invite anyone who can make it to join us here in Brookings. So thanks for being with us. Have a good day.

And again, thank you, ladies and gentlemen, for joining today's conference. You may now disconnect. Have a great day.