Good day, ladies and gentlemen, and welcome to Daktronics Fiscal Year 2023 Second Quarter Earnings Results Conference Call. As a reminder, this conference is being recorded today, Monday, December 12, and is available on the company's website at www.daktronics.com. We will have a question-and-answer session after the prepared remarks. [Operator Instructions] And I would now like to turn the conference over to Mr. Kevin McDermott, Daktronics Lead Independent Director. Please go ahead, Kevin.

Thank you, and good morning. My name is Kevin McDermott. I am the Lead Independent Director on the Daktronics Board and the Audit Committee Chair. I joined the Board in June 2015. Prior to my retirement in 2013, I was with the accounting firm at KPMG for 33 years. I served in various capacities at KP, the majority of which involved auditing the financial statements of publicly held companies. This morning, before passing the microphone to Reese and Sheila, I wanted to join you to acknowledge the concerns reflected in the stock price reaction to announcements made last week and to give you some background. Daktronics announced the going concern conclusion, the post fulfillment of the second quarter earnings release and call and a delay in the filing of the company's second quarter Form 10-Q. Daktronics was unable to provide further information at that time, because there were still related accounting and disclosure matters that had to be resolved. My presence today is also meant to underline to you that in addition to focusing on liquidity enhancement, your Board is prioritizing engagement with shareholders. Our goals today are to explain the substance of that going concern conclusion, share with you the exciting order pipeline, backlog and revenue update that might otherwise be overshadowed and give some specific detail on the plan and activity already underway to improve our liquidity situation and the cash flow generation from operations that has been hampered due to the necessary inventory buildup, given supply chain issues in order to serve this historic level of customer demand. Before Reece and Sheila take you through the earnings release and related commentary, I want to explain the going concern disclosure conclusion. Generally accepted accounting principles in the U.S. require a reporting company to consider at each annual and…

Thank you, Kevin. Good morning, everyone. Thank you for participating in our second quarter earnings conference call. I would like to review our disclosure cautioning investors and participants that in addition to statements of historical facts, we will be discussing forward-looking statements reflecting our expectations and plans about our future financial performance and future business opportunities. All forward-looking statements involve risks and uncertainties, which may be out of our control and may cause actual results to differ materially. Such risks include changes in economic conditions, changes in the competitive and market landscape, including impacts of global trade discussions and policies, the impact of governmental laws, regulations and orders, including those resulting from pandemics, disruptions to our business caused by geopolitical events, military actions, work stoppages, natural disasters or other international healthy emergencies, such as the COVID-19 pandemic, management of growth, timing and magnitude of future contracts, fluctuations of margins, availability of raw materials and components and shipping services, the introduction of new products and technology and other important factors. These identified important factors could cause actual results to differ materially from those disclosed in this call and the company's second quarter 2023 earnings release, and its most recent annual report on Form 10-K. We refer you to these documents. Our second quarter 2023 earnings release contains certain non GAAP financial measures and was furnished to the SEC on the Form 10 -- excuse me, 8-K this morning and is available on the Investors section at Daktronics' website at www.daktronics.com. I'll now turn the call over to Reece Kurtenbach for additional comments.

Thank you, Sheila. Thank you, Kevin, for your remarks. In the first half of fiscal 2023, we achieved sales increases even when our capacity was constrained due to significant unusual part shortages, a challenging labor environment, operating disruptions from COVID-19 related absences and the first quarter COVID-19 mandated shutdown of our Shanghai production facilities. I am proud of our teams’ ability to increase our sales output during the second quarter and through the first half of the year under these conditions. The unprecedented and persistent supply chain conditions caused lower gross profits through fulfillment, as well as higher cost for materials, labor and freightthat were not all able to be passed on to our customers. We made the strategic decision to keep delivery windows for our customers as close as possible to the originally committed date as supply chain and manufacturing constraints would allow. Even though this sometimes added additional cost to fulfill a project, to address supply chain volatility we aggressively secured inventory to fulfill orders for our customers, consuming cash while increasing predictability of our operations. We did all this because Daktronics has distinguished itself for 54 years for meeting our customer commitments on delivery dates, product quality and customer support. Our people displayed enormous strength, adaptability and resiliency over the past year and a half to maintain that reputation, securing supplies of critical components and responding to customers when demand came rushing back. So, through the first six months of fiscal 2023, cash was used for strategic growth in inventory stocking to add stability in our production, growth in accounts receivable due to continued growth in orders and sales and capital investments to increase manufacturing capacity. Today, our production and fulfillment operations continue to adapt and recover from the enduring implications of the pandemic. Supply chain disruptions…

Thanks, Reese. With that, I'll move on to our financial comments. Orders for the second quarter of fiscal 2023 increased 11.7% as compared to the second quarter of fiscal 2022 and increased by 2.2% on a year to date basis. Order increases for the year were driven by live events bookings for replacements and upgrades. These increases were offset by order volume declines in other areas, primarily as the market demand levels are normalizing after a record number of orders in fiscal 2022, driven up from pent up demand after the COVID-19 pandemic. In particular, orders have softened in international due to the weakening economic outlook related to geopolitical events and currency headwinds. Net sales for the second quarter of fiscal 2023 increased by 14% compared to the second quarter of fiscal 2022 and by 16.2% on a year to date basis. Sales growth was driven by fulfilling orders and backlog even while we experienced multiple material supply chain disruptions and labor shortages. As Reece conveyed, supply chain disruptions created an increase in lead times by extending the timing of converting orders to sales. This coupled with strong demand contributed to a larger than typical backlog and inventory levels. As a result of this relationship between the past order bookings and realization of sales, product order backlog remains at a historically high level of $463.1 million at the end of the quarter and was approximately $441 million as of the end of November. Gross profit as a percentage of net sales was 16.9% for the second quarter of fiscal 2023 as compared to 19.6% a year earlier and 16% for the six months ended October 29, 2022, as compared to 20.8% for the same fiscal six months a year earlier. This comparative decline in gross profit percentage was caused by…

Thank you, Sheila. To our investors and stakeholders, I would say that management understands the concern and uncertainty generated by last week's required announcement. As both Sheila and I described earlier as a key component of our liquidity enhancement program, we are pursuing other additional sources of liquidity and are focusing on reducing inventory levels. Our goal is to be able to remove this qualifying language as soon as is practical. The world has seen a lot of change over the past two years and Daktronics has navigated this as the ongoing industry leader in quality, technology and reliability. Customers continue to choose Daktronics as demonstrated by our historically strong order volume and backlog. We appreciate our customers believed in the Daktronics brand and we thank all of you for your commitment to what our products represent. Even with our recent going concern challenges, we believe our strategy to emerge from this time of the pandemic healthy and profitable by stabilizing our fulfillment performance through increased purchasing and critical components and increasing production bubbles through selective equipment investments and production staffing has reinforced the reasons why customers choose Daktronics. We have delivered many of the orders quoted with previous pricing structures and our backlog now mainly consists of orders booked under new pricing methodologies. We see signs of supply chain stabilizing, which will allow reduced inventory levels in the coming months as our production levels continue to increase. We do not believe that the geopolitical situation is back to normal or however this would be defined. But we do believe that the levels of uncertainty and volatility will not be as great in the coming months and will continue to stabilize in the coming calendar year. While macroeconomic factors continue to make it difficult to forecast the future, over the…

Thank you. [Operator Instructions] One moment for our first question please. Is from [B.J. Cook] (ph) with Singular Research. Please go ahead.

Can you guys hear me? Thanks for taking my questions.

Yes, no worries. We hear you fine.

Excellent. You had mentioned investing in manufacturing capacity upgrades. A lot of those projects finished, do you guys expect to execute on your order back -- order book faster going forward?If so, how much quicker do you guys trying to execute?

We have invested a lot in automation in our different factories and many of those projects have been completed and are being used. Equipment manufacturers are having their own supply chain challenges. So some of the equipment that we've ordered has not arrived yet and will be implemented in the coming months and maybe even early next fiscal year.

Okay. Thanks for that. Just one more quick one. Given the short term nature in the bump in the line of credit, are you guys expecting to realize cash from your elevated accounts receivable over the next month and a half or so or even since the end of the quarter?

Yes, maybe I'd say two things. Our banking facility has been very open and flexible with us. But of course, it's only guaranteed to the end of the quarter. And we believe as our business is continuing to be increasing, our production levels are increasing, we will convert more of our backlog more quickly into invoice orders.

Okay. Thanks. That's all I had. Appreciate it.

Thank you. [Operator Instructions] All right. Ladies and gentlemen, I'll turn it back to Mr. Reece for final remarks.

Thank you everybody for joining us on this morning's call. We are taking the going concern situation very serious and we are working hard to remove that qualifying language as soon as is possible and to update the group on those activities,we are planning to have our next conference call at the end of our Q3. Thank you, everyone, and have a good day. Bye-bye.

And with that, we thank you ladies and gentlemen. Today we conclude it with that and thank you for participating. You may now disconnect.