Thank you for standing by, and welcome to Daktronics First Quarter Fiscal Year 2025 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ prepared remarks, there will be a question-and-answer session. [Operator Instructions] As a reminder, today’s program is being recorded. And now, I’d like to introduce your host for today’s program, Carla Gatzke, the Company’s Secretary for Daktronics, for some introductory remarks. Please go ahead.

Thank you, Jonathan. Good morning, everyone. Thank you for participating in our first quarter earnings 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. These forward-looking statements reflect the company’s expectations or beliefs concerning future events. All forward-looking statements involve risks and uncertainties, which could cause actual results to differ materially from expectations. Such risks include, but are not limited to, changes in economic and market conditions, management of growth, timing and magnitude of future contracts and orders, fluctuations in margins, the introduction of new products and technologies, availability of raw materials, components and shipping services and other important factors. These identified factors could cause actual results to differ materially from those discussed in this call in the company’s first quarter 2025 quarterly earnings release and its most recent Annual Report on Form 10-K. Our first quarter 2025 earnings release contain certain non-GAAP financial measures and was furnished to the SEC, the Securities and Exchange Commission on a Form 8-K this morning. We also made slides available for today’s call and all of these documents are available on the Investors section at Daktronics website, www.daktronics.com. I’ll turn the call over to our CEO, Reece Kurtenbach.

Thanks, Carla. Good morning. Thank you all for joining us today. We’re off to a great start to the year against a record prior year quarter, demonstrating our continued strong execution towards driving growth and returns above our cost of capital. As you can see on our slide presentation on Page 3, first quarter – fiscal first quarter 2025 highlights, we delivered revenue growth as well as gross and operating profit expansion on a sequential basis. These continued financial results were primarily earned through steady growth in new orders, which increased 11% from last year, the completion of several large projects and efficient planning and execution throughout our fulfillment teams. This orchestration between our production and product teams served our customers well with on-time deliveries, especially for sports installs in our Live Events and High School Parks and Rec, HSPR business. Our operating environment remains stable with supply chain reliability adding greater predictability to our production schedules. Our more profitable business model generated solid operating cash flow of $19.5 million, a very strong performance against last year’s record comparison. During the quarter, as throughout the past several quarters, we have also executed on a number of strategies along our digital transformation, growth and efficiency road maps making progress toward our long-term objectives and enhancing our ability to drive future profitable growth. We have specific milestones along this road map planned for this fiscal 2025 and 2026 and are on-track for these next steps, which I will discuss further later in our call. Our backlog of $267 million reflects our year-over-year order growth and continued return to more normal seasonal trends as we continue to anniversary our resolution of past supply chain challenges. We enter our second fiscal quarter with good momentum, and we expect to drive order growth in fiscal…

Thank you, Reece. I invite you to turn to Slide 5 titled FQ1 Fiscal 2025 Financial Highlights to follow the first quarter’s financial outcomes. The quarter-over-quarter comparisons in this slide and related discussion are as of and for the fiscal quarters ended July 27, 2024, April 27, 2024, and April 29, 2023, unless otherwise stated. As the operating and seasonal environment in fiscal Q1 2025 was more comparable to our fiscal Q4 2024 results than a year ago results, we are adding in sequential comparisons, which are more meaningful this quarter. As a reminder, fiscal Q1 2024 results reflected record volumes as pent-up backlog was still being fulfilled. Our seasonal order, revenue and profit patterns continue to normalize. Order generation for the first quarter was strong and followed sequentially a Q4 strong order quarter, setting us up for the higher seasonal revenue generation typical of the seasonality in our business. Demand rebounded in all areas of our commercial business unit, On-Premise, Spectacular and Out-of-Home, especially in independent billboard operators, a reflection of our focus to these customers. Based on the strong return to a more seasonal – to more seasonal trends, product backlog level was $267 million at the end of the quarter, and we’re seeing higher levels of quoting activity. In fiscal Q1, we generated sales volumes of $226 million, a 4.7% growth rate from the fourth quarter and down from the record quarter of a year ago. The sequential increase is attributable to production and deliveries ramped up for sports installs, especially for Live Events and High School Park and Recreation business units. These levels of sales demonstrate our ability to convert orders into timely revenue generation through our manufacturing and our other fulfillment work streams. Gross margin increased sequentially to 26.4% and continue at levels that generate…

Thank you, Sheila. Turning to Slide 6, titled FY 2025 Strategic Priorities. Overall, we have a unique leadership position in our target markets which are large, growing and enjoy resilient demand driven by our customers’ desire to improve their audience experience in sports, commercial and transportation environments. To capitalize on this position, we are focused on digital and business transformation, improving our cost structure and further growing our markets. On the digital transformation front, we are investing in foundational enterprise performance management tools that will strengthen our management systems and improve data available to guide capital allocation decisions and focus our investments in the most profitable business segments. During fiscal 2025, we’re also plan to launch modernized service and systems management tools, which will improve both internal operations and customer experiences. Another focused effort will be planning automation in our front-end quoting and sales processes, which we plan to launch in phases beginning in fiscal 2026. We are also making investments to improve profitable growth and accelerate the lowering of our overall structural and product costs to increase market competitiveness. Not only do we see the digital transformation efforts as foundational to lowering our structural costs, but we are also investing in people capabilities and working with consultants to accelerate strategies expected to increase operational efficiencies to lower overall costs and increase market competitiveness. Finally, we continue to execute on strategies to both grow and capture a greater share of our SAM. These strategies include the advancing of our control system capabilities I previously mentioned, and adding professional services and other content to drive MRR, ensuring we are delivering enhanced returns as we help our customers achieve success in their investment in our offerings. To accelerate these strategic plans in fiscal 2025 and beyond, we are investing in transformation resources,…

Certainly. [Operator Instructions] Our first question comes from the line of Anja Soderstrom from Sidoti. Your question, please.

Thank you for taking my questions and congratulations on their great execution in the quarter. Can you just talk a little bit about the backlog? When do you expect that to normalize?

Good question, Anja. Backlog, we think we’ll start to see more of a seasonal cycle represented in our results where Q1 and Q2 tend to be higher sales revenue months, Q3 tends to be lower, and Q4 starts to build into our busier summer. So we would expect our backlog to grow as we move through Q3 and then tend to trend down in our summer months. And so we would expect that to continue on into – through FY2025 and into FY2026. But I think our backlog that was really high as we entered our last quarter – or excuse me, Q1 of 2024. Most of that has been resolved as far as unusually high backlog based on the supply chain issues and things that were going on into that last fiscal year. And maybe just a few final comments on backlog. The markets like these large projects, a lot of their business sits in backlog for a quarter or two or maybe more, depending on whether it’s a new construction project. But some of our markets like our commercial on-premise and our standard high school business, that runs on a much shorter lead time. And so maybe a 10-week lead order could book and ship within a quarter and never be seen in our backlog figures.

Okay. Thank you. And then [indiscernible] the revenue in the first quarter was quite strong sequentially. Was anything there that was pulled in from the second quarter? Or how should we think about the second quarter?

In our summer months, there’s a lot of projects in flight as many of our customers are sports-driven and getting ready for the fall sports. So it’s sometimes difficult to predict what’s going to happen right at a quarter boundary. But there wasn’t, I would say, unusual amount of movement. And so I don’t think much was pulled in from Q2 into Q1.

Okay. And in terms of your targeted operating margin, you’re there already. And you have – you’re taking a lot of initiatives with the digital transformation. Do you think maybe there would be room to expand that target or…

Great question. And that’s – our management team is looking at that today or now. We believe there’s room for growth, and we believe there is room for margin growth, operating margin growth – how do we balance those two is really the opportunity we have in front of us, but we believe there is room for top line growth and operating margin growth.

Okay. Thank you. And you also mentioned pricing as a driver for margin expansion. Can you just talk about the competitive environment and your value proposition compared to competitors and how you win?

Yes. Thank you. Continues to be a competitive environment. And most of our competition comes out of Southeast Asia with some kind of product – and then maybe it’s sold more closer to an end user or maybe there’s a reseller or two in between that product and the end user. Our value proposition has been very strong and remains consistent that we have strong control of the displays and how those AV systems are made, we have strong capability in the control systems and can offer features and workflows that maybe are harder for our competitors to offer. And we are a full-service organization, both technically, keeping the equipment looking and working its best as well as what I might call professional services using the equipment in a manner that helps our customers achieve their overall objectives. And by balancing all those three things together is what’s made Daktronics strong.

Okay. Thank you. I’ll get back in queue.

Thank you. Appreciate your questions today.

Thank you. And our next question comes from the line of Mac Furst from Singular Research. Your question, please.

Yes. This is Mac Furst with Singular Research. Congratulations on the quarter.

Thank you. Welcome to the call.

Thank you. I wanted to ask you about market share. How has that developed in the last couple of years and specifically in the last, say, three, four quarters. Can you comment on that? Or do you not follow that very closely? Or is that data hard to come by?

Yes. It’s more of that data is hard to come by. We do track win-loss on our opportunities. And so we do track our overall market share. But I would say one thing, as we’ve gone through the COVID and in our current times, we spend much less time with customers that are really price focus. They really want their lowest dollar is the highest priority thing that they’re looking at. And so we are focused on customers that see the value proposition that Daktronics has and are interested in pursuing a solution like that. And in this price-sensitive – highly price sensitivity market, I suspect we don’t have as higher market share as we had previously going into COVID.

Understand.

In other areas, I believe we’ve been able to maintain our market share quite well.

Okay. Can you comment at all about the credit position of the company? And how has that developed in the last couple of quarters, let’s say, three to four quarters, please?

As a credit position, we have a very strong balance sheet today, high levels of cash and are not pulled out any – on our line of credit. Did that hit the right spot there, Mac? Or was there another point to your question.

Yes. Yes, it did. What kind of credit is at your disposal at this point in time, if you needed it? Maybe you don’t need it, but if you needed it.

So we have an asset-based lending line and roughly runs around $35 million of availability on that line.

Thank you. Thank you, Sheila. Thank you. That’s all I have. Thank you very much.

Thank you.

Thank you. This does conclude the question-and-answer session of today’s program. I’d like to hand the program back to Reece Kurtenbach for any further remarks.

Thank you, everybody, for joining us on today’s call. Look forward to seeing you at our Q2 earnings release. And between now and then, we do have some investor marketing activities planned, including the September Sidoti Conference. So maybe we’ll see you out there in those types of activities. Have a great fall season, and we’ll see you in about three months. Thanks, everyone.

Thank you, ladies and gentlemen, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.