DAKTRONICS INC /SD/ MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-K)

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

This discussion should be read in conjunction with the accompanying Consolidated
Financial Statements and Notes to the Consolidated Financial Statements included
in this Form 10-K.

Management report – Financial year 2021 compared to financial year 2020

The comparison of fiscal 2021 to fiscal 2020, including results of operations and cash, can be viewed in the “MD&A” section of our Annual Report on Form 10-K for fiscal 2021, which comparison is incorporated by reference herein.

EXECUTIVE OVERVIEW

Our mission is to be a world leader at informing and entertaining audiences
through dynamic audio-visual communication systems. We organize into business
units to focus on customer loyalty over time and earn new and replacement
business as our products have a finite lifetime. See "Note 3. Segment Reporting"
of the Notes to our Consolidated Financial Statements included in this Form 10-K
for further information. Our strategies include the creation of a comprehensive
line of innovative solutions and systems and our ability to create and leverage
platform designs and technologies. These strategies align us to effectively
deliver value to our varied customers and their market needs, while serving our
stakeholders over the long-term. We focus on creating local capabilities for
sales, service, and manufacturing in geographies with expected digital market
opportunities. We believe consistently generating profitable growth will provide
value to our stakeholders (customers, employees, shareholders, suppliers, and
communities).
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We measure our success using a variety of metrics, 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 manufacturing costs
and the selling prices of our products impact profitability. Due to volatility
in our supply chain and labor conditions, our manufacturing costs and selling
prices of our products have increased during the 2022 fiscal year and may
continue to increase for some time into the future. Our competitors outside the
U.S. are impacted differently by the global trade environment allowing them to
avoid tariff costs and have access to parts supplies and lower costs of doing
business, which may allow them to maintain lower prices or reduce prices. As a
result, additional competitors have entered the market, and each year we must
sell more product to generate the same or greater level of net sales as in
previous fiscal years. However, the decline of digital solution pricing over the
years and increased user adoption and applications have increased the size of
the global market.

Competitors' offerings, actions and reactions also can vary and change over time
or in certain customer situations. Projects with multimillion-dollar revenue
potential attract competition, and competitors can use marketing or other
tactics to win business.

Each business unit's long-term performance can be impacted by economic
conditions in different ways and to different degrees. The effects of an adverse
economy are generally less severe on our sports related business as compared to
our other businesses, although in severe economic downturns with social changes
causing decreases in sporting event revenues, the sports business can also be
seriously impacted.

Outlook: Impacts to and changes in global economic conditions are expected as
the world economies recover from and react to the COVID-19 pandemic, adjust to
changing supply chain conditions and disruptions, and react to the evolving war
and geopolitical environment.

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

We have responded to input cost increases by increasing pricing, and we began
quoting at the new price levels across the business areas in the third quarter
of fiscal 2022. Certain areas will see additional increases at the beginning of
fiscal 2023. We also use pricing policies and opportunity evaluations across
markets to manage price levels. We will continue to monitor our supply chains
and our marketplaces and adapt our pricing methodologies as we see appropriate.

Although we cannot predict the length or severity of these conditions, we expect
continued disruptions in obtaining material, commodities, labor, and freight
availability and an increase in inflation. We also expect impacts to the global
economic conditions in reaction to the evolving war and geopolitical
environment. Due to longer planning horizons and volatility in supply chains, we
plan to carry higher quantities of inventory and anticipate changes in the
timing of payments from our customers as we work through different disruptions
and fulfill our backlog, all likely creating a consumption of cash. We are also
planning additional cash use for capital spending to grow our manufacturing
capacity.

All of these conditions have and will continue to cause volatility in our cash
flow, pricing, order volumes, lead-times, competitiveness, revenue cycles, and
production costs, and it is likely these conditions will have some negative
impact in fiscal 2023. However, the full impact to our financial condition,
results of operations and cash flows cannot be determined at this time.

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

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

Over the long term, we believe business unit growth will result from a number of factors, including:

•Standard display product market growth due to market adoption and lower product
costs, which drive marketplace expansion. Standard display products are used to
attract or communicate with customers and potential customers of retail,
commercial, and other establishments. Pricing and economic conditions are the
principal factors that impact our success in this business unit. We utilize a
reseller network to distribute our standard products.
•National accounts standard display market opportunities due to customers'
desire to communicate their message, advertising and content consistently across
the country. Increased demand is possible from national retailers, quick-serve
restaurants, petroleum retailers, and other nationwide organizations.
•Additional standard display offerings using micro-LED designs.
•Increasing use of LED technologies replacing signage previously using LCD
technology by existing and new customers.
•Increasing interest in spectaculars, which include very large and sometimes
highly customized displays as part of entertainment venues such as casinos,
shopping centers, cruise ships and Times Square type locations.
•New market adoption and expansion for use of LED in government and military and
corporate campuses.
•Dynamic messaging systems demand growth due to market adoption and expanded use
of this technology.
•The use of architectural lighting products for commercial buildings, which real
estate owners use to add accents or effects to an entire side or circumference
of a building to communicate messages or to decorate the building.
•The continued deployment of digital billboards as OOH advertising companies
continue developing new sites and replacing digital billboards reaching end of
life. This is dependent on no adverse changes occurring in the digital billboard
regulatory environment restricting future billboard deployments, as well as
maintaining our current market share in a business that is concentrated in a few
large OOH companies.
•Replacement cycles within each of these areas.

Live Events Business Unit: During fiscal year 2022, as the restrictions on
gathering started to decrease, more customers chose to invest or upgrade current
audiovisual systems in their locations. Some live events customers took
advantage of the downtime during the COVID-19 pandemic to build new or renovate
existing arenas and sport stadiums. This created large orders being booked
during fiscal year 2022 that are expected to be recognized as sales in future
fiscal years.

Over the long term, we believe growth in the Live Events business unit will result from a number of factors, including:

•Facilities spending more on larger display systems to enhance the game-day and
event experience for attendees.
•Lower product costs, driving an expansion of the marketplace.
•Our product and service offerings, including additional micro-LED offerings
which remain the most integrated and comprehensive offerings in the industry.
•The competitive nature of sports teams, which strive to out-perform their
competitors with display systems.
•The desire for high-definition video displays, which typically drive larger
displays or higher resolution displays, both of which increase the average
transaction size.
•Dynamic messaging system needs throughout a sports facility.
•Increasing use of LED technologies replacing signage previously using LCD
technology in and surrounding live events facilities.
•Replacement cycles within each of these areas.

High School Park and Recreation Business Unit: In the near-term, our customers
are upgrading their equipment as the pandemic eases and advertising revenue is
available.

In the long term, we believe that the growth of the High school park and recreation
the 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.
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•Increased demand for different types of displays and dynamic messaging systems,
such as message centers at schools to communicate to students, parents and the
broader community.
•Lower system costs driving the use of more sophisticated displays in school
athletic facilities, such as large integrated video systems.
•Expanding control system options tailored for the markets' needs.
•Certain display requirements for sporting events.

Transportation Business Unit: Daktronics has experienced governmental agencies
placing orders as a way to spend their allocated budgets for their fiscal years.
In addition, the Infrastructure Investment and Jobs Act signed into law in
November 2021, is expected to have a positive impact on all segments of United
States transportation terminals and public transit facilities.

Over the long term, we believe growth in the Transportation business unit will result from a number of factors, including:

•Increasing applications and acceptance of electronic displays to manage
transportation systems, including roadway, airport, parking, transit and other
applications.
•Effective use of the United States transportation infrastructure requires
intelligent transportation systems. This growth is highly dependent on
government spending, primarily by state and federal governments, along with the
continuing acceptance of private/public partnerships as an alternative funding
source.
•Expanded use of dynamic messaging systems for advertising and wayfinding use in
public transport and airport terminals due to expanded market usage and
displays, with LED technology replacing prior LCD installations and additional
display offerings using micro-LEDs.

Global Business Unit: As most restrictions on collection are reduced in all geographies, more and more customers are choosing to invest in their digital needs.

Over the long term, we believe that growth in the international business unit will result from a number of factors, including:

•Achieving greater penetration in various geographies and building products more
suited to individual markets. We continue to broaden our product offerings into
the transportation segment in Europe and the Middle East.
•Continued focus on sports facility, spectacular-type, OOH advertising products,
and architectural lighting market opportunities and the factors listed in each
of the other business units to the extent they apply outside of the United
States and Canada.
•Increasing interest in spectaculars, which include very large and sometimes
highly customized displays as part of entertainment venues such as casinos,
shopping centers, cruise ships and city-center locations.
•New market adoption and expansion of use of LED in government and military and
corporate campuses.
•Additional opportunities exist with expanded market usage of LED technology due
to price considerations, usage of LED technology replacing prior LCD
installations and additional display offerings using micro-LEDs.
•Our product and service offerings, including additional micro-LED offerings
which remain the most integrated and comprehensive offerings in the industry.
•Growing our reseller channels to promote our products and gain market share.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

A critical accounting policy is defined as a policy that is both very important
to the portrayal of a company's financial condition and results and requires
management's most difficult, subjective or complex judgments. We regularly
review our critical accounting policies and evaluate them based on these
factors. We believe the estimation process for uniquely configured contracts and
warranties are most material and critical. These areas contain estimates with a
reasonable
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likelihood to change, and those changes could have a material impact on our
financial condition and reported results of operations. The estimation processes
for these areas are also difficult, subjective and use complex judgments. Our
critical accounting estimates are based on historical experience; on our
interpretation of GAAP, current laws and regulations; and on various other
assumptions believed to be reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying values of assets
and liabilities not readily apparent from other sources. Actual results may
differ from these estimates.

Revenue recognition on uniquely configured contracts. Revenue for uniquely
configured (custom) or integrated systems is recognized over time using the cost
incurred input method. Over time revenue recognition is appropriate because we
have no alternative use for the uniquely configured system and have an
enforceable right to payment for work performed. The cost incurred input method
measures cost incurred to date compared to estimated total costs for each
contract. This method is the most faithful depiction of our performance because
it measures the value of the contract transferred to the customer. Costs to
perform the contract include direct and indirect costs for contract design,
production, integration, installation, and assurance-type warranty reserve.
Direct costs include material and components; manufacturing, project management
and engineering labor; and subcontracting expenses. Indirect costs include
allocated charges for such items as facilities and equipment depreciation and
general overhead. Provisions of estimated losses on uncompleted contracts are
made in the period when such losses are capable of being estimated.

We may have multiple performance obligations in these types of contracts;
however, a majority are treated as a combined single performance obligation. In
our judgment, this accounting treatment is most appropriate because the
substantial part of our promise to our customer is to provide significant
integration services and incorporate individual goods and services into a
combined output or system. Often times the system is customized or significantly
modified to the customer's desired configurations and location, and the
interrelated goods and services provide utility to the customer as a package.
See "Note 1. Nature of Business and Summary of Significant Accounting Policies"
of the Notes to our Consolidated Financial Statements included in this Form 10-K
for further information on our revenue recognition policies.

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

As of April 30, 2022 and May 1, 2021, we had approximately $28.9 million and
$26.0 million accrued for these warranty obligations, respectively. Due to the
difficulty in estimating probable costs related to certain warranty obligations,
there is a reasonable likelihood that the ultimate remaining costs to remediate
the warranty claims could differ materially from the recorded accrued
liabilities. See "Note 16. Commitments and Contingencies" of the Notes to our
Consolidated Financial Statements included in this Form 10-K for further
information on warranties.

RECENT ACCOUNTING PRONOUNCEMENTS

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

RESULTS OF OPERATIONS

Daktronics, Inc. operates on a 52- or 53-week fiscal year, with our fiscal year
ending on the Saturday closest to April 30 of each year. When April 30 falls on
a Wednesday, the fiscal year ends on the preceding Saturday. Within each fiscal
year, each quarter is comprised of 13-week periods following the beginning of
each fiscal year. In each 53-week year, an additional week is added to the first
quarter, and each of the last three quarters is comprised of a 13-week period.
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Net sales

The following table presents information on net sales for the years ended April 30, 2022 and May 1, 2021:

                                                                                  Year Ended
(in thousands)                               April 30, 2022           May 1, 2021           Dollar Change          Percent Change
Net Sales:
Commercial                                 $       154,211          $    127,300          $       26,911                    21.1  %
Live Events                                        199,106               143,049                  56,057                    39.2
High School Park and Recreation                    111,816                91,557                  20,259                    22.1
Transportation                                      62,707                58,284                   4,423                     7.6
International                                       83,130                61,843                  21,287                    34.4
                                           $       610,970          $    482,033          $      128,937                    26.7  %
Orders:
Commercial                                 $       192,917          $    138,878          $       54,039                    38.9  %
Live Events                                        313,940               157,177                 156,763                    99.7
High School Park and Recreation                    156,305                94,292                  62,013                    65.8
Transportation                                      77,993                49,696                  28,297                    56.9
International                                      104,916                75,841                  29,075                    38.3
                                           $       846,071          $    515,884          $      330,187                    64.0  %

Fiscal 2022 vs. Fiscal 2021

In fiscal 2022, sales and orders increased as demand increased in all markets compared to fiscal 2021 as global economies recovered from the economic downturn caused by the COVID-19 pandemic. We achieved record order levels due to the recovery, multi-million dollar orders for sports facilities and bulk orders for OOH displays. These orders relate to the Live Events, Commercial and International segments.

Net sales during fiscal year 2022 increased due to the conversion of the higher
order volume. Throughout the year however, material supply and labor shortages
created an increase in lead times, extending the timing of converting some
orders to sales.

Commercial: The increase in net sales for fiscal 2022 compared to fiscal 2021
was primarily due to an increase in OOH niche and spectaculars orders. Fiscal
2021 had an overall low market activity in these two particular niches due to
the pandemic, and their recovery was strong.

The increase in orders for fiscal 2022 compared to fiscal 2021 is primarily attributable to higher overall market activity across all market niches.

We continue to see increased adoption of video solutions in our Commercial
business unit marketplace. Depending on the duration of the current economic
conditions, we see opportunities for orders and sales over the coming years in
our OOH, on-premise, and spectacular focused niches due to replacement cycles,
expansion of dynamic messaging systems usage, releases of new solutions,
additional distribution methods, and increased market size due to the decline of
digital pricing over the years as well as the desire for higher resolution
technology. Due to a number of factors, such as the discretionary nature of
customers committing to a system, economic dependencies, regulatory
environments, competitive factors, and supply chain constraints, it is difficult
to predict orders and net sales for fiscal 2023. We expect growth in the
Commercial business unit over the long-term, assuming favorable economic
conditions and our success in counteracting competitive pressures.

Live Events: The increase in net sales and orders for fiscal 2022 compared to
fiscal 2021 was primarily due to high demand for upgraded or new solutions for
arenas, university venues, and sports stadiums. This increase was due to the
economic recovery from the COVID-19 pandemic, several large projects including
in the bowl and other immersive displays through
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the sports facilities, and replacement orders due to systems' ages. Bookings of
large multi-million dollar projects also contributed to the order increases and
a record order year for Live Events.

We continue to see ongoing interest from venues at all levels in increasing the
size and capabilities of their display systems and in the usage of dynamic
messaging systems throughout their facilities in our Live Events business unit
marketplace. A number of factors, such as the discretionary nature of customers
committing to upgrade systems, long replacement cycles, the limited number of
large custom projects, competitive factors, and the uncertainty of the overall
impact of supply chain constraints, make forecasting fiscal 2023 orders and net
sales difficult. We expect this business unit's size to remain stable over the
long-term, assuming favorable economic condition, and success in maintaining
market share by counteracting competitive pressures.

High school park and recreation: The increase in net sales and orders for fiscal year 2022 compared to fiscal year 2021 is mainly due to higher market activity, as schools move to video equipment systems and have tied financing to COVID-19 to invest in their facilities.

We expect larger video systems and our classic scoring and message centers to
remain in demand in fiscal 2023, primarily in high school facilities, which
benefit from our sports marketing services that generate advertising revenue to
fund the display systems and because of schools' desire to communicate with
students and parents using these systems. Some growth is also expected for
regulatory requirements of certain display types for sports events. Several
factors, such as the potential reduction in the availability of advertising
revenues, the discretionary nature of customers committing to upgrade systems,
replacement cycles, competitive factors, and the uncertainty of the overall
impact of supply chain constraints, make forecasting fiscal 2023 orders and net
sales difficult. We expect growth in this business unit over the long-term,
assuming favorable economic conditions.

Transportation: The increase in net sales and orders for fiscal 2022 compared to
fiscal 2021 was primarily due to pent up demand from fiscal 2021 for Intelligent
Transportation Systems ("ITS") which had been delayed due to the COVID-19
pandemic.

Several factors, such as transportation funding, the competitive environment,
customer delivery changes, and the uncertainty of the impacts of supply chain
constraints, make forecasting orders and net sales difficult for fiscal 2023.
However, the stability of long-term federal transportation funding and the
number of capital projects for highways and public transit that include dynamic
message signs and for advertising and wayfinding use in public transport and
airport terminals continue to rise. We expect continued growth in this business
unit over the long-term, assuming favorable economic conditions and continued
transportation funding.

International: The increase in net sales and orders for fiscal 2022 compared to fiscal 2021 is mainly due to the economic recovery following the COVID-19 pandemic in OOH, transport and stadium projects sportsmen.

We expect demand for larger video systems for commercial and sports
applications, indoor and outdoor OOH applications, and transportation
applications to remain strong over the long-term. Macroeconomic factors, the
discretionary nature of customers committing to new systems or replacements, the
pace of market growth, and the uncertainty of the impacts of the supply chain
constraints, may impact order bookings and timing, making it difficult to
predict order and sales levels for fiscal 2023. For the long-term, we believe
the International business unit has the potential for sales growth as we
penetrate markets with our established sales networks to increase our
International market share, continue to enhance our tailored portfolio of
product and control solution offerings, invest in additional distribution
methods, and expect the trend of increased use and adoption of our technology
globally to continue.
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Gross profit and contribution margin

                                                                      Year Ended
                                               April 30, 2022                                May 1, 2021
                                                           As a Percent of                           As a Percent of
(in thousands)                          Amount                Net Sales             Amount              Net Sales
Gross Profit:
Commercial                         $       31,851                  20.7  %       $   33,072                  26.0  %
Live Events                                21,787                  10.9              24,397                  17.1
High School Park and Recreation            35,477                  31.7              31,472                  34.4
Transportation                             18,172                  29.0              20,329                  34.9
International                               9,410                  11.3              11,313                  18.3
                                   $      116,697                  19.1  %       $  120,583                  25.0  %

Fiscal 2022 vs. Fiscal 2021

The decline in gross profit percentage in fiscal 2022 is primarily related to
the ongoing supply chain disruptions and inflationary challenges in materials,
freight, tariff, and personnel related costs; the difference in sales mix
between periods; other factors experienced during fiscal 2021 which had a
positive impact on fiscal 2021 margins; and an increase in warranty expense in
fiscal 2022. Total warranty expense as a percent of sales increased to 1.9
percent for fiscal 2022 as compared to 1.4 percent during fiscal 2021.

Factors impacting the gross profit in fiscal 2021 included the positive $2.1
million litigation claim reversal in the High School Park and Recreation
business unit and $1.8 million of COVID relief governmental subsidies offset by
$2.8 million of severance costs to reduce our workforce to adjust to the impacts
of the COVID-19 pandemic. In addition, we earned a higher rate of gross profit
on our service agreements in fiscal 2021 due to reduced stand ready services
conducted during the year because of the pandemic. During fiscal year 2022, we
had more large project sales which generally have lower gross profit because of
their competitive nature.

It is difficult to project gross profit levels for fiscal 2023 because of the
uncertainty regarding the level of sales, the sales mix, price strategy and
timing of sales generation, the COVID-19 impact, potential inflation and the
availability of materials, labor, and freight, and the competitive factors in
our business. We are focused on improving our gross profit margins as we execute
our strategies for improved profitability, which include selectively increasing
pricing, releasing new product designs to lower overall costs of the product;
improving reliability to reduce warranty expenses; expanding our global capacity
and planning; meeting customer solution expectations; and continued improvements
in operational effectiveness in manufacturing, installation, and service
delivery areas. Cost reductions made during the pandemic vary in permanency and
may not be sustainable in future periods as orders and sales volumes recover.

                                                                                Year Ended
                                                        April 30, 2022                                                      May 1, 2021
                                         As a Percent of                                                                            As a Percent of
(in thousands)           Amount             Net Sales             Dollar Change          Percent Change            Amount              Net Sales
Contribution Margin:
Commercial             $ 16,073                   10.4  %       $       (2,903)                 (15.3) %       $    18,976                   14.9  %
Live Events              11,903                    6.0                  (3,295)                 (21.7)              15,198                   10.6
High School Park and
Recreation               23,587                   21.1                   2,178                   10.2               21,409                   23.4
Transportation           14,553                   23.2                  (2,695)                 (15.6)              17,248                   29.6
International              (494)                  (0.6)                   
403                  (44.9)                (897)                  (1.5)
                       $ 65,622                   10.7  %       $       (6,312)                  (8.8) %       $    71,934                   14.9  %


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Fiscal 2022 vs. Fiscal 2021

Contribution margin is a non-GAAP measure and consists of gross profit less
selling expenses. Selling expenses consist primarily of personnel related costs,
travel and entertainment expenses, marketing related expenses (show rooms,
product demonstration, depreciation and maintenance, conventions and trade show
expenses), customer relationship management/marketing systems, bad debt
expenses, third-party commissions, and other expenses.

Contribution margin in fiscal 2022 was impacted by the sales levels and gross profit impacts previously discussed, as well as a 5.0% increase in selling expenses in fiscal 2022 compared to the 2021 financial year.

Since the start of fiscal 2022, we have adjusted our sales and marketing activities and staffing levels to meet current and expected future sales levels. In fiscal 2021, we had reduced the overall headcount and laid off employees to reduce operating costs to align with the uncertainties created by the COVID-19 pandemic. These savings in fiscal year 2021 were partially offset by a $1.4 million increased bad debt expense.

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

                                                                                    Year Ended
                                                            April 30, 2022                                                      May 1, 2021
                                             As a Percent of                                                                            As a Percent of
(in thousands)               Amount             Net Sales             Dollar Change          Percent Change            Amount              Net Sales
Contribution margin        $ 65,622                   10.7  %       $       (6,312)                  (8.8) %       $    71,934                   14.9  %
General and administrative   32,563                    5.3                   4,583                   16.4               27,980                    5.8
Product design and
development                  29,013                    4.7                   2,167                    8.1               26,846                    5.6
Operating income           $  4,046                    0.7  %       $      (13,062)                 (76.4) %       $    17,108                    3.5  %

Fiscal 2022 vs. Fiscal 2021

General and administrative expenses for fiscal year 2022 increased compared to the same period a year ago, mainly due to increased personnel expenses.

We expect general and administrative expenses to increase for fiscal 2023 as
compared to fiscal 2022 as labor rates continue to rise and further increase in
personnel may be needed to keep up with the increased demand.

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

Product design and development expenses in fiscal 2022 increased compared to fiscal 2021, primarily due to an increase in personnel expenses.

We expect product design and development expenses to increase for fiscal 2023 compared to fiscal 2022 due to continued increases in labor costs. We will continue to actively invest in new technologies.

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Other Income and Expenses

                                                                                 Year Ended
                                                        April 30, 2022                                                        May 1, 2021
                                        As a Percent of                                                                               As a Percent of
(in thousands)         Amount              Net Sales              Dollar Change          Percent Change             Amount               Net Sales
Interest income
(expense), net       $    171                        -  %       $          236                  (363.1) %       $       (65)                       -  %
Other expense, net   $ (3,109)                    (0.5) %       $         (126)                    4.2  %       $    (2,983)                    (0.6) %


Fiscal 2022 vs. Fiscal 2021

The change in net interest income (expense) for fiscal 2022 compared to fiscal 2021 is mainly attributable to the variation in investment levels and interest expense for our line of credit drawdowns.

Other expenses, net: The change in other income and expenses, net for fiscal year 2022 compared to fiscal year 2021, is mainly explained by a $0.6 million increase in losses of affiliated companies accounted for using the equity method.

Income taxes

Our effective tax rate was approximately 46.6 percent for fiscal year 2022. The
effective income tax rate for fiscal 2022 was impacted due to tax benefits from
permanent tax credits offset by valuation allowances as well as other various
permanent tax adjustments and state taxes with additional expense for prior year
provision to return adjustments.

Our fiscal 2021 effective tax rate was approximately 22.3 percent resulting from
the tax benefit of permanent tax credits and previous year provision to return
adjustments offset by valuation allowances as well as other various permanent
tax adjustments and state taxes.

Our consolidated effective tax rate is impacted by the statutory income tax
rates applicable to each of the jurisdictions in which we operate. Due to
various factors, and because we operate in multiple state and foreign
jurisdictions, our effective tax rate is subject to fluctuation. See "Note 12.
Income Taxes" of the Notes to our Consolidated Financial Statements included in
this Form 10-K for further information.

CASH AND CAPITAL RESOURCES

                                                                                Year Ended
(in thousands)                                         April 30, 2022           May 1, 2021           Dollar Change
Net cash (used in) provided by:
Operating activities                                 $       (27,035)         $     66,212          $      (93,247)
Investing activities                                         (31,384)              (10,221)                (21,163)
Financing activities                                          (3,576)              (15,585)                 12,009
Effect of exchange rate changes on cash                         (399)                 (416)                     17
Net (decrease) increase in cash, cash equivalents
and restricted cash                                  $       (62,394)         $     39,990          $     (102,384)



Cash decreased by $62.4 million in fiscal 2022 as compared to an increase of
$40.0 million in fiscal 2021. Operating assets and liabilities decreased cash
flow by $45.4 million during fiscal 2022 as the business expanded compared to a
$31.7 million increase in cash flow during fiscal 2021 as the business
contracted and management conserved the Company's cash.

Net cash used in operating activities: Net cash used in operating activities was
$27.0 million for fiscal 2022 compared to $66.2 million net cash provided by
operating activities in fiscal 2021. The $93.2 million decrease in cash from
operating activities was primarily the result of changes in net operating assets
and liabilities and a decrease of $10.3 million in net
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income. For specific quantitative changes in operating assets and liabilities,
see "Note 13. Cash Flow Information" of the Notes to our Consolidated Financial
Statements included in this Form 10-K.

Net cash used in investing activities: Net cash used in investing activities
totaled $31.4 million for fiscal 2022 compared to $10.2 million in fiscal 2021.
Purchases of property and equipment totaled $20.4 million in fiscal 2022
compared to $7.9 million in fiscal 2021. Proceeds from the sales of property and
equipment totaled $0.9 million in fiscal 2022 compared to $3.2 million in fiscal
2021. Purchase of marketable securities totaled $4.0 million in fiscal 2022
compared to no purchases of marketable securities in fiscal 2021.

Net cash used in financing activities: Net cash used in financing activities was
$3.6 million for fiscal 2022 compared to $15.6 million in fiscal 2021. During
fiscal 2021, we paid $15.0 million on notes payable. During fiscal 2021, there
were no share repurchases compared to $3.2 million of share repurchases in
fiscal 2022.

Other Liquidity and Capital Resources Discussion: The timing and amounts of changes in working capital, profitability, capital expenditures, investments in affiliated companies, share buybacks and dividend payments have impact on our liquidity.

Working capital was $103.9 million at April 30, 2022 and $118.4 million at
May 1, 2021. The changes in working capital, particularly changes in accounts
receivable, accounts payable, inventory, and contract assets and liabilities,
and the sports market seasonality, can have a significant impact on the amount
of net cash provided by operating activities largely due to the timing of
payments and receipts. On multimillion-dollar orders, the time between order
acceptance and project completion may extend up to or exceed 12 months or more
depending on the amount of custom work and a customer's delivery needs. We often
receive down payments or progress payments on these orders. We expect to use
cash in operations as our business returns and exceeds pre-pandemic levels.

We had $7.1 million of retainage on long-term contracts included in receivables
and contract assets as of April 30, 2022, which has an impact on our liquidity.
We expect to collect these amounts within one year.

We are sometimes required to obtain performance bonds for display installations,
and we have a bonding line available through a surety company for an aggregate
of $150.0 million in bonded work outstanding. If we were unable to complete the
work, and our customer would call upon the bond for payment, the surety company
would subrogate its loss to Daktronics. At April 30, 2022, we had $88.3 million
of bonded work outstanding against this line.

Our business growth and profitability improvement strategies depend on
investments in capital expenditures and strategic investments. We projected
capital expenditures to be approximately $30 million for fiscal 2023. Projected
capital expenditures include manufacturing equipment for new or enhanced product
production, expanded capacity, investments in quality and reliability equipment,
and continued information infrastructure investments.

The Board of Directors authorized reinstatement of the share repurchase program
in December of 2021. Shares may be repurchased from time to time in open market
purchases, private transactions or other transactions. The timing, volume, and
nature of share repurchases will be at the sole discretion of management and
will be dependent on market conditions, applicable securities laws and other
factors, and share repurchases may be suspended or discontinued at any time.

The Board of Directors suspended dividends in fiscal 2020 as part of our cash conservation measures during the pandemic. The timing and future reinstatement of dividends are at the discretion of the Board of Directors. Future dividends are also affected by limits imposed on our credit facility.

We believe the audiovisual industry fundamentals will drive long-term growth for
our business; however, for the near-term outlook, we expect to continue to have
disruptions from our supply chain and logistics. Due to longer planning horizons
and volatility in supply chains, we plan to carry higher quantities of inventory
and anticipate changes in the timing of payments from our customers as we work
through different disruptions and fulfill backlog. We also plan to use cash for
capital spending to grow our manufacturing capacity. When cash is needed, we
expect to use borrowings under our bank credit agreement. As of April 30, 2022,
we were in compliance with all applicable bank loan covenants. For additional
information on financing agreements, see "Note 7. Financing Agreements" of the
Notes to our Consolidated Financial Statements included in this Form 10-K.


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