Daktronics, Inc.

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 12th, and is available on the company's website at www.daktronics.com. We will have a question and answer session after the prepared remarks, and to do that, simply press star, then 1-1 on your touchstone telephone. 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 postponement of the second quarter earnings release and call, and the 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 Reese 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 US require a reporting company to consider at each annual and interim reporting date whether there are conditions and events considered in the aggregate that raise substantial doubt about the company's ability to continue as a going concern for the 12-month period from the issuance date of the financial statements. If such condition exists, management then must evaluate whether its plans sufficiently alleviate that substantial doubt. Management's assessment is then considered by the company's independent auditors. As discussed in this morning's release, and to a greater extent in the Form 10Q Daktronics intends to file tomorrow, the company's order and backlog coming out of the pandemic has been very strong. However, Daktronics had to manage through significant pandemic-induced supply chain issues. These supply line constraints led to the decision to increase inventory levels in order to improve the predictability in the production cycle, which has absorbed much of the company's customary levels of liquidity. In addition, global economic and geopolitical conditions have introduced increased risk to our cash flow forecasts, and our ability to predict the radar backlog will convert to cash over the next 12 months. While Daktronics Bank previously increased the company's borrower capacity from $35 to $45 million, the incremental $10 million is subject to renewal every 90 days. Further, as plans for additional financing have not been finalized and are subject to market conditions that are not within Daktronics' control, US GAAP does not allow the company to consider such plans in its going concern evaluation. As a result, we unfortunately had to conclude that substantial doubt, as defined under U.S. GAAP accounting framework, did exist. I will now hand the call over to Reese and Sheila, but will be available during the Q&A session and will be happy to respond to questions at that time. Thank you. Now I'll turn the call over to Reese.

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 health emergencies, such as a 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 in 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 8K this morning and is available on the investor section at Daktronics' website at www.daktronics.com. I'll now turn the call over to Reese Kurtenbach for additional comments.