Daktronics, Inc. Announces 2025 Fiscal Second Quarter Results

Rhea-AI Summary

Daktronics (NASDAQ:DAKT) reported strong fiscal Q2 2025 results with sales of $208.3 million, up 4.5% year-over-year. The company achieved record cash flows from operations of $43.3 million for the quarter and $62.8 million for the first six months of fiscal 2025.

Key financial highlights include gross profit margin of 26.8%, operating income of $15.8 million, and net income of $21.4 million. Product order backlog stood at $236.0 million, while product and service orders reached $177.6 million for the quarter.

The company is executing its business transformation plan aimed at growing revenue faster than the addressable market and expanding operating margins. Daktronics also announced plans to convert its $25.0 million Convertible Note to common stock in tranches, which will save approximately $5.2 million in interest expense.

Positive

• Sales increased 4.5% YoY to $208.3 million
• Record operating cash flow of $43.3 million in Q2
• Strong gross profit margin of 26.8%
• Net income of $21.4 million for the quarter
• Expected $5.2 million savings in interest expense from Convertible Note conversion

Negative

• Product order backlog decreased to $236.0 million from $306.9 million YoY
• Product and service orders declined 3.3% YoY to $177.6 million
• Operating income decreased to $15.8 million from $19.4 million YoY
• Operating expenses increased to $40.1 million from $34.8 million YoY

Insights

Financial Analyst

Daktronics delivered a solid fiscal Q2 2025 with several notable achievements. Sales grew 4.5% to $208.3 million, while maintaining a healthy 26.8% gross margin. The company generated record operating cash flow of $43.3 million for the quarter and $62.8 million year-to-date, demonstrating strong operational efficiency.

Key financial positives include $21.4 million in net income and adjusted net income of $13.9 million. The balance sheet strengthened with $134.4 million in cash and marketable securities. The strategic decision to convert the Alta Fox convertible note will save approximately $5.2 million in interest expenses.

However, there are some cautionary signals: orders decreased 3.3% year-over-year and the backlog declined to $236 million from $306.9 million last year. Operating expenses increased due to investments in digital transformation and sales team expansion.

Market Research Analyst

The company's market positioning remains strong, with notable installations at high-profile venues like the L.A. Clippers' Intuit Dome and Miami HEAT's Kaseya Center. The business transformation strategy focuses on targeting high-margin market segments and implementing tiered product offerings, which should support sustainable growth.

The 3.3% year-to-date order growth indicates steady market demand despite quarterly fluctuations. The company's focus on digital transformation and enterprise management tools positions it well for future market opportunities. The working capital ratio of 2.3 and 11.9% inventory reduction since fiscal year-end demonstrate improved operational efficiency.

Generates Record Cash Flow on Strong Sales Growth

BROOKINGS, S.D., Dec. 04, 2024 (GLOBE NEWSWIRE) -- Daktronics, Inc. (NASDAQ-DAKT), the leading U.S.-based designer and manufacturer of best-in-class dynamic video communication displays and control systems for customers worldwide, today reported results for its fiscal 2025 second quarter which ended October 26, 2024.

Fiscal Q2 2025 financial highlights include:

• Sales of $208.3 million, a 4.5 percent increase from the second quarter of fiscal 2024, and fiscal year-to-date sales of $434.4 million, up 0.6 percent compared with the same period last fiscal year
• Gross profit as a percentage of net sales of 26.8 percent, compared to 27.2 percent for the second quarter of fiscal 2024, and the seventh sequential quarter with over a 24.5 percent gross profit, demonstrating the effectiveness of management's business improvement initiatives
• Operating income of $15.8 million, compared to $19.4 million for the second quarter of fiscal 2024; operating income adjusted for consultant related expenses associated with business transformation initiatives was $19.1 million⁽¹⁾
• Record cash flows from operations of $43.3 million for the fiscal second quarter and $62.8 million for the first six months of fiscal 2025
• Product order backlog of $236.0 million⁽²⁾ at October 26, 2024, compared to $267.2 million at the end of the first quarter of fiscal 2025 and $306.9 million at the end of the second quarter of fiscal 2024
• Product and service orders of $177.6 million⁽²⁾ for the quarter, a decrease of 3.3 percent from the second quarter of 2024 and $353.8 million on a year-to-date basis, a year-to-date increase of 3.3 percent
• Net income for the quarter was $21.4 million, excluding the non-operating non-cash debt fair value adjustment and operating adjustment for consultant related expenses associated with business transformation initiatives, adjusted net income⁽¹⁾ was $13.9 million for the quarter
  

Reece Kurtenbach, Daktronicsʹ Chairman, President and Chief Executive Officer, commented, “We delivered strong second fiscal quarter results and made steady progress on our recently announced strategic and digital transformation initiatives. We generated record cash flow from operations of $43.3 million, as our order backlog continued to be reduced in level and in relation to steady sales, reaching total cash flow from operations of $62.8 million for the first half of the year. We completed innovative and visually striking installations at the L.A. Clippers' Intuit Dome, the Miami HEAT's Kaseya Center that have both drawn attention in trade and social media. We also served other customers with the completion and update to the latest digital technologies at numerous college and high school sporting facilities and commercial locations.”

_{(1) Adjusted operating income and adjusted net income is not a measure defined by accounting principles generally accepted in the United States of America ("GAAP"), to report our results exclusive of items that are non-recurring or not core to our operating business. We believe presenting this non-GAAP financial measurement provides investors with a consistent way to analyze our performance. For more information, see the supplemental calculation contained later in this release.
(2) Orders and backlog metrics are not measures defined by GAAP, and our methodology for determining orders and backlog may vary from the methodology used by other companies in determining their orders and backlog amounts. For more information related to backlog, see Part I, Item 1. Business of our Annual Report on Form 10-K for the fiscal year ended April 27, 2024.}

Update on Business and Digital Transformation
Kurtenbach added, “We continue to execute on our business transformation plan, the goal of which is to grow revenue faster than the Company’s addressable market, expand operating margins, and generate returns on capital in the mid-to-high-teens and consistently above the Company’s cost of capital. During the quarter we made significant progress in a number of areas, including enterprise management tools, new show control capability, and upgrades to service and systems maintenance solutions, which are set to go live in the second half of the fiscal year.”

Key components of this program include:

1. Carefully allocating resources to end market segments, prioritizing investments in areas where Daktronics has clear advantages and opportunities for above market growth at acceptable margins
2. Aligning product delivery with differing customer needs through a tiered product offering strategy with pricing aligned with value delivered
3. Achieving higher profit by reducing product input costs and focusing on efficiency improvements in manufacturing operations
4. Maximizing balance sheet efficiencies
5. Refining our critical business and financial management practices, including product pricing, business planning, and incentive compensation to fully support our performance objectives.
   

Update on CFO Search
As previously disclosed on October 21, 2024, the Board of Directors (the “Board”) has initiated a search for a new Chief Financial Officer. The Board is continuing to make progress on this search effort and will provide an additional update when the Company has more to announce.

Outlook
Daktronics enters the third quarter of fiscal 2025 with order growth of 3.3 percent year-over-year, and continues to expect order volume to increase for the full fiscal year. The first half of the fiscal year is typically the highest-volume sales of the year, and are expected to be at normal "seasonal" levels for the remainder of fiscal 2025. Management continues to refine and execute its digital and strategic transformation initiatives and will continue to make disciplined investments through the rest of the fiscal year to strengthen Daktronics' business foundation for future profitability and sustainable returns.

Second Quarter Results
Orders for the second quarter of fiscal 2025 decreased by 3.3 percent from the second quarter of fiscal 2024. Order volume for the quarter declined primarily due to an order decrease in the Live Events, Transportation and International business units. Variability in orders between periods is natural in these large project business areas and the time of year for sports projects. These declines were offset by large project bookings in the Spectacular niche, end of calendar year purchases by business unit relating to increasing adoption of video displays in this market. Orders for the first half of the year increased 3.3 percent.

Net sales for the second quarter of fiscal 2025 increased by 4.5 percent as compared to the second quarter of fiscal 2024. The sales increase was driven by comparatively higher volumes in the Commercial, Live Events and Transportation business units offset by lower sales levels in the High School Park and Recreation and International business units. This mix difference is the result of variability of orders described above and because during fiscal 2024, the operating environment and supply chain stabilized. Daktronics was able to capitalize on its operational capacity investments to fill order backlog and return to more shorter delivery lead times, especially in the High School Park and Recreation market.

Gross profit as a percentage of net sales decreased slightly to 26.8 percent for the second quarter of fiscal 2025 as compared to 27.2 percent a year earlier. The decrease is partially attributable to a change in sales mix between periods.

Operating expenses increased to $40.1 million in the second quarter of fiscal 2025 as compared to $34.8 million for the second quarter of fiscal 2024. Increased operating expenses reflect investments in staffing resources to support information technology and digital transformation programs as well as sales team expansion to support opportunities for future growth. During the second quarter of fiscal 2025, the Company incurred $3.3 million of consultant related expenses associated with the previously announced strategic and digital transformation initiatives.

The above changes resulted in an operating income percent for the second quarter of fiscal 2025 of 7.6 percent. Adjusted for consultant related expenses, operating income was 9.2 percent⁽¹⁾ as compared to 9.7 percent for the second quarter of fiscal 2024.

The increase in interest income, net for the second quarter of fiscal 2025 compared to the same period one year ago was primarily due to interest income earned on cash balances.

For the quarter ended October 26, 2024, the Company recorded $10.3 million of income for the non-cash change in fair value of a convertible note payable, which is accounted for under the fair value option.

The effective income tax rate for the second quarter of fiscal 2025 produced an effective tax rate of 15.0 percent primarily due to the reduction of the convertible note fair value adjustment to expense that is not deductible for tax purposes in proportion to the period's increase in pre-tax income. The effective tax rate for the second quarter of fiscal 2024 was 64.8 percent due to an increase in the fair value adjustment.

Balance Sheet and Cash Flow
Cash, restricted cash and marketable securities totaled $134.4 million at October 26, 2024, and $65.4 million of total current and long-term debt was outstanding as of that date, which includes $38.1 million of face value and $27.8 million of adjustments to fair value, and is net of $0.5 million of debt issuance costs. There were no draw-downs on the asset-based revolving credit facility during the first six months of fiscal 2025, and $40.8 million was available to draw at October 26, 2024. In the first six months of fiscal 2025, Daktronics generated $62.8 million of cash from operations and used $10.5 million for purchases of property and equipment. At the end of the fiscal 2025 second quarter, the working capital ratio was 2.3 to 1. Inventory levels dropped 11.9 percent since the end of the 2024 fiscal year on April 27, 2024. Management’s focus remains on managing working capital through expected growth of the Company.

As previously announced on November 11, 2024, the Company delivered to Alta Fox Opportunities Fund, LP ("Alta Fox") notice of the conversion of an initial $7.0 million in face value of the $25.0 million senior second lien secured promissory note (the "Convertible Note") held by Alta Fox into shares of the Company's common stock, with a conversion date of December 3, 2024. The Company intends to convert the remainder of the Convertible Note over the next several months, in tranches of up to $7.0 million in face value every 30 days, as provided for in the Convertible Note. The Company will issue and deliver shares when Alta Fox certifies the delivery of shares will not cause its ownership to exceed the "Maximum Percentage". On November 25, 2024, the Company received from Alta Fox a written notice to increase the Maximum Percentage to 14.99 percent. This increase from the in-effect 3.00 percent maximum ownership takes effect 61 days after receipt of notice. The Board’s decision to initiate the conversion of the Convertible Note is consistent with the Company’s ongoing focus on balance sheet optimization and cost efficiency and will save the Company approximately $5.2 million in interest expense over the remaining term of the Convertible Note.

To help offset the share dilution that will result from the conversion of the Convertible Note into common stock, the Company intends to execute on its existing share repurchase authorization as soon as practicable.

Webcast Information
The Company will host a conference call and webcast to discuss its financial results today at 10:00 a.m. (Central Time). This call will be broadcast live at http://investor.daktronics.com where related presentation materials will also be posted prior to the conference call. A webcast will be available for replay shortly after the event.

About Daktronics
Daktronics has strong leadership positions in, and is the world's largest supplier of, large-screen video displays, electronic scoreboards, LED text and graphics displays, and related control systems. The Company excels in the control of display systems, including those that require integration of multiple complex displays showing real-time information, graphics, animation, and video. Daktronics designs, manufactures, markets and services display systems for customers around the world in four domestic business units: Live Events, Commercial, High School Park and Recreation, and Transportation, and one International business unit. For more information, visit the Company's website at: www.daktronics.com.

Safe Harbor Statement
Cautionary Notice: In addition to statements of historical fact, this news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and is intended to enjoy the protection of that Act. These forward-looking statements reflect the Company's expectations or beliefs concerning future events. The Company cautions that these and similar statements involve risk and uncertainties which could cause actual results to differ materially from our expectations, including, but 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 technology, the impact of adverse weather conditions, increased regulation, and other risks described in the company's SEC filings, including its Annual Report on Form 10-K for its 2024 fiscal year. Forward-looking statements are made in the context of information available as of the date stated. The Company undertakes no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur.

For more information contact:
INVESTOR RELATIONS:
Sheila M. Anderson, Chief Financial Officer
Tel (605) 692-0200
Investor@daktronics.com

Alliance Advisors IR
Carolyn Capaccio / Jody Burfening
DAKTIRTeam@lhai.com

Daktronics, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
	Three Months Ended								Six Months Ended
	October 26, 2024				October 28, 2023				October 26, 2024				October 28, 2023
Net sales	$	208,331			$	199,369			$	434,419			$	431,900
Cost of sales		152,468				145,170				318,858				306,554
Gross profit		55,863				54,199				115,561				125,346
Operating expenses:
Selling		14,704				14,653				30,340				27,582
General and administrative		15,550				10,889				27,273				20,488
Product design and development		9,839				9,221				19,462				17,624
		40,093				34,763				77,075				65,694
Operating income		15,770				19,436				38,486				59,652
Nonoperating (expense) income:
Interest (expense) income, net		273				(1,326	)			202				(2,207	)
Change in fair value of convertible note		10,304				(10,650	)			(11,286	)			(17,910	)
Other expense and debt issuance costs write-off, net		(1,164	)			(1,303	)			(1,999	)			(5,282	)
Income before income taxes		25,183				6,157				25,403				34,253
Income tax expense		3,777				3,992				8,943				12,892
Net income	$	21,406			$	2,165			$	16,460			$	21,361
Weighted average shares outstanding:
Basic		46,796				46,030				46,576				45,838
Diluted		51,715				46,705				47,507				46,454
Earnings per share:
Basic	$	0.46			$	0.05			$	0.35			$	0.47
Diluted	$	0.22			$	0.05			$	0.35			$	0.46

Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands)
(unaudited)
	October 26, 2024				April 27, 2024
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	134,352			$	81,299
Restricted cash		—				379
Accounts receivable, net		111,307				117,186
Inventories		121,582				138,008
Contract assets		44,955				55,800
Current maturities of long-term receivables		1,272				298
Prepaid expenses and other current assets		9,180				8,531
Income tax receivables		144				448
Total current assets		422,792				401,949
Property and equipment, net		73,815				71,752
Long-term receivables, less current maturities		2,537				562
Goodwill		3,194				3,226
Intangibles, net		696				840
Debt issuance costs, net		1,910				2,530
Investment in affiliates and other assets		21,084				21,163
Deferred income taxes		25,858				25,862
TOTAL ASSETS	$	551,886			$	527,884

Daktronics, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
(in thousands)
(unaudited)
	October 26, 2024				April 27, 2024
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt	$	1,500			$	1,500
Accounts payable		57,463				60,757
Contract liabilities		62,458				65,524
Accrued expenses		42,811				43,028
Warranty obligations		15,334				16,540
Income taxes payable		531				4,947
Total current liabilities		180,097				192,296
Long-term warranty obligations		23,054				21,388
Long-term contract liabilities		18,330				16,342
Other long-term obligations		5,446				5,759
Long-term debt, net		63,887				53,164
Deferred income taxes		142				143
Total long-term liabilities		110,859				96,796
SHAREHOLDERS' EQUITY:
Preferred Shares, no par value, authorized 50 shares; no shares issued and outstanding		—				—
Common Stock, no par value, authorized 115,000 shares; 48,810 and 48,121 shares issued at October 26, 2024 and April 27, 2024, respectively		70,282				65,525
Additional paid-in capital		52,505				52,046
Retained earnings		154,491				138,031
Treasury Stock, at cost, 1,907 shares at October 26, 2024 and April 27, 2024, respectively		(10,285	)			(10,285	)
Accumulated other comprehensive loss		(6,063	)			(6,525	)
TOTAL SHAREHOLDERS' EQUITY		260,930				238,792
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	551,886			$	527,884

Daktronics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
	Six Months Ended
	October 26, 2024				October 28, 2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	16,460			$	21,361
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		9,794				9,494
(Gain) loss on sale of property, equipment and other assets		(40	)			101
Share-based compensation		1,050				1,091
Equity in loss of affiliates		1,832				1,461
(Recoveries of) provision for doubtful accounts, net		(152	)			240
Deferred income taxes, net		13				20
Non-cash impairment charges		—				654
Change in fair value of convertible note		11,286				17,910
Debt issuance costs write-off		—				3,353
Change in operating assets and liabilities		22,577				(11,374	)
Net cash provided by operating activities		62,820				44,311
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(10,466	)			(9,226	)
Proceeds from sales of property, equipment and other assets		124				52
Purchases of equity and loans to equity investees		(2,041	)			(2,899	)
Net cash used in investing activities		(12,383	)			(12,073	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on notes payable		—				40,000
Payments on notes payable		(1,358	)			(18,125	)
Principal payments on long-term obligations		(206	)			(204	)
Debt issuance costs		—				(6,454	)
Proceeds from exercise of stock options		4,188				1,005
Tax payments related to RSU issuances		(591	)			(303	)
Net cash provided by financing activities		2,033				15,919
EFFECT OF EXCHANGE RATE CHANGES ON CASH		204				139
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		52,674				48,296
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
Beginning of period		81,678				24,690
End of period	$	134,352			$	72,986

Daktronics, Inc. and Subsidiaries
Net Sales and Orders by Business Unit
(in thousands)
(unaudited)
	Three Months Ended													Six Months Ended
	October			October			Dollar				Percent			October			October			Dollar				Percent
(in thousands)	26, 2024			28, 2023			Change				Change			26, 2024			28, 2023			Change				Change
Net Sales:
Commercial	$	43,439		$	42,453		$	986			2.3	%		$	77,638		$	89,336		$	(11,698	)		(13.1	)%
Live Events		77,207			68,210			8,997			13.2				185,815			160,209			25,606			16.0
High School Park and Recreation		48,071			48,942			(871	)		(1.8	)			96,077			105,176			(9,099	)		(8.7	)
Transportation		21,478			20,243			1,235			6.1				43,968			41,612			2,356			5.7
International		18,136			19,521			(1,385	)		(7.1	)			30,921			35,567			(4,646	)		(13.1	)
	$	208,331		$	199,369		$	8,962			4.5	%		$	434,419		$	431,900		$	2,519			0.6	%
Orders:
Commercial	$	44,548		$	34,209		$	10,339			30.2	%		$	86,670		$	66,643		$	20,027			30.1	%
Live Events		70,524			79,016			(8,492	)		(10.7	)			121,423			131,219			(9,796	)		(7.5	)
High School Park and Recreation		35,838			32,800			3,038			9.3				82,285			68,539			13,746			20.1
Transportation		12,222			21,500			(9,278	)		(43.2	)			34,981			40,485			(5,504	)		(13.6	)
International		14,458			16,168			(1,710	)		(10.6	)			28,401			35,437			(7,036	)		(19.9	)
	$	177,590		$	183,693		$	(6,103	)		(3.3	)%		$	353,760		$	342,323		$	11,437			3.3	%

Reconciliation of Free Cash Flow*
(in thousands)
(unaudited)
	Six Months Ended
	October 26, 2024				October 28, 2023
Net cash provided by operating activities	$	62,820			$	44,311
Purchases of property and equipment		(10,466	)			(9,226	)
Proceeds from sales of property and equipment		124				52
Free cash flow	$	52,478			$	35,137

*

In evaluating its business, Daktronics considers and uses free cash flow as a key measure of its operating performance. The term free cash flow is not defined under accounting principles generally accepted in the United States of America ("GAAP") and is not a measure of operating income, cash flows from operating activities or other GAAP figures and should not be considered alternatives to those computations. Free cash flow is intended to provide information that may be useful for investors when assessing period to period results.

Reconciliation of Adjusted Operating Income*
(in thousands)
(unaudited)
	Three Months Ended								Six Months Ended
	October 26, 2024				October 28, 2023				October 26, 2024				October 28, 2023
Operating income (GAAP Measure)	$	15,770			$	19,436			$	38,486			$	59,652
Consultant related expenses associated with business transformation initiatives		3,344				—				4,299				—
Adjusted operating income (non-GAAP measure)	$	19,114			$	19,436			$	42,785			$	59,652

*

In evaluating its business, Daktronics considers and uses adjusted operating income as a key measure of its operating performance. The term adjusted operating income is not defined under GAAP and is not a measure of operating income, cash flows from operating activities, or other GAAP figures and should not be considered alternatives to those computations. We define non-GAAP adjusted operating income as operating income plus consulting related expenses related to our business transformation initiatives. Management believes non-GAAP adjusted operating income is a useful indicator of our financial performance and our ability to generate cash flows from operations. Our definition of non-GAAP adjusted operating income may not be comparable to similarly titled definitions used by other companies. The table above reconciles non-GAAP adjusted operating income to comparable GAAP financial measures.

Reconciliation of Adjusted Net Income*
(in thousands)
(unaudited)
	Three Months Ended								Six Months Ended
	October 26, 2024				October 28, 2023				October 26, 2024				October 28, 2023
Net income	$	21,406			$	2,165			$	16,460			$	21,361
Consultant related expenses associated with business transformation initiatives, net of taxes		2,842				—				2,786				—
Change in fair value of convertible note		(10,304	)			10,650				11,286				17,910
Debt issuance costs expensed due to fair value of convertible note, net of taxes		—				—				—				2,092
Adjusted net income	$	13,944			$	12,815			$	30,532			$	41,363

*	Adjusted net income. We disclose adjusted net income as a non-GAAP financial measurement in order to report our results exclusive of items that are non-recurring or not core to our operating business. We believe presenting this non-GAAP financial measurement provides investors with a consistent way to analyze our performance.

Reconciliation of Long-term Debt
(in thousands)
(unaudited)
Long-term debt consists of the following:
	October 26, 2024				April 27, 2024
Mortgage	$	13,125			$	13,875
Convertible note		25,000				25,000
Long-term debt, gross		38,125				38,875
Debt issuance costs, net		(574	)			(761	)
Change in fair value of convertible note		27,836				16,550
Current portion		(1,500	)			(1,500	)
Long-term debt, net	$	63,887			$	53,164

FAQ

What was Daktronics (DAKT) revenue in Q2 2025?

Daktronics reported sales of $208.3 million in Q2 2025, representing a 4.5% increase from Q2 2024.

How much cash flow did DAKT generate in Q2 2025?

Daktronics generated record cash flows from operations of $43.3 million in Q2 2025 and $62.8 million for the first six months of fiscal 2025.

What was DAKT's order backlog as of October 26, 2024?

Daktronics' product order backlog was $236.0 million as of October 26, 2024, down from $306.9 million in Q2 2024.

How much will Daktronics save from converting its Convertible Note?

Daktronics expects to save approximately $5.2 million in interest expense over the remaining term by converting the $25.0 million Convertible Note to common stock.