The Company also reported that gross profit as a percentage of net sales was 15%, which was lower compared to 22% a year earlier, operating expenses were $31.3 million, compared to $26.5 million a year earlier, and operating margin for the first quarter of fiscal 2023 was negative 3.2%, compared to positive 3.9% for the first quarter of fiscal 2022. Daktronics also disclosed that it recorded a valuation allowance of approximately $13.0 million for deferred tax assets, which "created a covenant violation under our line of credit agreement." As a result, the Company "also expects to conclude that its disclosure controls and procedures and internal control over financial reporting were not effective as a result of material weaknesses."