Evertz Technologies Limited

Good day, ladies and gentlemen, and welcome to the eBirds Second Quarter 2020 Conference Call. As a reminder, today's conference is being recorded. It is Thursday, December 12, 2019. At this time, I'd like to turn the conference over to Mr. Brian Campbell, Executive Vice President of Business Development. Please go ahead, Mr. Campbell.

Thank you, Chantal. Good afternoon, everyone, and welcome to eBirds Technologies Conference Call for our Fiscal 2020 second quarter ended October 31st, 2019 with Doug Moore, Ebert's Chief Financial Officer, and myself, Brian Campbell. Please note that our financial press release and MD&A will be available on CDAR on the company's investor website. Doug and I will comment on the financial results and then open the call to your questions. I would like to start with a few highlights, and then Doug will provide additional details. First off, I'm pleased to report sales for the second quarter totaled $120 million, up 7% from the prior year. This increase was driven predominantly by the adoption of Everett's new technologies and products and by the strength in the U.S.-Canada region, which had sales for the quarter of $88.6 million, an increase of 14% from the prior year. Our base is well diversified. with the top 10 customers accounting for approximately 49% of sales during the quarter and with no single customer over 12%. In fact, we had 124 customer orders of over $200,000 in the quarter. Gross margin in the quarter was $69.3 million, up for 57.9%, which is within our target range. Investment in research and development during the quarter totaled $22.9 million. Net earnings for the second quarter were $20.5 million, while fully diluted earnings per share were $0.27. Ebert's working capital was $222 million, with cash of $5.4 million as of October 31, 2019. Operational highlights for the second quarter include Ebert's strong presence at the International Broadcast Conference, where Group M6 Paris Headquarters Modernization II IP with Ebert's was featured in the IBC IP Showcase Theater. This master control and play out IP migration is a leading deployment of SEMT 2110, leveraging Ebert's pioneering software-defined video networking technologies. In addition, during the quarter, it was announced that CBS partnered with EBRITS to launch Dabble, CBS's new lifestyle channel, hosted completely in the public cloud using EBRITS Mediator X and Overture Playout solutions deployed within Amazon Web Services public cloud. At the end of November, EBRITS purchase order backlog was in excess of $97 million and shipments during the month were in excess of $39 million. We attribute this strong financial performance and robust combined shipments and purchase order backlog to the ongoing technical transition in the industry, channel and video services proliferation, increasing global demand for high-quality video anywhere, anytime, and specifically to the growing adoption of Evert's IP-based software-defined video networking solutions, Evert's IT and virtualized cloud solutions, our immersive 4K Ultra HD solutions, and our state-of-the-art Dreamcatcher IP replay and live production suite. Today, ERIP's Board of Directors declared a regular quarterly dividend of $0.18 per share, payable on or about December 20th. I will now hand over to Doug Moore, ERIP's Chief Financial Officer, to cover our results in great detail.

All right. Thank you, Brian. Good afternoon, everyone. Sales were $119.8 million in the second quarter of fiscal 2020, compared to $112.3 million in the second quarter of fiscal 2019. This represents an increase of $7.5 million, or 7%, over the quarter-to-quarter. Sales were $223.2 million for the six months ended October 31, 2019, compared to $215.4 million in the same period last year. This represents an increase of approximately 4%. The U.S.-Canada region had sales for the quarter of $88.6 million compared to $77.5 million last year. This represents an increase of $11.1 million, or 14% quarter over quarter. Sales in the U.S.-Canada region were $160.8 million for the six months ended October 31, 2019, compared to $152.7 million in the same period last year. This represents an increase of $8.1 million, or 5%. The international region had sales for the quarter of $31.2 million compared to $34.8 million last year. The international segment represented 26% in total sales this quarter as compared to 31% in the same period last year. Sales in the international region were $62.4 million for the six months ended October 31, 2019, compared to $62.6 million in the same period last year. This represents a small decrease of $0.2 million. Gross margin for the second quarter was approximately 57.9% and within the company's historical range. Gross margin for the six months ended October 31st was approximately 57.6%, also within the historical range. Filling and admin expenses were $18 million for the second quarter. That's an increase of $1.6 million for the same period last year. Selling and admin expenses as a percentage of revenue were approximately 15% compared to 14.6% for the same period last year. Selling and admin expenses were $34.3 million for the six months ended October 31st, an increase of $2 million from the same period last year. For the first two quarters, selling and admin expenses as a percentage of revenue were approximately 15.4% compared to 15% the same period last year. Research and development expenses were 22.9 million for the second quarter, which represented a 1.8 million increase from the second quarter last year. For the six months ending October 31st, research and development costs were 45.6 million, which represented an increase of 3.2 million over the same period last year. Foreign exchange for the second quarter was a loss of 1.1 million compared to a gain of $0.8 million in the same period last year, or in exchange for the six-month end of October 31st, was a loss of $2.9 million, compared to a gain of $1.9 million in the same period last year. The six-month loss was predominantly a result of the decrease in the value of the U.S. dollar since April 30th. Turning to a discussion of liquidity of the company, cash as at October 31st, 2019, was $5.4 million, as compared to $104.6 million, at April 30th, 2019. Working capital was $222 million at October 31st, 2019, compared to $282.5 million at the end of April 2019. Looking now specifically at cash flows for the quarter, the company used cash in operations at $12.9 million, which is net of $36.8 million in change in non-working capital and current taxes. If the effects of the change in non-cash working capital and current taxes were excluded, the company generated $23.9 million cash from operations in the quarter. The change in non-cash working capital is largely driven by an increase in accounts receivable of approximately $39 million between July 31st and October 31st. It's worth noting that collections of AR substance quarter ends have driven an increase of cash from $5.4 million at October 31st to approximately $29 million at the end of November 2021. Back to the cash flow in the quarter, the company generated cash from investing activities of $1.8 million, as marketable securities were disposed for proceeds of $4.1 million, partially offset by the acquisition of capital assets of $2.2 million. The company used cash in financing activities of $81.9 million, which was principally driven by dividends paid of $83.4 million, including a special dividend of $69.1 million. That was all partially offset by the issuance of capital stock pursuant to the company stock option plan of $3.4 million. Finally, I'll review our share capital position at October 31, 2019. Shares outstanding were approximately $76.8 million, and options outstanding were approximately $1.1 million. Weighted average shares outstanding were $76.7 million, and weighted average fully diluted shares were $76.8 million for the quarter ended October 31, 2019. This brings to a conclusion the review of our financial results and position for the second quarter. Finally, I would like to remind you that some of the statements presented today are forward-looking, subject to a number of risks and uncertainties, and we refer you to the risk factors described in the annual information forum and official reports filed with the Canadian Securities Commission. Brian, back to you.