Evertz Technologies Limited

Good day, ladies and gentlemen, and welcome to the EVIRT's Q1 2021 conference call. As a reminder, today's conference is being recorded. It is Wednesday, September 9th, 2020. At this time, I would like to turn the conference over to Mr. Brian Campbell, Executive Vice President of Business Development. Please go ahead, Mr. Campbell.

Thank you, Jonathan. Good afternoon, everyone, and welcome to the Ebert's Technologies Limited conference call for our fiscal 2021 first quarter ended July 31st, 2020 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. Doug and I will comment on the financial results and then open the call to your questions. Before delving into our recent business results and outlook, I'd like to briefly address the extraordinary COVID pandemic. The pandemic has created headwinds and significant challenges, delaying customer deliveries, installations, and impacting customer operations around the globe. That said, our customers are fundamentally healthy, and Everts has a unique and powerful technology position. Everts is a technical innovator and fundamentally sound business committed to protecting our people and supporting our customers. We're proud of the role we play as an essential service provider and critical supplier, enabling vital communications, telecommunications, broadcast, and new media services worldwide. We are appreciative of the continuing strong partnerships with our customers and for the extraordinary efforts made by our employees in these challenging times. Turning now to Evert's results, I'd like to begin by providing a few notes and then Doug will go into greater detail. First off, sales for the first quarter fiscal 2021 were $56.3 million, down as compared to $103.4 million for the first quarter last year. Our sales base remains well diversified with the top 10 customers accounting for approximately 44% of sales during the quarter and with no single customer over 9%. In fact, we had 91 customer orders of over $200,000. Gross margin in the quarter was $32.2 million or 57.2%. Investments in research and development totaled $16.6 million, net of $6.7 million in wage subsidies. further reinforcing Everett's commitment to R&D despite these challenging times. Net earnings for the first quarter were 0.6 million dollars and fully diluted earnings per share were one cent in the quarter. Everett's working capital was approximately 218.8 million with 102 million in cash as at July 31st, 2020. The purchase order backlog at the end of August was in excess of $118 million, a record high, and shipments during the month were $36 million. Today, Everett's Board of Directors has declared a quarterly dividend of $0.09 per share payable on September 18, 2020. I will now hand over to Doug Moore, Everett's Chief Financial Officer, to cover our results in greater detail.

Thank you, Brian. Good afternoon, everyone. Sales were 56.3 million in the first quarter of fiscal 2021 compared to 103.4 million in the first quarter of fiscal 2020, a decrease of 47.1 million. The U.S.-Canadian region had sales for the quarter of 35.9 million compared to 74 million last year, a decrease of 51%. The international region had sales for the quarter of 20.4 million compared to $29.4 million last year, a decrease of 31%. The decrease of revenues was due to widespread customer shutdowns, travel restrictions, and projects on hold as a result of the COVID-19 pandemic. Gross margin for the first quarter was approximately 57.2%, consisting with 57.2% in the prior year. While the gross margin was adversely impacted by low manufacturing volumes, Offsetting the negative impacts was $3.6 million of wage-related government assistance, which is recorded as a reduction of salary costs within cost of sales. Selling and administrative expenses were $11.9 million for the first quarter, as compared to $16.3 million in the same period last year. Selling and administrative expenses as a percentage of revenue was 21.2% compared to 15.8% in the same period last year. The decrease in expenses was driven by $1.9 million reduction in travel and promotion costs associated with reduced selling activities and travel restrictions associated with the COVID-19 pandemic. Selling and administrative expenses also included $1.3 million in wage subsidies that was recorded as a reduction in the costs and costs in the quarter. Research and development expenses were $16.6 million for the first quarter, which represents a $6.1 million or 27% decrease from the first quarter last year. Decrease is predominantly a result of 6.7 million of wage subsidies recorded as a reduction in cost in the quarter. Foreign exchange loss was 3.1 million as compared to a foreign exchange loss in the prior year of 1.8 million. The loss was predominantly a result of the decrease in the value of the US dollar as at July 31st, 2020, when compared to April 30th, 2020. Turning to a discussion of the liquidity of the company, Cash as at July 31, 2020 was $102 million as compared to $75 million as at April 30, 2020. Working capital was $218.8 million as at July 31, 2020 compared to $223 million as at April 30, 2020. The company generated cash and operations of $36.3 million, which is gross of a $32.2 million change in non-cash working capital and current taxes in the first quarter. If the effects of the change in non-cash working capital and taxes were excluded from the calculation, the company generated $4.1 million in cash from operations. The company acquired $1.8 million of capital assets. The company used cash from financing activities of $8.3 million, which predominantly consisted of the payment of dividends of $6.9 million. Shares outstanding were approximately $76.4 million, and options outstanding were approximately 5.6 million as at July 31st, 2020. Weighted average shares outstanding and weighted average fully diluted shares outstanding were both 76.4 million for the quarter ended July 31st, 2020. This brings to a conclusion the review of our financial results and position for the first 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 our annual information form and the official reports filed with the Canadian Securities Commission. Brian, back to you.