Evertz Technologies Limited

Please stand by. Good day and welcome to the EVIRT's second quarter 2022 conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Brian Campbell, Executive Vice President of Business Development. Please go ahead, sir.

Thank you, Melinda. Good afternoon, everyone, and welcome to EVIRT's technologies conference call for our fiscal 2022 second quarter, ended October 31st, 2021. 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 and on the company investor website. Doug and I will comment on the financial results and then open the call to your questions. Turning now to Ebert's results, I'll begin by providing a few highlights and then Doug will provide additional detail. First off, sales for the second quarter totaled $107.2 million, an increase of 7% compared to the $100.5 million in the second quarter last year. This solid increase from our second fiscal quarter of 2021 was experienced primarily in the U.S.-Canada region and was driven predominantly by the adoption of Everett's new technologies and products. Our base is well diversified, top 10 customers accounting for approximately 44% of sales during the quarter with no single customer over 8%. In fact, we had 122 customer orders of over $200,000 in the quarter. Gross margin in the quarter was $61.1 million, or 57%, which is within our target range. Investment in research and development during the quarter totaled $24.4 million. Debt earnings for the second quarter were $17.2 million, while fully diluted earnings per share were 22 cents. Evert's working capital was $144.9 million, with cash of $37.7 million as of October 31, 2021. At the end of November, Ebert's purchase order backlog was a record high, $162 million, and shipments during the month were $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 Everett's IP-based software-defined video networking solutions, Everett's IT and cloud solutions, our immersive 4K Ultra HD solutions, our state-of-the-art Dreamcatcher IP replay, live production suite, and Bravo Studio. Today, Everett's board of directors declared a regular quarterly dividend of $0.18 per share payable on or about December 23rd. I will now hand over to Doug Moore, Evert's Chief Financial Officer, to cover our results in greater detail.

Thank you, Brian, and good afternoon, everyone. Looking at revenues, sales were $107.2 million in the second quarter of fiscal 2022 compared to $105 million in the second quarter of fiscal 2020, an increase of $6.7 million quarter over quarter. For the six months ended October 31st, 2021, sales were $204.4 million compared to $156.8 million in the same period last year. This represents an increase of $47.6 million or 30%. As it relates to revenues in specific regions, the U.S.-Canada region had sales for the quarter of $78.2 million compared to $66.9 million last year. This represents an increase of $11.3 million, or 17% quarter over quarter. Sales in the US Canadian region were $142.6 million for the six months ended, October 31st, 2021, compared to $102.8 million in the same period last year, an increase of $39.8 million, or 39%. The international region had sales for the quarter of $29 million, compared to $33.6 million last year. a decrease of 4.6 million quarter over quarter. The international segment represented 27% of total sales this quarter as compared to 32% in the same period last year. The six months ended October 31st, 2021. Sales in the international region were 61.7 million compared to 54 million in the same period last year, an increase of 7.7 million. Net margins, gross margin for the second quarter was approximately 57%, compared to 59.4% in the prior year, and within our target range. For the six months ended October 31st, gross margin was approximately 57.6%, also within our target range. Turning to selling and administrative expenses, S&A was $14.8 million in the second quarter, an increase of $2 million for the same period last year. Selling and admin expenses as a percentage of revenue was approximately 13.8% as compared to 12.7% for the same period last year. The increase is inclusive of $1 million increase in travel and promotion costs associated with increased selling activities. Selling and admin expenses were $28.7 million for the six-month ending period. October 31, 2021, an increase of $4 million from the same period last year. Selling and administrative expenses as a percentage of revenue for the six months were approximately 14.1% as compared to 15.8% for the same period last year. Research and development expenses were $24.4 million for the second quarter, which represents a $4.7 million increase from $19.7 million in the second quarter last year. Investment tax credits, which relate to R&D expenses, were 2.9 million in the quarter, compared to credits of 4.7 million in the second quarter last year. The decrease in investment tax credits is driven by a favorable audit ruling relating to prior years that was recognized last year and did not reoccur in the current year. For the six months ending October 31st, research and development expenses were 49.1 million, which represents an increase of 12.9 million over the same period last year. Research and development expenses as a percentage of revenue were approximately 24% over the period as compared to 23.1% for the same period last year. And to FX, foreign exchange for the second quarter was a gain of 2.2 million when compared to a loss of 1.3 million in the same period last year. The quarterly gain was predominantly a result of the translation of U.S. assets into Canadian dollars at a favorable exchange rate during the quarter. Foreign exchange for the sixth month ended October 31, 2021, was a gain of $3.6 million compared to a loss of $4.4 million in the same period last year. Turning to a discussion of liquidity of the company, cash as at October 31, 2021, was $37.7 million as compared to $108.8 million at April 30, 2021. Working capital was $144.9 million at October 31st, compared to $214.5 million at the end of April 2021. Looking now specifically at cash flows, the company generated cash and operations of $0.9 million, which is net of the $22.2 million change in non-cash working capital and current taxes. If the effects of the change in non-cash working capital and current taxes are excluded from the calculation, The company generated 23.1 million in cash from operations during the quarter. The company also used cash of 1.9 million for investing activities, which was predominantly driven by the acquisition of capital assets. The company used cash in financing activities of 91.7 million, which was principally driven by dividends paid of 90.3 million, including a special dividend of 76.3 million. Finally, I will review our share capital position as of October 31st, 2021. Shares outstanding were approximately 76.3 million and options outstanding were approximately 5.5 million. Weighted average shares outstanding were 76.3 million and weighted average fully diluted shares were 76.6 million for the quarter ended October 31st. 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 Form and the official reports filed with the Canadian Securities Commission. Brian, back to you.