Evertz Technologies Limited

Good afternoon, ladies and gentlemen, and welcome to the Everts Q4 investor conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. Today's call is being recorded June the 23rd, 2022. And I would now like to turn the call over to Mr. Brian Campbell, Executive Vice President of Business and Development. Please go ahead, sir.

Thank you, Michelle. Good afternoon, everyone, and welcome to the Everts Technologies conference call for our fourth quarter ended April 30, 2022, with Doug Moore, Everts Chief Financial Officer, and myself, Brian Campbell. Please note that our financial press release and MD&A are now available on CDARF Doug and I will comment on the financial results and then open the call to your questions. Turning now to Evert's results, I'll begin with a few annual and fourth quarter highlights, following which Doug will provide more details. First off, I'm pleased to report sales for the fiscal quarter totaled $441 million, driven in part by the adoption of Evert's new technologies. Annual net earnings were $72.7 million, resulting in fully diluted earnings per share of $0.94 for fiscal 2022. Investment in research and development totaled $102.4 million for fiscal 2022, further reinforcing Evert's commitment to R&D. Moving on to the fourth quarter financials, sales in the quarter were $116.1 million, up 24% year-over-year. Gross margin for the fourth quarter was $68.3 million, or 58.9% of sales. And foreign exchange for the quarter was a gain of $1.1 million. Net earnings for the fourth quarter were $19.2 million, with fully diluted earnings per share of 25 cents. At April 30, 2022, Everett's working capital was $158.9 million, with $33.9 million in cash. The purchase order backlog at the end of May was in excess of $148 million, and shipments during the month of May were $26 million. We attribute our solid annual and quarterly performance to the ongoing technical transition in the industry, channel and video services proliferation, and the 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, and state-of-the-art Dreamcatcher IP replay and Bravo live production suite. Our sales base is well diversified, with the top 10 customers accounting for approximately 40% of sales during the year, with no single customer over 6%. In fact, we had 475 customer orders of over $200,000, a 35% increase from the 353 customer orders of over 200,000 received last year. Today, Everett's Board of Directors declared a quarterly dividend of 18 cents per share, which will be paid on or about July 7th. I will now hand over the call to Doug Moore, Everett's Chief Financial Officer, to cover our results in greater detail.

Thank you, Brian. Good afternoon, everyone. Starting with revenues, Sales were $116.1 million in the fourth quarter of fiscal 2022 compared to $93.3 million in the fourth quarter of fiscal 2021, which represents an increase of $22.8 million, or 24%. Sales for the fiscal year ended April 30, 2022, were $441 million compared to $342.9 million in the same period last year. That represents an increase of approximately $98.1 million or 29%. Regarding regional revenues, the US-Canada region had sales for the fourth quarter of $77.8 million compared to $63.6 million in Q4 last year. That's an increase of $14.2 million or 22%. The international region had sales for the quarter of $38.2 million compared to $29.7 million last year an increase of $8.5 million, or 29%. Back to fiscal results. Sales in the U.S.-Canadian region were $299.4 million for the year ended April 30th, compared to $222.7 million in the same period last year. This represents an increase of $76.7 million, or 34%. Sales in the international region were $141.7 million for the year ended April 30, 2022, compared to $120.2 million in the same period last year, representing an increase of $21.5 million, or 18%. Fortunately, the national segment represented 33% of total sales in the quarter and 32% of total sales in the year, compared to 32% and 35% in the respective periods last year. Turning to gross margins, the gross margin for the quarter was approximately 58.9% compared to 59.6% in the fourth quarter of fiscal 2021. Gross margin for the year was 57.9% compared to 58.2% in fiscal 2021. Both the Q4 and fiscal 2022 gross margin rates were within the company's target range. For operating costs, Selling and administrative expenses were $16.1 million for the fourth quarter, an increase of $3.1 million from the same period last year. The increase is inclusive of a $2.1 million increase in travel, promotion, and trade show costs when compared to Q4 of 2021. As a percentage of revenue, selling and admin expenses were approximately 13.9%. Selling and administrative expenses were $60.9 million for the year ended April 30, 2022, an increase of $11.5 million from the same period in fiscal 2021. For the year, selling administrative expenses as a percentage of revenue were approximately 13.8% compared to 14.4% last year. Turning to R&D, research and development expenses were $27.3 million for the fourth quarter, which represents a $4.8 million increase from the fourth quarter last year. The increase in R&D expenses is driven by an increase in net salary costs. Unlike Q4 last year and Q4 of 2022, there was no reduction in costs associated with government assistance. As a percentage of revenue, R&D was approximately 23.5% in the quarter as compared to 24% for the same period last year. For the year, research and development expenses were $102.4 million which represents an increase of $22.2 million over the same period last year. R&D expenses as a percentage of revenue were approximately 23.2% for the year compared to 23.4% last year. Foreign exchange for the fourth quarter resulted in a gain of $1.1 million compared to a loss of $5.1 million in the same period last year. The gain of 1.1 million was driven by the increase in the value of the U.S. dollar against the Canadian dollar between January 31st and April 30th, 2022. Foreign exchange for the year ended April 30th, 2022, resulted in a gain of 6.5 million compared to a loss of 14.9 million in the prior year. The gain was driven by an increase in the value of the U.S. dollar compared to the Canadian dollar over that period. Turning to a discussion of liquidity with the company, Cash as at April 30, 2022 was $33.9 million compared to $108.8 million as at April 30, 2021. Working capital was $158.9 million as at April 30, 2022 compared to $214.5 million at the end of April 30, 2021. Regarding quarterly cash flows, the company generated cash from operations of $21.5 million which includes a $2.4 million net change in non-cash working capital and current taxes. If the effects of the change of non-cash working capital and current taxes are excluded from that calculation, the company generated $23.9 million cash from operations in the quarter. In the quarter, the company used $1.3 million from investing activities, which was principally driven by capital asset purchases. and the company used cash from financing activities of $15 million, which was principally driven by the dividends paid of $13.7 million. Regarding fiscal cash flows, for the year the company generated from operations cash of $68.7 million, which is net of a $24.3 million change in non-cash working capital and current taxes. The change in non-cash working capital was driven by a $26 million increase in accounts receivable over the year, a $25 million increase in inventory, partially offset by a $16 million increase in deferred revenue over the year. If the effects of the change of non-cash working capital and current taxes are excluded, the company generated $93 million cash from operations. Regarding financing activities, during the year the company paid approximately $131.4 million in dividends, which includes a special dividend of $76.3 million. Finally, Looking at our share capital position as of April 30, 2022, shares outstanding were approximately 76.2 million, and options outstanding were approximately 5.1 million. Weighted average shares were 76.3 million, and weighted average fully diluted shares outstanding were approximately 76.6 million for the year ended. That brings to a conclusion the review of our financial results and position for the fourth quarter and fiscal year end. And finally, I would like to remind you that some of the statements presented here and 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 the official reports filed with the Canadian Securities Commission. Brian, back to yourself.