Evertz Technologies Limited

Good afternoon, ladies and gentlemen, and welcome to the eBirds Q3 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. This call is being recorded on Thursday, the 2nd of March, 2023. I would now like to turn the conference over to Brian Campbell, Executive Vice President, Business and Development. Please go ahead, Mr. Campbell.

Good afternoon, everyone, and welcome to Everett's Technologies Conference call for our fiscal 2023 third quarter, ended January 31st, 2023, with Doug Moore, Everett'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's investor websites. 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 go into greater detail. First off, sales for the third quarter totaled $110.9 million. Our sales base is well diversified. The top 10 customers accounting for approximately 32% of sales during the quarter with no single customer or over 7%. In fact, we had 113 customer orders of over $200,000 during the quarter. Gross margin in the quarter was 65.6 million, or 59.2% for the quarter, which is within our target range. Net earnings before foreign exchange for the third quarter were $19.8 million, and fully diluted earnings per share was $0.16. Giver's working capital was $157.5 million, with $5.3 million in bank indebtedness as of January 31, 2023. The purchase order backlog at the end of February was in excess of $140 million, and shipments during the month of February were $31 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, and our state-of-the-art Dreamcatcher IP replay and Bravo live production suite. Today, Everett's board of directors declared a dividend of $0.19 per share payable on or about March 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. Starting at revenues, sales were $110.9 million for the third quarter of fiscal 2023. That's a decrease of $9.7 million, or 8%, compared to $120.6 million in the third quarter of fiscal 2022. For the nine months ended January 31, 2023, sales were $325.7 million compared to $324.9 million in the same period last year. That represents an increase of approximately $0.8 million. Looking at specific regions, the U.S.-Canadian region had sales for the quarter of $71.2 million, a decrease of $7.7 million, or 10%, compared to $78.9 million in the same period last year. Sales in the U.S.-Canadian region were $238.2 million for the nine months period ending January 31, 2023, compared to $221.5 million the same period last year, which represents an increase of $16.7 million, or 8%. The international region had sales with a quarter of $39.6 million, compared to $41.7 million last year, a decrease of $2.1 million, or 5%. The international segment represented 36% of total sales this quarter. That's compared to 35% in the same period last year. Sales in the international region were 87.5 million for the nine-month period ended January 31, 2023, compared to 103.4 million in the same period last year. That represents a decrease of 15.9 million, or 15%. Gross margin for the third quarter was approximately 59.2%, compared with 57.4% in the third quarter as of January 31st last year and was within our target range. Gross margin for the nine months ending January 31st was approximately 58.8% and also within the company's target range. For operational expenses, selling and amending expenses were $16.3 million for the third quarter. That's an increase of $0.3 million from the same period last year. Selling and administrative expenses as a percentage of revenue were approximately 14.7% as compared to 13.3% for the same period last year. For the nine-month period ending January 31st, selling and admin expenses were $44 million. That's a decrease of $0.7 million compared to $44.7 million from the same period last year. For the nine-month period Selling and admin expenses as a percentage of revenue were approximately 13.5% as compared to 13.8% for the same period last year. Turning to R&D, research and development expenses were $30.2 million for the third quarter, which represents a $4.2 million increase from the third quarter last year. R&D expenses as a percentage of revenues were approximately 27.3% over the period as compared to 21.5% for the same period last year. For the year, research and development expenses were $87.3 million, which represents an increase of $12.1 million over the same period last year. R&D expenses as a percentage of revenue were approximately 26-28% over the period, compared to 23.1% in the same period last year. The increase in the nine-month period includes an $11.6 million increase in net salary expenses, and that's driven by increased headcount and salary increases. current staff as well. Foreign exchange for the third quarter was a loss of 2.3 million. That's compared to a gain of 1.7 million in the same period last year. The loss was driven by a decrease in the value of the U.S. dollar compared to the Canadian dollar between October 31st and January 31st. Foreign exchange for the nine-month ended January 31st was a gain of 1.7 million. That's compared to a gain of $5.4 million in the same period last year, and the nine-month gain was driven by an increase in the value of the U.S. dollar since April 30, 2022. Turning to a discussion of liquidity of the company, bank indebtedness as at January 31, 2023, was $5.3 million as compared to cash of $33.9 million as at April 30, 2022. Working capital was $157.5 million as of January 31, 2023, as compared to $158.9 million at the end of April 30, 2022. Now looking specifically at the cash flows for the quarter ended January 31, 2023, the company generated cash from operations of $16.2 million, which is net of a $3.4 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, the company generated $19.6 million cash from operations for the quarter. The company used cash from investing activities of $1.6 million for the third quarter ended January 31, 2023, which was principally driven by the acquisition of capital assets in the quarter. The company used cash from financing activities of $16.3 million, which was principally driven by dividends paid of $14.5 million. Finally, I will review our share capital position as at January 31st, 2023. Shares outstanding were approximately 76.2 million, and options outstanding and share-based RSUs were approximately 4.9 million and 1.1 million respectively. Lastly, the weighted average shares outstanding were 76.2 million, and the weighted average of fully diluted shares were 76.3 million. That brings to a conclusion the review of our financial results and position for the third 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 in the official reports filed within the Canadian Securities Commission. Brian, back to yourself. Thank you, Doug.