Evertz Technologies Limited

Good afternoon, ladies and gentlemen, and welcome to IVERT 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 0 for the operator. This call is being recorded on Wednesday, June 21, 2023. I would now like to turn the conference over to Brian Kimball, Executive Vice President, Business Development. Please go ahead.

Thank you, Julia. Good afternoon, everyone, and welcome to the Everts Technologies conference call for our fourth quarter and year ended April 30th, 2023, with Doug Moore, Everts 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 website. Doug and I will comment on the financial results and then open the call to your questions. I will begin with a few annual and fourth quarter highlights, following which Doug will provide more detail. First off, I'm pleased to report sales for the fiscal year totaled a record $454.6 million. Annual net earnings were $64.6 million, resulting in fully diluted earnings per share of $0.84 for fiscal 2023. Investments in research and development totaled $117.1 million for fiscal 2023. Now moving on to the fourth quarter financials. Sales in the fourth quarter were a record high, $128.9 million, up 11% year-over-year. Gross margin for the fourth quarter was $76.7 million, or 59.5% of sales. And foreign exchange for the fourth quarter was a gain of $252,000. Net earnings for the fourth quarter were $18.6 million, with fully diluted earnings per share of $0.24 in the quarter. At April 30, 2023, Everest Working Capital was $171.4 million with $12.5 million cash. Purchase order backlog at the end of May was a record high, $392 million, and shipments during the month of May were $40 million. We attribute our strong annual and quarterly performance 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 continued adoption of Everett's IP-based software-defined video networking solutions, Everett's IT and cloud solutions, our immersive 4K Ultra HD solutions, and the state-of-the-art Dreamcatcher IP replay and Bravo Live production suite. Our sales is well diversified, with the top 10 customers in the fourth quarter accounting for approximately 43% of sales, with no single customer over 6%. In fact, we had 133 customer orders of over $200,000 in the quarter. Today, ERIS Board of Directors declared a dividend of $0.19 per share, which will be paid on or about July 6th. I will now hand over the call to Doug Moore, Evert's Chief Financial Officer, to cover our results in greater detail.

Thank you, Brian. Good afternoon, everyone. Starting with revenues, sales were $128.9 million in the fourth quarter of fiscal 2023, once compared to $116.1 million in the fourth quarter of fiscal 22, which represents an increase of $12.8 million, or 11%. Sales for the fiscal year ended April 30, 2023, For $454.6 million compared to $441 million in the same period last year, that represents an increase of approximately $13.6 million. Regarding regional revenues, the U.S.-Canadian region had sales for the fourth quarter of $98 million compared to $77.8 million last year, an increase of $20.2 million or 26%. The international region had sales for the quarter of $30.9 million compared to $38.2 million last year, a decrease of $7.3 million. Now fiscal results again. Sales in the U.S.-Canadian region were $337.1 million in 2023 compared to $299.4 million in fiscal 2022. That represents an increase of $37.7 million, or 13%. Sales in the international region were $117.5 million for the year ended April 30, 2023. That's compared to $141.7 million in fiscal 2022, representing a decrease of $24.2 million. Proportionally, the international segment represented 24% of total sales in the quarter and 26% of the total sales in the year, compared to 33% and 32% in the respective periods last year. Looking at gross margins, the gross margin for the fourth quarter was approximately 59.5% compared to 58.9% in the fourth quarter of fiscal 2022. Gross margins for the year were approximately 59% compared to 57.9% in fiscal 2022. Both the fourth quarter and fiscal 2023 gross margins were within the company's target range. Looking at operating costs, Selling and administrative expenses were $17.5 million for the fourth quarter. That's an increase of $1.4 million in the same period last year. Selling and admin expenses were $61.5 million for the year ended April 2023. That's an increase of $0.6 million from fiscal 2022. Selling and admin expenses as a percentage of revenue were approximately 13.5% compared to 13.8% last year. Looking at R&D, research and development expenses were $29.9 million for the fourth quarter, which represents a $2.6 million increase from the fourth quarter last year. For the year, research and development expenses were $117.1 million, which represents an increase of $14.7 million compared to fiscal 2022. The key drivers to the increase being approximately $6 million in additional costs from increased headcount to address key R&D initiatives, and approximately $8 million associated with salary increases. R&D expenses as a percentage of revenue were approximately 25.8% for the year, compared to 23.2% last year. Foreign exchange for the fourth quarter was a gain of $0.3 million. That's compared to a gain of $1.1 million the same period last year. Foreign exchange for the 12 months ended April 30th with a gain of $2 million compared to a loss of $6.5 million in the prior year. In both cases, the gains were driven by a change in value of the U.S. to Canadian dollars. Turning to a discussion of liquidity of the company, cash and bank indebtedness as of April 30th, 2023 netted to a total of $6.5 million in cash. That's compared to $33.9 million as of April 30th, 2022. Working capital was $171.4 million as of April 30, 2023, compared to $158.9 million at the end of April 2022. In our quarterly cash flows, the company generated cash from operations of $25.9 million, and that includes a $0.8 million change in non-cash working capital and current taxes. If the effects of those changes in non-cash working capital and current taxes were excluded, the company generated $26.7 million in cash from operations in the quarter. The company generated 3 million dollars in cash from investing activities and the company used 16.5 million in financing activities which is gross of the 5.9 million dollars presented as bank indebtedness on the balance sheet and that was driven by dividends paid of 14.5 million dollars. We have fiscal cash flows For the year, the company generated cash from operations of $53.8 million, and that's net of $37.7 million change in non-cash working capital and current taxes. If the effects of the changes in non-cash working capital and current taxes were excluded, the company generated $91.5 million in cash from operations. As we've discussed in prior calls, the main use of cash in working capital relates to increase of inventory. Regarding financing activities, During the year, the company paid approximately $56.4 million in dividends. Finally, I'll review our share capital position as of April 30, 2023. Shares were approximately $76.1 million, and options and equity-based restricted share units outstanding combined to approximately $6.3 million. Weighted average shares were $76.2 million, and weighted fully average shares, deluged shares outstanding were also 76.2 million for the year ended. That brings to a conclusion the review of our financial results and position for the fourth 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 on the Canadian Securities Commission. Brian, back to yourself.