Evertz Technologies Limited

Good afternoon, ladies and gentlemen, and welcome to the Evert second quarter investor 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. I would now like to turn the conference over to Brian Campbell, Executive Vice President of Business Development. Please go ahead.

Thank you, Jenny. Good afternoon, everyone, and welcome to Everett's Technologies conference call for our fiscal 2024 second quarter ended October 31, 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 website. Doug and I will comment on the financial results and then open the call to your questions. Turning now to Everett's results, I'll begin by providing a few highlights and then Doug will provide additional details. First off, sales for the second quarter totaled a record high $30.7 million, up 15% compared to $113.2 million in the second quarter of last year. Our base is well diversified with the top 10 customers accounting for approximately 48% of sales during the quarter with one customer accounting for approximately 11.4%. In fact, we had 100 customer orders of over $200,000 in the quarter. Gross margin in the quarter was $78 million or 59.7% which is at the upper end of our target range. Investment in research and development during the quarter totaled $33.2 million. Net earnings for the second quarter were $22.3 million, while fully diluted earnings per share were 29 cents. Evert's working capital was $191.3 million, with cash of $55.9 million as of October 31st. Operational highlights for the quarter include Evert's stellar presence at the International Broadcast Conference, where Evert's EV670 virtualized media processing platform won a TV Tech Best of Show, and the Evert's Reflector cloud video processing platform was recognized with a TVB Best of Show award. This software-as-a-service SaaS platform for media transcoding is helping customers optimize their operations by leveraging adaptable cloud-based workflows. At the end of November 2023, Ebert's purchase order backlog was in excess of $324 million and shipments during the month were $48 million. We attribute this strong financial performance and robust combined shipments and purchase order backlog to channel and video services proliferation, increasing global demand for high-quality video anywhere, anytime, the ongoing technical transition to IP, IT, and cloud-based architectures in the industry, and specifically to the growing adoption of Evert's IP-based software-defined video networking solutions, Evert's IT and cloud solutions, our immersive 4K, 8K, ultra-high-definition solutions, our state-of-the-art Dreamcatcher IP replay and live production with Bravo Studio featuring the iconic Studer audio. Today, Everett's Board of Directors declared a regular quarterly dividend increased to 19.5 cents per share payable on or about December 21st. I will now hand the conference over to Doug Moore, Everett's Chief Financial Officer, to cover our results in greater detail.

Thank you, Brian, and good afternoon. Starting at looking at revenues, sales were $130.7 million in the second quarter of fiscal 2024, compared to $113.2 million in the second quarter of fiscal 2023. That's an increase of $17.5 million, or 15% quarter over quarter. Where the six months ended, October 31, 2023, sales were $256.6 million, compared to $214.8 million in the same period last year. That represents an increase of $41.8 million or 19%. As it relates to revenues in specific regions in Canada and the U.S. combined, they had sales for the quarter of $74 million compared to $88.3 million last year. That represents a decrease of $14.3 million or 16% quarter over quarter. Sales in the U.S. and Canadian region where $161 million for the six months ended October 31, 2023, compared to $166.5 million in the same period last year, a decrease of about 3%. International regions had sales for the quarter of $56.8 million. That's compared to $24.9 million last year. It represents an increase of $31.9 million quarter-over-quarter, or 128%. The international segment represented 43% of total sales in the current quarter. For the six months ended October 31st, international sales were $95.5 million compared to $48.3 million in the same period last year, an increase of $47.2 million or 98%. Gross margin for the second quarter was approximately 59.7% compared with 59.6% in the prior year quarter and within our target range. For the six months ended, October 31st, gross margin was approximately 58.5%, also within our target range. Turning to selling and amending expenses, selling and amending was $17.5 million in second quarter. That's an increase of $2.8 million from the same period last year. Selling and amending expenses as a percentage of revenue were approximately 13.4%, as compared to 13% for the same period last year. Selling and amend expenses were $33.9 million for the six months ended October 31, 2023, an increase of $6.2 million for the same period last year. As a reminder, the prior year expenses in Q1, so Q1 prior year, included a $3.8 million recovery that didn't reoccur in the current year, and that partially explains the large increase six months, over six months. Selling and amend expenses as a percentage of revenue were approximately 13.2% over the period as compared to 12.7 for the same period last year. Research and development expenses were $32.2 million for the second quarter. That represents a $3.5 million increase from $28.7 million in the second quarter last year. As a percentage of revenue, R&D expenses was 24.6% compared to 25.3% in the prior year. For the six months ended October 31st, Research and development expenses were $64.2 million. That represents an increase of $7.1 million over the same period last year. And the increase includes approximately $5.5 million in increased salary costs. Research and development expenses as a percentage of revenue were approximately 25% over the six-month period, as compared to 26.6% for the same period last year. Foreign exchange for the second quarter was a gain of $2.9 million when compared and that's compared to $3 million in the same period last year. The current period gain was predominantly driven by approximately a 4% increase in the value of the U.S. dollar, as of October 31, 2023, compared to July 31, 2023. Foreign exchange for the six-month period ended October 31, 2023, and was a gain of $0.9 million. That's compared to a gain of $4 million in the same period last year. Turning to a discussion of liquidity of the company, Cash as at October 31st, 2023 was $55.9 million as compared to net cash of $6.5 million as at April 30th, 2023. Working capital was $191.3 million as at October 31st, 2023 compared to $171.4 million as at the end of April 30th, 2023. Looking now at cash flows. The company generated cash and operations of $20.3 million which is net of $10.6 million change in non-working capital and current taxes. That includes a quarterly decrease in accounts payable of $28.8 million. If the effects of the change in non-cash working capital and current taxes are excluded from the calculation, the company generated $30.9 million in cash from operations during the quarter. Looking at investing activities, the company generated cash of $4.1 million, which was predominantly driven by proceeds from disposal of investments of $6.3 million. This was partially offset by cash used for the acquisition of capital assets of $2.3 million. The company used cash in financing activities of $17 million, which was principally driven by dividends paid of $14.5 million. Finally, I'll look at our share capital position as at October 31, 2023. Shares outstanding were approximately 76 million, and options and equity-based restricted share units outstanding were approximately 6 million. The weighted average shares outstanding were 76.1 million, and the weighted average fully diluted shares was 76.7 million for the quarter ended October 31st. That brings to conclusion the review of our financial results and position for the second quarter. And 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 with the Canadian Securities Commission. Brian, back to yourself.