Evertz Technologies Limited

Good afternoon, ladies and gentlemen, and welcome to the Everts Q3 investor call. At this time, all lines are in 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, Eric. Good afternoon, everyone, and welcome to Everett's Technologies conference call for our fiscal 2024 third quarter, ended January 31st, 2024, 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 will begin by providing a few highlights and then Doug will provide additional detail. First off, sales for the third quarter totaled $135.3 million, an increase of 22% compared to $110.9 million in the third quarter last year. Our base is well diversified with the top 10 customers accounting for approximately 35% of sales during the quarter and with the single largest customer totaling approximately 5%. In fact, we had 110 customer orders of over $200,000 in the quarter. Gross margin in the quarter was $79.7 million, or 58.9%, which is within our target range. Investment in research and development during the quarter totaled $34 million. Net earnings for the third quarter were $19 million, while fully diluted earnings per share were $0.24. Evert's working capital was $199.6 million as of January 31st, and at the end of February, Evert's purchase back order was in excess of $292 million, and shipments during the month were $40 million. We attribute the 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 in the industry, and specifically to the growing adoption of Everett's IP-based software-defined video networking solutions, Everett's IT cloud solutions, our immersive 4K ultra high-definition solutions, and Everett's state-of-the-art Dreamcatcher IP replay and live production Bravo Studio featuring the iconic Studer audio. Today, Everett's board of directors declared a quarterly dividend of 19.5 cents per share payable on or about March 29th. I'll now hand over to Doug Moore, Everett's chief financial officer, to cover results in greater detail.

All right, thanks, Brian. Good afternoon, everyone. I'll start by looking at revenues. Sales were $135.3 million in the third quarter of fiscal 2024 compared to $110.9 million for the third quarter of fiscal 2023. That's an increase of 22% or $24.4 million quarter over quarter. For the nine months ended January 31st, 2024, sales were $391.9 million compared to $325.7 million in the same period last year. That represents an increase of $66.2 million, or 20%. Looking at specific regional revenue, the US-Canadian region had sales for the quarter of $80.5 million, compared to $71.2 million last year. That represents an increase of $9.3 million, or 13% quarter over quarter. Sales in the US and Canadian region were $241.5 million for the nine-month period ended January 31, 2024, compared to $238.2 million in the same period last year, an increase of $3.3 million, or 1%. In the international region, revenues for the quarter were $54.8 million, compared to $39.6 million last year, an increase of $15.2 million quarter-over-quarter. The international segments represented 40% of total sales this quarter as compared to 36% in the same period last year. For the nine months ended January 31, 2024, sales in the international region were $150.3 million compared to $87.5 million in the same period last year. That's an increase of 72% or $62.8 million. Gross margins for the third quarter were approximately 58.9%, compared with 59.2% prior and within our target range. For the nine-month period end of January 31st, gross margin was approximately 58.6%, and that's also within our target range. Turning to selling and amend expenses, S&A was $18.3 million in the third quarter. That's an increase of $2 million from the same period last year. Selling and amending expenses as a percentage of revenue were approximately 13.5% as compared to 14.7% in the same period last year. Selling administrative expenses were $52.2 million for the nine months ended January 31, 2024, an increase of $8.2 million from the same period last year. Selling and amending expenses as a percentage of revenue were approximately 13.3% over the period compared to 13.5% for the same period last year. Research and development expenses were $34 million for the third quarter. That represents an increase of $3.8 million from $30.2 million in the third quarter last year. Investment tax credits relating to R&D expenses were $4 million in the quarter, compared to credits of $3.6 million in the third quarter last year. For the nine months ending January 31st, Research and development expenses were $98.1 million. That represents an increase of $10.9 million over the same period last year and includes an increase of $7.8 million associated with salary costs. Research and development expenses as a percentage of revenue were approximately 25.1% over the period compared to 26.8% for the same period last year. Foreign exchange for the third quarter was a loss of $2.8 million. The quarterly loss was predominantly driven by the decrease in value of the U.S. dollar against the Canadian dollar from October 31st, 2023 to January 31st, 2024. Foreign exchange for the nine-month period ended January 31st with a loss of $2 million compared to a gain of $1.7 million in the same period last year. Turning to a discussion of liquidity of the company, cash added at January 31st, 2024 was $69.7 million as compared to cash of $12.5 million at April 30th, 2023. Working capital was $199.6 million as at January 31st, 2024, compared to $171.4 million at the end of April 30th, 2023. Now look at the cash flows. The cash generated cash in operations from $30.2 million, which is net of $5.2 million change in non-cash working capital and current taxes. The effects of the change in non-cash working capital and current taxes were excluded from the calculation. The company generated $25 million in cash from operations during the quarter. The company used cash of $0.6 million for investing activities, which was principally driven by the acquisition of capital assets. And the company used cash in financing activities of $16.1 million, which was principally driven by dividends paid of $14.8 million. Finally, our share capital position as of January 31, 2024, shares outstanding were approximately 76.1 million, and options and share-based RSUs outstanding were approximately 5.7 million. Weighted average shares outstanding were 76 million, and weighted average fully diluted shares was 77 million for the quarter ended January 31, 2024. That concludes the review of our financial results and position for the third quarter. 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.