Evertz Technologies Limited

Good afternoon, ladies and gentlemen, and welcome to the E-Words Q4 investor call. At this time, all lines are in lesson-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 Mr. Brian Campbell, Executive Vice President of Business Development. Thank you. Please go ahead.

Thank you, Ina. Good afternoon, everyone, and welcome to Everett's Technologies conference call for our fiscal 2024 fourth quarter, ended April 30th, 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'll begin by providing a few highlights, and then Doug will provide additional details. First off, I'm pleased to report sales for the fiscal year totaled $514.6 million, an increase of 13% or $60 million from the prior year. Revenue from the recurring software services and other software segment was $188.9 million, representing 37% of total revenue in a year. International revenues increased 50% in 2024, reaching $176.6 million. Earnings from operations totaled over $100 million. Net earnings increased 10 percent to $71 million, resulting in fully diluted earnings per share of $0.91 for the year versus $0.84 for the prior year. Investments in research and development totaled $134.8 million, up from $117.1 million in the prior year. Year over year, our cash positions strengthened. closing 2024 with $86.3 million in cash and cash equivalents, compared to $6.6 million in 2023 net of bank indebtedness. Turning to the fourth quarter results, sales for the fourth quarter totaled $122.8 million. Gross margin in the quarter was $72.7 million, or 59.2%. up from 58.9% in the third quarter. Investments in research and development during the quarter totaled $36.7 million, and net earnings for the fourth quarter were $13.9 million, while fully diluted earnings per share were $0.18. Everett's working capital was $201.7 million as at April 30, 2024, up $30.2 million from April 2023. At the end of May, Everett's purchase order backlog was more than $295 million, and shipments during the month of May were $32 million. The strong financial performance, including shipments and robust purchase order backlog, continues to be driven by the ongoing technical transition in the industry, channel and video services proliferation, increasing global demand for high-quality video anywhere, anytime, and specifically by the adoption of Everett's solutions such as Everett's IP-based software-defined video networking solutions, Everett's IT and cloud-native solutions, our immersive 4K ultra-high-definition solutions, Our state-of-the-art Dreamcatcher IP replay and live production with Bravo Studio featuring the iconic Studer Audio solutions. Our sales are well diversified with the top 10 customers in the fourth quarter accounting for approximately 37% of sales with no single customer over 6%. In fact, we had 113 customer orders over $200,000 in the quarter. Today, Everett's Board of Directors declared a regular quarterly dividend of $0.195 per share payable on or about July 10th. I will now hand over to Doug Moore, Everett's Chief Financial Officer, to cover our results in greater detail.

Thank you, Brian, and good afternoon, everyone. Looking at revenues... Sales in the quarter were $122.8 million in fiscal 2024 Q4, as compared to $128.9 million in the fourth quarter of fiscal 2023. For the year ended April 30, 2024, sales were $514.6 million, compared to $454.6 million in the same period last year. This represents an increase of 60 million or 13%. For our year-end results, we've also split out revenue hardware from combined software and service revenue. So, further, hardware revenue in the year was $325.7 million, and combined software service revenue was $188.9 million. This compares to $281.2 million in hardware revenue and $173.4 million in combined software service revenue in the prior year-end, April 3, 2023. Looking at regional revenue, quarterly revenues in the US-Canadian region were 96.5 million compared to 98.9 million in the prior year, while quarterly revenues in the international region were 26.2 million compared to 30 million in the prior year. The international segment represented 21% of total sales in the quarter compared to 23% in the same period last year. For the year ended April 30th, 2024, sales in the US-Canadian region were 338 million a slight increase compared to $337.1 million in the prior 12-month period. For the year-ended sales in the international region, we're $176.6 million. That's compared to $117.5 million in the same period last year. It represents an increase of $59.1 million, or 50%. Gross margin for the fourth quarter was approximately 59.2%, compared to 59.4% in the prior year and within our target range. For the year, gross margin was approximately 58.8% and also within our target range. Turning to selling and administrative expenses, S&A was $20.1 million in the fourth quarter, an increase of $2.6 million from the same period last year. Selling and admin expenses as a percentage of revenue was approximately 16.3% in the quarter as compared to 13.6% for the same period last year. Selling and admin expenses were $72.3 million for the 12 months ending April 30, 2024, an increase of $10.7 million from the same period last year. Selling and admin expenses as a percentage of revenue were approximately 14.1% for the 12-month period, as compared to 13.5% for the same period last year. Research and development expenses were $36.7 million for the fourth quarter, which represents a $6.8 million increase over the same period last year and includes $4.1 million in increased salary costs. Further, there were $1.4 million in temporary elevated R&D resource costs in the quarter, specifically relating to a specific project this quarter that was not in the prior year. Investment tax credits for the quarter were $4.1 million compared to credits of $3.5 million in the prior year fourth quarter. And for the year ended April 30th, R&D expenses were $134.8 million, which represents an increase of $17.7 million over the prior year and includes $14.4 million in increased salary costs. R&D expenses were approximately 26.2% of revenue over the year compared to 25.7% in 2023. The foreign exchange for the fourth quarter was a gain of $2.1 million, The gain was predominantly a result of the increase in value of the U.S. dollar against the Canadian dollar between January 31, 2024 and April 30, 2024. Foreign exchange for the 12 months year-ended April 30th was a gain of $0.2 million as compared to a gain of $2 million in the same period last year. Turning to discussion liquidity of the company, cash as at April 30, 2024 was $86.3 million compared to cash of $12.5 million as of April 30th, 2023. Working capital was $201.4 million as of April 30th, 2024, compared to $171.4 million at the end of April 30th, 2023. Looking at cash flows for the quarter ended April 30th, the company generated cash from operations of $34.2 million, which is net of a $14.6 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 from the calculation, the company generated $19.6 million in cash from operations during the quarter. The company used cash at $3.4 million for investing activities in the quarter, which was principally driven by the acquisition of capital assets. The company used cash in financing activities at $15 million, which was principally driven by dividends paid at $14.9 million. Now looking at cash flows for the 12-month period ended April 30th. The company generated cash from operations of $144.7 million, which is net of a $49.3 million change in non-cash working capital and current taxes. Those effects were excluded from the calculation. The company generated $95.4 million in cash from operations during the year. The company used $2.3 million of cash for investing activities, which was principally driven by the acquisition of capital assets of $9.6 million, partially offset by the disposal of investments during the year. The company used cash in financing activities of $70.2 million, which was principally driven by dividends paid of $58.6 million. Finally, reviewing our share capital position as of April 30, 2024, shares outstanding were approximately $76.1 million, and options in share-based RSUs outstanding were approximately $5.4 million. Weighted average shares outstanding were 76.1 million, and weighted average fully diluted shares were 77 million for the year end of April 30, 2024. That concludes 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 in the official reports filed with the Canadian Securities Commission. Brian, back to yourself.