Evertz Technologies Limited

Good afternoon, ladies and gentlemen, and welcome to the Everts Q3 2025 conference 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, Andrew. Good afternoon, everyone, and welcome to Ebert's Technologies conference call for our fiscal 2025 third quarter and January 31st, 2025, with Doug Moore, Ebert'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 details. First off, sales for the first quarter, for the third quarter, totaled $136.9 million, up 9% sequentially from the prior quarter and 1% year over year. Revenue included $99.1 million in the U.S.-Canada region up 23% sequentially. Recurring software services and other software revenues increased 6.3% year-over-year, totaling $55 million in the quarter. Our base is well diversified, with the top 10 customers accounting for approximately 48% of sales during the quarter, with no single customer accounting for over 10% of sales. In fact, we had 115 customer orders of over $200,000 in the quarter. Gross margin in the quarter was $79.1 million, or 57.8%, which is within our target range. Investment in research and development during the quarter totaled $36.6 million. Net earnings for the third quarter were $21.1 million, while fully diluted earnings per share were $0.27. Everest working capital was $207.9 million, with cash of $96.3 million as of January 31, 2025. At the end of February, 2025 Ebert's purchase order backlog was in excess of $269 million and shipments during the month were $39 million. We attribute this strong financial performance and robust combined shipments and purchase order backlog to channel and video services proliferation, increased global demand for high-quality video anywhere, anytime, the ongoing technical transition to IP, IT, cloud-based architectures in the industry, 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, 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 of 20 cents per share payable on or about March 20th. I'll now hand it over to Doug Moore, Everett's Chief Financial Officer, to cover our results in greater detail.

All right. Thanks, Brian. Good afternoon. Starting with sales, revenue was a record $136.9 million in the third quarter of fiscal 2025. as compared to $135.3 million in the third quarter of fiscal 2024, an increase of $1.6 million, or just over 1%. For the nine months ended January 31st, revenue was $373.8 million, compared to $391.8 million in the same period last year, with a decline of $18 million, or approximately 4.5%. Looking at revenues in specific regions, the U.S. and Canadian region had revenue for the quarter of $99.1 million, compared to $80.5 million last year. That represents an increase of $18.6 million, or 23% quarter over quarter. Revenue in the U.S. and Canadian region for $267.9 million for the nine months ended January 31st, 2025, compared to $241.5 million in the same period last year, an increase of $26.4 million, or 11%. The international region had revenue for the quarter of $37.8 million, compared to $54.8 million last year, a decrease of $16.9 million, or 31% quarter-to-quarter. The international segment represented 28% of total sales in the quarter. For the nine months, end of January 31, 2025, international revenue was $105.9 million, compared to $150.3 million in the same period last year, a decline of $44.4 million, or Around 29.5%. Looking at the, we'll call it class of revenue. Hardware revenue in the three-month period into January 31st, 2025 was $81.2 million. That's compared to $82.8 million in the same period last year. While software and services revenue was $55.7 million in 2019. the quarter ended January 31, 2025, compared to $52.4 million in the same period last year. For the nine months, hardware revenue was $207.4 million, while software and services revenue were $166.4 million. Now looking at gross margins, gross margin for the third quarter was approximately 57.8%, compared with 58.9% in the prior year quarter. The gross margin was within our target range, albeit slightly lower than the past few quarters. The comparative decrease was largely driven by the product mix we delivered in the quarter. For the nine months ended January 31st, gross margin was approximately 58.8%. As noted, both quarterly and year-end to date margins were within our target range. Turning to selling and admin expenses, S&A was $19.2 million in the third quarter, That's an increase of 0.9 million from the same period last year. And S&A represented approximately 14% of revenue compared to 13.5% in the same period last year. For the nine months, period ended January 31st, selling and amending expenses were $55.2 million, increase of 3 million from the same period last year. And selling and amending expenses as a percentage of revenue were approximately 14.8% over the period. Now, research and development expenses, they were $36.6 million for the third quarter. That represents a $2.6 million increase from $34 million in the third quarter last year. The increase includes $1.7 million in increased salary costs and $0.9 million increase in a combination of higher software, prototypes, and material costs. As a percentage of revenue, R&D expenses were 26.7% compared to 25.1% last year. For the nine months, research and development expenses were $110.2 million. That represented an increase of $12.1 million over the same period last year. The increase included an increase of $5.7 million in North American salaries and another million in overseas salaries. Research and development expenses as a percentage of revenue were approximately 29.5% year-to-date. Foreign exchange for the third quarter was a gain of $3.9 million. compared to a loss of $2.9 million in the same period last year. The gain in the quarter was largely driven by the U.S. to Canadian exchange rate. So we closed January 31st at approximately $1.45 to $1.00, so $1.45 Canadian to $1.00 American. That's compared to $1.39 in October 31st. Foreign exchange, the nine months ended. January 31st was a gain of $4.7 million. That's compared to a loss of $2 million in the same period last year. Looking at liquidity of the company, Cash as at January 31st, 2025 was $96.3 million as compared to net cash of $86.3 million as at April 30th. Working capital was $207.9 million as at January 31st compared to $201.4 million at the end of April 30th. For cash flows, the company generated cash from operations of $53 million, which includes a $24.8 million change in non-cash working capital and current taxes. That change includes a quarterly decrease of inventory of approximately $11 million, which was split relatively evenly between finished goods and raw materials, as well as an increase in accounts payable of $7.4 million. If the effects of the change in non-cash working capital and current taxes are excluded, the company generated $26.8 million in cash from operations during the quarter. The company used cash of $1.1 million from investing activities, that's principally driven by the acquisition of capital assets, And the company used cash and financing activity of $17.2 million, which is principally driven by dividends paid of $15.1 million. Finally, looking at our share capital position as of January 31st, shares outstanding were approximately $75.9 million, and options and equity-based restricted share units outstanding were approximately $5.1 million. The weighted average shares of standing were 76 million, and the weighted average of fully diluted shares were 77 million for the quarter ended January 31st. That brings to a conclusion the review of 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 with the Canadian Securities Commission. Brian, back to yourself. Thank you, Doug.