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spk05: Same third quarter of this fiscal year represented an increase from the 68.9% realized in our second quarter of this fiscal year. And just to complete the thought, that same second quarter gross margin represented an increase from the 66.6% realized the quarter before that, our first quarter of this fiscal year. We have discussed gross margin expansion in previous calls, but to put an exclamation point on the matter, margin expansion resulted from firstly, our exit from the house of worship business as the vertical was a below the average performer in terms of gross margins. We believe that initiative in it of itself resulted in approximately a 200 basis point improvement in margins each quarter since our exit in April, 2023. Secondly, our supply chains are reverting to more typical delivery schedules and more typical pricing. In this quarter that's just ended, as an example, the additional cost for these difficult-to-procure components was rather de minimis, well under $100,000. And on a year-to-date basis, the additional cost for this component was approximately $950,000, or representing about 100 basis points in our cost of goods sold. The good news is that the extra costs incurred in fiscal 2023 were approximately half of the costs that we incurred in fiscal year 2022, a year in which the gross margins were being impacted by almost 200 basis points. We do expect these extra expenses to continue to dissipate with the impact to this fiscal year's results being approximately half of the expense incurred in fiscal 2023. Lastly, we have completed our migrations of ERP systems at both MCS and AviWest, so our supply chain folks have more visibility to inventory levels, manufacturing forecasts, and purchasing methodologies at both MCS and AviWest. This represents a bit of a greenfield opportunity for further improvements. With that said, and it has and as has been suggested on past calls, our fourth quarters are commensurate with the U.S. government year-end, and we are typically the beneficiary of higher defense spending. This quarter, just completed, is no exception. Thus, the quarter's mix of revenues included a higher percentage of legacy products, which historically operate at a higher overall product margin. Although we do have Opportunities for additional improvements in gross margins, particularly related to the amount of difficult-to-secure inventory consumed in fiscal 2024, and added visibility and control of supply chains. It's the mix of revenues in the next few quarters that may change our gross margin composure. The result of it is that we may see gross margins in the near term and or mid-term reflect the fact that a higher proportion of our revenues are coming from AWS products and MCS products than we had just incurred in our fourth quarter. These gross margin improvements are real, and we should realize the benefits in fiscal year 2024 and beyond. Any variances are likely going to be related more to mix. Total expenses for this fourth quarter were $22.9 million. That's a decrease of $3.2 million when compared to the prior year comparative period. Even more noteworthy is that the quarter just ended included certain performance-based compensation expenses that were not incurred in the prior fiscal year and may not happen in 2024. Much of the decrease in total expenses is related to the restructuring costs of $2.3 million that were incurred in the fourth quarter of our prior year. However, we have essentially completed the restructuring exercise that was initiated in that fourth quarter of fiscal 2022 and completed in the third quarter of fiscal 2023. At the end of this last quarter, we had 359 employees, compared to 393 employees at the same time the prior year. Also know that year end headcount was down from the 374 employees at the end of our previous quarter. That's our third quarter. What is really exciting about our fourth quarter performance is that most of the noise related to restructurings and acquisitions is behind us. And this recent fourth quarter provides a sense of the earning potential of the business. And there may be opportunities for additional OPEX savings in the first quarter of 2024. For the fiscal year, total expenses were 97.4 million. That's an increase of 5.8 million when compared to the prior year. Again, year-over-year comparisons are still impacted by the timing of the Abby West transaction. The Abby West transaction was consummated in April of 2022, which implies that Abby West's cost structure was only represented for seven months in fiscal 22 versus 12 months in the year just ended. But if we were to focus on the $5.8 million increase year-over-year, Compensation-related expenses added approximately 3.8 million, much of which can be attributed to the five additional months of compensation paid based on the timing of the Abby West acquisition. Remember, the acquisition added approximately 80 people to our organization in April 2022. Depreciation and amortization expenses increased by 1.4 million, again, largely the result of the timing of the Abby West acquisition. Travel expenses added an incremental $1.5 million, partly related to the timing of the AWS acquisition, but more related to the growth in MCS that we are seeing. And then, of course, the Canadian dollar exchange rate impact on the U.S. dollar denominated assets and liabilities added an incremental $1.5 million to total expenses when comparing this year to last year. On the other hand, We did successfully reduce our use of independent contractors for our R&D initiatives by about 1.5 million, which was really part of our restructuring initiatives. And restructuring costs in fiscal 2023 were 800,000 less than the fiscal year just completed. I'm sorry, 800,000 less in this fiscal year just completed when we compare it to the prior fiscal year. The results of the better gross margins and a decrease in OpEx was an adjusted EBITDA for the quarter of $5.7 million. That's an increase of $800,000 or 15% when compared to the prior year comparative period. By now, I think we can all agree that we've been conveying our perspective that that third quarter would be a turning point for high vision. and the adjusted EBITDA margin for the quarter just completed was 15.9%. This adjusted EBITDA margin compares quite positively to the 12.4% in the prior quarter, that's our third quarter of fiscal 2023, and compares positively to the 7.5% in the quarter prior to that, our second quarter of fiscal 2023. We have made slow and steady progress to reach our goal of 20% adjusted EBITDA margins, and I believe now you are beginning to see the full benefits of the restructuring plan. We still have additional opportunities to increase adjusted EBITDA margins. We may continue to see modest increases in gross margins as we absorb the remaining higher cost componentry and we apply our supply chain tools to ABVUS and MCF. since they are now on a common platform. We should also see additional decreases in compensation expense in the near term, as we will likely not have the same outsized obligations related to performance-based compensation that we had in 2023. Although our fourth quarter has been traditionally our largest quarter, and as such, our most profitable quarter, that seasonality pattern is less true as the Department of Defense and the U.S. government is tending to buy our gear more radically throughout the year. Further, MCS and Abby West seasonality seems to mitigate the fourth quarter seasonality of our legacy business. But despite all of that, we still believe that our fourth quarter performance is a true indicator of the earning potential of the business. Adjusted EBITDA for the full year was $14.8 million, an increase of $6.7 million, or 83% when compared to the prior year. The adjusted EBITDA margin for this full year was 10.6% compared to only 6.4% for the prior year comparable period. I should mention that we also saw significant improvement in the net income for the quarter. The net income this quarter was $2.5 million compared to a net loss of $1.1 million to the same time last year. That represents a $3.6 million improvement. So quickly, the improved gross margins were more than able to offset the modest revenue differences year over year, generating incremental gross profit of $800,000. And that incremental gross profit was further benefited by 3.2 million decrease in total expenses. On the other hand, income tax cost us an incremental 500,000. For the full fiscal 2023, our net loss was only 500,000 compared to a net loss of 6.3 million for the prior year. This $5.8 million improvement is largely related to the $14.2 million incremental revenues and improved gross margins that resulted in an incremental gross profit of $10.3 million. Now, this incremental gross profit was offset by increases in expenses of $5.8 million and increases in income tax by $900,000. Overall, pretty good performance. With respect to the balance sheet, We ended the quarter with a cash balance of $8.3 million, a modest increase of $800,000 from the prior quarter end. However, we also ended the quarter with only $4.7 million outstanding on the credit facility. That's also a reduction of $900,000 from the prior quarter end, but it's a $6.5 million reduction from the beginning of this fiscal year. Total assets at year end were $144.1 million, That's a decrease of $4.5 million from the prior year end. But this decrease in assets can be attributed to a $4.2 million reduction in intangible assets. Now, just on the side, we amortized $6.8 million in intangibles during the year, but the impact of the amortization was offset by exchange rate impacts on those same assets. We also decreased inventory levels by 2.1 million. Again, that was an initiative that we spoke about in the past and has been a focus much of the year. We reduced right of use assets by 1.5 million, and there was a modest reduction in trade and other receivables. Now, these decreases were offset by the $2.5 million increase in our cash balance this fiscal year and 1.5 or 1.6 million increase in tax credits receivables. The story on the liability side is even more compelling. Total liabilities at quarter end were $49.9 million. That's a decrease of $8.4 million from the end of fiscal 2022. This decrease in liabilities during the year include $6.5 million decrease in the line of credit, $1.8 million decrease in the purchase price table related to the Abby West transaction, 1.4 million decrease in restructuring costs payable, 1.4 million decrease in lease liabilities, and 900,000 decrease in term loans. These five items themselves represent a reduction of liabilities by $12 million. Now, these decreases were offset by 3.3 million increase in deferred revenue. This 30% increase in total deferred revenues is commensurate with the approximate 30% growth in our maintenance and support revenues that we spoke about before. So with respect to the remaining integration plans, for AviWest, we have completed the move of AviWest to a common accounting system. We completed AviWest's move to a common ERP system. And with this enhanced visibility of AWS inventory, we hope to increase the flexibility of the AWS supply chain and reduce product costs to increase gross margins. Our focus in the near term is to sell more AWS products in North America, and we're well on our way. At HiVision MCS, progress has accelerated. We have fully integrated development teams. We have fully integrated production capabilities. and we have migrated MCS ERP system and accounting system to common platforms. Our focus in the near term is to sell more MCS product internationally. In terms of expectations for fiscal 2024, first of all, our revenue guidance for the full year factors in our exit from the House of Worship vertical in April 2023. We are projecting revenues for this fiscal year to be between $145 and $150 million. We also expect to see continued expansion of our adjusted EBITDA margin as we take advantage of the recent restructuring and the synergistic opportunities. Thus, we anticipate adjusted EBITDA margins in the mid-teens, and we still anticipate seeing one quarter in this fiscal year knocking on the door of our long-term adjusted EBITDA margin of 20%. Since we believe this fourth quarter just completed represents a bit of a watershed event, we wanted to manage first quarter fiscal 2024 expectations as well. Typically, we see first quarter revenues being down from the prior fourth quarter, which was the case in this most recent first quarter. first quarter 2023. We will likely see something similar this year, again mitigated for the seasonality that we expect to see from MCS and Abby West. The revenue mix will likely be more slanted towards our MCS and Abby West products, as MCSs and Abby West revenue tend to be strongest at calendar year end. The result is that we will likely see lower gross margins due to mix. However, the revenue difference and the gross margin difference will likely be overcome by additional reductions in total expenses. So that really concludes my prepared remarks. I'm going to pass the microphone back to Mirko, and then we will open the floor to questions.
spk03: Thanks, Dan. Actually, I think we'll just open up for questions, and then I'll close up after that. So who's going to ask the questions?
spk00: Thank you. If you have a question, please press star 1 on your telephone keypad. If you wish to remove yourself from the queue, simply press star 1 again. One moment, please, for your first question. Your first question comes from the line of Nick Corcoran of Acumen Capital Partners. Your line is open.
spk04: Hey, guys. Congrats on the strong quarter and end of the year. Maybe... Maybe thinking about your guidance for fiscal 24, can you maybe talk about how we should think about the growth by end market?
spk05: I'm not sure I have that much visibility. Mirko, is this something that you can speak to?
spk03: Yeah, you know, it's a tough one. We don't really... I don't think we're ready to say exactly per market. I mean, at this point, I would say if I was going to take a stab at it, honestly, I think our biggest growth for next year is going to be probably in the Command 360 and the Enterprise and Defense space. And I think broadcast is also showing some good because it is an Olympic year. And an election year. Well, and an election year. But, you know, it's like that's the unknown right now. But I haven't seen an election that hasn't been positive for business ever. So I don't expect it to be a negative. But the only thing that I'm concerned about is this whole continuing revolution and the whole budget nonsense that keeps, you know, kicking down the can down the road. I don't see I don't think they're going to freeze the budget, but you just never know. And that could affect. you know, every company, you know, that deals with the government, right? So at this point, you know, I'd rather not break it down by market. I think overall, we feel very confident because of this free market and how it actually spins out at the end. It's probably too early to tell.
spk04: That's fair, and good call. And you spoke about cross-selling MCF and AVIOS products into other geographies. How successful have you been to date and what should we be disappointed for?
spk03: Yeah, no, good question. Actually, I'm very pleased on the progress that we've done in the international expansion and business development investments for the Command360 space. It is a long-term cycle. Let's not forget that. So we're really building for 2025, 2026, and 2027 and beyond. but we've hired people, we've got people in place. We've actually closed several really good deals last year in international. We've got a great pipeline. So I'm very pleased on how that's progressing. I'd say on the other side, on the broadcast side, from the US side, we are actually really jump-starting this year. We're working on a rental program we've launched. We're looking at a long-term leasing program. Probably a little slower than I want it to, but I think there's some good progress that we're doing this year. So I expect both of those to really show some fruit in 2024. That's great.
spk04: That's all the questions I have. Thanks.
spk00: Your next question comes from Daniel Rosenberg of Paradigm Capital. Your line is open.
spk02: Hi, Mirko and Ben. Congrats on a strong quarter. My first question was just around the trend of recurring revenue. I was just wondering how much visibility do you have on recurring versus the more transactional revenue? How far can you see into the year?
spk03: Dan, do you want to take that?
spk05: Well, I can, yeah, I can kind of speak to parts of it, right? So recurring revenue, maintenance and support, that gives us some visibility. And I believe we did around $25 million last year in such maintenance and support. And that tends to be a bit of a machine these days. And we get the benefit of the renewal. So we're happy to see that the growth in that area increases. is exceeding that of the growth of our product sales specifically because it demonstrates that we're not losing people who are maintenance and support contracts. So we're seeing 20%. That's a firm, firm answer. The house of worship business or the cloud business is a little bit, it's a smaller business right now since we got rid of the house of worship vertical. And so I don't have a tremendous amount of information about it. But I think there's another element of this that we need to discuss and that's this programmatic business. These are larger sails with multiple installations that span years. And so we get the benefit of knowing that this is going to come in next year, this is going to come in the following year, this is going to come in the year after that. And there's been two examples that we keep up and pointing to to demonstrate this. One is with the Navy, where we've been retrofitting all of the ships as they come into dry dock every few years. for upgrades and updates. That's a program where we've replaced ourselves a couple of times, and that has been the gift that keeps on giving. And we hope to be able to even get into the next version of revamp on that as well. The other example is the State Department. We're replacing every State Department's video infrastructure system with our technologies, and we are deploying that 20, 30 at a time per year. So that gives us some visibility as to what's going on. This is also a true dynamic of our MCS business. Once we get into some of these financial services organizations or these larger companies, they have multiple control rooms across the world, and they want to settle on a single vendor. And once we get in there, it's a land and expand, and that generates incremental revenues for the foreseeable future. We probably need to spend a little bit more time assessing what it is, but historically, we had visibility to do as much as 60% of our revenue. Maybe it's about 50% now when we don't have house of worship to look at, but it's a significant piece of our business is known at any given point in time.
spk02: Okay, I appreciate that context. It was great to see the balance sheet really strengthen significantly in the quarter. And I saw the NCIB mentioned in your statement. So I was just wondering how aggressive you intend to be with the NCIB, given where shares are or other uses of capital for that matter. Just your comments on that.
spk05: Well, I mean, I think our design, the reason for the NCIB is to provide support for a thinly traded stock. we have seen some movement in the stock. I think people are finally listening to the high vision story, even though we've sort of been pounding our chest for the last three quarters, that this is a real story that's got legs and that you ought to hang on if you want outsized returns. This run-up has happened in the last three or four days. So we have to sort of rethink about what our strategy is going to be, but it is there for us to provide support It is there for us to demonstrate that we believe the shares are undervalued, and we're looking forward to being able to sort of bring some value to all of our shareholders as a result.
spk02: Okay. And just last one for me, a bit of housekeeping. I just didn't quite hear clearly the guidance. I heard the top end was $150, but I didn't hear the bottom end.
spk05: What I said is that we expect for the full year our adjusted EBITDA margin to be in the mid-teens. Usually when I say mid-teens, that's just over 15% mid-teens. But there's some variability to that. And I still believe that we are going to be knocking on the door of 20% in at least one of the quarters coming up.
spk02: And then on the top line on revenue?
spk05: The range that we're giving is 145 to 150.
spk02: Okay, perfect. I'll pass the line. Thanks so much and congrats again.
spk00: Again, if you would like to ask a question, please press star 1 on your telephone keypad. Your next question comes from the line of Robert Young of Canaccord Genuity. Your line is open.
spk01: Hi, good evening. Maybe just the first question on EBITDA margins quarter over quarter. I think you said that EBITDA margin expansion, I think that's a full year comment. But he said gross margins should be weaker in Q1, offset partly by OPEX. I'm just trying to understand the cadence of gross margin expansion through the quarter, maybe how that affects Q1 EBITDA for modeling purposes.
spk05: Well, look, so we've seen over 600 basis points improvement in gross margins from a year ago to where we are today. And most of that is specifically related to things that you can clearly see. Again, the high-priced components that we had to purchase and the exit of the House of Worship business. Those are known. Those were forecast. And we kind of gave everyone an expectation of how that was going to impact those margins. The third, having more control and visibility to supply chains at Abby West and MCS is a little less specific. Clearly opportunity. We've got some of the best people in our organization working on these things here. And so there is possibility for opportunity. What I wanted to try and convey is that, first of all, I don't expect to see tremendous gross margin expansions from what we saw in the fourth quarter. That's number one. That's a big number that we have there. Can it happen? Sure, it can happen. But I don't want that to be the expectation that we're going to be seeing one to two point improvements for the remainder of the year. In fact... I'm kind of suggesting to you, given mixed, we'll likely see a decline in gross margins for no other reason than mixed. So I don't want anyone to get alarmed that the margins are going to be give or take from the levels we are today, but it's all based on mixed. What I'm trying to suggest is that our cost structure for our fourth quarter is pretty sound. We spent a lot of time making sure that our fourth quarter was as clean as could be so that we could demonstrate to everyone that the business does generate 20% EBITDA margins at scale. I think we've done that. I think that you'll see in our first quarter that our expenses will be somewhat less than our fourth quarter demonstrated for compensation reasons and so on and so forth. So any shortfall from fourth quarter revenues or any shortfall in the gross margin that might happen due to mix likely will be overcome through additional savings and offbacks. That's the message I'm trying to convey.
spk01: Okay. I mean, if I parse all that, I guess it still sounds like you think that there's a chance for EBITDA margins to expand quarter over quarter in Q1. I'm just sorry to ask that question again. I just want to make sure I understand it correctly.
spk05: Well, if you're asking me whether our first quarter 2024 is going to be better than our first quarter 2023, absolutely. I mean, we only generated EBITDA of two plus million dollars, whereas we just finished 5.7, right? So I'm sorry, first quarter 2023 with 2.1, we're certainly going to be doing better than that. We're probably going to be looking and feeling more like fourth quarter than any other quarter.
spk01: Okay, that's helpful. And then a little bit of commentary on the election activity typically driving positive opportunities for AmeriCo. I'm trying to understand that. Is that related to the broadcast business or does it create opportunities in the government and military business? Maybe you can just give a little more insight into that. My sense... It might pause some government spending, and so maybe you'd correct my understanding there.
spk03: Yeah, that's a very good question because there's multiple markets being involved here, right? I was more referring to government spending rather than, you know, why broadcasters think because it's election year they're going to sell a few systems. That's, to me, a much smaller piece. you know, where most of our broadcast business is all about live sports, right? Okay, some live news, but that's, I was more referring to the election year, but also referring to potential, you know, non-passage of budgets to run the government and the government shuts down, right? And we've seen what happens with that previously. So that's my only concern. I don't believe that's going to happen during the election year, But then, you know what, given what's going on in the U.S. at this point, who knows what's going to happen. So that was my only comment is government spending. Remember, we're doing a lot of government business, government enterprise business, government defense business. And that's a big piece of the business, right? So should I take the wrong turn? You know, that's the only thing I'm going to be worried about for next year. The good news is it's election year. And I don't think we've ever witnessed a negative consumer business year in an election year, ever. But I have to say it anyways.
spk01: Okay. Thank you. And maybe last question, another high-level one for you. Last quarter, you'd highlighted a lot of activity around cybersecurity, and I think you're tying it to government spend, like local spending. emergency, fire, police, et cetera. Can you maybe put a little bit of meat around that? Like, are you still seeing that sort of demand around cybersecurity? And maybe give a sense of how you plug into that opportunity, and then I'll pass the line.
spk03: Yep, absolutely. In fact, it's going gangbusters, the activity on that. Everybody that we talk to, that is a requirement. Everybody's concerned about security. They have been for a while. We've been involved in this for a long time, but we're seeing it exponentially in the enterprise space, not just government, not just defense, of course, but in the enterprise space, whether it's banking, pharmaceuticals, oil and gas, everybody is concerned about security, cybersecurity, and secure networks. And that's what we're all about. So the good news is that that's the hot button. We're right at the top of that. I mean, again, I appreciate it. These are long-term sales opportunities, right? So we're preparing. We're building. We're doing a lot of biz dev. We're working with integrators, partners, child partners, especially internationally, to build that infrastructure out and possibly take advantage of what I believe is going to be a huge market expansion in the next five years. So that's really the positioning of the X to the massive business. but we're definitely, that's not going to stop. And as we look at it from the defense side, unfortunately, with just way too many wars going on, I don't see that that's going to change anytime soon. I think it's going to continue, and that's actually getting more interest within the defense sector where they do need mission-critical awareness, decision-making capability, and that plays right into our whole end-to-end piece.
spk05: If I could just fill in a spot here, I mean, I think everyone can get their head around what MCS's business are. You see a lot of TV programs where you see controls with lots of screens and lots of visualization and so on and so forth. Now, all of a sudden, there are enterprises who have control rooms focused on the cybersecurity threat. Let's take banks as an example. They are monitoring emails, and they're monitoring networks, and they're monitoring intrusions, and they're monitoring everything. They're using our visualization systems as a means to capture and display all of that information in a single location to be on top of it at any given point in time. So I hate to say it, but cyber problems are part of the wind in our sails.
spk01: That's great. Thanks for the color. Congrats on a strong quarter. I'll pass the line.
spk00: All right. Thanks. There are no further questions at this time. I'll now turn the call back to Mirko Wicca for some closing remarks.
spk03: Okay. Well, thank you, Jean-Louis. And I just want to thank all of our shareholders and, of course, analysts on the line today for their continued support of hydrogen. And I really look forward to speaking with you in mid-March when we will be discussing our first quarter of 2024 results. So thank you, everybody. Thank you for listening, and we'll speak later. Bye.
spk00: This concludes today's conference call. You may now disconnect.
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