Evertz Revenue and Earnings Decline in Fiscal Q3 2012 Despite Improving International Performance

Posted by Joe Zaller
Mar 07 2012

Evertz announced that its revenue for the third quarter of its 2012 fiscal year was C$71.4m, a decline of 15% versus the same period a year ago, and up 1% versus the previous quarter.

The company’s top ten customers provided 27% of revenue during the quarter, with no one customer accounting for more than 6% (C$4.3m), and the company had 70 orders in excess of C$200,000.

Net earnings for the quarter were C$12.7m (C$0.17 per share), down 48% versus the same quarter last year.

The results for the quarter were below the expectations of equity analysts, who on average were looking for revenue of C$78.8m and EPS of C$0.24.

Revenue in the US/Canada region was C$32m, or 45% of total revenue, down 19% versus the same period a year ago, and down 11% versus the previous quarter.

International revenue was C$39.4m, an increase of 11% versus last year, and an increase of 14% versus last quarter.  When asked about the company’s international performance, Evertz EVP Brian Campbell attributed the growth to the increasing demand for the company’s products in international markets as a result of the ongoing worldwide transition to HDTV operations, the rebound in some international markets, and the fact that that Evertz had been able to “refocus its resources” where needed thanks to its flexible sales structure.

Gross margins in the quarter were 56.2%, down from 58% last year and down from 57.3% last quarter.  The company attributed the decline in gross margins to a different geographic and product mix in the quarter, particularly the lower sales performance in the US market where margins for some products are higher.

R&D expenses in the quarter were C$11m, an increase of 15% versus the same period last year.  On its conference call with equity analysts Evertz CFO Anthony Gridley attributed the rise in R&D spending to the timing of expenditure for prototyping materials, which increased during the quarter.  Gridley also said that the company will continue to increase its R&D investment, and that a run-rate of approximately C$11m per quarter should be considered normal.

SG&A expenses for the quarter were C$12.7m, an increase of 27% versus last year. Selling and administrative expenses represented approximately 17.7% of revenue in the quarter.

Capex was up sharply to C$10.9m, due primarily to the purchase of a new airplane for approximately C$9m during the quarter.  The company said it is in the process of retiring the existing airplane that it already owns.

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Year to Date Performance:

Revenue for the first nine months of fiscal 2012 was C$217m, down 10% versus last year.

Year-to-date US and Canada revenue was C$113.2m, down 14% versus the previous year.  Year-to-date revenue in the international region was C$103.9m, down 5% versus the previous year.

Gross margins for the first nine months of the year were 57%, down from 58% last year, but still within what the company’s targeted range.

 

Outlook:

The company said that it expect its revenue for the second half of the current half of the fiscal year to exceed the first half of the year, and that it should grow faster than the overall market over the next several years.

Campbell said that Evertz is entering the fourth quarter and the upconing NAB trade show with strong momentum.  The company’s purchase order backlog at the end of February 2012 was in excess of C$42m and shipments during the month of February 2012 C$26 million.  In the past the company typically turned its PO backlog into sales in 4-6 weeks, but Campbell said that more recently the conversion time between orders and sales had increased, and that some of the company’s current backlog will take longer to convert into sales.

 

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Related Content:

Press Release: Evertz Technologies Reports Results for the Third Quarter Ended January 31, 2012

Previous Year: Evertz Q3 2010 Net Income Doubles as Revenue Rises 26 Percent

Previous Quarter Press Release: Evertz Technologies Reports Results for the Second Quarter Ended October 31, 2011

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  1. […] Evertz announced that its revenue for the third quarter of its 2012 fiscal year was C$71.4m, a decline of 15% versus […]

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