Evertz Misses Expectations as Revenue Dip 14 Percent in Q4 FY 2013, Still Delivers Record Full-Year Performance

Posted by Joe Zaller
Jun 17 2013

Evertz announced that its revenue for the fourth quarter of its 2013 fiscal year was C$65.4m, down 14% versus the same period a year ago, and down 9% versus the previous quarter.

Net earnings for the quarter were C$10.52m (C$0.11 per share), down 40% versus the same quarter last year, and down 20% versus the previous quarter.

The results were well below the consensus expectations of equity analysts who were expecting revenue of C$73.2m and EPS of C$0.17. Analysts called the results “disappointing,” and noted that this was the company’s weakest quarter since Q4 2008.

Evertz EVP Brian Campbell said the company’s performance in the quarter had been impacted by the same type of macroeconomic issues seen across the technology sector in the first quarter of 2013, “where it’s pretty much in the first quarter sales have been off ten percent.” He also said that the European market had been weaker and is an area of concern for the company.

However, Campbell noted that the company does not necessarily see this as a long term trend, saying “I think it’s more a delay of spending as customers determine what they’re going to do in 2013.”

Revenue in the US/Canada region was C$33.3m, down 9.1% versus the same period a year ago, and down 1% versus the previous quarter.  US/Canada sales were 51% of total revenue during the quarter, up from 48% of revenue during the same period a year ago, and up from 47% of revenue last quarter.

International revenue was C$32.1m, down 19% versus the same period last year, and down 16% versus the previous quarter. International sales were 49% of total revenue, down from 52% last year, and down from 55% last quarter.

The company had 52 orders in the quarter that were greater than C$200,000 (down from 57 last quarter), and no single customer accounted for more than 5% of the company’s total revenue in the quarter.

Gross margins for the fourth quarter were 56.7%, up from 56% last year and up from 56.1% last quarter. Evertz CFO Anthony Gridley said that gross margins in the quarter were within the company’s historical range.

R&D expenses in the quarter were C$15.3m, an increase of 20.1% versus the same period last year, and up 17% versus the previous quarter.   R&D expenses were approximately 23.5% of revenue in the quarter, versus 15% last year, and 17% last quarter. Gridley attributed the sharp rise in R&D expenditure in the quarter to accelerated the purchase of materials and prototypes before the end of its fiscal year.  Gridley added that the company, which sees strong R&D as one of its differentiators, added engineers in the quarter and intends to continue adding engineers every quarter.

Selling and administrative expenses for the quarter were C$14m, an increase of 14% versus last year, and an increase of 2% versus the previous quarter. Selling and administrative expenses represented approximately 21% of revenue in the quarter versus 16% of revenue during the same period last year, and 19% of revenue last quarter.

The company’s purchase order backlog at the end of the third quarter of 2012 was in excess of C$35m, down from C$45m last quarter, and shipments during the month of May 2013 were $19 million.

 

Record Results for the Full Fiscal Year 2013

Revenue for the full year FY 2012 was C$316.3, up 8% versus the previous year, and a record result for the company.

The company’s top 10 customers accounted for approximately 25% of sales (C$79.1m) during the year, with no single customer representing over 5% (C$15.8m) of total annual revenue.

Full year fiscal 2013 net earnings were C$65.2m (C$0.88 per share), up 9% compared to net earnings of C$60m (C$0.81) in fiscal 2012.

During the year, the company had 246 orders of more than C$200,000, down from 282 in the previous year.

Full year revenue from the US and Canada revenue was $C173.2m, up 15.6% versus the full fiscal year 2012.  US/Canada revenue accounted for 55% of total revenue in fiscal 2013, up from 51% in fiscal 2012.

Full year revenue from the international region was $C143.1m, essentially flat with the previous year. International revenue accounted for 45% of total revenue in fiscal 2013, down from 49% in fiscal 2012.

Cash provided by operations was C$89.6 m for the 2013 fiscal year, up from C$66.6m in fiscal 2012. Before taking into account taxes and the changes in non-cash working capital, Evertz generated C$78.6m from operations for fiscal 2013, compared to C$73.0m for fiscal 2012.

Gross margins for the full year fiscal 2013 were 57.5%, up from 57% last year and within what company’s targeted range.

Full year R&D expenses were C$52.85m, an increase of 20% versus the previous year.   R&D expenses were approximately

Selling and administrative expenses for the fiscal year were C$53.1m, an increase of 13% versus fiscal 2012.  Selling and administrative expenses represented approximately 17% of full year revenue, up from 16% of full year revenue in fiscal 2012.

For the year ended April 30, 2013, the company used cash in financing activities of C$40.1m as a result of the payment of dividends of C$42.9m, repurchase of capital stock costing C$4.2m offset by the issuance of share capital of C$8m.

Campbell attributed the company’s record revenue to “continued worldwide demand for Evertz’s high-definition 3G and 4K video infrastructure offerings. More specifically, in success of Evertz’s comprehensive solutions delivering compelling value to our customers, and to the ongoing transition to high definition, and the increasing global demand for high-quality video.”

Campbell said the company remains “cautiously optimistic regarding the global economic environment, confident in Evertz’s ability to deliver compelling value and long-term stability to our customers. We’re encouraged by the Company’s continued solid performance in fiscal 2013, its record sales of C$316m, delivering net earnings of 21%, all while investing C$53m in R&D to fuel future growth. We are encouraged by the momentum we carry into fiscal 2014 with a purchase order backlog plus new shipments totaling over C$54m. With Evertz’s significant investments in new award-winning technologies, our comprehensive product offerings and the capabilities of our staff, Evertz is poised to build upon our leadership position.”

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