Evertz announced record revenue for the first quarter of its 2015 fiscal year of C$98.0m, up 54% versus the same period a year ago (a poor quarter for the company), and up 12.5% versus the previous quarter.
Net earnings for the quarter were C$19.7m ($0.27 earnings per share), an increase of 61.3% versus the first fiscal quarter of 2014, and an increase of 33% versus the preceding quarter. The company generated C$15.3m cash from operations in the quarter. This compares to cash from operations of C$2.7m during the same period last year and negative C$1.3m during the previous quarter.
The revenue result is the highest in Evertz’s corporate history. It came in well above the consensus estimates of equity analysts, which were expecting revenue of $C91.7m and earnings of C$0.24 per share.
Evertz EVP Brian Campbell attributed the strong performance “to the ongoing transition to HD, channel proliferation, the increasing global demand for high-quality video anywhere anytime, to worldwide demand for Evertz’s comprehensive product offering with our optimized workflow solutions providing compelling value to customers and to the growing adoption of Evertz’s state of the art sports replay and our software defined video networking solutions”
Revenue in the US/Canada region was C$55.5m, up 55% versus the same period a year ago, and up 28.8% versus the previous quarter. US/Canada sales were 57% of total revenue during the quarter, up from 56% of revenue during the same period a year ago, and 49.5% of revenue last quarter.
International revenue was C$42.5m, representing 52% growth versus the previous year’s result and a slight decrease of 3.7% when compared to the previous quarter. International sales were 43% of total revenue, down from 44% last year and 50.5% last quarter.
The top ten customers in the quarter accounted for 31% of revenue (C$17.2m), and the largest customer in the quarter accounted for 6% of revenue (C$3.3m).
During the first quarter of fiscal 2015, Evertz had 86 individual customers each representing over $200,000 of revenue.
Gross margins in the quarter were 57.0%, down slightly from 57.5% last year and up from 56.3% last quarter. Evertz executives said that the gross margin performance in the quarter were within the company’s target range of 56% to 60%. Consistent with recent calls, equity analysts asked both why the company’s gross margins were not increasing more rapidly with revenue growth, and what is required for gross margins to move to the high-end of Management’s target range.
While Management cited gross margins drivers of product mix, geographic mix, and the discounting of volume orders, the principal factor was the competitive pricing environment. “We’ve been in a quite a competitive pricing environment for the last year, so there hasn’t been any significant change to that.” noted Campbell.
R&D expenses in the second quarter were C$15.8m, an increase of 18% versus the same period last year, and down 2.8% versus the previous quarter. R&D expenses were approximately 13.6% of revenue in the quarter, lower on a percentage basis than last year (16.6%) and last quarter (15.8%) due to higher revenue.
Selling and administrative expenses for the quarter were C$13.4m, an increase of 16% versus last year, and a decrease of 18.8% versus the previous quarter. Selling and administrative expenses represented approximately 15.5% of revenue in the quarter versus 20.5% of revenue during the same period last year, and 18.9% of revenue last quarter.
The company said that its shipments in August 2014 were C$25m, and that its purchase order backlog at the end of the quarter was in excess of C$46m.
The company ended the quarter with $103.4m of cash and short term investments up slightly from C$102.0 at the end of last quarter.
There was some additional commentary provided during management’s exchange with equity analysts:
Thanos Moschopoulos, BMO: “…With respect to the EXE and the overall IP product platform, is there any incremental color you can provide in terms of the types of customers you are seeing adopt that solution?”
Brian Campbell, Evertz: “…We are definitely seeing good interest and traction within our broadcast and new media customer set”
Rob Young, Canaccord Genuity: “…A lot of your competitors have been going through large M&A and are you seeing any beneficial environment for Evertz while some of these large competitors change their strategy?”
Brian Campbell, Evertz: “Yes we have picked up market share from our perspective. We have very solid year-over-year growth and I don’t know that any of the competitors have had anything similar to that although some of them are no longer public entities where you can see the numbers. So I would say that yes we have definitely benefited and as a consequence perhaps of their activities but also directly resulting from the very significant, sustained investments we’ve made in new products and innovation.
Campbell concluded the call by emphasizing several points, “Our commitment to R&D continues to deliver innovative solutions enabling our customers to migrate to IP and IT based solutions to address the increasing complexities of our industry and to implement multiscreen TV everywhere anytime solutions. Our customers have confidence in Evertz’s financial stability and our competitive position as one of the largest pure-players in the broadcast technology sector.”
Press Release: Evertz Technologies Limited Revenue for the three months ended July 31, 2014
Evertz Revenue Declines 33 Percent in Q1 Fiscal 2014
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