Evertz announced revenue for the first quarter of its 2017 fiscal year, which ended on July 31, 2016. Revenue for the quarter was C$87.0 million, up 2.5% versus the same period a year ago, and down 9.7% versus the previous quarter.
The strengthening US dollar contributed a foreign exchange gain of C$6.6 million during the quarter.
Net earnings for the quarter were C$18.6 million (C$0.25 earnings per share), flat versus the first fiscal quarter of 2016, and an increase of 129.6% versus the preceding quarter. The company generated C$19.9 million cash from operations in the quarter. This compares to cash used by operations of C$7.8 million during the same period last year and cash from operations of C$10.1 million during the previous quarter.
Revenue results for the quarter were below the consensus estimates of equity analysts of C$95.1 million, while earnings results were above the consensus estimates of analysts of C$0.24 per share.
During management’s exchange with analysts, EVP Brian Campbell attributed the lower level of revenue in the quarter to the typical lumpiness of orders along with the stretching of certain orders into future quarters.
The Company said its shipments during August 2016 were C$31 million, and that its purchase order backlog at the end of the quarter was in excess of C$70 million. The combined shipments and backlog of C$101 million is a record level for Evertz.
The top ten customers in the quarter accounted for 30% of revenue and no customer accounted for an excess of 6% of revenue. Evertz had 104 individual customers each representing over $200,000 of revenue.
Gross margins in the quarter were 57.3%, down slightly from 56.4% last year and also down from 57.1% last quarter. For the quarter operating margins were 28.5%, compared to 29.9% during the same period last year and 23.9% in the FQ4 2016.
Evertz ended the quarter with C$125.4 million of cash and cash equivalents up slightly from C$123.1 million at the end of last quarter.
Revenue by Geography:
- Revenue in the US/Canada region was C$52.1 million, an increase of 4.2% versus the same period a year ago, and flat versus the previous quarter. US/Canada sales were 59.9% of total revenue during the quarter, up from 58.9% of revenue during the same period a year ago, and a substantial increase versus the 53% contribution during the preceding quarter.
- International revenue was C$34.9 million, flat versus the previous year’s result and a decrease of 22.6% when compared to the previous quarter. International sales were 40.1% of total revenue, down from 41.1% last year and 47.0% last quarter.
Operating Expenditures by Function:
- R&D expenses (before tax credits) in the second quarter were C$17.5 million, an increase of 7.4% versus the same period last year, and an increase of 1.2% versus the previous quarter. R&D expenses were 20.1% of revenue in the quarter, higher on a percentage basis than the 19.2% last year and the 17.9% last quarter.
- Selling and administrative expenses for the quarter were C$14.9 million, a slight increase of 0.7% versus last year, and a decrease of 8.0% versus the preceding quarter. Selling and administrative expenses represented approximately 17.1% of revenue in the quarter versus 19.2% of revenue during the same period last year, and 17.9% of revenue in the previous quarter.
Management Commentary on Results:
Consistent with earlier quarters, Evertz EVP Brian Campbell attributed the overall performance and combined shipment and order backlog “to the ongoing transition to HD, channel proliferation, the increasing global demand for high-quality video anywhere anytime”. Also consistent with previous quarters, Mr. Campbell added emphasis on “the growing adoption of Evertz’s IP-based software-defined networking solutions.”
While Evertz declined to provide an update on the number of SDVN deployments (over 50 SDVN installments as of the 2016 NAB Show), the Company did issue a press release on the receipt of a C$13.5 million purchase order for a “state-of-the-art” IP facility for a US customer. The purchase order includes multiple EXE hyperscale and IPX modular switch cores, IP media gateways, and compression and control solutions.
In responding to a question by Thanos Moschopoulos of BMO Capital Markets on the interest level of cloud for Evertz customers, Mr. Campbell provided commentary on cloud adoption in the media sector. “It’s very much early days, but it is meaningful” stated Mr. Campbell. “And Evertz is well down the path in virtualizing the important components for customers to meet to their needs, whether that’s in a public cloud or in a private cloud or hybrid” continued Mr. Campbell.
Press release on Evertz FY Q1 2017 Results
MD&A on Evertz FY Q1 2017 Results
Financial Statements for Evertz FY Q1 2017
Press Release on “State-of-the-Art” IP Facility Order
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