EVERTZ REPORT_Front_Back Cover_2022_Aug 30.pdf - p1 (August 31, 2022 18:30:32)
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A LETTER TO FELLOW SHAREHOLDERS
Fiscal 2022 marked Evertz’ return to pre-pandemic revenues and profitability. Despite challenges, Evertz generated
strong revenue growth of 29% year over year, while generating 75% more pre-tax earnings. Evertz has managed
through the challenges by expeditiously addressing issues head on, while continuing to prioritize the health and safety
of our employees, customers and partners, working assiduously with our customers to provide on-time deliveries and
continuous support and solutions, and continuing to maintain our focus on investing into new technologies. Evertz
decisive actions and adherence to our strategic vision has resulted in Evertz ending the year with a healthy balance
sheet, strong operational cash flows, spirited efficiency gains, while delivering significant value to shareholders.
Highlights from the year include:
• Annual revenues of $441 million;
• Earnings before taxes of $98 million, an increase of 75% year-over-year;
• Annual investment in research and development of $102 million;
• Distribution of excess cash flow through quarterly dividends totaling $0.72 per share during the year;
• Return to shareholders of excess capital through a special dividend of $1.00 per share; and
• Year-end cash of $34 million.
VIDEO PROLIFERATION, 4K/UltraHD, LIVE CONTENT, ANYWHERE & ANYTIME
Today our customers’ evolving needs are driven by the global demand for more content, channels and services and
by the emergence of UltraHD with High Dynamic Range and enhanced audio to create an immersive experience and
by increasing consumer appetite for high quality video delivered anywhere, anytime across a broad array of devices.
Evertz expertise in delivering end to end solutions, from production, content creation, distribution, through to delivery,
provides compelling advantages which enable our global media, broadcast, cable, telco, OTT, IPTV, satellite, content
creator, government agencies and enterprise customers to address this increasingly complex video landscape.
IP, IT, SOFTWARE NETWORKING & MULTI-CLOUD EXPANDS MARKET
Evertz foundation of unsurpassed video domain knowledge coupled with our commitment to the internal development
and selective acquisition of new leading edge technologies is a unique competitive advantage. In the past year alone,
Evertz invested $102 million in R&D and over $440 million throughout the past five years. The annual investments
fueled development activities within our core product portfolio and funded intensive longer term R&D initiatives, such
as: unified Orchestration, Control & Management, Analytics and User Interface software platforms; high performance
low latency IP networking technologies; our IT based and “Cloud” architectures; Playout & Content Management;
DreamCatcher Replay & Live Production; Compression and Media Transport Solutions; and Professional AV Solutions.
These initiatives are enabling our customers to efficiently transition to IP, IT and public/private/hybrid “Cloud” based
solutions. We believe the hyper-scale EXE together with our modular Software Defined Video Networking (SDVN)
platforms; Magnum Orchestration System; DreamCatcher IP based replay and live production suite, including BRAVO,
which gives customers the tools to create content with smaller production teams and lower costs; and the extension
of SDVN based, IP based, and dedicated AV distribution solutions through evertzAV, will significantly expand our
addressable market and have a long-term benefit to Evertz customers and our shareholders.
2022 ANNUAL REPORT
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EVERTZ TECHNOLOGIES LIMITED
IP, IT & “CLOUD” LEADERSHIP - DESIGNED, DELIVERED, DEPLOYED & EXTENDED
Evertz is at the forefront of the IP, IT and “Cloud” technical transition for the broadcast and new media industry with an
extensive 10/25/100 Gigabit Ethernet product portfolio leveraging Evertz’ Software Defined Video Networking solution
and its industry’s leading orchestration and control software. Evertz SDVN technology is deployed in industry leading
facilities across the world. MAGNUM, Evertz’ orchestration and control application bridges the major components in
a hybrid or all IP based facility including Evertz switch fabrics, media IP gateways, and traditional broadcast products
while the Evertz VUE Anywhere product seamlessly extends secure operation control to enable collaborative Work
From Home (WFH) and other socially distant operational scenarios for our customers. Media companies across the
globe continue to further adopt and leverage the Evertz Emmy Award winning Mediator and Overture platforms in
public/private/hybrid “Cloud” environments to streamline their global operations and content supply chains in addition
to generating industry leading and enterprise class linear, non-linear and OTT video streaming solutions. Evertz is
designing, delivering and deploying the most advanced and innovative IP, IT and “Cloud” based solutions to help
broadcast, new media, higher education and enterprise customer’s future-proof their facilities, prepare for the growing
landscape of remote operation and remote television production and deliver high quality video anywhere, anytime on
any device.
COMPANY RECOGNITION
TV Technology – 2022 NAB Best of Show – Evertz awarded, in April 2022, to NATX
32/64 100G network-based broadcast distribution solution, constructed using
Evertz' award-winning SDVN architecture.
Next TV – 2022 NAB Best of Show – Evertz awarded, in April 2022, to evertz.
io platform, a revolutionary streaming and playout SaaS service solution.
50 Best Managed Company - Evertz was awarded as a 2022 Platinum
Member of Canada’s 50 Best Managed Companies, which recognizes
excellence in Canadian companies. Canada’s 50 Best Managed Companies
identifies Canadian corporate success through companies focused on their
core vision, creating stakeholder value and excelling in the global economy.
Evertz is a proud supporter of Conscious Planet and committed to raising
awareness via regenerative initiatives and the Save Soil Movement. The Save
Soil Movement is a global movement launched to address land degradation
and advocate for healthy soil and is consistent with Evertz goal of operating in
a sustainable future.
FOUNDATION FOR GROWTH
As a leader in our technology sector, we are continuously looking forward to position Evertz to lead; reaching out to
current and new market customers with clean, technologically superior solutions. As the market leader, we are well
positioned with numerous, large exciting opportunities to capitalize on this in the coming year. Evertz is built upon
the long-term vision of generating value and sustainable success through continuous investment in technology while
maintaining a vigilant focus on operating discipline.
We generate significant cash from operations and maintain a pristine balance sheet. We view this financial strength as
a competitive advantage, providing flexibility and allowing us to deliver significant value to our shareholders through the
continued payment of dividends, while adhering to our strategy of investment into new technologies.
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EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT MOVING FOWARD
Evertz has managed through the last two years of disruption and is very well positioned, with the backing of our healthy
balance sheet and consistent investments in our technological solutions, to benefit from an economic revival and the
industry transition to IP and Cloud based solutions.
Our 2023 plan is to utilize our procurement and design capabilities to address the global supply chain challenges and
continue to deliver for our customers, while maintaining our focus on investing into new technologies, leveraging and
expanding upon the high profile industry leading IP, IT installations and “Cloud” solutions that Evertz has successfully
deployed with key customers and gain broader adoption with the broadcast industry and within vertical markets.
Key successes to build upon:
•
IP based Software Defined Video Networking platforms;
•
IT based workflow and “Cloud” services Ultra HD and HDR, delivering an immersive viewing experience
from production to playout;
• VUE Anywhere – securely extending operational intelligence, real-time control and workflow efficiency
over the network to virtually anywhere, enabling operator WFH
• Media flow on premier Cloud solutions;
• Media eXchange compression platform;
• DreamCatcher – IP based instant replay & Bravo live production suite; and
• evertzAV – network based, high quality audio visual solutions.
These technologies provide superior solutions enabling our customers to address and implement complex multi-platform
solutions, including the expansion of their remote operation capabilities, the implementation of “work-from-home” virtual
operations anywhere and to efficiently transition to evolving IP & IT based solutions including “Cloud” services.
We enter fiscal 2023 with significant momentum and demand for our solutions of Evertz IP, IT & “Cloud” based solutions
Designed, Delivered, Deployed and Extended with influential industry leaders across the world. As a leading innovator and
one of the largest pure players in our technology sector, we believe Evertz is in a position of strength to provide solutions
to customers and deliver to shareholders!
We would like to take this opportunity to thank our employees, channel partners, customers and shareholders for their
continued support and we look forward to a safe, healthy and successful future.
Romolo Magarelli
Director, President and Chief Executive Officer
Douglas A. DeBruin
Executive Chairman
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EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT
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MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year ended April 30, 2022
THE FOLLOWING MANAGEMENT’S DISCUSSION AND ANALYSIS IS A REVIEW OF RESULTS OF THE OPERATIONS AND THE LIQUIDITY
AND CAPITAL RESOURCES OF THE COMPANY. IT SHOULD BE READ IN CONJUNCTION WITH THE SELECTED CONSOLIDATED
FINANCIAL INFORMATION AND OTHER DATA AND THE COMPANY’S CONSOLIDATED FINANCIAL STATEMENTS AND THE
ACCOMPANYING NOTES CONTAINED ON SEDAR. THE CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY ARE PREPARED
IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRS”) AND ARE PRESENTED IN CANADIAN
DOLLARS. THE FISCAL YEAR OF THE COMPANY ENDS ON APRIL 30 OF EACH YEAR. CERTAIN INFORMATION CONTAINED HEREIN IS
FORWARD-LOOKING AND BASED UPON ASSUMPTIONS AND ANTICIPATED RESULTS THAT ARE SUBJECT TO RISKS, UNCERTAINTIES
AND OTHER FACTORS. SHOULD ONE OR MORE OF THESE UNCERTAINTIES MATERIALIZE OR SHOULD THE UNDERLYING
ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY SIGNIFICANTLY FROM THOSE EXPECTED.
FORWARD-LOOKING STATEMENTS
The report contains forward-looking statements reflecting Evertz’s objectives, estimates and expectations. Such
forward-looking statements use words such as “may”, “will”, “expect”, “believe”, “anticipate”, “plan”, “intend”,
“project”, “continue” and other similar terminology of a forward-looking nature or negatives of those terms.
Although management of the Company believes that the expectations reflected in such forward-looking statements
are reasonable, all forward-looking statements address matters that involve known and unknown risks, uncertainties
and other factors. Accordingly, there are or will be a number of significant factors which could cause the Company’s
actual results, performance or achievements, or industry results to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking statements.
The report is based on information available to management on June 23, 2022.
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EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT w
OVERVIEW
Evertz is a leading solutions provider to the television broadcast, telecommunications and new-media industries.
Founded in 1966, Evertz is a leading supplier of software, equipment and technology solutions to content creators,
broadcasters, specialty channels and television service providers. Evertz designs, manufactures and markets video
and audio infrastructure solutions for the production, post-production and transmission of television content. The
Company’s solutions are purchased by content creators, broadcasters, specialty channels and television service
providers to support their increasingly complex multi-channel digital and high definition television (“HDTV/Ultra HD”)
and next generation high bandwidth low latency IP network environments and by telecommunications and new-
media companies. The Company’s products allow its customers to generate additional revenue while reducing costs
through efficient signal routing, distribution, monitoring and management of content as well as the automation and
orchestration of more streamlined and agile workflow processes on premise and in the “Cloud”.
The Company made early research and development investments to establish itself as the leading supplier to
the broadcast industry addressing the ongoing technical transition to IP and IT based production, workflow and
distribution systems helping to create more efficient and agile workflows enabling the proliferation of high quality
video emerging Ultra HD, High Dynamic range initiatives. The Company has maintained its track record of rapid
innovation; is a leader in the expanding Internet Protocol Television (“IPTV”) market and a leader in Software Defined
Video Network (“SDVN”) technology. The Company is committed to maintaining its leadership position, and as such,
a significant portion of the Company’s staff is focused on research and development to ensure that the Company’s
products are at the forefront of the industry. This commitment contributes to the Company being consistently
recognized as a leading broadcast and video networking industry innovator by its customers.
SIGNIFICANT ACCOUNTING POLICIES
Outlined below are those policies considered particularly significant:
Basis of Measurement
These financial statements have been prepared on the historical cost basis except for certain financial assets and
liabilities which are stated at fair value. Historical cost is generally based on the fair value of the consideration
given in exchange for assets.
Functional and Presentation Currency
These financial statements are presented in Canadian dollars, which is the Company’s group functional currency.
Each subsidiary of the Company determines its own functional currency based on the primary economic environment
in which the subsidiary operates. All financial information presented in Canadian dollars has been rounded to the
nearest thousand, except per share amounts.
Basis of Consolidation
These financial statements incorporate the financial statements of the Company and entities controlled by the
Company (its subsidiaries). Control is achieved where the Company has power over an entity, has exposure or rights
to variable returns from its involvement with the entity and has the ability to use its power over the entity to affect the
amount of the investor’s returns.
The results of subsidiaries acquired or disposed of are included in the consolidated statements of earnings and
comprehensive earnings from the effective date of acquisition of control and up to the effective date of disposal
of control, as appropriate. Total comprehensive earnings of subsidiaries is attributed to the owners of the Company
and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
All intra-Company transactions, balances, income and expenses are eliminated in full on consolidation.
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2022 ANNUAL REPORT
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EVERTZ TECHNOLOGIES LIMITED
2022 ANNUAL REPORTEVERTZ TECHNOLOGIES LIMITED
Business Combinations
Business combinations are accounted for using the acquisition method. The cost of the acquisition is measured
at the aggregate of the fair values, at the date of acquisition, of assets transferred, liabilities incurred or assumed,
and equity instruments issued by the Company. The acquiree’s identifiable assets and liabilities assumed are
recognized at their fair value at the acquisition date. Acquisition-related costs are recognized in earnings as incurred.
Any contingent consideration is measured at fair value on date of the acquisition and is included as part of the
consideration transferred. The fair value of the contingent consideration liability is re-measured at each reporting
date with corresponding gain/loss recognized in earnings. The excess of the consideration over the fair value of the
net identifiable assets and liabilities acquired is recorded as goodwill.
On an acquisition by acquisition basis, any non-controlling interest is measured either at the fair value of the non-
controlling interest or at the fair value of the proportionate share of the net identifiable assets acquired. Where the
non-controlling interest holds a put option that can be settled by a fixed amount of cash, in connection with their
remaining shares, the fair value of the put option is recognized as a financial redemption liability. In such a case,
the non-controlling interest is deemed to have been acquired at the acquisition date and a financial redemption
liability is recorded instead of a non-controlling interest. Options that are not exercisable for at least one year are
presented as non-current liabilities. Subsequent measurement of the redemption liability is recorded using the
effective interest rate method and recognized in the statement of earnings while no earnings are attributed to the
non-controlling interest.
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the
business less accumulated impairment losses, if any.
Revenue Recognition
Revenue is measured using a five-step recognition model which includes; 1) identifying the contract(s) with the
customer; 2) identifying the separate performance obligations in the contract; 3) determining the transaction price;
4) allocating the transaction price to separate performance obligations; and 5) recognizing revenue when (or as)
each performance obligation is satisfied.
Step 1: Identifying the contract
Before recognizing revenue, the Company reviews customer contracts to ensure each party’s rights and payment
terms are identified, there is commercial substance, and that it is probable that the Company will collect the
consideration in exchange for the goods or services as stated in the contract.
Step 2: Identifying performance obligations
The Company regularly sells hardware and software solutions including related services, training and commissioning
on a stand-alone basis. A customer contract typically lists items separately with distinct item descriptions, quantities,
and prices. If a contract contains a bundle of items priced together at a single price, the Company analyzes the
contract to identify distinct performance obligations within the bundle.
Step 3: Determining the transaction price
Transaction prices are typically the prices stated on the purchase orders or contracts, net of discounts. The Company
reviews customer contracts for any variable considerations, existence of significant financing components and
payables to customers, and adjusts transaction prices accordingly.
Step 4: Allocating the transaction price to performance obligations
If a customer contract includes multiple performance obligations, the transaction price is allocated to each
performance obligation based on its relative stand-alone selling price. If a stand-alone selling price is not directly
observable, the Company estimates the stand-alone selling price of individual elements, based on prices at which the
deliverable is regularly sold on a stand-alone basis after considering specific discounts where appropriate.
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2022 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS (CONT’D)EVERTZ TECHNOLOGIES LIMITED
Step 5: Recognizing revenue upon satisfaction of performance obligations
The timing of revenue recognition is based on when a customer obtains control of the asset. Control of an asset refers
to the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset. Control
includes the ability to prevent other entities from directing the use of, and obtaining the benefits from, an asset. The
Company reviews customer contracts and the nature of the performance obligations to determine if a performance
obligation is satisfied over time or at a point in time, and recognizes revenue accordingly.
Revenue from sales of hardware are recognized upon shipment, provided that the significant risks and rewards
of ownership have been transferred to the customer, the Company retains neither continuing managerial involvement
to the degree usually associated with ownership nor effective control over the goods sold, revenue can be reliably
measured and its probable that the economic benefits will flow to the Company.
Revenue from software solutions are recognized either over a period of time or at a point in time depending
on the contractual terms of the contract identified and the specific performance obligations identified therein.
For performance obligations satisfied over time, the Company measures the progress using either an input
or output method, depending on which yields the most reliable estimate.
Revenue from services is recognized as services are performed and warranty revenue is recognized ratably
over the warranty period.
Certain of the Company’s contracts are long-term in nature. When the outcome of the contract can be assessed
reliably, the Company recognizes revenue on long-term contracts over time, based on costs incurred relative to the
estimated total contract costs. When the outcome of the contract cannot be assessed reliably contract costs incurred
are immediately expensed and revenue is recognized only to the extent that costs are considered likely to be
recovered. Revenue recognized in excess of billings are recorded as contract assets.
Contract assets are recognized when revenue is recognized in excess of billings or when the Company has a right
to consideration and that right is conditional to something other than the passage of time. Contract assets are
subsequently transferred to accounts receivable when the right to payment becomes unconditional.
Finance Income
Interest revenue is recognized when it is probable that the economic benefits will flow to the Company and the
amount of revenue can be measured reliably. Interest revenue is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial
recognition.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and in the bank, net of outstanding bank overdrafts.
Inventories
Inventories consist of raw materials and supplies, work in progress and finished goods. Inventories are stated at the
lower of cost and net realizable value. Cost is determined on a weighted average basis and includes raw materials,
the cost of direct labour applied to the product and the overhead expense.
Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and
costs necessary to make the sale.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognized impairment loss.
Where the costs of certain components of an item of property, plant and equipment are significant in relation to the
total cost of the item, they are accounted for and depreciated separately. Depreciation expense is calculated based
on depreciable amounts which is the cost of an asset less residual value and is recognized in earnings on a straight-
line basis over the estimated useful life of the related asset. Borrowing costs are capitalized to the cost of qualifying
assets that take a substantial period of time to be ready for their intended use.
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2022 ANNUAL REPORTEVERTZ TECHNOLOGIES LIMITED
The estimated useful lives are as follows:
Asset
Office furniture and equipment
Research and development equipment
Machinery and equipment
Leaseholds
Building
Airplanes
Basis
Straight-line
Straight-line
Straight-line
Straight-line
Straight-line
Straight-line
Rate
10 years
5 years
5 - 15 years
5 years
10 - 40 years
10 - 20 years
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognized in earnings.
The Company reviews the residual value, estimated useful life and the depreciation method at least annually.
Impairment of Non-Financial Assets
Goodwill is tested for impairment annually, or whenever events or changes in circumstances indicate that the carrying
amount may be more than its recoverable amount. At each reporting period, the Company reviews the carrying
amounts of its other non-financial assets to determine whether there is any indication that those assets have suffered
an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where the asset does not generate cash inflows that are largely
independent from other assets, the Company estimates the recoverable amount of the cash-generating unit (“CGU”)
to which the asset belongs. Goodwill is allocated to a group of CGU’s based on the level at which it is monitored for
internal reporting purposes.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset for which the estimates
of future cash flows have not been adjusted.
If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount
of the asset or CGU is reduced to its recoverable amount. An impairment loss relating to a CGU to which goodwill has
been allocated, is allocated to the carrying amount of the goodwill first. An impairment loss is recognized immediately
in earnings.
An impairment loss in respect of goodwill is not reversed. Where an impairment loss subsequently reverses for other
non-financial assets, the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognized for the asset or CGU in prior years. A reversal of an impairment
loss is recognized immediately in earnings.
Intangible Assets
Intangible Assets
Intangible assets represent intellectual property acquired through business acquisitions and are recorded at cost less
any impairment loss and are amortized using the straight–line method over a five–year period. The estimated useful
life and amortization method are reviewed at the end of each reporting period.
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2022 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS (CONT’D)EVERTZ TECHNOLOGIES LIMITED
Research and Development
All research and development expenditures are expensed as incurred unless a development project meets the criteria
for capitalization. Development expenditures are capitalized only if development costs can be measured reliably, the
product or process is technically and commercially feasible, future economic benefits are probable and the Company
intends to and has sufficient resources to complete development and to use or sell the asset. No internally generated
intangible assets have been recognized to date.
Research and development expenditures are recorded gross of investment tax credits and related government grants.
Investment tax credits for scientific research and experimental development are recognized in the period the
qualifying expenditures are incurred if there is reasonable assurance that they will be realized.
Investment in an Associate
Investments in an Associate are entities in which the Company has significant influence over, but not have control or
joint control over the financial and operating policies. Investments in an Associate are accounted for using the equity
method. Under the equity method, the initial investment is recognized at cost, which includes transaction costs.
Subsequent to initial recognition, the carrying amount is increased or decreased in recognition of the Company’s
share of the profit or loss after the date of acquisition, until the date on which significant influence ceases.
At the end of each reporting period, the Company also reviews the carrying amounts of Investments in an Associate
to determine whether there is any indication that those assets have suffered an impairment loss. If any such
indication exists, the carrying amount of such investment is compared to its recoverable amount, being the higher
of its fair value less costs of disposal and value-in-use. If the recoverable amount of an investment is less than its
carrying amount, the carrying amount is reduced to its recoverable amount and an impairment loss, being the excess
of carrying amount over the recoverable amount, is recognized immediately. When an impairment loss reverses
in a subsequent period, the carrying amount of the investment is increased to the revised estimate of recoverable
amount, but so that the increased carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognized.
Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past
event, it is probable that the Company will be required to settle that obligation and a reliable estimate can be made
of the amount of the obligation.
The amount recognized as a provision is the best estimate of the consideration required to settle the present
obligation at the reporting period, taking into account the risks and uncertainties surrounding the obligation.
Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount
is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third
party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the
amount of the receivable can be measured reliably.
Leasing
At inception of a contract, the Company assesses whether that contract is, or contains, a lease. A contract is,
or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time
in exchange for consideration.
The Company records a right-of-use asset and a lease liability at the lease commencement date. The right-of-use
asset is initially measured at cost, consisting of the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial direct costs incurred and an estimate
of costs to dismantle and remove the underlying asset or restore the site on which it is located; less any lease
incentives received.
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2022 ANNUAL REPORTEVERTZ TECHNOLOGIES LIMITED
The right-of-use asset is depreciated on a straight-line basis over the lease term. The lease term consists of the
non-cancellable period of the lease; periods covered by options to extend the lease, where the Company is reasonably
certain to exercise the option; and periods covered by options to terminate the lease, where the Company
is reasonably certain not to exercise the option.
The lease liability is initially measured at the present value of lease payments that are not paid at the
commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily
determined, the Company’s incremental borrowing rate. The Company generally use their incremental borrowing
rate as the interest rate implicit in our leases cannot be readily determined. The lease liability is subsequently
measured at amortized cost using the effective interest rate method. Certain leases require us to make payments
that relate to property taxes, insurance, and other non-rental costs. These non-rental costs are typically variable
and are not included in the calculation of the right-of-use asset or lease liability.
Foreign Currency Translation
The individual financial statements of each subsidiary entity are presented in the currency of the primary economic
environment in which the entity operates (its functional currency). For the purpose of the consolidated financial
statements, the results and financial position of each group entity are presented in Canadian dollars (“CDN”),
which is the functional currency of the parent Company and the presentation currency for the financial statements.
In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s
functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the
transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated
at the rates prevailing at that date. Exchange differences are recognized in earnings in the period in which they arise.
Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Company’s foreign
operations are expressed in Canadian dollars using exchange rates prevailing at the end of the reporting period.
Income and expense items are translated at the average exchange rates for the period. Foreign currency gains
and losses are recognized in other comprehensive earnings. The relevant amount in cumulative foreign currency
translation adjustment is reclassified into earnings upon disposition or partial disposition of a foreign operation
and attributed to non-controlling interests as appropriate.
Income Taxes
Current Tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net earnings as reported
in the statement of earnings because it excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by the statement of financial position
date.
Deferred Tax
Deferred tax is the tax expected to be payable or recoverable on unused tax losses and credits, as well as differences
between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases
used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary
differences and deferred tax assets are recognized to the extent that it is probable that taxable profits will be
available against which unused tax losses, credits and other deductible temporary differences can be utilized. Such
assets and liabilities are not recognized if the temporary difference arises from the initial recognition of goodwill or
from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that
affects neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting period and reduced to the extent that
it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
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2022 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS (CONT’D)EVERTZ TECHNOLOGIES LIMITED
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the
asset is realized. The measurement of deferred tax liabilities and assets reflects the tax consequences that would
follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the
carrying amount of its assets and liabilities. Deferred tax is charged or credited to earnings, except when it relates
to items charged or credited directly to other comprehensive earnings or equity, in which case the deferred tax
is also dealt with in other comprehensive earnings or equity.
Share Based Compensation
Equity settled share based payments to employees and others providing similar services are measured at the fair
value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity
settled share based transactions are set out in note 19 of the consolidated financial statements.
The fair value determined at the grant date of the equity settled share based payments is expensed on a straight-line
basis over the vesting period of the option based on the Company’s estimate of the number of equity instruments
that will eventually vest. At each reporting period, the Company revises its estimate of the number of equity
instruments expected to vest. The impact of the revision of the original estimates, if any, is recognized in earnings
such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to share based
payment reserve.
Cash settled share based earnings to employees, including restricted share units, or others providing similar
services are measured at the fair value of the instruments at the grant date. The fair value is recognized as an
expense with a corresponding increase in liabilities over the vesting period of the option grant. At each reporting
period, the Company revises its estimate of fair value and the number of instruments expected to vest. The impact
of the revision of the original estimates, if any, is recognized in earnings such that the cumulative expense reflects
the revised estimate, with a corresponding adjustment to liabilities.
Earnings Per Share
The Company presents basic and diluted earnings per share (“EPS”) data for its common shares. Basic EPS
is calculated by dividing the net earnings attributable to shareholders by the weighted average number of common
shares outstanding during the period. Diluted EPS is determined by adjusting the net earnings attributable to
shareholders and the weighted average number of common shares outstanding for the effects of all potentially
dilutive common shares, which is comprised of share options granted to employees with an exercise price below
the average market price.
Finance Costs
Finance costs directly attributable to the acquisition, construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added
to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure
on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other finance costs are recognized in earnings in the period in which they are incurred.
Investment Tax Credits
The Company is entitled to investment tax credits, which are earned as a percentage of eligible research and
development expenditures incurred in each taxation year. Investment tax credits relate entirely to the Company’s
research and development expenses in the consolidated statements of earnings but are presented separately in the
consolidated statements of earnings for information purposes. Investment tax credits are recognized and recorded
within income tax receivable or as a reduction of income tax payable, when there is reasonable assurance they will
be received.
11
2022 ANNUAL REPORTEVERTZ TECHNOLOGIES LIMITED
Government Assistance
The Company applied and received assistance from multiple assistance programs within various countries
worldwide. The assistance has been recognized as an offsetting reduction to expenses and the cost of labour
applied to manufactured inventory. During the year, $3,259 (2021 - $31,096) in assistance was deducted from
expenses and $904 (2021 - $2,303) from the cost of inventory.
Financial Instruments
The Company’s financial assets and liabilities which are initially recorded at fair value and subsequently measured
based on their assigned classifications as follows:
Asset/Liability
Cash and cash equivalents
Marketable securities
Trade and other receivables
Trade and other payables, excluding RSUs
RSUs
Long-term debt
Long-term redemption liability
Classification
Amortized cost
Fair value through profit or loss
Amortized cost
Amortized cost
Fair value through profit or loss
Amortized cost
Amortized cost
Financial Assets
All financial assets are initially measured at fair value, plus transaction costs, except for those financial assets
classified as fair value through profit or loss, which are initially measured at fair value. Transaction costs in respect
of financial instruments that are classified as fair value through profit or loss are recognized in earnings immediately.
Transaction costs in respect of other financial instruments are included in the initial measurement of the financial
instrument.
Financial assets are classified into the following specific categories: financial assets “at fair value through profit or
loss” (“FVTPL”), “fair value through other comprehensive income (“FVOCI”)” and “amortized cost”. The classification
depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
Financial assets at FVTPL are stated at fair value, with any gains or losses arising on re-measurement recognized
in earnings.
Impairment of Financial Assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the time of initial
recognition and at each reporting period. Financial assets are impaired where there is objective evidence that,
as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future
cash flows of the investment have been affected. For certain categories of financial assets, such as trade and other
receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment
on a collective basis. Objective evidence of impairment of a financial asset can include a significant or prolonged
decline in the fair value of an asset, default or delinquency by a debtor, indication that a debtor will enter bankruptcy
or financial re-organization or the disappearance of an active market for a security.
For financial assets carried at amortized cost, the amount of the impairment is the difference between the asset’s
carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original
effective interest rate.
12
2022 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS (CONT’D)EVERTZ TECHNOLOGIES LIMITED
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with
the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account.
A trade receivable is considered impaired if it is probable that a customer will not pay all amounts due. When a trade
receivable is considered impaired, it is recorded in the allowance account. Subsequent recoveries of amounts are
credited against the allowance account. Changes in the carrying amount of the allowance account are recognized
in earnings. When there is no reasonable expectation of recovery, the trade receivable balance is written off against
the allowance account.
Financial Liabilities and Equity Instruments Issued by the Company
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on re-measurement recognized
in earnings. The net gain or loss recognized in earnings incorporates any interest paid on the financial liability and
is included in the “other income and expenses” line item in the consolidated statements of earnings.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all
of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct
issue costs.
Other financial liabilities, including long term debt and redemption liabilities, are initially measured at fair value,
net of transaction costs. Other financial liabilities are subsequently measured at amortized cost using the effective
interest method, with interest expense recognized on an effective yield basis.
Critical Accounting Estimates and Judgments
The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year.
Consequently, actual results could differ from those estimates. Those estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate
is revised and in any future periods affected. Significant estimates include the determination of expected credit losses
which are based on the amount and timing of cash flows expected to be received, provision for inventory obsolescence
which is recorded to adjust to the net realizable value of inventory and based on current market prices and past
experiences, the useful life of property, plant and equipment and intangibles for depreciation which are based on past
experiences, expected use and industry trends, amortization and valuation of net recoverable amount of property,
plant and equipment and intangibles, determination of fair value for share based compensation, evaluating deferred
income tax assets and liabilities, the determination of fair value of financial instruments and the likelihood of
recoverability, and the determination of implied fair value of goodwill and implied fair value of assets and liabilities
for purchase price allocation purposes and goodwill impairment assessment purposes.
Significant items requiring the use of judgment in application of accounting policies and assumptions include the
determination of functional currencies, classification of financial instruments, classification of leases, determination
if revenues should be recognized at a point in time or over time, application of the percentage of completion method
on long-term contracts, degree of componentization applied when calculating amortization of property, plant and
equipment, and identification of cash generating units for impairment testing purposes.
The Company has also assessed the impact of the pandemic on the estimates and judgements described above.
The Company believes that the long-term estimates and assumptions do not require significant revisions. Although
the Company determined that no significant revisions to such estimates, judgement or assumptions were required,
the pandemic is fluid and given the inherent uncertainty at this time, revisions may be required in future periods to
the extent that the negative impacts on the Company business operations arising from the pandemic continue or
worsen. Any such revisions could result in a material impact on our results of operations and financial condition.
13
2022 ANNUAL REPORTEVERTZ TECHNOLOGIES LIMITED
Operating Segments
An operating segment is a component of the Company that engages in business activities from which it may earn
revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s
other components. The Company reviewed its operations and determined that it operates a single reportable
segment, the television broadcast equipment market. The single reportable operating segment derives its revenue
from the sale of hardware and software solutions including related services, training and commissioning.
YEAR END HIGHLIGHTS
Revenue was $441.0 million for the year ended April 30, 2022 an increase of $98.1 million, compared to
$342.9 million for the year ended April 30, 2021.
For the year ended April 30, 2022, net earnings were $72.7 million, an increase from $42.0 million for the year
ended April 30, 2021 and fully diluted earnings per share were $0.94, an increase from $0.55 for the year ended
April 30, 2021.
Gross margin during the year ended April 30, 2022 was 57.9% as compared to 58.2% for the year ended
April 30, 2021.
Foreign exchange gain during the year was $6.5 million, predominantly driven by the increase in value of the
US dollar against the Canadian dollar since April 30, 2021.
Selling and administrative expenses for the year ended April 30, 2022 was $60.9 million as compared to the year
ended April 30, 2021 of $49.4 million. As a percentage of revenue, selling and administrative expenses totaled
13.8% for the year ended April 30, 2022 as opposed to 14.4% for the year ended April 30, 2021.
Research and development (“R&D”) expenses were $102.4 million for the year ended April 30, 2022 as compared
to $80.2 million for the year ended April 30, 2021.
Cash and cash equivalents were $33.9 million and working capital was $158.9 million as at April 30, 2022,
compared to cash and cash equivalents of $108.8 million and working capital of $214.5 million as at April 30, 2021.
HIGHLIGHTS FROM THE FOURTH QUARTER
Revenue was $116.1 million for the fourth quarter ended April 30, 2022; an increase of $22.8 million,
when compared to $93.3 million for the same period ended April 30, 2021.
For the fourth quarter ended April 30, 2022, net earnings were $19.2 million, an increase from $9.8 million for the
fourth quarter ended April 30, 2021. Fully diluted earnings per share were $0.25 an increase from $0.13 in the
fourth quarter ended April 30, 2021.
For the fourth quarter ended April 30, 2022, foreign exchange gain during the quarter was $1.1 million, compared
to a foreign exchange loss of $5.1 million for the fourth quarter April 30, 2021.
Gross margin during the fourth quarter ended April 30, 2022 was 58.9% compared to 59.6% in the fourth quarter
ended April 30, 2021.
Selling and administrative expenses for the fourth quarter ended April 30, 2022 was $16.1 million as compared
to the fourth quarter ended April 30, 2021 of $13.0 million. As a percentage of revenue, selling and administrative
expenses totaled 13.9% for the fourth quarter ended April 30, 2022 compared to 13.9% in the fourth quarter ended
April 30, 2021.
Research and development expenses were $27.3 million for the fourth quarter ended April 30, 2022 as compared
to $22.5 million for the fourth quarter ended April 30, 2021.
14
2022 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS (CONT’D)EVERTZ TECHNOLOGIES LIMITED
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(In thousands of dollars except earnings per share and share data)
Revenue
Cost of goods sold
Gross margin
Expenses
Selling and administrative
General
Research and development
Investment tax credits
Share based compensation
Foreign exchange (gain) loss
Earnings before undernoted
Finance income
Finance costs
Share of net loss from Investment in Associate
Other income and expenses
Earnings before income taxes
Provision for (recovery of) income taxes
Current
Deferred
Net earnings for the year
Net earnings attributable to non-controlling interest
Net earnings attributable to shareholders
Net earnings for the year
Earnings per share
Basic
Diluted
Year Ended April 30,
2022
2021
2020
$
441,016
$
342,888
$
436,592
185,701
255,315
60,884
4,563
102,438
(12,336)
5,028
(6,465)
154,112
101,203
309
(2,445)
(1,493)
338
97,912
26,959
(1,724)
25,235
72,677
932
71,745
72,677
0.94
0.94
$
$
$
$
$
143,464
199,424
49,413
3,896
80,187
(13,042)
6,123
14,861
141,438
57,986
687
(1,709)
(531)
(588)
55,845
17,369
(3,484)
13,885
41,960
202
41,758
41,960
0.55
0.55
$
$
$
$
$
188,216
248,376
67,597
3,509
90,827
(7,595)
4,964
(3,484)
155,818
92,558
1,077
(1,845)
-
169
91,959
22,304
483
22,787
69,172
565
68,607
69,172
0.90
0.90
$
$
$
$
$
15
2022 ANNUAL REPORTEVERTZ TECHNOLOGIES LIMITED
SELECTED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONSOLIDATED BALANCE SHEET DATA
Cash and cash equivalents
Inventory
Working capital
Total assets
Shareholders' equity
As at April 30,
2022
33,902
177,268
158,947
420,979
230,938
$
$
$
$
$
$
$
$
$
$
2021
108,771
152,669
214,515
451,793
292,734
$
$
$
$
$
2020
75,025
161,985
223,720
443,673
295,012
Number of common shares outstanding:
Basic
Fully-diluted
Weighted average number of shares outstanding:
Basic
Fully-diluted
76,229,696
81,285,196
76,284,366
82,169,366
76,449,446
78,077,946
76,266,341
76,570,564
76,357,895
76,403,894
76,624,706
76,642,787
16
2022 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS (CONT’D)EVERTZ TECHNOLOGIES LIMITED SELECTED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)
CONSOLIDATED STATEMENT OF OPERATIONS DATA
Revenue
Cost of goods sold
Gross margin
Expenses
Selling and administrative
General
Research and development
Investment tax credits
Share based compensation
Foreign exchange (gain) loss
Earnings before undernoted
Finance income
Finance costs
Share of net loss from Investment in Associate
Other income and expenses
Earnings before income taxes
Provision for (recovery of) income taxes
Current
Deferred
Net earnings for the year
Net earnings attributable to non-controlling interest
Net earnings attributable to shareholders
Net earnings for the year
Earnings per share:
Basic
Diluted
2022
100.0%
42.1%
57.9%
13.8%
1.0%
23.2%
(2.8%)
1.2%
(1.5%)
34.9%
23.0%
0.1%
(0.6%)
(0.4%)
0.1%
22.2%
6.1%
(0.4%)
5.7%
16.5%
0.2%
16.3%
16.5%
2021
100.0%
41.8%
58.2%
14.4%
1.2%
23.4%
(3.8%)
1.8%
4.3%
41.3%
16.9%
0.2%
(0.5%)
(0.1%)
(0.2%)
16.3%
5.1%
(1.0%)
4.1%
12.2%
0.1%
12.1%
12.2%
2020
100.0%
43.1%
56.9%
15.5%
0.8%
20.8%
(1.7%)
1.1%
(0.8%)
35.7%
21.2%
0.2%
(0.4%)
0.0%
0.0%
21.0%
5.1%
0.1%
5.2%
15.8%
0.1%
15.7%
15.8%
$
$
0.94
0.94
$
$
0.55
0.55
$
$
0.90
0.90
17
2022 ANNUAL REPORTEVERTZ TECHNOLOGIES LIMITED
REVENUE AND EXPENSES
Revenue
The Company generates revenue principally from the sale of software, equipment, and technology solutions
to content creators, broadcasters, specialty channels, television service providers, government and corporate.
The Company markets and sells its products and services through both direct and indirect sales strategies.
The Company’s direct sales efforts focus on large and complex end-user customers. These customers have long sales
cycles typically ranging from four to eight months before an order may be received by the Company for fulfillment.
The Company monitors revenue performance in two main geographic regions: (i) United States/Canada and
(ii) International.
The Company currently generates approximately 60% to 70% of its revenue in the United States/Canada.
The Company recognizes the opportunity to more aggressively target markets in other geographic regions
and intends to invest in personnel and infrastructure in those markets.
While a significant portion of the Company’s expenses are denominated in Canadian dollars, the Company collects
a significant amount of its revenues in currencies other than the Canadian dollar and therefore has significant
exposure to fluctuations in foreign currencies, in particular the US dollar. Approximately 75% to 80% of the Company’s
revenues are denominated in US dollars.
REVENUE
(In thousands of Canadian dollars)
United States/Canada
International
2022
299,359
141,657
441,016
$
$
Year Ended April 30,
2021
$
$
222,680
120,208
342,888
$
$
2020
289,003
147,589
436,592
Total revenue for the year ended April 30, 2022 was $441.0 million, an increase of $98.1 million as compared
to revenue of $342.9 million for the year ended April 30, 2021. The increase in revenue is due to projects coming
online and general increase in activity compared to the prior year.
Revenue in the United States/Canada region was $299.4 million for the year ended April 30, 2022, an increase
of $76.7 million or 34% when compared to revenue of $222.7 million for the year ended April 30, 2021.
Revenue in the International region was $141.7 million for the year ended April 30, 2022, an increase
of $21.5 million or 18% as compared to revenue of $120.2 million for the year ended April 30, 2021.
COST OF SALES
Cost of sales consists primarily of costs of manufacturing and assembly of products. A substantial portion of these
costs is represented by components and compensation costs for the manufacture and assembly of products as well
as inventory obsolescence and write-offs. Cost of sales also includes related overhead, certain depreciation, final
assembly, quality assurance, inventory management and support costs. Cost of sales also includes the costs of
providing services to clients, primarily the cost of service-related personnel.
18
2022 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS (CONT’D)EVERTZ TECHNOLOGIES LIMITED
GROSS MARGIN
(In thousands of Canadian dollars, except for percentages)
2022
2021
2020
Gross margin
Gross margin % of sales
$
255,315
$
199,424
$
248,376
57.9%
58.2%
56.9%
Year Ended April 30,
Gross margin for the year ended April 30, 2022 was $255.3 million, compared to $199.4 million for the year ended
April 30, 2021. As a percentage of revenue, the gross margin was 57.9% for the year ended April 30, 2022 compared
to 58.2% for the year ended April 30, 2021.
Gross margins vary depending on the product mix, manufacturing volumes, geographic distribution, competitive
pricing pressures and currency fluctuations. During fiscal 2022, a global supply chain disruption, including a global
semi conductor chip shortage has caused the Company to experience unstable procurement capabilities leading
to increased lead times and increased component costs. The Company has taken proactive steps to minimize the
impact, resulting in $22.9 million increase in raw materials since April 30, 2021. The pricing environment continues
to be very competitive with substantial discounting by our competition.
The Company expects that it will continue to experience competitive pricing pressures. The Company continually
seeks to build its products more efficiently and enhance the value of its product and service offerings in order
to reduce the risk of declining gross margin associated with the competitive environment.
Operating Expenses
The Company’s operating expenses consist of: (i) selling, administrative and general; (ii) research and development
and (iii) foreign exchange.
Selling expenses primarily relate to remuneration of sales and technical personnel. Other significant cost components
include trade show costs, advertising and promotional activities, demonstration material and sales support. Selling
and administrative expenses relate primarily to remuneration costs of related personnel, legal and professional fees,
occupancy and other corporate and overhead costs. The Company also records certain depreciation and amortization
charges as general expenses. For the most part, selling, and administrative expenses are fixed in nature and do not
fluctuate directly with revenue. The Company has certain selling expenses that tend to fluctuate in regards to the
timing of trade shows.
The Company invests in research and development to maintain its position in the markets it currently serves and
to enhance its product portfolio with new functionality and efficiencies. Although the Company’s research and
development expenditures do not fluctuate directly with revenues, it monitors this spending in relation to revenues
and adjusts expenditures when appropriate. Research and development expenditures consist primarily of personnel
costs and material costs. Research and development expenses are presented on a gross basis (without deduction
of research and development tax credits). Research and development tax credits associated with research and
development expenditures are shown separately under research and development tax credits.
SELLING AND ADMINISTRATIVE
(In thousands of Canadian dollars, except for percentages)
2022
2021
2020
Selling and administrative
Selling and administrative % of sales
$
60,884
$
49,413
$
67,597
13.8%
14.4%
15.5%
Year Ended April 30,
19
2022 ANNUAL REPORTEVERTZ TECHNOLOGIES LIMITED
Selling and administrative expenses excludes stock based compensation, depreciation and amortization of
intangibles. Selling and administrative expenses for the year ended April 30, 2022 were $60.9 million or 13.8%
of revenue, as compared to selling and administrative expenses of $49.4 million or 14.4% of revenue for the year
ended April 30, 2021. The increase of $11.5 million includes increases of $4.9 million in both travel and promotion
costs associated with increased selling activities and in net salary. Selling and administrative expenses decreased
$6.7 million when compared to $67.6 million in year ended April 30, 2020. The decrease of $6.7 million includes
a $3.1 million decrease in travel and promotion costs and a $2.4 million decrease in net salary costs compared
to the year ended April 30, 2020.
Share Based Compensation
In March 2016, the Company adopted a restricted share unit (RSU) plan to attract, motivate and compensate persons
who are integral to the growth and success of the Company. During the year ended April 30, 2022, share based
compensation expense associated with the plan was $3.7 million, as compared to $4.9 million for the year ended
April 30, 2021.
RESEARCH AND DEVELOPMENT (R&D)
(In thousands of Canadian dollars, except for percentages)
2022
2021
2020
Research and development expenses
$
102,438
$
80,187
$
90,827
Research and development % of sales
23.2%
23.4%
20.8%
Year Ended April 30,
Research and development expenses excluded stock based compensation but includes depreciation. For the year
ended April 30, 2022, gross R&D expenses were $102.4 million, an increase of $22.2 million as compared to an
expense of $80.2 million for the year ended April 30, 2021. The increase of $22.2 million includes a $19.9 million
increase in net salary costs. R&D expenses increased $11.6 million when compared to the $90.8 million in year
ended April 30, 2020. The increase of $11.6 million includes a $9.1 million increase in net salary costs compared
to the year ended April 30, 2020.
Investment Tax Credits
For the year ended April 30, 2022, investment tax credits were $12.3 million compared to $13.0 million for the year
ended April 30, 2021. The decrease in investment tax credits is predominantly a result of a successful appeal in the
prior year.
Foreign Exchange
For the year ended April 30, 2022, the foreign exchange gain was $6.5 million, as compared to a foreign exchange
loss for the year ended April 30, 2021 of $14.9 million. The loss was predominantly driven by the increase in value
of the US dollar against the Canadian dollar since April 30, 2021.
Investment in Associate, Finance Income, Finance Costs, Other Income and Expenses
For the year ended April 30, 2022, a loss of $1.5 million was incurred in relation to the Company’s share of losses
in DDSports, Inc. an investment in an associate. For the year ended April 30, 2022, finance income, finance costs,
other income and expenses netted to a loss of $1.8 million.
20
2022 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS (CONT’D)EVERTZ TECHNOLOGIES LIMITED
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and Capital Resources
(In thousands of dollars except ratios)
Key Balance Sheet Amounts and Ratios:
Cash and cash equivalents
Working capital
Long-term assets
Days sales outstanding in accounts receivable
Statement of Cash Flow Summary
Operating activities
Investing activities
Financing activities
Net (decrease) increase in cash
Year Ended April 30,
2022
33,902
158,947
92,338
83
$
$
$
2021
108,771
214,515
100,854
82
Year Ended April 30,
2022
68,673
(4,963)
(137,516)
(74,869)
$
$
$
$
2021
100,996
(18,638)
(49,381)
33,746
$
$
$
$
$
$
$
Operating Activities
For the year ended April 30, 2022, the Company generated cash from operations of $68.7 million, compared to
$101.0 million for the year ended April 30, 2021. Excluding the effects of the changes in non-cash working capital
and current taxes, the Company generated cash from operations of $93.0 million for the year ended April 30, 2022
compared to $59.0 million for the year ended April 30, 2021.
Investing Activities
The Company used cash for investing activities of $5.0 million for the year ended April 30, 2022 which was principally
driven by the acquisition of capital assets of $5.5 million.
Financing Activities
For the year ended April 30, 2022, the Company used cash from financing activities of $137.5 million, which was
principally driven by dividends paid of $131.4 million including a special dividend of $76.3 million and capital stock
repurchased for $0.7 million.
WORKING CAPITAL
As at April 30, 2022, the Company had cash and cash equivalents of $33.9 million, compared to $108.8 million
at April 30, 2021.
The Company had working capital of $158.9 million as at April 30, 2022 compared to $214.5 million
as at April 30, 2021.
Notwithstanding the uncertainty surrounding the impact of the pandemic, the Company believes that the current
balance in cash plus future cash flow from operations will be sufficient to finance growth and related investment
and financing activities in the foreseeable future.
Day sales outstanding in accounts receivable were 83 days at April 30, 2022 as compared to 82 for April 30, 2021.
21
2022 ANNUAL REPORTEVERTZ TECHNOLOGIES LIMITED
SHARE CAPITAL STRUCTURE
Authorized capital stock consists of an unlimited number of common and preferred shares.
Common shares
Stock options granted and outstanding
FINANCIAL INSTRUMENTS
Year Ended April 30,
2022
76,229,696
5,055,500
2021
76,284,366
5,885,000
The Company’s financial instruments consist of cash and cash equivalents, trade and other receivables, trade and
other payables and long- term debt. Unless otherwise noted, it is management’s opinion that the Company is not
exposed to significant interest or credit risks arising from these financial instruments. The Company estimates the
fair value of these instruments approximates the carrying values as listed below.
Fair Values and Classification of Financial Instruments:
The following summarizes the significant methods and assumptions used in estimating the fair values of financial
instruments:
I. Quoted prices (unadjusted) in active markets for identical assets or liabilities.
II. Inputs other than quoted prices included in level I that are observable for the asset or liability, either directly
or indirectly. Cash and cash equivalents, trade and other receivables, trade and other payables and long-term
debt fair value measurements have been measured within level II.
III. Inputs for the asset or liability that are not based on observable market data.
CONTRACTUAL OBLIGATIONS
The following table sets forth the Company’s contractual obligations as at April 30, 2022:
(In thousands)
Lease commitments
Redemption liabilities
Total
34,530
3,423
37,953
$
$
Payments Due by Period
Less than
1 Year
2-3 Years
4-5 Years
Thereafter
$
$
5,436
3,423
8,859
$
$
9,620
-
9,620
$
$
8,476
-
8,476
$
$
7,575
-
7,575
OFF-BALANCE SHEET FINANCING
The Company does not have any off-balance sheet arrangements.
RELATED PARTY TRANSACTIONS
In the normal course of business, we may enter into transactions with related parties. These transactions occur under
market terms consistent with the terms of transactions with unrelated arms-length second parties. The Company
continues to lease a premise from a company in which two shareholders’ each indirectly hold a 16% interest,
continues to lease a facility from a company in which two shareholders each indirectly hold a 20% interest, continues
to lease three facilities for manufacturing where two shareholders indirectly own 100% interest, continues to lease
a facility from a company in which two shareholders each indirectly own a 35% interest, and continues to lease
a facility where two shareholders each indirectly own 46.6%.
22
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS (CONT’D)
SELECTED CONSOLIDATED QUARTERLY FINANCIAL INFORMATION
The following table sets out selected consolidated financial information for each of the eight quarters ended
April 30, 2022. In the opinion of management, this information has been prepared on the same basis as the
audited consolidated financial statements. The operating results for any quarter should not be relied upon
as any indication of results for any future period.
(In thousands)
2022
Quarter Ending
2021
2020
(Unaudited)
Apr 30
Jan 31
Oct 31
July 31
Apr 30
Jan 31
Oct 31
July 31
$ 116,089 $ 120,563 $ 107,199 $ 97,165 $
47,749
68,340 $
51,351
69,212 $ 61,077 $ 56,686 $
46,122
40,479
93,293 $
92,776
$ 100,482 $ 56,337
37,735
55,558 $
40,793
51,983
$
40,823
24,113
59,659 $ 32,224
41,477
38,885
37,377
36,373
41,503
37,659
30,986
31,289
26,863 $
30,327 $ 23,700 $ 20,313 $
14,055 $
14,324
$
28,673 $
935
(1,030)
(1,429)
(279)
(553)
1,138
(298)
(555)
(150)
25,833 $
18,957
28,898 $ 23,421 $ 19,760 $
21,250
16,991
14,547
12,917 $
9,954
14,026
10,272
0.25 $
0.25 $
0.28 $
0.28 $
0.22 $
0.22 $
0.19 $
0.19 $
0.13 $
0.13 $
0.13
0.13
0.18 $
0.18 $
1.18 $
0.18 $
0.18 $
0.18
$
$
$
$
28,118 $
21,048
785
485
0.28 $
0.28 $
0.01
0.01
0.09 $
0.09
Revenue
Cost of
goods sold
Gross margin $
Operating
expenses
Earnings from
operations
$
Other income
and expenses
Earnings
before taxes
Net earnings
Net earnings
per share:
Basic
Diluted
Dividends
per share
$
$
$
$
The Company’s revenue and corresponding earnings can vary from quarter to quarter depending on the delivery
requirements of our customers. Our customers can be influenced by a variety of factors including upcoming sports
or entertainment events as well as their access to capital. Net earnings represent net earnings attributable to
shareholders.
23
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT DISCLOSURE CONTROLS AND PROCEDURES
Management, including the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the
Company’s disclosure controls and procedures (as defined in National Instrument 52-109 of the Canadian Securities
Administrators) as of April 30, 2022.
Management has concluded that, as of April 30, 2022, the Company’s disclosure controls and procedures were
effective to provide reasonable assurance that material information relating to the Company would be made known
to them by others within the Company, particularly during the period in which this report was being prepared.
INTERNAL CONTROLS OVER FINANCIAL REPORTING
Management is responsible for and has designed internal controls over financial reporting, or caused it to be
designed under management’s supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with IFRS. Management
has concluded that, as of April 30, 2022, the Company’s internal controls over financial reporting were effective
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with IFRS.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There have been no changes to the Company’s internal controls over financial reporting during the period ended
April 30, 2022 that have materially affected, or reasonably likely to materially affect, its internal controls over
financial reporting.
On May 15, 2013 the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) released
Internal Control-Integrated Framework: 2013, which is an update to the internal control framework previously
issued in 1992. Management is currently operating under the 1992 Framework and is transitioning to the updated
Framework. While no significant changes to the Company’s internal control system are expected to result from the
transition, any modifications to such expectation will be reported by the Company within the following MD&A.
OUTLOOK
While the Company believes the pandemic to be temporary, and the Company has shown improvement since the
first quarter of fiscal 2022, the situation is fluid and the impact of the pandemic on future operations and results,
including the impact on overall customer demands is inherently uncertain at this time. Although the Company is
an essential service provider and has increased health and safety protocols to continue operations, widespread
customer delays, travel restrictions and the postponement or cancellation of sporting as well as other live events
and various other related projects may have an adverse effect on the Company’s revenues and future financial
results. Given the uncertainty regarding the situation, it cannot reasonably estimate the severity of any such impact
at this time. The Company believes the situation is temporary and is well positioned to benefit from an economic
revival and the industry transition to IP and Cloud based solutions. The Company will continue to maintain the
financial flexibility needed to fund working capital needs and investment opportunities in the foreseeable future.
Gross margin percentages may vary depending on the impact of the pandemic on operations, mix of products
sold, the Company’s success in winning more complete projects, utilization of manufacturing capacity and the
competitiveness of the pricing environment. R&D will continue to be a key focus as the Company continues
to invest in new product developments despite the uncertainty surrounding the pandemic.
RISKS AND UNCERTAINTIES
The Company risk factors are outlined in our AIF filed on SEDAR.
24
2022 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS (CONT’D)EVERTZ TECHNOLOGIES LIMITED
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Evertz Technologies Limited
OPINION
We have audited the consolidated financial statements of Evertz Technologies Limited (“Evertz” or the “Company”),
which comprise the consolidated statements of financial position as at April 30, 2022 and 2021, and the
consolidated statements of earnings, changes in equity and cash flows for the years then ended, and notes
to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the consolidated financial position of the Company as at April 30, 2022 and 2021, and its consolidated financial
performance and its consolidated cash flows for the years then ended in accordance with International Financial
Reporting Standards (“IFRS”).
BASIS FOR OPINION
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial
Statements section of our report. We are independent of the Company in accordance with the ethical requirements
that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our opinion.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
consolidated financial statements of the current period. These matters were addressed in the context of our audit
of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters. We have determined the matter described below to be the key audit matter
to be communicated in our report.
REVENUE RECOGNITION
Description of the Key Audit Matter
The Company generates revenue through the sale of hardware, software solutions, services, warranty as well as
a combination of these revenue streams over long-term contacts with certain customers. Contracts where revenue
is recognized over time involves significant estimates and judgments including:
• Determination of the number of performance obligations;
• Estimation of the project costs to complete for long term contracts; and
• Determination of whether revenue from the contracts should be recognized at a point in time or over time.
As a result of the number different streams and complexities that arise, revenue recognition was determined
to be a key audit matter requiring special audit consideration.
Please refer to notes 2 and 15 to the consolidated financial statements for details on the Company’s Use
of Estimates and Judgments and accounting policies related to revenue recognition.
25
2022 ANNUAL REPORTEVERTZ TECHNOLOGIES LIMITED
How the Key Audit Matter Was Addressed in the Audit
Our audit procedures included a review of the terms of a sample of contracts in effect during the year, including
any modifications or amendments, for recognition and measurement in a manner consistent with the Company’s
accounting policies, including management’s assessment of the number of performance obligations and the
period of recognition.
We obtained an understanding of any changes in revenue streams that would have occurred since April 30, 2021.
For estimation of project costs to complete for long term contracts, we evaluated the reasonableness of the significant
assumptions used by management in estimating the total costs to completion, performed a retrospective review on
previous estimated costs on completed contracts and performed procedures to compare the original estimated costs
to actual costs incurred to date.
OTHER INFORMATION
Management is responsible for the other information. The other information which is filed with the relevant Canadian
Securities Commissions comprises:
• The information included in the Management Discussion and Analysis for the year ended April 30, 2022; and
• The information included in the 2022 Annual Report.
Our opinion on the consolidated financial statements does not cover the other information and we do not express
any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially inconsistent with
the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
We obtained the Management Discussion and Analysis for the year ended April 30, 2022 prior to the date
of this auditor’s report. If, based on the work we have performed on this other information, we conclude that
there is a material misstatement of this other information, we are required to report that fact in this auditor’s
report. We have nothing to report in this regard.
The Annual Report is expected to be made available to us after the date of the auditor’s report. If, based on the
work we will perform on this other information, we conclude that there is a material misstatement of this other
information, we are required to report that fact to those charged with governance.
RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE
CONSOLIDATED FINANCIAL STATEMENTS
Management is responsible for the preparation and fair presentation of the consolidated financial statements
in accordance with IFRS, and for such internal control as management determines is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless management either intends to liquidate the Company or to cease operations,
or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
26
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS (CONT’D)
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with Canadian generally accepted auditing standards will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis
of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that
is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated
financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based
on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may
cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements represent the underlying transactions and events
in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Company to express an opinion on the consolidated financial statements. We are responsible for the
direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, related safeguards.
27
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT
From the matters communicated with those charged with governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our
report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Jamie Barron.
BDO CANADA LLP
CHARTERED PROFESSIONAL ACCOUNTANTS, LICENSED PUBLIC ACCOUNTANTS
Oakville, Ontario
June 23, 2022
28
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at April 30, 2022 and April 30, 2021
(In thousands of Canadian dollars) April 30, 2022 April 30, 2021
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables (note 3)
Contract assets
Prepaid expenses
Inventories (note 4)
Property, plant and equipment (note 5)
Right-of-use assets (note 6)
Goodwill (notes 7 and 28)
Intangibles (notes 8 and 28)
Investment in an Associate (notes 9 and 29)
Deferred income taxes (note 27)
LIABILITIES
Current liabilities
Trade and other payables
Provisions (note 10)
Deferred revenue
Current portion of lease obligations (note 11)
Current portion of redemption liability (notes 13 and 28)
Income tax payable (note 27)
Long-term redemption liability (note 13 and 28)
Long-term lease obligations (note 11)
EQUITY
Capital stock (note 14)
Share based payment reserve
Accumulated other comprehensive loss
Retained earnings
Total equity attributable to shareholders
Non-controlling interest (note 24)
See accompanying notes to the consolidated financial statements.
29
$
$
$
$
33,902
100,020
6,398
5,930
177,268
323,518
37,877
24,637
21,033
3,317
5,474
5,123
$
108,771
76,785
2,821
6,559
152,699
347,635
44,799
23,570
21,140
4,476
6,869
3,304
420,979
$
451,793
68,405
7,379
74,267
4,088
3,423
7,009
164,571
-
22,760
187,331
143,502
10,893
(4,093)
80,636
76,543
230,938
2,710
233,648
420,979
$
66,727
4,069
58,047
4,122
-
155
133,120
2,523
21,245
156,888
143,605
9,514
(1,062)
140,677
139,615
292,734
2,171
294,905
$
451,793
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Years ended April 30, 2022 and 2021
Share-
based
pay-
ment
reserve
Accumu-
lated
other
compre-
hensive
earnings
Capital
stock
Retained
earnings
Total
equity
attributable
to share-
holders
Non-
control-
ling
interest
Total
Equity
$ 143,915 $ 8,279 $ 1,032 $ 141,786 $
295,012 $ 2,408 $ 297,420
(In thousands
of Canadian dollars)
Balance at
April 30, 2020
Net earnings
for the year
Foreign currency
translation adjustment
Total comprehensive
earnings for the year
Dividends declared
Share based
compensation expense (note 19)
Repurchase
of common shares (note 14)
$
-
-
- $
-
-
-
-
41,758
41,758
202
41,960
(2,094)
-
(2,094)
(39)
(2,133)
- $ (2,094) $
-
-
41,758 $
(41,222)
39,664 $ 163 $
(41,222)
(400)
39,827
(41,622)
-
1,235
(310)
-
-
-
-
1,235
(1,645)
(1,955)
-
-
1,235
(1,955)
Balance at
April 30, 2021
Net earnings
for the year
Foreign currency
translation adjustment
Total comprehensive
earnings for the year
$ 143,605 $ 9,514 $ (1,062) $ 140,677 $
292,734 $ 2,171 $ 294,905
-
-
-
-
-
71,745
71,745
932
72,677
(3,031)
-
(3,031)
(143)
(3,174)
$
- $
- $ (3,031) $
71,745 $
68,714 $
789 $
69,503
Dividends declared
Share based
compensation expense (note 19)
Repurchase of
common shares (note 14)
-
-
-
1,379
(103)
-
-
-
-
(131,198)
(131,198)
(250)
(131,448)
-
1,379
(588)
(691)
-
-
1,379
(691)
Balance at
April 30, 2022
$ 143,502 $ 10,893 $ (4,093) $
80,636 $
230,938 $ 2,710 $ 233,648
See accompanying notes to the consolidated financial statements.
30
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF EARNINGS
Years ended April 30
(In thousands of Canadian dollars, except per share amounts)
Revenue (notes 15 and 22)
Cost of goods sold
Gross margin
Expenses
Selling, administrative and general (note 16)
Research and development (note 17)
Investment tax credits
Foreign exchange (gain) loss
Finance income
Finance costs
Share of net loss from Investment in Associate, net of income taxes (note 9)
Other income (loss)
Earnings before income taxes
Provision for (recovery of) income taxes
Current (note 27)
Deferred (note 27)
Net earnings for the year
Net earnings attributable to non-controlling interest (note 24)
Net earnings attributable to shareholders
Net earnings for the year
Earnings per share (note 26)
Basic
Diluted
See accompanying notes to the consolidated financial statements.
2022
$
441,016
$
185,701
255,315
66,388
106,525
(12,336)
(6,465)
154,112
101,203
309
(2,445)
(1,493)
338
97,912
26,959
(1,724)
25,235
72,677
932
71,745
72,677
0.94
0.94
$
$
$
$
$
$
$
$
$
$
2021
342,888
143,464
199,424
54,508
85,111
(13,042)
14,861
141,438
57,986
687
(1,709)
(531)
(588)
55,845
17,369
(3,484)
13,885
41,960
202
41,758
41,960
0.55
0.55
31
2022 ANNUAL REPORTEVERTZ TECHNOLOGIES LIMITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
Years ended April 30
(In thousands of Canadian dollars)
Net earnings for the year
Items that may be reclassified to net earnings:
Foreign currency translation adjustment
Comprehensive earnings
Comprehensive earnings attributable to non-controlling interest
Comprehensive earnings attributable to shareholders
Comprehensive earnings
See accompanying notes to the consolidated financial statements.
2022
2021
72,677
$
41,960
(3,174)
69,503
789
68,714
69,503
(2,133)
39,827
163
39,664
39,827
$
$
$
$
$
$
$
32
2022 ANNUAL REPORTEVERTZ TECHNOLOGIES LIMITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended April 30
(In thousands of Canadian dollars)
Operating activities
Net earnings for the year
Add: Items not involving cash
Depreciation of property, plant and equipment (note 5)
Amortization of right-of-use assets (note 6)
Amortization of intangible (note 8)
Gain on disposal of property, plant and equipment (note 5)
Share of net loss from Investment in Associate (note 9)
Share-based compensation (note 19)
Interest expense
Deferred income tax expense (note 27)
Current tax expenses, net of investment tax credits (note 27)
Income taxes paid
Changes in non-cash working capital items (note 18)
Cash provided by operating activities
Investing activities
Acquisition of property, plant and equipment (note 5)
Proceeds from disposal of property, plant and equipment
Business acquisitions (note 28)
Investment in an Associate (note 29)
Cash used in investing activities
Financing activities
Repayment of long term debt (note 12)
Principle payments of lease liabilities (note 11)
Interest paid
Dividends paid
Dividends paid by subsidiaries to non-controlling interests
Capital stock repurchased (note 14)
Cash used in financing activities
Effect of exchange rates on cash and cash equivalents
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents beginning of year
2022
2021
$
72,677
$
41,960
11,451
4,924
1,207
(400)
1,493
1,379
1,955
(1,724)
92,962
14,623
(8,848)
(30,064)
68,673
(5,478)
515
-
-
(4,963)
-
(4,322)
(1,055)
(131,198)
(250)
(691)
(137,516)
(1,063)
(74,869)
108,771
11,679
5,130
795
(12)
531
1,235
1,142
(3,484)
58,976
4,327
(6,732)
44,425
100,996
(9,577)
26
(1,287)
(7,800)
(18,638)
(241)
(4,422)
(1,142)
(41,222)
(400)
(1,954)
(49,381)
769
33,746
75,025
Cash and cash equivalents end of year
$
33,902
$
108,771
See accompanying notes to the consolidated financial statements.
33
2022 ANNUAL REPORTEVERTZ TECHNOLOGIES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Years ended April 30, 2022 and 2021
(In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
EVERTZ TECHNOLOGIES LIMITED (“EVERTZ” OR THE “COMPANY”) IS INCORPORATED UNDER THE CANADA BUSINESS
CORPORATIONS ACT. THE COMPANY IS INCORPORATED AND DOMICILED IN CANADA AND THE REGISTERED HEAD OFFICE IS
LOCATED AT 5292 JOHN LUCAS DRIVE, BURLINGTON, ONTARIO, CANADA. THE COMPANY IS A LEADING SUPPLIER OF SOFTWARE,
EQUIPMENT AND TECHNOLOGY SOLUTIONS TO CONTENT CREATORS, BROADCASTERS, SPECIALTY CHANNELS AND TELEVISION
SERVICE PROVIDERS. THE COMPANY DESIGNS, MANUFACTURES AND DISTRIBUTES VIDEO AND AUDIO INFRASTRUCTURE
SOLUTIONS FOR THE PRODUCTION, POST–PRODUCTION, BROADCAST AND TELECOMMUNICATIONS MARKETS.
1. STATEMENT OF COMPLIANCE
These consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board ("IASB").
These consolidated financial statements were authorized for issue by the Board of Directors on June 23, 2022.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Measurement
These financial statements have been prepared on the historical cost basis except for certain financial assets and
liabilities which are stated at fair value. Historical cost is generally based on the fair value of the consideration
given in exchange for assets.
Functional and Presentation Currency
These financial statements are presented in Canadian dollars, which is the Company’s group functional currency.
Each subsidiary of the Company determines its own functional currency based on the primary economic environment
in which the subsidiary operates. All financial information presented in Canadian dollars has been rounded to the
nearest thousand, except per share amounts.
Basis of Consolidation
These financial statements incorporate the financial statements of the Company and entities controlled by the
Company (its subsidiaries). Control is achieved where the Company has power over an entity, has exposure or rights
to variable returns from its involvement with the entity and has the ability to use its power over the entity to affect the
amount of the investor’s returns.
The results of subsidiaries acquired or disposed of are included in the consolidated statements of earnings and
comprehensive earnings from the effective date of acquisition of control and up to the effective date of disposal
of control, as appropriate. Total comprehensive earnings of subsidiaries is attributed to the owners of the Company
and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
All intra-Company transactions, balances, income and expenses are eliminated in full on consolidation.
Business Combinations
Business combinations are accounted for using the acquisition method. The cost of the acquisition is measured at
the aggregate of the fair values, at the date of acquisition, of assets transferred, liabilities incurred or assumed, and
equity instruments issued by the Company. The acquiree’s identifiable assets and liabilities assumed are recognized
at their fair value at the acquisition date. Acquisition-related costs are recognized in earnings as incurred. Any
contingent consideration is measured at fair value on date of the acquisition and is included as part of the
consideration transferred. The fair value of the contingent consideration liability is re-measured at each reporting
date with corresponding gain/loss recognized in earnings. The excess of the consideration over the fair value of the
net identifiable assets and liabilities acquired is recorded as goodwill.
On an acquisition by acquisition basis, any non-controlling interest is measured either at the fair value of the non-
controlling interest or at the fair value of the proportionate share of the net identifiable assets acquired. Where the
non-controlling interest holds a put option that can be settled by a fixed amount of cash, in connection with their
remaining shares, the fair value of the put option is recognized as a financial redemption liability. In such a case, the
non-controlling interest is deemed to have been acquired at the acquisition date and a financial redemption liability
34
2022 ANNUAL REPORTEVERTZ TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2022 and 2021 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
is recorded instead of a non-controlling interest. Options that are not exercisable for at least one year are presented
as non-current liabilities. Subsequent measurement of the redemption liability is recorded using the effective interest
rate method and recognized in the statement of earnings while no earnings are attributed to the non-controlling
interest.
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the
business less accumulated impairment losses, if any.
Revenue Recognition
Revenue is measured using a five-step recognition model which includes; 1) identifying the contract(s) with the
customer; 2) identifying the separate performance obligations in the contract; 3) determining the transaction price;
4) allocating the transaction price to separate performance obligations; and 5) recognizing revenue when (or as)
each performance obligation is satisfied.
Step 1: Identifying the contract
Before recognizing revenue, the Company reviews customer contracts to ensure each party’s rights and payment
terms are identified, there is commercial substance, and that it is probable that the Company will collect the
consideration in exchange for the goods or services as stated in the contract.
Step 2: Identifying performance obligations
The Company regularly sells hardware and software solutions including related services, training and commissioning
on a stand-alone basis. A customer contract typically lists items separately with distinct item descriptions, quantities,
and prices. If a contract contains a bundle of items priced together at a single price, the Company analyzes the
contract to identify distinct performance obligations within the bundle.
Step 3: Determining the transaction price
Transaction prices are typically the prices stated on the purchase orders or contracts, net of discounts. The Company
reviews customer contracts for any variable considerations, existence of significant financing components and
payables to customers, and adjusts transaction prices accordingly.
Step 4: Allocating the transaction price to performance obligations
If a customer contract includes multiple performance obligations, the transaction price is allocated to each
performance obligation based on its relative stand-alone selling price. If a stand-alone selling price is not directly
observable, the Company estimates the stand-alone selling price of individual elements, based on prices at which
the deliverable is regularly sold on a stand-alone basis after considering specific discounts where appropriate.
Step 5: Recognizing revenue upon satisfaction of performance obligations
The timing of revenue recognition is based on when a customer obtains control of the asset. Control of an asset
refers to the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset.
Control includes the ability to prevent other entities from directing the use of, and obtaining the benefits from,
an asset. The Company reviews customer contracts and the nature of the performance obligations to determine
if a performance obligation is satisfied over time or at a point in time, and recognizes revenue accordingly.
Revenue from sales of hardware are recognized upon shipment, provided that the significant risks and rewards
of ownership have been transferred to the customer, the Company retains neither continuing managerial involvement
to the degree usually associated with ownership nor effective control over the goods sold, revenue can be reliably
measured and its probable that the economic benefits will flow to the Company.
Revenue from software solutions are recognized either over a period of time or at a point in time depending
on the contractual terms of the contract identified and the specific performance obligations identified therein.
For performance obligations satisfied over time, the Company measures the progress using either an input
or output method, depending on which yields the most reliable estimate.
35
2022 ANNUAL REPORTEVERTZ TECHNOLOGIES LIMITED
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue from services is recognized as services are performed and warranty revenue is recognized ratably over the
warranty period.
Certain of the Company’s contracts are long-term in nature. When the outcome of the contract can be assessed
reliably, the Company recognizes revenue on long-term contracts over time, based on costs incurred relative to the
estimated total contract costs. When the outcome of the contract cannot be assessed reliably contract costs incurred
are immediately expensed and revenue is recognized only to the extent that costs are considered likely to be
recovered. Revenue recognized in excess of billings are recorded as contract assets.
Contract assets are recognized when revenue is recognized in excess of billings or when the Company has a right
to consideration and that right is conditional to something other than the passage of time. Contract assets are
subsequently transferred to accounts receivable when the right to payment becomes unconditional.
Finance Income
Interest revenue is recognized when it is probable that the economic benefits will flow to the Company and the
amount of revenue can be measured reliably. Interest revenue is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial
recognition.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and in the bank, net of outstanding bank overdrafts.
Inventories
Inventories consist of raw materials and supplies, work in progress and finished goods. Inventories are stated at the
lower of cost and net realizable value. Cost is determined on a weighted average basis and includes raw materials,
the cost of direct labour applied to the product and the overhead expense.
Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and
costs necessary to make the sale.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any recognized impairment loss.
Where the costs of certain components of an item of property, plant and equipment are significant in relation to the
total cost of the item, they are accounted for and depreciated separately. Depreciation expense is calculated based
on depreciable amounts which is the cost of an asset less residual value and is recognized in earnings on a straight-
line basis over the estimated useful life of the related asset. Borrowing costs are capitalized to the cost of qualifying
assets that take a substantial period of time to be ready for their intended use.
The estimated useful lives are as follows:
ASSET
Office furniture and equipment
Research and development equipment
Machinery and equipment
Leaseholds
Building
Airplanes
BASIS
Straight-line
Straight-line
Straight-line
Straight-line
Straight-line
Straight-line
RATE
10 years
5 years
5 - 15 years
5 years
10 - 40 years
10 - 20 years
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognized in earnings.
The Company reviews the residual value, estimated useful life and the depreciation method at least annually.
36
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2022 and 2021 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Impairment of Non-Financial Assets
Goodwill is tested for impairment annually, or whenever events or changes in circumstances indicate that the carrying
amount may be more than its recoverable amount. At each reporting period, the Company reviews the carrying
amounts of its other non-financial assets to determine whether there is any indication that those assets have suffered
an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where the asset does not generate cash inflows that are largely
independent from other assets, the Company estimates the recoverable amount of the cash-generating unit (“CGU”)
to which the asset belongs. Goodwill is allocated to a group of CGU’s based on the level at which it is monitored for
internal reporting purposes.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset for which the estimates
of future cash flows have not been adjusted.
If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount
of the asset or CGU is reduced to its recoverable amount. An impairment loss relating to a CGU to which goodwill has
been allocated, is allocated to the carrying amount of the goodwill first. An impairment loss is recognized immediately
in earnings.
An impairment loss in respect of goodwill is not reversed. Where an impairment loss subsequently reverses for other
non-financial assets, the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognized for the asset or CGU in prior years. A reversal of an impairment
loss is recognized immediately in earnings.
Intangible Assets
Intangible Assets
Intangible assets represent intellectual property acquired through business acquisitions and are recorded at cost less
any impairment loss and are amortized using the straight–line method over a five–year period. The estimated useful
life and amortization method are reviewed at the end of each reporting period.
Research and Development
All research and development expenditures are expensed as incurred unless a development project meets the criteria
for capitalization. Development expenditures are capitalized only if development costs can be measured reliably, the
product or process is technically and commercially feasible, future economic benefits are probable and the Company
intends to and has sufficient resources to complete development and to use or sell the asset. No internally generated
intangible assets have been recognized to date.
Research and development expenditures are recorded gross of investment tax credits and related government grants.
Investment tax credits for scientific research and experimental development are recognized in the period the
qualifying expenditures are incurred if there is reasonable assurance that they will be realized.
Investment in an Associate
Investments in an Associate are entities in which the Company has significant influence over, but not have control or
joint control over the financial and operating policies. Investments in an Associate are accounted for using the equity
method. Under the equity method, the initial investment is recognized at cost, which includes transaction costs.
Subsequent to initial recognition, the carrying amount is increased or decreased in recognition of the Company’s
share of the profit or loss after the date of acquisition, until the date on which significant influence ceases.
At the end of each reporting period, the Company also reviews the carrying amounts of Investments in an Associate
to determine whether there is any indication that those assets have suffered an impairment loss. If any such
indication exists, the carrying amount of such investment is compared to its recoverable amount, being the higher
of its fair value less costs of disposal and value-in-use. If the recoverable amount of an investment is less than its
carrying amount, the carrying amount is reduced to its recoverable amount and an impairment loss, being the excess
37
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
of carrying amount over the recoverable amount, is recognized immediately. When an impairment loss reverses
in a subsequent period, the carrying amount of the investment is increased to the revised estimate of recoverable
amount, but so that the increased carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognized.
Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past
event, it is probable that the Company will be required to settle that obligation and a reliable estimate can be made
of the amount of the obligation.
The amount recognized as a provision is the best estimate of the consideration required to settle the present
obligation at the reporting period, taking into account the risks and uncertainties surrounding the obligation.
Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying
amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third
party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the
amount of the receivable can be measured reliably.
Leasing
At inception of a contract, the Company assesses whether that contract is, or contains, a lease. A contract is,
or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time
in exchange for consideration.
The Company records a right-of-use asset and a lease liability at the lease commencement date. The right-of-use
asset is initially measured at cost, consisting of the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs
to dismantle and remove the underlying asset or restore the site on which it is located; less any lease incentives
received.
The right-of-use asset is depreciated on a straight-line basis over the lease term. The lease term consists of the
non-cancellable period of the lease; periods covered by options to extend the lease, where the Company is reasonably
certain to exercise the option; and periods covered by options to terminate the lease, where the Company is
reasonably certain not to exercise the option.
The lease liability is initially measured at the present value of lease payments that are not paid at the commencement
date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s
incremental borrowing rate. The Company generally use their incremental borrowing rate as the interest rate implicit
in our leases cannot be readily determined. The lease liability is subsequently measured at amortized cost using the
effective interest rate method. Certain leases require us to make payments that relate to property taxes, insurance,
and other non-rental costs. These non-rental costs are typically variable and are not included in the calculation of the
right-of-use asset or lease liability.
Foreign Currency Translation
The individual financial statements of each subsidiary entity are presented in the currency of the primary economic
environment in which the entity operates (its functional currency). For the purpose of the consolidated financial
statements, the results and financial position of each group entity are presented in Canadian dollars (“CDN”),
which is the functional currency of the parent Company and the presentation currency for the financial statements.
38
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2022 and 2021 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s
functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the
transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated
at the rates prevailing at that date. Exchange differences are recognized in earnings in the period in which they arise.
Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Company’s foreign
operations are expressed in Canadian dollars using exchange rates prevailing at the end of the reporting period.
Income and expense items are translated at the average exchange rates for the period. Foreign currency gains
and losses are recognized in other comprehensive earnings. The relevant amount in cumulative foreign currency
translation adjustment is reclassified into earnings upon disposition or partial disposition of a foreign operation
and attributed to non-controlling interests as appropriate.
Income Taxes
Current Tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net earnings as reported
in the statement of earnings because it excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by the statement of financial position
date.
Deferred Tax
Deferred tax is the tax expected to be payable or recoverable on unused tax losses and credits, as well as differences
between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases
used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary
differences and deferred tax assets are recognized to the extent that it is probable that taxable profits will be
available against which unused tax losses, credits and other deductible temporary differences can be utilized.
Such assets and liabilities are not recognized if the temporary difference arises from the initial recognition of goodwill
or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction
that affects neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting period and reduced to the extent that
it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the
asset is realized. The measurement of deferred tax liabilities and assets reflects the tax consequences that would
follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the
carrying amount of its assets and liabilities. Deferred tax is charged or credited to earnings, except when it relates
to items charged or credited directly to other comprehensive earnings or equity, in which case the deferred tax is also
dealt with in other comprehensive earnings or equity.
Share Based Compensation
Equity settled share based payments to employees and others providing similar services are measured at the fair
value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity
settled share based transactions are set out in note 19.
The fair value determined at the grant date of the equity settled share based payments is expensed on a straight-line
basis over the vesting period of the option based on the Company’s estimate of the number of equity instruments that
will eventually vest. At each reporting period, the Company revises its estimate of the number of equity instruments
expected to vest. The impact of the revision of the original estimates, if any, is recognized in earnings such that the
cumulative expense reflects the revised estimate, with a corresponding adjustment to share based payment reserve.
39
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash settled share based earnings to employees, including restricted share units, or others providing similar services
are measured at the fair value of the instruments at the grant date. The fair value is recognized as an expense with a
corresponding increase in liabilities over the vesting period of the option grant. At each reporting period, the Company
revises its estimate of fair value and the number of instruments expected to vest. The impact of the revision of the
original estimates, if any, is recognized in earnings such that the cumulative expense reflects the revised estimate,
with a corresponding adjustment to liabilities.
Earnings Per Share
The Company presents basic and diluted earnings per share (“EPS”) data for its common shares. Basic EPS is
calculated by dividing the net earnings attributable to shareholders by the weighted average number of common
shares outstanding during the period. Diluted EPS is determined by adjusting the net earnings attributable to
shareholders and the weighted average number of common shares outstanding for the effects of all potentially
dilutive common shares, which is comprised of share options granted to employees with an exercise price below
the average market price.
Finance Costs
Finance costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets
that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost
of those assets, until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure
on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other finance costs are recognized in earnings in the period in which they are incurred.
Investment Tax Credits
The Company is entitled to investment tax credits, which are earned as a percentage of eligible research and
development expenditures incurred in each taxation year. Investment tax credits relate entirely to the Company’s
research and development expenses in the consolidated statements of earnings but are presented separately in the
consolidated statements of earnings for information purposes. Investment tax credits are recognized and recorded
within income tax receivable or as a reduction of income tax payable, when there is reasonable assurance they will
be received.
Government Assistance
The Company applied and received assistance from multiple assistance programs within various countries
worldwide. The assistance has been recognized as an offsetting reduction to expenses and the cost of labour
applied to manufactured inventory. During the year, $3,259 (2021 - $31,096) in assistance was deducted
from expenses and $904 (2021 - $2,303) from the cost of inventory.
Financial Instruments
The Company’s financial assets and liabilities which are initially recorded at fair value and subsequently measured
based on their assigned classifications as follows:
Asset/Liability
Cash and cash equivalents
Marketable securities
Trade and other receivables
Trade and other payables, excluding RSUs
RSUs
Long-term debt
Long-term redemption liability
Classification
Amortized cost
Fair value through profit or loss
Amortized cost
Amortized cost
Fair value through profit or loss
Amortized cost
Amortized cost
40
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2022 and 2021 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial Assets
All financial assets are initially measured at fair value, plus transaction costs, except for those financial assets
classified as fair value through profit or loss, which are initially measured at fair value. Transaction costs in respect
of financial instruments that are classified as fair value through profit or loss are recognized in earnings immediately.
Transaction costs in respect of other financial instruments are included in the initial measurement of the financial
instrument.
Financial assets are classified into the following specific categories: financial assets “at fair value through profit
or loss” (“FVTPL”), “fair value through other comprehensive income (“FVOCI”)” and “amortized cost”. The classification
depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
Financial assets at FVTPL are stated at fair value, with any gains or losses arising on re-measurement recognized
in earnings.
Impairment of Financial Assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the time of initial
recognition and at each reporting period. Financial assets are impaired where there is objective evidence that,
as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future
cash flows of the investment have been affected. For certain categories of financial assets, such as trade and other
receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on
a collective basis. Objective evidence of impairment of a financial asset can include a significant or prolonged decline
in the fair value of an asset, default or delinquency by a debtor, indication that a debtor will enter bankruptcy
or financial re-organization or the disappearance of an active market for a security.
For financial assets carried at amortized cost, the amount of the impairment is the difference between the asset’s
carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original
effective interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the
exception of trade receivables, where the carrying amount is reduced through the use of an allowance account.
A trade receivable is considered impaired if it is probable that a customer will not pay all amounts due. When a trade
receivable is considered impaired, it is recorded in the allowance account. Subsequent recoveries of amounts are
credited against the allowance account. Changes in the carrying amount of the allowance account are recognized
in earnings. When there is no reasonable expectation of recovery, the trade receivable balance is written off against
the allowance account.
Financial Liabilities and Equity Instruments Issued by the Company
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on re-measurement recognized in
earnings. The net gain or loss recognized in earnings incorporates any interest paid on the financial liability and
is included in the “other income and expenses” line item in the consolidated statements of earnings.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all
of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct
issue costs.
Other financial liabilities, including long term debt and redemption liabilities, are initially measured at fair value,
net of transaction costs. Other financial liabilities are subsequently measured at amortized cost using the effective
interest method, with interest expense recognized on an effective yield basis.
41
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Critical Accounting Estimates and Judgments
The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year.
Consequently, actual results could differ from those estimates. Those estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate
is revised and in any future periods affected.
Significant estimates include the determination of expected credit losses which are based on the amount and
timing of cash flows expected to be received, provision for inventory obsolescence which is recorded to adjust to
the net realizable value of inventory and based on current market prices and past experiences, the useful life of
property, plant and equipment and intangibles for depreciation which are based on past experiences, expected
use and industry trends, amortization and valuation of net recoverable amount of property, plant and equipment
and intangibles, determination of fair value for share based compensation, evaluating deferred income tax assets
and liabilities, the determination of fair value of financial instruments and the likelihood of recoverability, and the
determination of implied fair value of goodwill and implied fair value of assets and liabilities for purchase price
allocation purposes and goodwill impairment assessment purposes.
Significant items requiring the use of judgment in application of accounting policies and assumptions include the
determination of functional currencies, classification of financial instruments, classification of leases, determination
of the number of revenue performance obligations, determination if revenues should be recognized at a point in time
or over time, application of the percentage of completion method on long-term contracts, degree of componentization
applied when calculating amortization of property, plant and equipment, and identification of cash generating units
for impairment testing purposes.
The Company has also assessed the impact of the pandemic on the estimates and judgements described above.
The Company believes that the long-term estimates and assumptions do not require significant revisions. Although
the Company determined that no significant revisions to such estimates, judgement or assumptions were required,
the pandemic is fluid and given the inherent uncertainty at this time, revisions may be required in future periods
to the extent that the negative impacts on the Company business operations arising from the pandemic continue
or worsen. Any such revisions could result in a material impact on our results of operations and financial condition.
Operating Segments
An operating segment is a component of the Company that engages in business activities from which it may earn
revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s
other components. The Company reviewed its operations and determined that it operates a single reportable
segment, the television broadcast equipment market. The single reportable operating segment derives its revenue
from the sale of hardware and software solutions including related services, training and commissioning.
42
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
3. TRADE AND OTHER RECEIVABLES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2022 and 2021 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
Trade receivables, net of allowances
Other receivables
4. INVENTORIES
Finished goods
Raw material and supplies
Work in progress
2022
96,966
3,054
100,020
2022
53,970
83,058
40,240
177,268
$
$
$
$
2021
72,529
4,256
76,785
2021
58,319
60,124
34,256
152,699
$
$
$
$
Cost of sales for the year ended April 30, 2022 included $169,691 of inventory (2021 - $138,110) and $4,005
of inventory write-offs (2021 - $3,274).
5. PROPERTY, PLANT AND EQUIPMENT
Office furniture and equipment $
Research and development
equipment
Airplanes
Machinery and equipment
Leaseholds
Land
Buildings
April 30, 2022
Accumulated
Depreciation
Cost
Carrying
Amount
April 30, 2021
Accumulated
Depreciation
Cost
Carrying
Amount
4,593 $
3,068 $
1,525 $
4,787 $
3,231 $ 1,556
40,316
11,599
69,153
9,195
2,055
9,916
30,544
9,720
55,936
6,527
-
3,155
9,772
1,879
40,778
11,535
28,027
9,154
12,751
2,381
13,217
69,202
54,094
15,108
2,668
2,055
6,761
9,188
2,197
6,037
-
3,151
2,197
10,710
3,055
7,655
$ 146,827 $
108,950 $
37,877 $ 148,397 $ 103,598 $ 44,799
43
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT
5. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Office
furniture
and
equip-
ment
Research
and
develop-
ment
equip-
ment
Machin-
ery
and
equip-
ment
Lease-
holds
Airplanes
Land
Buildings
Total
Cost
Balance as at April 30, 2020 $ 4,819 $ 38,735 $ 11,535 $ 67,698 $ 9,206 $ 2,332 $ 11,293 $ 145,618
Additions
373
4,281
-
4,917
6
-
-
9,577
Foreign exchange
(2,135)
-
adjustments
Disposals
(4,663)
-
Balance as at April 30, 2021 $ 4,787 $ 40,778 $ 11,535 $ 69,202 $ 9,188 $ 2,197 $ 10,710 $ 148,397
(957)
(2,456)
(266)
(1,972)
(567)
(16)
(186)
(219)
(135)
-
(24)
-
Additions
Foreign exchange
adjustments
538
1,940
64
2,936
-
-
-
5,478
(260)
(374)
-
(153)
7
(142)
(794)
(1,716)
Disposals
(5,332)
-
Balance as at April 30, 2022 $ 4,593 $ 40,316 $ 11,599 $ 69,153 $ 9,195 $ 2,055 $ 9,916 $ 146,827
(2,028)
(2,832)
(472)
-
-
-
Accumulated Depreciation
Balance as at April 30, 2020 $ 3,252 $ 25,072 $
Depreciation for the year
Foreign exchange
adjustments
Disposals
(274)
(1,972)
(148)
(219)
5,201
346
Balance as at April 30, 2021 $ 3,231 $ 28,027 $
Depreciation for the year
Foreign exchange
adjustments
Disposals
Balance as at April 30, 2022 $ 3,068 $ 30,544 $
(337)
(2,023)
(245)
(460)
4,877
542
8,579 $ 52,407 $ 5,546 $
- $ 2,968 $
97,824
575
4,879
491
-
-
(746)
(2,446)
-
-
9,154 $ 54,094 $ 6,037 $
4,562
490
566
-
-
(76)
(2,644)
9,720 $ 55,936 $ 6,527 $
-
-
-
-
-
187
11,679
(100)
-
(1,268)
(4,637)
- $ 3,055 $ 103,598
11,451
-
414
(972)
(314)
-
(5,127)
-
-
- $ 3,155 $ 108,950
Carrying amounts
At April 30, 2021
$ 1,556 $ 12,751 $
2,381 $ 15,108 $ 3,151 $ 2,197 $
7,655 $
44,799
At April 30, 2022
$ 1,525 $ 9,772 $
1,879 $ 13,217 $ 2,668 $ 2,055 $
6,761 $
37,877
44
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT
5. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2022 and 2021 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
6. RIGHT-OF-USE ASSETS
Balance as at May 1, 2020
Amortization for the year
Foreign exchange adjustments
Balance as at April 30, 2021
Additions
Amortization for the year
Foreign exchange adjustments
Balance as at April 30, 2022
7. GOODWILL
The changes in carrying amounts of goodwill are as follows:
Balance as at April 30, 2020
Business acquisitions (note 28)
Foreign exchange differences
Balance as at April 30, 2021
Foreign exchange differences
Balance as at April 30, 2022
Land & Building
$
$
$
$
$
$
28,823
(5,130)
(123)
23,570
5,665
(4,924)
326
24,637
Cost
20,771
650
(281)
21,140
(107)
21,033
The Company performs an impairment test annually on April 30th or whenever there is an indication of impairment.
For the purposes of testing for impairment, goodwill has been allocated to the following cash-generating units as follows:
Evertz Microsystems Ltd.
Holdtech Kft
Quintech
ATCI
Ease Live
April 30,
2022
13,782
5,558
676
366
651
21,033
$
$
2021
13,951
5,549
639
351
650
21,140
$
$
The key assumptions used in performing the impairment tests as at April 30, 2022 are as follows:
Method of determining recoverable amount:
Discount Rate:
Perpetual growth rate:
Value in use
8.0% - 11.0%
2 - 4%
The key assumptions are inherently uncertain due to the fluidly evolving impact of the pandemic.
Recoverable Amount
Management’s past experience and future expectations of the business performance is used to make a best estimate
of the expected revenue, earnings before interest, taxes, depreciation and amortization and operating cash flows for
a five year period. Subsequent to the fifth year, the present value of the fifth year cash flows is calculated in perpetuity.
45
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT
7. GOODWILL (CONTINUED)
Discount Rate
The discount rate applied is a pretax rate that reflects the time value of money and risk associated with the business.
The discount rate applied varies depending on the jurisdictions in which the entity operates.
Perpetual Growth Rate
The perpetual growth rate is management’s current assessment of the long-term growth prospect of the Company
in the jurisdictions in which it operates.
Sensitivity Analysis
Management performs a sensitivity analysis on the key assumptions. The sensitivity analysis indicates reasonable
changes to key assumptions will not result in an impairment loss.
8. INTANGIBLES
Balance as at April 30, 2020
Amortization
Foreign exchange differences
Business acquisitions (note 28)
Balance as at April 30, 2021
Amortization
Foreign exchange differences
Balance as at April 30, 2022
9. INVESTMENT IN AN ASSOCIATE
Balance as at May 1, 2020
Purchase of shares in associate (note 29)
Foreign exchange differences
Share of net loss, net of income taxes
Balance as at April 30, 2021
Foreign exchange differences
Share of net loss, net of income taxes
Balance as at April 30, 2022
10. PROVISIONS
Balance as at April 30, 2020
Net additions
Foreign exchange differences
Balance as at April 30, 2021
Net (reductions) additions
Foreign exchange differences
Balance as at April 30, 2022
$
$
$
$
$
$
Cost
1,573
(795)
(158)
3,856
4,476
(1,207)
48
3,317
Cost
-
7,800
(400)
(531)
6,869
98
(1,493)
5,474
Total
5,031
(633)
(329)
4,069
(309)
60
7,379
Warranty and
Returns
Lease/
Retirement
Obligations
4,381
(740)
(310)
3,331
3,435
90
6,856
650
107
(19)
738
(185)
(30)
523
$
$
$
46
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS (CONT’D)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2022 and 2021 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
10. PROVISIONS (CONTINUED)
Warranty and Returns
The provision relates to estimated future costs associated with standard warranty repairs and returns on hardware
solutions. The provision is based on historical data associated with similar products. The warranty and returns are
expected to be incurred within the next twelve months.
Lease/Retirement Obligations
The provision relates to estimated restoration costs expected to be incurred upon the conclusion of Company leases.
11. LEASE LIABILITIES
Opening Balance
Additions
Interest
Lease Payments
Foreign exchange adjustments
Closing Balance
Less current portion
Long term lease obligations
12. LONG TERM DEBT
a) Credit Facilities
April 30,
2022
April 30,
2021
$
25,367 $
5,665
1,029
(5,351)
138
26,848
4,088
$
22,760 $
29,865
-
1,097
(5,519)
(76)
25,367
4,122
21,245
The Company has the following credit facilities available:
1. Credit facility of $75,000 and a treasury risk management facility up to $10,000 available, bearing interest at
prime, subject to certain covenants and secured by all Canadian based assets. Advances under these facilities
bear interest at prime. There were no borrowings against either of these facilities as at April 30, 2022 or 2021.
2. Credit facility available of $1,155 bearing interest at WIBOR plus 1.4% per annum. There were no borrowings
outstanding under this facility as at April 30, 2022 or 2021.
13. REDEMPTION LIABILITY
Opening Balance
Business Acquisitions (note 28)
Amortization
Foreign Exchange Adjustments
Closing Balance
April 30,
2022
$
2,523 $
-
781
119
April 30,
2021
-
2,523
-
-
$
3,423 $
2,523
47
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT
14. CAPITAL STOCK
Authorized capital stock consists of:
Unlimited number of preferred shares
Unlimited number of common shares
Balance as at April 30, 2020
Cancelled pursuant to NCIB
Balance as at April 30, 2021
Cancelled pursuant to NCIB
Balance as at April 30, 2022
Number of
Common
Shares
76,449,446
(165,080)
76,284,366
(54,670)
76,229,696
Amount
143,915
(310)
143,605
(103)
143,502
$
$
$
Dividends Per Share
During the year, $1.72 in dividends per share including a special dividend of $1.00 per share, were declared
(2021 - $0.54 including per share).
Normal Course Issuer Bid
In October 2020, the Company filed a Normal Course Issuer Bid (“NCIB”) with the TSX to repurchase, at the
Company’s discretion, until October 25, 2021 up to 3,819,487 outstanding common shares on the open market
or as otherwise permitted, subject to normal terms and limitations of such bids. During the year, the Company did
not purchase and cancel any shares (2021 – 123,700 common shares at a weighted average price of $11.86).
In October 2021, the Company renewed the Normal Course Issuer Bid (“NCIB”) with the TSX to repurchase, at the
Company’s discretion, until October 28, 2022 up to 3,814,218 outstanding common shares on the open market
or as otherwise permitted, subject to normal terms and limitations of such bids. During the year, the Company
purchased and cancelled 54,670 common shares at a weighted average price of $12.64 (2021 – nil).
15. REVENUE
Hardware, including related software
Services, including warranty, training and commissioning
Long term contract revenue
16. SELLING, ADMINISTRATIVE AND GENERAL EXPENSES
Selling and administrative
Depreciation - selling and administrative
General:
Share based compensation (note 19)
Amortization of intangibles
2022
2021
$
344,868 $
37,563
58,585
273,499
26,969
42,420
$
441,016 $
342,888
2022
$
60,884
$
3,356
941
1,207
2021
49,413
3,101
1,199
795
$
66,388
$
54,508
48
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2022 and 2021 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
17. RESEARCH AND DEVELOPMENT
Research and development
Depreciation - research and development
General:
Share based compensation (note 19)
18. STATEMENT OF CASH FLOWS
Changes in non–cash working capital items
Trade and other receivables
Contract assets
Inventories
Prepaid expenses
Trade and other payables
Deferred revenue
Provisions
19. SHARE BASED PAYMENTS
2022
$
97,020
$
5,418
4,087
$
106,525
$
2021
74,971
4,924
5,216
85,111
2022
2021
$
(25,880)
$
12,518
(3,577)
(25,488)
276
5,075
16,220
3,310
5,043
8,919
2,274
3,662
12,971
(962)
$
(30,064)
$
44,425
Stock Option Plan
The Company established, in June 2006, a stock option plan to attract, retain, motivate and compensate employees,
officers and eligible directors who are integral to the growth and success of the Company. A number of shares equal
to 10% of the Company’s outstanding common shares are to be reserved for issuance under the stock option plan.
The Board of Directors administers the stock option plan and will determine the terms of any options granted.
The exercise price of an option is to be set by the Board of Directors at the time of grant but shall not be lower than
the market price as defined in the option plan at the time of grant. The term of the option cannot exceed 10 years.
Stock options currently granted normally fully vest and expire by the end of the fifth year.
The changes in the number of outstanding share options are as follows:
Balance as at April 30, 2020
Granted
Forfeited
Expired
Balance as at April 30, 2021
Granted
Forfeited
Expired
Balance as at April 30, 2022
49
Number of
Options
1,628,500
$
4,697,000
(341,500)
(99,000)
5,885,000
$
3,000
(672,500)
(160,000)
5,055,500
$
Weighted
Average
Exercise Price
16.75
12.39
14.01
15.36
13.46
15.14
12.80
16.99
13.43
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT
19. SHARE BASED PAYMENTS (CONTINUED)
Stock options outstanding as at April 30, 2022 are:
Weighted
Average
Exercise Price
$
$
$
$
$
12.35
15.38
16.24
17.88
13.43
Number of
Outstanding
Options
3,760,000
510,500
245,000
540,000
5,055,500
Weighted
Average
Remaining
Contractual
Life
3.3
2.0
2.4
2.4
3.0
Number of
Options
Exercisable
-
246,300
56,000
72,000
374,300
Weighted
Average
Exercise Price
of Exercisable
Options
$
$
$
$
$
-
15.70
16.36
17.47
16.14
Exercise Price
$ 12.28 - $12.86
$ 14.07 - $15.80
$ 16.08 - $16.87
$ 17.39 - $18.63
Totals
Restricted Share Unit Plan
The Company established, in March 2016, a restricted share unit (“RSU”) plan to provide an incentive to participants;
including key executives of the Company, by rewarding such participants with equity-based compensation. Under the
terms of the plan, RSU’s are issued to the participant with a vesting period of three years. On the vesting date,
all RSU’s will be redeemed in cash at the fair market value at the date of vest plus any accrued dividends.
The changes in the number of outstanding RSUs are as follows:
Balance as at April 30, 2020
Granted
Exercised
Forfeited
Balance as at April 30, 2021
Granted
Exercised
Forfeited
Balance as at April 30, 2022
Number of
RSUs
921,000
77,000
(160,000)
(40,500)
797,500
10,000
(315,500)
(49,000)
443,000
As at April 30, 2022, the average remaining contractual life for outstanding RSUs is 0.8 years (2021 – 1.38 years).
Compensation Expense
Stock Option Plan
The share based compensation expense that has been charged against earnings over the fiscal period is $1,379
(2021 - $1,235). Compensation expense on grants during the year was calculated using the Black-Scholes option
pricing model with the following weighted average assumptions:
Risk-free interest rate
Dividend yield
Expected life
Expected volatility
Weighted average grant-date fair value
April 30, 2022
April 30, 2021
0.94%
4.76%
5 years
24%
1.74
$
0.38%
5.66%
5 years
23%
1.09
$
Expected volatility is based on historical share price volatility over the past five years of the Company. Share based
compensation expense was calculated using a weighted average forfeiture rate of 22% (2021 – 13%).
50
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT
19. SHARE BASED PAYMENTS (CONTINUED)
19. SHARE BASED PAYMENTS (CONTINUED)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2022 and 2021 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
Restricted Share Unit Plan
The share based compensation expense that has been charged against earnings over the fiscal period is $3,649
(2021 - $4,888). Share based compensation expense was calculated using a weighted average forfeiture rate
of 11% (2021 - 7%). As at April 30, 2022, the total liability included within trade and other payables is $5,646
(2021 - $7,535).
20. COMMITMENTS AND CONTINGENCIES
In the normal course of operations, the Company is party to a number of lawsuits, claims and contingencies.
Accruals are made in instances where it is probable that liabilities have been incurred and where such liabilities
can be reasonably estimated. Although it is possible that liabilities may be incurred in instances for which
no accruals have been made, the Company believes the possibility of outflow of cash is remote and thus
no additional provisions have been recognized.
The Company is committed to payments under long term debt agreements and certain lease obligations in Note 11
with minimum annual lease payments as follows:
2022
2023
2024
2025
2026
Thereafter
Balance as at April 30, 2022
Redemption
Liabilities
Leases
Payments
$
$
3,423
-
-
-
-
-
3,423
$
5,436
$
4,977
4,643
4,938
3,538
7,575
31,107
$
$
Total
8,859
4,977
4,643
4,938
3,538
7,575
34,530
Total operating lease expense during the year was $420 (2021 - $425).
The Company has obtained documentary and standby letters of credit aggregating to a total of $4,524
(2021 - $16,005).
21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company estimates that the fair value of financial instruments approximates their carrying values. The following
summarizes the significant methods and assumptions used in estimating the fair values of financial instruments:
I. Quoted prices (unadjusted) in active markets for identical assets or liabilities.
II. Inputs other than quoted prices included in level I that are observable for the asset or liability, either directly
or indirectly. Cash and cash equivalents, trade and other receivables, trade and other payables, long term
debt, and fair value disclosures have been determined using level II fair values.
III. Inputs for the asset or liability that are not based on observable market data.
(a) Financial risk management:
The Company, through its financial assets and liabilities, is exposed to various risks. The following analysis provides
a measurement of risks as at April 30, 2022:
51
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT
21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
Credit risk
Credit risk is the risk of a financial loss to the Company if a customer or counterparty to a financial instrument fails
to meet its contractual obligations. Financial instruments that potentially subject the Company to concentrations of
credit risk consist of cash and cash equivalents, contract assets and trade and other receivables the total of which
is the maximum exposure to credit risk. The Company performs evaluations of the financial situations of its customers
and uses various controls and processes, such as credit checks and billings in advance to investigate credit risk.
Management does not believe that there is significant credit concentration or risk not already provided for.
The Company sets up an allowance for doubtful accounts using the lifetime expected credit losses related to total
receivables, while factoring in the credit risks of the individual customer and the aging of receivables. Amounts
owing over 90 days are individually evaluated and provided for as an expected credit loss where appropriate in the
allowance for doubtful accounts. When considering the need for provisions in relation to balances past due, the
Company considers forward looking information such as region specific economic factors including industry outlook,
employment, politics, and other market indicators including the estimated impact of the pandemic. The Company also
takes into consideration customer specific payment history. The trade and other receivables are presented as follows
net of the allowance for doubtful accounts:
Trade and other receivables
Allowance for doubtful accounts
The change in the allowance for doubtful accounts was as follows:
Balance at beginning of year
Increase in allowance
Bad debt recaptured and write-offs
Impact of variation in exchange rates
Balance at end of year
April 30, 2022
April 30, 2021
$
$
102,522
(2,502)
100,020
$
$
80,334
(3,549)
76,785
April 30, 2022
April 30, 2021
$
$
3,549
$
658
(1,685)
(20)
2,502
$
4,030
1,307
(1,492)
(296)
3,549
The aging of trade and other receivables, net of the allowance for doubtful accounts was:
Less than 30 days past billing date
30-60 days past billing date
61-90 days past billing date
Greater than 90 days past billing date
April 30, 2022
April 30, 2021
$
41,297
$
17,720
11,299
29,704
$
100,020
$
33,814
20,289
5,256
17,426
76,785
52
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT
21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2022 and 2021 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
Exchange Rate Risk
The Company transacts a significant portion of its business in U.S. dollars and is therefore exposed to currency
fluctuations.
U.S. dollar financial instruments are as follows:
Cash and cash equivalents
Trade and other receivables
Trade and other payables
April 30, 2022
April 30, 2021
$
$
14,071
$
76,702
(10,400)
76,970
60,330
(7,421)
80,373
$
129,879
Based on the financial instruments as at April 30, 2022, a 5% change in the value of the U.S. dollar would result
in a gain or loss of $4,019 in earnings before income tax.
Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with its financial
liabilities. The Company's primary source of liquidity is its cash reserves. The Company also maintains certain credit
facilities to support short term funding of operations and trade finance. The Company believes it has sufficient
available funds to meet current and foreseeable financial requirements. The Company expects to settle all current
financial liabilities within the next year. Maturity of lease obligations are disclosed in Note 20.
22. SEGMENTED INFORMATION
The Company reviewed its operations and determined that it operates a single reportable segment, the television
broadcast equipment market. The single reportable operating segment derives its revenues from the sale of hardware
and software solutions including related services, training and commissioning.
Revenue
United States
International
Canada
2022
279,005
$
141,657
20,354
2021
210,503
120,208
12,177
441,016
$
342,888
$
$
April 30, 2022
Property, Plant
and Equipment
Goodwill
Intangible
Assets
Right-of-Use
Assets
Investment in an
Associate
United States
$
4,388
$
1,286
$
896
$
718
$
5,474
International
Canada
9,577
23,912
18,164
1,583
2,421
-
3,770
20,149
-
-
$
37,877
$
21,033
$
3,317
$
24,637
$
5,474
53
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT
22. SEGMENTED INFORMATION (CONTINUED)
April 30, 2021
Property, Plant
and Equipment
Goodwill
Intangible
Assets
Right-of-Use
Assets
Investment in an
Associate
United States
$
4,959
$
1,225
$
1,363
$
$1,162
$
6,869
International
Canada
10,794
29,046
18,332
1,583
3,113
-
94
22,314
-
-
$
44,799
$
21,140
$
4,476
$
23,570
$
6,869
23. RELATED PARTY TRANSACTIONS
Balances and transactions between the Company and its subsidiaries, which are related parties of the Company,
have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the
Company and other related parties are disclosed below.
Related Party Transactions
Two shareholders each indirectly hold a 16% interest in the Company’s leased premises in Ontario. This lease
expires in 2029 with a total of $7,544 committed over the remaining term. During the year, rent paid for the leased
principal premises amounted to $1,049 (2021 – $1,024) with no outstanding amounts due as at April 30, 2022.
The Company also leases property where two shareholders indirectly own 100% interest. This lease was renewed
in October 2021 and this lease expires in September 2026 with a total of $1,356 committed over the remaining
term. During the year, rent paid for the leased principal premises amounted to $279 (2021 – $252) with no
outstanding amounts due as at April 30, 2022.
On December 1, 2008 the Company entered into a property lease agreement where two shareholders each
indirectly hold a 20% interest in the Company’s leased premises in Ontario. This lease expires in 2028 with
a total of $6,017 committed over the remaining term. During the year, rent paid for the leased principal premises
amounted to $867 (2021 – $851) with no outstanding amounts due as at April 30, 2022.
On May 1, 2009 the Company entered into a property lease agreement where two shareholders each indirectly
hold a 35% interest. This lease expires in 2029 with a total of $3,895 committed over the remaining term.
During the year, rent paid for the leased principal premises amounted to $525 (2021 – $507) with no outstanding
amounts due as at April 30, 2022.
The Company also leases a property where two shareholders indirectly own 100% interest. The lease expires
in 2023 with a total of $254 committed over the remaining term. During the year, rent paid for the leased principal
premises amounted to $152 (2021 – $152) with no outstanding amounts due as at April 30, 2022.
On May 1, 2016 the Company entered into a property lease agreement where two shareholders each hold a 46.6%
interest. This lease expires in 2026 with a total of $4,157 committed over the remaining term. During the year,
rent paid for the leased principal premises amounted to $996 (2021 – $996) with no outstanding amounts due
as at April 30, 2022.
On August 1, 2016 the Company entered into a property lease agreement. Currently two shareholders indirectly own
100% interest. This lease expires in 2026 with a total of $1,180 committed over the remaining term. During year,
rent paid for the leased principal premises amounted to $263 (2021 – $261) with no outstanding amounts due
as at April 30, 2022.
These transactions were in the normal course of business and entered into at their respective fair values.
54
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT
22. SEGMENTED INFORMATION (CONTINUED)
23. RELATED PARTY TRANSACTIONS (CONTINUED)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2022 and 2021 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
The remuneration of directors and other members of key management personnel for the years ended April 30, 2022
and April 30, 2021 are as follows:
Short-term salaries and benefits
Share-based payments
The total employee benefit expense was $139,600 (2021 - $117,536).
Subsidiaries:
The Company has the following significant subsidiaries:
Company
Evertz Microsystems Ltd.
Evertz USA
Evertz UK
Holdtech Kft.
Quintech Electronics & Communications Inc.
Tech Digital Manufacturing Limited
Truform Metal Fabrication Ltd.
Ease Live AS
2022
4,600
-
4,600
$
$
2021
4,330
204
4,534
$
$
% Ownership
100%
100%
100%
100%
100%
100%
75%
73%
Location
Canada
United States
United Kingdom
Hungary
United States
Canada
Canada
Norway
24. NON-CONTROLLING INTERESTS
The Company has non-controlling interests of 25% of Truform Metal Fabrication Ltd., located in Canada, and 10% with
Studiotech Poland Sp. z.o.o., located in Poland. The Company also has a non-controlling interest of 27% of Ease Live
AS, located in Norway, whose interest has been separately recorded as a redemption liability (see note 28).
The table below summarizes the aggregate financial information relating to the above subsidiaries before eliminating
entries, as no such subsidiary is individually significant.
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity attributable to shareholders
Non-controlling interest
Revenue
Net earnings attributable to:
Shareholders
Non-controlling interest
$
April 30,
2022
19,937
10,358
4,422
262
22,901
2,710
April 30,
2022
$
April 30,
2021
16,957
11,750
2,992
247
21,353
2,171
April 30,
2021
$
48,539
$
30,277
3,079
932
1,607
202
During the year, $250 (2021 - $400) in dividends were paid to non-controlling interests.
55
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT
25. CAPITAL DISCLOSURES
The Company’s capital is composed of total equity attributable to shareholders which totals $230,938
(2021 - $292,734) as at April 30, 2022. The Company’s objective in managing capital is to ensure sufficient
liquidity to finance increases in non-cash working capital, capital expenditures for capacity expansions,
pursuit of selective acquisitions and the payment of quarterly dividends. The Company’s strategy on capital
risk management has not changed significantly since April 30, 2021.
The Company takes a conservative approach towards financial leverage and management of financial risk
and the Company currently satisfies their internal requirements.
The Company is not subject to any capital requirements imposed by a regulator.
26. EARNINGS PER SHARE
Weighted average common shares outstanding
Dilutive-effect of stock options
Diluted weighted average common shares outstanding
2022
2021
76,266,341
76,357,895
304,223
45,999
76,570,564
76,403,894
The weighted average number of diluted common shares excludes 1,295,500 options because they were anti-dilutive
during the period (2021 – 1,539,500).
27. INCOME TAXES
The Company’s effective income tax rate differs from the statutory combined Canadian income tax rate as follows:
Expected income tax expense using statutory rates (25%, 2021 - 25%)
$
24,478
$
13,961
2022
2021
Difference in foreign tax rates
Benefit arriving from prior year losses
Non-deductible stock based compensation
Non-deductible losses
Change in estimates relating to prior periods
Other
640
-
365
395
(759)
116
545
(45)
321
138
(755)
(280)
$
25,235
$
13,885
Benefit arising from a previously unrecognized tax loss has been recognized in the year as a result of a change
in estimated taxable income in future years.
Components of deferred income taxes are summarized as follows:
Deferred income tax assets (liabilities):
Tax loss carried forward
Research and development tax credits
Equipment tax vs accounting basis
Non-deductible reserves
April 30, 2022
April 30, 2021
$
$
142
$
(2,963)
3,001
4,943
5,123
$
107
(2,428)
913
4,712
3,304
56
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2022 and 2021 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
As at April 30, 2022, the Company had $3,092 (2021 - $3,267) in tax losses for which no deferred tax asset has
been recognized in the statement of financial position. Of these losses, $1,058 expire in 2025 while the remaining
balance has no expiry.
28. BUSINESS ACQUISITIONS
Business Combinations
On October 27, 2020, the Company completed the investment of 73% in the voting share capital of Ease Live
AS (“Ease Live”), who are based in Bergen, Norway. Ease Live, which was formerly part of Sixty AS, is a direct to
consumer interactive graphics company. The fair value of total consideration transferred upon acquisition included
cash considerations of $5,327, which was transferred into Ease Live for future use. The non-controlling shareholders
hold a put option for the remaining shareholdings, exercisable between November 15, 2022 and December 15, 2022
for a fixed cash price of $3,518. The put option has been separately valued as a redemption liability, as summarized
in note 13, and the non-controlling interest is deemed to have been acquired at the acquisition date. The acquisition
was accounted for under the acquisition method and its operating results have been included in these financial
statements since the date of acquisition. During the year, $1,289 in revenue and $606 in losses were included within
the consolidated statement of earnings (2021 - $233 in revenue and $832 in losses).
The allocation of the purchase price was based on management’s estimate of the fair value of assets acquired and
liabilities assumed. The total purchase price of $795 is net of $4,532 cash left in the company for future operations.
The allocation of the purchase price was as follows and is subject to adjustments as additional information
is evaluated by the company:
Trade and other payables
Intangible assets
Goodwill (not tax deductible)
Long-term redemption liability
(791)
3,459
650
(2,523)
795
$
The intangible assets relate to the technology, patents and workforce acquired during the investment.
Goodwill of $650 arising from the acquisition consists largely of the expansion of the Company’s product
lines and potential customer base.
Asset Acquisitions
In February 2021, the Company completed the strategic asset acquisition of the “Studer” audio brand technology
and related assets from Harman International. The fair value of total consideration transferred upon acquisition
included cash considerations of $369, cash considerations held in escrow for twelve months after acquisition
of $123 and the undertaking of warranty and other related obligations fair valued at $63. The allocation of the
purchase price was based on management’s estimate of the fair value of assets acquired and liabilities assumed.
The allocation of the purchase price was as follows:
Inventory
Intangible assets
Trade and other payables
158
397
(63)
492
$
The intangible assets relate to the technology, patents, brand and workforce acquired.
57
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT
29. INVESTMENT IN AN ASSOCIATE
In December, 2020 the Company invested $7,800 in the share capital of DDSports Inc. (Shot Tracker), a revolutionary
sports technology company based in Kansas, United States. The Company has a significant influence on DDSports
Inc., due to its approximately 20% percentage ownership and the holding of a board seat. As such, the investment
is treated under the equity method. Under the equity method, the initial investment is recognized at cost, and the
carrying amount is increased or decreased in recognition of the Company’s share of the profit or loss of DDSports Inc.
after the date of acquisition.
During fiscal 2022, $1,493 in losses were recorded in recognition of the Company’s share of DDSports Inc. losses
after the date of acquisition (2021 - $531). As at April 30, 2022, DDSports Inc. had $6,068 in working capital and
$9,603 in net assets (2021 - $11,477 in working capital and $24,262 in net assets).
30. SUBSEQUENT EVENT
On June 23, 2022 the Company declared a quarterly dividend of $0.18 with a record date of July 5, 2022
and a payment date of July 12, 2022.
5-YEAR FINANCIAL HIGHLIGHTS
(all amounts in thousands, except EPS and share amounts)
Consolidated Statement of Earnings Data
Year Ended April 30,
2022
2021
2020
2019
2018
Sales
$ 441,016
$ 342,888
$ 436,592
$ 443,556
$ 402,832
Selling and administrative expenses
Research and development expenses
Earnings before income taxes
Net earnings
Fully diluted EPS
60,884
102,438
97,912
72,677
0.94
49,413
80,187
55,845
41,960
0.55
67,597
90,827
91,959
69,172
0.90
67,821
85,823
105,087
78,504
1.02
65,531
80,804
72,966
53,546
0.70
Consolidated Balance Sheet Data
Cash and cash equivalents
Total assets
Shareholder’s equity
Number of common shares
Outstanding
Basic
Fully-diluted
Year Ended April 30,
2022
2021
2020
2019
2018
$
33,902
420,979
230,938
$ 108,771
451,793
292,734
$
75,025
443,673
295,012
$
94,184
421,115
329,227
$
94,184
421,115
329,227
76,266,341
76,570,564
76,357,895
76,403,894
76,449,446
78,077,941
76,481,746
78,722,746
76,481,746
78,722,746
58
EVERTZ TECHNOLOGIES LIMITED2022 ANNUAL REPORT
CORPORATE AND SHAREHOLDER INFORMATION
DIRECTORS AND EXECUTIVE OFFICERS
Romolo Magarelli
Director, President and Chief Executive Officer
Douglas DeBruin
Executive Chairman
Christopher Colclough 1, 2
Director
Dr. Thomas Pistor 1
Director
Dr. Ian McWalter 1, 2
Director
Brian Piccioni
Director
Rakesh Patel
Chief Technology Officer,
Director
Brian Campbell
Executive Vice-President,
Business Development
Douglas Moore
Chief Financial Officer
Eric Fankhauser
Vice-President,
Product Development
Vince Silvestri
Vice-President of Software
Systems
Robert Peter
Vice-President,
International Operations
Jeff Marks
Vice-President
of Manufacturing
Dan Turow
Vice-President of File Based
Solutions
Paulo Francisco
Vice-President of Engineering
Evertz AV Division
Marsha Garner
Vice-President, Inside Sales
and Administration
Orest Holyk
Vice-President of Sales USA
1 Member of the Audit Committee.
2 Member of the Compensation Committee.
AUDITORS
BDO Canada LLP
360 Oakville Place Drive
Suite 500
Oakville, ON, Canada L6H 6K8
T: (289) 881-1111
LEGAL COUNSEL
WeirFoulds LLP
66 Wellington Street West, Suite 4100
P.O. Box 35, TD Bank Tower
Toronto, ON, Canada M5K 1B7
T: (416) 365-1110
EXCHANGE LISTING
The common shares of the Company are listed
on the Toronto Stock Exchange under the symbol ET
INVESTOR RELATIONS
Douglas Moore
Chief Financial Officer
T: (905) 335-7580
email: ir@evertz.com
ANNUAL SHAREHOLDERS MEETING
10:00 a.m. Wednesday, October 5, 2022
1160 Sutton Drive
Burlington, ON Canada L7L 6R6
REGISTRAR AND TRANSFER AGENT
Computershare Investor Services Inc.
100 University Ave., 8th floor, North Tower
Toronto, ON Canada M5J 2Y1
email: service@computershare.com
T: 1-800-736-1755
www.computershare.com
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