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2023 HIGHLIGHTS
EVERTZ TECHNOLOGIES LIMITED CORPORATION OFFICES
STRENGTH
INNOVATION
GENERATING CASH
PROFITABILITY
Annual
Revenue
Re-investment
in R&D
Operating
Activities
$455M
$117M
$92M
Earnings
Before Taxes
$88M
REVENUE
(in millions of dollars)
$441
$455
$343
2021
2022
2023
NORTH AMERICA
74%
26%
INTERNATIONAL
2023 Revenue
DIVIDENDS PAID
(annual total in millions of dollars)
CASH FROM OPERATING ACTIVITIES
(in millions of dollars)
$54.9
$56.4
$93.0
$91.5
$41.2
$59.0
CORPORATE HEAD OFFICE
Evertz Technologies Ltd.
5292 John Lucas Dr.
Burlington, ON
L7L 5Z9
T: (905) 335-3700
Burbank
2020 N. Lincoln Street
Burbank, CA
91504
T: (818) 558-3910
F: (818) 558-3906
Indiana
250 Airport Road
Indiana, PA
15701
T: (724) 349-1412
F: (724) 349-1421
Evertz UK
260 Wharfedale Road
Winnersh Triangle
Berkshire, UK
RG41 5TP
T: 44-118-921-6800
F: 44-118-921-6802
Evertz Asia Ltd.
Tower One
Unit 1618
Metroplaza, 223 Hing Fong Road
Kwai Fong, New Territories
Hong Kong
T: (852) 2850-7989
F: (852) 2850-7978
Sales Offices
Burlington, ON
Burbank, CA
Phoenix, AZ
New York City, NY
Indiana, PA
Berkshire, UK
Croatia
Germany
Beijing
Hong Kong
Shanghai
Singapore
India
Dubai
Australia
2021
20221
1excludes $76.3 M special dividend September 2021
2023
2022
(before changes in non-working capital and current taxes)
2021
2023
58.2%
57.9%
59.0%
16.9%
23.0%
21.0%
2021
2022
2023
GROSS MARGIN
OPERATING EARNINGS
A LETTER TO FELLOW SHAREHOLDERS
Evertz had another very successful year in fiscal 2023, with record annual revenues and strong momentum heading
into fiscal 2024. Evertz commitment to our customers’ success and their trust in our capabilities allowed Evertz to
generate record annual revenues, combined with a significant increase in order intake, resulting in a 165%
year-over-year increase in our order backlog.
Evertz Sustainable Success:
• Management:
• Over 300 years of industry experience within the senior management team;
• Decisive actions, addressing issues head on, with an adherence to Evertz vision;
• Operational discipline and uncompromising commitment throughout the
organization to doing it the “right way”, including the maintenance of S&A under
15% and delivering superior financial performance;
• Strategic planning, identifying and solving solutions in both the immediate and
long-term, foreseeing industry transitions;
• Careful planning with no economic layoffs in Company history, ensuring
continuity for our over 1,900 dedicated staff.
• Technology Leader:
• Continuous investment in research and development, including $117 million in
fiscal 2023 and over $450 million throughout the past five years, resulting in
superior technological products;
• Maintaining a focus on investing into new technologies, including “Cloud” native
solutions and services such as evertz.io and DreamCatcher™ BRAVO Studio;
• Emphasis on technical design and support, including over half of all staff associated
with technical design and support.
• Commitment:
• Commitment to customers, working assiduously with our customers to provide new
technological solutions, on-time and reliable deliveries, with continuous service
and after sale support;
• Commitment to the prioritization of the health and safety of our employees,
customers and partners;
• Commitment to sustainable solutions, including development of Cloud based and remote
solutions and our continued support of the Save the Soil movement.
Highlights from the year include:
• Record annual revenues of $455 million;
• Earnings before taxes of $88 million;
• Annual investment in research and development of $117 million;
• Distribution of excess cash flow through increased quarterly dividends totaling $0.74 per share during the year;
• Record open order backlog of $392 million as at May 31, 2023, an increase of 165% over the prior year.
RESEARCH AND DEVELOPMENT INITIATIVES
Evertz invested $117 million in R&D in the past year and over $450 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™ Live Production Suite; Interactive graphic overlay platforms; Compression and Media
Transport Solutions; and Professional AV Solutions. These solutions are enabling our customers to efficiently transition
to IP, IT and public/private/hybrid Cloud based solutions, providing flexible tools for content creation, production,
monetization, and distribution.
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EVERTZ TECHNOLOGIES LIMITED2023 ANNUAL REPORT
COMPANY RECOGNITION
TV Technology – 2023 NAB Best of Show – Evertz awarded, in June 2023,
to DreamCatcher™ Live Production Suite, including BRAVO Studio, the complete
Cloud-based production control suite providing virtual access to all the services
found in a traditional control room, including integration of the power of Studer
Vista audio mixing.
Next TV – 2023 NAB Best of Show – Evertz awarded, in June 2023, to Reflektor,
the SaaS IP distribution platform, a powerful, low-bandwidth Cloud on-ramp option
for easy and convenient contribution of high-quality video with ultra-low latency for
Cloud production and streaming applications.
SportsPro OTT – 2022 Best New Platform, Best User Experience, Best in Fan
Engagement – Evertz awarded, in November 2022, all three awards to EaseLive,
the SaaS interactive graphic overlay platform, used to take fan experiences to
another level by engaging fans with dynamic and personalized storytelling content
on top of the live stream as a single-screen experience.
50 Best Managed Company - Evertz was awarded as a 2023 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.
Save Soil Movement - Evertz continues to be a proud sponsor of Conscious
Planet and committed to raising awareness to 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 dealing with increasing complexity. It is clear that technology
is an essential driver to productivity and economic growth. Evertz is in a position to lead; able to reach out to current
and new market customers with clean, technologically superior solutions and leverage the power of technology to
solve challenges brought forth to ourselves and our customers. 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 LIMITED2023 ANNUAL REPORT
MOVING FOWARD
Evertz is entering the new year with record backlog and record pipeline, and with the backing of our healthy balance
sheet and consistent investments in our technological solutions, we expect superior industry results for the 2024
fiscal year.
We are maintaining our focus on investing into new technologies, leveraging and expanding upon the high-profile
industry leading Cloud and on-premise solutions that Evertz has successfully deployed. With significant orders and
a robust pipeline with key customers, we expect to gain broader adoption within the Media and Entertainment
technology industry and vertical markets.
Key successes to build upon:
• IP based Software Defined Video Networking platforms;
• IT based workflow and Cloud services, delivering an immersive viewing experience from production to playout;
• Mediator-X Asset Management and Playout platforms, managing and delivering content over private and
public Cloud infrastructures;
• evertz.io – powerful Cloud SaaS, enabling the launch and monetization of many OTT, DTC, Connected TV,
and Free Ad-Supported TV “FAST” channels around the world;
• DreamCatcher™ Live Production Suite – IP based instant replay & BRAVO Studio live production suite;
• Studer Audio – live production solution for comprehensive audio mixing; and
• evertzAV – network based, high quality and highly secure audio visual solutions.
These technologies provide superior solutions enabling our customers to address and implement complex
multi-platform solutions, including efficient, flexible, and reliable creation, production, monetization, and distribution
of content, with the expansion of remote operation capabilities, and to efficiently transition to evolving IP & IT based
solutions including Cloud and SaaS services.
We enter fiscal 2024 with significant momentum and demand for our Evertz IP, IT & Cloud native services and
solutions 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 LIMITED2023 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year ended April 30, 2023
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 21, 2023.
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EVERTZ TECHNOLOGIES LIMITED2023 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.
2023 ANNUAL REPORT
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EVERTZ 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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2023 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 income 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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2023 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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2023 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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2023 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.
10
2023 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 compensation 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
2023 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, there was no assistance received or deducted from expenses
(2022 - $3,259). As of April 30, 2023, $510 in prior years assistance remained as a reduction to the cost
of inventory (2022 - $904).
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:
Assets/Liabilities
Cash and cash equivalents
Trade and other receivables
Investments in public companies
Investments in private companies
Bank indebtedness
Trade and other payables, excluding RSUs
Cash based RSU liability
Redemption liability
Classification
Amortized cost
Amortized cost
Fair value through other comprehensive income
Fair value through profit and loss
Amortized cost
Amortized cost
Fair value through profit and loss
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 (“FVTOCI”)” 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. Financial assets at FVTOCI are stated at fair value, with any gains or losses arising on re-measurement
recognized in other comprehensive earnings.
Impairment of Financial Assets
Financial assets, other than those at FVTPL and FVTOCI, are assessed for indicators of impairment at the time
of initial recognition and at each reporting period. The Company measures a loss allowance based on the lifetime
expected credit losses. Lifetime expected credit losses are estimated based on factors such as the Company’s past
experience of collecting payments, observable changes in national or local economic conditions that correlated with
default on receivables, financial difficulties of the borrower, and it becoming probable that the borrow will either enter
bankruptcy or financial reorganization. Financial assets are written off when there is no reasonable expectation
of recovery.
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
2023 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
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.
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, related services, training and commissioning and long-term
contracts.
13
2023 ANNUAL REPORTEVERTZ TECHNOLOGIES LIMITED
New and Revised IFRSs Issued but Not Yet Effective
Following is a listing of amendments, revisions and new International Financial Reporting Standards issued but not
yet effective. Unless otherwise indicated, earlier application is permitted.
Presentation of Non-Current Liabilities with Covenants
Amendments to IAS 1, Presentation of Financial Statements was issued by the IASB in January 2020 and clarifies
the classification, presentation and disclosure requirements in the standard for non-current liabilities with covenants.
The amendments are effective for reporting periods beginning on or after January 1, 2024. The Company does not
expect that the adoption of this standard listed above will have a material impact on the consolidated financial
statements of the Company.
Lease Liability in Sale and Leaseback Transactions
Amendments to IFRS 16, Leases was issued by the IASB in September 2022 and clarifies the subsequent
measurement requirements for sale and leaseback transactions for sellers-leasees. The amendments are effective
for reporting periods beginning on or after January 1, 2024. The Company does not expect that the adoption of the
standard listed above will have a material impact on the consolidated financial statements of the Company.
YEAR END HIGHLIGHTS
Revenue was $454.6 million for the year ended April 30, 2023 an increase of $13.6 million, compared
to $441.0 million for the year ended April 30, 2022.
For the year ended April 30, 2023, net earnings were $64.6 million, a decrease from $8.1 million from
$72.7 million for the year ended April 30, 2022 and fully diluted earnings per share were $0.84,
a decrease from $0.94 for the year ended April 30, 2022.
Gross margin during the year ended April 30, 2023 was 59.0% as compared to 57.9% for the year ended
April 30, 2022.
Foreign exchange gain during the year was $2.0 million, predominantly driven by the increase in value
of the US dollar against the Canadian dollar since April 30, 2022.
Selling and administrative expenses for the year ended April 30, 2023 was $61.5 million as compared to the year
ended April 30, 2022 of $60.9 million. As a percentage of revenue, selling and administrative expenses totaled
13.5% for the year ended April 30, 2023 as opposed to 13.8% for the year ended April 30, 2022.
Research and development (“R&D”) expenses were $117.1 million for the year ended April 30, 2023 as compared
to $102.4 million for the year ended April 30, 2022.
Cash and cash equivalents were $12.5 million, bank indebtedness was $5.9 million and working capital was
$171.4 million as at April 30, 2023, compared to cash and cash equivalents of $33.9 million and working
capital of $158.9 million as at April 30, 2022.
HIGHLIGHTS FROM THE FOURTH QUARTER
Revenue was $128.9 million for the fourth quarter ended April 30, 2023; an increase of $12.8 million,
compared to $116.1 million for the same period ended April 30, 2022.
For the fourth quarter ended April 30, 2023, net earnings were $18.6 million, a decrease from $19.2 million
for the fourth quarter ended April 30, 2022. Fully diluted earnings per share were $0.24 a decrease from
$0.25 in the fourth quarter ended April 30, 2022.
For the fourth quarter ended April 30, 2023, foreign exchange gain during the quarter was $0.3 million,
compared to a foreign exchange gain of $1.1 million for the fourth quarter April 30, 2022.
14
2023 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS (CONT’D)EVERTZ TECHNOLOGIES LIMITED
Gross margin during the fourth quarter ended April 30, 2023 was 59.5% compared to 58.9% in the fourth quarter
ended April 30, 2022.
Selling and administrative expenses for the fourth quarter ended April 30, 2023 was $17.5 million as compared
to the fourth quarter ended April 30, 2022 of $16.1 million. As a percentage of revenue, selling and administrative
expenses totaled 13.6% for the fourth quarter ended April 30, 2023 compared to 13.9% in the fourth quarter ended
April 30, 2022.
Research and development expenses were $29.9 million for the fourth quarter ended April 30, 2023 as compared
to $27.3 million for the fourth quarter ended April 30, 2022.
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
Total Operating Expenses
Earnings before undernoted
Finance income
Finance costs
Net loss from investments through profit and loss
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,
2023
2022
$
454,578
$
441,016
$
186,320
268,258
61,518
4,704
117,127
(13,415)
4,662
(1,966)
172,630
95,628
376
(3,718)
(5,364)
888
87,810
25,066
(1,811)
23,255
64,555
523
64,032
64,555
0.84
0.84
$
$
$
$
$
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
$
$
$
$
$
$
$
$
$
$
15
2021
342,888
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
2023 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,
2023
12,468
202,479
171,428
436,652
243,099
$
$
$
$
$
$
$
$
$
$
2022
33,902
177,268
158,947
420,979
230,938
$
$
$
$
$
2021
108,771
152,669
214,515
451,793
292,734
Number of common shares outstanding:
Basic
Fully-diluted
Weighted average number of shares outstanding:
Basic
Fully-diluted
76,145,758
82,446,008
76,229,696
81,285,196
76,284,366
82,169,366
76,200,248
76,232,462
76,266,341
76,570,564
76,357,895
76,403,894
16
2023 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
Total Operating Expenses
Earnings before undernoted
Finance income
Finance costs
Net loss on investments through profit and loss
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
2023
100.0%
41.0%
59.0%
13.5%
1.0%
25.8%
(3.0%)
1.0%
(0.4%)
38.0%
21.0%
0.0%
(0.7%)
(1.2%)
0.2%
19.3%
5.5%
(0.4%)
5.1%
14.2%
0.1%
14.1%
14.2%
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%
17.2%
0.2%
17.0%
17.2%
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%
$
$
0.84
0.84
$
$
0.94
0.94
$
$
0.55
0.55
17
2023 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 70% to 80% 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 80% to 85% of the
Company’s revenues are denominated in US dollars.
REVENUE
(In thousands of Canadian dollars)
United States/Canada
International
2023
337,109
117,469
454,578
$
$
Year Ended April 30,
2022
$
$
299,359
141,657
441,016
$
$
2021
222,680
120,208
342,888
Total revenue for the year ended April 30, 2023 was $454.6 million, an increase of $13.6 million as compared
to revenue of $441.0 million for the year ended April 30, 2022.
Revenue in the United States/Canada region was $337.1 million for the year ended April 30, 2023, an increase
of $37.7 million or 12.6% when compared to revenue of $299.4 million for the year ended April 30, 2022.
Revenue in the International region was $117.5 million for the year ended April 30, 2023, a decrease
of $24.2 million or 17.1% as compared to revenue of $141.7 million for the year ended April 30, 2022.
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. Cost of sales also includes related overhead, certain depreciation, final assembly, quality assurance,
inventory management, support costs as well as inventory obsolescence and write-offs. Cost of sales also includes
the costs of providing services to clients, primarily the cost of service-related personnel.
18
2023 ANNUAL REPORTMANAGEMENT’S DISCUSSION AND ANALYSIS (CONT’D)EVERTZ TECHNOLOGIES LIMITED
GROSS MARGIN
(In thousands of Canadian dollars, except for percentages)
2023
2022
2021
Gross margin
Gross margin % of sales
$
268,258
$
255,315
$
199,424
59.0%
57.9%
58.2%
Year Ended April 30,
Gross margin for the year ended April 30, 2023 was $268.3 million, compared to $255.3 million for the year ended
April 30, 2022. As a percentage of revenue, the gross margin was 59.0% for the year ended April 30, 2023 compared
to 57.9% for the year ended April 30, 2022.
Gross margins vary depending on the product mix, manufacturing volumes, geographic distribution, competitive
pricing pressures and currency fluctuations. During fiscal 2022 and 2023, 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 $23.5 million increase in raw materials since April 30, 2022. 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)
2023
2022
2021
Selling and administrative
Selling and administrative % of sales
$
61,518
$
60,884
$
49,413
13.5%
13.8%
14.4%
Year Ended April 30,
19
2023 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, 2023 were $61.5 million
or 13.5% of revenue and increase of $0.6 million, as compared to selling and administrative expenses
of $60.9 million or 13.8% of revenue for the year ended April 30, 2022.
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, 2023, share based
compensation expense associated with the plan was $0.9 million, compared to $3.7 million for the year ended
April 30, 2022. In June 2022, the Company adopted an equity based restricted share unit plan, which was approved
by shareholders on October 6, 2022. During the year ended April 30, 2023, share based compensation expense
associated with the 2022 plan was $2.5 million.
RESEARCH AND DEVELOPMENT (R&D)
(In thousands of Canadian dollars, except for percentages)
2023
2022
2021
Research and development expenses
$
117,127
$
102,438
$
80,187
Research and development % of sales
25.8%
23.2%
23.4%
Year Ended April 30,
Research and development expenses excluded stock based compensation but includes depreciation. For the year
ended April 30, 2023, gross R&D expenses were $117.1 million, an increase of $14.7 million as compared to an
expense of $102.4 million for the year ended April 30, 2022. The increase of $14.7 million includes a $2.4 million
increase in software expenses, and an increase in net salary costs driven by salary increases of $7.9 million and
an increase in head count to address key R&D initiatives for $5.9 million.
Investment Tax Credits
For the year ended April 30, 2023, investment tax credits were $13.4 million compared to $12.3 million for the
year ended April 30, 2022.
Foreign Exchange
For the year ended April 30, 2023, the foreign exchange gain was $2.0 million, as compared to a foreign exchange
gain for the year ended April 30, 2022 of $6.5 million. The gain was predominantly driven by the decrease in value
of the US dollar against the Canadian dollar since April 30, 2022.
Investment in Associate, Finance Income, Finance Costs, Other Income and Expenses
For the year ended April 30, 2023, a loss of $2.1 million was incurred in relation to the Company’s treatment
of the investment in DDSports, Inc under the equity method. During the year, the Company lost significant influence
in DDSports, Inc and the investment was revalued to fair value. A loss upon revaluation of $3.3 million was recorded.
For the year ended April 30, 2023, finance income, finance costs, other income and expenses netted to a loss
of $2.4 million.
20
2023 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 in cash
Year Ended April 30,
2023
12,468
171,428
86,744
86
$
$
$
2022
33,902
158,947
92,338
83
Year Ended April 30,
2023
53,814
(17,119)
(58,023)
(21,434)
$
$
$
$
2022
68,673
(4,963)
(137,516)
(74,869)
$
$
$
$
$
$
$
Operating Activities
For the year ended April 30, 2023, the Company generated cash from operations of $53.8 million, compared to
$68.7 million for the year ended April 30, 2022. Excluding the effects of the changes in non-cash working capital
and current taxes, the Company generated cash from operations of $91.5 million for the year ended April 30, 2023
compared to $93.0 million for the year ended April 30, 2022.
Investing Activities
The Company used cash for investing activities of $17.1 million for the year ended April 30, 2023 which
was principally driven by the acquisition of investments, which net of proceeds from disposals, used cash
of $10.6 million, and the acquisition of capital assets for $6.6 million.
Financing Activities
For the year ended April 30, 2023, the Company used cash from financing activities of $58.0 million, which was
principally driven by dividends paid of $56.4 million, $4.3 million in principle payments on capitalized leases, capital
stock repurchased for $1.0 million, partially offset by a $5.9 million increase in short-term bank indebtedness.
WORKING CAPITAL
As at April 30, 2023, the Company had cash and cash equivalents of $12.5 million and bank indebtedness
of $5.9 million, compared to $33.9 million in cash and cash equivalents as at April 30, 2022. The decrease
in cash and cash equivalents is predominately a result of the increase in inventory from April 30, 2022
of $25.2 million and the acquisition of investments, net of disposals, of $8.2 million.
The Company had working capital of $171.4 million as at April 30, 2023 compared to $158.9 million
as at April 30, 2022.
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 86 days at April 30, 2023 as compared to 83 for April 30, 2022.
21
2023 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
Restricted stock options granted and outstanding
FINANCIAL INSTRUMENTS
Year Ended April 30,
2023
2022
76,145,758
4,788,500
1,511,750
76,229,696
5,055,500
-
The Company’s financial instruments consist of cash and cash equivalents, bank indebtedness, 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, 2023:
(In thousands)
Lease commitments
Redemption liabilities
Total
26,911
3,711
30,622
$
$
Payments Due by Period
Less than
1 Year
2-3 Years
4-5 Years
Thereafter
$
$
5,283
3,711
8,994
$
$
10,139
-
10,139
$
$
7,091
-
7,091
$
$
4,398
-
4,398
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 LIMITED2023 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, 2023. 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)
2023
Quarter Ending
2022
2021
Apr 30
Jan 31
Oct 31
July 31
Apr 30
Jan 31
Oct 31
July 31
$ 128,919 $ 110,873 $ 113,248 $ 101,538 $ 116,089 $ 120,563
$ 107,199 $
97,165
52,273
Revenue
Cost of
goods sold
Gross margin $ 76,647 $ 65,611 $ 67,477 $ 58,524 $ 68,340 $
Operating
expenses
Earnings from
operations
$ 30,468 $ 17,465 $ 28,392 $ 19,304 $ 26,863 $
39,085
45,262
39,220
46,179
43,014
48,146
45,771
41,477
47,749
51,351
69,212
46,122
61,077 $
40,479
56,686
$
38,885
37,377
36,373
30,327
$
23,700 $
20,313
Other income
and expenses
Earnings
before taxes
Net earnings
4,547
(1,243)
(1,644)
(385)
(1,030)
(1,429)
(279)
(553)
$ 25,921 $ 16,222 $ 26,748 $ 18,919 $ 25,833 $
19,817
18,422
18,957
13,841
11,951
28,898
21,250
Net earnings
per share:
Basic
Diluted
Dividends
per share
$
$
$
0.24 $
0.24 $
0.16 $
0.19 $
0.26 $
0.26 $
0.18 $
0.18 $
0.25 $
0.25 $
0.28
0.28
0.19 $
0.19 $
0.18 $
0.18 $
0.18 $
0.18
$
$
$
$
23,421 $
16,991
19,760
14,547
0.22 $
0.22 $
0.19
0.19
1.18 $
0.18
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 LIMITED2023 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, 2023. Management has concluded that, as of April 30, 2023, 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, 2023, 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, 2023 that have materially affected, or reasonably likely to materially affect, its internal controls over
financial reporting. Management is currently operating under the Committee of Sponsoring Organizations
of the Treadway Commission Internal Control-Integrated Framework: 2013.
OUTLOOK
Management is encouraged with the Company’s revenue outlook, including within the cloud native technology
and service business, as evidenced by the receipt of significant orders and increase in the Company’s backlog.
Gross margin percentages may vary depending on the 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.
RISKS AND UNCERTAINTIES
The Company risk factors are outlined in our AIF filed on SEDAR.
24
2023 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, 2023 and 2022, 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, 2023 and 2022, 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.
REVENUE RECOGNITION
Description of the Key Audit Matter
The Company generates revenue through the sale of hardware, software solutions, services and warranty, as well
as a combination of these revenue streams. The Company’s contracts with customers involve multiple performance
obligations. Determining whether the products and services represent distinct performance obligations, the allocation
of the transaction fee to the performance obligations and, for certain performance obligations in certain arrangements,
whether to recognize revenue at a point in time or over time may require significant management judgment.
We identified revenue recognition as a key audit matter. Significant auditor judgment and effort, involving more senior
professionals, was required to evaluate the results of our audit procedures regarding the Company’s significant
judgments in identifying distinct performance obligations and whether to recognize the related revenue over time
or at a point in time.
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
2023 ANNUAL REPORTEVERTZ TECHNOLOGIES LIMITED
How the Key Audit Matter Was Addressed in the Audit
Our audit procedures to address the Key Audit Matter included, but were not limited to, the following:
• Obtaining, reading and understanding the terms of a sample of contracts entered into during the year.
• For a sample of revenue transactions recognized during the year, we performed the following:
• We agreed key contractual terms back to signed contracts, including contract amendments
and correspondence with customers, where applicable;
• Assessed the Company’s determination of the distinct performance obligation by examining
the contract source documents;
• We assessed the Company’s determination of the allocation of the transaction fee to the performance
obligation based on the standalone selling price for the performance obligation; and
• We obtained evidence of the Company’s satisfaction of the performance obligation to the client and
assessed the Company’s determination of whether to recognize the related revenues over time
or at a point in time based on the terms of the agreements and the nature of the performance
obligation rendered.
OTHER INFORMATION
Management is responsible for the other information. The other information comprises:
• The information included in the Management Discussion and Analysis; and
• The information, other than the financial statements and our auditor’s report thereon, included in the Annual Report.
Our opinion on the consolidated financial statements does not cover the other information and we do not and will 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 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 LIMITED2023 ANNUAL REPORT
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 LIMITED2023 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.
CHARTERED PROFESSIONAL ACCOUNTANTS, LICENSED PUBLIC ACCOUNTANTS
Oakville, Ontario
June 21, 2023
28
EVERTZ TECHNOLOGIES LIMITED2023 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at April 30, 2023 and April 30, 2022
(In thousands of Canadian dollars) April 30, 2023 April 30, 2022
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 (note 7)
Intangibles (note 8)
Investments (note 9)
Deferred income taxes (note 27)
LIABILITIES
Current liabilities
Bank Indebtedness (note 12)
Trade and other payables
Provisions (note 10)
Deferred revenue
Current portion of lease obligations (note 11)
Current portion of redemption liability (note 13)
Income tax payable (note 27)
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
$
12,468
106,871
11,032
10,319
202,479
343,169
34,730
20,396
21,333
2,125
8,160
6,739
$
33,902
100,020
6,398
5,930
177,268
323,518
37,877
24,637
21,033
3,317
5,474
5,123
$
436,652
$
420,979
$
$
5,928
75,521
5,104
69,827
4,060
3,711
7,590
171,741
18,827
190,568
143,344
14,696
(2,402)
87,460
85,058
243,099
2,985
246,084
436,652
$
-
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
EVERTZ TECHNOLOGIES LIMITED2023 ANNUAL REPORT CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Years ended April 30, 2023 and 2022
Share-
based
pay-
ment
reserve
Accumu-
lated
other
compre-
hensive
earnings
Capital
stock
Total
equity
attributable
to share-
holders
Non-
control-
ling
interest
Retained
earnings
Total
Equity
$ 143,605 $ 9,514 $ (1,062) $ 140,677 $
292,734 $ 2,171 $ 294,905
(In thousands
of Canadian dollars)
Balance at
April 30, 2021
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)
$
-
-
- $
-
-
-
-
71,745
71,745
932
72,677
(3,031)
-
(3,031)
(143)
(3,174)
- $ (3,031) $
-
-
71,745 $
68,714 $ 789 $
(131,198)
(131,198)
(250)
69,503
(131,448)
-
1,379
(103)
-
-
-
-
1,379
(588)
(691)
-
-
1,379
(691)
Balance at
April 30, 2022
Net earnings
for the year
Unrealized loss on an FVTOCI
investments, net of tax (note 9)
Foreign currency
translation adjustment
Total comprehensive
earnings for the year
Dividends declared
Share based
compensation expense (note 19)
Repurchase of
common shares (note 14)
Balance at
April 30, 2023
$ 143,502 $ 10,893 $ (4,093) $
80,636 $
230,938 $ 2,710 $ 233,648
-
-
-
-
-
-
-
64,032
64,032
523
64,555
(1,595)
3,286
-
-
(1,595)
-
(1,595)
3,286
177
3,463
$
- $
- $ 1,691 $
64,032 $
65,723 $
700 $
66,423
-
-
-
3,803
(158)
-
-
-
-
(56,392)
(56,392)
(425)
(56,817)
-
3,803
(816)
(973)
-
-
3,803
(973)
$ 143,344 $ 14,696 $ (2,402) $
87,460 $
243,099 $ 2,985 $ 246,084
See accompanying notes to the consolidated financial statements.
30
EVERTZ TECHNOLOGIES LIMITED2023 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
Finance income
Finance costs
Net loss on investments through profit and loss (note 9)
Other income
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.
2023
$
454,578
$
186,320
268,258
66,760
121,251
(13,415)
(1,966)
172,630
95,628
376
(3,718)
(5,364)
888
87,810
25,066
(1,811)
23,255
64,555
523
64,032
64,555
0.84
0.84
$
$
$
$
$
$
$
$
$
$
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
31
2023 ANNUAL REPORTEVERTZ TECHNOLOGIES LIMITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
Years ended April 30
(In thousands of Canadian dollars)
Net earnings for the year
Other comprehensive earnings (loss):
Unrealized gain (loss) on investments, net of tax (note 9)
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.
2023
2022
$
64,555
$
72,677
(1,595)
3,463
66,423
700
65,723
66,423
-
(3,174)
69,503
789
68,714
69,503
$
$
$
$
$
$
32
2023 ANNUAL REPORTEVERTZ TECHNOLOGIES LIMITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended April 30
2023
2022
$
64,555
$
72,677
10,851
4,714
1,238
3,277
(8)
614
2,087
3,803
2,165
(1,754)
91,542
11,248
(12,252)
(36,724)
53,814
(6,572)
60
(10,607)
(17,119)
5,928
(4,283)
(1,877)
(56,392)
(425)
(974)
(58,023)
(106)
(21,434)
33,902
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
$
12,468
$
33,902
(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 intangibles (note 8)
Revaluation loss on investment in associate (note 9)
Gain on disposal of property, plant and equipment (note 5)
Realized loss on investments
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
Acquisition of investments, net of proceeds on disposal
Cash used in investing activities
Financing activities
Proceeds from credit facility (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 in cash and cash equivalents
Cash and cash equivalents beginning of year
Cash and cash equivalents end of year
See accompanying notes to the consolidated financial statements.
33
2023 ANNUAL REPORTEVERTZ TECHNOLOGIES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Years ended April 30, 2023 and 2022
(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 21, 2023.
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
34
2023 ANNUAL REPORTEVERTZ TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2023 and 2022 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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.
35
2023 ANNUAL REPORTEVERTZ TECHNOLOGIES LIMITED
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 income 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 LIMITED2023 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2023 and 2022 (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 LIMITED2023 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 LIMITED2023 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2023 and 2022 (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 LIMITED2023 ANNUAL REPORT
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash settled share based compensation 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, there was no assistance received or deducted from expenses
(2022 - $3,259). As of April 30, 2023, $510 in prior years assistance remained as a reduction to the cost
of inventory (2022 - $904).
40
EVERTZ TECHNOLOGIES LIMITED2023 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2023 and 2022 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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:
Assets/Liabilities
Cash and cash equivalents
Trade and other receivables
Investments in public companies
Investments in private companies
Bank indebtedness
Trade and other payables, excluding RSUs
Cash based RSU liability
Redemption liability
Classification
Amortized cost
Amortized cost
Fair value through other comprehensive income
Fair value through profit and loss
Amortized cost
Amortized cost
Fair value through profit and loss
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 (“FVTOCI”)” 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. Financial assets at FVTOCI are stated at fair value, with any gains or losses arising on re-measurement
recognized in other comprehensive earnings.
Impairment of Financial Assets
Financial assets, other than those at FVTPL and FVTOCI, are assessed for indicators of impairment at the time
of initial recognition and at each reporting period. The Company measures a loss allowance based on the lifetime
expected credit losses. Lifetime expected credit losses are estimated based on factors such as the Company’s past
experience of collecting payments, observable changes in national or local economic conditions that correlated with
default on receivables, financial difficulties of the borrower, and it becoming probable that the borrow will either enter
bankruptcy or financial reorganization. Financial assets are written off when there is no reasonable expectation
of recovery.
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.
41
EVERTZ TECHNOLOGIES LIMITED2023 ANNUAL REPORT
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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
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.
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, related services, training and commissioning and long-term
contracts.
New and Revised IFRSs Issued but Not Yet Effective
Following is a listing of amendments, revisions and new International Financial Reporting Standards issued but not
yet effective. Unless otherwise indicated, earlier application is permitted.
42
EVERTZ TECHNOLOGIES LIMITED2023 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2023 and 2022 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Presentation of Non-Current Liabilities with Covenants
Amendments to IAS 1, Presentation of Financial Statements was issued by the IASB in January 2020 and clarifies
the classification, presentation and disclosure requirements in the standard for non-current liabilities with covenants.
The amendments are effective for reporting periods beginning on or after January 1, 2024. The Company does not
expect that the adoption of this standard listed above will have a material impact on the consolidated financial
statements of the Company.
Lease Liability in Sale and Leaseback Transactions
Amendments to IFRS 16, Leases was issued by the IASB in September 2022 and clarifies the subsequent measurement
requirements for sale and leaseback transactions for sellers-leasees. The amendments are effective for reporting periods
beginning on or after January 1, 2024. The Company does not expect that the adoption of the standard listed above will
have a material impact on the consolidated financial statements of the Company.
3. TRADE AND OTHER RECEIVABLES
Trade receivables, net of allowances
Other receivables
4. INVENTORIES
Finished goods
Raw material and supplies
Work in progress
2023
105,692
1,179
106,871
2023
53,446
106,614
42,419
202,479
$
$
$
$
2022
96,966
3,054
100,020
2022
53,970
83,058
40,240
177,268
$
$
$
$
Cost of sales for the year ended April 30, 2023 included $171,059 of inventory (2022 - $169,691) and $3,150
of inventory write-offs (2022 - $4,005).
5. PROPERTY, PLANT AND EQUIPMENT
Office furniture and equipment $
Research and development
equipment
Airplanes
Machinery and equipment
Leaseholds
Land
Buildings
April 30, 2023
Accumulated
Depreciation
Cost
Carrying
Amount
April 30, 2022
Accumulated
Depreciation
Cost
Carrying
Amount
5,169 $
3,589 $
1,580 $
4,593 $
3,068 $
1,525
34,008
11,599
69,811
9,570
2,276
27,086
10,263
56,937
7,086
-
10,984
3,726
6,922
1,336
40,316
11,599
30,544
9,720
9,772
1,879
12,874
69,153
55,936
13,217
2,484
2,276
7,258
9,195
2,055
9,916
6,527
-
3,155
2,668
2,055
6,761
$
143,417 $
108,687 $
34,730 $ 146,827 $ 108,950 $ 37,877
43
EVERTZ TECHNOLOGIES LIMITED2023 ANNUAL REPORT
5. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Office
furniture
and
equip-
ment
Research
and
develop-
ment
equipment
Airplanes
Machin-
ery
and
equip-
ment
Lease-
holds
Land
Build-
ings
Total
Cost
Balance as at April 30, 2021 $ 4,787 $ 40,778 $ 11,535 $ 69,202 $ 9,188 $ 2,197 $ 10,710 $ 148,397
Additions
538
1,940
64
2,936
-
-
-
5,478
Foreign exchange
(1,716)
adjustments
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
(374)
(2,028)
(153)
(2,832)
(260)
(472)
(794)
-
(142)
-
7
-
-
-
Additions
Foreign exchange
adjustments
490
1,429
125
465
-
-
4,274
363
-
16
6,572
1,052
12
221
1,052
2,927
Disposals
(12,909)
Balance as at April 30, 2023 $ 5,169 $ 34,008 $ 11,599 $ 69,811 $ 9,570 $ 2,276 $ 10,984 $ 143,417
(8,202)
(4,668)
(39)
-
-
-
-
Accumulated Depreciation
Balance as at April 30, 2021 $ 3,231 $ 28,027 $ 9,154 $ 54,094 $ 6,037 $
Depreciation for the year
Foreign exchange
adjustments
Disposals
(76)
(2,644)
(337)
(2,023)
(245)
(460)
4,562
4,877
566
542
490
-
-
-
-
Balance as at April 30, 2022 $ 3,068 $ 30,544 $ 9,720 $ 55,936 $ 6,527 $
Depreciation for the year
Foreign exchange
adjustments
Disposals
Balance as at April 30, 2023 $ 3,589 $ 27,086 $ 10,263 $ 56,937 $ 7,086 $
813
(4,646)
440
(8,144)
80
(38)
4,834
4,246
559
543
479
-
-
-
-
- $ 3,055 $ 103,598
-
-
-
414
11,451
(314)
-
(972)
(5,127)
- $ 3,155 $ 108,950
10,851
-
190
1,714
381
-
(12,828)
-
-
- $ 3,726 $ 108,687
Carrying amounts
At April 30, 2022
At April 30, 2023
$ 1,525 $
9,772 $
1,879 $ 13,217 $ 2,668 $ 2,055 $ 6,761 $ 37,877
$ 1,580 $
6,922 $ 1,336 $ 12,874 $ 2,484 $ 2,276 $ 7,258 $ 34,730
44
EVERTZ TECHNOLOGIES LIMITED2023 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2023 and 2022 (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, 2021
Additions
Amortization for the year
Foreign exchange adjustments
Balance as at April 30, 2022
Amortization for the year
Foreign exchange adjustments
Balance as at April 30, 2023
7. GOODWILL
The changes in carrying amounts of goodwill are as follows:
Balance as at April 30, 2021
Foreign exchange differences
Balance as at April 30, 2022
Foreign exchange differences
Balance as at April 30, 2023
Land & Building
$
$
$
$
$
$
23,570
5,665
(4,924)
326
24,637
(4,714)
473
20,396
Cost
21,140
(107)
21,033
300
21,333
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,
2023
$
13,926
5,346
1,023
387
651
21,333
$
2022
13,782
5,558
676
366
651
21,033
$
$
The key assumptions used in performing the impairment tests as at April 30, 2023 are as follows:
Method of determining recoverable amount:
Discount Rate:
Perpetual growth rate:
Value in use
9.0% - 12.0%
1 - 3%
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.
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.
45
EVERTZ TECHNOLOGIES LIMITED2023 ANNUAL REPORT
7. GOODWILL (CONTINUED)
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, 2021
Amortization
Foreign exchange differences
Balance as at April 30, 2022
Amortization
Foreign exchange differences
Balance as at April 30, 2023
Cost
$4,476
(1,207)
48
$3,317
(1,238)
46
$2,125
$
$
$
The intangible assets relate to the technology, patents and workforce acquired during prior period acquisitions.
9. INVESTMENTS
Investments in:
Publically traded companies
Private companies
April 30,
2023
8,160
-
$
8,160
$
April 30,
2022
-
5,474
5,474
Investments in publically traded companies are maintained at their fair value and are classified as financial assets
designated at fair value through other comprehensive income. The designation was made upon initial recognition
as the investments were not held for the purpose of trading.
Investments in private companies are maintained at their fair value and are classified as financial assets designated
at fair value through profit and loss. The investment in private companies consists of an investment in share capital
of DDSports Inc. (Shot Tracker). Upon initial recognition the investment was treated under the equity method as
it determined the Company had a significant influence on DDSports Inc., due to its approximately 20% percentage
ownership and the holding of a board seat. In fiscal 2023, DDSports Inc completed new share issuances and the
Company’s ownership percentage decrease to approximately 9%. The decrease in ownership percentage
has resulted in the loss of significant influence and the revaluation of the investment to its fair value, which the
Company has determined to be nil, resulting in an impairment of $3,277. Prior to revaluation, in fiscal 2023,
$2,087 million in losses were recorded under the equity method in recognition of the Company’s share of
DDSports Inc. (2022 - $1,493).
46
EVERTZ TECHNOLOGIES LIMITED2023 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2023 and 2022 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
10. PROVISIONS
Balance as at April 30, 2021
Net (reductions) additions
Foreign exchange differences
Balance as at April 30, 2022
Net (reductions) additions
Foreign exchange differences
Balance as at April 30, 2023
Warranty and
Returns
Lease/
Retirement
Obligations
$
$
$
3,331
3,435
90
6,856
(2,364)
20
$
$
738
(185)
(30)
523
35
34
4,512
$
592
Total
4,069
3,248
60
7,379
(2,329)
54
5,104
$
$
$
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
April 30,
2023
April 30,
2022
$
26,848 $
-
961
(5,244)
322
$
$
22,887 $
4,060
18,827 $
25,367
5,665
1,029
(5,351)
138
26,848
4,088
22,760
12. CREDIT FACILITIES
The Company has the following credit facilities available:
1. Credit facility of $75 million and a treasury risk management facility up to $10 million available,
bearing interest at prime, subject to certain covenants and secured by all Canadian based assets.
Advances under these facilities bear interest at prime. As at April 30, 2023 and April 30, 2022,
the Company was in compliance with covenants. There were borrowings against the facilities
as at April 30, 2023 of $5,928 (April 30, 2022 – nil).
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, 2023 or 2022.
47
EVERTZ TECHNOLOGIES LIMITED2023 ANNUAL REPORT
13. REDEMPTION LIABILITY
Opening Balance
Amortization
Foreign Exchange Adjustments
Closing Balance
April 30,
2023
April 30,
2022
$
3,423
$
2,523
57
231
781
119
$
3,711
$
3,423
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 non-controlling shareholders held a put option for the remaining
shareholdings, exercisable between November 15, 2022 and December 15, 2022 for a fixed cash price of
$3,734. The option was not exercised. The non-controlling shareholders hold another put option for the remaining
shareholdings, exercisable between November 15, 2023 and December 15, 2023 for a fixed cash price of $3,734.
The put option has been separately valued as a redemption liability, and the non-controlling interest is deemed
to have been acquired at the acquisition date.
14. CAPITAL STOCK
Authorized capital stock consists of:
Unlimited number of preferred shares
Unlimited number of common shares
Balance as at April 30, 2021
Cancelled pursuant to NCIB
Balance as at April 30, 2022
Cancelled pursuant to NCIB
Balance as at April 30, 2023
Number of
Common
Shares
76,284,366
(54,670)
76,229,696
(83,938)
76,145,758
Amount
143,605
(103)
143,502
(158)
143,344
$
$
$
Dividends Per Share
During the year, $0.74 in dividends per share, were declared (2022 - $1.72 per share including a special dividend
of $1.00 per share were declared).
Normal Course Issuer Bid
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 33,494 common shares under this NCIB at a weighted average price of $12.01
(2022 – 54,670 common shares at a weighted average price of $12.64).
In November, 2022, the Company entered into a new Normal Course Issuer Bid (“NCIB”) with the TSX to repurchase,
at the Company’s discretion, until November 13, 2023 up to 3,809,810 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 50,444 common shares under this NCIB at a weighted average price of $11.32 (2022 - nil).
48
EVERTZ TECHNOLOGIES LIMITED2023 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2023 and 2022 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
15. REVENUE
Hardware and software
Services, including warranty, maintenance 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
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
2023
2022
$
349,115 $
56,825
48,638
342,129
47,730
51,157
$
454,578 $
441,016
2023
2022
$
61,518
$
60,884
3,441
3,356
538
1,263
941
1,207
$
66,760
$
66,388
2023
$
112,380
$
4,747
2022
97,020
5,418
4,124
4,087
$
121,251
$
106,525
2023
2022
$
(3,475)
$
(25,880)
(4,634)
(23,899)
(3,765)
5,764
(4,440)
(2,275)
$
(36,724)
$
(3,577)
(25,488)
276
5,075
16,220
3,310
(30,064)
49
EVERTZ TECHNOLOGIES LIMITED2023 ANNUAL REPORT
19. SHARE BASED PAYMENTS
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, 2021
Granted
Forfeited
Expired
Balance as at April 30, 2022
Forfeited
Expired
Balance as at April 30, 2023
Stock options outstanding as at April 30, 2023 were:
Exercise Price
$ 12.28 - $12.86
$ 14.07 - $15.80
$ 16.08 - $16.20
$ 17.24 - $17.98
Totals
Weighted
Average
Exercise Price
$
$
$
$
$
12.35
15.37
16.17
17.94
13.38
Number of
Outstanding
Options
3,603,500
500,000
220,000
465,000
4,788,500
Stock options outstanding as at April 30, 2022 were:
Exercise Price
$ 12.28 - $12.86
$ 14.07 - $15.80
$ 16.08 - $16.87
$ 17.39 - $18.63
Totals
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
50
Number of
Options
5,885,000
$
3,000
(672,500)
(160,000)
5,055,500
$
(174,500)
(92,500)
4,788,500
$
Weighted
Average
Exercise Price
13.46
15.14
12.80
16.99
13.43
12.72
17.35
13.38
Weighted
Average
Remaining
Contractual
Life
2.3
1.0
1.6
1.6
2.1
Weighted
Average
Remaining
Contractual
Life
3.3
2.0
2.4
2.4
3.0
Number of
Options
Exercisable
-
320,000
144,000
283,000
747,000
Number of
Options
Exercisable
-
246,300
56,000
72,000
374,300
Weighted
Average
Exercise Price
of Exercisable
Options
$
$
$
$
$
-
15.70
16.16
17.93
16.63
Weighted
Average
Exercise Price
of Exercisable
Options
$
$
$
$
$
-
15.70
16.36
17.47
16.14
EVERTZ TECHNOLOGIES LIMITED2023 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2023 and 2022 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
19. SHARE BASED PAYMENTS (CONTINUED)
Restricted Share Unit Plan (2016 Plan)
The Company established, in March 2016, a restricted share unit (“RSU-2016”) 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 issued under the 2016 Plan 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 under the 2016 Plan
are as follows:
Balance as at April 30, 2021
Granted
Exercised
Forfeited
Balance as at April 30, 2022
Exercised
Forfeited
Balance as at April 30, 2023
Number of
RSUs
797,500
10,000
(315,500)
(49,000)
443,000
(371,500)
(4,500)
67,000
As at April 30, 2023, the average remaining contractual life for outstanding RSUs under the
2016 Plan is 0.7 years (2022 – 0.8 years).
Restricted Share Unit Plan (2022 Plan)
The Company established, in June 2022, a new restricted share unit plan (RSU-2022). The purpose of the plan
is 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, the Company will redeem RSUs granted to a participant
under the 2022 Plan through the issuance of one Common Share of the Company for each fully vested RSU. The
Board of Directors administers the equity based restricted share unit plan and will determine the terms of any
restricted share units granted. Restricted share units currently granted normally fully vest and expire by the end
of the fifth year.
A number of restricted share units equal to 10% of the Company’s outstanding common shares are to be reserved
for issuance under the equity based restricted share unit plan, less the aggregate number of stock options granted
under the Stock Option Plan described above.
The change in the number of outstanding RSUs under the 2022 Plan are as follows:
Balance as at April 30, 2022
Granted
Forfeited
Balance as at April 30, 2023
Number of
RSUs (2022 Plan)
-
1,522,250
(10,500)
1,511,750
As at April 30, 2023, the average remaining contractual life for outstanding RSUs under the 2022 Plan is 3.4 years.
51
EVERTZ TECHNOLOGIES LIMITED2023 ANNUAL REPORT
19. SHARE BASED PAYMENTS (CONTINUED)
Compensation Expense
Stock Option Plan
The share based compensation expense that has been charged against earnings over the fiscal period is $1,265
(2022 - $1,379). Compensation expense on grants was calculated using the Black-Scholes option pricing model.
There were no grants completed in fiscal 2023. In 2022, grants were calculated 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
0.94%
4.76%
5 years
24%
1.74
$
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 24% (2022 – 22%).
Restricted Share Unit Plan (2016 Plan)
The share based compensation expense that has been charged against earnings over the fiscal year is $858
(2022 - $3,649). Share based compensation expense was calculated using a weighted average forfeiture rate
of 23% (2022 - 11%). As at April 30, 2023, the total liability included within trade and other payables is $780
(2022 - $5,646).
Restricted Share Unit Plan (2022 Plan)
The share base compensation expense that has been charged against earnings over the fiscal year is $2,539
(2022 – nil). Compensation expense on grants during the year was calculated using the fair value of the Company’s
share price at the grant date. Share based compensation expense was calculated used a weighted average forfeiture
rate of 10% (2022 – nil).
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:
2024
2025
2026
2027
2028
Thereafter
Balance as at April 30, 2023
$
$
Redemption
Liabilities
Leases
Payments
$
5,283
$
4,856
5,283
3,737
3,354
4,398
26,911
$
$
3,711
-
-
-
-
-
3,711
52
Total
8,994
4,856
5,283
3,737
3,354
4,398
30,622
EVERTZ TECHNOLOGIES LIMITED2023 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2023 and 2022 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
20. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Total operating lease expense during the year was $489 (2022 - $420).
The Company has obtained documentary and standby letters of credit aggregating to a total
of $14,360 (2022 - $4,524).
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, 2023:
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. 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, 2023
April 30, 2022
$
$
109,702 $
(2,831)
106,871 $
102,522
(2,502)
100,020
April 30, 2023
April 30, 2022
$
$
2,501 $
778
(629)
181
2,831 $
3,549
658
(1,685)
(20)
2,502
53
EVERTZ TECHNOLOGIES LIMITED2023 ANNUAL REPORT
21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
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, 2023
April 30, 2022
$
44,616
$
21,199
7,259
33,797
41,297
17,720
11,299
29,704
$
106,871
$
100,020
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, 2023
April 30, 2022
$
$
3,248
$
87,548
(10,433)
80,363
$
14,071
76,702
(10,400)
80,373
Based on the financial instruments as at April 30, 2023, a 5% change in the value of the U.S. dollar would result
in a gain or loss of $4.0 million 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 operating 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
2023
306,926
$
117,469
30,183
454,578
$
2022
279,005
141,657
20,354
441,016
$
$
54
EVERTZ TECHNOLOGIES LIMITED2023 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2023 and 2022 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
22. SEGMENTED INFORMATION (CONTINUED)
April 30, 2023
Property, Plant
and Equipment
Goodwill
Intangible
Assets
Right-of-Use
Assets
Investment in an
Associate
United States
$
4,114
$
1,411
$
395
$
246
$
International
Canada
9,553
21,063
18,339
1,583
1,730
-
3,617
16,533
$
34,730
$
21,333
$
2,125
$
20,396
$
-
-
-
-
April 30, 2022
Property, Plant
and Equipment
Goodwill
Intangible
Assets
Right-of-Use
Assets
Investment in an
Associate
United States
$
International
Canada
$
4,388
9,577
23,912
37,877
1,286
$
896
$
718
$
5,474
18,164
1,583
2,421
-
3,770
20,149
-
-
21,033
$
3,317
$
24,637
$
5,474
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 $6,489 committed over the remaining term. During the year, rent paid for the leased
principal premises amounted to $1,055 (2022 – $1,049) with no outstanding amounts due as at April 30, 2023.
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 $1,065 committed over the remaining
term. During the year, rent paid for the leased principal premises amounted to $292 (2022 – $279) with no
outstanding amounts due as at April 30, 2023.
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 $5,139 committed over the remaining term. During the year, rent paid for the leased principal premises
amounted to $877 (2022 – $867) 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 $3,234 committed over the remaining term.
During the year,
rent paid for the leased principal premises amounted to $525 (2022 – $525) with no outstanding amounts
due as at April 30, 2023.
The Company also leases a property where two shareholders indirectly own 100% interest. The lease expires
in 2023 with a total of $102 committed over the remaining term. During the year, rent paid for the leased
principal premises amounted to $152 (2022 – $152) with no outstanding amounts due as at April 30, 2023.
55
EVERTZ TECHNOLOGIES LIMITED2023 ANNUAL REPORT
23. RELATED PARTY TRANSACTIONS (CONTINUED)
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 $3,146 committed over the remaining term. During the year, rent
paid for the leased principal premises amounted to $1,011 (2022 – $996) with no outstanding amounts due as at
April 30, 2023.
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 $909 committed over the remaining term. During the
year, rent paid for the leased principal premises amounted to $271 (2022 – $263) with no outstanding amounts
due as at April 30, 2023.
These transactions were in the normal course of business and entered into at their respective fair values.
The remuneration of directors and other members of key management personnel for the years ended
April 30, 2023 and April 30, 2022 are as follows:
Short-term salaries and benefits
Share-based payments
The total employee benefit expense was $151,266 (2022 - $139,600).
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
2023
5,010
2,816
7,826
$
$
2022
4,600
-
4,600
$
$
% Ownership
100%
100%
100%
100%
100%
100%
75%
73%
Location
Canada
United States
United Kingdom
Hungary
United States
Canada
Canada
Norway
24. NON-CONTROLLING INTEREST
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 13).
56
EVERTZ TECHNOLOGIES LIMITED2023 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
Years ended April 30, 2023 and 2022 (In thousands of Canadian dollars, except for “number of common shares”, “number of options” and “per share” information)
24. NON-CONTROLLING INTEREST (CONTINUED)
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,
2023
13,697
17,122
3,028
114
24,692
2,985
April 30,
2023
$
April 30,
2022
19,937
10,358
4,422
262
22,901
2,710
April 30,
2022
$
30,208
$
48,539
2,666
523
3,079
932
During the year, $425 (2022 - $250) in dividends were paid to non-controlling interests.
25. CAPITAL DISCLOSURES
The Company’s capital is composed of total equity attributable to shareholders which totals $243,099
(2022 - $230,938) as at April 30, 2023. 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, 2022.
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
2023
2022
76,200,428
32,034
76,232,462
76,266,341
304,223
76,570,564
The weighted average number of diluted common shares excludes 1,612,500 options because they were anti-dilutive
during the period (2022 – 1,295,500).
57
EVERTZ TECHNOLOGIES LIMITED2023 ANNUAL REPORT
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%, 2022 - 25%)
$
21,953
$
24,478
2023
2022
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
(152)
(101)
1,029
1,395
(459)
(410)
640
-
365
395
(759)
116
$
23,255
$
25,235
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, 2023
April 30, 2022
$
$
549
$
(2,825)
5,604
3,411
6,739
$
142
(2,963)
3,001
4,943
5,123
As at April 30, 2023, the Company had $6,415 (2022 - $3,267) in tax losses for which no deferred tax asset has
been recognized in the statement of financial position. Of these losses, $6,415 expire in 2025 while the remaining
balance has no expiry.
28. SUBSEQUENT EVENT
On June 21, 2023 the Company declared a quarterly dividend of $0.19 with a record date of June 29, 2023
and a payment date of July 6, 2023.
58
EVERTZ TECHNOLOGIES LIMITED2023 ANNUAL REPORT
5-YEAR FINANCIAL HIGHLIGHTS
(all amounts in thousands, except EPS and share amounts)
Consolidated Statement of Earnings Data
Year Ended April 30,
2023
2022
2021
2020
2019
Sales
$ 454,578
$ 441,016
$ 342,888
$ 436,592
$ 443,556
Selling and administrative expenses
Research and development expenses
Earnings before income taxes
Net earnings
Fully diluted EPS
61,518
117,127
87,810
64,555
0.84
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
Consolidated Balance Sheet Data
Year Ended April 30,
2023
2022
2021
2020
2019
Cash and cash equivalents
$
12,468
$
33,902
$ 108,771
$
75,025
$ 104,583
Total assets
Shareholder’s equity
Number of common shares
Outstanding
Basic
436,652
243,099
420,979
230,938
451,793
292,734
443,673
295,012
466,597
353,123
76,200,248
76,266,341
76,357,895
76,624,706
76,510,417
Fully-diluted
76,232,462
76,570,564
76,403,894
76,642,787
76,529,799
59
EVERTZ TECHNOLOGIES LIMITED2023 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
Senior Vice-President,
Media Distribution and
Chief Information Officer (CIO)
Paulo Francisco
Vice-President of Engineering
Evertz AV Division
Marsha Garner
Vice-President, Inside Sales
and Administration
Orest Holyk
Vice-President of Sales USA
Jeremy Blythe
Vice-President of Engineering
Media Distribution
1 Member of the Audit Committee.
2 Member of the Compensation Committee.
AUDITORS
BDO Canada LLP
3115 Harvester Road
Suite 400
Burlington, ON, Canada L7N 3N8
T: (905) 639-9500
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 4, 2023
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
60
EVERTZ TECHNOLOGIES LIMITED2023 ANNUAL REPORT 2023 HIGHLIGHTS
EVERTZ TECHNOLOGIES LIMITED CORPORATION OFFICES
STRENGTH
INNOVATION
GENERATING CASH
PROFITABILITY
Annual
Revenue
Re-investment
in R&D
Operating
Activities
$455M
$117M
$92M
Earnings
Before Taxes
$88M
REVENUE
(in millions of dollars)
$441
$455
$343
2021
2022
2023
NORTH AMERICA
74%
26%
INTERNATIONAL
2023 Revenue
DIVIDENDS PAID
(annual total in millions of dollars)
CASH FROM OPERATING ACTIVITIES
(in millions of dollars)
$54.9
$56.4
$93.0
$91.5
$41.2
$59.0
CORPORATE HEAD OFFICE
Evertz Technologies Ltd.
5292 John Lucas Dr.
Burlington, ON
L7L 5Z9
T: (905) 335-3700
Burbank
2020 N. Lincoln Street
Burbank, CA
91504
T: (818) 558-3910
F: (818) 558-3906
Indiana
250 Airport Road
Indiana, PA
15701
T: (724) 349-1412
F: (724) 349-1421
Evertz UK
260 Wharfedale Road
Winnersh Triangle
Berkshire, UK
RG41 5TP
T: 44-118-921-6800
F: 44-118-921-6802
Evertz Asia Ltd.
Tower One
Unit 1618
Metroplaza, 223 Hing Fong Road
Kwai Fong, New Territories
Hong Kong
T: (852) 2850-7989
F: (852) 2850-7978
Sales Offices
Burlington, ON
Burbank, CA
Phoenix, AZ
New York City, NY
Indiana, PA
Berkshire, UK
Croatia
Germany
Beijing
Hong Kong
Shanghai
Singapore
India
Dubai
Australia
2021
20221
1excludes $76.3 M special dividend September 2021
2023
2022
(before changes in non-working capital and current taxes)
2021
2023
58.2%
57.9%
59.0%
16.9%
23.0%
21.0%
2021
2022
2023
GROSS MARGIN
OPERATING EARNINGS
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