Good afternoon, ladies and gentlemen, and welcome to the Evertz Q1 Investor Call. At this time, all participant lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require any assistance, please press star zero for the operator. Also note that the call is being recorded on Tuesday, September 13, 2022. I now would like to turn the conference over to Brian Campbell, Executive Vice President, Business and Development. Please go ahead, sir.
Thank you, Sylvie. Good afternoon, everyone, and welcome to the Evertz Technologies Limited conference call for fiscal 2023 first quarter ending July 31, 2022, with Doug Moore, Evertz Chief Financial Officer, and myself, Brian Campbell. Please note that our financial press release and MD&A will be available on SEDAR. Doug and I will comment on the financial results and then open the call to your questions. Turning now to Evertz results, I would like to begin by providing a few highlights, and then Doug will go into greater detail.
First off, I'm pleased to report sales for the first quarter totaled CAD 101.5 million, up 5% year-over-year, with strong performance in the US/Canada region, where sales increased 21% year-over-year to CAD 78.2 million, driven to a large extent by the adoption of Evertz new technologies and products. Our sales is well diversified, with the top 10 customers accounting for approximately 45% of sales during the quarter, with no single customer over 8%. In fact, we had 103 customer orders of over CAD 200,000. Gross margin in the quarter was CAD 58.5 million or 57.6%, which is within our target, 56%-60% range. Investment in research and development during the quarter totaled CAD 28.3 million.
Net earnings for the first quarter were CAD 13.9 million, while fully diluted earnings per share were CAD 0.18 in the quarter. Evertz working capital was CAD 159.3 million, with CAD 25.6 million in cash as at July 31, 2022. Purchase order backlog was CAD 140 million at the end of August, and shipments during the month were CAD 33 million. We attribute the solid quarterly financial performance and robust combined shipments and purchase order backlog to the ongoing technical transition in the industry, channel and video services proliferation, increasing global demand for high quality video anywhere, anytime, and specifically to the growing adoption of Evertz IP-based software-defined video networking solutions, Evertz IT and cloud solutions, our immersive 4K and 8K Ultra HD solutions, and our state-of-the-art DreamCatcher IP replay and BRAVO Studio live production suite.
Today, Evertz Board of Directors has declared a quarterly dividend of CAD 0.18 per share payable on or about September 29, 2022. I'll now hand the call over to Doug Moore, Evertz Chief Financial Officer, to cover the results in greater detail.
Thank you, Brian, and good afternoon, everyone. Sales were CAD 101.5 million for the first quarter of fiscal 2023, compared to CAD 97.2 million in the first quarter of fiscal 2022, an increase of CAD 4.3 million or 5%. U.S./Canada region had sales for the quarter of CAD 78.2 million, compared to CAD 64.4 million last year, an increase of 21%. International region had sales for the quarter of CAD 23.3 million compared to CAD 32.8 million last year. Gross margin for the first quarter was approximately 57.6% compared with 58.3% in the prior year and within our target range. Selling and administrative expenses were CAD 12.9 million for the first quarter, compared to CAD 14 million in the same period last year.
Selling and admin expenses as a percentage of revenue, 12.7% compared to 14.4% in the same period last year. Research and development expenses were CAD 28.3 million for the first quarter this year as compared to CAD 24.7 million in the same period last year. CAD 2.8 million of the increase is attributable to increased salary costs from increased headcount as well as wage increases. Research and development expenses as a percentage of revenue was 27.9% compared to 25.4% in the same period last year. Foreign exchange gain was CAD 1 million compared to a foreign exchange gain in the prior year of CAD 1.4 million.
The gain in the current period was predominantly a result of the increase in the value of the U.S. Dollar as at July 31, 2022, when compared to April 30, 2022, as well as the translation of U.S. Assets into Canadian dollars at favorable exchange rates during the quarter. Turning to a discussion of liquidity of the company, cash as at July 31, 2022, was CAD 25.6 million, as compared to CAD 33.9 million as at April 30, 2022. Working capital was CAD 159.3 million as at July 31, 2022, compared to CAD 158.9 million at the end of April 2022.
The company generated cash in operations of CAD 19.3 million, which is gross of 1.6 million change in non-cash working capital and current taxes in the first quarter. If the effects of the change in non-cash working capital and taxes were excluded from the calculation, the company generated CAD 17.7 million in cash from operations. During the quarter, the company acquired marketable securities of CAD 11 million and CAD 1.9 million of capital assets. The company used cash from financing activities CAD 15.1 million, which predominantly consisted of the payment of dividends of CAD 13.7 million. Shares outstanding were approximately 76.2 million, and options outstanding were approximately 5 million as at July 31, 2022. Weighted average shares outstanding were 76.2 million, and weighted average fully diluted shares outstanding were 76.4 million for the quarter ended.
This brings to a conclusion the review of our financial results and position for the first quarter. Finally, I would like to remind you that some of the statements presented today are forward-looking, subject to a number of risks and uncertainties, and we refer you to the risk factors described in our Annual Information Form in the official reports filed with the Canadian Securities Administrators. Brian, back to yourself.
Thank you, Doug. Sylvie, we're now ready to open the call to questions from the analysts.
Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please slowly press star followed by one on your touchtone phone. You will then hear a three-tone prompt acknowledging your request. If you would like to withdraw from the question queue, please press star followed by two. If you're using a speakerphone, we ask that you please lift the handset before pressing any keys. Please go ahead and press star one now if you have any questions. Your first question will be from Thanos Moschopoulos at BMO Capital Markets. Please go ahead.
Hi. Good afternoon. Brian, can you give us some more color in terms of just the current market conditions you're seeing? I mean, obviously there's, you know, some macro events going on, some global uncertainty. I know you've had to deal with supply constraints in recent quarters as well. So for example, when we see the, you know, softer revenue you had internationally this quarter, is that just lumpiness? Is it indicative of a softer environment? You know, just any color you can provide in terms of current conditions would be helpful.
Well, thanks, Thanos. Overall, Evertz end demand environment continues to be very robust. We've got strong backlog heading into the first quarter fiscal 2023, and we're quite optimistic about the outlook going forward. You know, we are cognizant of the macroeconomic environment as are our customers, however, we're well positioned with an extremely robust business model and a large backlog. With respect to international, it is down from this quarter. On a trailing 12-month basis, it's you know, in the range that it's been over the last couple of years. There is you know, definitely some of the macro environment impacting international sales, but we continue to have good, strong international sales. It's part of the backlog as well too.
Okay. As far as supply chain, any color in terms of whether the situation is getting, you know, better or worse or stable?
Well, I can address that. Yeah, sorry. You mean from a component perspective or from a sales perspective?
From a component perspective, yeah.
That still represents a significant challenge, quite frankly. Anecdotally, sometimes it feel like it's getting better, but it's still an ongoing challenge where certain vendors are difficult to source components from. We're doing our best to mitigate by sourcing, you know, parts, additional parts to deal with long lead times. I mean, even this quarter alone, we raised our raw materials by another CAD 15 million as we continue to stockpile inventory. You know, while it's a challenge, we were able to deliver CAD 100 million of revenue in the quarter and CAD 33 million in August. We are doing our best to mitigate it, but it's definitely a significant ongoing challenge that has not gone away.
Okay. I know you don't disclose your cloud or recurring revenue separately, but just any commentary there in terms of how that's progressing? You know, I think in recent years, we've seen more of a customer appetite toward cloud. It's. Is any of that perhaps accelerating given the current backdrop or what's the dynamic you're seeing on that front?
We continue to see very strong cloud deployments, not all of them hitting the press, but we're very actively engaged on that front. That said, we are delivering traditional on-premise, you know, solutions to numerous customers as well too. There's a very good solid mix of our new technologies, both, you know, cloud and on-premise based.
Okay. All right. That's all. Thank you.
Thank you. Once again, ladies and gentlemen, if you would like to ask a question, please press star followed by one on your touchtone phone. Your next question will be from Rob Young at Canaccord Genuity. Please go ahead.
Hi, good evening. Maybe just I'll continue Thanos' last question there on the cloud. I understand you can't name a lot of customers or describe some unannounced activities, but maybe if you can just in a generic way, give maybe a cross-section of where, you know, the most demand you're seeing in your cloud related product, that could be helpful.
You mean with respect to geographic or?
No, whatever you choose, whatever you'd like to share.
As you can tell, the North American market has been the strongest for us, right? It's near 70% on the trailing 12-month basis. That is the strongest geographic market for us. With respect to cloud, we've had successes with Evertz.IO as well too, our new SaaS-based platform. The Mediator, you know, award-winning product family, plus the new Evertz.IO are both doing very well. That's, you know, a bit of an update on the cloud dynamics.
All right. Maybe if you could talk a little bit about the backlog. In the past, you've given us a sense of, you know, how much of the current backlog might be deliverable in the next 12 months. Maybe just talk about the relative duration of what's in there.
That's a good question. Of the CAD 141 million, over 90% of it is deliverable in the next 12 months, so it's a very, you know, robust backlog number.
Okay, the CAD 33 million for an August period is looking like a pretty high level for the summer, especially.
Yes.
Given the weakness in international. Just, can you talk about what's going on there? That'd be helpful.
We have our, you know, teams out helping our customers to deploy solutions. We have a, you know, a tremendous amount of customer demand right now for Evertz next generation solutions, and we are out helping to deploy those with customers to meet their timelines for whether it's, you know, sporting events or other milestones that they wanna hit. That does represent a very good solid shipment number for August.
I mean, could we think of that as an inflection or a strengthening in demand? It just seems like a very strong shipment number for an August period.
Yeah, it is a very good shipment number. We're proud of it. We're proud of the teams who have helped, you know, deploy, you know, during the month. You know, sales have done an outstanding job of, you know, continuing to provide, you know, the orders, you know, with key customers. I wouldn't necessarily say it's an inflection. It is a continuation of, you know, very robust demand from our key customers.
Okay. Maybe last question from me would just be around the ability to access customer sites. I know that's been an ongoing theme. Is that something that is continuing to improve or is it improved a lot this quarter? Maybe if you could just talk about that and then I'll pass the line.
Yeah. It is getting better in Canada. It hasn't improved a lot this quarter over the prior quarters. North America, we have, you know, good access. We still have challenges internationally. We are getting on site and deploying as well, too. Again, that's against the macro backdrop internationally that we're all well aware of. You know, it's modestly better than it was in the prior quarter. Again, too, it's still a challenging environment to get folks, you know, on site in some locations.
Got it. Thanks. I'll pass the line.
Thank you. At this time, Mr. Campbell, we have no further questions. Please proceed with your closing.
Thank you, Sylvie. I'd like to thank the participants for the questions and to add that we're very pleased with the company's performance during the first quarter of fiscal 2023, which saw strong quarterly sales of CAD 101.5 million. The strength in the U.S.-Canada region, where sales rose 21% from the prior year. Solid gross margins of 57.6%, which together with Evertz's disciplined expense management, yielded earnings of CAD 0.18 per share, all while investing over CAD 28 million in R&D to sustain future growth. We're entering the second quarter of fiscal 2023 with significant momentum, fueled by CAD 33 million of shipments in August, plus a CAD 141 million purchase order backlog, totaling in excess of CAD 174 million.
Fueled by the continued adoption and successful large scale deployments of Evertz' software-defined IP, IT, and cloud-based video networking solutions by some of the largest broadcast new media service providers and enterprise companies in the industry. With Evertz's significant investments in software-defined IP, IT, and cloud technologies, the over 500 industry-leading SDVN deployments and the capabilities of our staff, Evertz is poised to build upon our leadership position in the broadcast and media technology sector. Thank you. We look forward to having many of you join us on the fifth of October at our annual general meeting. Please note any changes to the meeting will be announced by way of press release. Goodbye.
Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we ask that you please disconnect your lines. Have a good evening.