Good afternoon, ladies and gentlemen, and welcome to the Evertz second quarter investor call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. I would now like to turn the conference over to Brian Campbell, Executive Vice President of Business Development. Please go ahead.
Thank you, Jenny. Good afternoon, everyone, and welcome to Evertz Technologies' conference call for our fiscal 2024 second quarter ended October 31st, 2023, 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 and on the company's investor website. Doug and I will comment on the financial results and then open the call to your questions. Turning now to Evertz results, I'll begin by providing a few highlights, and then Doug will provide additional details. First off, sales for the second quarter totaled a record high CAD 130.7 million, up 15% compared to CAD 113.2 million in the second quarter of last year.
Our base is well diversified, with the top 10 customers accounting for approximately 48% of sales during the quarter, with one customer accounting for approximately 11.4%. In fact, we had 100 customer orders of over CAD 200,000 in the quarter. Gross margin in the quarter was CAD 78 million, or 59.7%, which is at the upper end of our target range. Investment in research and development during the quarter totaled CAD 33.2 million. Net earnings for the second quarter were CAD 22.3 million, while fully diluted earnings per share were CAD 0.29. Evertz working capital was CAD 191.3 million, with cash of CAD 55.9 million as at October 31st.
Operational highlights for the quarter include Evertz's stellar presence at the International Broadcast Conference, where Evertz ev670 Virtualized Media Processing Platform won a TV Tech Best of Show, and the Evertz Reflector Cloud Video Processing Platform was recognized with a TVB Best of Show Award. This software as a service, SaaS platform for media transcoding, is helping customers optimize their operations by leveraging adaptable cloud-based workflows. At the end of November 2023, Evertz purchase order backlog was in excess of CAD 324 million, and shipments during the month were CAD 48 million.
We attribute this strong financial performance and robust combined shipments and purchase order backlog to channel and video services proliferation, increasing global demand for high-quality video anywhere, anytime, the ongoing technical transition to IP, IT, and cloud-based architectures in the industry, and specifically to the growing adoption of Evertz IP-based software-defined video networking solutions, Evertz IT and cloud solutions, our immersive 4K, 8K ultra-high definition solutions, our state-of-the-art DreamCatcher, IP replay, and live production with Bravo Studio, featuring the iconic Studer Audio. Today, Evertz Board of Directors declared a regular quarterly dividend increased to CAD 0.195 per share, payable on or about December 21st. I will now hand the conference over to Doug Moore, Evertz Chief Financial Officer, to cover our results in greater detail.
Thank you, Brian, and good afternoon. Starting at—looking at revenues, sales were CAD 130.7 million in the second quarter of fiscal 2024, compared to CAD 113.2 million in the second quarter of fiscal 2023. That's an increase of CAD 17.5 million or 15% quarter-over-quarter. For the six months ended October 31st, 2023, sales were CAD 256.6 million, compared to CAD 214.8 million in the same period last year. That represents an increase of CAD 41.8 million or 19%. As it relates to revenues in specific regions, in Canada and the U.S. combined, we had sales for the quarter of CAD 74 million, compared to CAD 88.3 million last year.
That represents a decrease of CAD 14.3 million or 16% quarter-over-quarter. Sales in the U.S. and Canadian region were CAD 161 million for the six months ended October 31st, 2023, compared to CAD 166.5 million in the same period last year, a decrease of about 3%. International regions had sales for the quarter of CAD 56.8 million. That's compared to CAD 24.9 million last year. It represents an increase of CAD 31.9 million, quarter-over-quarter or 128%. The international segment represented 43% of total sales in the current quarter. For the six months ended October 31st, international sales were CAD 95.5 million, compared to CAD 48.3 million in the same period last year, an increase of CAD 47.2 million or 98%.
CAD 47.2 million, sorry, or 98%. Gross margin for the second quarter was approximately 59.7%, compared with 59.6% in the prior year quarter, and within our target range. For the six months ended October 31st, gross margin was approximately 58.5%, also within our target range. Turning to the selling, general, and administrative expenses. SG&A was CAD 17.5 million in the second quarter. It's an increase of CAD 2.8 million from the same period last year, and SG&A expenses as a percentage of revenue were approximately 13.4%, as compared to 13% for the same period last year. SG&A expenses were CAD 33.9 million for the six months ended October 31st, 2023, an increase of CAD 6.2 million for the same period last year.
As a reminder, the prior year expenses in Q1, so Q1 prior year, included a CAD 3.8 million recovery that didn't reoccur in the current year, and that partially explains the large increase over six months. Selling, general and administrative expenses as a percentage of revenue were approximately 13.2% over the period, as compared to 12.7% for the same period last year. Research and development expenses were CAD 32.2 million for the second quarter. That represents a CAD 3.5 million increase from CAD 28.7 million in the second quarter last year. As a percentage of revenue, R&D expenses was 24.6%, compared to 25.3% in the prior year. For the six months ended October 31st, research and development expenses were CAD 64.2 million.
That represents an increase of CAD 7.1 million over the same period last year, and the increase includes approximately CAD 5.5 million in increased salary costs. Research and development expenses as a percentage of revenue were approximately 25% over the six-month period, as compared to 26.6% for the same period last year. Foreign exchange for the second quarter was a gain of CAD 2.9 million, and that's compared to CAD 3 million in the same period last year. The current period gain was predominantly driven by approximately 4% increase in the value of the U.S. dollar as of October 31st, 2023, compared to July 31st, 2023. Foreign exchange for the six-month period ended October 31st, 2023, was a gain of CAD 0.9 million.
That's compared to a gain of CAD 4 million in the same period last year. Turning to a discussion of liquidity of the company. Cash as of October 31st, 2023, was CAD 55.9 million, as compared to net cash of CAD 6.5 million as at April 30th, 2023. Working capital was CAD 191.3 million as at October 31st, 2023, compared to CAD 171.4 million as at the end of April 30th, 2023. Looking now at cash flows. The company generated cash in operations of CAD 20.3 million, which is net of CAD 10.6 million change in non-working capital, working capital and current taxes. That includes a quarterly decrease in accounts payable of CAD 28.8 million.
If the effects of the change in non-working capital, non-cash working capital, sorry, and current taxes are excluded from the calculation, the company generated CAD 30.9 million in cash from operations during the quarter. In net investing activities, the company generated cash of CAD 4.1 million , which was predominantly driven by proceeds from disposal of investments of CAD 6.3 million. This was partially offset by cash fees for the acquisition of capital assets of CAD 2.3 million. The company used cash in financing activities of CAD 17 million, which was principally driven by dividends paid of CAD 14.5 million. Finally, a look at our share capital position as at October 31st, 2023. Shares outstanding were approximately 76 million, and options and equity-based restricted share units outstanding were approximately six million.
The weighted average shares outstanding were 76.1 million, and the weighted average fully diluted shares was 76.7 million for the quarter ended October 31st. That brings to a conclusion the review of our financial results and position for the second 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 the annual information form in the official reports filed with the Canadian Securities Commission. Brian, back to yourself.
Thank you, Doug. Jenny, we're now ready to open the call to questions.
Yes, thank you. Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press the star followed by the one on your touchtone phone. You will hear a three-tone prompt acknowledging your request. Questions will be taken in the order received. If you wish to cancel your request, please press the star followed by the two. If you're using a speakerphone, please lift your handset before pressing any keys. Once again, that is star one if you wish to ask a question. Your first question is from Thanos Moschopoulos from BMO Capital Markets. Please ask your question.
Hi, good afternoon. The gross margin was obviously very strong. I think it might be your best ever, and that's despite a higher international mix. And I know that margins can, you know, fluctuate based on the mix in any given quarter, but, anything that you would call out as far as that dynamic?
So, I mean, you're right in looking at the history, you see a correlation between international revenue and lower margins. I mean, that's just depending on the projects we delivered in the quarter, it just pushed up the margin. There's not really any one-time or unusual items to point out. It's really just the mix driving it. So, I mean, we are still within our end of it, of course, but I mean, that's just the fluidity to it. Not really anything to point to specifically.
Would it be the case, though, that perhaps there's like a higher software and/or cloud mix in there which is contributing to the margins?
Again, I'm just gonna point to the mix. So I guess what I would say is, if you look at Q1, it's, you know, 57.5. So I think we're sitting in our target the last couple of quarters. We were at 59.5 in Q4 last year, so it's been a positive trend there, but it's not really a product mix driven and not really a specific item to point to.
Okay. Brian, any comments in terms of the spending environment? And I know that, you know, the dynamic and the demand that you see for your products is always somewhat different than what the market as a whole might be doing. But certainly it seems like there's been an uptick in growth if we look at, you know, the strong growth rate you've had the last couple of quarters, and, you know, the strong shipments reported for November. So, you know, might some of this be kind of pent-up demand coming out of, you know, with component shortages subsiding coming out of the pandemic, or, you know, anything else that you would more specific as far as market share gains? Any commentary helpful.
So, yes, Thanos, from Evertz's perspective, it's been a very good quarter, both in terms of delivery of projects and revenue, and also securing new orders for good, profitable business and large contracts as well, too. So Evertz does see, you know, a very good, strong environment for our products. Whether that's, you know, specific to our customers or an underlying trend for the industry. The industry trend, I'll have to leave that to you, but definitely we're, you know, seeing a very productive environment for ourselves.
Okay. North America was obviously down year over year, presumably more to do with project timing and, you know, maybe a tough year-over-year comp, rather than being indicative of any softness in that market.
Yeah, I mean, there's just some natural lumpiness to it, right? So you're on the right path there. That is not really an issue to point to. It's just the timing of certain deliveries and milestones that went out, so.
Okay. Finally, with respect to cloud, any particular update you can offer? I mean, clearly there's been a trend of, you know, customers, you know, larger customers adopting cloud. Is that something that you're seeing continue? You know, any update in terms of what you're seeing as far as, you know, be it pipeline, customer discussions and so forth, would be helpful.
So our cloud discussions with customers and our deliveries, you know, continue to roll out and be very, you know, encouraging, very strong. And of course, that's anchored by the CAD 152 million five-year purchase order that we received and disclosed. So that is a very significant cloud deployment, multi-year deployment, both in terms of, you know, products and services, and that does underpin that sector for us.
All right. All the best. Thanks.
Thank you. Your next question is from Robert Young from Canaccord Genuity. Please ask your question.
Hi, good evening. Nice to see the dividend increase. I was wondering if you could share if there's any policy around that or any way to that you're organizing the timing and the quantum of that increase? Looks like you're doing it once a year. Maybe just give me any kind of color you can around that.
So, yeah, Rob, we are pleased to, you know, announce the CAD 0.195 quarterly dividend. The board, you know, is cognizant of our cash flow and cash buildup, and that increase to CAD 0.195 reflects very, you know, strong, pristine balance sheet and our cash flow generation capabilities as well, too. So it is a, you know, board-based discussion.
All right. Maybe a little more on the international growth. You had that CAD 25 million international order in April. I believe last couple of quarters, you said you hadn't seen that pass through revenue. So is that the CAD 25 million dollar deal, or is there some part conversion of that here?
Yeah. So I mean, you're, you're correct in your assertion of the, the prior quarter, there wasn't any. I mean, there's, there's quite a variety of different projects that happened to get delivered in, in Q2 here in the international region. I would say that approximately CAD 15 million of that CAD 25 million went out in the quarter, Q2. So, I mean, there's, certainly a, a portion of that associated with that project.
Okay. And that's the large customer, the 11.4%. That's about CAD 15 million, so.
Yeah.
That's the thing.
Around approximately 25 press release, yeah.
Okay. Then, maybe if you can give any other color around this CAD 4.1 million generated in the investment activities. You gave a little bit of color in the prepared remarks, but I missed it. Maybe if you could just expand on that.
Yeah, sure. So it's, let me look it here. So CAD 6.3 million is disposal of investments. So on the, on the balance sheet, t hey're now disposed of. There's CAD 6.3 million that came from there, then partially offset just by a little over CAD 2 million in capital asset purchases.
All right. Okay. Last question for me is just around the backlog trend. You know, it peaked at, I guess, just under CAD 400 million, CAD 394 million. It's down CAD 70 million in the last two quarters. Still at a very high level, obviously, highest ever. But if you could give maybe just a little bit of context around, you know, the trend in the backlog, maybe give us maybe the moving parts there, that would be helpful, and then I'll pass the line.
I guess I could say a couple different things. So, I would say that approximately 45% of that or a little above it, is just, 47%, I think, is about, expected to be more than 12 months out, just to provide a little color in that sense. On the big, I'm taking things off on the big, CAD 150 million purchase order. To date, in the first two quarters, we've recognized about CAD 11 million. And then I could mention the other large order that we press released is another CAD 15 million that comes off, if you normalize that a bit I guess, but to provide color on.
Okay. And you said roughly half, 47%, s orry, I missed the context there. Half of it is within the next 12 months? Is that what you'd said? That, that.
Greater than 12 months.
Current backlog.
47% is greater than it was expected to get delivered more than 12 months from now.
Got it. So that means obviously the other 53% is gonna flow through the income statement in the next 12 months.
That's correct. Yeah.
All right. Okay. Thank you. I'll pass the line.
Thank you. There are no further questions at this time. I will now hand the call back to Brian for the closing remarks.
Thank you, Jenny. I'd like to thank the participants for the questions and to add that we are very pleased with the company's performance during the second quarter of fiscal 2024, which saw record quarterly sales of CAD 130.7 million, an increase of 15% year-over-year. Strong gross margins of 59.7% in the quarter, which together with Evertz's disciplined expense management, yielded quarterly earnings per share of CAD 0.29.
We're entering into the second half of fiscal 2024 with significant momentum, fueled by a combined purchase order backlog, plus November shipments totaling in excess of CAD 372 million, by the growing adoption and successful large-scale deployments of Evertz's IP-based software-defined video networking and cloud solutions by some of the largest broadcast, new media, service provider, and enterprises in the industry, and by the continuing success of DreamCatcher BRAVO, our state-of-the-art IP-based replay and production suite. With Evertz's significant investments in software-defined IP, IT, and cloud technologies, the over 600 industry-leading IP SDN deployments and the capabilities of our staff, Evertz's is poised to build upon our leadership position to provide innovative solutions to customers and deliver to shareholders. Thank you, everyone, and good night.
Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect.