Evertz Technologies has acquired a 3.12% stake in live production replay specialist EVS.
The announcement was made by EVS as part of a transparency notification required by securities regulators.
EVS says that it was notified on October 22, 2018 that Evertz acquired 424,936 EVS shares (presumably through open-market purchases), crossing the 3% equity stake that requires a transparency notification.
The open-market move by Evertz is unusual for a company that is typically focused on developing its own product portfolio, with the occasional bolt-on acquisition. Evertz generates a lot of cash, and pays a healthy dividend to its shareholders, including special dividends as high as C$100 million, which it did in 2013. During its 2016 fiscal year, Evertz paid a special cash dividend of C$83.1 million, bringing the total dividend payout for the year to C$137.5.
Evertz competes with EVS in the live production replay market with its Dreamcatcher product. However, EVS remains the dominant player in the live sports replay market, thanks to its long-standing customer relationships, as well as a loyal following among live production freelancers.
Despite its strong market position, 2018 has been a difficult trading year for EVS – highly unusual for an even-year filled with big events including the FIFA World Cup. The company experienced it’s first even-year decline in almost two decades when it issued its earnings for Q2 and 1H 2018.
Consequently, EVS has seen a sharp drop in it’s share price, which is down 45.2% since the beginning of 2018, and down 51.4% over the past year.
In 2018, EVS has also gone through a management shake-up. In July of this year, the company and then Managing Director Muriel De Lathouwer mutually agreed to end De Lathouwer’s term of the office and duties, of Managing Director and CEO, effective July 10, 2018
EVS Board of Directors Authorizes New Share Buyback Program
Concurrent with the transparency notification regarding Evertz, EVS announced that its Board of Directors has decided “to start a share buyback program of its outstanding shares for a maximum amount of EUR 10 million.”
Pierre De Muelenaere, Chairman of the Board and Interim CEO of EVS, declared: “The recent fall of the share price of EVS has led the Board to consider a share buyback program. The recent transparency notification of Evertz has accelerated our process and, in a special meeting organized this October 24, 2018, the Board has unanimously decided to start a share buyback program. This shows the Board’s strong confidence in the future of the company.”
The share buyback program will be implemented in accordance with the authorization set forth in article 10 of the Articles of Association of the company. The program will start on October 25, 2018, for a period of maximum 2 years.
This program will be executed in compliance with the applicable buyback regulations. EVS will mandate an independent broker to execute the program through open market purchases on its behalf.
EVS Pre-Announces Q3 2018 Results
EVS also issued a trading update – pre-announcing its (unaudited) Q3 2018 results three weeks early, rather than waiting for the previously scheduled earning announcement date of November 15, 2018.
According to the company, the Q3 2018 results for EVS are as follows
Revenue for the third quarter of 2018 was EUR 29.6 million, an increase of 12.5% versus the previous year, and an increase of 39.6% versus the second quarter of 2018, when EVS reported its first even-year revenue decline since 2002.
Revenues for the first nine months of 2018 were EUR 73.7 million, a decline of 6.7% versus the first nine months of 2017.
The company’s order book stood at EUR 30.1 million on October 21, 2018, up 19.4% versus October 31, 2018 (please note the ten-day year-over-year offset), and down 33.2% from EUR 44.3 million as of August 25, 2018 (as per the company’s Q2 2018 earnings announcement)
EVS chief Financial officer Yvan Absil said: “As previously communicated, revenue in 1H18 were exceptionally low, and an acceleration of the business was expected in 2H18 due to several actions, including as of August the shipment of our new XT-VIA platform. Under these circumstances and taking into account our strong cash position, our company can afford this investment.”
EVS did not disclose its cash position in it’s Q3 2018 pre-announcement. As part of its Q2 2018 earnings announcement, EVS said it had cash and cash equivalents totaling EUR 39.6 million as of June 30, 2018.
Compared to EVS, Evertz appears to be in a slightly better cash position, having ended its fiscal year (April 30, 2018) with C$94.2 million of cash and cash equivalents, down slightly from C$98.2 million at January 31, 2018.
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