Haivision Systems Q3 2023 Earnings Call Transcript

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Provided by Quartr
September 13, 2023

There are 7 speakers on the call.

Operator

Hello, and welcome to the HyVision 3Q 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. I will now turn the conference over to Mark Howitsche. Please go ahead.

Speaker 1

Thank you, Sarah, and good afternoon, everyone. Thank you for joining us today to discuss our Q3 results in the 1st 9 months of our fiscal year 2023. As demonstrated by the results we announced earlier today, demand for our products not only remain strong, but our business fundamentals have never been better. We achieved a record Q3 revenue of $35,000,000 which represents an 18.2% growth over Q3 of last year, As we continue to deliver top line rate is inclusive of the revenue reduction we took because of exiting the house to worship vertical. We also achieved a record 1st 9 months revenue of 104,200,000 which represents an 18.6% growth over last year 1st month 9 months.

Speaker 1

Again, this is inclusive of the revenue reduction of the House of Worship vertical that we have now completely exited from. And our gross profit for Q3 Grew 30% from last year's Q3, which is pretty impressive. And we delivered an adjusted EBITDA of 4 point $3,000,000 for Q3, which represents a 12.4% operating margin. Now this is compared to last year's Q3 adjusted EBITDA loss of $1,500,000 and this represents an increase Of 3 87 percent. For the 1st 9 months of the year, Our adjusted EBITDA was $9,100,000 representing an increase of 193% from last year's 9 months performance.

Speaker 1

As a reminder, we have always said that it's typical for our OpEx to be front loaded, And we expect a much stronger EBITDA and operating margin performance in the second half of the year, which the Q3 results have clearly demonstrated. We expect Q4 to follow this trend. Now in addition, our gross margins in Q3 have increased to 71.9 percent from last year's Q3 of 66.1%. Now as we mentioned several times on our previous earnings calls, This was always our 2023 plan, and I'm very happy to say that we delivered what we said we would. And I believe that this is only the beginning of what's to come in the future quarters.

Speaker 1

Our focus has been and continues to be Profitability and EBITDA performance. We clearly made the right decision last October to exit the House of Worship Managed Services market, Which has been successfully completed end of April and is now starting to show in our P and L as promised. I should, however, mention the strong Q3 we just announced did include a significant $2,500,000 U. S. Government programmatic order that was originally scheduled to come into our Q4 as part of our government year end planning.

Speaker 1

Obviously, It's always good news when orders come earlier than expected. With this movement, we do expect our Q4 to be adjusted by this amount Objections that Dan will be discussing. Now Q4 has always been the highest quarter by far in all of our fiscal years. In fact, last year's Q4 was very, very high. In fact, if I recall, it was almost $39,000,000 due to an unusually strong U.

Speaker 1

S. Government quarter. Now interestingly enough, this year, we have seen a more balanced and consistent quarterly performance. In fact, in Q1 of this year, if you remember, we did $34,000,000 In Q2, we did $35,000,000 And now in Q3, we delivered again $35,000,000 I expect this to continue into 2024 as we are finding that our 3 main verticals, our defense, our broadcast and enterprise Balance each other out globally and give us better business predictability. In addition, it's interesting to note the U.

Speaker 1

S. Government Has been slowly moving for multi quarter purchasing cycles and not only depending on the year end September October timeframe, which always falls in our Q4. And we are also seeing Strong demand for our global security operation centers within the global financial banking industry, Cybersecurity, police centers, federal inflations, public safety and all defense sectors. The need to have real time mission critical and secure access to all your video sources and assets for real time analysis or situational awareness is becoming more paramount. And we are now the leading vendor delivering the entire contribution, distribution and visualization ecosystem In this critical area, we believe that our company has a bright future ahead and we are committed to maximizing long term value for all our shareholders.

Speaker 1

We are confident in our ability to execute on our strategic plan and deliver continued growth and success. In closing, despite the economic headwinds and continued supply chain challenges we keep hearing about from other companies, I believe that HyVision has weathered the storm better than most. And we expect our Q4 to be strong and consistent with our strategic plan I feel very comfortable with our year end projections. Dan will discuss our guidance for the remainder of the year shortly. And we are also very confident in our strategic plan and expect to demonstrate revenue growth And significant profitability growth in 2024.

Speaker 1

Finally, as we previously mentioned, We are moving quickly towards achieving our longer term goal of delivering 20% EBITDA performance. Dan, please continue with the financial details.

Speaker 2

Thank you, Mirko. So let's talk numbers. Revenue for this Q3 of fiscal 2023 was $35,000,000 That's an increase of $5,400,000 18.2% from the prior year comparative period. The revenue increase is notable for a number of reasons. First of all, The revenue comparison is an apples to apples comparison as revenue from Abi West is included in both periods.

Speaker 2

Revenue from just the products increased by 28.8% in the quarter. This impact This impact also is reflective of the $1,900,000 decrease in cloud solution revenue when compared to last year. We saw fantastic revenue growth despite our decision to exit the managed services space that focus on the House of Worship market. Even our maintenance and support revenues saw double digit growth, growing 15% year over year. This recent quarter did represent a record performance in terms of 3rd quarter revenue, which historically tended to be a slower period for the company.

Speaker 2

Hope to see more of these types of records in fiscal year 2024 and beyond. Revenue for the 9 months ended July 31 was $104,200,000 that's an increase of $16,300,000 or 18.6 percent from the prior year comparative period. Note that year to date results included AbbVie West performance for the entire 9 months, Whereas in the prior year comparative period, year to date results included AviWest for only 4 months. On the other hand, this year to year Performance reflects our exit from the managed services market in April. For the 9 month period, we saw cloud solution revenue declined by $2,800,000 when compared to the prior year period.

Speaker 2

So with that said, we are seeing huge growth and we see huge growth in maintenance and support revenue, which also grew by 23% year over year. Recurring revenue, which we defined as our cloud solutions and our maintenance and support was 5,600,000 We're about 16% of total revenue in this recent Q3, and it was about $20,300,000 or 19% of total revenue on a year to date basis. We anticipated that our recurring revenue would decrease as a percentage of our total revenue once we exited the managed services business. With that said, we do expect maintenance and support revenues to continue to grow robustly going forward. For this quarter, our gross margins were 71.9 percent That compares to 66.1 percent in the prior year comparable period.

Speaker 2

Further, this quarter's gross margin We're an improvement from the 68.9 percent realized last quarter, that's our Q2 of this fiscal year, and an increase from the 66% in the quarter before that, our Q1 this fiscal year. As discussed in our last earnings call, we anticipated margins to improve in this 3rd quarter and even suggested that the impact could be as much as 200 basis Well, we certainly exceeded that expectation. The managed services business Had about 600,000 and 6 costs related to platform license fees, 3rd party add ons and minimum bandwidth commitments. Said another way, the managed service business tended to be a below the average performer in terms of gross margin. Further, supply chains appear to be reverting to more normal delivery schedules.

Speaker 2

We did incur just over $300,000 in additional costs related to hard to procure componentry that was consumed in the quarter. On a year to date basis, the additional cost for this componentry was approximately 950 We're about 100 basis points. These extra costs were approximately half of the costs that we incurred last year, which impacted margins by over 200 basis points. We expect this extra expense To continue to dissipate going forward with the next year expectation for these costs to be half of the cost that we incurred this year. And just to complete the thought, there really wasn't much variation in overall mix throughout the year.

Speaker 2

Thus these gross margin improvements Our real improvements. Total expenses for this quarter were $25,600,000 an increase of $1,200,000 when compared to the same period in the prior year. However, in this quarter, total included a non recurring restructuring cost of $1,500,000 We essentially completed the restructuring exercise that was initiated in the 4th Quarter last year. The result is that we ended the quarter with 3 74 employees compared to 4 18 employees a year ago. And that compares to the 389 employees at the end of second quarter.

Speaker 2

Generally speaking, approximately 70 5% of our cost structure is related to compensation expenses and related social charges, thus you can put the math together. I should mention that since the most recent restructuring was largely completed in the second half of this quarter, there may be additional opportunities for OpEx Savings in this 4th quarter. However, Next week is our 2nd largest trade show, the International Broadcasting Convention or IBC and it may result in incremental marketing spend in this Q4. On a year to date basis, Total expenses were $74,400,000 an increase of $9,100,000 when compared to the year Earlier period. As a reminder, the Abby West transaction was consummated in April of 2022, Which implies it was only part of our cost structure for 4 months in the comparable period last year.

Speaker 2

Thus, it is impacting year over year comparisons. Abby West added approximately 80 people last year. If we were to isolate the reason for the increase, Compensation related expenses added approximately $4,000,000 in total expenses, most of which would be attributable to the timing of the Abby West acquisition. Increases in depreciation and amortization expenses related to acquired assets and intangibles Added an incremental $2,300,000 in total expenses. Increased travel expenses added an incremental $1,500,000 And the Canadian dollar's exchange rate impact on U.

Speaker 2

S. Dollar denominated assets and liabilities added an incremental $1,000,000 to total expenses. When we normalize total expenses for share based payments, depreciation of fixed assets, The amortization of intangibles and restructuring costs, total expenses were $20,800,000 a decrease of $400,000 from the prior year. The result of the higher revenues, Better gross margins and a decrease in OpEx is that adjusted EBITDA for the quarter was 4,300,000 That's an increase of $5,900,000 when compared to the adjusted EBITDA loss of $1,500,000 for the same period in the prior year. The adjusted EBITDA margin for this quarter was 12.4%.

Speaker 2

That margin compares quite positively to the 7.5% in the prior quarter and the 6.2% in the quarter prior to that. In prior calls, we had certainly been signaling our belief that the Q3 would be somewhat of a watershed event. I believe now you are beginning to see the full benefit And as there's still some additional opportunities to increase EBITDA margins going forward, we should see this continuing. We should see gross margins continue as we absorb the remaining higher cost componentry and as we continue to migrate the 2 acquisitions to common ERP platform. And as I explained earlier, we should see additional OpEx savings in the 4th quarter Based on the timing of our restructuring exercise completed in June, albeit with this cautionary note that we do have our 2nd largest trade show in this Q4 as well.

Speaker 2

Adjusted EBITDA for the 9 month period was $9,100,000 that's an increase of $5,900,000 when Compared to adjusted EBITDA of $3,100,000 for the prior comparable period. The adjusted EBITDA margin for this 9 month period was 8.7%, That compares quite favorably to 3.6% for the prior year comparable period. We also saw a significant improvement in the net loss for the quarter. The net loss for this quarter was only $900,000 Compared to a net loss of $4,200,000 for the same period in the prior year. That $3,400,000 improvement is largely related to The $5,400,000 increase in revenue and the improvement in gross margin contributing $5,600,000 in incremental gross profit.

Speaker 2

Now these increases were offset by the $1,200,000 in incremental expenses and we did get some benefit from income tax recoveries of 900,000 Net loss on a year to date basis was $3,800,000 but that too compares quite favorably to the net loss of $5,100,000 for the prior year Comparative period. With respect to the balance sheet, we ended the quarter with a cash balance of 7 point $5,000,000 a modest increase of $200,000 from the prior quarter end. However, we also ended the quarter with only 5 point $5,000,000 outstanding on the credit facility. That's a reduction of $4,500,000 from prior quarter end and we reduced our term loans by an additional $1,000,000 Total assets at July 31 were $133,900,000 that is a decrease of 14,700,000 from the end of fiscal year 2022 and the decrease in assets in the 9 month period largely relate to a $7,600,000 reduction In trade and other receivables, a $5,800,000 reduction in intangible assets And a $2,400,000 reduction in inventory. These decreases were offset by the $1,700,000 increase In our cash balance this fiscal year.

Speaker 2

Total liabilities at quarter end were $46,100,000 That's a decrease of $12,200,000 from the end of fiscal 2022. The decrease in total liabilities for the 9 month period included $5,500,000 decrease in the line of credit, a $4,800,000 decrease in trade and other payables, $1,200,000 decrease in our lease liabilities and again $1,000,000 reduction in the amount of term loans outstanding. With respect to the remaining integration plans, for AbbVie West, we have completed the move of AbbVie West And we just completed AbbVie West's move to a common ERP system. With this enhanced Visibility to Avi West inventory, we hope to increase the flexibility of Avi West's supply chain and reduce direct product costs to increase gross margins. Our focus in the near term will be to sell more of Abi West products in North America.

Speaker 2

At High Vision MCS, progress is also accelerating. Our current focus is to fully integrate development teams We expect this to be completed this month. Our next major focus is integrating its production capabilities And migrating MCS' ERP system to a common platform. The pace of integration is increasing over the remainder of the year. Just on an aside, this week we also had our 12th ISO 9,001 audit and we're pleased to say that once again the auditors found our Quality management system to be fully effective, in fact, with outstanding ratings on most benchmarked activities.

Speaker 2

In terms of expectation for the remainder of the year, we have completely transitioned out of the household worship market And even after losing that revenue, our overall revenues continue to show growth. Thus, our revenue guidance for the full year, which factors in the reduction in our managed services revenue is now expected to be a bit higher. We had suggested That revenue for the year would be between $130,000,000 $135,000,000 with the high end of that range being increasingly in sight. We are now forecasting revenue for the full fiscal year to be somewhere between $135,000,000 $140,000,000 this year. We also expect to see continued expansion of our adjusted EBITDA margin as we continue to exploit synergistic opportunities And achieving double digit adjusted EBITDA margins.

Speaker 2

That concludes my prepared remarks. So I'm passing the microphone back to you, Mirko, and then we'll open the floor to questions.

Speaker 1

Thank you, Dan. I guess we can look at some questions at the moment.

Operator

Your first question comes from the line of Nick Corrigan with Acumen Capital Partners. Your line is open.

Speaker 3

This is Nick Corkerman from McHenry Capital Partners. I appreciate the time and congrats on a great quarter. Just a couple of questions for me. First, with Avi West, you've talked about sales in North America. Can you maybe talk about the traction you've been getting And whether or not the writers strike in Hollywood has increased the demand for either the products from Avi West or your Kind of legacy products?

Speaker 1

Sure. Yes, I'll take that. I mean, it's right now the traction we're getting It's actually been pretty solid. Again, remember that Abbey West was very, very low or weak, I would say, In the North American coverage, and obviously, high vision is very, very strong in North America. So Our whole push has been for the last year is to get not only get up to speed, but get all of our clients testing equipment, getting their Hands on the equipment and just seeing how it works with the legacy systems.

Speaker 1

So I think we normally made great progress. I think there's a lot More opportunity yet to come. And so I'm pretty optimistic from a lot of our key, key broadcast clients, which have Basically, moquito is everywhere to really get on the bandwagon of the Pro Series. So we do have already some wins, and I think we're looking for Huge growth there in fiscal 2024. I don't think the I'm not hearing At all, anything about the rider strikes that's affecting our business.

Speaker 1

The majority of our business, honestly, is live sports, And that's pretty healthy. That's doing very, very well for us globally.

Speaker 3

Great. And then maybe thinking about the adjusted EBITDA margins, how should we think about the progression to 20%? And How should

Speaker 1

we think about the Q4 relative

Speaker 3

to the Q3?

Speaker 2

Well, Nick, thank you for the question. We see opportunity to lower our OpEx in the Q4. We also see opportunity to Our gross margin in the Q4 and hopefully that's going to translate to a higher EBITDA margin. I think we've been forecasting that we should be in the double digits for the full year based on current performance. And so we do see some expansion in the 4th

Speaker 3

And thinking longer Kind of longer term, what do you think the time line to get 20% less?

Speaker 2

I'm sorry, I didn't hear the last part of that question.

Speaker 3

Yes. I'm thinking about the time line for you to get from the adjusted EBITDA margins you had in the Q3 to 20%.

Speaker 2

So I think what we sort of forecasted is that in 2024, we will see a 20% EBITDA margin in one of our quarters. I'm not ready to commit. I don't think we will get to 20% for the full year. I'm not suggesting that it's outside out of question, But our goal right now is to demonstrate 20% growth in at least one of our quarters, 20% EBITDA margins in 1 of our quarters.

Speaker 3

That's helpful. And how should we think about the conversion of free cash flow from adjusted EBITDA?

Speaker 2

Well, I tried to sort of give you a way to look at the equation here. Our adjusted EBITDA was about $4,300,000 And as I kind of pointed out between the cash balance and our line of credit, we were able to reduce our line of credit by $4,500,000 We were able to reduce Our debt by $1,000,000 that should give you a sense that adjusted EBITDA is a fairly good indicator of what our cash generating ability might be.

Speaker 3

Great. And then the last question for me, just as you start generating more free cash flow, What are your capital allocation priorities between paying down debt, share buybacks, M and A and any other uses?

Speaker 2

I'm not sure I heard what your first sub point was. I think we're right now focused on integration Fully integrating these two properties, demonstrating our EBITDA margin, we have been quite successful in M and A. All of our acquisitions thus far have been Very successful and it's something that we would probably be looking to at the future, but we're not looking for anything that's distracting us from this goal of demonstrating

Speaker 3

And have share buybacks been something you've contemplated?

Speaker 2

Not really. No, not at this juncture. It's not something we think about. I think we're with $7,000,000 in the bank right now, I don't think it's an opportunity for us to be buying back shares at this juncture.

Speaker 3

Great. That's all for me. Thanks for taking my questions.

Operator

Your next question comes from the line of Daniel Rosenberg with Paradigm Capital. Your line is open.

Speaker 4

Thanks and congrats on a very strong quarter. My first question goes to the levers that You were speaking to on lowering OpEx. And so I was just curious to hear specifics around what areas Are you able to achieve this? And then is it the scale that you guys are the operating leverage and economies of scale that's helping Drive the confidence in your statements around getting to 20% next year?

Speaker 2

Good question. So, the way that I look at the equation, we started this restructuring effort in the Q4 of last year. Now mind you, we had purchased AbbVie West in April of 2022. And so that Q4 was the Q1 that we were able to see What the expense burden would be of that entity and how the teams were working together. We recognized really quickly that we had to Right size our R and D efforts because we've done a number of acquisitions in the last few years and many of those acquisitions included A significant number of engineers to help build products for us.

Speaker 2

So as we're going through the exercise, we are focusing on having everyone working on a Common platforms using common technologies, common methodologies and that's what's resulted in the headcount decrease in last year. Now in this current period, our focus is a little bit different. We wanted to see what products have legs, what products had opportunity going forward. And we realigned our development teams to be more focused on those products that generate the most revenue for the business. And that resulted in additional headcount reduction of about 15 people.

Speaker 2

So we've now reprioritized the business focusing on those new products, Focusing on the opportunities going forward and we're able to make some pretty decisive decisions that I think are going to generate additional EBITDA going forward.

Speaker 4

Okay. Appreciate that. And in terms of the debt pay down, I'm just Curious to hear if there's anything specific around the timing or structure that sparked you Wanting to pay down in this quarter or any targets in terms of leverage ratios that you think are the right ones to have for this company?

Speaker 2

If you're talking about just, trade I'm sorry, regular debt term loans, We assume those term loans as part of the Abby West transaction and those term loans were very favorably priced. Some of them were as low as 1% interest rates and what have you. We're not looking to accelerate our payments against those debt instruments rather this just happens to be the timing of repayment for these Instruments, nothing is leading us to accelerate that at all. With respect to the line of credit, it's just happenstance. We have no obligation to pay it down.

Speaker 2

We're not looking to pay it down, but what are we going to do with excess cash rather than paying interest rates on and we decide to pay it down. Now mind you, we still have this line of credit, a $35,000,000 line of credit with the accordion expansion feature for $25 additional $1,000,000 So we could pay it down and then reuse it if we wanted to.

Speaker 4

Okay. Thanks for that. And last one for me. So a number of product launches and Industry recognition around products and awards. Just curious what excites What are the new product areas that are exciting and growth potential for you, The ones

Speaker 1

that get you most excited, let's say. Yes. Great question. I mean, there's There are several. In fact, right now, we're in the middle of, I think, 3 separate shows going on this week and next week.

Speaker 1

IBC is the 2nd largest broadcast show and we're actually showing some pretty cool technology there. We're also showcasing In another actually, defense show is our Command 360. I just found out a couple hours ago, we just won an award a show award for that One of the best products, which is our Command 360 visual collaboration systems. I think that's one of the ones that we're the most excited about. We just started rolling that out.

Speaker 1

There's a tremendous potential. We're seeing a huge potential In all of these global secure operation centers, interestingly enough from all sectors, Believe it or not, the banking sector, which we're extremely strong in, we are the leader in that sector And they just can't get enough of our stuff. So that's cool. Fiber security is going bananas with our systems. So we're seeing it in state and local, police, fire, emergency response, and not to mention all the defense Groups that we deal with.

Speaker 1

So the Command 360 is the one that really, really is getting us excited. It's by far The big growth engine going forward, so that's cool. There are some new changes. We're actually launching a couple of new moquito, which is Our core product, and that's exciting. We'll be launching a couple more in the next two quarters, different variations.

Speaker 1

We did a single channel Makita, which was the first time ever we launched that in a different form factor. And then we're also Doing a soft launch, so showcasing kind of an early adoption beta program for our HUB 350, which is our cloud System to connect all of our devices, edge devices for our broadcast workflow. So we did a sneak preview at NAB. We're doing a little more than a sneak preview at IBC this week or starting this weekend, I should say. And that It's scheduled to be GA ed or generally available at the end of the calendar year, kind of Q1 of 2024 Calendar, where we expect that to bring on more speed, from a total solution itself.

Speaker 1

So We've got the cloud platform, Hub 360, Command 360 and some of the Keto stuff, and we're really reenergizing the Pro Series Transmitters in the North America market, where I see a huge opportunity.

Speaker 4

Thanks. Congrats again and thanks for taking my questions. I'll pass the line.

Operator

Your next question comes from the line of Robert Young with Canaccord. Your line is open.

Speaker 5

Hi, good evening. I was hoping to dig a little bit into gross margins and the outlook. You'd said that the gross margins were maybe a little better than expected given the house of worship impact no longer A drag, supply chain improvement, maybe a little bit of integration. I think you'd suggested that gross margins can continue to get better As you move integrate or integrate, the recent acquisitions and put them on a common ERP and then Further supply chain benefits. And so it seems should we be thinking of 71%, 72% being a base Like will it improve from here or are there any negative things that we should be considering?

Speaker 2

Well, Robert, nice to hear from you again. I'm not sure I'd be as optimistic as you are, but maybe I'm just a very conservative Tend to be fairly conservative. The one area that's fairly defined is the cost of this componentry that we spent Some incremental monies to be able to obtain to be able to serve our customers. Last year, those incremental costs were about 210 basis points. And we've seen that number be cut in half this year.

Speaker 2

It's about 110 basis points that's impacted our financial statements. And we anticipate that to actually be reduced in half next year as well. So that's a real tangible benefit you can look at. Now when it comes to the ERP and the migration of the 2 entities, That speaks to an opportunity, but we've got some work to do to make sure that we can exploit it. I've got a lot of confidence in our supply chain people.

Speaker 2

As Mirka kind of alluded to, we weathered this global shortage better than many of our competitors out there. There was not a single Customer that we could not deliver products to because of the way that we were able to handle our supply chains. So I am confident that Being on a common platform with the common tools that we use to be able to manage our cost of goods sold, we'll be able to impact MCS' business and AbbVie West's Business going forward. So if you were conservatively speaking, I would maybe look at a half Point improvement next year and another 0.5 point improvement the year after that and another 0.5% improvement thereafter. But we are certainly going to strive to better that as well.

Speaker 5

Okay, great. And then, I mean, looking at OpEx, The restructuring exercise, you said it was completed in June, so there's some residual impact there. To get to the EBITDA margin expansion, would it be are there some is it mostly driven by top line growth or will there be some additional OpEx benefit in addition to the growth margin

Speaker 1

you just talked about?

Speaker 2

I'm anticipating a little bit more OpEx benefit as a result of the timing of the last restructuring. If you think about it, we did the restructuring at the second half of June. So our Q2 financial our Q3 financials had fully loaded costs for those individuals for both the month of May June. Those expenses aren't going to be part of our Q4 equation. Again, I'm cautioning that we do have a one of our big trade shows in the Q4 that's going to go the opposite direction.

Speaker 2

But overall, I do believe we're going to be seeing some incremental benefit. Now in terms of revenue, Mirko kind of mentioned that We're seeing more of a flattening of our revenue curve. It used to be that our Q4 was a very large quarter. It was in concert with The U. S.

Speaker 2

Year end, but we're seeing that even that business seems to come in more ratably throughout the year. And we did have a surprise opportunity with our programmatic deal came into the Q3 that we firmly expected to see in

Speaker 1

the Q4. So we're probably seeing flat

Speaker 2

revenue in

Speaker 1

the 4th quarter give or take.

Speaker 5

Okay. And so actually that was my next question, the government program, I think it was $2,500,000 Is that full $2,500,000 Is that the pull forward or Was that the size of the program and it was pulled forward?

Speaker 2

That was the amount of revenue recognized in the Q3 that we thought was going to be a 4th quarter event.

Speaker 4

Okay.

Speaker 1

All

Speaker 5

right. Okay, thanks. That's great. Thanks for taking my questions. Congrats on the quarter.

Speaker 1

Thank

Operator

you. My apologies. Your next question comes from the line of Daniel H. Baldini with Aperon Asset Management, your line is open.

Speaker 6

Great. Thanks very much for taking my call. Yes. I have a question that relates really to the U. S.

Speaker 6

Portion of your broadcast business. And that is in recent weeks, we So, observed a standoff between Charter and Disney and the settlement appears to Basically have accelerated the demise of the cable bundle here in the U. S. And I'm just curious, how Could you grow your U. S.

Speaker 6

Broadcast business in a world where there's just fewer cable channels out there and fewer local affiliates

Speaker 1

Okay. Well, thank you for the question. Let me just Explain what we actually do in broadcast and where our systems are sold. And we're predominantly in live sports, Right. And which means, we work with the affiliates and with the main broadcasting companies, but also That deal with people like the NFL, people like the Fox News sorry, Sports, not Fox Sports, ESPN, and then they work with people like the NCAAs, and then they go down and down in the different sporting leagues For instant replays, for live monitoring of games, practice fields, etcetera, Golf events, so we're not really competing or I should say competing, we're not looking for cable network Type of news business, if you follow me.

Speaker 1

We're seeing that live sports It's actually growing globally, not just the U. S, right? Now for us, what we as a company, we've never been Involved in wireless or cellular bonded type of solutions, right, encoding solutions. We've all been fixed We are in Iraq at events, but Avi West Technology brings us The capability to do 5 gs wireless cellular bonded technology where if you think As an example, think of PGA and golf and the guys with the backpacks following the golfers, right? I mean, That stuff we've never played with before.

Speaker 1

Now we are involved in that heavily. So for us, we're seeing our business Potentially increasing because we're doing both wired and wireless and that's a pickup for us, right? That's pickup market share that we were never involved in. So from a North American broadcast perspective, it's been pretty strong. I mean, we also benefited from the big COVID bubble, right, which is tremendous.

Speaker 1

Everybody doing remote production, everybody doing everything remote, but we haven't seen a slowdown of live sports, is really what we do very well. Does that help?

Speaker 6

All right. Yes, that's helpful. Thanks very much.

Operator

And there are no further questions at this time. I will turn the call over to Mirko Wicca.

Speaker 1

Okay. Well, thank you, Sarah. So I just want to basically thank everybody and all our shareholders And analysts on the line today for the continued support of HiVision and we look forward to speaking with all of you in January We plan to be discussing our full year 2023 results. So that's going to be sometime late Sorry, as always, and really look forward to be able to talk about the whole year results. Thanks again and we'll see everybody in January.

Speaker 1

Bye.

Operator

This concludes today's conference call. We thank you for joining. You may now disconnect your lines.

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Key Takeaways

  • HyVision achieved a record Q3 revenue of $35 million (18.2% YoY growth) and a record 9-month revenue of $104.2 million (18.6% YoY), despite exiting the House of Worship vertical.
  • Gross margin expanded to 71.9% in Q3 (up from 66.1%), and adjusted EBITDA turned positive at $4.3 million (12.4% margin) versus a $1.5 million loss last year, with 9-month adjusted EBITDA rising 193% to $9.1 million.
  • The planned exit from low-margin managed services (House of Worship) has boosted profitability, and management reiterated a longer-term goal of achieving 20% EBITDA margins.
  • A $2.5 million U.S. government order was pulled into Q3, reflecting a shift to multi-quarter federal purchasing cycles, and full-year revenue guidance was raised to $135 million–$140 million.
  • Integration of AviWest and MCS is underway with common ERP consolidation and supply-chain normalization, while new products like Command360 and the Hub350 cloud platform are positioned to drive future growth.
AI Generated. May Contain Errors.
Earnings Conference Call
Haivision Systems Q3 2023
00:00 / 00:00