Evertz Technologies Limited (ET) Earnings Call Transcript & Summary

I welcome you to Evertz' 15th Annual Shareholders Meeting as a public company. Thank you all for attending with us here today. We'll conduct the official business and procedures of our annual meeting today, and I'm pleased to call this meeting to order. With me today is Romo Magarelli, President, Chief Executive Officer of Evertz; also Doug Moore, Chief Financial Officer and Corporate Secretary, who will assist with the procedural matters and act as Secretary of the meeting. On the screen beside me, you'll find agenda outlining the procedures of today's meeting. Following the completion of the formal business of the meeting, Doug will report on Evertz' financial performance for fiscal year 2021 and then Romo will take you through an overview of the industry as well as look at Evertz' outlook for the future. First item on the agenda will be the appointment of scrutineers to report on the shareholders present in person and the number of shares represented by proxy at this meeting, to compute the votes on any polls taken at this meeting and any adjournment thereof and to report thereon to the Chairman. With the consent of the meeting, I should now appoint Amy Kam of Computershare Investor Services, Inc. to act as scrutineers and would ask them to prepare the attendance report. The notice of the -- the notice calling this meeting of shareholders was mailed on September 15, 2021, to all shareholders of record as at September 1, 2021, along with all applicable proxy-related materials. The Secretary has an affidavit attesting to the mailing of notice of this meeting, which is available for inspection by shareholders. I direct that a copy of the notice of the meeting together with the affidavit attesting to the mailing be kept by the Secretary with the records of the meeting. In view of the fact that these documents have been tabled and have been delivered to all shareholders of record, I will now ask for a motion that the reading of the notice of this meeting be dispensed with.

I so move.

Thank you, Brian. Can someone second the motion?

Mr. Chairman, I'm a shareholder, and I second the motion.

Thank you. Those all in favor of the motion, please signify by raising your hand. [Voting]

Those opposed? [Voting]

None. Okay. I declare the motion carried. I'm advised that the scrutineer -- I'm advised by scrutineers that scrutineers' report on share representation is ready. And now I'll ask the Secretary, Doug Moore, to read the scrutineer's report.

So the scrutineers' report indicates that 38 persons holding a total of 58,754,992 shares are represented both in person and by proxy here. And that indicates 77.02% of outstanding shares are represented at the meeting.

Based on the scrutineers' report, I conclude that the required quorum of 2 persons, each being a shareholder or duly appointed proxy holder together holding or representing by proxy not less than 51% of outstanding common shares is present and declare the meeting to be duly called and properly constituted for transaction of such business as may properly come before it. Before commencing the business of this meeting, I would like to comment on voting procedures. Each holder of common share is entitled to 1 vote for each share held in respect of each matter to be dealt with at this meeting. The scrutineer has advised that 58,754,992 votes are present or represented by proxy at today's meeting. Based on the proxies received for this meeting, it is evident that if a ballot is conducted on any item of business to be dealt with at the meeting other than the reapproval of the company's stock option plan, the total number of votes attached to shares represented at the meeting by proxy required to be voted against what, to my knowledge, will be the decision of the meeting in relation to any such item is less than 5% of all votes that might be cast by shareholders personally or through proxy at the meeting on the ballot. Accordingly, with the consent of the shareholders in the meeting, the votes on election of the directors and the votes on the appointment of auditors and any other matter that may properly come before this meeting other than the reapproval of the stock option plan will be conducted by a show of hands and the vote on reapproval of the stock option plan will be conducted by ballot. Please note that the bylaws of the company allow every shareholder who has not submitted a proxy and every proxy holder present at the meeting to have 1 vote on the show of hands and that each shareholder or proxy holder present in person at this meeting has the right to demand that a ballot be conducted on any resolution either before the show of hands vote or following that vote. Where a ballot is conducted on any resolution, I will vote by ballot all the proxies submitted to me as proxy holder as required by law. The first item of business for this meeting is to receive the audited consolidated financial statements of Evertz for the year ended April 30, 2021, along with the auditor's report on these statements. The 2021 annual report, which contains consolidated financial statement and auditors' report, was mailed to all registered shareholders together with the notice of this meeting as well as to nonregistered shareholders who requested a copy. The Board has approved this financial statement and has directed that they be placed before the shareholders. The next item of business is election of directors. The Board has determined by a resolution that there will be 7 directors. Of the 7 nominees proposed for election, all currently serve as directors of the company and are eligible for reelection. The management proxy circular sent to you provides the names and background information of each of these nominees. Each director elected to the Board will hold office until the next Annual Meeting of Shareholders or until the director's successor is elected or appointed. Before we proceed with the nominees, I'd like to introduce the proposed directors. Chris Colclough; Dr. Ian McWalter; Dr. Thomas Pistor; Brian Piccioni; Rakesh Patel; Romolo Magarelli; and myself, Douglas DeBruin. I will now entertain nominations for Directors of Evertz. I declare the meeting open for nomination for election of 7 directors to hold office for the term expiring at the close of the next annual meeting of shareholders. May I have the nominations?

Mr. Chairman, I'm a shareholder, and I nominate each of Chris Colclough; Dr. Ian McWalter; Dr. Thomas Pistor; Brian Piccioni; Rakesh Patel; Romolo Magarelli; and Doug DeBruin to serve as directors of the company until the next Annual Meeting of Shareholders or until their successors are elected or appointed.

Thank you, Brian. Are there any further nominations?

Mr. Chairman, I'm a shareholder and I second Brian's nomination.

I wasn't ready. Okay. Shareholders are entitled to vote for the directors on an individual basis and not as a slate. Consequently, shareholders can vote for all of the proposed directors nominated, vote for some of them -- sorry, that's a -- would someone second the motion for election? That was you, Bob, for a seconding.

Mr. Chairman, I'm a shareholder, and I second the nomination.

Okay. Great. Someone move the resolution for election of 7 directors -- named as directors.

Mr. Chairman, I'm a shareholder, and I move the election of each of Chris Colclough; Dr. Ian McWalter; Dr. Thomas Pistor; Brian Piccioni; Rakesh Patel; Romolo Magarelli; and Doug DeBruin to serve as directors of the company until the next Annual Meeting of Shareholders or until their successors are elected or appointed.

Okay. Now I met you, Bob. Thank you, Brian. Can someone second the motion?

Mr. Chairman, I'm a shareholder, and I second the motion.

Thank you. All those in favor of the motion, please signify by raising your hand. [Voting]

Those opposed? [Voting]

None opposed. I declare that Chris Colclough; Dr. Ian McWalter; Dr. Thomas Pistor; Rakesh Patel; Brian Piccioni; Romo Magarelli; Doug DeBruin had been duly elected as directors of the company to hold office until the close of the next Annual Meeting of Shareholders. The next item of business is appointment of auditors. In the management proxy circular, it is recommended that BDO Canada LLP be reappointed as auditors of the company and the director to be authorized to fix the auditors' remuneration. May I have a motion reappointing BDO Canada LLP as auditors?

Mr. Chairman, I'm a shareholder, and I move that BDO Canada LLP be reappointed as auditors of the company until the next Annual Meeting of the Shareholders and that the Board of Directors of the company be authorized to fix the auditor's remuneration.

Second the motion?

Mr. Chair, I'm a shareholder, and I second the motion.

Thank you. Those all in favor of the motion, please signify by raising your hand? [Voting]

Those opposed? [Voting]

None. I declare the motion carried and BDO Canada LLP is duly appointed as auditors of the company until the next Annual Meeting of Shareholders, and the Board of Directors of the company is authorized to fix their remuneration. Next item of business is reapproval of the company's stock option plan. Because the company's stock option plan is a rolling plan, whereby the maximum number of shares reserved and issued under stock option plan at any time is equal to 10% of the number of shares of the company issued and outstanding from time to time, the rules of the TSX require the stock option plan be reapproved every 3 years. The stock option plan was last reapproved by shareholders on October 10, 2018, with no modifications. The Board reapproved the stock option plan and the unallocated options here under on August 25, 2021. The stock option plan is fully described in the management proxy circular. The text of proposed resolution to reapprove the stock option plan is set forth starting on Page 9 of the management proxy circular. May I have a motion reapproving the stock option plan and approving all unallocated stock options under the stock option plan?

Mr. Chairman, I'm a shareholder, and I move that the resolution starting on Page 9 of the management proxy circular be approved whereby, among other things, the stock option plan is reapproved and all unallocated options, rights or other entitlements under the stock option plan are approved, which approval shall be effective until October 6, 2024.

Second the motion?

Mr. Chairman, I'm a shareholder, and I second the motion.

I now direct that we proceed by ballot. The scrutineers' ballots for this vote, all registered shareholders represented in person who have not submitted proxies and proxy holders should identify themselves to the scrutineers by raising their hands to receive a ballot. You may vote on the resolution from the stock option plan and the unallocated options here under by marking an X opposite For or Against on the ballot. Okay. Please complete your ballots and return them to the scrutineers. [Voting]

Okay. We got the ballots in. Scrutineer has now provided me with the ballot results, which show the stock option plan has been approved by a majority of votes accordingly. I declare the stock option plan resolution starting on Page 8 of the management proxy circular is approved. The company's stock option plan as described in management proxy circular is reapproved and all unallocated options, rights or other entitlements under stock option plan are approved until October 6, 2024. That concludes the formal requirements of today's meeting. Before I officially close the meeting, does anyone have any questions regarding the items so far? No questions. May I now have a motion that this meeting is terminated?

Mr. Chairman, I'm a shareholder, and I move that this meeting be terminated.

Thank you, Brian. Can someone second the motion?

Mr. Chairman, I'm a shareholder, and I second the motion.

You've heard the motion as moved and seconded. All in favor? [Voting]

Any contrary? [Voting]

No? I now declare this meeting terminated. Now it's my pleasure to update you on the company's business operations and financial affairs. Before I pass it over to Doug to take you through financial results for the fiscal year ended April 30, 2021, I'd like to point out that certain information within today's presentation may contain forward-looking statements and that actual results may vary from those that are forecast or projected based on material factors, assumptions that we have sometimes beyond the company's control. Even though we had to go through unprecedented times this fiscal year, Evertz continues to be a world leader in the video technology sector. Through market-leading product innovations and state-of-the-art successful project completions, Evertz is able to help its customers navigate and benefit from the technology transitions, the company transitions and challenges in the market. Evertz has developed and deployed software-defined IP, IT and public-private hybrid cloud-based solutions, which continue to lead the industry even more so in today's environment. Evertz is built upon a long-term vision of generating value and sustainable success through investment in our technology portfolio, while continuing to maintain a strict operating discipline. This vision and discipline has allowed Evertz to build a strong balance sheet and secure financial position. Fiscal 2021 tested our industry as never before, as the global pandemic affected activities in industries around the world. As an essential business, Evertz had to do its utmost best to ensure that it navigated through this challenging time to ensure we continue, as usual, to work audaciously to -- with our customers and partners to provide continuous uninterrupted support and innovative solutions. Evertz' decisive actions and adherence to our values has resulted in improvements to our financial results since the first quarter of fiscal 2021, ending the year with a healthy balance sheet, strong operational cash flow, efficiency gains while delivering significant value to shareholders. Evertz was not immune to the unprecedented challenges as delayed customer deliveries, installations and global travel restrictions impacted revenues during the year, which totaled $343 million. During this period, Evertz forged ahead with our commitment to the development of new innovative solutions. These investments fueled development activities within our core product portfolio, funded longer-term R&D initiatives such as high-performance, low-latency IP networking technologies; our IT-based and virtual cloud architectures; playout and content management; DreamCatcher IP-based replay and BRAVO live production suite; compression and media transport solutions; and professional AV solutions. These initiatives are enabling our customers to transition to IP, IT and public, private and hybrid cloud-based solutions. Our 2022 plan is to continue our focus on investing into new technologies, which is even more important in these challenging times, and leverage and expand upon virtualized cloud solutions that Evertz has successfully deployed within key customers to help them adapt to the new working environment. These technologies provide superior solutions enabling our customers to address and implement complex multi-platform solutions and to efficiently transition to evolving IT-based solutions, including virtualized cloud services. We enter into fiscal 2022 with significant momentum of IP, IT and cloud-based solutions, designed, delivered, deployed and extended with an influential industry-leading -- leaders across the world. As a leading innovator and one of the largest pure players in our technology sector, we believe Evertz is again in a position of strength to deliver to customers and to shareholders. Now prior to passing it over to Romolo, who will elaborate on the new product introductions and touch upon a few key successes, I'd like to first pass it over to Doug Moore, our CFO, to take you through our financial results for the fiscal year 2021 in more detail. Thank you very much.

Thank you, Doug. First slide, we're going in. So in regards to the financial results of the -- during the year, Evertz posted $343 million in sales in fiscal 2021, as that represents a decrease of $94 million or 21% compared to the prior year. As noted earlier by Doug, the decrease was driven by decreased activity, temporary customer shutdowns, travel restrictions and postponement of projects during -- as a result of the pandemic. Next slide. Looking at revenue at the International region in particular, despite the decreased activity in the fiscal year 2021, over the past 15 years, Evertz has achieved a 7% annual compound growth rate, with International sales growing $46 million in 2006 to $120 million in fiscal 2021, now representing 35% of total sales. As it relates to margins, the company strives to maintain a gross margin target within the 56% to 60% range. In 2021, our gross margin was within that range at 58.2%. And for the fiscal 2021 year, selling and administrative expenses were $49.4 million. That represents 14.4% of revenue. And despite the challenges presented during the year, stable margins and strong cost accountable management has enabled Evertz to continue our solid profitability in fiscal 2021. In particular, we achieved operating earnings of $58 million or 17% of sales. Looking at results as a percentage of revenues, net earnings as a percentage was 12.2%. As previously noted, selling and admin were 14.4% of revenue. While our commitment to innovation is clearly demonstrated here as our annual R&D investments as a percentage of revenue represented 23.4%. I'll turn to cash flows. During fiscal 2021, we generated cash from operating activities of $59 million. After including the impact of change in nonworking capital and current taxes, we generated an impressive $101.1 million -- $101 million, sorry, from operations. Cash from operations were used to invest in the acquisition of capital assets, which net of disposals, resulted in the use of $10 million. We completed the business acquisitions of Ease Live, Studer and the investment in ShotTracker, the 3 of which totaled approximately $9 million. And lastly, we paid quarterly dividends totaling $0.54 a year or $41.6 million. Lastly, moving to the balance sheet. The company finished the year in a strong stable position. As at April 30, cash was $108.8 million and working capital was $214.5 million. Total assets were $452 million. Given the difficulty of the past year plus and the remaining uncertainty, we view our pristine balance sheet as a very key asset in and of itself. Now to move beyond financial discussions, I would like to pass it over to Romolo, our President and CEO, who will give an update on recent investments and an industry and corporate overview. Thanks very much.

All right. Thank you to the two Dougs, and good morning, everyone. I'm very proud of the commitment and accomplishments of our team, especially during this challenging time. Before I go into more details about the year's events, let me briefly touch upon some highlights and some industry trends. We are an engineering-focused innovator that designs and produce the market's Tier 1 technology solutions for the media broadcast, television service provider and enterprise AV markets. We have and continue to lead the industry's technical transition to the IP, IT and cloud-based facilities of the future. All of the industry leaders, such as WarnerMedia, Disney, Apple, Amazon and Google, have benefited from our pioneering solutions. In fiscal 2021, we continue to expand our market through technical innovation, strategic acquisitions, investments and partnerships. For example, our recent acquisition of Ease Live, a direct-to-consumer interactive graphics overlay technology. Direct-to-consumer distribution has become the priority for our entertainment, sports and news customers. Our customers are looking for fast and simple implementations of graphically driven experiences that can drive new ways to engage and maintain their audiences. The NBA League Pass and YES Networking streaming solutions are early adopters of this technology, and they are just scratching the surface with respect to its capabilities. They're able to seamlessly offer interactive engagements such as offering live stats, polls, quizzes, et cetera, without requiring painful app upgrades and development cycles. Also, Ease Live is being integrated into BRAVO, our cloud-based production environment. With BRAVO's comprehensive metadata tagging capability, the ability to provide deeper level of video personalization is achieved by moving the compositing function closer to the consumer. For video rights holders, the Ease Live technology opens the door for more sponsorships, advertising inventory and in-game betting. Next, Evertz, along with Verizon Ventures, led a small financing round in ShotTracker. Their revolutionary sports technology is currently aimed at NCAA basketball, providing real-time analytics with sub-latency via sensors on the balls, the players in the court. Our funding is enabling the acceleration of deployment across the NCAA Division 1 basketball conferences and expansion of hiring and enhancing sensor capabilities and more. ShotTracker's live real metadata feeds have already been integrated into BRAVO. Along with other co-pilot technology, the ShotTracker data will drive auto clip generation, auto production and AI-assisted production, much needed to get the cost down so that rights holders can tap into assets that were otherwise unaffordable to produce and distribute. In addition, Evertz completed the strategic acquisition of the iconic audio brand, Studer, along with its related intellectual property and assets. We saw this as a part of our strategy that enhance our live media production tool sets. Studer's intellectual property and technology are being migrated to fit into our overall strategy for both our on-prem and cloud-based solutions. Evertz has successfully deployed more than 550 SDVN systems across the world, including recent deployments in the larger scale facilities in the U.S. and internationally, an unrivaled accomplishment. Here are some examples where we provided some of these key solutions. EA Sports deployed an extensive entirely cloud-based BRAVO production cluster, used for example, to produce their Apex Legends Global Series competition events. Multiple sources in different formats are sent to BRAVO Studio in the cloud, where EA operational staff can fully access, shape and deliver to content delivery networks, all from the comfort of their homes. DreamCatcher BRAVO Studio provides innovative tools for live production in the cloud, enabling the EA team to embrace new workflows while still being able to reliably reach fans with engaging original content. The new UFC broadcast operations center will host all of UFC pay-per-view events, UFC Fight Nights, Contender Series events and Ultimate Fighter Series. UFC can now produce anything and everything out of their Apex operations center. Scalability was the primary reason behind their decisions to go IP but they also wanted to stay on the forefront of technology by going 1080p and having the capability to go 4K whenever the time comes. Over the last few years, the Ostankino Technical Center has been transferring its technical infrastructure to IP using Evertz' SDVN technology and equipment, resulting in a system that's used to broadcast 12 channels of news, sports and entertainment to more than 250 million viewers around the world. We are delighted that this close collaboration has allowed us to meet our customer requirements. It's very satisfying to know that our Mediator system has been so well received by a broadcaster who is internationally renowned for its very high technical standards. Disney has streamlined operations for its broadcast and entertainment networks by consolidating playout, transmission and media operations at its new technical hub dubbed Digital Center 3 in The Woodlands, Texas. DC3 centralizes playout functions with our SDVN and Mediator solutions, hence, consolidates functions, staff and complicated workflows spread across New York, L.A., North Carolina and Las Vegas, all in one spot. I'd now like to take a few minutes to discuss what our team has accomplished during the year. We have made key advancements in a number of areas. We achieved solid sales and profitability despite the obvious challenges in the world. Our key R&D efforts were further validated by award-winning customer deployments and implementation of our work-from-home solutions. We continue to lead the industry's technical transition in advanced cloud on-prem hybrid solutions for the local or remote acquisition, production and distribution of content. Evertz' AV division delivered large-scale deployments in higher education, global financial customers and in the government. Recapping the 2021 financial results, we delivered industry-leading profitability, with pretax earnings of 60% on $343 million in sales. In fact, we have achieved over 72 quarters of -- consecutive quarters of profitability. Turning to fiscal '22, we are off to a strong start with a first quarter sales of $99 million and operating earnings of over $20 million. We now enter the second quarter of fiscal '22 with significant momentum, fueled by a combined purchase order backlog totaling $191 million, up 24% from the prior year. Now moving on to talk about the drivers in our industry. There are several factors converging that are helping us to grow our market. First, live TV, content and emergence of Ultra HD with high dynamic range and enhanced audio to create an immersive experience. Live TV fueled by sports, news and variety shows is increasing viewership. Second, the TV Everywhere and direct-to-consumer phenomena is a necessity for our customers. And lastly, the demand for more content, interactive channels and services, along with higher resolutions and ability to have remote operations capability is driving the transition to IP, IT and cloud-based architectures. Delivering more with less is a necessity for our customers. Evertz has solutions to meet the drivers of our market. Over the past 5 years, we've invested over $411 million in R&D and set a pace of innovation that is unmatched in the industry. The Evertz R&D has produced new solutions in every product category. But most importantly, we are at the forefront of the IP and cloud transitions with our initiatives in software-defined video and IP network platforms, media asset management, workflow solutions and pay-as-you-go video services, advanced production technology and real-time streaming solutions for mission control applications and, of course, Evertz AV, our network-based, high-quality audio visual solutions. Evertz has earned a worldwide reputation as a solution provider for delivering IP and cloud solutions today. Our key customers recognize our commitment and leadership and their support sustains our future. Thank you for your interest in Evertz, and thank you for taking the time to join us in person today and for those online. At this point, we would be pleased to answer any of the questions you may have. Thank you.

I'll read out the question online. So there's an online question is, can you speak to how the demand environment was affected by the pandemic and how it's been evolving in recent months as things have been reopening? It's from Thanos.

Yes. So I can add to that. Yes, basically, I think when the first -- when the pandemic first kicked in, as you can imagine, production and live production and any new type of projects were basically put on to a grinding halt. And so the first 4 months, it's a little ways back now, but the first 4 months was almost like a full break supply to any projects -- new projects that are coming on and being planned. And certainly, all of live production was effectively gone to 0. So it absolutely affected us in an extremely aggressive way the first 4 to 5 months. And now I think I would say, certainly in North America, we've seen in the last 6 months, things really lighting up, pent-up demand starting to bubble up and see some projects happening in international markets, although I see that bounce coming back a little delayed to what's happened in North America, but starting to move. We have a question?

So we don't formally provide forecasts in regards to future years. I think I'll leave that to the analysts.

What we have done was that included backlog information and the first month sales in our press release as well. So it's showing that the first quarter we had was pretty reasonable at...

$97 million.

$97 million. And the backlog and sales are pretty high. We do have some orders that are longer lead with our new services type that we provide. But we look in strong shape for first quarter is done, second quarter looks pretty good. And from there on, you never know what happens with part shortages, government imposed -- I don't know what I want to call them, but whatever, government-imposed crackdowns on doing business, like getting people in and out of the country has taken us -- we're used to be able to get people from New York up here in less than an hour and into our plant. It takes them 4 to 5 hours to get here now. Got to go to Pearson, they got to stand around, wait for some idiots to -- I mean some government customs people to check them in and fly them back over here to Burlington then bring them in. And when you had a meeting, you usually set at 9:00 a.m. Even if they get up in the morning at 5:00 and on the plane by 6:00, they're not here until noon. So it -- but we're fortunate and better than, I think, our competitors by staying open. And if there is no other imposed slowdowns, we'll deal with the ones we do have and look all right for ensuing year.

There's another question on the line from Thanos again. It's a follow-up. Clearly, you've had some logistical challenges in deploying products -- projects, sorry, due to the pandemic. Can you speak to how that's been developing, i.e., are pandemic-related constriction still a significant strain? Or do you see ongoing improvement in that regards?

I answered a lot of that there. But the challenges in deployment is -- like the second half, I think, was already answered in my last one. But the first part of deployment projects, just depending on which state and which country, getting the service people on staff to help commission and put them in has taken a lot longer. Like you used to be able to send them in the next day, so now they have to go through like a bunch of questionnaires and get them in and out, probably our VP of handling that advanced technology and customer solutions probably can elaborate on some of the additional roadblocks he's had to deal with. Brian, please?

So Doug, it's a very good question. We are still constrained in terms of the travel environment. We're an essential service provider. So we're able to get people on projects in the United States, our largest market and abroad. However, it's not as easy as it was previously. As Doug mentioned, you can't just get on a plane and go. We have numerous levels of paperwork to get in and out of Canada plus whatever jurisdiction, it can be state-dependent in the country. So when we send folks abroad to assist with some of the state-of-the-art deployments for customers, we'll see people on the road for up to 3 months at a time and then returning to Canada. So the duration of the people's engagement is longer. So it's more complex to handle the logistics. And there's, of course, testing involved in certain European countries. Our folks have to have rapid antigen tests every 48 hours to stay on site. So there's definitely added complications to it, but we're continuing to help our customers deploy.

To address the situation of the travel, Brian has established setting up service teams in every country, almost like the U.S. has really been beefed up as many people as you can get. So there is less travel just within the country.

Next question from Dan. So can Evertz benefit from the rapid increase in time spent with online video games? Yes. Actually, certainly in the production side, I think I referenced EA Sports as being one of our customers. I think there's a couple of things going on. Certainly, on the -- with respect to sports, a lot of production and media gets produced behind it for a lot of these tournaments and whatnot. And so that's a sector that we're looking at for both our production technologies as well as some of our distribution stuff and streaming technologies, for example, our XPS systems. So yes, from that perspective, certainly, as the video gaming moves up a level. And then we're also looking at how we can go down market a little bit and take advantage of some lower Tier 3, Tier 4 versions of production, but I think that's a ways out, but we're certainly reviewing that. Yes.

Dan again. Is Evertz having trouble securing chips and other components?

Short answer, yes. Everyone is. You can't even get cars, you can't get anything. But I think we mitigate it better or as well as anybody can seeing as we've in the past been criticized for having too much inventory. Now we might get the last laugh saying, well, we have inventory and we have secure bonds in place, which we've been accepting even at times when we don't know if we need the parts and secure them in our inventory. So we're in, in my estimate, better shape than any of our competitors. The only thing is going forward, would we have problems compared to huge conglomerates that can buy large amounts of chips? I don't -- that's to be foreseen whether this pandemic-type shortages, self-imposed shortages on labor not alleviate. And hopefully in the spring, like we're in good shape with chips all the way through to the spring and part shortages. And I'm glad that we have extra stock. And we do -- if we are short and something doesn't come, we quickly try to get across that is available in the industry. But I know everyone's feeling the pinch on shortages.

Questions? Anymore?

Just to kill time, actually, we're labeled an essential service business by the Ontario government. So we never had to shut down at all. Evertz kept open. And as an essential service, we were supposed to be able to get our service people back and forth across the border without any quarantine restrictions, which was at the whim of the customs officials usually or when they came in. So I would say half, 2/3 of our service people did not have to quarantine, similar to truck drivers and whatever else they listed.

Okay. I think that's it. Thank you, guys.

Thank you guys for attending.

Thank you very much.

Perfect.