Q2 2026 Evertz Technologies Ltd Earnings Call

December 10, 2025

Speaker #1: Welcome to the conferencing

Operator: Welcome to the conferencing center.

Speaker #1: center. Hello.

Operator: Hello, thank you for calling. Which conference would you like to join?

Speaker #2: Thank you for calling. Which conference would you like to join? Okay. Your first name and your last name, please. How about your company name?

David Brown: I'm just trying to join Evertz Technologies Limited.

Operator: Okay. Your first name and your last name, please.

David Brown: David Brown.

Operator: How about your company name?

David Brown: Company calling from is Aiero, that's A-I-E-R-O.

David Brown: Company calling from is Aiera, that's A-I-E-R-A.

Speaker #2: Okay. Thank you.

Operator: Okay, thank you.

Brian Scott Campbell: Reflects both the strong long-term operating performance of the company and its solid balance sheet, thereby enabling a distribution of cash over and above what is considered necessary to meet known commitments and maintain adequate reserves. I'll now hand over to Doug Moore, Evertz Chief Financial Officer, to cover our results in greater detail.

Brian Campbell: Reflects both the strong long-term operating performance of the company and its solid balance sheet, thereby enabling a distribution of cash over and above what is considered necessary to meet known commitments and maintain adequate reserves. I'll now hand over to Doug Moore, Evertz Chief Financial Officer, to cover our results in greater detail.

Speaker #3: Operating performance of the company reflects both its strong long-term outlook and solid balance sheet, thereby enabling a distribution of cash over and above what is considered necessary to meet known commitments and maintain adequate reserves.

Speaker #3: I'll now hand over to Doug Moore, Ebert's Chief Financial Officer, to cover our results in greater

Speaker #3: detail. Thank you,

Douglas Moore: Thank you, Brian. Looking at revenues, so revenue was CAD 132.7 million in the second quarter of fiscal 2026, a 6% increase compared to CAD 125.3 million in the second quarter of fiscal 2025. For the six months ending 31 October 2025, revenues were CAD 244.9 million, up CAD 8 million or 3% from the six months compared to the six months ending 31 October 2024. Quarterly hardware revenue increased slightly year over year from CAD 70.5 million to CAD 72 million, a 2% increase, while software and services revenue also increased from CAD 54.8 million to CAD 60.7 million, or 11%. Revenue from software and services represented approximately 46% of total revenue in the quarter. Year to date, hardware revenues up 5% to CAD 132.5 million for the six months period ending 31 October, while revenues from software and services were up slightly to CAD 112.4 million from CAD 110.7 million.

Doug Moore: Thank you, Brian. Looking at revenues, so revenue was CAD 132.7 million in the second quarter of fiscal 2026, a 6% increase compared to CAD 125.3 million in the second quarter of fiscal 2025. For the six months ending 31 October 2025, revenues were CAD 244.9 million, up CAD 8 million or 3% from the six months compared to the six months ending 31 October 2024.

Speaker #4: Brian. Revenues for the second quarter of fiscal 2026 were $132.7 million, a 6% increase compared to $125.3 million in the second quarter of fiscal 2025.

Speaker #4: For the sixth month ending October 31, 2025, revenues were $244.9 million, up $8 million or 3% from the six months compared to the six months ending October 31, 2024.

Quarterly hardware revenue increased slightly year over year from CAD 70.5 million to CAD 72 million, a 2% increase, while software and services revenue also increased from CAD 54.8 million to CAD 60.7 million, or 11%. Revenue from software and services represented approximately 46% of total revenue in the quarter. Year to date, hardware revenues up 5% to CAD 132.5 million for the six months period ending 31 October, while revenues from software and services were up slightly to CAD 112.4 million from CAD 110.7 million.

Speaker #4: Quarterly hardware revenue increased slightly year over year from $70.5 million to $72 million. The 2% increase, while software and services revenue also increased from $54.8 million to $60.7 million or 11%.

Speaker #4: Revenue from software and services represented approximately 46% of total revenue in the quarter. Year to date, $132.5 million for the six-month period ending October 31st, with hardware revenues up 5%.

Speaker #4: While revenues from software and to $112.4 million from million. Looking at regional $110.7 revenues, quarterly revenues in the new US-Canadian region were $98.5 million, compared to $94.8 million in the prior year.

Douglas Moore: Looking at regional revenues, quarterly revenues in the US-Canadian region were CAD 98.5 million compared to CAD 94.8 million in the prior year, while quarterly revenues in the international region were CAD 34.2 million compared to CAD 30.4 million in the prior year. The international segment represented 26% of total sales in the quarter compared to 24% the same period last year. For the six months ended 31 October, international revenue was CAD 66.9 million compared to CAD 68.1 million the same period last year, a decline of 2%. For the six months period ending, international sales represented 27% of total sales compared to 29% in the same period last year. Gross margins for the quarter were 58.6% compared to 59.3% in the prior year.

Looking at regional revenues, quarterly revenues in the US-Canadian region were CAD 98.5 million compared to CAD 94.8 million in the prior year, while quarterly revenues in the international region were CAD 34.2 million compared to CAD 30.4 million in the prior year. The international segment represented 26% of total sales in the quarter compared to 24% the same period last year.

Speaker #4: While quarterly revenues in the international region were $34.2 million compared to $30.4 million in the prior year, the international segment represented 26% of the total sales in the quarter.

Speaker #4: Compared to 24% for the same period last year, for the six months ended October 31st, international revenue was $66.9 million, compared to $68.1 million for the same period last year, a decline of 2%.

For the six months ended 31 October, international revenue was CAD 66.9 million compared to CAD 68.1 million the same period last year, a decline of 2%. For the six months period ending, international sales represented 27% of total sales compared to 29% in the same period last year. Gross margins for the quarter were 58.6% compared to 59.3% in the prior year.

Speaker #4: And then for the six-month period ending, international sales represented 27% of total sales, compared to 29% in the same period last year. Gross margins for the quarter were 58.6%, compared to 59.3% in the prior year.

Speaker #4: The gross margin is down sequentially from the past two quarters. Driven by varied product mix delivered in the quarter, but overall was within our 56 to 60% target range.

Douglas Moore: The gross margin is down sequentially from the past two quarters, driven by varied product mix delivered in the quarter, but overall was within our 56% to 60% target range. For the six months ending 31 October, the gross margin was 59.9% at the very high end of that same target range. Turning to selling and administrative expenses, S&A was CAD 19.1 million in the second quarter, an increase of CAD 0.7 million or 4% from the same period last year. Selling and admin expenses as a percentage of revenue were approximately 14.4% compared to 14.7% for the same period last year. Sequentially, S&A is up approximately CAD 0.5 million from Q1. That includes a CAD 0.8 million increase in trade shows and travel costs quarter over quarter, the largest driver of which was our attendance at the IBC show.

The gross margin is down sequentially from the past two quarters, driven by varied product mix delivered in the quarter, but overall was within our 56% to 60% target range. For the six months ending 31 October, the gross margin was 59.9% at the very high end of that same target range. Turning to selling and administrative expenses, S&A was CAD 19.1 million in the second quarter, an increase of CAD 0.7 million or 4% from the same period last year. Selling and admin expenses as a percentage of revenue were approximately 14.4% compared to 14.7% for the same period last year.

Speaker #4: For the six months ended October 31st, the gross margin was 59.9%, at the very high end of that same target range. Turning to selling and administrative expenses, S&A was $19.1 million in the second quarter, an increase of $0.7 million or 4% from the same period last year.

Speaker #4: Administrative expenses as a percentage of selling and revenue were approximately 14.4%, compared to 14.7% for the same period last year. Sequentially, S&A is up approximately $0.5 million from Q1.

Sequentially, S&A is up approximately CAD 0.5 million from Q1. That includes a CAD 0.8 million increase in trade shows and travel costs quarter over quarter, the largest driver of which was our attendance at the IBC show. For the six months ending 31 October, S&A expenses were CAD 37.7 million or 15.4% of sales compared to CAD 36 million or 15.2% of sales for the same period last year. Research and development expenses were CAD 36.6 million for the second quarter, which represents a CAD 0.3 million increase from the same period last year.

Speaker #4: That includes an $0.8 million increase in trade shows and travel costs quarter over quarter, the larger driver of which was our attendance at the IBC show.

Speaker #4: For the six months ending October 31, S&A expenses were $37.7 million, or 15.4% of sales, compared to $36 million, or 15.2% of sales, for the same period last year.

Douglas Moore: For the six months ending 31 October, S&A expenses were CAD 37.7 million or 15.4% of sales compared to CAD 36 million or 15.2% of sales for the same period last year. Research and development expenses were CAD 36.6 million for the second quarter, which represents a CAD 0.3 million increase from the same period last year. As a percentage of revenue, R&D expenses were 27.6% compared to 29% in the prior year. Sequentially, R&D expenses were declined CAD 0.4 million from the first quarter, 31 July. The decline was primarily due to lower salary and benefit costs, including the impact of less co-ops that we have in Q1 during the summer. For the six months ending 31 October, R&D expenses were CAD 73.6 million compared to 73.7 million for the same period last year. Investment tax credits for the quarter were CAD 4.4 million compared to credits of 3.6 million the prior year second quarter.

Speaker #4: Research and development expenses were $36.6 million for the second quarter, which represents a $0.3 million increase from the same period last year. As a percentage of revenue, R&D expenses were 27.6%, compared to 29% in the prior year.

As a percentage of revenue, R&D expenses were 27.6% compared to 29% in the prior year. Sequentially, R&D expenses were declined CAD 0.4 million from the first quarter, 31 July. The decline was primarily due to lower salary and benefit costs, including the impact of less co-ops that we have in Q1 during the summer. For the six months ending 31 October, R&D expenses were CAD 73.6 million compared to 73.7 million for the same period last year. Investment tax credits for the quarter were CAD 4.4 million compared to credits of 3.6 million the prior year second quarter.

Speaker #4: Sequentially, R&D expenses declined by $0.4 million from the first quarter, July 31st. The decline was primarily due to lower salary and benefit costs, including the impact of fewer co-ops than we had in Q1 during the summer.

Speaker #4: For the six months ending October 31st, R&D expenses were $73.6 million, compared to $73.7 million for the same period last year. Investment tax credits for the quarter were $4.4 million, compared to credits of $3.6 million in the prior year’s second quarter.

Speaker #4: And then FX for the second quarter resulted in a gain of $0.8 million. It's pretty consistent with a foreign exchange gain of $0.8 million in the second quarter last year.

Douglas Moore: FX for the second quarter resulted in a gain of CAD 0.8 million. It's pretty consistent with a foreign exchange gain of CAD 0.8 million the second quarter last year. While for the six months ending 31 October 2025, foreign exchange resulted in a gain of CAD 1.5 million compared to a gain of CAD 0.8 million the same period last year. That foreign exchange gain was predominantly driven by a weaker Canadian dollar compared to the US dollar, which closed at approximately 1.4 as at 31 October 2025. Now, looking at the liquidity of the company, cash as at 31 October 2025 was CAD 96.7 million. That's a decline of cash compared to cash of CAD 111.7 million as at 30 April 2025. Working capital was CAD 205.7 million as at 31 October 2025, compared to CAD 206.9 million at the end of 30 April 2025.

FX for the second quarter resulted in a gain of CAD 0.8 million. It's pretty consistent with a foreign exchange gain of CAD 0.8 million the second quarter last year. While for the six months ending 31 October 2025, foreign exchange resulted in a gain of CAD 1.5 million compared to a gain of CAD 0.8 million the same period last year. That foreign exchange gain was predominantly driven by a weaker Canadian dollar compared to the US dollar, which closed at approximately 1.4 as at 31 October 2025.

Speaker #4: For the six months ending October 31st, foreign exchange resulted in a gain of $1.5 million, compared to a gain of $0.8 million for the same period last year.

Speaker #4: And that foreign exchange gain was predominantly driven by a weaker Canadian dollar compared to the US dollar, which closed at approximately 1.40 as of October 31, 2025.

Now, looking at the liquidity of the company, cash as at 31 October 2025 was CAD 96.7 million. That's a decline of cash compared to cash of CAD 111.7 million as at 30 April 2025. Working capital was CAD 205.7 million as at 31 October 2025, compared to CAD 206.9 million at the end of 30 April 2025. Now, looking at cash flows for the quarter, the company used cash from operations of CAD 5.4 million, which is net of a CAD 26.3 million change in non-cash working capital and current taxes.

Speaker #4: looking at the liquidity of the Now company, cash as at October 31st, 2025, was $96.7 million. That's a decline of cash compared to cash of $111.7 million as at April 30th.

Speaker #4: The working capital was $205.7 million as of October 31, 2025, compared to $206.9 million at the end of April 30, 2025. Now, looking at cash flows for the quarter, the company used cash from operations of $5.4 million, which is net of a $26.3 million change in non-cash working capital and current taxes.

Douglas Moore: Now, looking at cash flows for the quarter, the company used cash from operations of CAD 5.4 million, which is net of a CAD 26.3 million change in non-cash working capital and current taxes. If the effects of the change in non-cash working capital and current taxes are excluded from the calculation, the company would have generated CAD 25.2 million in cash from operations during the quarter. The biggest use of cash and working capital during the quarter relates to a CAD 19.9 million decrease in payables that was driven by the disbursement of bonuses in the quarter and the net release of CAD 8.1 million in deferred revenue in the quarter. The company used cash of CAD 6.4 million for investing activities, which was principally driven by the acquisition of capital assets. Those acquisitions of capital assets included the acquisition of land and building that we were renting outside of Pittsburgh, Pennsylvania.

If the effects of the change in non-cash working capital and current taxes are excluded from the calculation, the company would have generated CAD 25.2 million in cash from operations during the quarter. The biggest use of cash and working capital during the quarter relates to a CAD 19.9 million decrease in payables that was driven by the disbursement of bonuses in the quarter and the net release of CAD 8.1 million in deferred revenue in the quarter. The company used cash of CAD 6.4 million for investing activities, which was principally driven by the acquisition of capital assets.

Speaker #4: If the effects of the change in non-cash working capital and current taxes are excluded from the calculation, the company would have generated $25.2 million in cash from operations during the in working capital during the quarter.

Speaker #4: $19.9 million decrease in payables that was driven by the disbursement of bonuses in the quarter, and the net release of $8.1 million of deferred revenue in the biggest use of cash quarter.

Speaker #4: The company used cash of $6.4 million from investing activities, which was principally driven by the acquisition of capital assets. Those acquisitions included the purchase of land and a building that we were renting outside of Pittsburgh, Pennsylvania.

Those acquisitions of capital assets included the acquisition of land and building that we were renting outside of Pittsburgh, Pennsylvania. That's the facility where we're increasing our manufacturing capabilities. The company used cash in financing activities of CAD 17 million, which was principally driven by dividends paid of CAD 15.1 million and lease payments of CAD 1.1 million. Subsequent to the past quarter end, so just recently, we also renewed our NCIB, which will have an effective date of 11 December 2025.

Speaker #4: That's the facility where we're increasing our manufacturing capabilities. The company used cash in financing activities of $17 million, which was principally driven by dividends paid of $15.1 million and lease payments of $1.1 million.

Douglas Moore: That's the facility where we're increasing our manufacturing capabilities. The company used cash in financing activities of CAD 17 million, which was principally driven by dividends paid of CAD 15.1 million and lease payments of CAD 1.1 million. Subsequent to the past quarter end, so just recently, we also renewed our NCIB, which will have an effective date of 11 December 2025. Finally, looking at our share capital position as at 31 October 2025, shares outstanding were approximately 75.5 million, and options and share-based RSUs outstanding were approximately two million. Weighted average shares outstanding were 75.5 million, and weighted average fully diluted shares was 76.6 million as at 31 October 2025. That concludes the review of our financial results and position for the second quarter.

Speaker #4: Subsequent to the past quarter end, so just recently, we also renewed our NCIB which will have an effective date of December 11th. capital position as at October 31st, Finally, looking at our share 2025, shares outstanding were approximately $75.5 million, and options and share-based RSUs outstanding were approximately $2 million.

Finally, looking at our share capital position as at 31 October 2025, shares outstanding were approximately 75.5 million, and options and share-based RSUs outstanding were approximately two million. Weighted average shares outstanding were 75.5 million, and weighted average fully diluted shares was 76.6 million as at 31 October 2025. That concludes the review of our financial results and position for the second quarter.

Speaker #4: Weighted average shares outstanding were $75.5 million, and weighted average fully diluted shares were $76.6 million as at October 31st. That concludes the review of our financial results and position for the second quarter.

Douglas Moore: 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 and the official reports filed with the Canadian Securities Commission. Brian, thank you.

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 and the official reports filed with the Canadian Securities Commission. Brian, thank you.

Speaker #4: I would like to remind you that some of the statements presented today are forward-looking and are subject to a number of risks and uncertainties. We refer you to the risk factors described in the annual information form and the official reports filed with the Canadian Securities Commission.

Speaker #4: Ryan?

Speaker #2: Thank you, Doug. We're now ready to open the call to questions.

Brian Scott Campbell: Thank you, Doug. We're now ready to open the call to questions.

Brian Campbell: Thank you, Doug. We're now ready to open the call to questions.

Speaker #3: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star, followed by the one on your telephone keypad.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your telephone keypad. You will hear a prompt that your hand has been raised, and should you wish to cancel your request, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Thank you. Your first question comes from the line of Thanos Moschopoulos from BMO Capital Markets. Please go ahead.

Speaker #3: You will hear a prompt that your hand has been raised, and should you wish to cancel your request, please press star, followed by the two.

Speaker #3: If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Thank you. And your first question comes from the line of Dennis Michopoulos from BMO Capital Markets.

Speaker #3: Please go ahead.

Speaker #4: Hi, good afternoon. On the gross margin, clearly it was within your targeted range, but a little later than the last two quarters. Is that just typical volatility or product mix, or is there anything else to call out, like maybe some impact from the initial ramp of your US facilities or something like that?

Thanos Moschopoulos: Hi, good afternoon. On the gross margin, clearly it was within your targeted range, but a little later than the last two quarters. Is that just typical volatility, your product mix, or is there anything else to call out, like maybe some impact from the initial ramp of your US facilities or something like that? Thanks.

Speaker #4: Thanks.

Speaker #5: No, it's really a

Douglas Moore: No, it really is a product mix. There's not really a specific item to call out that materially impact the margin. I think that's part of the reason we have that volatility. We expect that volatility. That's part of the reasons why we're hesitant to change our target range from that 56% to 60%. And we're still at the strong end of that, but yeah, it's really just the volatility driven by product mix that we happen to deliver in the quarter.

Doug Moore: No, it really is a product mix. There's not really a specific item to call out that materially impact the margin. I think that's part of the reason we have that volatility. We expect that volatility. That's part of the reasons why we're hesitant to change our target range from that 56% to 60%. We're still at the strong end of that, but yeah, it's really just the volatility driven by product mix that we happen to deliver in the quarter.

Speaker #5: Product mix. There's not really a specific item to call out that materially impacted the margin. I think that's part of the reason we had that volatility.

Speaker #5: We expect that volatility. That's part of the reasons why we're hesitant to change our target range from that 56 to 60 percent. And we're still at the strong end of that, but yeah, it's really just the volatility driven by product mix that we happen to deliver in the

Speaker #5: quarter. R&D spend has

Thanos Moschopoulos: R&D spend has been relatively stable in recent quarters, which I mean, from my perspective, is a healthy dynamic. Is that reflective of maybe just greater OpEx discipline on your part? Is it reflective maybe of just how you feel about the strength of your competitive position and thus not needing to ramp up that investment relative to where you sit competitively, or what's the dynamic there?

Speaker #4: been relatively stable in recent quarters. Which I mean from my perspective, is a healthy dynamic. Is that reflective of maybe just greater OPEX discipline on your part?

Speaker #4: Just how do you feel about the strength of your competitive position? Is it reflective, maybe, of your position? And thus, not needing to ramp up that investment relative to where you sit competitively or what the dynamic is?

Speaker #4: there? No, I think there was a significant

Douglas Moore: No, I think there was a significant ramp-up a couple of years ago that were partially due to inflationary factors with, quite frankly, hiring and retaining engineers. Some of that broader inflationary drivers have subsided to some levels anyway. But no, R&D is still a major commitment of Evertz too as an investment. So it's really the inflationary factors on salaries kind of going back to more historical norms as opposed to we dealt with a couple of years ago.

Doug Moore: No, I think there was a significant ramp-up a couple of years ago that were partially due to inflationary factors with, quite frankly, hiring and retaining engineers. Some of that broader inflationary drivers have subsided to some levels anyway, but no, R&D is still a major commitment of Evertz too as an investment. It's really the inflationary factors on salaries kind of going back to more historical norms as opposed to we dealt with a couple of years ago.

Speaker #5: There was a ramp-up a couple of years ago that was partially due to inflationary factors, particularly with hiring and retaining engineers. Some of those broader inflationary drivers have subsided.

Speaker #5: To some levels anyway. But no, R&D is still a major commitment of Evert's due as an investment. So it's really the salaries the inflationary factors on salaries kind of going back to more historical norms as opposed to we dealt with a couple of years

Speaker #5: ago.

Speaker #4: Great. And then,

Thanos Moschopoulos: Great. And then, Brian, just in terms of the overall environments, what you're hearing from your customers coming out of IPC, is it sort of status quo, or is there anything else, any changes that you'd highlight in recent weeks or months regarding customer priorities or propensity to spend?

Thanos Moschopoulos: Great. Then, Brian, just in terms of the overall environments, what you're hearing from your customers coming out of IPC, is it sort of status quo, or is there anything else, any changes that you'd highlight in recent weeks or months regarding customer priorities or propensity to spend?

Speaker #4: Brian, just in terms of the overall environments, what you're hearing from your customers coming out of IPC, is it sort of status quo, or is there anything else, any changes that you'd highlight in recent weeks or months regarding customer priorities or propensity to spend?

Speaker #5: Well, we continue to have a very robust backlog, and you can see from the month shipments in November, along with a very strong quarter, we’re firing on most of the cylinders.

Brian Scott Campbell: Well, we continue to have a very robust backlog, and you can see from the month shipments in November, along with a very strong quarter, we're firing on most of the cylinders. So you had increases in the North American and international regions in sales. So we have been seeing continued adoption of Evertz products from our customers. They have projects that they want to execute on, and we have the products to be able to help them with those needs.

Brian Campbell: Well, we continue to have a very robust backlog, and you can see from the month shipments in November, along with a very strong quarter, we're firing on most of the cylinders. you had increases in the North American and international regions in sales. We have been seeing continued adoption of Evertz products from our customers. They have projects that they want to execute on, and we have the products to be able to help them with those needs.

Speaker #5: So, we had increases in the North American and international regions in sales. We have been seeing continued adoption of Evertz products from our customers.

Speaker #5: They're they have projects that products to be able to help them with they want to execute on, and we have the those needs.

Speaker #4: Great. I'll leave it there. Thanks.

Thanos Moschopoulos: Great. I'll leave it there. Thanks.

Speaker #3: Thank you. And your next question comes from the line of Robert Yang from Caneco Genuity. Please go

Operator: Thank you. And your next question comes from the line of Robert Young from Canaccord Genuity. Please go ahead.

Operator: Thank you. Your next question comes from the line of Robert Young from Canaccord Genuity. Please go ahead.

Speaker #3: ahead. Hi.

Robert Young: Hi. Good evening. Maybe just a little more around the decision to issue the special dividend. I mean, you've renewed the buyback. You've increased the quarterly dividend, and you're issuing a special dividend. So I was wondering if you could give us some sense of the decision-making behind that and the timing. And maybe if you could take it one step further just to give us a sense of where you see the balance sheet in the near term after that and what it means for your confidence in the near term.

Robert Young: Hi. Good evening. Maybe just a little more around the decision to issue the special dividend. You've renewed the buyback. You've increased the quarterly dividend, and you're issuing a special dividend. I was wondering if you could give us some sense of the decision-making behind that and the timing. Maybe if you could take it one step further just to give us a sense of where you see the balance sheet in the near term after that and what it means for your confidence in the near term.

Speaker #6: Good evening. Maybe just a little more around the decision to issue the special dividend. the buyback. You've increased I mean, you've renewed the quarterly dividend and you're issuing a special dividend.

Speaker #6: So I was wondering if you could give us some sense of the decision-making behind that and the timing. And maybe if you could take it one step further, just to give us a sense of where you see the balance sheet in the near term after that and what it means for your confidence in the near term.

Speaker #5: So So the board does make the decision regarding the dividends and the special dividends. The timing is consistent with prior special dividends that we've had.

Brian Scott Campbell: The board does make the decision regarding the dividends and the special dividends. The timing is consistent with prior special dividends that we've had. The balance sheet still remains pristine in a cash position and no debt. We are confident, as you can tell, with the business prospects we've got going forward. We're continuing to invest very heavily in R&D and have a very robust product portfolio. We're in very good shape as an organization. With respect to M&A activities going forward, we still have full flexibility.

Brian Campbell: The board does make the decision regarding the dividends and the special dividends. The timing is consistent with prior special dividends that we've had. The balance sheet still remains pristine in a cash position and no debt. We are confident, as you can tell, with the business prospects we've got going forward. We're continuing to invest very heavily in R&D and have a very robust product portfolio. We're in very good shape as an organization. With respect to M&A activities going forward, we still have full flexibility.

Speaker #5: The balance sheet still remains pristine. Within a cash position and no debt, and we are confident, as you can tell, with the business prospects, we've got going forward.

Speaker #5: We're continuing to invest very heavily in R&D and have a very robust product portfolio. So we're in very good shape as an organization, and with respect to M&A activities, going forward, we still have full

Speaker #5: flexibility. Okay.

Robert Young: Okay. And then just take one of Stanis's questions a little further. The gross margin, it is notable that the recurring software is up quarter over quarter, but the gross margins are down. And although it is at the higher end of the range, it is at the low end of where we've seen it over the last several quarters. And so I'm just trying to understand the dynamic there. Is that the international revenue ticking higher? I'm just trying to understand what is it that's driving that because it doesn't make sense to me.

Robert Young: Okay. Then just take one of Stanis's questions a little further. The gross margin, it is notable that the recurring software is up quarter over quarter, but the gross margins are down. Although it is at the higher end of the range, it is at the low end of where we've seen it over the last several quarters. I'm just trying to understand the dynamic there. Is that the international revenue ticking higher? I'm just trying to understand what is it that's driving that because it doesn't make sense to me.

Speaker #4: And then just take one of Thanos' questions a little further, the gross margin. Is this notable that the recurring software is up a quarter over quarter?

Speaker #4: But the gross margins are down, and although it is at the higher end of the range, it is at the low end of where we've seen it over the last several quarters.

Speaker #4: And so, I'm just trying to understand the dynamic there. Is that the international revenue taking higher? I'm just trying to understand what is it that's driving that?

Speaker #4: Because it doesn't make sense to me.

Speaker #5: Well, I mean, I think there's inherently always going to be volatility. So, international revenue, you're correct, generally has a little bit lower of a margin.

Douglas Moore: Well, I mean, I think there's inherently always going to be volatility. So international revenue, you're correct, generally has a little bit lower of a margin. But it really is not as simple as saying US region sales are up, therefore margins up, or software and service is up, therefore it's up. It really is driven by a general product mix. And we've had volatility in the past through, although we've been slightly above that target range, I think there's not really one item to point to.

Doug Moore: Well, I mean, I think there's inherently always going to be volatility, so international revenue, you're correct, generally has a little bit lower of a margin. It really is not as simple as saying US region sales are up, therefore margins up, or software and service is up, therefore it's up. It really is driven by a general product mix. We've had volatility in the past through, although we've been slightly above that target range, I think there's not really one item to point to. Another point to make is in the quarter, we did have some pretty significant customer concentration. Often very significant customers may get higher discounting.

Speaker #5: But it really is. It's not as simple as saying US region sales are up; therefore, margins are up. Or software and services are up; therefore, it’s up.

Speaker #5: It really is driven by a general product mix. And we've had volatility in the past. Although we've been slightly above that target range, I think there's not really one item to point to.

Speaker #4: Okay.

Robert Young: Okay.

Douglas Moore: I guess another point to make is in the quarter, we did have some pretty significant customer concentration. Often very significant customers may get higher discounting.

Speaker #5: make is in the quarter, we did I mean, I guess another point to have some pretty significant customer concentration. So often very significant customers may get higher discounting.

Speaker #4: Okay. And then we're just around the corner from the renegotiation of Kuzma, and I know that you guys as a management team have been trying to prepare operations in the U.S. ahead of that.

Robert Young: Okay. Then we're just around the corner from the renegotiation of CUSMA. I know that you guys as a management team have been trying to prepare operations in the US ahead of that. Could you maybe give us a summary of where you are on that and how comfortable you are if CUSMA ends without a replacement deal?

Speaker #4: Could you maybe give us a summary of where you are on that and how comfortable you are if Kuzma ends without a

Speaker #4: replacement deal? Yeah.

Speaker #5: I mean, so currently from a as of today, perspective, so again, the vast majority of what we're selling is USMCA compliant, and therefore not being impacted by the tariffs when we sell through to the United States.

Douglas Moore: Yeah. I mean, so currently, from an as of today perspective, so again, the vast majority of what we're selling is USMCA compliant and therefore not being impacted by the tariffs when we sell through to the United States. We do continue to build up manufacturing capabilities outside Pittsburgh, Pennsylvania. That's the acquisition of the building and land there is to exert a bit more control as we build out that facility. It is a work in progress, but we continue to progress.

Doug Moore: Yeah. Currently, from an as of today perspective, so again, the vast majority of what we're selling is USMCA compliant and therefore not being impacted by the tariffs when we sell through to the United States. We do continue to build up manufacturing capabilities outside Pittsburgh, Pennsylvania. That's the acquisition of the building and land there is to exert a bit more control as we build out that facility. It is a work in progress, but we continue to progress.

Speaker #5: We continue to build up manufacturing capabilities outside Pittsburgh, Pennsylvania. That's the acquisition of the building and land there to exert a bit more control as we build out that facility.

Speaker #5: It is a work in progress, but we continue to.

Speaker #5: It is a work in progress, but we continue to progress. Yeah.

Robert Young: If tariffs suddenly apply to your product, if a renegotiation isn't successful, what does that look like for Evertz, I guess? Just at a high level, if you can just give us a sense of what your planning looks like to deal with something like that.

Speaker #4: If tariffs suddenly apply to your product, and if a renegotiation isn't successful, what does that look like for Evertz? I guess, at a high level, if you could just give us a sense of what your planning looks like to deal with something like that.

Speaker #5: There would be certain products that we would increase manufacturing out of that facility. We would not be able to push every single product there at this point in time.

Douglas Moore: There would be certain products that we would increase manufacturing out of that facility. We would not be able to push every single product there at this point in time, but certainly we would shift some builds there as opposed to here. There, as in being United States as opposed to Canada. But we continue to build on the amount of products we can build there.

Doug Moore: There would be certain products that we would increase manufacturing out of that facility. We would not be able to push every single product there at this point in time, but certainly we would shift some builds there as opposed to here. There, as in being United States as opposed to Canada but we continue to build on the amount of products we can build there.

Speaker #5: But certainly, we would shift some builds there, as opposed to here. "There" meaning the United States, as opposed to Canada. But we continue to build on the amount of products we can build.

Speaker #5: there. Okay.

Robert Young: Okay. Would you believe that the gross margin target range would still be something you could maintain?

Speaker #4: Would you believe that the gross margin target range would still be something you could maintain?

Speaker #5: Yeah. Yes.

Douglas Moore: Yes.

Doug Moore: Yes.

Speaker #4: Okay. And then, last question for me: just on the proportion of the backlog that you expect to convert in the next 12 months. That'd be helpful.

Robert Young: Okay. And then last question for me, just on the proportion of the backlog that you expect to convert in the next 12 months. That'd be helpful. I'll pass the line.

Robert Young: Okay. Then last question for me, just on the proportion of the backlog that you expect to convert in the next 12 months. That'd be helpful. I'll pass the line.

Speaker #4: I'll pass the line.

Speaker #5: So I guess it'd be about 40% that is more than 12 months out. So that's 60% in the next 12 months.

Speaker #5: So, I guess about 40% is more than 12 months out, which means that 60% is in the next 12 months.

Douglas Moore: So I guess it'd be about 40% is more than 12 months out. So that's 60% in the next 12 months.

Doug Moore: It'd be about 40% is more than 12 months out so that's 60% in the next 12 months.

Robert Young: Okay.

Speaker #3: Thank you. Once again, should you have any questions, please press star followed by the one on your telephone keypad. Your next question comes from the line of Paul Traver from RBC Capital Markets.

Operator: Thank you. Once again, should you have a question, please press star, followed by the one, on your telephone keypad. Your next question comes from the line of Paul Treiber from RBC Capital Markets. Please go ahead.

Speaker #3: Please go ahead.

Speaker #4: Oh, good afternoon. Thanks for taking the question. Just a question on the recurring software revenue in the quarter. It was quite strong. You mentioned a number of different product areas that you did see strengthen, but specifically, could you speak to whether there were any outliers that drove the momentum in the quarter?

Thanos Moschopoulos: Oh, good afternoon. Thanks for taking the question. Just a question on the recurring software revenue in the quarter. It was quite strong. You mentioned a number of different product areas that you did see strengthen, but specifically, could you speak to, was there any outliers that drove the momentum in the quarter? And then, do you see, looking forward, do you see it sustained, or should we expect it to be sustained in the CAD 60 million-plus range going forward?

Paul Treiber: Oh, good afternoon. Thanks for taking the question. Just a question on the recurring software revenue in the quarter. It was quite strong. You mentioned a number of different product areas that you did see strengthen, but specifically, could you speak to, was there any outliers that drove the momentum in the quarter? Then, do you see, looking forward, do you see it sustained, or should we expect it to be sustained in the CAD 60 million-plus range going forward?

Speaker #4: And then, looking forward, do you see it sustained, or should we expect it to be sustained in the $60 million-plus range going forward?

Speaker #5: So, there is some lumpiness to it because it's recurring software and other software and services as well. There are times when you could have software-based projects that have acceptance met.

Douglas Moore: There is some lumpiness to it because it's recurring software and other software and services as well. There are times when you could have software-based projects that have acceptance met, so where you would have a bit of a spike, I guess you'd say. If you look at the past eight quarters, there's a general range that kind of has been falling through, but there's definitely some peaks, I'd say, within that quarter to quarter.

Doug Moore: There is some lumpiness to it because it's recurring software and other software and services as well. There are times when you could have software-based projects that have acceptance met, so where you would have a bit of a spike, I guess you'd say. If you look at the past eight quarters, there's a general range that kind of has been falling through, but there's definitely some peaks, I'd say, within that quarter to quarter.

Speaker #5: So, where you would have a bit of a spike, I guess you’d say. If you look at the past eight quarters, there’s a general range.

Speaker #5: It kind of has been falling through. But there's definitely some peaks, I'd say, within that quarter to quarter.

Speaker #4: Yeah. So, looking at it over the trailing 12 months, if you do that on a rolling basis, we're at $224 million of recurring software services, and software, and it's now that's 44% of it on a trailing 12-month basis.

Brian Scott Campbell: Yeah. So looking at it over the trailing 12 months, if you do that on a rolling basis, we're at CAD 224 million of recurring software services and software, and that's 44% of a trailing 12-month basis. So we're in and around that 40% to 44% range, and we do suggest that you look at it on a trailing 12-month basis.

Brian Campbell: Yeah. Looking at it over the trailing 12 months, if you do that on a rolling basis, we're at CAD 224 million of recurring software services and software, and that's 44% of a trailing 12-month basis. We're in and around that 40% to 44% range, and we do suggest that you look at it on a trailing 12-month basis.

Speaker #4: So we're in and around that 40% to 44% range. We do suggest that you look at it on a trailing 12-month basis.

Speaker #4: Okay. That's helpful. Secondly, can you remind us or outline the company's traction in the defense market? Specifically, I'm referring to the Canadian federal government, which announced a number of initiatives to boost defense spending and make other investments.

Robert Young: Okay. That's helpful. Secondly, just can you remind us or outline the company's traction in the defense market? Specifically, where I'm going is the Canadian federal government announced a number of initiatives to boost defense spending and make other investments. Do you see opportunities for Evertz within the Canadian Department of Defense?

Paul Treiber: Okay. That's helpful. Secondly, just can you remind us or outline the company's traction in the defense market? Specifically, where I'm going is the Canadian federal government announced a number of initiatives to boost defense spending and make other investments. Do you see opportunities for Evertz within the Canadian Department of Defense?

Speaker #4: Do you see opportunities for Evertz within the Canadian Department of Defence?

Speaker #5: Yes, we do, and we're actively pursuing them. We have historically had good success with the U.S. and at times NATO partners. So that's not business that we've had over the past years.

Douglas Moore: Yes, we do. We're actively pursuing them. We have historically had good success with US and, at times, NATO partners. That's business that we've had over the past years. We do have key elements of our technologies that are Common Criteria certified and NIAP listed, allowing us to sell those products into government facilities. That is definitely a key focus of ours. We have been spending an increasing amount of time with the Canadian government as they've increased the spending initiative and dialogue with specifically Canadian content. We fit front and square as a dual-use innovation leader and are exactly the type of company that the Canadian government and defense should support.

Doug Moore: Yes, we do. We're actively pursuing them. We have historically had good success with US and, at times, NATO partners. That's business that we've had over the past years. We do have key elements of our technologies that are Common Criteria certified and NIAP listed, allowing us to sell those products into government facilities. That is definitely a key focus of ours. We have been spending an increasing amount of time with the Canadian government as they've increased the spending initiative and dialogue with specifically Canadian content. We fit front and square as a dual-use innovation leader and are exactly the type of company that the Canadian government and defense should support.

Speaker #5: And we do have key elements of our technologies that are Common Criteria certified and NIAP listed, allowing us to sell those products into government facilities.

Speaker #5: So that is definitely a key focus of ours. We have been spending an increasing amount of time with the Canadian government as they've increased the spending initiative and dialogue.

Speaker #5: We fall front and square as a dual-use innovation leader and are exactly the type of company that the Canadian government and defense should.

Speaker #4: Great. Thanks for taking the

Robert Young: Great. Thanks for taking the questions.

Paul Treiber: Great. Thanks for taking the questions.

Douglas Moore: Thank you.

Doug Moore: Thank you.

Speaker #3: Thank

Speaker #3: There are no further questions at this time. I will now hand the call back to Mr. Campbell for any closing remarks.

Operator: Thank you. There are no further questions at this time. I will now hand the call back to Mr. Campbell for any closing remarks.

Speaker #3: remarks. Thank you,

Brian Scott Campbell: Thank you, Ina.

Brian Campbell: Thank you, Ina. I'd like to thank the participants for their questions and to add that we are pleased with the company's performance during Q2 of fiscal 2026, which saw sales of CAD 132.7 million, including CAD 60.7 million in software and services revenue. Solid gross margins of 58.6% in the quarter, which together with Evertz's disciplined expense management yielded quarterly earnings per share of CAD 0.24.

Speaker #5: Ina, I'd like to thank the participants for their questions and add that we are pleased with the company's performance during Q2 of fiscal 2026, which saw sales of $132.7 million, including $60.7 million in software and services revenue.

Douglas Moore: I'd like to thank the participants for their questions and to add that we are pleased with the company's performance during Q2 of fiscal 2026, which saw sales of CAD 132.7 million, including CAD 60.7 million in software and services revenue. Solid gross margins of 58.6% in the quarter, which together with Evertz's disciplined expense management yielded quarterly earnings per share of CAD 0.24. We are entering the second half of Evertz's fiscal 2026 with significant momentum fueled by over CAD 46 million of shipments in November, with a combined purchase order backlog plus shipments totaling in excess of CAD 286 million. By the continued adoption and successful large-scale deployments of Evertz's IP-based software-defined video networking and cloud solutions, with the largest new media and broadcast players in the industry, and with government, defense, and enterprise. And by the continuing success of DreamCatcher Bravo, our state-of-the-art IP-based replay and production suite.

Speaker #5: Solid gross margins of 58.6% in the quarter, which together with Evert's disciplined expense management yielded quarterly earnings per share of 24 cents. We are entering the second half of Evert's fiscal 2026 with significant momentum fueled by over 46 million of shipments in November with a combined purchase order backlog plus shipments totaling in excess of 286 million.

We are entering the second half of Evertz's fiscal 2026 with significant momentum fueled by over CAD 46 million of shipments in November, with a combined purchase order backlog plus shipments totaling in excess of CAD 286 million. By the continued adoption and successful large-scale deployments of Evertz's IP-based software-defined video networking and cloud solutions, with the largest new media and broadcast players in the industry, and with government, defense, and enterprise and by the continuing success of DreamCatcher Bravo, our state-of-the-art IP-based replay and production suite.

Speaker #5: By the continued adoption and successful large-scale deployments of Evertz's IP-based software-defined video networking and cloud solutions, with the largest new media and broadcast players in the industry, as well as with government, defense, and enterprise, and by the continuing success of Dreamcatcher Bravo, our state-of-the-art IP-based replay and production suite, alongside 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 is poised to build upon our leadership position in the broadcast and media technology sector.

Douglas Moore: 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 is poised to build upon our leadership position in the broadcast and media technology sector. Thank you and good night.

Doug Moore: 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 is poised to build upon our leadership position in the broadcast and media technology sector. Thank you and good night.

Speaker #5: Thank you and good

Speaker #5: Night. And this concludes today's call.

Operator: This concludes today's call. Thank you for participating. You may all disconnect.

Q2 2026 Evertz Technologies Ltd Earnings Call

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