Q3 2026 Evertz Technologies Ltd Earnings Call

March 4, 2026

Good afternoon, ladies and gentlemen, and welcome to the Ebert skewed three Investor Conference call. At this time all lines are in a listen only mode. Following the presentation, we'll conduct a question and answer session.

But any time during this call he would acquire immediate assistance. Please press star zero for operator.

This call is being recorded on Wednesday March four 2006.

I would now like to turn the conference over to Brian Campbell.

Second the VP of business development. Please go ahead Sir.

Brian Campbell: Thank you, John. Good afternoon, everyone, and welcome to Evertz Technologies Conference Call for our fiscal 2026 Q3 ended 31 January 2026, with Doug Moore, Evertz Chief Financial Officer, and myself, Brian Campbell. Please note that our financial press release and MD&A will be available on SEDAR and on the company investor website. Doug and I will comment on the financial results and then open the call to your questions. Turning now to Evertz results, I'll begin by providing a few highlights, and then Doug will provide additional detail. First off, sales for the Q3 totaled a record CAD 139.3 million, up 5% sequentially from the prior quarter. This includes revenue in the international region of CAD 43.7 million, up 27.7% sequentially.

Thank you John Good afternoon, everyone and welcome to <unk> Technologies Conference call for fiscal 2026 third quarter ended January 31, 2026, with Doug Moore, Chief Financial Officer, and myself, Brian Campbell.

Please note that our financial press release, and MD&A will be available on SEDAR and on the company Investor website.

Doug and I will comment on the financial results and then open the call to your questions.

Yeah.

Turning now to EBIT results I'll begin by providing a few highlights and then Doug will provide additional detail.

First off the sales for the third quarter totaled a record $139 $3 million up 5% sequentially from the prior quarter.

This includes revenue in the international region of $43 7 million up 27, 7% sequentially.

Brian Campbell: Recurring software services and other software revenue increased 12.3% year-over-year, totaling CAD 62.5 million in the quarter. Our sales base is well diversified, with the top 10 customers accounting for approximately 44% of sales during the quarter, with no single customer accounting for more than 16% of sales. In fact, we had 107 customer orders of over CAD 200,000. Gross margin in the quarter was CAD 81.2 million or 58.3% compared to 57.8% in Q3 of the prior year. Net earnings were CAD 18.7 million, resulting in fully diluted earnings per share of CAD 0.24 for the quarter.

Recurring software services and other software revenue increased 12.3% year over year totaling $62 5 million in the quarter.

Our sales base is well diversified with the top 10 customers accounting for approximately 44% of sales during the quarter.

With no single customer accounting for more than 16% of sales.

In fact, we had 107 customer orders of over $200000.

Okay.

Gross margin in the quarter was $81 2 million or 58, 3% compared to 57, 8% in the third quarter of the prior year.

Net earnings were $18 7 million, resulting in fully diluted earnings per share of 24 cents for the quarter.

Brian Campbell: Investment in research and development totaled CAD 36.7 million, and Evertz working capital was CAD 133.2 million, including cash of CAD 24.8 million as at 31 January 2026. At the end of February, Evertz purchase order backlog was more than CAD 246 million, and shipments during the month of February were CAD 32 million. We attribute this strong financial performance and solid combined shipments and purchase order backlog to channel and video services proliferation, increasing global demand for high quality video anywhere, anytime, the ongoing technical transition to IP, IT, and cloud-based architectures in the industry, and specifically to the growing adoption of Evertz IP-based software-defined video networking solutions, Evertz IT cloud solutions, our immersive 4K, 8K ultra-high definition solutions, our state-of-the-art DreamCatcher IP replay and live production with BRAVO Studio featuring the iconic Studer audio.

Investment in research and development totaled $36 7 million.

Ear, its working capital was $133 2 million, including cash of $24 8 million.

How is that January 31 2026.

At the end of February <unk> purchase order backlog was more than $246 million in shipments during the month of February were $32 million.

We attribute this strong financial performance and solid combined shipments and purchase order backlog it too.

Channel and video services proliferation, increasing global demand for high quality video anywhere anytime you on <unk>.

Technical transition to IP and cloud based architectures in the industry.

And specifically to the growing adoption of <unk> IP based software defined video networking solutions.

Cloud solutions, our immersive <unk> 8-K, Ultra high definition solutions.

Our state of the Art Dream catcher IP replay in live production with Bravo studio featuring the iconic it's tutor audio.

Brian Campbell: Today, the board of directors declared a regular quarterly dividend of CAD 0.205 per share payable on or about 20 March. I will now hand over to Doug Moore, Evertz Chief Financial Officer, to cover our results in greater detail.

Today, the board of directors declared a regular quarterly dividend of 25 cents per share payable on or about March 20th.

I will now hand over to Douglas <unk>.

Chief Financial officer to cover our results in greater detail.

Doug Moore: All right, thanks, Brian. Good afternoon, everyone. For the sales were CAD 139.3 million in Q3 of fiscal 2026. That's a 2% increase compared to CAD 136.9 million in Q3 of fiscal 2025. For the nine months ending 31 January 2026, sales were CAD 384.2 million, up CAD 10.4 million or 3% for the nine-month period ending 31 January 2025. Quarterly hardware revenue was CAD 76.8 million, a decrease from CAD 81.2 million the prior year. While software and services revenue increased to CAD 62.5 million from CAD 55.7 million the prior year. Revenues from software and services represented approximately 45% of the total revenue in the quarter.

Alright, Thanks, Brian and good afternoon, everyone.

The sales were $139 $3 million in the third quarter of fiscal 2026, that's a 2% increase compared to $136 nine in the third quarter of fiscal 2025.

For the nine months ending January 31, 2026 sales were $384 2 million up $10 4 million or 3% for the nine months period, ending January 31, 'twenty 'twenty five.

Quarterly hardware revenue was $76 8 million a decrease from $81 2 million in the prior year.

Our software and services revenue increased to $62 5 million from $55 7 million in the prior year.

Revenues from software and services represented approximately 45% of the total revenue in the quarter.

Doug Moore: Year to date, hardware revenue is up 1% year-over-year to CAD 209.3 million for the 9 months ending 31 January 2026, while revenues from software and services is up 5% to CAD 174.9 million from CAD 166.4 million the prior year. Year to date, software and service revenue represented approximately 46% of total revenue over the period. Looking at regional revenue. Quarterly revenues in the US-Canadian region declined 3% to CAD 95.6 million compared to CAD 99.1 million the prior year. This was more than offset by a 15% increase in quarterly revenues in the international region, which were CAD 43.7 million compared to CAD 37.8 million the prior year.

Year to date <unk> revenue is up 1% year over year to $209 3 million for the nine months ending January 31 2026.

While revenues from software and services is up 5% to $174 9 million.

From $166 4 million in the prior year.

Year to date software and service revenue represented approximately 46% of total revenue over the period.

Looking at regional revenue quarterly revenues in the U S. Canadian region declined 3% to $95 6 million compared to $99 1 million the prior year.

This was more than offset by a 15% increase in quarterly revenues in international regions, which are $43 7 million compared to $37 8 million in the prior year.

Doug Moore: The international segment represented 31% of total sales in the quarter compared to 28% in the same period last year. For the nine months ending 31 January, revenues in the Canadian-US region were up 2% to CAD 273.6 million, while international revenue increased 3% to CAD 110.6 million compared to CAD 105.9 million the same period last year. For the nine months period ending 31 January, international sales represented 28% of total sales compared to 28% the same period last year. Gross margin for the quarter was 58.3% as compared to 57.8% the prior year. For the nine months ending 31 January, the gross margin was 59.3%.

International segment represented 31% of total sales in the quarter compared to 28% in the same period last year.

For the nine months ending January 31.

Revenues in the Canadian U S region were up 2% to $273 6 million, while international revenue increased 3% $210 6 million compared to $105 9 million in the same period last year.

For the nine months period, ending January 31 International sales represented 29% of total sales compared to 28, 28% same period last year.

Gross margin for the quarter was 58, 3% as compared to 57, 8% in the prior year and then for the nine months ending January 31, the gross margin was 59, 3%.

Doug Moore: Both the quarter end and year-end gross margin percentages were within the company's 56% to 60% target range. Looking at S&A expenses. S&A was CAD 18.6 million in Q3, a decline of CAD 0.6 million or 3% for the same period last year. Selling and admin expenses as a percentage of revenue were approximately 13.3% compared to 14% for the same period last year. Sequentially, selling and admin is down approximately a half million CAD from Q2. Decline is primarily driven by the timing of trade show and promotions costs, which decreased about CAD 900,000 as in Q2 we attended our IBC trade show last quarter. For the 9 months ending 31 January, selling and admin expenses were CAD 56.3 million or 14.7% of sales.

Both the quarter and year end gross.

Gross margin percentages were within the company's 56% to 60% target range.

Looking at M&A expenses.

<unk> was $18 $6 million in the third quarter, a decline of <unk> 6 million or 3% for the same period last year.

Selling and admin expenses as a percentage of revenue were approximately 13, 3% compared to 14% for the same period last year.

Sequentially.

Selling and admin is down approximately $5 million from Q2.

That decline is primarily driven by the timing of trade show on promotions costs.

Which decreased about 900000 as in Q2, we attended our ABC trade show last quarter.

For the nine months ending January 31, selling and admin expenses were $56 3 million or 14, 7% of sales as compared to $55 2 million or 14, 7% of sales for the same period last year.

Doug Moore: That's compared to CAD 55.2 million or 14.7% of sales for the same period last year. Research and development expenses were CAD 36.7 million for Q3. That represents a CAD 0.1 million increase over the same period last year. As a percentage of revenue, R&D expenses were 26.4% compared to 26.7% in the prior year. For the 9 months ending 31 January, R&D expenses were CAD 110.4 million or 28.7% of sales. That's compared to CAD 110.2 million for the same period last year. ITCs for Q3 were CAD 4.8 million. That's compared to ITCs of CAD 3.6 million the prior year Q3.

Research and development expenses were $36 7 million for the third quarter that represents a <unk> 1 million increase over the same period last year.

As a percentage of revenue.

<unk> expenses were 26, 4% compared to 26, 7% in the prior year.

For the nine months ending January 31, R&D expenses were $110 4 million or 28, 7% of sales.

That's compared to $110 2 million for the same period last year.

<unk> for the quarter were $4 8 million as compared to OTC is a $3 6 million in the prior year third quarter.

Doug Moore: Foreign exchange for Q3 resulted in a loss of CAD 2.3 million as compared to a gain for Q3 ended 31 January 2025 of CAD 3.9 million. The largest driver behind the current period loss was a translation of US dollar assets into Canadian dollars, given a decline of the US dollar versus the Canadian dollar over the quarterly period. We had closed 31 October at approximately 1.402:1 US to Canadian, and that dropped to approximately 1.3612 as at 31 January. For the 9 months ending 31 January, foreign exchange resulted in a loss of CAD 0.8 million compared to a gain of CAD 4.7 million the same period last year. Turning to the discussion of liquidity of the company.

Foreign exchange for the third quarter resulted in a loss of $2 3 million as compared to a gain for the third quarter ended January 31, 2025, or $3 9 million.

The largest driver behind the current period loss with the translation of U S dollar assets into Canadian dollars, given the decline of the U S dollar versus the Canadian dollar over the quarterly period.

We had closed October 31 at approximately one four to one U S carrier and that dropped to approximately $1 36 wanted to as at January 31.

The nine months ended January 31, foreign exchange resulted in a loss of <unk> 8 million compared to a gain of $4 7 million in the same period last year.

Turning to a discussion of liquidity of the company cash as at January 31, 2026 was $24 8 million.

Doug Moore: Cash as at 31 January 2026 was CAD 24.8 million, a decline compared to cash of CAD 111.7 million as at 30 April 2025. The decline was primarily due to CAD 91 million in dividends distributed in the quarter, including CAD 75.5 million in special dividends paid during Q3. Working capital was CAD 133.2 million as of 31 January 2026, compared to CAD 206.9 million at the end of 30 April 2025. Now looking at cash flows for the quarter. The company generated cash from operations of CAD 29.3 million, which is net of a CAD 4.4 million change in non-cash working capital and current taxes.

A decline compared to cash of $111 7 million as at April 32025.

The decline was primarily due to $91 million of dividends distributed in the quarter, including $75 5 million of special dividends paid during Q3.

Working capital was $133 2 million as of January 31, compared to $206 9 million at the end of April 32025.

And looking at cash flows for the quarter.

The company generated cash from operations of $29 3 million, which is net of a $4 4 million change non cash working capital and current taxes.

Doug Moore: If the effects of change in non-cash working capital and current taxes were excluded from the calculation, the company generated CAD 24.9 million in cash from operations during the quarter. It's worth noting we did use about CAD 10 million in cash and inventory in the quarter as we purchased some last-time buy products and also securing parts for plant production. We increased raw materials. The company used cash of CAD 7 million for investing activities, which was principally driven by the acquisition of capital assets in the quarter, including the acquisition of an airplane for CAD 4.4 million, replacing aircraft previously sold during the year. The company used cash and financing activities of CAD 92.4 million, which as noted, was principally driven by dividends paid in CAD 91 million, including the special dividend of CAD 75 and a half million.

If the effects of the change in noncash working capital in current taxes were excluded from the calculation the company generated $24 9 million in cash from operations during the quarter.

It's worth, noting we did use about $10 million in cash and inventory in the quarter as we purchased some classified byproducts and also security parks per plant production.

Increased raw materials.

The company used cash of $7 million for investing activities was.

Principally driven by the acquisition of capital assets in the quarter, including the acquisition of an airplane for $4 4 million, replacing aircraft previously sold during the year.

The company used cash in financing activities and $92 4 million, which as noted was principally driven by dividends paid and $91 million, including the special dividend of $75 5 million.

Doug Moore: Finally, looking at our share capital position at 31 January 2026. Shares outstanding were approximately CAD 75.5 million, and options and share-based RSUs outstanding were approximately CAD 4.5 million. Weighted average shares outstanding were CAD 75.5 million, and weighted average fully diluted shares were CAD 76.7 million as of 31 January. That concludes the review of our financial results and position for Q3. 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. We refer you to the risk factors described in the annual information form and the official reports filed with the Canadian Securities Commission. Brian, back to yourself.

Finally, looking at our share capital position at January 31, 'twenty 'twenty six shares outstanding were approximately $75 5 million and options and share based R issues outstanding were approximately $4 5 million.

Weighted average shares outstanding were $75 5 million and weighted average fully diluted share diluted shares were $76 7 million as of January 31.

That concludes the review of our financial results and position for the third quarter.

Finally, I would like to remind you that some of the statements presented today are forward looking and 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 back to yourself.

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

Thank you Doug.

John We're now ready to open the call to questions.

John: 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 number 1 on your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number 2. If you're using a speaker phone, please lift the handset before pressing any keys. Once again, it is star 1 if you wish to ask a question. Your first question comes from the line of Thanos Moschopoulos from BMO Capital Markets. Your line is now open.

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 number 1 on your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number 2. If you're using a speaker phone, please lift the handset before pressing any keys. Once again, it is star 1 if you wish to ask a question. Your first question comes from the line of Thanos Moschopoulos from BMO Capital Markets. Your line is now open.

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 number one on your Touchtone phone.

We'll hear prompt that youre headed spirits.

Should you wish to decline for the polling process. Please press star followed by the number too.

If you're using a speaker phone please lift the handset before pressing any keys.

Once again it is star one if you wish to ask a question.

Your first question comes from the line of sinus Mr Policy from BMO capital markets. Your line is now open.

Thanos Moschopoulos: Hi, good afternoon. North American growth was clearly a little bit slower, recognizing you had strong growth internationally. Just with respect to North America, anything you'd call out as far as what you're seeing in the environment, or is that just reflective of project timing, which as we know, can be sometimes lumpy?

Hi, good afternoon.

North American growth was clearly a little bit slower.

Recognizing its stronghold internationally.

Just with respect to North America.

You would call out as far as what Youre seeing in the environment or is that just reflective of project timing, which as we know can be sometimes lumpy.

Yeah.

Brian Campbell: Good. Stannis, it's Brian. I'm actually on a remote cell phone here in Ottawa at a defense conference event, and that you were breaking up a little bit there. Could you repeat the question for us?

Okay.

Dennis It's Brian I'm actually at a remote cell phone here in Ottawa Defense Conference event.

You were breaking up a little bit there could you repeat the question for us.

Thanos Moschopoulos: Sure. I was just asking about the slower growth in North America during the quarter, whether you've seen any change in the end markets or whether that's just reflective of project timing and lumpiness.

Sure I was just asking about the slower growth in North America during the quarter.

Whether you've seen any change in the.

The end markets or whether thats, just reflective of project timing and Lumpiness.

Okay.

Brian Campbell: I would advise that it's more reflective of timing and lumpiness. We haven't seen a significant change, and we are heading into the NAB event, the tail end of April, where we're going to be, you know, connecting again directly with, you know, many customers on site. It's, we're quite excited by that.

Advisors.

More of a reflective.

<unk> and Lumpiness.

So we haven't seen a.

Significant change and we are heading into.

Hey, Ben.

Tail end of April we're quite a b connecting.

Directly with.

Many customers.

On site.

We're quite excited by that.

Thanos Moschopoulos: Okay. Clearly defense is topical. Maybe on each side of the border, we've seen Canada focusing on ramping up domestic procurement. In the US you're obviously been investing in building out your operations. Can you update us in terms of, what you're seeing in terms with respect to defense opportunities?

Okay.

Defense is topical so maybe on each side of the border.

In Canada, focusing on ramping up domestic procurement and in the U S. Youre, obviously, you've been investing in building out our operations.

Can you update us in terms of what Youre seeing in terms with respect to defense opportunities.

Okay.

Brian Campbell: We're definitely encouraged by the steps that are being taken on multiple fronts, whether that's government initiatives that mandate the defense, the Canadian defense sector, and the internal people as well too. You know, that is tends to be a longer-term sales cycle. It's all, you know, quite encouraging, and we're, you know, very intent on devoting sufficient, you know, resources to help the Canadian government as they're moving forward. As you know, we have had successes over the years in the US and with NATO partners.

We are definitely encouraged by.

The steps that are being taken.

On multiple fronts, whether thats.

Government initiatives mandate.

Defense Canadian defense sector.

Yes.

Internal.

People as well too so.

That is.

It tends to be a longer term.

<unk> cycle, but it is quite encouraging.

We are very intent on devoting sufficient resources.

To help.

The Canadian government as they are.

Moving forward as you know we have had.

Our successes over the years.

In the U S and with NATO partners.

Yeah.

Thanos Moschopoulos: Great. Maybe one last one for me. OpEx has been relatively stable in recent quarters, which is good to see that expense discipline. Any puts and takes as we think about the near-term OpEx trajectory? Should this be representative of the run rate near term?

Great.

Maybe one last one for me.

<unk> has been relatively stable in recent quarters.

Good to see that expense discipline.

Any any puts and takes as we think about the near term opex.

Trajectory.

Or should this be representative of the run rate near term.

Doug Moore: No, I mean, the big thing to call out there is, like while Q2 had IBC, Q4 has NAB or NAB. That is a pretty significant show for us. Just from a Q3 to Q4 perspective, you can, you know, I would expect an increase of, you know, a million and a half CAD to 2 million. The same with on the Q4 front as we ramp up for that show. We, a little bit harder to forecast, but we do often have some increases in R&D materials and prototypes.

No I mean, the big thing to call out the areas like while Q2 had ABC.

Q4 is an app so.

So that is a pretty significant show for us.

Just from a Q3 to Q4 perspective.

I would expect an increase of.

I don't have the $2 million.

The same was on the Q4 front as we ramp up for that show.

Those are harder to forecast when we do often have some increases in R&D materials prototypes, which is historically last couple of years I think we've been about an extra <unk> 5 million in Q4.

Brian Campbell: Last couple years anyway, been about an extra CAD half million in Q4. Then beyond Q4, it's, you know, there's nothing specific to call out other than inflationary matters.

Doug Moore: Last couple years anyway, been about an extra CAD half million in Q4. Then beyond Q4, it's, you know, there's nothing specific to call out other than inflationary matters.

And then beyond Q4.

Nothing specific to call it other than inflationary matters.

Robert Young [Managing Director, Head of Research: Great. I'll pass along. Thank you.

Thanos Moschopoulos: Great. I'll pass along. Thank you.

Great I'll pass along thank you.

Okay.

John: Your next question comes from the line of Robert Young from Canaccord Genuity. Your line is now open.

Operator: Your next question comes from the line of Robert Young from Canaccord Genuity. Your line is now open.

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

Robert Young [Managing Director, Head of Research: Hi, Brian. I think you noted you were attending the Ottawa Conference on Security and Defence earlier in the call. I think I heard that.

Robert Young: Hi, Brian. I think you noted you were attending the Ottawa Conference on Security and Defence earlier in the call. I think I heard that.

Hi, Brian.

Thank you noted you're attending the Ottawa Conference on security Defense.

Earlier in the call I think I heard that could you talk about what you're showing at that conference one of the products that you are.

Brian Campbell: Correct, yeah.

Robert Young [Managing Director, Head of Research: Could you talk about what you're showing at the conference? What are the products that you're displaying to a defense customer? What are the areas where you think Evertz can be meaningful in supplying, you know, the Canadian defense establishment?

Robert Young: Could you talk about what you're showing at the conference? What are the products that you're displaying to a defense customer? What are the areas where you think Evertz can be meaningful in supplying, you know, the Canadian defense establishment?

Blaine to a defense customer.

Areas, where you think <unk> can be meaningful and supplying the Canadian defense establishment.

Brian Campbell: Yeah. It isn't as much a trade show as you're familiar with the NAB and IBC. It's more attended in conference, but we're definitely continuing to reinforce and make strong relationships on multiple fronts. It is the, you know, monitoring command and control solutions, our transport. As you know, core elements of our key technologies are Common Criteria and NIAP certified, and that plays very well to the direction that's being taken by, you know, much of the new spending initiatives.

Yes.

So it isn't as much a trade show as youre familiar with the <unk>.

<unk> and Ibs C.

It's more attended conference but.

Definitely continuing to reinforce and big.

Strong relationships on multiple fronts.

And.

It is the.

Okay.

Monitoring command and control solutions our transport.

Core elements of our key technologies are common criteria certified.

And that plays very well to the direction.

That's being taken by us.

Much of the new spending initiatives.

Robert Young [Managing Director, Head of Research: Okay. No specific product areas that you're in a sales motion at this conference. Is there anything worth highlighting? You understand you're highlighting products that you have certifications related to, but what product areas would you highlight as particularly relevant to a defense customer?

Robert Young: Okay. No specific product areas that you're in a sales motion at this conference. Is there anything worth highlighting? You understand you're highlighting products that you have certifications related to, but what product areas would you highlight as particularly relevant to a defense customer?

Okay. So no specific product areas that you're in a sales motion at this conference. So is there anything worth highlighting we understand youre highlighting products that you have certifications relate to but is there any what product areas would you highlight as particularly relevant.

<unk> a deep bench.

<unk>.

Okay.

Brian Campbell: Rob, other than the ones I articulated previously, which is the, you know, command and control relevant ones, which are, you know, multi-viewers, signal processing, the DreamCatcher live production solutions, that whole family of technical operations center, live production, replay, storage solutions, all, and transport all fall into, you know, categories that would be of demand, and of course, the RF solutions of which we have many, and we're at the forefront of the DFE push, which is the digitization of IF RF solutions.

So rob other than the ones I articulated previously which is the <unk>.

Command and control relevant ones, which are multi viewers.

Signal processing.

Dream catcher live production solutions that whole family of.

Yes.

Technical operations Center live production replay storage.

Solutions and transported all fall into.

Categories that would be of demand and of course the <unk>.

RF solutions.

Of which we have many and we're at the forefront of the dip.

Push which is the digitization of RF and RF.

RF solutions.

Robert Young [Managing Director, Head of Research: Okay, great. That's great color. Also note you added SOC 2 to the evertz.io product, which maybe we can just give us a sense of what that opens up for Evertz. Is that a meaningful addressable market change?

Robert Young: Okay, great. That's great color. Also note you added SOC 2 to the evertz.io product, which maybe we can just give us a sense of what that opens up for Evertz. Is that a meaningful addressable market change?

Okay, Great that's great color.

No.

You added <unk> to the <unk> product.

Maybe if you can just.

Give us a sense of what that opens up or <unk> is that a meaningful.

Addressable market change.

Yes.

Brian Campbell: Yeah, it's very early days. I don't have anything to add there.

Yes, it's very early it's early days I don't know.

Have anything to add there.

Robert Young [Managing Director, Head of Research: Okay. Then, I know the backlog ticked up for the first time in quarter-over-quarter. Sequentially, it ticked up for the first time in a while. Maybe is that driven by, like, a weaker level of February shipments? Or is there another factor to call out there?

Robert Young: Okay. Then, I know the backlog ticked up for the first time in quarter-over-quarter. Sequentially, it ticked up for the first time in a while. Maybe is that driven by, like, a weaker level of February shipments? Or is there another factor to call out there?

Okay and then.

No the backlog ticked up for the first time.

Quarter over quarter sequentially. It ticked up for the first time in a while.

Is that driven by maybe a weaker level of February shipments or is it.

Is there another factor to call out there.

Okay.

Brian Campbell: Doug, do you want to handle that? Yeah, sure. It's just again, there's some lumpiness in projects, whether we deliver or they come in, some significant orders come in at a time. It's just a reflection of strong demand. You are correct that the February shipments are a bit light. That's fair. Yeah, the growth in backlog up, I think CAD 6 million quarter-over-quarter is very positive, but I think it's, you know, not directly attributable to one item. I would say it's just, you know, strength across strong demand.

Brian Campbell: Doug, do you want to handle that?

But Doug do you want to handle that yes sure.

Doug Moore: Yeah, sure. It's just again, there's some lumpiness in projects, whether we deliver or they come in, some significant orders come in at a time. It's just a reflection of strong demand. You are correct that the February shipments are a bit light. That's fair. Yeah, the growth in backlog up, I think CAD 6 million quarter-over-quarter is very positive, but I think it's, you know, not directly attributable to one item. I would say it's just, you know, strength across strong demand.

Again, there is some lumpiness in projects, whether we deliver or they come in some significant orders come in at a time, but it's just a reflection of strong demand. So.

You are correct that February shipments are a bit light.

That's fair, but yet the growth in.

The growth in backlog.

I think 6 billion quarter over quarter is.

Positive, but I think it's.

Not directly attributable to one item I would say, it's just <unk>.

Strength across strong demand.

Robert Young [Managing Director, Head of Research: Okay. Maybe last question. You noted the inventory build in the quarter. Is that driven by anything in the pipeline or any maybe unannounced programs that you've won, something that's not... Go ahead, sorry.

Robert Young: Okay. Maybe last question. You noted the inventory build in the quarter. Is that driven by anything in the pipeline or any maybe unannounced programs that you've won, something that's not... Go ahead, sorry.

Okay. Maybe last question you noted that.

The inventory build in the quarter or is that driven by anything in the pipeline or and maybe you have announced.

Program, you've widened something thats not okay.

Go ahead, I'm, sorry, it's actually it's more driven by.

Brian Campbell: No, it's actually, it's more driven by market, I guess procurement realities, with you know, there's some memory, certain components like memory on allocation where basically have to secure parts to guarantee our ability to ship. It's more driven by the procurement side and then seeing there's certain products on allocation or you know, potential coming shortages that we're you know, using some of the cash to stockpile.

Doug Moore: No, it's actually, it's more driven by market, I guess procurement realities, with you know, there's some memory, certain components like memory on allocation where basically have to secure parts to guarantee our ability to ship. It's more driven by the procurement side and then seeing there's certain products on allocation or you know, potential coming shortages that we're you know, using some of the cash to stockpile.

Market.

I guess procurement realities.

Theres some memory certain components like memory on allocation where.

Basically you have to secure parts to guarantee our ability to ship. So it's more driven by.

The procurement side and seeing theres certain products on allocation or potential company shortages.

That.

Using some of the cash to stockpile.

Robert Young [Managing Director, Head of Research: Okay, I think that's it for me. I'll pass on.

Robert Young: Okay, I think that's it for me. I'll pass on.

Okay, I think thats it for me I'll pass the line.

Okay.

John: As a reminder, if you have a question or any follow-up, please press star one. Your next question comes from the line of Paul Treiber from RBC Capital Markets. Your line is now open.

Operator: As a reminder, if you have a question or any follow-up, please press star one. Your next question comes from the line of Paul Treiber from RBC Capital Markets. Your line is now open.

As a reminder, if you have a question or any follow up please press star one.

Next question comes from the line of Paul <unk> from RBC capital markets. Your line is now open.

Robert Young [Managing Director, Head of Research: Oh, thanks very much. Good afternoon. Just a question on recurring software and services revenue. It was strong again this quarter. Is there anything to call out in terms of either unusuals or project completion, or do you see it as, you know, continue to grow in these sort of low double digits here?

Paul Treiber: Oh, thanks very much. Good afternoon. Just a question on recurring software and services revenue. It was strong again this quarter. Is there anything to call out in terms of either unusuals or project completion, or do you see it as, you know, continue to grow in these sort of low double digits here?

Hello, Thanks, very much good afternoon, just a question on recurring software and services revenue was strong again this quarter is there anything to call out in terms of either unusuals our program.

Project completion or do you see it as continuing to grow in these sort of low double digits here.

Brian Campbell: I think you still have to. You have to track it for the last, you know, eight quarters. Look, there's been a strong trend in growth. But there's not, you know, a milestone of, you know, achieved at CAD 10 million or something like that. There's always some volatility based on project completion and milestone completion. It's not a specific, you know, one contract to point to, but there'll be continued some peaks, you know, going forward. You'll see over the past eight plus quarters or more, really 12 quarters, it's been growing because of trends.

I think you still have that it's attractive for the last eight quarters.

Doug Moore: I think you still have to. You have to track it for the last, you know, eight quarters. Look, there's been a strong trend in growth. But there's not, you know, a milestone of, you know, achieved at CAD 10 million or something like that. There's always some volatility based on project completion and milestone completion. It's not a specific, you know, one contract to point to, but there'll be continued some peaks, you know, going forward. You'll see over the past eight plus quarters or more, really 12 quarters, it's been growing because of trends.

There has been a strong trend in growth.

But theres not a milestone.

Achieved a $10 million or something like that but.

There is always some volatility based on project completion of milestone completion.

So there's not a specific one contract to point to but.

And there'll be continued some peaks.

Going forward, but you'll see over the past eight plus quarters or more really 12 quarters, it's been growing because of the trend.

Paul Treiber: Okay, that's helpful. International, the strength in international is the highest quarterly level in a number of years. Has anything changed in terms of your momentum there and the drivers of that growth and what's driving that?

Okay. That's helpful and then and then international the strength in international and the highest quarterly level in a number of years.

Yes anything changed in terms of your momentum there and the drivers of that growth and what's driving that.

A lot of the growth in the current quarter at least compared to the prior year as it was.

Brian Campbell: A lot of the growth in the current quarter, at least compared to the prior years, it was a couple of projects in Europe that we completed. I don't know that's really a macro thing to call out necessarily than the, you know, the lumpiness or volatility in this case, you know, helping us in the quarter.

Doug Moore: A lot of the growth in the current quarter, at least compared to the prior years, it was a couple of projects in Europe that we completed. I don't know that's really a macro thing to call out necessarily than the, you know, the lumpiness or volatility in this case, you know, helping us in the quarter.

A couple of projects in Europe that we completed.

I don't know if thats really a macro thing to call out necessarily then.

The lumpiness or volatility in this case.

Helping us in the quarter.

Paul Treiber: Lastly, just on gross margins, it ticked down a little bit sequentially. Does that relate to international, or some of these larger projects? You know, the mix may have a little gross margin than the past.

And then just lastly, just some gross margins.

Ticked down a little bit sequentially does that relate to international.

Some of these larger projects.

Mix may have a little gross margin than the past.

Brian Campbell: Yeah. I mean, the main driver, of course, is the product mix, but in this case, there is some drag due to the international margins being a bit tighter than elsewhere. You know, it's still well within the range. It's still, you know, a strong margin, but there'll be volatility even going forward. Yeah, there's a bit of a drag in the quarter with the international sales.

Doug Moore: Yeah. I mean, the main driver, of course, is the product mix, but in this case, there is some drag due to the international margins being a bit tighter than elsewhere. You know, it's still well within the range. It's still, you know, a strong margin, but there'll be volatility even going forward. Yeah, there's a bit of a drag in the quarter with the international sales.

Yes, I mean, the main driver of course is the product mix, but in this case there is some.

Some drag due to the international margins being a bit.

Tighter than elsewhere so.

It's still well within the range is still.

Our strong margin, but there'll be volatility going forward, but yes, there is a bit of a drag in the quarter and with the international sales.

Paul Treiber: Just lastly, on the topic of gross margins. With memory costs going up, how will that impact gross margins? Is it a relatively small portion of your BOM that it's basically immaterial from a consolidated point of view?

And then just lastly, just on the topic of gross margins with memory costs going up.

Or would that impact gross margins relatively small portion of your bomb that it's basically immaterial from a consolidated point of view.

Brian Campbell: Yeah. I mean, what we do is we analyze BOMs on an individual level. You know, if there's marketable cost increases, we may have to, you know, address that through pricing. It's not, it's not, you know, in the current quarter, it hadn't affected margins necessarily. It's really just, you know, having to acquire, use cash to basically acquire inventory so we have it there to ship basically when we need it. It hasn't really been a drain on margins, but it is causing us to react and with procurement.

Doug Moore: Yeah. I mean, what we do is we analyze BOMs on an individual level. You know, if there's marketable cost increases, we may have to, you know, address that through pricing. It's not, it's not, you know, in the current quarter, it hadn't affected margins necessarily. It's really just, you know, having to acquire, use cash to basically acquire inventory so we have it there to ship basically when we need it. It hasn't really been a drain on margins, but it is causing us to react and with procurement.

Yeah, I mean, what we do is we analyzed bombs on an individual level. So.

If theres marketable cost increases we may have to address that through pricing, but.

It's not it's not in the current quarter hasn't affected.

Margins necessarily it's really just.

Having to acquire.

We used cash to basically acquire inventory. So we have to have their ship basically when we need it so it hasnt really been a drain on margins but.

It is causing us to react with <unk>.

Kevin.

Paul Treiber: Okay. Thanks for taking the questions.

Okay. Thanks for taking the questions.

John: There are no further questions at this time. I will now turn the call over to Brian Campbell. Please continue, sir.

Operator: There are no further questions at this time. I will now turn the call over to Brian Campbell. Please continue, sir.

There are no further questions at this time I will now turn the call over to Brian Tebo. Please continue Sir.

Okay.

Brian Campbell: I'd like to thank the participants for their questions and to add that we are pleased with the company's performance during Q3 of fiscal 2026, which saw record sales of CAD 139.3 million, including CAD 62.5 million in software and services revenue. Solid gross margins at 58.3% in the quarter, which together with Evertz disciplined expense management, yielded quarterly earnings of CAD 0.24 per share, despite a foreign exchange loss of CAD 2.3 million in the quarter. We're entering into the last quarter of fiscal 2026 with significant momentum, fueled by over CAD 32 million of shipments in the month of February, with a combined purchase order backlog plus February shipments totaling in excess of CAD 278 million.

Thank you participants for their questions and to add that.

We are pleased with the company's performance during Q3.

Fiscal 2026, which saw record sales of $139 3 million, including $62 5 million in software and services revenue solid gross margins of 58, 3% in the quarter, which together with disciplined expense management yielded quarterly earnings of 24.

Per share despite a foreign exchange loss of $2 3 million in the quarter.

We're entering into the last quarter of fiscal 2026 with significant momentum fueled by over $32 million of shipments in the month of February with a combined purchase order backlog plus February shipments totaling in excess of $278 million.

Brian Campbell: By the continuing adoption and successful large-scale deployments of Evertz IP-based software-defined video networking and cloud solutions by the largest broadcast new media service provider and enterprises in the industry, and by the continuing success of DreamCatcher BRAVO, our state-of-the-art IP replay production suite. With Evertz 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 while further penetrating government and defense. Thank you and good night.

By the continuing adoption and successful large scale deployments of EBIT IP based software defined video networking and cloud solutions by the largest broadcast new media service provider and enterprises in the industry and by the continuing success of Dream catcher Bravo.

State of the art IP replay production suite.

With significant investments in software defined IP and.

And cloud technologies for 600 industry, leading IP SDN deployments and the capabilities of our staff.

<unk> is poised to build upon our leadership.

Positioned in the broadcast and media technology sector, while further penetrating government and defense.

Thank you and good night.

John: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

[music].

Okay.

Q3 2026 Evertz Technologies Ltd Earnings Call

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