Q4 2026 Evertz Technologies Ltd Earnings Call

June 24, 2026

Speaker #1: Welcome to the conferencing.

Brian Campbell: Welcome to the conferencing.

Speaker #2: Hello, can I have the conference you wish to join? Hello, can I have the conference you wish to join? All right, thank you so much.

Operator: Hello, can I have the conference you wish to join?

[Company Representative] (Agera): Hello?

Operator: Hello, can I have the conference you wish to join?

[Company Representative] (Agera): Yeah. This is the Evertz Technologies.

Operator: All right. Thank you so much. Can I have your name?

Speaker #2: Can I have your name? All right. And how about your company name? All right. I'll join you now. Thank you.

[Company Representative] (Agera): Yes, this is David Brown.

Operator: All right, how about your company name?

[Company Representative] (Agera): Agera.

Operator: All right. I'll join you now. Thank you.

Operator: Thank you. Good afternoon, ladies and gentlemen, and welcome to the Evertz Q4 Investor Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star 0 for the operator. This call is being recorded on 24 June 2026. I would now like to turn the conference over to Brian Campbell, Executive Vice-President of Business Development. Please go ahead.

Speaker #3: Good afternoon, ladies and gentlemen, and welcome to the Evertz Q4 Investor Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a Q&A session.

Operator: Good afternoon, ladies and gentlemen, and welcome to the Evertz Q4 Investor Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star 0 for the operator. This call is being recorded on 24 June 2026. I would now like to turn the conference over to Brian Campbell, Executive Vice-President of Business Development. Please go ahead.

Speaker #3: If at any time during this call you require immediate assistance, please press *0 for the operator. This call may be recorded on June 24, 2026.

Speaker #3: I would now like to turn the conference over to Brian Campbell, Executive Vice President of Business Development. Please go ahead.

Speaker #4: Thank you, John. Good afternoon, everyone, and welcome to Evertz Technologies' conference call for our Q4 2026 and year ended April 30. Joining me are Doug Moore, Evertz Chief Financial Officer, and myself, Brian Campbell.

Brian Campbell: Thank you, John. Good afternoon, everyone, and welcome to Evertz Technologies conference call for our 2026 Q4 and year ended 30 April, 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's investor website. Doug and I will comment on the financial results and then open the call to your questions. Turning now to Evertz results. First off, we had record annual sales in excess of a half a billion dollars, coming in at CAD 515.8 million for the year. This includes revenue in the international region of CAD 148 million, up 16% from the prior year.

Speaker #4: Please note that our financial press release and MD&A will be available on SEDAR and on the company's investor website. Doug and I will comment on the financial results and then open the call to your questions.

Speaker #4: Turning now to Evertz results. I'll begin by providing a few highlights, and then Doug will provide additional detail. First off, we had record annual sales, in excess of half a billion dollars, coming in at $515.8 million for the year.

Speaker #4: This includes revenue in the International region of $148 million, up 16% from the prior year. Recurring software services and other software revenue increased 8% year over year, totaling $240.7 million for the year.

Brian Campbell: Reoccurring software services and other software revenue increased percent year over year, totaling CAD 240.7 million in the year. Margin rates remain consistently strong, coming in at 59.3% versus 59.5% prior year, and 58.8% two years ago. Total margin dollars were CAD 306 million. Net earnings were CAD 64.4 million, resulting in a fully diluted earnings per share of CAD 0.83. Our sales base is well diversified, with the top 10 customers accounting for approximately 44% of sales, with no single customer accounting for more than 10% on a full year basis. In fact, we had 87 customer orders of over CAD 200,000. Turning to the Q4, sales were up 3% year over year to CAD 131.6 million.

Speaker #4: Margin rates remain consistently strong, coming in at 59.3% versus 59.5% prior year and 58.8% two years ago. Total margin dollars were $306 million, net earnings were $64.4 million, resulting in a fully diluted earnings per share of $0.83.

Speaker #4: Our sales base is well diversified, with the top 10 customers accounting for approximately 44% of sales, and no single customer accounting for more than 10% on a full-year basis.

Speaker #4: In fact, we had 87 customer orders of over $200,000. Turning to the fourth quarter, sales were up 3% year over year to $131.6 million. Recurring software, services, and other software was $65.8 million, an increase of 17% from the prior year.

Brian Campbell: Reoccurring software services and other software was CAD 65.8 million, an increase of 17% from the prior year. Gross margin in the quarter was CAD 78.1 million versus CAD 78.9 million in the Q4 previous year. Net earnings in the quarter were CAD 15.2 million, as compared to CAD 13 million in the corresponding period last year. Fully diluted earnings per share were CAD 0.20, up from CAD 0.17 in the previous Q4. Operational highlights for the quarter included Evertz' stellar presence at the National Association of Broadcasters NAB Show in Las Vegas, where Evertz won prestigious Future Best of Show awards distributed across the primary industry publications presented by TV Technology. The BRAVO-BLADE recognized for expanding multi-program live production capabilities from a single event. Our ENX, an innovative media core designed specifically for hybrid IP and SDI facilities.

Speaker #4: Gross margin in the quarter was $78.1 million, versus $78.9 million in the fourth quarter of the previous year. Net earnings in the quarter were $15.2 million, as compared to $13 million in the corresponding period last year.

Speaker #4: Fully diluted earnings per share were $0.20, up from $0.17 in the previous fourth quarter. Operational highlights for the quarter included Evertz's stellar presence at the National Association of Broadcasters in Las Vegas, where Evertz Future Best of Show awards were distributed across the primary industry publications, presented by TV Technology. The Bravo Best of Blade was recognized for expanding multi-program live production capabilities from a single event; our ENX, an innovative media core designed specifically for hybrid IP and SDI facilities; and Excalibur, a high-density encoding platform engineered for scalable media transport.

Brian Campbell: The X-CALIBER, a high-density encoding platform engineered for scalable media transport. The MMA and NUCLEUS product won in the AV technology area for IPMX certified IP gateway solution built to bridge pro AV and broadcast environments with seamless IPMX and ST2110 integration. At the end of May, Evertz' purchase order backlog was more than CAD 237 million, and shipments during the month of May were CAD 33 million. We attribute the strong financial performance and robust combined shipments and purchase order backlog to channel and video services proliferation, increased global demand for high-quality video anywhere and 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 and 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.

Speaker #4: The MMA and Nucleus product won in the AV Technology area for its IPMX-certified IP gateway solution, built to bridge ProAV and broadcast environments with seamless IPMX and ST 2110 integration.

Speaker #4: At the end of May, Evertz purchase order backlog was more than $237 million, and shipments during the month of May were $33 million.

Speaker #4: We attribute the strong financial performance and robust combined shipments and purchase order backlog to channel and video services proliferation; increased 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 and cloud solutions, our immersive 4K and 8K ultra-high-definition solutions, and our state-of-the-art DreamCatcher IP replay and live production with Bravo Studio, featuring the iconic Studer audio.

Speaker #4: Today, Evertz's Board of Directors declared a regular quarterly dividend of $0.205 per share, payable on or about July 13. I'll now hand over to Doug Moore, Evertz's Chief Financial Officer, to cover our results in greater detail.

Brian Campbell: Today, Evertz' board of directors declared a regular quarterly dividend of CAD 0.205 per share payable on or about 13 July. I'll now hand over to Doug Moore, Evertz' Chief Financial Officer, to cover our results in greater detail.

Speaker #5: Thanks, Brian. Good afternoon. Looking at revenues, despite a relatively slow start to the quarter, sales were $131.6 million in the fourth quarter of fiscal 2026, a 3% increase compared to the $127.8 million in the fourth quarter of fiscal 2025.

Doug Moore: Thanks, Brian, and good afternoon. Looking at revenues, despite a relatively slow start to the quarter, sales were CAD 131.6 million in Q4 of fiscal 2026, a 3% increase compared to CAD 127.8 million in Q4 of fiscal 2025. While for the year ending 30 April 2026, sales were CAD 515 million, up CAD 14.2 million or 2.8% from the prior year. Quarterly hardware revenue was CAD 65.7 million. That's a decrease from CAD 71.7 million the prior year. While software and services revenue increased to CAD 65.8 million from CAD 56.1 million in the prior year. Actually, revenue from software and services represented approximately 50% of the total revenue in the quarter. For the year, hardware revenue declined 1% to CAD 275.1 million, while revenues from software and services increased 8% to CAD 240.7 million from CAD 222.6 million in the prior year. Excuse me.

Speaker #5: For the year ending April 30, 2026, sales were $515 million, up $14.2 million or 2.8% from the prior year. Quarterly hardware revenue was $65.7 million, a decrease from $71.7 million the prior year, while software and services revenue increased to $65.8 million from $56.1 million in the prior year.

Speaker #5: For the year—I'm sorry—actually, revenue from software and services represented approximately 50% of total revenue in the quarter. For the year, hardware revenue declined 1% to $275.1 million, while revenues from software and services increased 8% to $240.7 million, from $222.6 million in the prior year.

Speaker #5: Excuse me. Annually, software and services revenue represented 47% of total revenue, versus 44% in the prior year. Looking at regional revenues, quarterly revenues in the U.S./Canadian region were $94.2 million, that's a decline compared to $106.5 million in the prior year.

Doug Moore: Annually, software and services revenue represented 47% of total revenue versus 44% in the prior year. Looking at regional revenues, quarterly revenues in the US-Canadian region were CAD 94.2 million. That's a decline compared to CAD 106.5 million in the prior year. However, this is more than offset by a CAD 16 million increase in quarterly revenues in the international region, which were CAD 37.4 million compared to CAD 21.3 million in the prior year Q4. The international segment represented 28% of total sales in the quarter as compared to 17% in the same period last year. For the year ended 30 April 2026, revenues in the Canadian/US region were down 2% to CAD 367.8 million, while international revenues increased CAD 20.8 million or 16% to CAD 148 million. The increase in the year was driven by increased project deliveries in Western Europe in particular.

Speaker #5: However, this is more than offset by a $16 million increase in quarterly revenues in the international region, which were $37.4 million compared to $21.3 million in the prior year fourth quarter.

Speaker #5: The international segment represented 28% of total sales in the quarter, as compared to 17% in the same period last year. For the year ended April 30, 2026, revenues in the Canadian/US region were down 2% to $367.8 million, while international revenues increased $20.8 million, or 16%, to $148 million. The increase in the year was driven by increased project deliveries in Western Europe, in particular.

Speaker #5: For the year ending April 30, international sales represented 29% of total sales, compared to 25% in the same period last year. Gross margin for the quarter was 59.3%, compared to 61.7% in the prior year.

Doug Moore: For the year ending 30 April, international sales represented 29% of total sales, compared to 25% in the same period last year. Gross margin for the quarter was 59.3%, compared to 61.7% in the prior year. It's worth noting the prior year comparative quarter was higher than typical, and the current quarter is more in line with their target range of 56% to 60%. For the year, the gross margin was 59.3%, which was also within the company's 66% to 60% target range. Turning to selling and administrative expenses. S&A was CAD 20.7 million in Q4. That's relatively consistent with the same period last year. S&A expenses as a percentage of revenue were approximately 15.7% as compared to 16.2% for the same period last year. Sequentially, selling and admin expenses were up approximately CAD 10 million from Q3.

Speaker #5: It's worth noting the prior year comparative quarter was higher than typical, and the current quarter is more in line with our target range of 56% to 60%.

Speaker #5: For the year, the gross margin was 59.3%, which was also within the company's 56% to 60% target range. Turning to selling and administrative expenses, S&A was $20.7 million in the fourth quarter, which is relatively consistent with the same period last year.

Speaker #5: S&A expenses as a percentage of revenue were approximately 15.7%, as compared to 16.2% for the same period last year. Sequentially, selling and admin expenses were up approximately $2 million from Q3. That increase was driven by increased trade show and travel costs, which in turn was driven by our participation at the NAB trade show in the fourth quarter.

Doug Moore: That increase was driven by increased trade show and travel costs, which in turn was driven by our participation at the NAB Trade Show in Q4. For the year ending 30 April, selling and admin expenses were CAD 77 million or 14.9% of sales. That's compared to CAD 75.9 million or 15.1% of sales in the prior year. Research and development expenses were CAD 37.7 million for Q4. That represents an increase of CAD 1.2 million the prior year. As a percentage of revenue, R&D expenses were 28.7% compared to 28.6% in the prior year. For the year ending 30 April, R&D expenses were CAD 148.1 million or 28.7% of sales. That's compared to CAD 146.8 million for the same period last year, an increase of approximately 1% year over year.

Speaker #5: For the year ending April 30, selling and admin expenses were $77 million, or 14.9% of sales. That's compared to $75.9 million, or 15.1% of sales, in the prior year.

Speaker #5: Research and development expenses were $37.7 million for the fourth quarter. That represents an increase of $1.2 million from the prior year, and as a percentage of revenue, R&D expenses were 28.7%, compared to 28.6% in the prior year.

Speaker #5: For the year ending April 30, R&D expenses were $148.1 million, or 28.7% of sales. That's compared to $146.8 million for the same period last year, an increase of approximately 1% year over year.

Speaker #5: Foreign exchange for the fourth quarter resulted in a gain of $400,000, as compared to a loss for the fourth quarter last year of $4.5 million. During the fourth quarter of the current year—sorry, during the fourth quarter of the current year—the US dollar versus Canadian dollar declined modestly from 1.38 to 1.37 to 1, as opposed to the fourth quarter last year, where the US dollar declined more significantly from 1.44 to 1.40 to 1.

Doug Moore: Foreign exchange for Q4 resulted in a gain of CAD 400,000 as compared to a loss for Q4 last year of CAD 4.5 million. During Q4 of the current year, US dollar versus Canadian dollar declined modestly from 1.38 to 1.37 to 1, as opposed to Q4 last year, where the US dollar declined more significantly from 1.44 to 1.4 to 1. For the year ending 30 April, foreign exchange resulted in a loss of CAD 0.4 million compared to a gain of CAD 0.2 million last year. Turning to the discussion of liquidity of the company. Cash as of 30 April was CAD 19.1 million, a decline compared to cash of CAD 111.7 million as of 30 April 2025.

Speaker #5: For the year ending April 30, foreign exchange resulted in a loss of $0.4 million, compared to a gain of $0.2 million last year. Turning to the discussion of liquidity of the company, cash as at April 30 was $19.1 million, a decline compared to cash of $111.7 million as at April 30, 2025.

Speaker #5: The decline was primarily driven by the $136 million in dividends we distributed during the year, including the $75.5 million in special dividends that we paid during the third quarter.

Doug Moore: The decline was primarily driven by the CAD 136 million in dividends we distributed during the year, including the CAD 75.5 million in special dividends that we paid during Q3. Working capital was CAD 131.7 million as of 30 April 2026, compared to CAD 206.9 million at the end of 30 April 2025. Looking now at cash flows for the quarter. For the three months ended 30 April, cash from operations were CAD 18.4 million. That's compared to CAD 33.3 million generated during the three months last year. If you exclude the changes in non-cash working capital and current taxes, cash from operations were CAD 19.1 million for Q4 of this year, compared to CAD 17.7 million for the same period last year. In the quarter, the company used CAD 3.9 million for investing activities. That's particularly for the acquisition of property, plant, and equipment.

Speaker #5: Working capital was $131.7 million as at April 30, 2026, compared to $206.9 million at the end of April 30, 2025. Looking now at cash flows for the quarter, for the three months ended April 30, cash from operations was $18.4 million. That's compared to $33.3 million generated during the three months last year.

Speaker #5: If you exclude the changes in non-cash working capital and current taxes, cash from operations was $19.1 million for the fourth quarter this year, compared to $17.7 million for the same period last year.

Speaker #5: In the quarter, the company used $3.9 million for investing activities, specifically for the acquisition of property, plant, and equipment. For the quarter, the company used $17.1 million for financing activities, $15.4 million of which was for the payment of dividends during the quarter.

Doug Moore: For the quarter, the company used CAD 17.1 million for financing activities, CAD 15.4 million of which was for the payment of dividends during the quarter. For the year, the company generated cash from operations of CAD 76.2 million, which is net of a CAD 10.2 million change in non-cash working capital and current taxes. If the effects of that change were excluded from the calculation, the company generated CAD 86.4 million in cash from operations during the year. The company used cash of CAD 17.8 million for investing activities, which was principally driven by the acquisition of property, plant, and equipment of CAD 18.7 million, including the land and building we purchased outside Pennsylvania. The company used cash and financing activities of CAD 147.1 million, which, as previously noted, was principally driven by dividends paid. Finally, looking at our share capital position as of 30 April 2026.

Speaker #5: For the year, the company generated cash from operations of $76.2 million, which is net of a $10.2 million change in non-cash working capital and current taxes. If the effects of that change were excluded from the calculation, the company generated $86.4 million in cash from operations. During the year, the company used cash of $17.8 million for investing activities, which was principally driven by the acquisition of property, plant, and equipment of $18.7 million, including the land and building we purchased outside Pennsylvania.

Speaker #5: And the company used cash in financing activities of $147.1 million, which, as previously noted, was principally driven by dividends paid. Finally, looking at our share capital position as at April 30, 2026, shares outstanding were approximately 75.6 million, and options and share-based RSUs outstanding were approximately 4.2 million.

Doug Moore: Shares outstanding were approximately 75.6 million, and options and shares based RSUs outstanding were approximately 4.2 million. Weighted average shares outstanding were 75.5 million, and weighted average fully diluted shares were 76.8 million. This concludes the review of our financial results and position for the Q4 and year-end. 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 refer you to the risk factors described in the annual information form and the official reports filed with the Canadian Securities Administrators. Brian, back to yourself.

Speaker #5: Weighted average shares outstanding were 75.5 million, and weighted average fully diluted shares were 76.8 million. This concludes the review of our financial results and position for the fourth quarter and year-end.

Speaker #5: And then 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 in the official reports filed with the Canadian Securities Commission. Brian, back to yourself.

Speaker #1: Thank you, Doug. John, we're now ready to open the call to questions.

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

Speaker #3: Thank you. We will now begin the question-and-answer session. Should you have a question, please press star, followed by the number one, on your touch-tone phone.

Operator: Thank you. We will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touch tone phone. You will hear a prompt that your hand has been raised. Should you have a question, please press star one. Should you wish to decline from the polling process, please press star followed by the number two. If you're using a speakerphone, please lift the handset before pressing any keys. Our 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. Should you have a question, please press star one. Should you wish to decline from the polling process, please press star followed by the number two.

Speaker #3: If you're using a speakerphone, please lift the handset before pressing any keys. Our first question comes from the line of Thanas Mastropoulos from BMO Capital Markets.

Speaker #3: Please go ahead.

Speaker #4: Hi, good afternoon. There was a nice acceleration in the growth rate for your software business this quarter. Is there anything in particular that you would call out in that regard, or is it just sort of the ongoing trends and drivers that we've talked about in prior quarters?

Thanos Moschopoulos: Hi, good afternoon. There was a nice acceleration in the growth rate for your software business this quarter. Is there anything in particular that you would call out in that regard? Or just sort of the ongoing trends and drivers that we've talked about in prior quarters.

Doug Moore: I could call out, there was a couple larger project milestones that we met in the quarter that would have caused about CAD 7 to 8 million additional software and services revenue that was released from deferred revenue. There's ongoing releases and deferrals throughout the year, that's a bit more substantial than typical. If I had to call out something, there's two projects that made up between CAD 7 and 8 million worth of software and service revenue releases.

Speaker #5: I can call out there were a couple of larger project milestones that we met in the quarter that would have caused about $7 million to $8 million additional software and services revenue that was released from deferred revenue.

Speaker #5: There are ongoing releases and deferrals throughout the year, but that's a bit more substantial than typical. So, if I had to call it something, there are two projects that made up between $7 and $8 million worth of software and service revenue releases.

Speaker #4: Oh, okay. Would that be one-time revenue, or is that recurring revenue that's now coming online?

Thanos Moschopoulos: Okay. Would that be one-time revenue or is that recurring revenue that's now been coming online?

Speaker #5: It would be more of a project-based, one-time milestone.

Doug Moore: It would be more of a project-based one-time milestone.

Speaker #4: Okay, that's helpful. With respect to the hardware side of the business, I mean, obviously, there's a lot of price inflation happening with components. We did see consistent margins this quarter, but going forward, how should we think about that dynamic?

Thanos Moschopoulos: Okay, that's all. With respect to the hardware side of the business, obviously a lot of price inflation happening with components. We could see consistent margins this quarter, going forward, how should we think about that dynamic? Would you expect to be able to pass through those costs and maintain margins? What do you see on the component side?

Speaker #4: Would you expect to be able to pass through those costs and maintain margins, or what do you see on the component side?

Doug Moore: We are seeing some challenges, of course, in bringing in parts and increased costs, especially with memory particular and certain other aspects. The target range remains the same, the 56% to 60%. We manage pricing how we need to, I can't directly say everything would be passed along, but our target range remains the same, and doing our best to mitigate those cost increases.

Speaker #5: We are seeing some challenges, of course, in bringing in parts and increased costs, especially with memory, particularly in certain other aspects. The target range remains the same—the 56 to 60 percent.

Speaker #5: We manage pricing how we need to, but I don't think I can directly say everything would be passed along. However, our target range remains the same, and we're doing our best to mitigate those cost increases.

Speaker #4: Okay. And last one for me, Brian, any update of note with respect to your government and defense opportunities on either side of the border?

Thanos Moschopoulos: Okay. Last one from me. Brian, any update of note with respect to your government and defense opportunities on your side of the order?

Speaker #5: Yeah. So, we are very encouraged by the U.S. international and domestic opportunities that we see for Evertz—much of it dual-purpose technologies, where we have decades of domain knowledge and expertise demonstrated in live news and sports at the highest level.

Brian Campbell: Yeah. We are very encouraged by the US international and domestic opportunities that we see for Evertz. Much of it dual purpose technologies, where we have decades of domain knowledge and expertise demonstrated in the live news, sports at the highest level. Those technologies, common criteria certified, NIAP listed for installation in secure facilities. We have routing platforms that can handle the top secret, and other levels as well too. We're very well-positioned to be able to grow with that area. It's something that we do have significant experience in some high-profile locations that we can't necessarily speak to. What we have done is increase our emphasis and awareness domestically and also internationally. We've opened up an Evertz office in Colorado Springs, and we have one in Ottawa as well too.

Speaker #5: Then those technologies come in, criteria-certified and NIAP-listed, for installation in secure facilities. We have routing platforms that can handle Top Secret, Secret, and other levels as well.

Speaker #5: So, we're very well positioned to be able to grow with that area. It's something that we do. We do have significant experience in some high-profile locations that we can't necessarily speak to, but what we have done is increase our emphasis and awareness domestically and also internationally.

Speaker #5: So, we've opened up the Evertz office in Colorado Springs, and we have one in Ottawa as well. You may have seen that we participated with the Canadian delegation that included the Canadian Secretary of State for Defense Procurement and the CEO of DIA.

Brian Campbell: You may have seen that we participated with a Canadian delegation that included the Canadian Secretary of State for Defence Procurement and CEO of DIA into the SAHA Defense and Aerospace Exposition in Istanbul. That was quite a large event and contingent and we were front and center there. Those initiatives we're continuing to work very strongly, and I'll pass it over to Doug to add a little bit more color to that financial color.

Speaker #5: To the SAHA Defense and Aerospace Exposition in Istanbul. That was quite a large event and contingent, and we were front and center there. So those initiatives, we're continuing to work very strongly on, and I'll pass it over to Doug to add a little bit more color to that—financial color.

Speaker #5: Yeah, I mean, from a quantification perspective, we don't separately disclose sales to government or military in our financial statements. However, I could comment that over the past year—

Doug Moore: Yeah, from a quantification perspective, we don't separately disclose sales to government military in our financial statements. However, I could comment that over the past year, sales to government military aerospace customers combined to be over CAD 50 million in the year and also over 10% of revenue. Just to give you some kind of context of the scope.

Speaker #5: Sales to government, military, and aerospace customers combined to be over $50 million in the year, and also over 10 percent of revenue. So, just to give you some kind of context of the scope.

Speaker #4: That's very helpful color. I appreciate it. I'll pass it along. Thank you.

Thanos Moschopoulos: That's very helpful color, appreciate it. I'll pass it on. Thank you.

Speaker #3: Your next question comes from the line of Robert Young from Canaccord Genuity. Please go ahead.

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

Speaker #5: Hi, great to hear the context around the defense sector. I was wondering if you could go a little bit deeper there, just to talk about how you're going to market.

Robert Young: Hi. Great to hear the context around the defense sector. I was wondering if you could go a little bit deeper there just to talk about how you're going to market. Are you doing that with a partner? Are you building out any partner relationships specific to defense, or are you pursuing any specific opportunities in defense currently with partners? Can you talk about the go to market?

Speaker #5: Are you doing that with a partner, or are you building out any partner relationships specific to defense? Are you pursuing any specific opportunities in defense currently with partners?

Speaker #5: Can you talk about the go-to-market? Yeah, so the answer is yes to all of the above. We have, in the past, done so.

Brian Campbell: The answer is yes to all of the above. We have in the past done so like that. Many of the large installations that we have in the US or NATO areas have been through US or international large prime contractors. Evertz providing very meaningful subsystems and solutions, secure environments. There is more public context around that. You may have seen recently that Evertz joined ATHORA as a foundational partner advancing sovereign Canadian defence interoperability. This is led by Calian and Evertz brings real-time operational infrastructure, secure networking, data transport, and data transport expertise to these next generation defense modernization opportunities that we are seeing domestically in Canada. Similarly, Evertz has joined Babcock’s Team INSPIRE to provide next generation strategic communications for the Canadian Armed Forces. Babcock is a UK-based prime contractor that we have experience with as well too.

Speaker #5: Like that, many of the large installations that we have in the US or NATO areas have been through US or international large prime contractors.

Speaker #5: So, Evertz is providing very meaningful subsystems and solutions in secure environments. There's more public context around that. So you may have seen recently that Evertz joined Athora as a foundational partner advancing sovereign Canadian defense interoperability.

Speaker #5: This is led by Callian, and Evertz brings real-time operational infrastructure, secure networking, data transport, and data transport expertise to these next-generation defense modernization opportunities that we're seeing domestically in Canada.

Speaker #5: Similarly, Evertz has joined Babcock's Team Inspire to provide next-generation strategic communications for the Canadian Armed Forces. Babcock is a UK-based prime contractor that we have experience with as well, too.

Speaker #5: So, those are a couple of the recent public domain relationships that we're very much leaning into and are significantly contributing to these opportunities.

Brian Campbell: Those are a couple of the recent public domain relationships that we are very much leaning into and are significantly contributing to these opportunities.

Speaker #4: Okay, great. Great to hear about all those efforts. That $50 million revenue number you shared—how would that compare with the last five years, for example?

Robert Young: Okay. Great to hear about all those efforts. That CAD 50 million revenue number you shared, how would that compare with the last five years, for example? Are you seeing a meaningful increase in opportunities or any increase in deal size? Is there anything to put context around how much of that defense spend or defense opportunity is new and how much has already been a part of Evertz business?

Speaker #4: Are you seeing a meaningful increase in opportunities, or any increase in deal size? Is there anything to put in context around how much of that defense spend or defense opportunity is new, and how much has already been a part of Evertz's business?

Speaker #5: So, that would be roughly a 12 percent increase over the prior year. It's been lumpy because of big projects in the past, and we would foresee it to be like that in the future.

Brian Campbell: That would be roughly a 12% increase over the prior year. It's been lumpy because of big projects in the past, we would foresee it to be like that in the future. We are looking at large programs. Those don't happen instantaneously. As you know, you often go through a RFI stage, RFP, and then contracting. Definitely, it takes time, but we're really encouraged by the opportunities we see in front of us.

Speaker #5: But we are looking at large programs; those don't happen instantaneously. As you know, you often go through an RFI stage, an RFP, and then contracting.

Speaker #5: It definitely takes time, but we're really encouraged by the opportunities we see in front of us.

Speaker #4: Yeah. Maybe last question for me would be around the KASMA renegotiations. I think you still manufacture the bulk of your product in Canada, and I'm curious about what you might have done to prepare for any change in that.

Robert Young: Yeah. Maybe the last question from me would be around the CUSMA renegotiations. I think you still manufacture the bulk of your product in Canada, I'm curious about what you might have done to prepare for any change in that. I know the North American revenue base has declined the last two quarters, I'm curious if that's a function of upcoming CUSMA or if there's some other factor. Then I'll pass the line.

Speaker #4: I know the North American revenue base has declined the last two quarters, and I'm curious if that's a function of upcoming KASMA or if there's some other factor.

Speaker #4: And then I'll pass the line.

Speaker #5: Yeah. I mean, I can comment that we continue to ramp up capacity outside Pittsburgh there. So now we've spent during the year, we spent between 7 and 8 million dollars in, I think, three or four million was associated with land and building, but also an additional equipment and leasehold improvements to ramp up our ability to manufacture and just outside Pittsburgh there in Indiana.

Doug Moore: Yeah, I can comment that we continue to ramp up capacity outside Pittsburgh there. Now during the year, we spent between CAD 7 and 8 million, and I think CAD 3 million or CAD 4 million was associated with the land and building, but also additional equipment and leasehold improvements to ramp up our ability to manufacture just outside Pittsburgh there in Indiana. Currently, the vast majority of what we're selling is USMCA compliant and not being subjected to tariffs. It's something we'll have to monitor and address, but as of this time, it's not a huge, at least a clear impact.

Speaker #5: But currently, the vast majority of what we're selling is USMCA compliant and not being subjected to tariffs. So it's something we'll have to monitor and address.

Speaker #5: But as of this time, it's not a huge, at least a clear, impact.

Speaker #4: Well, I guess the question I'm trying to ask is, if the negotiations were to yield an end to that agreement, how should investors be thinking about how well Evertz is prepared?

Robert Young: Well, I guess the question I'm trying to ask is if the negotiations were to yield an end to that agreement, how should investors be thinking about how well Evertz is prepared?

Speaker #5: Yeah. So, I mean, we will have to add additional capacity to our United States facility, but we will have six months to fully address those plans properly.

Doug Moore: Yeah. We will have to additional capacity to our United States facility, but we will have six months to fully address those plans properly.

Speaker #4: Okay. Thanks.

Robert Young: Okay, thanks.

Speaker #3: Your next question comes from the line of Paul Triber from RBC Capital Markets. Please go ahead.

Operator: Your next question comes from the line of Paul Treiber from RBC Capital Markets. Please go ahead.

Speaker #4: Good afternoon. Thanks for the detail on the defense business. Just another one, if I may, on defense—is defense revenue skewed more towards hardware or recurring software?

Paul Treiber: Good afternoon. Thanks for the detail on the defense business. Just another one, if I may, on defense is, did defense revenue, is it skewed more towards hardware or reoccurring software, or does it match the mix of the entire company?

Speaker #4: Does it match the mix of the entire company?

Speaker #5: So it would be more skewed towards hardware. Software is a large component of the modernization issues, and it is part of those sales to that sector.

Brian Campbell: It would be more skewed towards hardware. Software is a large component of the modernization issues, and it is part of those sales to that sector. We do not have the analysis to tell you currently what the product mix is. We're not disclosing that at this time.

Speaker #5: We do not have the analysis to tell you currently what the product mix is. We're not disclosing that at this time.

Speaker #4: Okay, that's helpful. Second question is just on the international revenue growth. You mentioned there's a degree of lumpiness due to project timing. Was it related to those—I think there are two project milestones that you hit?

Paul Treiber: Okay. That's helpful. The second question is just on the international revenue growth. You mentioned there's a degree of lumpiness due to project coming. Was it related to those, I think there's two projects, milestones that you hit. Were those in Europe?

Speaker #4: Were those in Europe?

Speaker #5: No, actually, they were in North America. They're not correlated in this case. This is just project deliveries that happened to be in Q4 and in the international region.

Doug Moore: No, actually they were in North America. They're not correlated in this case. This is just project deliveries that happened to be in Q4 in international region. Yeah, they're not related in this case.

Speaker #5: So yeah, they're not related in this case.

Speaker #4: Okay. And when you look forward to international, do you see that momentum—that growth in international—being sustained? And is that segment going through a period of stronger growth here?

Paul Treiber: Okay. When you look forward to international, do you see that momentum, that growth in international sustained, is that segment going through a period of stronger growth here?

Doug Moore: We had an improvements in Western Europe for sure, but there's still a fair amount of political unrest in certain jurisdictions. Year-over-year, there was definitely an improvement in the UK and Western Europe.

Speaker #5: We did significantly release—we had improvements in Western Europe, for sure. So there's still a fair amount of political unrest in certain jurisdictions.

Speaker #5: But year over year, there was definitely an improvement in the UK and Western Europe.

Speaker #4: Okay. And then just lastly, during the quarter—I mean, obviously, there was the conflict in the Middle East. There’s also the World Cup in North America.

Paul Treiber: Okay. Just lastly, just during the quarter, obviously there's the conflict in the Middle East, there's also the World Cup in North America. With all those large events going on, did the conflict have any impact on procurement discussions, what you've seen through the quarter? Conversely, the World Cup, was there a benefit from the World Cup in the quarter?

Speaker #4: With all those large events going on, did the conflict have any impact on procurement discussions? What have you seen through the quarter? And then, conversely, there's a World Cup.

Speaker #4: Was there a benefit from the World Cup in the quarter?

Speaker #5: The benefit from the World Cup would have happened in prior quarters, as infrastructures updated their facilities well in advance of the actual event—similar to the way the Olympics and other events happen.

Brian Campbell: Benefit for the World Cup would've happened in prior quarters as infrastructures updated their facilities well in advance of the actual events. Similar to the way the Olympics and other events happen.

Speaker #5: So not directly to Q4.

Doug Moore: Not directly to Q4.

Speaker #4: Okay, so there's no late catch-up of those deployments.

Paul Treiber: Okay, there's no late catch-up of those deployments?

Speaker #5: No. No, it's not so.

Doug Moore: No. There's not to.

Speaker #4: Okay. Thanks for taking the questions.

Paul Treiber: Okay. Thanks for taking the questions.

Speaker #5: Thank ank you.

Doug Moore: Yeah.

Speaker #3: 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 would now turn the call over to Brian Campbell. Please continue, sir.

Speaker #5: Thank you, John. I'd like to thank the participants for their questions and to add that we are pleased with the company's performance during fiscal 2026, which saw record sales of $515.8 million, including $240.7 million in software and services revenue, solid gross margins of 59.3% for the year, which, together with Evertz's disciplined expense management, yielded earnings per share of $0.85.

Brian Campbell: Thank you, John. I'd like to thank the participants for their questions and to add that we are pleased with the company's performance during fiscal 2026, which saw record sales of CAD 515.8 million, including CAD 240.7 million in software and services revenue, solid gross margins of 59.3% for the year, which together with Evertz disciplined expense management, yielded earnings per share of CAD 0.85. We are entering into fiscal 2027 with significant momentum, fueled by over 33 million shipments in May, with a combined purchase order backlog plus shipments totaling in excess of CAD 270 million.

Speaker #5: We are entering into fiscal 2027 with significant momentum, fueled by over $33 million of shipments in May, with a combined purchase order backlog plus shipments totaling in excess of $270 million.

Speaker #5: By the continued operation or adoption of, and successful large-scale deployments of, Evertz's IP-based software-defined video networking and cloud solutions by the largest broadcast, new media service providers, and enterprises in the industry, by the continuing success of Dreamcatcher Bravo and our state-of-the-art IP replay suite, and we're very encouraged by the opportunities in the government, defense, and aerospace sector.

Brian Campbell: By the continued adoption of and successful large-scale deployments of Evertz IP-based software-defined video networking and cloud solutions by the largest broadcast new media service providers and enterprises in the industry, by the continuing success of DreamCatcher, BRAVO, and our state-of-the-art IP replay suite. We're very encouraged by the opportunities in the government, defense, and aerospace sector. With the Evertz significant investments in software-defined IP, IT, and cloud technologies, the over 600 industry-leading SDN deployments, and our capabilities of the staff, Evertz is poised to build upon our leadership position in the sector. Thank you and good night.

Speaker #5: With Evertz's significant investments in software-defined IP, IT, and cloud technologies, the over 600 industry-leading SDN deployments, and our capabilities of the staff, Evertz is poised to build upon our leadership position in the sector.

Speaker #5: Thank you and good night.

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

Q4 2026 Evertz Technologies Ltd Earnings Call

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