Evertz Technologies Q1 Earnings Call Highlights

Key Points

• Revenue rose 5.5% year over year to CAD 118.3 million in fiscal 2027’s first quarter, driven by a 14% increase in software and services revenue to CAD 58.9 million. Net earnings were CAD 8.0 million, or CAD 0.10 per diluted share, while gross margin declined to 58.6% from 61.4%.
• International revenue increased 17.5% to CAD 38.3 million, helped by the completion of European projects. Evertz’s purchase-order backlog exceeded CAD 259 million at the end of August, with recent order growth broadly based and more hardware-focused.
• Cash fell to CAD 2.5 million from CAD 19.1 million as the company built approximately CAD 20 million of raw-material inventory to address longer AI-related supply-chain lead times. Management said tariffs were not materially affecting results, and the board declared a CAD 0.205 quarterly dividend per share.

Evertz Technologies TSE: ET reported fiscal 2027 first-quarter revenue of CAD 118.3 million, up 5.5% from CAD 112.0 million a year earlier, as growth in software and services and international sales offset a slight decline in hardware revenue.

For the quarter ended July 31, 2026, the company recorded net earnings of CAD 8.0 million, or CAD 0.10 per diluted share. Evertz said software and services revenue rose 14% year over year to CAD 58.9 million and accounted for 49.8% of total revenue, while hardware revenue declined to CAD 59.3 million from CAD 60.5 million.

Chief Financial Officer Doug Moore said the company’s gross margin was 58.6% during the quarter, compared with 61.4% in the prior-year period, though it remained within Evertz’s target range. He said the higher proportion of international revenue partly offset the favorable effect of software and services representing nearly half of revenue.

International sales rise as projects are completed

International revenue increased 17.5% to CAD 38.3 million, representing 32% of quarterly sales, while revenue in the U.S.-Canadian region was largely flat at CAD 79.9 million, compared with CAD 79.5 million a year earlier.

Moore attributed the increase in international revenue to the timing of project completions, including several projects in Europe. He characterized Evertz’s revenue as project-centric and said quarterly regional results can be affected by where projects reach completion and receive customer acceptance.

Software and services growth was also tied to completed projects and related sign-offs, Moore said. While annual license renewals can contribute to third-quarter seasonality, he said the quarterly movement in software and services revenue is primarily driven by volumes and project timing.

Moore described the increasing software and services mix as a longer-term shift in Evertz’s business model. The company remains hardware-centric, he said, but has expanded software solutions for functions that were previously hardware-only and added more service-level agreements.

Backlog exceeds CAD 259 million

Evertz said its purchase-order backlog exceeded CAD 259 million at the end of August, while August shipments totaled CAD 30 million. Executive Vice President of Business Development Brian Campbell said the combined backlog and August shipments exceeded CAD 289 million.

Moore said the backlog increase was relatively broad-based rather than driven by a single contract. The company received some contracts in the CAD 5 million to CAD 10 million range, which he said was not unusual for Evertz. The recent increase in backlog was more hardware-driven than software-driven, although contracts generally contain a mix of offerings.

Some of the incoming business was related to government customers, Moore said, adding that such projects tend to be more hardware-centric. Government and defense sales represented between 5% and 6% of quarterly revenue, he said, while noting that segment demand can be “lumpy.”

Campbell said Evertz had strong government order intake in August and has been working to expand its Canadian government presence. He also cited the company’s existing position in the U.S. government and defense market and, at times, with NATO customers.

Inventory build reduces cash balance

Evertz ended the quarter with cash, net of bank indebtedness, of CAD 2.5 million, down from CAD 19.1 million at April 30. Moore said the decline was primarily driven by a sharp rise in raw-materials inventory.

The company brought in approximately CAD 20 million of raw materials during the quarter, including memory, storage and servers, in response to longer supply-chain lead times associated with AI demand. Moore said Evertz experienced some delays in server receipts during the quarter but was not currently facing part shortages or other supply constraints.

Cash generated from operations was CAD 0.8 million, including a CAD 16 million negative change in non-cash working capital and current taxes. Excluding those effects, operating cash flow was CAD 16.8 million, unchanged from the first quarter of fiscal 2026. Working capital was CAD 215.1 million at July 31, up from CAD 200.2 million at the end of the prior quarter.

Evertz also used CAD 2.1 million for investing activities, including CAD 1.8 million in capital assets and CAD 300,000 for the acquisition of a small AV integrator in the Ottawa region. Financing activities used CAD 16.8 million, principally reflecting CAD 15.5 million in dividend payments.

Tariffs and costs not materially affecting results

Moore said Evertz was not being materially affected by additional tariffs. While some marginal tariff costs have occurred, he said most of the company’s products are not currently being assessed tariffs under the applicable product codes and remain protected by the U.S.-Mexico-Canada Agreement framework.

The company can manufacture certain products in the United States, particularly for government-related projects, but Moore said the majority of its production is not moved through its U.S. operations. He called the tariff environment volatile but said it was not expected to materially affect Evertz’s margin structure or U.S. growth.

Evertz invested CAD 38.5 million in research and development during the quarter, up CAD 1.5 million from a year earlier. The increase included approximately CAD 700,000 in salary costs and CAD 300,000 in patent-related professional fees. The board declared a quarterly dividend of CAD 0.205 per share, payable on or about Oct. 1.

About Evertz Technologies (TSE:ET)

Evertz Technologies Limited TSX: ET designs, manufactures and markets video and audio infrastructure solutions for the production, post-production and transmission of video content. The Company's solutions are purchased by the television broadcast, telecommunications, professional audio-visual, content creator, advanced education, government, military, enterprise, and new media sectors to support increasingly complex multi-channel digital and high-definition, Ultra HD, and high dynamic range formats and next generation high bandwidth low latency IP network environments.

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