Evertz Technologies Q3 Earnings Call Highlights

Evertz Technologies (TSE:ET) reported record fiscal third-quarter sales and highlighted continued growth in software and services revenue, while management pointed to project timing as a key factor behind softer results in North America and noted increasing activity around government and defense opportunities.

Record quarterly revenue, led by software and international growth

On its fiscal 2026 third-quarter earnings call for the period ended Jan. 31, 2026, Evertz said sales totaled a record CAD 139.3 million, up 5% sequentially and up 2% from CAD 136.9 million in the same quarter a year earlier.

The company’s software and services segment continued to expand. Management said recurring software services and other software revenue rose 12.3% year-over-year to CAD 62.5 million, while hardware revenue was CAD 76.8 million, down from CAD 81.2 million a year earlier. Software and services represented approximately 45% of quarterly revenue.

Regionally, quarterly revenue in Canada and the U.S. declined 3% year-over-year to CAD 95.6 million, while international revenue increased 15% to CAD 43.7 million. International sales represented 31% of total sales in the quarter versus 28% in the prior-year period.

During the question-and-answer session, management attributed the international strength largely to “a couple of projects in Europe” that were completed during the quarter, characterizing the impact as project-related rather than a broader macro shift.

Margins within target range; earnings impacted by foreign exchange

Gross margin for the quarter was 58.3%, up from 57.8% in the prior-year quarter and within the company’s stated 56% to 60% target range. Net earnings were CAD 18.7 million, producing fully diluted earnings per share of CAD 0.24.

Chief Financial Officer Doug Moore said foreign exchange was a headwind in the quarter, with a CAD 2.3 million loss compared with a CAD 3.9 million gain a year earlier. He said the primary driver was translation of U.S. dollar assets into Canadian dollars as the U.S. dollar weakened over the period, moving from roughly 1.42 at Oct. 31 to about 1.3612 at Jan. 31.

On sequential margin changes, management said the quarter’s product mix was the main driver, and added that international margins were “a bit tighter than elsewhere,” creating some drag in the period.

Expenses steady; management flagged higher trade show costs in Q4

Selling and administrative expenses were CAD 18.6 million, down 3% from the prior year, and represented about 13.3% of revenue versus 14% a year earlier. Moore said S&A declined sequentially due mainly to the timing of trade show and promotional costs, noting the company attended the IBC trade show in the prior quarter.

Research and development expense was CAD 36.7 million, roughly flat year-over-year, representing 26.4% of revenue. Moore said investment tax credits were CAD 4.8 million versus CAD 3.6 million in the prior-year quarter.

Asked about near-term operating expense trends, management said trade show costs are expected to rise in the fiscal fourth quarter due to the NAB event. The company indicated it would expect an increase of roughly CAD 1.5 million to CAD 2.0 million from Q3 to Q4 related to the show, and also cited the potential for higher R&D materials and prototype costs, historically about an additional CAD 0.5 million in Q4.

Backlog and shipments; inventory build tied to component procurement

Management said purchase order backlog at the end of February was more than CAD 246 million, and shipments during February were CAD 32 million. On the call, Moore acknowledged February shipments were “a bit light,” while describing the backlog increase as a reflection of strong demand and the inherent lumpiness of project timing.

The company also discussed a quarter-over-quarter inventory build. Management said it was driven primarily by procurement realities, including certain components (such as memory) being on allocation and the need to secure parts to maintain the ability to ship. Moore added that the company used about CAD 10 million in cash and inventory in the quarter to purchase “last-time buy” products and secure parts for planned production.

When asked about rising memory costs and potential margin impact, management said it analyzes bills of materials at an individual level and may address material cost increases through pricing when warranted. It added that increased component costs had not affected margins in the quarter, though they did influence procurement decisions and inventory levels.

Cash position and dividends; increased focus on government and defense

Evertz reported cash of CAD 24.8 million at Jan. 31, down from CAD 111.7 million at April 30, 2025. Moore said the decline was primarily due to CAD 91 million in dividends distributed during the quarter, including CAD 75.5 million in special dividends. Working capital was CAD 133.2 million at quarter-end, compared with CAD 206.9 million at April 30, 2025.

The board declared a regular quarterly dividend of CAD 0.205 per share, payable on or about March 20.

Management also discussed efforts to expand further into government and defense markets. Executive Vice President of Business Development Brian Campbell, speaking from an Ottawa security and defense conference, said the company is encouraged by initiatives related to defense procurement, but characterized defense as a longer-cycle market. He highlighted areas he described as relevant to defense customers, including:

• Monitoring, command-and-control solutions and transport
• Multi-viewers and signal processing
• DreamCatcher live production, replay, and related storage solutions
• RF solutions and the industry push toward digitization of IF/RF (DIFI)

Campbell also noted that core elements of Evertz’s technologies are Common Criteria and NIAP certified, which he said aligns with the direction of new spending initiatives.

Addressing North American revenue softness, Campbell said management views the slower growth as largely timing-related, describing the business as subject to lumpiness tied to project schedules. He added the company expected to reconnect with customers at the NAB event later in April.

In closing remarks, management said it was entering the final quarter of fiscal 2026 with momentum supported by February shipments and backlog, as well as continued adoption of the company’s IP-based software-defined video networking and cloud solutions and ongoing traction for its DreamCatcher BRAVO production suite.

About Evertz Technologies (TSE:ET)

Evertz Technologies Ltd is a Canadian provider of telecommunications equipment and technology solutions to the television broadcast and new-media industries. Evertz equipment is used in the production, post-production and transmission of television content. Its solutions are sold to content creators, broadcasters, and service providers looking to support multi-channel digital and high definition television, and next generation Internet Protocol environments. More than half of the firm’s revenue is generated in the United States.