Evertz Technologies Limited

Good afternoon, ladies and gentlemen, and welcome to the e-verse Q2 of fiscal 2026 conference call. At this time, online is in lesson-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 zero for the operator. I would now like to turn the conference over to Brian Campbell, Executive Vice President of Business Development. Thank you. Please go ahead.

Thank you, Mina. Good afternoon, everyone, and welcome to Ebert's Technologies conference call for our fiscal 2026 second quarter, ended October 31st, 2025, with Doug Moore, Ebert's Chief Financial Officer, and myself, Brian Campbell. Please note that our financial press release and MD&A will be available on CDAR 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 Ebert's results, I will begin by providing a few highlights, and then Doug and I will provide additional detail. First off, sales for the second quarter totaled $132.7 million, up 18.4% sequentially from the prior quarter, and revenue in the U.S.-Canada region was $98.5 million, up 24% sequentially. reoccurring software services and other software revenue totaled $60.7 million in the quarter, an increase of 17.6% sequentially from the prior quarter. Our sales base is well diversified with the top 10 customers accounting for approximately 53% of sales during the quarter, with no single customer accounting for more than 16% of sales. In fact, we had 98 customer orders of over $200,000 in the quarter. Gross margin in the quarter was 77.8 million, or 58.6%, compared to 59.3% in the second quarter of the prior year. Net earnings were 18.6 million, resulting in fully diluted earnings per share of 24 cents for the quarter. Investments in research and development totaled 36.6 million. Ebert's working capital was 205.79, including cash of 96.7 million as of October 31st, 2025. Operational highlights for the quarter include Ebert's stellar presence at the International Broadcast Conference, where Ebert's innovative ENX Convert Media Infrastructure platform was recognized with a TV Tech Best of Show Award, and Evert's Frame Rate Conversion platform, which is purpose-built for premium live sports and news production and global content delivery, won a TVB Europe Best of Show Award. At the end of November, Evert's purchase order backlog was more than $240 million, and shipments during the month of November were $46 million. We attribute the strong financial performance and robust 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, and specifically to the growing adoption of Evert's IP-based software-defined video networking solutions, Evert's 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. And today, Everett's Board of Directors declared a regular quarterly dividend of 20.5 cents per share payable on or about December 24th. Furthermore, Everett's Board of Directors also declared a special dividend of $1 per share, also payable on December 24th. The special dividend reflects both the strong long-term operating performance of the company and its solid balance sheet, thereby enabling a distribution of cash over and above what is considered necessary to meet known commitments and maintain adequate reserves. I'll now hand over to Doug Moore, EGIT's Chief Financial Officer, to cover our results in greater detail.

Thank you, Brian. All right. So revenue was $132.7 million in the second quarter of fiscal 2026, a 6% increase compared to $125.3 million in the second quarter of fiscal 2025. For the six months ending October 31st, 2025, revenues were $244.9 million, up 8 million or 3% compared to the six months ending October 31st, 2024. Quarterly hardware revenue increased slightly year-over-year from $70.5 million to $72 million, a 2% increase, while software and services revenue also increased from $54.8 million to $60.7 million, or 11%. Revenue from software and services represented approximately 46% of total revenue in the quarter. Year-to-date, hardware revenues up 5% to $132.5 million through the six months period ending October 31st, while revenues from software and services were up slightly to $112.4 million from $110.7 million. Looking at regional revenues, quarterly revenues in the U.S.-Canadian region were $98.5 million compared to $94.8 million in the prior year, while quarterly revenues in the international region were $34.2 million compared to $30.4 million in the prior year. The international segment represented 26% of total sales per quarter compared to 24% in the same period last year. For the six months ended October 31st, international revenue was $66.9 million compared to $68.1 million in the same period last year, a decline of 2%. And then for the six-month period ending, international sales represented 27% of total sales compared to 29% in the same period last year. Gross margins for the quarter were 58.6% compared to 59.3% in the prior year. The gross margin has down sequentially for the past two quarters, driven by a varied product mix delivered in the quarter, but overall was within our 56% to 60% target range. For the six months ending October 31st, the gross margin was 59.9% at the very high end of that same target range. Turning to selling and administrative expenses, S&A was $19.1 million in the second quarter, an increase of .7 million or 4% from the same period last year. And selling and admin expenses as a percentage of revenue were approximately 14.4% compared to 14.7% for the same period last year. Sequentially, S&A is up approximately 5 point, sorry, 0.5 million from Q1. That includes a $0.8 million increase in trade shows and travel costs quarter over quarter, the largest driver of which was our attendance at the IBC show. For the six months ending October 31st, S&A expenses were $37.7 million, or 15.4% of sales, compared to $36 million, or 15.2% of sales for the same period last year. Research and development expenses were $36.6 million for the second quarter, which represents a $0.3 million increase from the same period last year. As a percentage of revenue, R&D expenses were 27.6% compared to 29% in the prior year. Sequentially, R&D expenses were declined, $0.4 million in the first quarter, July 31st. The decline was primarily due to lower salary and benefit costs, including the impact of less co-ops that we have in T1 during the summer. For the six months ending October 31st, R&D expenses were $73.6 million compared to $73.7 million for the same period last year. Investment tax credits for the quarter were $4.4 million compared to credits of $3.6 million the prior year second quarter. And then FX for the second quarter resulted in a gain of $0.8 million. It's pretty consistent with the foreign exchange gain of $0.8 million the second quarter last year. While for the six months ending October 31st, foreign exchange resulted in a gain of $1.5 million compared to a gain of $28 million in the same period last year. And that foreign exchange gain was predominantly driven by a lucrative Canadian dollar compared to the U.S. dollar, which closed at approximately $1.4 as of October 31st, 2025. Now looking at the liquidity of the company, cash as of October 31st, 2025 was $96.7 million. That's a decline of cash compared to cash of $111.7 million as of April 30th. And working capital was $205.7 million as of October 31st, 2025, compared to $206.9 million at the end of April 30th, 2025. Now looking at cash flows for the quarter, the company used cash from operations of $5.4 million, which is net about $26.3 million change in non-cash working capital and current taxes. If the effects of the change in non-cash working capital and current taxes are excluded from the calculation, the company would have generated $25.2 million in cash from operations during the quarter. The biggest use of cash in working capital during the quarter relates to a $19.9 million decrease in payables that was driven by the disbursement of bonuses in the quarter and the net release of $8.1 million of deferred revenue in the quarter. The company used cash of $6.4 million for investing activities, which was principally adjourned by the acquisition of capital assets. And those acquisition of capital assets included the acquisition of land and building that we were renting outside of Pittsburgh, Pennsylvania. That's the facility where we're increasing our manufacturing capabilities. The company used cash in financing activities of 17 million, which was principally driven by dividends paid of 15.1 million and lease payments of 1.1 million. Subsequent to the past quarter end, so just recently, we also renewed our NCIB, which will have an effective date of December 11th. Finally, looking at our share capital position as of October 31st, 2025, shares outstanding were approximately 75.5 million, and options and share-based RSUs outstanding were approximately 2 million. Weighted average shares outstanding were 75.5 million, and weighted average fully diluted shares was 76.6 million as of October 31st. That concludes the review of our financial results and position for the second quarter. Finally, I would like to remind you that some of the statements presented today are forward-looking, subject to a number of risks and uncertainties, and we refer you to the risk factors described in the annual information form in the official reports filed with the Canadian Securities Commission. Brian.