Evertz Technologies Limited

Good afternoon, ladies and gentlemen, and welcome to the Everts Q3 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 zero for the operator. This call is being recorded on Wednesday, March 4, 2026. I would now like to turn the conference over to Brian Campbell, Executive VP of Business Development. Please go ahead, sir. Thank you, John.

Good afternoon, everyone, and welcome to Ebert's Technologies conference call for our fiscal 2026 third quarter and January 31st, 2026. 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 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'll begin by providing a few highlights and then Doug will provide additional detail. First off, 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. 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 $200,000. 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 $0.24 for the quarter. Investment in research and development totaled $36.7 million. Ebert's working capital was $133.2 million, including cash of $24.8 million as at January 31, 2026. At the end of February, Everett's purchase order backlog was more than $246 million, and shipments during the month of February were $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 the growing adoption of Evert's IP-based software-defined video networking solutions, Evert's 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. And today, the Board of Directors declared a regular quarterly dividend of 20.5 cents per share payable on or about March 20th. I will now hand over to Doug Moore-Everts, Chief Financial Officer, to cover our results in greater detail.

All right. 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 136.9 in the third quarter of fiscal 2025. For the nine months ending January 31st, 2026, sales were 384.2 million, up 10.4 million, or 3%, for the nine-month period ending January 31st, 2025. Quarterly hardware revenue was 76.8 million, a decrease from 81.2 million the prior year, while 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. Year to date, quarter revenue is up 1% year over year to 209.3 million for the nine months ending January 31st, 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. Look at our 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 the international region, which were $43.7 million compared to $37.8 million in the prior year. 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 January 31st, revenues in the Canadian-US region were up 2% to $273.6 million, while international revenue increased 3% to $110.6 million, compared to $105.9 million in the same period last year. For the nine months period ending January 31st, international sales represented 29% of total sales compared to 28% in the 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 31st, the gross margin was 59.3%. 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 $18.6 million in the third quarter, a decline of 0.6 million or 3% for the same period last year. Selling and amending expenses as a percentage of revenue were approximately 13.3% compared to 14% for the same period last year. Sequentially, selling and amending is down approximately half a million dollars from Q2. That decline is primarily driven by the timing of trade show and promotions costs, which decreased about $900,000 as in Q2 we attended our IBC trade show last quarter. For the nine-month ending to January 31st, sun and mint expenses were $56.3 million, or 14.7% of sales. That's compared to $55.2 million, or 14.7% of sales for the same period last year. Research and development expenses were $36.7 million for the third quarter. That represents a $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 nine months ending January 31st, R&D expenses were $110.4 million, or 28.7% of sales, as compared to $110.2 million for the same period last year. ITCs for the quarter were $4.8 million as compared to ITCs of $3.6 million in the prior year of third quarter. 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 of $3.9 million. The largest driver behind the current period loss was a translation of U.S. dollar assets into Canadian dollars given a decline of the U.S. dollar versus the Canadian dollar over the quarterly period. We had closed October 31st at approximately 1.401 US to Canadian, and that dropped to approximately 1.3612 of that January 31st. So nine months into January 31st, foreign exchange resulted in a loss of 0.8 million compared to a gain of 4.7 million the same period last year. Turning to the discussion of liquidity of the company, cash as at January 31st, 2026 was 24.8 million. A decline compared to cash of $111.7 million as of April 30, 2025. The decline was primarily due to $91 million in dividends distributed in the quarter, including $75.5 million in 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 30, 2025. A look 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 in non-cash working capital and current taxes. If the effects of change in non-cash working capital and 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 last-time byproducts and also securing parts for planned production. We increased raw materials. The company used cash at $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 $4.4 million, replacing aircraft previously sold during the year. The company used cash in financing activities at $92.4 million, which, as noted, was principally driven by dividends paid at $91 million, including the special dividend of $75.5 million. Finally, looking at our share capital position at January 31, 2026, Shares outstanding were approximately 75.5 million, and auctions and share-based RSUs outstanding were approximately 4.5 million. Weighted average shares outstanding were 75.5 million, and weighted average diluted shares were 76.7 million as of January 31st. 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, 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.