Evertz Technologies Limited

Good afternoon, ladies and gentlemen, and welcome to the eBirds Q4 Investor Conference Call. At this time, all lines are in 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 Par 0 for the operator. These calls may be recorded on June 24, 2026. I would now like to turn the conference over to Brian Campbell, Executive Vice President of Business Development. Please go ahead.

Thank you, John. Good afternoon, everyone, and welcome to Ebertz Technologies' conference call for our 2026 fourth quarter and year-ended April 30th with Doug Moore, Ebertz 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 the year's results, I'll begin by providing a few highlights and then Doug will provide additional details. First off, we had record annual sales in excess of a half a billion dollars coming in at $515.8 million for the year. This includes revenue in the international region of $148 million, up 16% from the prior year. reoccurring software services and other software revenue increased percent year over year totaling 240.7 million a 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 net earnings were at $64.4 million resulting in a fully diluted earnings per share of $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 $200,000. During the fourth quarter, sales were up 3% year-over-year to $131.6 million. Reoccurring software, services, and other software was $65.8 million, an increase of 17% from the prior year. Gross margin in the quarter was $78.1 million versus $78.9 million in the fourth quarter previous year. Net earnings in the quarter were $15.2 million as compared to $13 million in the corresponding period last year. Fully diluted earnings per share were $0.20 up from $0.17 in the previous fourth quarter. Operational highlights for the quarter included Hebert's stellar presence at the National Association of Broadcasters NAB show in Las Vegas where Hebert's won prestigious future Best of Show awards distributed across the primary industry publications presented by TV Technology. The Bravo Best of Late recognized for expanding multi-program live production capabilities of a single event. ENX, an innovative media core specifically for hybrid IP and SDI facilities. Excalibur, a high-density encoding platform engineered for scalable media transport. The MMA and Nucleus product, one in the AV technology area for IPMX-certified IP gateway solution built to bridge Pro-AD and broadcast environments with seamless IPMX and ST2110 integration. At the end of May, Evert's purchase order backlog was more than $237 million, and shipments during the month of May were $33 million. We attribute the strong financial performance and robust combined shipments of 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 Everett's IP-based software-defined video networking solutions, Everett's IT and cloud solutions, our immersive 4K, 8K ultra-high definition solutions, our state-of-the-art screen capture IP replay and live production with Bravo Studio featuring the iconic Studer audio. Today, ERIT's Florida directors declared a regular quarterly dividend of 20.5 cents per share, payable on or above July 13th. I'll now hand over to Doug Moore, ERIT's Chief Financial Officer, to cover our results in greater detail.

Thanks, Brian, and 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, 3% increase compared to the $127.8 million in the fourth quarter of fiscal 2025. While for the year ending April 30th, 2026, sales were $515 million, up $14.2 million or 2.8% from the prior year. Quarterly hardware revenue was $65.7 million. That's 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. Revenue from software and services represented approximately 50% of the total revenue in the quarter. For the year, hardware revenues declined 1% to $275.1 million, while revenues from software and services increased 8% to $222.6 million in the prior year. Software 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. 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. The international segments represented 28% of total sales in the quarter, as compared to 17% in the same period last year. For the year ended April 30th, 2026, revenues in the Canadian U.S. 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. For the year ending April 30th, 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 56 to 60% target range. Turning to selling and administrative expenses, S&A was $20.7 million in the fourth quarter. That's relatively consistent with the same period last year. The 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 amending 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 NAV trade show in the fourth quarter. For the year ending April 30th, selling and amending 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. Restriction development expenses were $37.7 million for the fourth quarter. That represents an increase of $1.2 million for 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 April 30th, R&D expenses were $148.1 million, or 28.7% sales. as compared to $146.8 million for January last year, an increase of approximately 1% year over year. Foreign exchange for the fourth quarter resulted in the 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, U.S. dollar versus Canadian dollar declined modestly from 1.38 to 1.37 to 1. as opposed to the fourth quarter last year with a U.S. dollar decline more significantly from 1.44 to 1.41. For the year ending April 30th, poor 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 of April 30th was $19.1 million. a decline compared to cash of $111.7 million as of April 30th, 2025. 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. Working capital was $131.7 million as of April 30th, 2026, compared to $206.9 million at the end of April 30th, 2025. Looking now at cash flows for the quarter, for the three months ended April 30th, cash from operations were $18.4 million. That's compared to $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 $19.1 million for the fourth quarter this year compared to $17.7 million for the same period last year. In the quarter, the company used $3.9 million for investing activities. That's particularly for the acquisition of property, plant, and equipment. And 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. For the year, the company generated cash from operations of $76.2 million, which is a net of a $10.2 million change in non-cash, working capital, and current taxes. 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 vesting activities, which is principally driven by the acquisition of property, plants, and equipment of $18.7 million, including the land and building we've purchased outside Pennsylvania. And the company used cash in financing activities of $147.1 million, which as previously noted was principally driven by dividends paid. Finally, look at our share capital position as of April 30, 2026. Shares outstanding were approximately $75.6 million, and options and shares based are assumed 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 fourth quarter and year-end. And 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 in the official reports filed with the Canadian Securities Commission. And Brian, back to yourself.

Thank you. John, we're now ready to open the call to questions.

Thank you. This will now begin the question and answer session. Should you have a question, please press star followed by the number 1 on your touchtone phone. You will hear a prompt if your hand has been raised. Should you have a question, please press star 1. Should you wish to decline from the polling process, please press the star followed by the number 2. If you're using a speakerphone, please lift the handset before pressing any keys. Our first question comes from the line of Thanos Mastropoulos from BMO Capital Markets. Please go ahead.

Hi, good afternoon. It 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, you know, just sort of the ongoing trends and driver that we've talked about in prior quarters?

I could call it. There was a couple of larger project milestones that we met in the quarter that would have caused about $7 million, $8 million additional software and services revenue that was released from deferred revenue. There's ongoing, you know, releases and deferrals throughout the year, but that's a bit more substantial and difficult. So, if I had to call it something, if there's two projects that made up between $7 and $8 million worth of offer and service revenue releases.

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

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

Okay. That's helpful. With respect to the hardware side of the business, I mean, obviously a lot of price inflation happening with components. We did see some margins this quarter, but going forward, how should we think about that dynamic? Would you expect to be able to pass through those costs and margins, or what do you think on the component side?

We are seeing some challenges, of course, and bringing in parts and then increased costs, especially with memory in particular, and other aspects. The target range remains the same of the 56 to 60%. We'd be, you know, managed pricing, we need to, but I don't think, 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.

And lastly for me, Brian, any update of note with respect to U.S. government and defense opportunities on the other side of the border?

Yeah, so we are very encouraged by the U.S. international and domestic opportunities that we see for U.S. much of a dual purpose technologies where we have decades of domain knowledge and expertise demonstrated in the live news sports at the highest level, then those technologies by common criteria certified and I have listed for installation in secure facilities and we have routing platforms that can handle the top secret, secret and other levels. as well too, so we're very well positioned to be able to grow with that area. It's something that we do use. 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. So we've opened up Evert's office in Colorado Springs and we have one in Ottawa as well too. You may have seen that we participated with a Canadian delegation that included the Canadian Secretary of State for Defense Procurement and CEO of and 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. So, you know, those initiatives, you know, were continued work. very strongly passes over to Doug to have a little bit more color to that financial color.

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

That's very helpful. I'll appreciate it. I'll pass it on. Thank you.

Your next question comes from the line of Robert Young from Panacor Genuity. Please go ahead.

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? Are you pursuing any specific opportunities in defense currently with partners? Talk about the go-to-market.

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. So Ebers providing very meaningful subsystems and solutions in secure environments. There's more public context around that. So you may have seen recently that Ebers joined Thora as a foundational partner advancing sovereign Canadian defense interoperability. This is led by Talion, and Evers 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. Similarly, 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. So those are a couple of the recent public domain relationships that we're very much leaning into. are significantly contributing to these opportunities.

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? Are you seeing a meaningful increase in opportunities or any increase in deal size? or anything to put context around, you know, how much of that defense spend or defense opportunity is new and how much has already been a part of e-works business?

So that would be roughly a 12% 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. but 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. It definitely takes time, but we're really encouraged by the opportunities we see in front of us.

Yeah, maybe the last question for me would be around the CUSMA 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. I know the North American revenue base has declined the last two quarters, and I'm curious if that's a function of upcoming CUSMA or if there's some other factor, and then I'll pass on.

Yeah, I mean, I can comment that we continue to ramp up capacity outside Pittsburgh there. So now we spent – during the year, we spent between $7 and $8 million, and I think $3 or $4 million was associated with land and building, but also additional equipment and leasehold improvements to ramp up our ability to manufacture just outside Pittsburgh there in Indiana. So 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, but as of this time, it's not a huge, at least a clear impact.

Well, I guess the question I'm trying to ask is if negotiations were to yield, like, an end to that agreement, what would – how should investors be thinking about how well E-Works is prepared?

Yeah, so, I mean, we will have to – additional capacity to our United States facility, but we will have six months to fully address those plans properly.

Okay, thanks. Your next question comes from the line of Paul Tiber from RBT Capital Markets. Please go ahead.

Thanks for the detail on the defense business. Just another one, if I may, on defense is defense revenue, is it skewed more towards hardware or recurring software? Does it match the mix of the entire company?

So it would be more skewed towards hardware. Software is a large component of the modernization issues. 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.

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

No, actually, they were in North America. They're not correlated in this case. This is just... project deliveries that happens to be in Q4 in international regions. So, yeah, they're not related in this case.

Okay. And when you look forward to international, I mean, do you see that momentum, that growth in international sustained? And is that segment going through a period of stronger growth here?

Oh, yeah. We did significantly release – we had an improvement in Western Europe for sure. So there's still a fair amount of political unrest in certain jurisdictions. But year over year, there was definitely improvement in the UK and Western Europe.

Okay, and then just lastly, during the quarrel, and 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, were there any... did the conflict have any impact on procurement discussions, what you've seen through the quarter, and then conversely, like the World Cup, was there a benefit from the World Cup in the quarter?

Benefit for the World Cup would happen 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.

So not directly the Q4.

Okay, so there's no late catch-up of those deployments?

No, it's not there.

Okay. Thanks for taking the questions.

There are no further questions at this time. I'll turn the call over to Brian Campbell. Please continue, sir.

Thank you, John. I'd like to thank the participants for other 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 Evert's discipline expense management, yielded earnings per share of 85 cents. 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. By the continued operate or adoption of and successful large scale deployments of Everett's IP based on 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 air defense and aerospace sector. With the eBritz Significant investments in software-defined IP, IT, and cloud technologies, the over 600 industry-leading SDN deployments, and our capabilities of the staff, Ebertz is poised to build upon our leadership position in this sector. Thank you, and good night.

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