Street Calls of the Week
Evertz Technologies Limited reported its Q1 FY2026 earnings, revealing a slight increase in sales to $112.1 million from $111.6 million in Q1 FY2025. The company posted net earnings of $11.9 million, marking a 22% year-over-year increase. Earnings per share (EPS) stood at $0.15, surpassing the forecasted $0.135. Following the earnings announcement, the company’s stock price rose by 1.75%, closing at $12.24. According to InvestingPro data, the company maintains a "GOOD" financial health score of 2.61, with analysis suggesting the stock is currently undervalued based on its Fair Value assessment.
Key Takeaways
- Evertz Technologies exceeded EPS expectations with $0.15 against a forecast of $0.135.
- The company’s stock price increased by 1.75% after the earnings release.
- Net earnings rose by 22% year-over-year, reflecting strong financial performance.
- A significant portion of revenue, 46%, was driven by software and services.
- The company maintains a robust cash balance of $124.3 million.
Company Performance
Evertz Technologies demonstrated solid performance in Q1 FY2026 with a slight increase in sales compared to the same period last year. The company continues to strengthen its position in the broadcast and media technology sector, with a diversified customer base and no single customer accounting for more than 9% of sales. The U.S.-Canadian region contributed significantly to the revenue, generating $79.5 million.
Financial Highlights
- Revenue: $112.1 million, up from $111.6 million in Q1 FY2025.
- Net earnings: $11.9 million, a 22% increase year-over-year.
- Earnings per share: $0.15, compared to $0.135 forecasted.
- Gross margin: 61.4%, an improvement from 59.4% in the previous year.
- Cash balance: $124.3 million.
Earnings vs. Forecast
Evertz Technologies reported EPS of $0.15, exceeding the forecast of $0.135 by approximately 11.1%. This performance marks a positive trend for the company, showcasing its ability to surpass analyst expectations.
Market Reaction
Following the earnings announcement, Evertz Technologies’ stock rose by 1.75%, closing at $12.24. This movement reflects investor confidence in the company’s financial health and future prospects. Trading at a P/E ratio of 13.35, the stock appears attractively valued compared to industry peers. The stock’s performance remains within its 52-week range, with a high of $13.77 and a low of $9.45. For detailed valuation analysis and Fair Value estimates, visit InvestingPro, where you’ll find comprehensive research reports covering 1,400+ top stocks.
Outlook & Guidance
Evertz Technologies remains focused on expanding its software and IP-based solutions. The company is exploring mergers and acquisitions to align with strategic growth goals and is maintaining its quarterly dividend of $0.20 per share. Future revenue and EPS forecasts show positive growth, with projections for FY2025 and FY2026 indicating continued upward momentum.
Executive Commentary
Brian Campbell, Executive VP, stated, "We are poised to build upon our leadership position in the broadcast and media technology sector." He highlighted the company’s success in adjacent markets and emphasized that "Our software revenue is generally a higher margin than services or hardware."
Risks and Challenges
- Supply chain disruptions could impact production and delivery timelines.
- Market saturation in core sectors may limit growth opportunities.
- Macroeconomic pressures, such as inflation, could affect operational costs.
- Dependence on top customers, who account for 50% of sales, poses a concentration risk.
- The ongoing expansion in the U.S. requires careful management to ensure successful integration.
Q&A
During the earnings call, analysts inquired about the drivers behind the improved gross margin and the company’s cash balance strategy. Evertz Technologies also discussed its U.S. expansion progress and potential in non-broadcast markets, signaling opportunities for future growth.
Full transcript - Evertz Technologies Limited (ET) Q1 2026:
Katsuki, Conference Call Operator: Good afternoon, ladies and gentlemen, and welcome to the first quarter Evertz 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 0 for the operator. This call is being recorded on Wednesday, September 10, 2025. I would now like to turn the conference over to Mr. Brian Campbell, Executive Vice President of Business Development. Please go ahead, Mr. Campbell.
Brian Campbell, Executive Vice President of Business Development, Evertz Technologies Limited: Thank you, Katsuki. Good afternoon, everyone, and welcome to Evertz Technologies Limited’s conference call for our fiscal 2026 first quarter ended July 31, 2025, with Doug Moore, Evertz’s Chief Financial Officer, and myself, Brian Campbell. Please note that our financial press release and MD&A will be available on SEDAR 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 Evertz results, I’ll begin by providing a few highlights, and then Doug will provide additional details. First off, sales for the first quarter totaled $112.1 million, including $51.6 million in software and services revenue, representing 46% of total revenue. Our sales base is well diversified, with the top 10 customers accounting for approximately 50% of sales during the quarter, with no one customer accounting for more than 9% of sales.
In fact, we had 114 customer orders of over $200,000. Gross margin in the quarter was $68.8 million, or 61.4%, up from 59.4% in the prior year. Net earnings were $11.9 million, up 22% from the prior year, while fully diluted earnings per share were $0.15 for the quarter. Investment in research and development totaled $37 million in the quarter. Evertz working capital was $202.6 million, including cash of $124.3 million as at July 31, 2025. At the end of August, Evertz’s purchase order backlog was more than $252 million, and shipments during the month of August were $41 million.
We attribute the strong financial performance and robust combined shipments and purchase order backlog to channel and video service 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 to the growing adoption of Evertz’s IP-based software-defined video networking solutions, Evertz’s IT and cloud native solutions, our immersive 4K and 8K ultra-high-definition solutions, and Evertz’s state-of-the-art DreamCatcher IP replay and live production suite with BRAVO Studio featuring the iconic Studer audio. Today, Evertz’s board of directors declared a regular quarterly dividend of $0.20 per share payable on or about September 25. I’ll now hand over to Doug Moore, Evertz’s Chief Financial Officer, to cover our results in greater detail.
Doug Moore, Chief Financial Officer, Evertz Technologies Limited: All right, thank you, Brian. Starting with revenue, after a slow start in May of 2025, sales were $112.1 million in the first quarter of fiscal 2026, a slight increase compared to $111.6 million in the first quarter of fiscal 2025. Hardware revenue increased quarter over quarter from $55.7 million to $60.5 million, while software services revenue decreased from $55.9 million to $51.6 million in the current quarter. Revenue from the software services segment there represented approximately 46% of the total revenue in the quarter. Looking at regional revenue, quarterly revenues in the U.S.-Canadian region were $79.5 million compared to $73.9 million in the prior year, while quarterly revenues in the international region were $32.7 million compared to $37.7 million in the prior year. The international segment represented 29% of total sales in the quarter, that’s compared to 34% the same period last year.
Gross margin for the quarter was 61.4%, that’s compared to 59.4% in the prior year, and slightly above our target range. While the gross margin was above our target range for the second quarter in a row, that’s largely being driven by product mix, including a relatively high proportion of higher margin software service revenue in the quarter. Turning to selling and admin expenses, S&A was $18.6 million in the first quarter, an increase of $1 million from the same period last year, and selling and admin expenses as a percentage of revenue were approximately 16.6% as compared to 15.8% for the same period last year. Sequentially, S&A is down approximately $2 million from Q4. That’s largely driven by the non-reoccurrence of NAB, which we attended in April of this year. R&D expenses were $37 million for the first quarter.
That represents a $0.3 million decrease over the same period last year. As a percentage of revenue, R&D expenses were 33% compared to 33.5% in the prior year. The higher percentage is largely being driven by software revenue in Q1 this year and last. Investment tax credits for the quarter were $3.3 million. Foreign exchange for the first quarter was a gain of $0.7 million. That’s compared to a foreign exchange gain of less than $1 million in the first quarter last year. U.S. dollar closed at approximately $1.38 on July 31, not significantly different from its closing rate as at April 30. Turning to discussion of liquidity of the company, cash as at July 31st was $124.3 million, increasing compared to cash of $111.7 million as at April 30th. Working capital was $202.6 million as at July 31st, compared to $206.9 million at the end of April 30th.
The company generated cash from operations of $33.5 million. That includes $18 million change in non-cash working capital on current taxes. The effects in the change in non-cash working capital on current taxes were excluded from the calculation. The company would have generated $15.5 million in cash from operations during the quarter. The company used $0.5 million for investing activities, which was principally driven by the acquisition of capital assets of $1.4 million and partially offset by proceeds of disposals of $900,000. The company used cash in financing activities of $20.2 million, which was principally driven by dividends paid of $15.1 million and the repurchase of capital stock under a normal course issuer bid plan of $3.8 million, which translated to approximately 317,000 shares purchased and canceled in the quarter.
Finally, looking at our share capital position as of July 31st, shares outstanding were approximately 75.5 million, and options and share-based RSUs outstanding were approximately 2.1 million at the end of the quarter. During the quarter, approximately 2.7 million options expired. Weighted average shares outstanding were 75.5 million, and weighted average fully diluted shares were 76.6 million for the period ended July 31st, 2025. That concludes the review of our financial results and position for the first 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 our annual information form and the official reports filed with the Canadian Securities Commission. Brian, back to yourself.
Brian Campbell, Executive Vice President of Business Development, Evertz Technologies Limited: Thank you, Doug. Katsuki, we’re now ready to open the call to questions.
Katsuki, Conference Call Operator: Thank you very much. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press followed by the number one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press followed by the number two. If you are using a speaker phone, please make sure to lift your handset before pressing any keys. Your first question is from the line of Robert Young from Canaccord Genuity Corp. Please go ahead.
Robert Young, Analyst, Canaccord Genuity Corp: Hey, good evening. First place I’d like to start is the gross margins. Strong. Can you remind us what your target is and whether there’s any intent to adjust that? I think you said the software was down in the mix year over year in the quarter, but you also said that the gross margins were driven by high-margin software. If you could just maybe provide a little more color around, you may bridge between those two things so I can understand what’s going on there.
Brian Campbell, Executive Vice President of Business Development, Evertz Technologies Limited: First of all, note that there’s a lot of volatility in our margin. It’s driven by product mix. We haven’t, we’re not changing our target at this point. It’s 56% to 60%. We have had two quarters now that have exceeded that. Of course, just three quarters ago, we were at 57%. I think before we adjust our target range, we need a greater track record of variance there. The comments on the driven by the software and service revenue. First of all, that includes software and services. Year over year, you’re correct. It’s down to software and services year over year, even as a proportion. As a proportion over the past three quarters, it’s increased. Our software revenue is generally a higher margin than, of course, services or hardware. Being at 46% is part of the reason why that product mix pushed it up.
Even Q1 last year was high 59s, with a high proportion. It’s not a direct mathematical calculation, but there’s certainly a correlation between a higher proportion of software and services and margin.
Robert Young, Analyst, Canaccord Genuity Corp: Is there anything worth calling out, like product-wise? What is the driver? What is the product that is driving that high margin? Is it like a category you’d highlight?
Brian Campbell, Executive Vice President of Business Development, Evertz Technologies Limited: No, I mean, there’s a significant portfolio of products that are within software and services, right? I will remind that, you know, there’s two different types of software and services recognized. That’s some over time, whether it’s SLAs, warranties, and then there’s other components that are, you know, it could be a software, you know, site acceptance that triggers a release of revenue. It is, unfortunately, a fair mix of products that go into that category.
Robert Young, Analyst, Canaccord Genuity Corp: Okay. What could have happened here is like a milestone in software revenue recognition at high margin or something like that. Is that like a good idea?
Brian Campbell, Executive Vice President of Business Development, Evertz Technologies Limited: It happens every quarter. Projects that get released in that manner.
Robert Young, Analyst, Canaccord Genuity Corp: Okay. The other notable thing that jumped out at me was the cash balance, you know, quite high. Maybe I know that you always say that it’s a decision, you know, driven by the board, but I was hoping you can give us some insight into the thought process, you know, how you would go about deploying that capital, you know, whether it’s M&A or, you know, dividend. If you could give us a sense of the thought process, that’d be helpful.
Brian Campbell, Executive Vice President of Business Development, Evertz Technologies Limited: The thought process is quite consistent. We have distributed via regular quarterly dividends, which have been increasing in each of the last five years. Now, cash has been building up to a very significant level. We do continue to look at acquisition opportunities, but again, the acquisitions have to align with our growth and long-term strategic plan such that they provide very good shareholder value over the long haul. That thought process is what the board considers each quarter.
Doug Moore, Chief Financial Officer, Evertz Technologies Limited: I will also highlight that Q2 often has a large negative cash flow swing on working capital. Last year in Q2, we used cash from working capital $30 million, including $20 million payables. That’s, you know, coinciding with, like, looking ahead to past Q2s or forward and behind, that’s often we pay our incentive plans out in Q2, which is just cash. Looking ahead, we’re also looking at acquiring a building that we are currently leasing for $2.5 to $3 million Canadian. There is some, you know, it’s significant today, the cash balance, but we do expect the cash to decrease over the next quarter.
Brian Campbell, Executive Vice President of Business Development, Evertz Technologies Limited: The normal course issuer bid is in effect.
Robert Young, Analyst, Canaccord Genuity Corp: Okay. The last question before I hand it off to someone else, maybe just a high-level product question, two-part. I mean, you’re just fresh at IBC. Maybe you could give us a sense of what the areas of interest in the, you know, the Evertz product lineup are. The second part would be just, you know, just everyone’s looking at all at the Oracle results this morning and this enormous amount of infrastructure built into the data center. I thought maybe there’s an opportunity for you to talk about potential applications of your IP switching product, given, you know, the deterministic nature. If there’s an application inside of that data center build or something that you’re looking at, then I’ll pass the line.
Brian Campbell, Executive Vice President of Business Development, Evertz Technologies Limited: Rob, IBC does begin on Friday. Yes, we’re looking forward very much to seeing our customers over the weekend and renewing the relationships. We’re very excited by the lineup of products that we’re releasing and reinforcing our long-term commitment to investment in R&D and innovation. Of course, the IP-based and cloud-based solutions are a very integral part of our product portfolio and a big driver. We are excited by those opportunities and not just in the data center, but in customer facilities as well, on-premise and in the cloud.
Robert Young, Analyst, Canaccord Genuity Corp: Okay, thanks. I’ll pass on.
Katsuki, Conference Call Operator: The next question is from the line of Thanos Moschopoulos from BMO Capital Markets Equity Research. Please go ahead.
Robert Young, Analyst, Canaccord Genuity Corp: Hi, good afternoon. Just with respect to M&A opportunities, we’ve heard the comment from some other companies that there’s kind of more stuff available as of late. PE has been kind of looking to monetize assets and so forth. Are you seeing more M&A opportunities in the past or anything you’d say on that front?
Brian Campbell, Executive Vice President of Business Development, Evertz Technologies Limited: Dennis, you were breaking up. I didn’t hear all of your question, but I believe you asked, are we seeing more opportunities than in the past?
Robert Young, Analyst, Canaccord Genuity Corp: Yes.
Brian Campbell, Executive Vice President of Business Development, Evertz Technologies Limited: I would say it’s a fairly consistent level of acquisition opportunity. There are targets available, and as I said, we do investigate and analyze those opportunities, but we’re very selective in terms of ensuring that we’ve got alignment with Evertz’s portfolio of products and our growth areas that we’re looking at, whether it’s in our core markets or adjacent markets. That is an ongoing process.
Robert Young, Analyst, Canaccord Genuity Corp: Can you update us on your U.S. expansion, how that’s proceeding, and whether we should be mindful of any cost or margin implications as that could cause you to ramp up in the near term?
Doug Moore, Chief Financial Officer, Evertz Technologies Limited: I can give you an update for sure. Our location in Pennsylvania, just outside Pittsburgh, we’re continuing to ramp up capacity there. It’s not fully operational in the sense that we can’t manufacture everything there at this point, but we’re continuing to ramp that up. To date, in that part of that expansion, we’ve incurred about a little over $2 million in costs that we’ve already incurred. We do, that’s a building we currently lease that we will be planning on purchasing and hopefully closing this quarter, which will cost an extra $2.5 to $3 million. I’m sorry, I don’t know if there was a second part of that question.
Robert Young, Analyst, Canaccord Genuity Corp: Yeah, just whether we should think about any margin implications as you continue to ramp up production there, and that becomes maybe a larger part of the relative mix.
Doug Moore, Chief Financial Officer, Evertz Technologies Limited: There’ll be certainly some additional, like as there already is, some additional costs incurred by having some, say, redundant staff, you would say, by having people here and there doing similar things. At this point, it’s not overly material. It’s not, I’m not able to specifically quantify a significant impact. I don’t expect a significant impact at this time.
Robert Young, Analyst, Canaccord Genuity Corp: there any update you can provide in terms of what you’re seeing from customers outside of broadcast and media, for example in AV or in other parts of the other end markets?
Brian Campbell, Executive Vice President of Business Development, Evertz Technologies Limited: We continue to have good traction and success in the adjacent markets, specifically our Evertz AV. However, the press releases are somewhat sparse from that customer set. Oftentimes, government and military installations do not provide those press releases. That is very much a focus of part of our business and a successful part. However, I can’t provide you additional color.
Robert Young, Analyst, Canaccord Genuity Corp: On a relative basis, can you comment on whether they’re growing any faster or slower than the broadcast media market?
Brian Campbell, Executive Vice President of Business Development, Evertz Technologies Limited: It has greater potential for us as it’s a newer market.
Robert Young, Analyst, Canaccord Genuity Corp: Okay, I’ll pass the line. Thank you.
Katsuki, Conference Call Operator: Thank you very much. There are no further questions at this time. I’d like to turn the call back over to Mr. Brian Campbell for closing comments. Sir, please go ahead.
Brian Campbell, Executive Vice President of Business Development, Evertz Technologies Limited: I’d like to thank the participants for their questions and to add that we are pleased with the company’s performance during Q1 of fiscal 2026, which saw sales of $112 million, including $51.6 million in software and services revenue. Strong gross margins of 61.4% for the year, up from 59.4% in the prior year, along with continued investments in R&D totaling $37 million in the year. We closed the first quarter of fiscal 2026 with significant momentum fueled by combined purchase order backlog plus August shipments totaling in excess of $293 million. By the growing adoption and successful large-scale deployments of Evertz’s IP-based software-defined video networking and cloud solutions by some of the largest broadcast new media service providers and enterprises in the industry, and by the continuing success of DreamCatcher Bravo, our state-of-the-art IP-based replay and production suite.
With Evertz’s significant investments in software-defined IP, IT, and cloud technologies, the over 600 industry-leading IP SDN deployments, and the capabilities of our staff, Evertz is poised to build upon our leadership position in the broadcast and media technology sector, providing high reliability, reliable, innovative solutions to customers, and delivering to shareholders. Thank you. We look forward to having many of you join us on Wednesday, the 1st of October, at our annual general meeting. Good night.
Katsuki, Conference Call Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you very much for your participation. You may now disconnect.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.