Earnings call transcript: HiVision Q2 2025 sees revenue rise, stock dips

HiVision Systems Inc. reported its financial results for the second quarter of fiscal 2025. The company achieved revenue of $34.3 million, marking a slight increase of $100,000 from the previous year. The stock currently trades at $3.44, with InvestingPro analysis indicating the company is currently undervalued. The dip in stock price was attributed to an operating loss of $3.2 million, contrasting with an operating income of $1.8 million in the same quarter last year. According to InvestingPro’s comprehensive health assessment, the company maintains a "GOOD" overall financial health score of 2.53 out of 5.

Key Takeaways

• Revenue for Q2 2025 was $34.3 million, a slight year-over-year increase.
• The company reported an operating loss of $3.2 million, compared to a profit last year.
• Stock price fell by 1.26% post-earnings announcement.
• HiVision launched new products, including the Kraken X1 and Falcon X2.
• The company expects double-digit growth in 2026.

Company Performance

HiVision’s performance in Q2 2025 reflects a complex landscape of modest revenue growth amid operational challenges. The company’s revenue rose slightly, but the transition from an integrator to a manufacturer model, along with increased investments in R&D and sales, contributed to an operating loss. The company is focusing on expanding its product line and strengthening its position in the defense and broadcast markets.

Financial Highlights

• Revenue: $34.3 million, up $100,000 year-over-year.
• Operating Loss: $3.2 million, compared to $1.8 million operating income last year.
• Adjusted EBITDA: $1.7 million, down from $5.1 million in the same period last year.
• Gross Margins: 73%, an increase of 130 basis points from the previous year.
• Cash Balance: $11.8 million, a decrease of $4.8 million from the previous quarter.

Market Reaction

Following the earnings announcement, HiVision’s stock price decreased by 1.26%, closing at $4.76. The stock’s decline comes despite the company’s positive revenue growth and product launches, suggesting investor concerns over the operating loss and decreased cash balance. Currently trading at $3.44, the stock sits between its 52-week range of $2.69 to $5.12. Analyst consensus from InvestingPro shows mixed sentiment, with price targets ranging from $2.93 to $4.28. The company maintains a healthy current ratio of 1.65 and operates with a moderate debt-to-equity ratio of 0.14.

Outlook & Guidance

HiVision remains optimistic about its future, projecting double-digit growth in 2026. The company is preparing for a significant Navy contract expected to ramp up in 2026-2027 and is focusing on international expansion. The introduction of new products and partnerships, such as with Shield AI, is expected to drive growth in the coming years. InvestingPro data reveals the company has demonstrated strong historical growth with a 5-year revenue CAGR of 12%, while maintaining robust gross margins of 73%. For deeper insights into HiVision’s growth potential and comprehensive analysis, investors can access the detailed Pro Research Report, available exclusively to InvestingPro subscribers.

Executive Commentary

CEO Mirko Wicka expressed confidence in the company’s future: "Out of twenty-one years of HiVision, honestly, I have never seen such a long list of multimillion-dollar opportunities." He also highlighted the importance of the CNN deal, stating, "This is a massive win for HiVision in many respects."

Risks and Challenges

• Operating Loss: The shift from integrator to manufacturer has led to short-term financial challenges.
• Cash Flow: A decrease in cash reserves may impact future investments.
• Market Competition: The company faces strong competition in the defense and broadcast sectors.
• Economic Conditions: Global economic uncertainties could affect spending in key markets.
• Product Development: Delays or issues with new product launches could impact growth projections.

HiVision’s earnings call highlighted both opportunities and challenges as the company navigates its strategic transformation and prepares for future growth.

Full transcript - Haivision Systems Inc (HAI) Q2 2025:

Abby, Conference Operator: Ladies and gentlemen, thank you for standing by.

My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the HiVision second quarter twenty twenty five earnings call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad.

If you would like to withdraw your question, press one a time. Thank you. And I would now like to turn the conference over to Mirko Wicca, President and CEO. You may begin.

Mirko Wicka, President and CEO, HiVision: Thank you, Abby, and thank you, everyone, on the call for joining us today to discuss our second quarter of our fiscal year 2025, which ended in April 30. As mentioned on our last earnings call back in January, we are now well into our two year strategic plan, which will complete our overall business transformation and return HiVision to the double digit revenue growth we have seen in the past. It will also return us to our long term CAGR growth rate of between 1520% per year. Now we have completed our operational efficiency model, have a solid handle on the cost structure, gross margins, EBITDA and cash generation. Now the focus now is all about building high revenue growth.

As mentioned back in January as well, we have seen the bottom of the revenue curve back in Q1. Our key fundamental business model for the controller market, which was the move away from being an integrator to manufacturer, is complete. We are seeing a solid increase in our long term sales pipeline. Our business forecast is compelling, and we are seeing strong orders and revenue increase in the overall global controller market, not just in The U. S.

This is what we’ve been working hard on for the past eighteen to twenty four months, and it’s really great to see. Let me share a few thoughts on what to expect from us during the remainder of this fiscal year to prepare for this higher revenue growth in 2026 and 2027. And we’ve been investing in many new product development initiatives and introductions throughout this year, some of which we discussed earlier. But here are some of the highlights for both the mission and broadcast parts of our business. Remember that six months ago, we structured the company into two focused business areas: mission and broadcast.

We are already seeing the results of our actions, and our goal of focus is really paying off. Now within our mission business, we focus on strategic developments in AI. Last year, we announced that HiVision is partnering with Shield AI, right, which is a leading defense technology company whose mission is to protect service members and civilians with intelligent systems. And with this partnership, Shield AI Kestrel is now fully integrated with HiVision’s real time transcoding Kraken software system and can be easily deployed across a wide range of air, land and sea based platforms. It’s designed for intelligence, surveillance and reconnaissance and situational awareness applications and Kraken encodes, transcodes and transports high quality video and metadata in real time, even in environments where network bandwidth is unpredictable or limited.

The latest update to Kraken features the availability of a new option, Shield AI’s Tracker, the AI powered software for superior object detection. And Tracker uses AI and two decades of computer vision research and development to detect moving objects in full motion video, turning raw data into actual actionable intelligence with speed and efficiency. It can detect moving and stationary objects on land such as vehicles and people and in maritime settings such as boats, vessels, individuals and life jackets. Very, very cool stuff. Now in May, as promised, during the Defense Military Short Soft Week in Tampa, we launched an exciting next generation AI based hardware, what we’re calling tactical edge processor for the defense and ISR markets called the Kraken X1, which is also called the KX1.

It was extremely well received as it delivers incredible performance of AI enabled encoding in real time. The KX1 is a ruggedized and AI capable video processing appliance engineered for demanding ISR deployments, Combining real time encoding, transcoding, metadata processing and NVIDIA powered AI capabilities in a fanless and compact design, the KX1 brings battle tested high vision technology to remote and tactical edge environments. I mean, HiVision is absolutely the standard low latency edge transcoding delivery platform in the defense market and a market leader in providing a unified approach to tactical edge computing. And we expect our Kraken AI technology to drive many long term defense projects and increase our footprint within the global defense market. This is an area that is expected to have great growth potential for the next five to ten years, and we expect to be the leader.

Equally as exciting, within our broadcast business, we launched our next generation five gs transmitter platform. We successfully showcased this new generation of transmitter platform called the Falcon X2 in Vegas at

Dan, CFO, HiVision: the NAB show in April. This will

Mirko Wicka, President and CEO, HiVision: be the basis for the next two years of transitioning our entire line of transmitters to advanced five gs private networking. We’ve incorporated some revolutionary technologies and created a lower cost structure, which will result in better price performance and competitive product offerings for the future. This is very exciting as we also venture into an adjacent lower cost market with a small lightweight two antenna private five gs solution that we can now go more aggressively after our key competitors, Live View and TV View. Thus, a new revenue stream for HiVision. We will be announcing more systems within this platform throughout the next several quarters.

In addition, we will launch our next generation Makito later this fall, internally dubbed as the NGX, targeted specifically for the broadcast sports market that will open additional revenue streams for HiVision. We will deliver full GenLock synchronization capability, including high bandwidth 2,110 JPEG XS technologies. And our Makito clients have been asking for these for a long time, and we will deliver with our signature capabilities of high quality, reliability, low latency and security. This will enable all of our largest broadcast clients to now use HiVision for their full end to end workflow for both wired and wireless transmission, something no other vendor can do. All of these developments and strategic investments are key during 2025 and will affect revenue starting in our second half of fiscal twenty twenty six and really kick in during 2027 and beyond, another reason why we are so excited about the future of HiVision.

The last piece is pretty huge. I would like to end by sharing with you one specific and extremely exciting transformational competitive win we closed at the end of Q2 that establishes HiVision as industry leader in cellular, bonded and wireless five gs private networking. We have won several large and important deals in the five gs wireless space recently and took customers away from TVU, LiveU and Vigeru. They’re really three competitors in this market. To the names like the PGA, Eurosport, BigFish, just to name a few.

But now we flipped a huge Tier one customer that has been using LiveVue for over eighteen years for all their wireless needs. Warner Bros. Discovery has chosen HiVision to replace their entire CNN fleet of live view equipment for their electronic news gathering, ENG, and multicamera coverage of live events across all their offices and bureaus worldwide. This is a massive win for HiVision in many respects. It was also a very nice $5,500,000 order for over 300 units comprising of our Pro Series three hundred and four hundred transmitters, Air 300 units, Rack 400 systems, many Makitos, many Mojo Pro mobile player licenses and many live guest licenses and, of course, many of our StreamUp control system licenses.

In addition, the entire ecosystem will be connected with our Hub three sixty cloud based platform. The global rollout has already begun and is being installed during the next several months. All I can say is that CNN has decided to go with HiVision for our flexibility, our quality, our performance, our support and most of all, trust as a vendor to deliver the best technology for their needs. As you can imagine, this is a huge win for the company, and it’s only the beginning As we embark on our success in the wireless market, the next generation Falcon series of transmitters will make our solution even a stronger proposition for other customers. So in summary, couldn’t be happier with our performance as we maintain a strong focus and attention on revenue growth.

So I will now pass it to Dan to continue with the detailed financials.

Dan, CFO, HiVision: Thank you, Mirko. Good evening, everyone, and thank you for joining us. I’m pleased to walk you through our performance this quarter, which I’m classifying as the end of a transition and the beginning of strategic momentum. Let’s start with the top line. Q2 fiscal twenty twenty five revenue came in at $34,300,000 up modestly by $100,000 year over year.

Year to date revenue for the six months was $62,500,000 down $6,300,000 or 9.2% from the prior year. Importantly, though, Q2 revenue grew 22 over Q1, showing sequential strength and renewed sales energy. Some of this quarter’s revenue growth, about $2,100,000 came from favorable FX tailwinds due to Canadian dollar volatility, but there’s more to the story. We have been navigating a shift in U. S.

Government buying behavior and a move away from the integrator model in the control room space towards being a manufacturer and supplier of proprietary products. This transition is now largely complete, and the results are beginning to show. Our sales have overtaken past sales levels that included those party lower margin components. Our pipeline of opportunities is stronger than ever, and we have seen a notable rise in large scale opportunities. We believe we have reached an inflection point, and it bodes well for the half of this year.

Our recurring revenue from maintenance support and cloud services continues to show sound growth. Recurring revenue was $7,200,000 this quarter, up 11% year over year, and it was $14,200,000 year to date, a 10% increase. Recurring revenue now makes up 21.2% of Q2 total revenue, and that’s up two points from last year. This marks our consecutive quarter of double digit recurring revenue growth, a strong indicator of customer loyalty and a key contributor to future stability. Gross margins have stabilized after a softer Q1.

Gross margins improved to 73%, up from 71.7 a year ago. That’s a 130 basis point improvement. On a year to date basis, margins are steady at 72.5%, near our long term expected average. With that said, we may continue to see quarterly variations of gross margins related to the timing of U. S.

Navy deliveries, which is more closely aligned with MCS’ legacy integrator model. The seasonality of certain product families may impact quarterly margins, although recently announced product introductions have dissipated margin differences between product families. And the increase in sales of software only options or virtual machine deployments, which have a higher gross margin than our typical software sales when preinstalled on servers and sold as a complete appliance. Now, total Q2 expenses rose to $28,200,000 That’s up $5,500,000 year over year, but context really matters here. Dollars 1,500,000.0 relates to settlement and legal fees that were incurred.

1,800,000.0 stems from currency related impacts, largely from the weaker Canadian dollar compared to the euro or U. S. Dollar. And we also made strategic investments in R and D and incurred higher sales and marketing expenses related to higher levels of revenue. So let’s dive into each one of these three factors that impacted quarterly expenses.

A nonrecurring expense of $1,500,000 was recorded regarding a dispute filed back in 2017. The judge largely ruled in our favor, but the plaintiff has since appealed the decision. A final decision won’t be known for twelve to eighteen months. A major factor affecting total expenses was recent trade actions between The U. S.

And other countries, which created uncertainties in the market and ultimately cost HiVision one point eight million dollars in additional expenses. Approximately 80% of our total expenses are denominated in the euro or U. S. Dollar. And we’ve witnessed the Canadian dollar slump when tariffs were imminent and then rally when the U.

S. Administration announced a reprieve. The weaker Canadian dollar impacted total expenses by as much as $1,000,000 in the quarter. And additionally, the weaker Canadian dollar had an impact of an additional $800,000 related to the value of assets and liabilities on the balance sheet, which was recorded as a foreign exchange loss within total expenses, and specifically within general and administrative expenses. Lastly, some expense growth had always been planned and some was circumstantial, but all of it ties to long term positioning and revenue growth.

We had always planned on incremental investments in research and development and for that matter, operations and support to support the large number of new product introductions and growing business initiatives. We also incurred some incremental selling expenses like commissions and bonuses that were paid on buoyant sales that were incurred in the second quarter. Our sales teams are compensated on sales rather than on revenue. In terms of some seasonal spending, one of our largest trade shows is the National Association of Broadcasters, commonly referred to as NAB. It is the of our two largest trade shows that we exhibit at.

Thus, total expenses will tend to be higher in the second quarter, and we should see a similar result in our fourth quarter when we will be exhibiting at the International Broadcaster Convention, commonly referred to as IBC, in Amsterdam. At April 30, we did end the quarter with three eighty employees compared to three sixty five employees last year to illustrate the incremental investments we’ve made. The result of the flattish year over year revenues, albeit with slightly enhanced margins and the $5,500,000 increase in total expenses is that we did have an operating loss for the quarter of $3,200,000 compared to operating income of $1,800,000 in the same period last year. The $500,000 in additional gross margin was only partially able to offset the $5,500,000 increase in total expenses. And then again, as

Mirko Wicka, President and CEO, HiVision: a

Dan, CFO, HiVision: reminder, total expenses were impacted by 1,500,000 in nonrecurring expenses and $1,800,000 in additional expenses related to the weaker Canadian dollar. Turning to adjusted EBITDA. Adjusted EBITDA for the quarter was $1,700,000 compared to $5,100,000 in the same period last year, a decline of $3,400,000 As I mentioned, improving gross margins resulted in $500,000 in incremental gross profit. However, if we normalize total expenses for share based payments, depreciation and amortization, the nonrecurring impact of legal and then operating expenses were 23,300,000 or $3,900,000 higher than the same period last year. The adjusted EBITDA comparison for the six month period isn’t dramatically different than what we experienced in the second quarter, but was further encumbered by the year over year revenue decline in our first quarter.

For the six months, adjusted EBITDA is $2,200,000 compared to $10,200,000 in the prior year. That’s a decrease of $8,000,000 So in addition to the $3,900,000 increase in operating expenses cited earlier, year to date revenues fell short of prior year by $6,300,000 resulting in a $4,400,000 shortfall in gross profit when compared to that prior year. With respect to the balance sheet, we ended the quarter with cash balances of $11,800,000 That represents a decrease of $4,800,000 from the end of last quarter. A primary driver to the decline in cash is the $2,300,000 decline in deferred revenues related to maintenance support contracts, which have been invoiced for which revenue has yet to be realized. But also in January, we announced TSX’s approval of our normal course issuer bid renewal, or NCIB.

In this second quarter, we purchased over 400,000 shares for cancellation through the NCIB totaling $1,900,000 and that is $2,800,000 on a year to date basis. We’ve had some payments on term loans and lease liabilities, which amounted to another $600,000 during the quarter, and we also had capital expenditures during the quarter amounting to another $400,000 As a point of information to the group, between last year’s NCIB and this year’s renewal, HiVision has purchased over 1,400,000.0 shares for approximately $6,000,000 and we still believe that the stock is undervalued at today’s prices. We still maintain the $35,000,000 credit facility with the opportunities to expand the size of the line of credit if strategic opportunities arise, and there’s only about $7,300,000 outstanding on that line of credit. So let’s turn our attention towards tariffs. Last earnings call, we suggested that things are fluid.

Unfortunately, not sure we are seeing much more clarity today. But as things stand today, we are a Canadian company, and the majority of our production of proprietary technology is done in Canada. Fortunately, our proprietary products are governed by The United States Mexico Canada Agreement, USMCA, which replaced NAFTA back in 2020. Thus, there are no tariffs for our proprietary products manufactured in Canada when sold into The United States. In fact, we may be in an advantageous position.

Many of our competitors are overseas and may not have the benefit of the USMCA with respect to tariffs. And Canada isn’t currently imposing tariffs on countries that provide critical technology components, whereas The U. S. Might take a different position. Now the same isn’t true of our products that are currently manufactured in France, namely our transmitter products.

In April, the U. S. Administration announced broad tariffs on imports, which includes a 10% base tariff on all imports into The United States. However, the impact of these tariffs haven’t been significant. Yes, Mirko did allude to the significant success we are having with the transmitter in The United States.

However, it’s still a relatively early initiative for us. We also have means to lower the overall impact of tariffs. Tariffs are paid on the value of goods when they cross the border, and our corporate structure and transfer pricing methodologies enable us to mitigate some of the impact. Mirko also mentioned recent product introductions like the Falcon X2. A new product introduction is a great time to relook at our manufacturing strategy and where best to manufacture such products.

Of course, any tariff impact is really predicated on whether we can transfer the tariff burden to our customers. And we’ve had conversations with customers, and thus far, they’ve been largely receptive. I should also mention that we have a handful of tactics that are being considered for each of those for each of these tariff areas that we can accelerate or delay depending on the day to day actions of the U. S. Administration.

With that said, we believe our current course of action should provide us a cost effective solution with little risk. So for the time being, we intend to stay the course at least until there is some future clarity. And hopefully, with deep expertise on tariff macroeconomics are addressing the various issues and that thoughtful level headed decisions will be made. So to summarize, this quarter was a mix of transition, stabilization and building momentum. We’ve crossed key milestones in our business and in model shifts, and our recurring revenue is growing steadily.

And the pipeline has never looked more promising. So with that said, I’m going to hand the mic back to Mirko for Q and A. Thanks for everyone for attending.

Mirko Wicka, President and CEO, HiVision: Thank you. Abhi, let’s take some questions, please.

Abby, Conference Operator: Great. Thank star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press 1 a time. If you are called upon to ask your question and are listening via speakerphone on your device, And our question comes from the line of Robert Young with Canaccord Genuity. Your line is open.

Robert Young, Analyst, Canaccord Genuity: Great. question, on the gross margins, the expansion you noted this quarter. Is that all driven by the business model changes, the shift from integrator to manufacturer? Or is there some raw material benefit? I think you highlighted some advantageous situation there.

Maybe what are the drivers there behind the gross margins?

Dan, CFO, HiVision: Well, I would suggest that the transition from an integrator to manufacturer is having a positive impact on the business. We are not selling nearly as much of those party low margin components as part of our solutions in the control room space. But I would also suggest to you, the opposite is true to what happened in Q1. In Q1, the fixed cost of production was being amortized over a lower revenue level. Now that we’ve reverted back to our typical revenue levels here, it’s being amortized over a broader amount of revenue, and thus, we’ve been able to see margins improve.

Robert Young, Analyst, Canaccord Genuity: Okay. Okay. That’s great. Helpful. You said that there was a solid increase in pipeline.

Was that a general comment or is that focused on the control room market? Think it was general, but maybe just back up. Like, what are the areas of excitement? Can Abby the Kennedy Abby West business, the the contribution business, does that con continue to sign these large deals, this 5 and a half million dollar win? Is there more of that in the pipeline?

And I mean, there’s a broader commentary on the pipeline.

Dan, CFO, HiVision: The comment was a general comment on our overall pipeline, but it’s certainly true of the control room space as well. We’ve seen, robust, sales efforts in both areas across our entire company, and it’s giving us a lot of confidence in the half of the year.

Mirko Wicka, President and CEO, HiVision: Yeah. One thing maybe I’ll add, Robert, is one of the things I didn’t kind of mention in my talk, but since you bring it up, out of twenty one years of HiVision, honestly, I have never seen such a long list of multimillion dollar opportunities that we’re involved in, which only leads me to believe that we’re getting involved in much larger opportunities, that’s for sure. But at the levels and the amounts of them, I think you can expect that there’s going to be some significant announcements over the next two to three years. So the pipeline is very, very strong.

Robert Young, Analyst, Canaccord Genuity: That’s great to hear. And is that mostly around the wireless contribution space?

Mirko Wicka, President and CEO, HiVision: No, no. No, no, no. I think it’s the control room market is massive. Right now, our mission is about two thirds of our business. Our broadcast live events and sports is about a But it’s actually we’re seeing very large opportunities in both of those.

It’s all across the board.

Robert Young, Analyst, Canaccord Genuity: And then more specifically on that, win with CNN, can you dig into the drivers there if you could? Was it on the basis of superior product or superior road map? Or is it pricing? Like, what was it that encouraged CNN to, you know, rip and replace your competitor in favor of you?

Mirko Wicka, President and CEO, HiVision: Well, the fact that I’m not even allowed to say CNN, I’m gonna get in trouble. But I erred on a different level because I think it’s a significant opportunity. But it’s really with Warner Brothers, which owns CNN and a million other properties. So it’s the entire umbrella, which is very cool. So we now have a master agreement signed with Warner Brothers, which means we don’t have to negotiate separately in any of their properties.

Right? And they own a tremendous amount. In fact, some of them are our customers using Makitos. Right? So this is a huge, huge deal.

Now the main the main reason that they wanted to get out of, Live View is, number one, technology. They saw that our technology, together with the Hub three sixty opportunity that ties everything together, really gives them a compelling new way to do their work. Also, the transparency in our business model and especially the data rate and the charging that they were just getting frustrated with not getting explanation and to why they’re being billed tremendous amounts of money for data rates, where our solution is very clear and detailed oriented and the fact that they’ve got accustomed to our support and attentiveness and our reliability and our professionalism and our support. So it goes beyond just the technology, the products, it’s the people, the company, and and and they just wanted to go with HiVision. This is a big step.

This is eighteen year relationship. This is not a simple decision, but it’s it’s gonna crack the dam, in my opinion, where, people are now going to look at all the tier one broadcasters are gonna be well, already are opening up their eyes as to, all of our transmitter strategy. This is not we’re not even talking about our road map or a new technology, by the way. This is our current Pro three and Pro four series. We’re not this deal doesn’t even include anything to do with our Falcon.

This just just gets better with our Falcon technology.

Robert Young, Analyst, Canaccord Genuity: It’s great to hear. Maybe the last question, I’ll pass the line. I think last quarter, you’re a little bit cautious on some of the risks around The US spending. I know you already covered little bit of already covered that a little bit. But as it relates to Doge and some of the tight spending, maybe if you could just talk about that and the impact on near term, and I’ll pass the line.

Mirko Wicka, President and CEO, HiVision: Sure. I mean, look, remember, we’ve always said that if you look back last year, we had a very strong Q1 and strong Q2 and crappy Q3 and Q4, right? Because remember, with our revenue decline of our business model, and we said for 25,000,000 it’s going to be exactly the opposite, right? We have bad Q1 and bad Q2 and good Q3 and Q4. The fact that we had a really strong Q2, we’re ahead of the curve.

So that’s good news, right? We feel very confident in Q3 and we feel very confident in Q4. So the good thing is we’re ahead of the curve. Now we got slapped upside down with the tariff not the tariff, the foreign exchange nonsense and some of that stuff hurt us. It is what it is.

But the fact that Q2 is stronger, significantly stronger than we expected, that’s good news. But also, we’ve seen the defense spending and government U. S. Spending a little bit ahead of the curve. And I think a lot of people were just afraid.

I think they’re seeing they don’t know where Doge is going next, Right? Are they going to hit the military defense or not? And I think that also helps fuel the pipe. Now it seems that the defense is going to get more spending, and they’re not going to be cut and chainsawed, but we don’t know. So I think we’ve seen a little bit of that.

But right now, we have not seen any of our programs move. We haven’t seen anything canceled. Nothing’s been pushed out. In fact, we’re seeing some stuff pushing in. So we’re cautiously optimistic.

We feel that the government, defense sector, if anything, across the world is increasing their budgets. So we’re seeing it in all other countries, not just The U. S, where we’re getting opportunities where people are increasing, especially in Europe, are increasing their defense budgets, police budgets, security budgets, emergency response budgets, which is all good for us, which involves Makitos, Krakens, all of ISR properties, including the control room systems, exploitation systems. So it’s all going in the right direction for us from a pipeline build, and we’re very, very optimistic for the next five years. Our

Abby, Conference Operator: next question comes from the line of Daniel Rosenberg with Paradigm Capital. Your line is open.

Daniel Rosenberg, Analyst, Paradigm Capital: Thanks for taking my questions. My one comes around just the strength of the pipeline and kind of visibility you have for the towards the end of the year. I was just curious how far just curious around the conversion from pipeline to concrete revenue and then kind of how that lines up for when we think about Q3 and Q4 and the confidence you have in getting back to double digit growth?

Mirko Wicka, President and CEO, HiVision: Well, a very good question. Given our two business focuses, right, we got the broadcast and we got the mission. And obviously, the mission piece is a much longer transition, a lot much longer sales cycles, which we usually see at least a three to four, if not higher quarter conversion rate, even from sales, even if we get the order to revenue, could take up to two, three, four quarters just because of commissioning these complex rooms. So that’s it’s a very difficult one. Every customer is different, right?

Whereas on a broadcast, it’s usually much sooner, right? Broadcast, you can get the order, get the sale. We ship right away as revenue. So usually, it’s within the one or two quarters. Although here, were talking about CNN, and that’s going to be multiple quarters.

So there’s always exceptions. But I’d say what gives me comfort is that we’ve been talking about pipeline right? And then you look at order rates, right, the sorry, forecast because pipeline is one thing. That’s a long term. But then you get the forecast where you’re really forecasting within the one or two quarters, you think you might get the order.

And then once you do get the order, then you got to look at when is it going to be revenue, probably two quarters. So we expect, like we said before, is we should see the half kind of pick up from a revenue perspective. And we really expect ’26, what we said, double digit growth. ’26, we’re going to maintain ramping that through ’26. And then ’27 is really where the U.

S. Navy contract starts kicking in on top of that, right? So nothing’s changed from what we’ve been saying. half is going to be better than the half. We’ve said that from day one.

We just have a very good Q2, which is great. We just got to see how big Q4 could be. And has some of those defense or government orders pushed earlier that should have been in Q4? We don’t know yet. But overall for the year, we’re on track to set what we’ve We’re going be very similar to last year.

We’re going have higher OpEx, which is clear. We’re investing more in R and D. We’ve got more people than we did last year. And it’s all preparation for ’26, ’27 and ’28.

Daniel Rosenberg, Analyst, Paradigm Capital: Okay. I appreciate the color. My next question was just around the Navy contract. I was wondering if you could speak to how that ramps up and just the impacts on the margin mix for the overall business. I know a lot of things are changing, but just trying to get a better handle on how that margin plays out with the ramp of the Navy contract.

Mirko Wicka, President and CEO, HiVision: Dan, do you want to take that one?

Dan, CFO, HiVision: Sure. I think that, we kind of mentioned that the Navy contract could have an impact of 60 basis points to our overall gross margin. But we’ve been supplying the Navy over the last two quarters, even longer than that. And so that’s already sort of reflected in our financials. So the long term average that I spoke of before is likely to be the long term average.

Now we may have a little bit of volatility if the Navy deliverables represent a disproportionate amount of a business in any given quarter, but we’re not seeing that kind of a schedule being rolled out as of now. So I would tell you that the impact is fairly negligible at this point, but it probably was about 60 basis points for the overall business.

Daniel Rosenberg, Analyst, Paradigm Capital: Okay. And then, you know, just in terms of workflow that you’re doing there, are there any kind of key dates or shifts in schedules that are going to occur in the coming quarters or is steady cadence? How do we think about that?

Dan, CFO, HiVision: In terms of the Navy transaction?

Daniel Rosenberg, Analyst, Paradigm Capital: Yes.

Dan, CFO, HiVision: Well, there are deliveries planned throughout the summer and, towards the tail end of our fiscal year, and we’re very keenly focused on meeting those deliverables. Remember, this is the Navy, and they have to be put on ships. And those ships come into dock at a certain point in time, and we have to be ready for So most of our attention is making sure that our fulfillment processes are sound and that we can deliver timely. And thus far, it hasn’t been an issue for us.

Daniel Rosenberg, Analyst, Paradigm Capital: Okay. Great to hear. And maybe last one for me. Just thinking about the history of your company, you used M and A in the past to assemble leading technologies. I’m just curious if you could give an update on kind of the M and A landscape as you see it.

Any thoughts around things you’d be interested in having? Just general commentary around the strategy there.

Dan, CFO, HiVision: Well, I don’t think anything has fundamentally changed regarding our M and A strategy. We’re still talking to all sorts of companies on a regular basis looking for fit, looking for strategic benefit and what have you. We are a bit compromised in that, our share price is undervalued, and thus, we don’t have the shares, the stock to be used as a currency. So we’re kind of limited to non dilutive means of being able to acquire companies. So it’s limiting us a little bit here.

But nothing has fundamentally changed. We’re just trying to be quite rational in that. We’re going through this evolution, going through this transition. We’re focused on that. And as we continue to go through that effort, if the opportunity arises, we do have means to be able to execute it, provided the target isn’t so large that it outstrips our capability of being able to digest it.

Daniel Rosenberg, Analyst, Paradigm Capital: Okay. Understood. Thanks for taking my questions. I’ll pass the line.

Abby, Conference Operator: And our next question comes from the line of Jesse Pytluk with Cormark Securities. Your line is open.

Dan, CFO, HiVision: Hey, good evening. Just coming back

Jesse Pytluk, Analyst, Cormark Securities: to Daniel’s question on the Navy, systems contracts. I believe in the past, you might have alluded to seeing, or expectations for a more meaningful kind of volume ramp towards fiscal fourth quarter this year. Is that still the expectation? Or has that maybe moved around a little bit now?

Dan, CFO, HiVision: Well, fourth quarter, we do have a significant we have significant deliveries that we’re going it is ramping up as we speak right now. And I think what Mirko was kind of alluding to is that we’re gonna start seeing the benefit of the production contract towards the tail end of the year. But that production contract also has a ramp to it. And as as we see it, we we expect that ramp to have some significance in 2026, but even more significance in 2027 and beyond. Now that’s also subject to change.

Right? We have also seen that the Navy’s been trying to accelerate some of the deliveries, But we’re really sort of in the negotiation stage with respect to this option year, and we have yet to see what the final outcome will

Mirko Wicka, President and CEO, HiVision: be of that. I would just add to that, Jesse. I would say because I know we did say originally, at the beginning of the year, we were planning the most of the delivery in Q4, to your point. I think what we’re going see now that they’ve been trying to move it up, we might see that smooth over between Q3, which we’re in now, and Q4. So it might not be a spike.

It might be actually more level, which will be actually a good thing. For the option, Dan was talking, that’s really for next year, right, which is really the half. It will be second half of twenty twenty six. But I think we might see a more of a smoother rollout in Q3 and Q4 for the remaining of this year.

Jesse Pytluk, Analyst, Cormark Securities: Okay. That’s helpful. Thanks for the clarification. And then maybe just moving over to the Warner Discovery win. Congratulations on that.

Terms of the the 5 and a half million, is that gonna be kind of pretty much a smooth recognition, or will there be any lumpiness in that? And then can you maybe just speak to timing around other potential wins with other properties within the Warren Discovery family?

Mirko Wicka, President and CEO, HiVision: I wish I could, but hopefully, there’ll be many. I mean, one of the large pieces of that, again, the deal was because, again, CNN specifically for this one, is a large data component, which obviously will be recognized starting probably in about three months when they really start fully exercising systems, which will go on for the next year or so. They’ll be recognized later. That will be part of deferred revenue. Most of the equipment not most, but majority of the equipment was shipped at the April, and the rest is being shipped as we speak.

So from a revenue recognition, the hardware, software, all that stuff will be done this quarter. And so it’s a data piece, support piece, it’s significant support and installation, commissioning and all of that. So as you can appreciate, this is a very complex global rollout from 17 different operations and countries. So the coordination is I mean, for us, this is a pretty significant deal in the wireless space that we’ve never really played at large scale. So we’re learning as we go, and we’re working very, very closely with CNN.

So the next three to six months is going be critical. And I’d like to say that we are already talking to every broadcast Tier one company because they’re all using Makitos. They all know HiVision. But they don’t use our transmitters. And guess what?

Everybody is extremely anxious to see why CNN picked us and why this happened, and they’re all evaluating our technology. So I think you’re going to see over the next eighteen to twenty four months a very good, healthy growth in our transmitter business because this is a big one. For CNN to go, that’s huge, very huge.

Jesse Pytluk, Analyst, Cormark Securities: Okay. Thank you for that. Maybe just then on one final question then. Just with respect to the control room business and building out that international channel partner partnerships. Can you just maybe just give an update on on how that’s been progressing, if you’re seeing any particular, progress in any international, specific international jurisdictions and just, you know, maybe expectations on when you could start to see more meaningful revenue contributions, start to roll in?

Mirko Wicka, President and CEO, HiVision: Yep. No. It’s, no. It’s progressing very well. We had been postponing some of our training, for international, but that’s now is about to start.

We wanted to start that earlier in the year. So we’re actually winning deals. We’re actually seeing our forecast and our pipeline grow dramatically in international. Interesting we’ve made quite a few installations. Unfortunately, a lot of them we cannot name, but it’s progressing very well.

We’ve hired people. We’re growing the team. The training was about to start in Nashville. We’ve already had our several training sessions in The U. S, specifically for The U.

S. Partners, so that’s progressed very well. So I expect that to really kick into gear in the half of this year, where I see 26% is going to be, for us, a very healthy growth in the international space.

Jesse Pytluk, Analyst, Cormark Securities: All right. Perfect. That’s all for me. I’ll pass the line.

Abby, Conference Operator: And our next question comes from the line of Nick Cochran with Acumen Capital.

Nick Cochran, Analyst, Acumen Capital: Hey, guys. Most of my questions have been answered, but maybe the one, Ken, has recently announced increased military spending. I’m just wondering how you’re positioned to benefit from that going forward.

Mirko Wicka, President and CEO, HiVision: Good question. I mean, speak to my field guys, and we’re definitely talking to different levels in the Canadian defense industry. So we’re all over it. Unfortunately, if I look at it, the Canadians have always been very close to the Americans. And so it’s a bit of an awkward situation at the moment.

So we’re I think as a Canadian company, we’re positioned very, very well. And I think we’re going to take advantage of it. So it’s to take a little extra work right now. Canadian military already uses our stuff, but we just need to work a little harder right now to try to take that Canadian position because we’ve always kind of used the fact that, hey, The U. S.

Is using us. We’re the gold standard. It’s a nonissue. But I think we know Right now, we’re kind of going to revert a little bit and kind of put up the Canadian flag, if you know what I mean. So that is happening as we speak, right?

Nick Cochran, Analyst, Acumen Capital: Great. That’s good color. And then maybe last question for me. I know you mentioned that large win with for the five gs products. In the past, you spoke about leasing those products.

How is that going?

Mirko Wicka, President and CEO, HiVision: Well, rental program and the long term leasing program is still ongoing. I mean, we’re doing much better in Europe because they’ve been running that for many, many years, even as part of AviWest, right, when we bought them. So it’s a machine more in The U. S. We’re doing okay.

Do I think we’re doing great? No. I think we can do better. So we’ve got a huge focus on our rental and long term lease programs in The U. S, where we’re going to be investing in inventory, in partnerships.

So we’re still working it. It’s still a very, very small piece for us. It’s not a needle mover at all. But interestingly enough, if you look at the deal we just they were actually leasing for millions of dollars from Live View per year. And they went with us, and they bought everything.

So it’s kind of interesting. So I’m not sure if the dynamics are changing in that industry or not, But we’re still committed to the long term lease and for the rental piece.

Abby, Conference Operator: And we have no further questions. So I will now turn the conference back over to Mr. Mirko Wicka for closing remarks.

Mirko Wicka, President and CEO, HiVision: Super. Thanks, Abi. And well, in closing, I again just reiterate, we’re committed to maximizing our long term value for all of our shareholders, and we’re very confident in our ability to execute our strategic revenue growth plan and deliver solid growth for the future as promised. I just want to thank all our shareholders and analysts on the line today for their continued support of HiVision. And I look forward to speaking with all of you in mid September when we discuss our third quarter results.

Thank you, everybody.

Abby, Conference Operator: And ladies and gentlemen, this concludes today’s call, we thank you for your participation. You may now disconnect.

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