Release Date: March 05, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Evertz Technologies Ltd (EVTZF, Financial) reported record high quarterly sales of $136.9 million for Q3 2025, marking a 9% sequential increase and a 1% year-over-year growth.
- The company achieved a strong gross margin of 57.8%, which is within their target range.
- Recurring software services and other software revenues increased by 6.3% year-over-year, totaling $55 million in the quarter.
- Evertz Technologies Ltd (EVTZF) has a well-diversified customer base, with the top 10 customers accounting for approximately 48% of sales, and no single customer accounting for over 10% of sales.
- The company declared a regular quarterly dividend of $0.20 per share, reflecting confidence in its financial stability and future prospects.
Negative Points
- International revenue for the quarter decreased by 31% year-over-year, highlighting challenges in the international market.
- Gross margin slightly decreased compared to the previous year, attributed to the product mix delivered in the quarter.
- Research and development expenses increased by $2.6 million from the same quarter last year, impacting overall profitability.
- The company faces potential negative impacts from US tariffs, which could affect near-term margins and operational costs.
- Selling and administrative expenses increased, representing approximately 14% of revenue compared to 13.5% in the same period last year.
Q & A Highlights
Q: How is Evertz Technologies dealing with the potential impact of US tariffs on its business?
A: Douglas Moore, CFO, explained that Evertz is monitoring the situation closely and has been expanding its manufacturing capabilities in the US to mitigate potential impacts. The company has facilities in Canada and the US, and they are accelerating their expansion in the US to lessen tariff exposure. However, some near-term margin impacts are expected due to operational redundancies between Canadian and US facilities.
Q: Was there any front-loading of orders in anticipation of tariffs, and how does this affect the backlog?
A: Douglas Moore stated that there was no material front-loading of customer orders. The strong quarter was not significantly impacted by tariffs, and the company is focusing on manufacturing and shipping from the US where possible to minimize tariff effects.
Q: Will there be a significant increase in capital expenditures due to expanding US manufacturing capacity?
A: Douglas Moore indicated that Evertz has been planning this expansion for some time, with expected additional CapEx of $2 million to $5 million over the next 6 to 12 months. This expansion is not expected to double their capital assets.
Q: What are the reasons behind the decline in international revenue, and are there any macro-level challenges?
A: Douglas Moore noted that a large project from the previous year did not repeat, contributing to the decline. There are no specific macro-level challenges identified, but the international segment has seen a decrease in revenue.
Q: How is the overall demand environment for Evertz's products, particularly in light of the tariff situation?
A: Brian Campbell, EVP of Business Development, stated that demand remains robust. The company is looking forward to engaging with customers at the NAB trade show to strengthen relationships and continue building their backlog and order book.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
