Evertz Technologies: Riding the Wave of Recurring Revenue Growth in the Video Infrastructure Revolution

Evertz Technologies Limited (EVTZF) is poised to deliver its fiscal 2025 year-end results on June 25, 2025, a milestone event that could cement its position as a leader in the evolving video infrastructure market. With a strategic focus on software-defined solutions and recurring revenue streams, the company has demonstrated remarkable resilience amid shifting industry dynamics. This article explores how Evertz's recent financial performance, driven by accelerating software/services revenue and a robust backlog, positions it for sustained growth in high-definition (HD) and IP-based networking—a trend critical to global media infrastructure demands.

The Recurring Revenue Engine Takes Shape

Evertz's transition to a software-centric business model has been nothing short of transformative. In its most recent quarterly results (Q3 FY2025, ended Jan 31, 2025), the company reported record revenue of $136.9 million, a 9% sequential increase. Crucially, recurring software, services, and other software revenue rose to $55.7 million, a 6% year-over-year jump. This segment now accounts for approximately 40% of total revenue, up from 37% in FY2024, signaling a structural shift away from hardware dependency.

The momentum is even more pronounced in earlier quarters. In Q1 FY2025 (ended July 31, 2024), software/services revenue surged 26% YoY to $55.9 million, or 50% of total revenue, while hardware sales dipped due to project timing delays. Management emphasized that this growth reflects a broad-based demand for Evertz's cloud-native and IP-based solutions, including its Software-Defined Video Networking (SDVN) platform.

Strategic Positioning in a High-Growth Market

The video infrastructure sector is undergoing a seismic shift toward IP-based, cloud-driven systems, driven by the proliferation of 4K/UHD content, virtual production, and streaming platforms. Evertz's SDVN technology—designed to unify IP and legacy workflows—is uniquely positioned to capitalize on this trend.

Key advantages include:
1. Diversified Customer Base: Top 10 clients account for only 37% of revenue, reducing dependency risks.
2. Strong Backlog: As of January 2025, the company's purchase order backlog exceeded $302 million, up from $295 million in May 2024, indicating robust demand.
3. R&D Investment: Evertz spent $134.8 million (26% of revenue) on R&D in FY2024, fueling innovations like cloud-native encoders and AI-driven video analytics.

These investments are already bearing fruit. For instance, a $152 million multi-year software and services contract secured in FY2024 highlights the scalability of recurring revenue models, where clients pay for licenses, maintenance, and upgrades over time.

Navigating Hardware Volatility with Software Stability

While hardware revenue dipped in Q1 2025 ($55.7 million vs. $81.4 million in Q1 2024), management attributes this to project timing, not market weakness. The software segment's resilience—$55 million in Q3 2025, a 6.3% YoY increase—offsets hardware fluctuations. Gross margins expanded to 59.4% in Q1 2025 from 57.3% in Q1 2024**, underscoring software's higher profitability.

The company's financial health further supports its growth narrative: cash reserves rose to $91 million as of July 2024, and a $0.195 per share dividend remains intact, reflecting confidence in cash flow stability.

What to Watch for on June 25

Investors should focus on three key metrics in Evertz's June 25 results:
1. Software/Services Revenue Growth: A continuation of the 26% YoY Q1 surge would validate the recurring revenue model.
2. Backlog and Order Trends: Confirmation of sustained demand beyond the current backlog of over $300 million.
3. Gross Margin Expansion: Evidence that software's higher margins are offsetting hardware volatility.

Investment Thesis: Buy Ahead of the Transition Validation

Evertz presents a compelling opportunity for investors seeking stable cash flows and exposure to the video infrastructure boom. Its recurring revenue model reduces earnings volatility, while its IP/cloud expertise aligns with industry tailwinds. Key catalysts include:
- June 25 results: A strong print could re-rate the stock, currently trading at 12x trailing EBITDA—a discount to peers like Blackmagic Design (private) or Ross Video (private).
- Global market expansion: International revenue grew 50% YoY in FY2024, with the U.S. and Asia-Pacific regions as key growth hubs.
- Low single-customer risk: Diversification reduces exposure to sector-specific downturns.

Risk Factors:
- Hardware project delays: While manageable, prolonged slumps could pressure margins.
- Macroeconomic headwinds: Budget cuts in media/telecom could slow large-scale software contracts.

Conclusion: A Strong Buy Before the June 25 Results

Evertz Technologies has laid the groundwork for a recurring revenue-driven future. With software/services now comprising nearly half its revenue and a backlog signaling sustained demand, the June 25 results could mark a turning point. Investors focused on stable cash flows and long-term tech leadership should consider a position in EVTZF ahead of the announcement. The stock offers a 2.2% dividend yield and a strategic bet on a sector undergoing a fundamental technological transformation.

The verdict? Buy Evertz Technologies before June 25—the coming results may prove this shift to be as inevitable as the rise of IP-based video infrastructure itself.