Evertz Hoards $20M of Memory to Ride Out the AI Crunch — and Sits Out the Tariff-Refund Party
A modest 5.5% sales quarter hides a supply-chain cash squeeze and a quiet divergence from the market's hottest keyword themes.
ET.TO · Earnings Call · 2026-09-14
The Cash Story Isn't in the P&L
Evertz's fiscal Q1 2027 (ended July 31, 2026) looks unremarkable at the topline: sales of $118.3 million, up 5.5%, with software and services revenue of $58.9 million — nearly half the mix — and a 58.6% gross margin squarely inside the company's 56%–60% target range. Earnings per share of $0.10 on $8 million of net income. Nothing dramatic.
The drama is on the balance sheet. Cash net of bank indebtedness collapsed to $2.5 million from $19.1 million the prior quarter, and CFO Doug Moore was blunt about why: “the decrease is mostly driven by a sharp increase in raw materials inventory that we ended up bringing in during the quarter.” — Doug Moore, Chief Financial Officer · 2026-09-14 That phrase is now the company's number-one high-momentum theme — raw materials — and it is not a one-quarter blip.
The mechanism is the AI buildout, seen from the buyer's side. “it's chewed up a big chunk of our cash as the lead times are being pushed out largely with this AI demand... we've built up a lot of stock in memory and storage servers just to make sure we can deliver when we need to.” — Doug Moore, Chief Financial Officer · 2026-09-14 Evertz pulled roughly $20 million of memory, storage and servers forward into inventory. This is the same memory supply squeeze rippling through the global keyword tape all year, where memory pricing and memory-cost themes pepper the top-75 across multiple quarters. The crucial distinction: Evertz is on the wrong side of that trade. For memory makers, tight supply is margin expansion; for Evertz, it is working capital consumed and a lead times problem to manage. What started as a hedge has become a recurring procurement tax.
there's some memory -- certain components like memory on allocation where we have to secure parts to guarantee our ability to ship... we're using some of the cash to stockpile.
That was management two quarters ago, and the pattern has simply intensified, not resolved. The compensating comfort is that, so far, this is a cash-flow story, not a margin story — Moore again: “it hasn't really been a drain on margins, but it is causing us to react with procurement.” — Doug Moore, Chief Financial Officer · 2026-03-04 The risk investors should watch is whether the stockpiling ever stops being a timing choice and starts being a pricing problem.
Tariffs: Evertz Sits Out the Refund Windfall
Here is the sharpest contrast in the dataset. The single hottest theme in the entire global keyword tape is tariff recovery: Tariff Refund ranked first with a momentum reading of 422 in 2026Q2, and refunds keep surfacing across recent reporters — CULP, AEO, ASO, M, LOVE, DBI, VNCE, JILL, LAKE, HOFT all logged tariff-refund benefits in their latest quarters. For a wide swath of consumer and industrial names, IEEPA refunds are a genuine earnings tailwind.
Evertz is conspicuously absent from that party. When pressed by Canaccord's Robert Young, Moore was flat: “Not materially, no.” — Doug Moore, Chief Financial Officer · 2026-09-14 The reason is structural — “The majority of our products are currently being protected by the USMCA.” — Doug Moore, Chief Financial Officer · 2026-09-14 Evertz has already done the boring defensive work: it pre-built U.S. manufacturing capacity outside Pittsburgh and keeps most of its cross-border volume USMCA-compliant. So the company neither suffers the tariff headwind nor banks the refund windfall that so many other reporters booked. In a quarter where the market is celebrating refunds, Evertz is a quiet neutral — a genuine branch in the road relative to peers.
Defense, Backlog and the Made-in-Canada Pitch
The revenue mix was framed as broad-based and increasingly hardware centric in the backlog. Purchase order backlog at the end of August exceeded $259 million, and with $30 million shipped that month, combined backlog-plus-August-shipments topped $289 million. Moore described the sequential backlog rise as “a pretty relatively broad-based increase” — Doug Moore, Chief Financial Officer · 2026-09-14 — some $5–10 million contracts, but nothing press-release material.
The strategic thread that keeps compounding is Defense. It has been a recurring company keyword for several quarters, but the tone has hardened around the domestic angle. CEO Brian Campbell leaned on sovereignty: “being a Made in Canada solution, not just a Canadian goods for classification purposes, but we're -- with our campus in Burlington, our manufacturing operations and our 600 engineers and staff domiciled in Canada, we feel that we've got a very compelling solution to provide to Canadian government.” — Brian Campbell, CEO · 2026-09-14 Management flagged strong August order intake tied to government related demand, and the theme recurred as expected in Q&A — consistent with the prior call's framing of government and military as a growing, if lumpy, engine.
The Read-Through
This is a company riding a broad global wave (broad based demand, IP/cloud transition, AI-adjacent infrastructure demand) while being squeezed by the very same wave's upstream effects. The long term trend of software-and-services mix climbing toward half of revenue remains intact, and international growth of 17.5% was a bright spot. But a near-zero net cash position, funded by a deliberate memory and server stockpile, is the number that will define the next two quarters. Evertz isn't inventing a new story so much as being pulled into everyone else's — the AI hardware crunch and the tariff regime — from an unhelpful position on both. That is a subtler, but more useful, thing to notice than the headline 5.5%.