Haivision Systems Inc. (HAI) Q2 2026 Earnings Call Transcript

Thank you all for standing by. At this time, I would like to welcome everyone to the High Vision second quarter 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I would now like to turn the call over to Mirko Wicca, president, CEO, and chairman. You may now begin.

Thank you, Tracy. Good morning, everyone, and thank you for joining us of our earnings call to discuss the second quarter of fiscal 26, which ended in April 30th. Our second quarter unfolded against one of the most complex global operating environments we've seen in recent years. Heightened geopolitical tensions, including the conflict of the Middle East, ongoing supply chain volatility, component availability challenges, and customer procurement delays have created uncertainty across many of the markets we serve. As a result, some customer programs and capital spending decisions have shifted to the right impacting the timing of some revenue recognition. Now while these short-term headwinds have affected our near-term performance, they have not altered the underlying fundamentals of our business or the long-term demand drivers for our technology. In fact, we believe the secular trends supporting our company are stronger than ever. The increasing need for defense and intelligence capabilities, public safety modernization, critical infrastructure protection, cybersecurity resilience, enterprise security, and government digital transformation continues to create significant opportunities for our solutions worldwide. Our customers' missions have not changed. Their priorities have not changed. In many respects, they have become even more critical in today's geopolitical environment. Therefore, we remain focused on executing our long-term strategy rather than reacting to temporary market volatility. We are making substantial investments to modernize and strengthen our technology portfolio across both our mission systems and broadcast and media businesses. This includes a comprehensive refresh of our product roadmaps, next generation platforms, software capabilities, AI enabled solutions and integrated technologies designed to meet evolving customer requirements. We've been very very busy with this transformation the past 18 months and will continue to do so throughout fiscal 2027 now these investments are intentional they position the company not simply for the next quarter or the next fiscal year but for a new cycle of growth that we expect to accelerate through fiscal 28 and 29 and beyond now we have successfully navigated challenging market environments before our balance should remain solid, our customer relationships are deep, and our markets are strategically important and supported by long-term structural demand. Now while we expect some near-term volatility as customers work through procurement cycles and global supply chains continue to normalize, we remain highly confident in our long-term outlook. We believe the actions we are taking today will strengthen our competitor position, expand our addressable markets, and create meaningful shareholder value over the coming years. Our strategy is clear. Maintain operational discipline, continue investing in innovation, support our customers critical missions, and position the company to capitalize on the significant growth opportunities ahead. I appreciate the continued support of our customers, employees, shareholders, and partners and we look forward to updating you on our progress as we execute against our strategic objectives. Dan can you please continue with the detailed financials.

Thank you Mirko. Revenue for the second quarter of fiscal 2026 was 32.5 million representing a decrease of 1.8 million or 5.1 percent compared with the prior year period. Since our last earnings call on March 13th, the operating environment has become meaningfully more complex. Several external factors affected customer decision making, timing, procurement timing, and near-term purchasing patterns during the quarter. First, the conflict in the Middle East created additional uncertainty across several markets. At the time of our last call, the U.S. bombing campaign had begun less than two weeks earlier and market expectations around the duration and scope of the engagement were still evolving. The subsequent announcement of the blockade of the Strait of Hormuz a month after the earnings call added another layer of macroeconomic and geopolitical uncertainty, particularly around energy markets and broader customer planning. Within the defense sector, we have not seen evidence of a structural demand issue. Rather, the pressure we experience related primarily to procurement timing. Defense spending is being directed towards urgent readiness priorities, including air defense, counter drone capabilities, and replenishment needs. At the same time, broader modernization programs remain subject to normal budget cycles, approval processes, and program gates. One large defense program in particular is expected to contribute to lower purchasing levels in the near and medium term as assets associated with that program are currently deployed, and there is no defined timetable for their return. This has affected the timing of expected purchases, though we continue to believe the underlying requirement remains intact. Second, artificial intelligence has become a major investment priority across many customer segments. We are seeing significant investment in AI infrastructure projects, and customers are increasingly evaluating how AI will affect their own businesses, technology roadmaps, and capital allocation decisions. In the enterprise market, this has contributed to longer IT approval cycles. Buyers are prioritizing AI infrastructure, cybersecurity, cloud optimization, and cost reduction initiatives ahead of more discretionary communications and video refresh projects. In the broadcast space, we continue to see constrained media technology budgets, disciplined capital spending, and heightened scrutiny of return on investments for cloud, IP, remote production, and infrastructure upgrades. Related to this, we noted on our last earnings call that the global memory semiconductor market has entered a tight supply cycle driven largely by demand from AI data centers and high performance computing applications. That trend has continued. Memory prices are increasing and memory and server manufacturers are prioritizing AI optimized products which is further constraining supply for other server configurations in response we are monitoring supply chain conditions closely making incremental investments when deemed necessary we've also changed how we quote server based solutions servers are now offered as a separate line item rather than bundled with software into an appliance like offering. This gives customers greater purchasing flexibility. They may purchase software-only or virtual machine options, purchase servers through HiVision, or source servers through their own supply channels. This approach is intended to protect HiVision from volatility in server input costs and preserve margin discipline. At the same time, it may reduce reported top-line revenue by as much as $2 million, depending on the extent to which customers elect to source server hardware independently. Despite the second quarter revenue decline, our year-to-date performance remains positive. For the first half of fiscal 2026, total revenue was $76.8 million, an increase of $5.3 million, or 8.5%, compared with the same period in the prior year. Our recurring revenue from maintenance support contracts and cloud services continues to be found. Recurring revenue in the first quarter was $7.1 million, or about 22% of total revenue. On a year-to-date basis, recurring revenues 14.4 million or 21.3 percent of total revenue gross margins for the second quarter fiscal 2026 was 68.9 percent that's a decline of 410 basis points compared with the prior year period and on a year-to-date basis gross margins were 69.7 percent representing a decline of 200 basis points compared with the same period in the prior year as we discussed in our last earnings called gross margin performance continues to be affected by product and revenue mix. In particular, we highlighted three factors, increased transmitter sales, higher sales of HMP solutions installed on servers and sold as an appliance-like offering, and the timing of deliveries to a large defense customer, which reflects legacy activities from our systems integrate our business. Those product sets carried lower gross margins than our corporate average and affected both first quarter results and year-to-date performance. Although all three factors affected year-to-date performance, in the second quarter, the gross margin decline was driven primarily by the magnitude and composition of deliveries to a large defense customer. This quarter, in fact, represented the highest level of deliveries to that customer under the existing agreement, with revenue from those deliveries increasing approximately threefold compared with the same period last year. However, the mix of those deliveries was weighted heavily towards lower-margin third-party components rather than the higher-margin proprietary HiVision products. As a result, while the volume of deliveries was strong, the margin contribution was below our typical profile. Perhaps in the consolation, approximately 3 million of proprietary products' deliveries shifted from the second quarter into the third quarter due to supply chain constraints. Those deliveries are expected to carry a more favorable margin profile and would have improved the second quarter mix had they shipped as originally planned. Overall, the second quarter margin decline was primarily a function of revenue mix and delivery timing. With that said, we are facing gross margin pressure, reflecting higher component costs and constrained availability across memory and compute-related inputs. Technology manufacturers using memory, GPUs, CPUs, SSDs, NICs, or FPGAs are facing increasing purchases through brokers, higher bond costs, longer lead times, allocation risk, and expedite fees. This is creating allocation dynamics and upward pricing pressure. To illustrate the point, the number of component end-of-life events affecting our active production has accelerated and has doubled in the last six months compared to the previous six months. And equally important, the number of component end-of-life events received with no opportunity for last-time buy windows has climbed sharply. While we are taking pricing, sources, and design actions, including incremental investments in inventory, cost increases are flowing through faster than customer price adjustments, creating near-term, mid-term margin compression. Total expenses this quarter were $25.6 million, down $2.6 million from the prior year comparative period. Although still a favorable comparison, the prior year period did include a non-recurring expense of $1.5 million related to legal settlements and related fees. To further frame our total expense levels, last quarter, which is our first quarter of fiscal 2026 total expenses were 25 million and total expenses for the quarter before that our fourth quarter of fiscal 2025 were 25.5 4 million in fact total expenses for the last five quarters have averaged about 25.2 million as we have stated on previous calls our objective this year is to maintain the current level of expenses i think it's fair to say that thus far we are meeting that objective on a year-to-date basis total expenses are 50.6 million flat with prior year the non-recurring expenses incurred in fiscal 2025 were 1.7 million and but they were offset this year by increment incremental investments made in research and development to support our product realization calendar share-based compensation which varies based on the timing the magnitude, and the nature of the long-term incentive grants, and compensation, travel, and promotional expenses incurred in the G&A line item. Looking forward, there is some positive news. This August represents the five-year anniversary of the HiVision MCS acquisition. Thus, technology purchase as part of that acquisition will have been fully amortized, reducing total expenses by about $600,000 per quarter. The following April will be our five-year anniversary of the High Vision France acquisition, also known as AVI West. Thus, technology purchases part of that acquisition will have been fully amortized, reducing total expenses by another $350,000 per quarter. Thus, we should expect to see our operating profits increasing at an even faster rate than EBITDA as the business scales. The result of the quarterly decline in year-over-year revenue and the decline in year-over-year total expenses is that the operating loss for this quarter was $3.1 million flat at the same quarterly period last year. The $1.7 million decrease in revenue and decline in margins resulted in a $2.6 million decline in gross profit when compared to the prior year. However, that was offset by a commensurate $2.6 million decrease in total expenses. The year-to-date comparisons fared even better. On a year-to-date basis, the increase in year-over-year revenue and flattish expenses resulted in a year-to-date operating loss of only $3.3 million compared to an operating loss of $5.4 million for the comparable prior year period. That's a $2.1 million improvement. Our focus continues to be adjusted EBITDA as we believe it gives a clearer view of our performance by stripping out non-cash accounting-related expense items like depreciation, amortization, and share-based payments. For the second quarter, adjusted EBITDA was $300,000 compared to $1.7 million last year, and our adjusted EBITDA margin was 1% compared to 4.9% last year. On a year-to-date basis, adjusted EBITDA was $2.9 million, which exceeded the prior year by about 700,000 or 31 percent. We ended the quarter with 18.1 million in cash. That's an increase of 1.1 million from the end of last quarter and the amount outstanding on the line of credit decreased by 400,000. Further, our credit facility remained strong at 35 million with only 5.1 million outstanding. In fact, we recently extended the credit facility until August, 2028. The line of credit is still expandable to as much as 65 million in the event we identify an acquisition target. And BMO even doubled the level of permitted share buybacks under the facility. Note, we did renew our NCIB in January, 2026. And we purchased, that NCIB renewal allows us to purchase as much as 1.8 million shares. The NCIB was active in the month of May and we acquired over 200,000 shares for 1.2 million. Total assets at quarter end were 140.5 million, an increase of 1.8 million from the prior quarter end. Our balance sheet remains very strong. I do want to mention that on our last earning calls, we suggested that we will likely have to make incremental investments in inventory to support our new product to introductions and to support our sales forecast for the remainder of the year. After having declined by as much as nine and a half million since peaking in the second quarter of 2023, inventory balances at quarter end were 15.1 million. That is an increase of 3.2 million under during this quarter. Unfortunately, we anticipate further investments in inventory to be necessary as we've entered into this tight supply cycle driven by the demand from AI data centers and high performance computing. And prices are surging and we need to invest incrementally to maintain margins. Total liabilities of the quarter end were 46.2 million. That's an increase of 1.8 million from the prior quarter end. We did see the value of trade payables increased by 3.1 million from the end of fiscal 2025, but that's largely related to the recent inventory purchases. On the other hand, lease liabilities decreased by $400,000 as we continue to make rent payments, term loans decreased by $300,000 as we continue to make principal payments, and I should mention that we expect the term loans related to the High Vision France acquisition to be largely paid off by the middle of fiscal 2027. As Mirko suggested, the company continues to experience robust underlying demand across its key markets, though the timing of certain deliverables has shifted to later periods as a result of procurement delays, customer approval cycles, and supply chain constraints. Recent geopolitical developments involving government priorities have contributed to a reprioritization of spending across certain defense and government customers. We are still experiencing procurement bottlenecks limiting the ability of the Department of War to initiate new programs, increase production rates, and commit to larger, longer-term purchases. We continue to monitor funding of government agencies, like delays in the Department of Homeland Security funding, as an example, which have also impacted the timing of deliveries. Meanwhile, enterprise and broadcast customers are dealing with competing priorities of AI infrastructure, cloud optimization, and cost reduction initiatives. Despite these near-term, mid-term timing pressures, the company remains confident in its long-term growth prospects and continues to target consistent double-digit revenue growth over time. Unfortunately, growth may vary from quarter to quarter based on procurement timing, customer delivery schedules, and the macroeconomic conditions. Thus, we are lowering our expectations for the full fiscal year. We are now anticipating revenue between 140 and 142 million for fiscal 2026. And although we are monitoring supply chains closely, we expect margin compression resulting in margins closer to 70% in the near term. That concludes my prepared remarks. I'm passing the microphone back to you, Mirko, and then we'll open the floor to questions.

Yeah, thanks, Dan. I think we can open up the questions. Tracy?

We will now begin the question and answer session. At this time, I would like to remind everyone, if you would like to ask a question, please press star 1 now to raise your hand. We do ask that you pick up your handset when asking a question to allow for optimum sound quality.

If you are muted locally, please remember to unmute your device. please stand by now while we compile the q a roster your first question comes from the line of robert young with canaccord genuity your line is open please go ahead hi good morning um you uh you highlighted in the prepared comments that you weren't seeing a change in long-term demand so curious if you could um uh state whether there's program cancellations or any de-scoping um is there any change in the long-term outlook for any of your customers maybe just you know maybe go

deeper into the demand environment yeah sorry robert i i know you were kind of breaking up there i think the question is are we seeing any any changes to our long-term outlook for our key markets and customers is that the question i apologize i guess it's a bad connection here oh it's okay what i was looking for is just trying to get a sense if there's any program cancellations or if there's any de-scoping of programs as opposed to the delays that you're talking about uh well good question no we haven't seen any cancellations uh at all um the only thing that we've seen obviously we have one very large program that uh that we're working with over multi-years and we know that that uh is being a little bit delayed due to what's going on in the world and but I don't expect that to change dramatically it's just going to be shifting to the right of it but right now we have not seen any other programs or projects canceled but we are just seeing some enterprise delay move to the right some hesitation due to you know supply chain issues but besides that But very, very optimistic on our longer-term prospects.

And then the longer-term guidance that you've given, or rough guidance, I should say, over the next two to three years, where you suggest that you could see double-digit growth with a pack to 20% even with DAW margins.

I understand it's very difficult to understand where the macro goes from here, but just curious your level of confidence just seeing the long-term pipeline. yeah i mean i think you know we'll probably be better positioned i would say uh later in the year to go further but uh right now we're i mean in our view and our plans what we're seeing uh our double digit revenue growth is definitely going to be there 20 percent of the data is absolutely targeted but we're looking probably closer you know the end of 27 into 28 and 29 right so that that's what I say long-term it's we're gonna once the large defense program kicks into gear which should be planned for our fiscal 28 together with you know the supply chain changes and with all of our next generation technology all of our new products that we're announcing because we're announcing at an accelerating pace of products throughout the next 12 to 18 months uh those are all going to be kicking in so um i would expect 12 12 to 18 months uh we're going to be on the road to to what we said before okay and you you had some comments around a large program where they're i'm assuming it's a navy program their boats out at sea and they haven't been coming back and uh there's another you know program which had some impact on the on the margin structure uh is that can you comment whether that's the same program and like to me expect margin uh pressure from that program going forward or will that alleviate just because it's slowing in the near term yeah i mean obviously we can't talk about specifically but i think you're you're kind of on track um but no i don't see any margin compression there whatsoever uh you know uh it's only a a shift to the right of the actual revenue that's that's what we're seeing um there is no sorry let me let me suggest this uh robert if i could

uh had we had we not had the supply chain constraints and we had we delivered everything that we expected delivered in the second quarter we would not have seen as profound a margin compression as we as you saw in fiscal uh in the second quarter we are seeing margin compression as it relates to the supply chain issues going forward here. But candidly, that's to come. It's not part of the second quarter story as much as the second quarter deliveries were predominantly third-party components concentrated into a single quarter.

Okay. Thanks for that clarification. Last question for me. I'll pass the line. You suggested GPUs were a function of the margin compression and protection of the supply chain issue. I'm trying to understand what the driver, what product is using GPUs. I think it's only the KX1. And can I assume that you're starting to see some good volume delivery on that? And then I'll pass the line.

Well, some of the components that we're looking at are related to products that are in development right now. Now, let me be very clear about it. We've been able to secure our needs for the near-term, mid-term going forward here. But it hasn't been without certain challenges. I think that there's been sort of like a huge volatility in what our suppliers are telling us. And then when we sort of digest it and we start speaking with them, we're able to sort of rationalize and figure out where we are. And thus far, we've been able to serve all of our customers' needs. But we're seeing this happening quite a bit. We're seeing a lot of components suddenly go end of life. We're seeing a lot of components that are, the costs are going up and we're just, you know, we're making, we're weaving and bobbing to make sure that we are in a sound position, much like we did a couple of years ago when we had the worldwide component shortage. You might remember then we incrementally invested in inventory. We had to spend incrementally to be able to secure our source of supply. And we ended up having to spend about 2 million more in those said components that we realized over a two-year period, we're beginning to see that same kind of experience right now.

And again, Robert, I would add to that as well. I think Dan already mentioned it in his prepared remarks, but we are taking serious action about some price changing, increasing of price of our products. We've already done that for the server, spikes, memory, DRAMs a lot, and we've actually changed our business model on selling hardware like the Dell servers. So we're putting a lot of processes because we cannot continue absorbing these new changes. And now we're seeing it in other components and suppliers are just raising prices arbitrarily. So we will be changing or updating some of our pricing as early about this month. We did it last month and we're going to continue to do that if this continues. And I think right now what I'm hearing is seeing customers understand that.

They're seeing it everywhere and they're they're totally fine with it um and it's just something we have to do going forward so thanks for taking the questions sorry about the background noise and the connection congratulations to your son yep as a reminder if you would like to ask a question please press star one on your telephone keypad now your next question comes from the line of daniel rosenberg with Paradigm. Your line is open. Please go ahead.

Hi, good morning. Thanks for taking my questions. My first one just comes around the margin profile and the pricing initiatives that you're taking. So how do you think about that flowing through into your actual margin profile?

You know, when do those changes kind of flow through and help you get to back to a more normalized gross margin level um well the the price and server pricing that we just announced last month i mean again we we have to give people you know usually a 30-day notice period so we haven't seen that uh funnel through yet we expect uh it to start this quarter we're in q3 and of course into q4 and beyond so that's uh that's that's that's the first changes that we've done we're about to do new changes to other products starting this month which will

probably really affect us more in Q4 because again we have to give our customers it's always a standard 30-day quote protection mechanism when we announce that so I think you'll see most of those affect hopefully positively into Q4 and obviously the following year okay thanks for that and I I understand you explained the revenue that's being pushed out a bit based on the Middle East conflict, but specific to large contracts, I was wondering if you could maybe speak to broadly opportunities out there, understanding that these are larger ones but are still potentials to hit.

just any initiatives you're taking or anything you're seeing just more broadly around defense um you know i'm thinking of nato initiatives and things of that nature yeah a good question i mean we've got uh i think i mentioned uh last quarter uh earnings call that we've we've seen an unprecedented uh a number of very large opportunities so that's continuing i mean we've We've got quite a significant number of multimillion-dollar deals in the pipeline. This is our long-term forecast, and these are large opportunities, large deals. So we're very, very positive on that. We haven't seen any being canceled that we've been working on, but these things take time, right? So right now what we're seeing is there is a lot of interest in the NATO 5Is for sure. as they're starting to beef up a lot of their militaries, looking at technology. But, you know, these things don't happen overnight, and they just take several years sometimes. So it's increasing. The long-term pipeline is looking good. The forecasts are building. And so we don't see anything from our core business being affected from the need of the technology. It's just this temporary, you know, headwinds that we're kind of seeing where some people are shifting things to the right. Some people are waiting to see what happens. But overall, I mean, we're pretty bullish on the long-term prospects of what we're doing.

Okay, thanks for that. And then you mentioned some, the pricing pressures and, you know, I think everybody globally is seeing the headlines and, you know, we've certainly seen some comfort in customers coping with that. But I'm just wondering, you know, how far do you think this can go? And then anything in terms of the customer saying, well, you know, how much can they absorb? How much, you know, price and elasticity is there in the customer profile? Obviously, you're delivering high value things, but, you know, how much wiggle room do you think you have there?

It's a great question. I mean, the good thing is that we are in mission-critical operations, and not to say that price is not an issue, but customers that do need our technology at one point, we're not in such a price-sensitive situation where they can wait. So we're seeing within our operations, people do need the equipment. Yes, there's always pressure on price and pressure on budgets, no question. So I think in the pure defense, ISR, security space, we see that pretty positive. In the enterprise space and in the banking sector and the enterprise or even the government, we have both commercial and government enterprise. their projects can be deferred because they are concerned with budgets and they're using technology, even their previous generation technology, and they might decide to wait a year instead of doing a tech refresh. So I think there we might see some pressure where if I was going to do my typical three- to five-year tech refresh, things work. Why not wait a year until the supply chain subsides and the prices come down? That could be happening. We haven't seen that happening to a great extent, but that's the thing that we're watching right now.

Okay, thanks for that. And then lastly for me, I was curious about the product side on the broadcasting segment. So there's a number of hardware initiatives that you're putting out there. I'm curious on the software platforms that they're using, Like, you know, how tightly integrated are the kind of distribution softwares to the actual hardware products? Just any color you could provide on how you think about where the value lies on that side of the equation.

Well, there's two areas. I mean, we have the broadcast side and the mission side. I mean, in the broadcast side, we, you know, we've actually just changed all of our pricing because they depend on, you know, like the super micro type or Dell platforms where our software, like, for example, the Stream Hub is highly integrated on those platforms and they need high powered platforms to operate. um and uh so so there you know that's a pricing issue you know we've changed our pricing we've actually decoupled our system pricing for the first time ever and we're selling separately the hardware and separately the software and we're we've already put in um conditions that you know for example the hardware is absolutely non-discountable we're not in the hardware business to sell servers and the price will keep increasing based on the the suppliers and people have a choice by the way to buy their own service i mean these are off-the-shelf standard high performance service we're giving all customers their option to buy them if they want to buy them from us they have to pay a small premium but but there's no discounts and i think what might happen is people might end up buying their own. Our revenue, we might give up a million or two in revenue, but margins will improve. So that could be a good thing. And if they do buy the systems like that, well, at least we're not going to be losing money and funding the price increase. So that's affecting that stream of broadcast business. I mean, from an end quarter perspective, I think we're fine there. and we're actually going to be increasing all of our prices there as well. The servers also play a very big part in our mission system, the video distribution, right? Like our HMP, our high-vision media platform. I mean, those are very, very high-end servers. I mean, these things are going up 300% to 400% in price from the suppliers. It's crazy. And we do the same thing. We're decoupling the system pricing to hardware and software, and we're allowing our customers to either run them on VMs, which would be, for us, 100% margins, or they can buy their own servers if they want to. So it's kind of playing. So that's from a server perspective, right? But if you look at the product announcements that we've been going through in the last 12 months and continuing for the next 18 months, remember we did the KX1. I mean, that's a proprietary platform using the NVIDIA chipset with the AI transcoding system. And that's starting to get legs now. We'll be demoing it for a while now. We're starting to talk to people on programs. That's really going to be affecting revenue sometime next year going forward. And we just launched the Cobra, which is one of the most exciting products we ever launched in the mission side, which is really the video operation platform, very, very compact platform, again, with margins that we can control. These are proprietary programs. And then we also just launched the PlayISR Premium, which is something new, which is our mobile app where we're going to start licensing streams based on the ISR mission requirements to start building a pipeline for the audience into 27, 28. So these are all revenue generation, margin generation activities in the mission side. And remember, we just also refreshed the entire transmitter side, right? So in the Falcon X2, we just launched the ultra version. We just launched the Falcon X4, right, which is the really ultra low latency, you know, with four integrated 5G modems, next generation technology, 4K UHD. And that's just coming out of the oven. We just showed her at NAB, and we'll be shipping that by near the end of the year or end of fiscal year. So that's really going to be affecting Q1 of 2027 going forward. So there's a lot of players, and I'm not even talking about the Makita 1, which is probably the most significant platform that we launched at NAB, which is really the first of its kind, a single board, compact blade architecture, just like our regular Makito but this is this is going to be the only it's the only technology that will have encoding decoding h264 h265 jpeg xs and 2110 on the board no one is going to be able to do that so we're really excited with Makito one platform which will be coming out of the oven really the end of this year so as you can see like it's been almost every couple months we we're doing massive overhaul of next-gen technology. And there's more to come, by the way, in the next six months that are pretty exciting, especially in the mission side. So that's kind of what we've been working on all last year into this year, and we're going to be continuing next year. Sorry, that's a long-winded answer to that question.

And if I could just sort of finish the thought, one of the other concepts that should be conveyed is that we are in the process of creating ecosystems. We have a broadcast ecosystem and we have a mission ecosystem that are supported by our software properties, both our server properties, but equally important are cloud properties. So our Hub360 initiative is a means for all of our technology to be managed by a single portal to enable the operators who have a lot of our equipment to feed their entire fleet of equipment and be able to manage that entire fleet of equipment. It creates stickiness and and allegiance to our properties as we continue to build on it.

Great. I appreciate all the color on the product sets. I'll pass the line.

Your next question comes from the line of Sebastian Charland with Agave Capital. Your line is open. Please go ahead.

Good morning. Thank you for taking my questions. My first one will be on the sales side. i i noticed in the mdna that the sales team i think is the uh only one department that really had an increase year over year or a significant one i was wondering um in which verticals or geographies are these sales people i think it's about 15 people or a little less uh focused on dan do you yeah my recollection is that yeah we we made significant investments internationally particularly in international because we saw a huge opportunity not only on the broadcast side but on the mission side as well uh and so uh you know we wanted we we kind of retooled our sales uh

sales organizations to focus on these two two areas of sorts and this was where we believed that we had the the best opportunity low-hanging fruit by investing internationally got it yeah Yeah, but it's also for both markets, right?

It's not just the one market because we have increased our mission sales team internationally as well as our broadcast team internationally.

Okay, that's helpful. And we discussed it briefly on the last call, and let's say we look nationally in Canada, on the defense side, there's been new orderings of Bombardier planes. There's the large order for submarines, for F-35s, and maybe gripping jet fighters. There's also those new Navy ships and icebreakers coming in. I'm guessing those will all need low-latency, hay vision sort of kind of equipment going forward.

Have you seen any uptick in Canadian interest on the defense procurement side? um i hate to say it but uh uh we're still pretty small in canada in that market uh we we do work with the with dnd quite a bit obviously because they do follow uh the u.s a lot um they are using our equipment uh and and traditionally when like to give you an example whether it's a the navies have been working together for many many years and not just with canada but also australia the Five Eyes. So whatever is deployed traditionally within the U.S. system is always fitted into the NATO and partners systems. So that's already built into it. So my assumption is whenever the ships get built, and these are very long-term projects, and unfortunately are getting all the attention with the government because they need to get to their 3% to 5% of GDP, you're not going to get it by buying, you know, a few encoders, right? You're going to get it by buying planes and ships. So we are monitoring it, but in essence, it's still extremely small. In fact, we're getting much higher inputs and requirements from the European partners. They've got much more money to spend on this, and they seem to be moving much quicker in our type of product. So, So, yeah, no, we're on it. But I just wish, as a Canadian, I wish it was higher. But it's just, it's not a significant amount of business yet.

Okay, thank you for the clarification. That's it for me.

We have now reached the end of the Q&A session. I would like to hand the call back over to Mirko Wicca for closing remarks.

Thank you, Tracy. So, I guess in closing, I just want to reaffirm that we are very committed to maximizing our long-term value for all of our shareholders and we're confident in our ability to execute on our strategic growth plan. I just want to thank all our shareholders and analysts online today for the continued support of HiVision and look forward to speaking with you in mid-September when we'll discuss our third quarter performance and result. Thank you, everybody.

This concludes today's call. Thank you for attending. You may now disconnect.