Espial Reports Fourth Quarter and Full Year 2015 Results

OTTAWA, Ontario--()--Transforming the viewing experience worldwide, Espial® Group Inc. ("Espial" or the "Company"), (TSX:ESP), today announced its fourth quarter and full year financial results for the three and twelve month periods ended December 31, 2015.

Highlights

  • Increased revenue by 24% to a record $24.8 million in 2015
  • Adjusted EBITDA of $2.9 million in 2015
  • Fourth quarter revenue of $5.2 million
  • Fourth quarter adjusted EBITDA loss of $0.6 million
  • Secured two major European cable operators, serving around 5 million subscribers
  • Orange, a global mobile operator, launched Orange TV Stick in Romania and France with Espial’s HTML5 Client software
  • Mike Hayashi, former Time Warner Cable Executive Vice President, joined Espial’s board of directors
  • Acquired Bluestreak Technologies
  • Announced App partners providing apps for enhanced sports to games for our G4 Client
  • Launched Espial's Professional Services group

"In 2015, we took several strides forward in executing our strategy. We secured two additional major cable operator wins and focused efforts on progressing the implementation of our solutions towards trials and deployments,” said Jaison Dolvane, CEO, Espial. “We expanded our leadership team and our delivery capability, acquired Bluestreak, and deepened our engagement with several prospective customers.”

"Subsequent to year end, one of our European cable operator customers began field trials with our G4 Client solution. Additionally, a North American cable operator has started commercially shipping 4K Ultra HD set-top boxes to their subscribers with Espial software. Both of these are already significant accomplishments in 2016," added Mr. Dolvane. “Our priorities in 2016 are to continue supporting our current customers’ trial and deployment plans, and increase scale to address new wins. We have a good pipeline of new prospects, and believe now is the time to increase investment in our integration and support capabilities to ensure we successfully execute on this market opportunity.”

Financial Summary

For the three-month period ended December 31, 2015, revenue was $5.2 million compared with revenue of $5.3 million for the three months ended December 31, 2014. Adjusted EBITDA loss for the fourth quarter of fiscal 2015 was $0.6 million compared to adjusted EBITDA income of $0.5 million for the fourth quarter of fiscal 2014. Net loss for the quarter was $1.0 million, compared with a net loss of $0.2 million for the fourth quarter of fiscal 2014.

For the fiscal year ended December 31, 2015, the Company reported revenue of $24.8 million compared with revenue of $20.0 million for the fiscal year ended December 31, 2014. Adjusted EBITDA income for fiscal 2015 was $2.9 million compared to $3.2 million for fiscal 2014. Net income for the year was $1.3 million, compared to $1.2 million last year.

Q4 Financial Results

  • Fourth quarter revenues were $5,209,206 compared with revenues of $5,258,593 in the same period a year ago. Fourth quarter software license and royalty revenues were $2,426,721 compared to $2,898,646 in the fourth quarter of fiscal 2014. Professional services for the fourth quarters of 2015 and 2014 were $1,576,139 and $1,100,466 respectively. Maintenance and support revenues for the fourth quarter were $1,206,346 compared to $1,259,481 last year.
  • North American revenues were $2,457,595 in the fourth quarter of 2015 compared to $1,665,761 in 2014. Asia revenues were $616,408 in the fourth quarter of 2015 compared to $1,984,378 in 2014. European revenues were $2,135,203 in the fourth quarter of 2015 compared to $1,608,454 in 2014.
  • Gross margin for the fourth quarter of fiscal 2015 was 66% compared with 84% in the fourth quarter of fiscal 2014.
  • Operating expenses in the fourth quarter of fiscal 2015 were $4,639,271 compared to $4,429,375 in the fourth quarter of fiscal 2014.
  • Earnings before interest, foreign exchange, taxes, stock compensation, depreciation and amortization (adjusted EBITDA) for the fourth quarter of fiscal 2015 was a loss of $582,572 compared to income of $544,971 in fiscal 2014.
  • Net loss, which includes non-cash items like depreciation, amortization of intangibles and stock compensation, in the fourth quarter was $1,012,696 compared to $161,231 last year.

Fiscal 2015 Financial Results

  • Total revenues for the fiscal year ended December 31, 2015 were $24,834,692 compared with revenues of $20,003,757, in the same period a year ago. Software license and royalty revenues for the 2015 fiscal year were $11,767,217 compared to $8,723,977 in fiscal 2014. Professional services for the fiscal years of 2015 and 2014 were $8,294,954 and $6,429,023 respectively. Maintenance and support revenues for the fiscal year ended December 31, 2015 were $4,772,521 compared to $4,850,757 last year.
  • North American revenues were $11,073,288 in the 2015 fiscal year compared to $8,038,906 in 2014. Asia revenues were $3,000,206 in the 2015 fiscal year compared to $4,771,042 in 2014. European revenues were $10,761,198 in the 2015 fiscal year compared to $7,193,809 in 2014.
  • Gross margin for the 2015 fiscal year was 74% compared with 79% in fiscal 2014.
  • Operating expenses for the 2015 fiscal year were $17,873,415 compared to $14,237,250 in fiscal 2014.
  • Adjusted EBITDA for the fiscal year ended December 31, 2015 was income of $2,907,404 compared to $3,170,985 in fiscal 2014.
  • Net income in the 2015 fiscal year was $1,272,008 compared to $1,171,885 in 2014.

Cash, restricted cash and cash equivalents on December 31, 2015, was $49,947,096

A complete set of financial statements and management’s discussion and analysis for the period ended December 31, 2015 will be available at http://www.sedar.com.

Conference Call

The Company will be hosting a conference call to discuss the Q4 2015 financial results on February 25, 2016 at 5:00PM EDT and the phone number to join the results discussion is:

  • Toll Free line (Canada/US) 877-201-0168
  • Toll line (International/Local) 647-788-4901

The playback for the call will be available two hours after the call’s completion and will be available until 11:59pm ET on March 25, 2016, at the following numbers and passcode:

Toll-free line: +1-855-859-2056 or +1-404-537-3406, Passcode: 54895298

About Espial (www.espial.com)

With Espial, video service providers create responsive and engaging subscriber viewing experiences incorporating powerful content discovery and intuitive navigation. Service providers achieve ‘Web-speed’ innovation with Espial’s flexible, open software leveraging RDK and HTML5 technologies. This provides competitive advantage through an immersive and personalized user experience, seamlessly blending advanced TV services with OTT content. With customers spanning six continents, Espial is headquartered in Ottawa, Canada, has R&D centers in Montreal, Silicon Valley and the UK, and sales/support offices in the U.S., Europe and Asia. For more information, visit www.espial.com.

Forward Looking Statement

This press release contains information that is forward looking information with respect to Espial within the meaning of Section 138.4(9) of the Ontario Securities Act (forward looking statements) and other applicable securities laws. In some cases, forward-looking information can be identified by the use of terms such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "intend", "estimate", "predict", "potential", "continue" or the negative of these terms or other similar expressions concerning matters that are not historical facts. In particular, statements or assumptions about, economic conditions, ongoing or future benefits of existing and new customer and partner relationships, our position or ability to capitalize on the move to more open systems by service providers, existing or future opportunities for the company and products (including our ability to successfully execute on market opportunities and secure new customer wins) and any other statements regarding Espial's objectives (and strategies to achieve such objectives), future expectations, beliefs, goals or prospects are or involve forward-looking information.

Forward-looking information is based on certain factors and assumptions. While the company considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. Forward-looking information, by its nature necessarily involves known and unknown risks and uncertainties. A number of factors could cause actual results to differ materially from those in the forward-looking statements or could cause our current objectives and strategies to change, including but not limited to changing conditions and other risks associated with the on-demand TV software industry and the market segments in which Espial operates, competition, Espial’s ability to continue to supply existing customers and partners with its products and services and avoid being displaced by competitive offerings, effectively grow its integration and support capabilities, execute on market opportunities, develop its distribution channels and generate increased demand for its products, economic conditions, technological change, unanticipated changes in our costs, regulatory changes, litigation, the emergence of new opportunities, many of which are beyond our control and current expectation or knowledge.

Additional risks and uncertainties affecting Espial can be found in Management’s Discussion and Analysis of Results of Operations and Financial Condition and its Annual Information Form for the fiscal years ended December 31, 2014 and, when filed, 2015 on SEDAR at www.sedar.com. If any of these risks or uncertainties were to materialize, or if the factors and assumptions underlying the forward-looking information were to prove incorrect, actual results could vary materially from those that are expressed or implied by the forward-looking information contained herein and our current objectives or strategies may change. Espial assumes no obligation to update or revise any forward looking statements, whether as a result of new information, future events or otherwise, except as required by law. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.

Non-IFRS Financial Measures

We use adjusted net income (loss) and adjusted diluted earnings (loss) per share, which remove the impact of our amortization of intangible assets and stock based compensation expense, to measure our performance as these measures align our results and improve comparability against our peers. We use adjusted EBITDA to provide investors with a supplemental measure of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures. We believe that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets and assess our ability to meet our capital expenditure and working capital requirements.

Adjusted net income (loss), adjusted diluted earnings (loss) per share and adjusted EBITDA income (loss) are not recognized, defined or standardized measures under IFRS. Our definition of adjusted net income (loss), adjusted EBITDA income (loss) and adjusted diluted earnings (loss) per share will likely differ from that used by other companies and therefore comparability may be limited. Adjusted net income (loss), adjusted EBITDA income (loss) and adjusted diluted earnings (loss) per share should not be considered a substitute for or in isolation from measures prepared in accordance with IFRS. Investors are encouraged to review our financial statements and disclosures in their entirety and are cautioned not to put undue reliance on non-IFRS measures and view them in conjunction with the most comparable IFRS financial measures. We have reconciled adjusted net income (loss) and adjusted EBITDA income (loss) to the most comparable IFRS financial measure as follows:

 

Three months ended
December 31, 2015

 

Three months ended
December 31, 2014

 

Twelve months ended
December 31, 2015

 

Twelve months ended
December 31, 2014

(unaudited) (unaudited) (unaudited) (unaudited)
 
Net income (loss) $ (1,012,696) $ (161,231) $ 1,272,008 $ 1,171,884
Add
Stock based compensation 327,802 337,373 1,379,281 861,510
Amortization of intangibles   192,378   162,993   677,109   645,870
Adjusted net income (loss) (492,516) 339,135 3,328,398 2,679,264
Add(less)
Depreciation 86,040 56,084 262,364 194,868
Net interest income / expense (89,339) (36,136) (309,407) 23,687
Foreign exchange gain / loss (131,826) (131,942) (647,961) (205,653)
Income tax expense   45,069   317,830   274,010   478,818
Adjusted EBITDA $ (582,572) $ 544,971 $ 2,907,404 $ 3,170,984
Adjusted diluted net earnings per share $ (0.01) $ 0.01 $ 0.10 $ 0.11


Consolidated Statements of Income and
Comprehensive Income
(In Canadian dollars)

  Three Months Ended   Twelve months Ended

December 31,
2015
(unaudited)

 

December 31,
2014
(unaudited)

December 31,
2015

 

December 31,
2014

Revenue
Software $ 2,426,721 $ 2,898,646 $ 11,767,217 $ 8,723,977
Professional services 1,576,139 1,100,466 8,294,954 6,429,023
Support and maintenance   1,206,346   1,259,481 4,772,521   4,850,757
Total revenue 5,209,206 5,258,593 24,834,692 20,003,757
Cost of revenue   1,758,727   840,697 6,372,626   4,297,770
Gross margin   3,450,479   4,417,896 18,462,066   15,705,987
Expenses
Sales and marketing 1,278,857 1,162,783 5,041,954 3,991,274
General and administrative 861,738 849,277 3,423,686 2,843,589
Research and development 2,306,297 2,254,322 8,730,666 6,756,519
Amortization of intangible assets   192,378   162,993 677,109   645,869
    4,639,270   4,429,375 17,873,415   14,237,251
Income before other income (expense) (1,188,791) (11,479) 588,651 1,468,736
Interest income 131,826 131,942 647,959 205,653
Foreign exchange gain 89,339 36,136 309,408 82,476
Interest expense   -   - - (106,163)
Income (loss) before taxes (967,626) 156,599 1,546,018 1,650,702
Income tax expense   (45,069)   (317,830) (274,010)   (478,818)
Net and comprehensive income (loss) $ (1,012,695) $ (161,231) $ 1,272,008 $ 1,171,884
 
Earnings per common share - basic $ (0.04) $ 0.01 $0.04 $ 0.05
Earnings per common share - diluted $

(0.04)

$ 0.01 $0.04 $ 0.05


Consolidated Balance Sheets

    December 31, 2015   December 31, 2014
 
CURRENT ASSETS
Cash and cash equivalents $ 49,947,096 $ 18,111,324
Accounts receivable 8,397,948 3,861,058
Investment tax credits receivable 413,920 312,329
Prepaid expenses and other assets   734,906   567,853
59,493,870 22,852,564
 
Equipment 1,062,544 727,626
Intangible assets 1,658,610 1,496,794
Goodwill   3,632,604   3,340,808
  $ 65,847,628 $ 28,417,792
 
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 3,165,144 $ 2,521,480
Deferred revenue   3,690,638   3,557,667
6,855,782 6,079,147
Provisions   -   275,234
Total Liabilities 6,855,782 6,354,381
 
COMMITMENTS
SHAREHOLDERS' EQUITY
Share capital 126,583,844 91,072,570
Warrants - 928,063
Share based payments reserve 14,059,806 12,986,590
Deficit   (81,651,804)   (82,923,812)
    58,991,846   22,063,411
  $ 65,847,628 $ 28,417,792


Statements of Cash Flows

      Twelve months Ended
   

December 31,
2015

 

December 31,
2014

CASH PROVIDED BY (USED IN)  
OPERATING
Net income $ 1,272,008 $ 1,171,884
Items not affecting cash
Depreciation of property and equipment 262,364 194,868
Amortization of intangible assets 677,109 645,869
Share-based compensation expense 1,379,281 861,510
Interest accretion on long-term debt - 57,944
Provisions   (275,234) (369,711)
3,315,528 2,562,364
Changes in non-cash operating

working capital items

  (3,407,276) (1,715,059)
    (91,748) 847,305
INVESTING
Purchase of equipment (532,511) (383,146)
Purchase of intangibles (95,492) (43,265)
Purchase of business, net of cash acquired   (1,721,623) -
    (2,349,626) (426,411)
FINANCING
Repayment of term debt - (2,500,000)
Proceeds from options exercised 379,005 17,310
Proceeds from warrants exercised 1,281,453 2,201,141
Proceeds from equity financing 35,000,000 11,500,092
Costs of share issuance   (2,383,312) (935,206)
    34,277,146 10,283,337
Cash and cash equivalents inflow 31,835,772 10,704,231
Cash and cash equivalents, beginning of period   18,111,324 7,407,093
Cash and cash equivalents, end of period   $ 49,947,096 $ 18,111,324

Contacts

Espial Group Inc.
Carl Smith, +1 613-230-4770
Chief Financial Officer
csmith@espial.com
or
Kirk Edwardson, +1-613-230-4770 x1145
Director, Marketing
kedwardson@espial.com

Release Summary

Espial reports fourth quarter and full year 2015 results

Contacts

Espial Group Inc.
Carl Smith, +1 613-230-4770
Chief Financial Officer
csmith@espial.com
or
Kirk Edwardson, +1-613-230-4770 x1145
Director, Marketing
kedwardson@espial.com