Espial Reports 2015 Second Quarter Results

OTTAWA, Ontario--()--Transforming the viewing experience worldwide, Espial® Group Inc. ("Espial" or the "Company"), (TSX:ESP), today announced its second quarter financial results for the three and six month periods ended June 30, 2015.

Espial Q2 Highlights

  • Record quarterly revenue of $5.5 million
  • Adjusted EBITDA income of $0.4 million
  • Closed $35 million bought-deal financing
  • Acquired Bluestreak Technologies
  • Mike Hayashi, former Time Warner Cable Executive Vice President, joined Espial’s board of directors
  • Orange, a top-ten worldwide mobile operator, launched Orange TV Stick To Provide OTT Live TV, On-demand, and Internet Services Across Europe using Espial’s HTML5 Client software
  • Publicly launched Espial G4 STB Client solution at INTX cable show in Chicago
  • Launched Espial Experience™, a new Professional Services group.

"We had a strong quarter with record revenue and solid EBITDA," said Jaison Dolvane, CEO, Espial. "In Q2, we continued to make good progress on delivering our flagship G4 Client software and integration services to our previously announced RDK service provider customers. To support further growth, we also completed a significant financing, acquired Bluestreak which provides us with additional engineering talent and customers, and launched Espial Experience™ professional services group. RDK has continued to gain a tremendous amount of interest from operators worldwide, which together with our recent major operator wins, continues to strengthen our market position.

Financial Summary

For the three-month period ended June 30, 2015, the Company is reporting revenue of $5.5 million compared with revenue of $4.7 million for the three months ended June 30, 2014. Adjusted EBITDA income for the second quarter of fiscal 2015 was $0.4 million compared to $0.6 million for the second quarter of fiscal 2014. Net loss for the quarter was $0.3 million, compared with net income of $0.1 million last year. Adjusted net income for the second quarter was $0.3 million compared to adjusted net income of $0.4 million last year.

Q2 Financial Results

  • Second quarter revenues were $5,500,255 compared with revenues of $4,712,514 in the same period a year ago. Second quarter software license and royalty revenues were $1,709,951 compared to $1,109,268 in the second quarter of fiscal 2014. Professional services for the second quarters of 2015 and 2014 were $2,700,101 and $2,411,387 respectively. Maintenance and support revenues for the second quarter were $1,090,203 compared to $1,191,589 last year.
  • North American revenues were $1,577,798 in the second quarter of 2015 compared to $2,371,417 in 2014. Asia revenues were $528,631 in the second quarter of 2015 compared to $1,113,030 in 2014. European revenues were $3,393,826 in the second quarter of 2015 compared to $1,228,067 in 2014.
  • Gross margin for the second quarter of fiscal 2015 was 73% compared with 72% in the second quarter of fiscal 2014.
  • Operating expenses in the second quarter of fiscal 2015 were $4,302,266 compared to $3,157,315 in the second quarter of fiscal 2014.
  • Earnings before interest, foreign exchange, taxes, stock compensation, depreciation and amortization (adjusted EBITDA income) for the second quarter of fiscal 2015 was $370,506 compared to $601,951 in fiscal 2014.
  • Net loss, which includes non-cash items like depreciation, amortization of intangibles and stock compensation, in the second quarter was $277,835 compared to net income of $90,571 last year.

Cash, restricted cash and cash equivalents on June 30, 2015, was $48,131,003

A complete set of financial statements and management’s discussion and analysis for the quarter ended June 30, 2015 will be available at http://www.sedar.com.

Conference Call

The Company will be hosting a conference call to discuss the Q2 2015 financial results on July 30, 2015 at 08:30AM 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 August 31, 2015, at the following numbers and passcode:

  • Toll-free line: +1-855-859-2056 or +1-404-537-3406, Passcode: 41436385.

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 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, benefits of new customer and partner relationships, future opportunities for the company and products 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 effectively 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, 2013 and 2014 filed 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
June 30, 2015

 

Three months ended
June 30, 2014

 

Six months ended
June 30, 2015

 

Six months ended
June 30, 2014

(unaudited)   (unaudited)   (unaudited)   (unaudited)
 
Net income (loss) $ (277,835) $ 90,571 $ 81,390 $ 1,119,145
Add
Stock based compensation 425,417 150,584 746,280 184,345
Amortization of intangibles   168,442     160,770     329,662     321,538
Adjusted net income (loss) 316,024 401,925 1,157,332 1,625,028
Add(less)
Depreciation 51,370 46,115 99,413 85,816
Net interest income / expense (88,586) 10,912 (124,976) 94,619
Foreign exchange gain / loss (1,750) 92,321 (105,506) (21,460)
Income tax   93,448     50,678     130,241     123,765
Adjusted EBITDA $ 370,506   $ 601,951   $ 1,156,504   $ 1,907,768

Adjusted diluted net income (loss) per share

$ 0.01 $ 0.03 $ 0.04 $ 0.08


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

    Three Months Ended       Six Months Ended
  June 30, 2015   June 30, 2014       June 30, 2015   June 30, 2014
Revenue
Software $ 1,709,951 $ 1,109,268 $ 4,122,978 $ 4,536,619
Professional services 2,700,101 2,411,387 4,572,807 2,771,781
Support and maintenance   1,090,203   1,191,859       2,220,347     2,378,938
Total revenue 5,500,255 4,712,514 10,916,132 9,687,338
Cost of revenue   1,472,712   1,310,717       2,642,099     2,064,848
 
Gross margin   4,027,543   3,401,797       8,274,033     7,622,490
Expenses
Sales and marketing 1,202,748 924,620 2,348,834 1,846,921
General and administrative 902,947 637,026 1,692,988 1,180,964
Research and development 2,028,129 1,434,899 3,921,400 2,956,995
Amortization of intangible assets   168,442   160,770       329,662     321,539
    4,302,266   3,157,315       8,292,884     6,306,419
 
Income (loss) before other income (expense) (274,723) 244,482 (18,851) 1,316,071
Interest income 88,586 6,469 124,976 11,544
Foreign exchange gain (loss) 1,750 (92,321) 105,506 21,458
Interest expense   -   (17,381)       -     (106,163)
Income (loss) before taxes (184,387) 141,249 211,631 1,242,910
Income tax expense   (93,448)   (50,678)       (130,241)     (123,765)
Net income (loss) and comprehensive income (loss)   $ (277,835)   $ 90,571       $ 81,390   $ 1,119,145
 
Income (loss) per common share - basic $ (0.01) $ 0.00 $0.00 $ 0.06
 
Income (loss) per common share - diluted $ (0.01) $ 0.00 $0.00 $ 0.05


Consolidated Balance Sheets

      June 30, 2015       December 31, 2014    
         
CURRENT ASSETS
Cash and cash equivalents $ 48,131,003 $ 18,111,324
Accounts receivable 6,280,389 3,861,058
Investment tax credits receivable 608,507 312,329
Prepaid expenses and other assets       715,379         567,853
55,735,278 22,852,564
 
Equipment 770,832 727,626
Intangible assets 1,953,194 1,496,794
Goodwill       3,632,604         3,340,808
      $ 62,091,908       $ 28,417,792
 
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 2,535,233 $ 2,521,480
Provisions 14,795 -
Deferred revenue       3,140,752         3,557,667
5,690,780 6,079,147
Provisions       176,526         275,234
Total Liabilities 5,867,306 6,354,381
 
COMMITMENTS
 
SHAREHOLDERS' EQUITY
Share capital 124,865,795 91,072,570
Warrants 764,709 928,063
Share based payments reserve 13,436,520 12,986,590
Deficit       (82,842,422)         (82,923,812)
        56,224,602         22,063,411
      $ 62,091,908       $ 28,417,792


Statements of Cash Flows

      Six months Ended
      June 30, 2015       June 30, 2014
CASH PROVIDED BY (USED IN)            
OPERATING
Net income $ 81,390 $ 1,119,145
Items not affecting cash
Depreciation of property and equipment 99,413 85,816
Amortization of intangible assets 329,662 321,539
Share-based compensation expense 746,280 184,345
Interest accretion on long-term debt - 57,945
Provisions       (83,913)         (134,488)
1,172,832 1,634,302

Changes in non-cash operating

working capital items

      (2,559,744)         (1,679,892)
        (1,386,912)         (45,590)
INVESTING
Purchase of equipment (77,848) (63,730)
Purchase of intangibles (42,629) (24,669)
Purchase of business, net of cash acquired       (1,806,453)         -
        (1,926,930)         (88,399)
FINANCING
Repayment of term debt - (2,500,000)
Proceeds from options exercised 365,845 2,960
Proceeds from warrants exercised 350,988 474,582
Proceeds from equity financing 35,000,000 10,000,080
Costs of share issuance       (2,383,312)         (822,741)
        33,333,521         7,154,881
 
Cash and cash equivalents inflow 30,019,679 7,020,892

Cash and cash equivalents, beginning of period

      18,111,324         7,407,093
Cash and cash equivalents, end of period       $ 48,131,003       $ 14,427,985

Contacts

For inquiries from the financial press or analysts, contact:
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 2015 Second Quarter Results

Contacts

For inquiries from the financial press or analysts, contact:
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