Espial Reports Fourth Quarter and Full Year 2015 Results

 Ottawa, Ontario – February 25, 2016 – Transforming the viewing […]

 Ottawa, Ontario – February 25, 2016 – 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

 

 

For inquiries from the financial press or analysts, contact:

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

 

 

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