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Espial Reports Second Quarter 2018 Results
[July 31, 2018]

Espial Reports Second Quarter 2018 Results

Espial (News - Alert)® Group Inc. ("Espial" or the "Company"), (TSX:ESP), today announced its second quarter financial results for the three-month period ended June 30, 2018.

Recent Highlights

  • Second quarter revenue increased to $7.0 million, an increase of 18% from $5.9 million in Q1 2018.
  • Software-as-a-Service ("SaaS (News - Alert)") subscription revenue from Espial's Elevate SaaS video platform for the quarter was $1.2 million; a 5% sequential increase from Q1 2018.
  • Second quarter adjusted EBITDA1 significantly improved to a loss of $0.1 million, compared to a loss of $1.7 million in Q1 2018. Net loss was $0.5 million, compared to a net loss of $3.7 million in the first in Q1 2018.
  • Announced HBC selected Espial's Elevate to offer App-based TV services to mobile phones, tablets and consumer devices, like Roku media players and HDMI sticks.
  • In addition, secured 3 new Elevate SaaS agreements with operators, one of which was announced as 'Conway Corporation Signed an Elevate SaaS Agreement with Espial'.
  • Recently, Espial & Harmonic (News - Alert) announced a partnership to offer an end-to-end TV-as-a-Service (TVaaS) solution.

"We are pleased with our financial performance this quarter. We improved EBITDA to just under break-even in Q2 from a loss of $1.7 million in Q1. Our revenue increased 18% in Q2 to $7.0 million, from $5.9 million last quarter." said Jaison Dolvane, CEO of Espial. "In addition, we signed several new Elevate SaaS video platform customers in the quarter that will contribute to continued growth in our annual recurring SaaS revenue."

"We also demonstrated good progress on our SaaS initiatives. Our App-based TV and IPTV (News - Alert) software for set-tops, mobile and consumer devices continue to garner strong market interest." added Jaison Dolvane, CEO of Espial. "Consumers increasingly want to watch TV on their own terms, and are looking for new service options like skinny bundles, a la carte channels and more. Our products provide Pay TV operators with the ability to address such needs, while providing various capabilities to grow revenues and retain their subscribers."

Financial Summary

For the three-month period ended June 30, 2018, revenue was $7.0 million compared with revenue of $7.8 million for the three months ended June 30, 2017. Adjusted EBITDA for the second quarter of fiscal 2018 was a loss of $0.1 million compared to a loss of $2.8 million for the second quarter of fiscal 2017. Net loss for the quarter was $0.5 million, compared to a loss of $3.8 million for the second quarter of fiscal 2017.

Q2 Financial Results

  • Second quarter revenue was $7,027,593 compared with revenue of $7,809,765 in the same period a year ago. Second quarter software license revenue was $2,680,164 compared to $3,724,373 in the second quarter of fiscal 2017. Software subscription revenue from our Elevate SaaS video platform was $1,223,250 compared to zero last year. Professional services revenue for the second quarters of 2018 and 2017 were $1,351,417 and $1,915,529, respectively. Maintenance and support revenue for the second quarter was $1,772,762 compared to $2,169,863 last year.
  • North American revenues were $4,175,388 in the second quarter of 2018 compared to $4,741,854 in 2017. Asia revenues were $344,529 in the second quarter of 2018 compared to $823,868 in 2017. European revenues were $2,507,676 in the second quarter of 2018 compared to $2,244,043 in 2017.
  • Gross margin for the second quarter of fiscal 2018 was 76% compared to 73% the second quarter of fiscal 2017.
  • Operating expenses in the second quarter were $5,943,128 compared to $9,380,973 in the second quarter of fiscal 2017.
  • Adjusted EBITDA for the second quarter of fiscal 2018 was a loss of $119,366, compared to $2,830,355 in fiscal 2017.
  • Net loss, which includes non-cash items like depreciation, amortization of intangibles, and stock compensation, in the second quarter was $484,468 compared to a loss of $3,806,565 last year.

Cash and cash equivalents at June 30, 2018 was $31,312,322.

A complete set of financial statements and management's discussion and analysis for the period ended June 30, 2018 will be available at

Conference Call

The Company will be hosting a conference call to discuss the Q2 2018 financial results on July 31, 2018 at 5:00PM EDT and the phone number to join the results discussion is:

  • Toll Free line (Canada/US) 866-521-4909
  • Toll line (International/Local) 647-427-2311

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, 2018, at the following numbers and passcode:

Toll-free line: +1-800-585-8367 or +1-416-621-4642, Passcode: 7479329

About Espial (

Espial is transforming viewing experiences worldwide by enabling video services at web speed and web scale. From immersive user experience and discovery solutions to advanced cloud-based platforms, Espial solutions help service providers manage, deliver and monetize video and entertainment services. Espial's customers span six continents, have deployed tens of million devices, and are serviced through Espial's global sales, support, and innovation centers across North America, Europe, and Asia.

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 or new board nominees, 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, 2016 and 2017 on SEDAR at 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

Adjusted EBITDA represents net income (loss) adjusted to exclude shared-based compensation, amortization, depreciation, business restructuring expenses, interest income, other expense (income), and income tax expense. 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 EBITDA is not a recognized, defined or standardized measure under IFRS. Our definition of Adjusted EBITDA will likely differ from that used by other companies and therefore comparability may be limited. Adjusted EBITDA 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 EBITDA to the most comparable IFRS financial measure as follows:

1 Adjusted EBITDA is a non-IFRS measure. This measure is defined in the "Non-IFRS Financial Measures" of this news release.


Three months ended
June 30, 2018


Three months ended
June 30, 2017

(unaudited) (unaudited)
Net loss $ (484,468 ) $ (3,806,565 )
Share-based compensation 237,726 446,510
Amortization of intangibles   146,873     301,829  
Adjusted net loss (99,869 ) (3,058,226 )
Add (less)
Depreciation 114,345 103,406
Net interest (income) expense (102,365 ) (63,980 )
Other income/expense (144,423 ) 66,419
Income tax   112,946     122,026  
Adjusted EBITDA $ (119,366 ) $ (2,830,355 )

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

  Three Months Ended   Six Months Ended
June 30, 2018   June 30, 2017 June 30, 2018   June 30, 2017
Software licenses $ 2,680,164 $ 3,724,373 $ 4,704,662 $ 8,749,724
Software subscription 1,223,250 - 2,390,093 -
Professional services 1,351,417 1,915,529 2,257,489 3,501,463
Support and maintenance   1,772,762     2,169,863     3,607,606     4,222,588  
Total revenue 7,027,593 7,809,765 12,959,850 16,473,775
Cost of revenue   1,702,775     2,110,892     3,429,712     4,346,912  
Gross margin   5,324,818     5,698,873     9,530,138     12,126,863  
Sales and marketing 1,644,241 1,904,307 3,279,135 3,559,465
General and administrative 851,106 1,703,876 1,719,040 2,710,577
Research and development 3,300,908 5,470,961 7,217,085 10,756,591
Amortization of intangible assets 146,873 301,829 322,140 484,708
Business restructuring   -     -     1,873,793     -  
    5,943,128     9,380,973     14,411,193     17,511,341  
Loss before other income (expenses) (618,310 ) (3,682,100 ) (4,881,055 ) (5,384,478 )
Other income (expenses) 144,423 (66,419 ) 605,653 (149,414 )
Interest income   102,365     63,980     204,051     126,523  
Loss before taxes (371,522 ) (3,684,539 ) (4,071,351 ) (5,407,369 )
Income taxes   (112,946 )   (122,026 )   (149,502 )   (199,143 )
Net loss   (484,468 )   (3,806,565 )   (4,220,853 )   (5,606,512 )
Items that are or may be reclassified
subsequently to profit or loss:
Foreign currency translation
differences - foreign operations
  (181,898 )   -     (417,525 )   -  
Total comprehensive loss $ (666,366 ) $ (3,806,565 ) $ (4,638,378 ) $ (5,606,512 )
Net loss per common share - basic $ (0.01 ) $ (0.10 ) $ (0.12 ) $ (0.15 )
Weighted average number of common shares outstanding - basic 35,683,092 36,506,665 35,799,702 36,525,088
Net loss per common share - diluted $ (0.01 ) $ (0.10 ) $ (0.12 ) $ (0.15 )
Weighted average number of common shares outstanding - diluted 35,683,092 36,506,665 35,799,702 36,525,088

Consolidated Balance Sheets
(In Canadian Dollars)


June 30, 2018


December 31, 2017

Cash and cash equivalents $ 31,312,322 $ 38,813,911
Accounts receivable 8,675,434 6,792,420
Investment tax credits receivable 701,557 924,630
Prepaid expenses and other assets   1,053,655     841,617  
41,742,968 47,372,578
Property, plant and equipment 1,833,600 2,046,905
Intangible assets 919,418 941,187
Goodwill   3,632,604     3,632,604  
  $ 48,128,590   $ 53,993,274  
Accounts payable and accrued liabilities $ 2,711,298 $ 4,778,111
Provisions 322,976 -
Deferred revenue   3,374,128     3,345,828  
6,408,402 8,123,939
Provisions   59,804     -  
Total Liabilities 6,468,206 8,123,939
Share capital 123,050,294 123,738,952
Share based payments reserve 17,732,463 17,179,915
Accumulated other comprehensive loss (417,525 ) -
Deficit   (98,704,848 )   (95,049,532 )
    41,660,384     45,869,335  
  $ 48,128,590   $ 53,993,274  

Statements of Cash Flows
(In Canadian Dollars)

  Six Months Ended

June 30, 2018

  June 30, 2017
Net loss $ (4,220,853 ) $ (5,606,512 )
Items not affecting cash
Depreciation of property plant and equipment 238,970 203,236
Amortization of intangible assets 323,223 484,708
Share-based compensation expense 586,698 878,996
Business restructuring provisions 491,611 -
Provisions   -     (147,472 )
(2,580,351 ) (4,187,044 )
Changes in non-cash operating

working capital items

  (3,807,382 )   3,712,835  
    (6,387,733 )   (474,209 )
Purchase of equipment (112,352 ) (238,129 )
Purchase of intangibles   (294,080 )   -  
    (406,432 )   (238,129 )
Options exercised 43,563 8,214
Share repurchase program   (766,371 )   (556,870 )
    (722,808 )   (548,656 )
Net cash and cash equivalents outflow (7,516,973 ) (1,260,994 )
Cash and cash equivalents, beginning of period 38,813,911 43,047,878
Effects of exchange rates on cash and cash equivalents   15,384     -  
Cash and cash equivalents, end of period $ 31,312,322   $ 41,786,884  
Supplementary information:
Taxes paid $ 149,502 $ 199,143

1 Adjusted EBITDA is a non-IFRS measure. This measure is defined in the "Non-IFRS Financial Measures" of this news release.

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