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Espial Reports Third Quarter 2018 Results
[November 01, 2018]

Espial Reports Third Quarter 2018 Results


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

Recent Highlights

  • Third quarter revenue was $7.0 million.
  • Annualized recurring SaaS revenue has increased 68% from $4.1 million at the end of last year to $6.9 million at the end of the third quarter.
  • Third quarter adjusted EBITDA1 income was $0.01 million. Net loss was $0.6 million.
  • Announced that WideOpenWest (News - Alert) Inc. ("WOW!"), a leading broadband and communications service provider, will use Espial's Elevate video platform to power its WOW! ULTRA set top box offering.
  • Announced that TDS Broadband Services, LLC ("TDS") signed an agreement to license Espial's Elevate Cloud video platform.
  • Announced the Elevate Cloud IPTV (News - Alert) Platform is available on Amazon Web Services (AWS) and ready for deployment with AWS Elemental services.
  • Announced a fully managed TV-as-a-Service ("TVaaS") solution for Android (News - Alert) TV, including support for Android TV Operator Tier set-top boxes and Android TV retail devices.
  • Germany based Tele Columbus announced it will launch a new marketing campaign in the fourth quarter to drive sales of their Espial powered advanceTV video service.

"We are pleased with our financial performance for this quarter. We demonstrated solid growth in our SaaS annual recurring revenues, up 68% from Q4, 2017 and reported positive adjusted EBITDA for the quarter", said Jaison Dolvane, CEO of Espial. "We announced key deals with WOW! and TDS that will contribute to our SaaS revenue. We also announced initiatives with Harmonic (News - Alert), Amazon Web Services and AndroidTV as we continue to enhance our IPTV and App-based TV offerings."

Financial Summary

For the three-month period ended September 30, 2018, revenue increased to $7.0 million compared with revenue of $6.8 million for the three months ended September 30, 2017. Adjusted EBITDA for the third quarter of fiscal 2018 was positive $0.01 million compared to a loss of $2.0 million for the third quarter of fiscal 2017. Net loss for the quarter was $0.6 million, compared to a loss of $3.1 million for the third quarter of fiscal 2017.

Q3 Financial Results

  • Third quarter revenue was $7,042,530 compared with revenue of $6,801,812 in the same period a year ago. Third quarter software license revenue was $2,225,200 compared to $3,088,162 in the third quarter of fiscal 2017. Software subscription revenue from our Elevate SaaS video platform, which included $349,279 for past performance, was $2,079,080 compared to zero last year. Professional services revenue for the third quarters of 2018 and 2017 were $1,272,921 and $1,553,636, respectively. Maintenance and support revenue for the third quarter was $1,465,329 compared to $2,160,014 last year.
  • North American revenues were $4,268,955 in the third quarter of 2018 compared to $3,672,267 in 2017. European revenues were $2,487,674 in the third quarter of 2018 compared to $2,237,491 in 2017. Asia revenues were $285,901 in the third quarter of 2018 compared to $892,054 in 2017
  • Gross margin for the third quarter of fiscal 2018 was 71%, unchanged from the third quarter of fiscal 2017.
  • Operating expenses in the third quarter were $5,282,607 compared to $7,623,409 in the third quarter of fiscal 2017.
  • Adjusted EBITDA for the third quarter of fiscal 2018 was a positive $11,813, compared to a loss of $2,012,869 in fiscal 2017.
  • Net loss, which includes non-cash items like depreciation, amortization of intangibles, and stock compensation, in the third quarter was $557,902 compared to a loss of $3,144,241 last year.

Cash and cash equivalents at September 30, 2018 was $29,801,512.

A complete set of financial statements and management's discussion and analysis for the period ended September 30, 2018 will be available at http://www.sedar.com.

Conference Call

The Company will be hosting a conference call to discuss the Q3 2018 financial results on November 1, 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 December 3, 2018, at the following numbers and passcode:

Toll-free line: +1-800-585-8367 or +1-416-621-4642, Passcode: 5979476

About Espial (www.espial.com)

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. 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 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 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

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:





 

Three months ended
September 30, 2018

 

Three months ended
September 30, 2017

(unaudited)   (unaudited)
Net loss

$ (557,902)

$ (3,144,241)
Add
Share-based compensation 12,510 368,403
Amortization of intangibles   148,427   251,220
Adjusted net loss (396,965) (2,524,618)
Add (less)

 

Depreciation 112,440 145,996
Net interest (income) expense (116,796) (77,103)
Other income/expense 324,307 253,172
Income tax   88,827   189,684
Adjusted EBITDA  

$ 11,813

  $ (2,012,869)

Consolidated Statements of Loss and

Comprehensive Loss

(In Canadian dollars)

  Three Months Ended   Nine Months Ended

September 30,
2018

 

September 30,
2017

 

September 30,
2018

 

September 30,
2017

Revenue
Software licenses $ 2,225,200 $ 3,088,162 $ 6,929,862 $ 11,837,886
Software subscription 2,079,080 - 4,469,173 -
Professional services 1,272,921 1,553,636 3,530,410 5,055,099
Support and maintenance   1,465,329   2,160,014   5,072,935   6,382,602
Total revenue 7,042,530 6,801,812 20,002,380 23,275,587
Cost of revenue   2,021,487   1,956,892   5,451,200   6,303,804
Gross margin   5,021,043   4,844,920   14,551,180   16,971,783
Expenses
Sales and marketing 1,604,289 1,773,906 4,883,425 5,333,371
General and administrative 660,414 1,117,289 2,344,771 3,827,866
Research and development 2,869,477 4,480,994 10,086,561 15,237,585
Amortization of intangible assets 148,427 251,220 470,566 735,928
Business restructuring   -   -   1,873,793   -
    5,282,607   7,623,409   19,659,116   25,134,750
Loss before other income (expenses) (261,564) (2,778,489) (5,107,936) (8,162,967)
Other income (expenses) (324,307) (253,172) 281,353 (402,586)
Interest income   116,796   77,103   320,847   203,626
Loss before taxes (469,075) (2,954,558) (4,505,736) (8,361,927)
Income taxes   (88,827)   (189,683)   (273,019)   (388,826)
Net loss   (557,902)   (3,144,241)   (4,778,755)   (8,750,753)
Items that are or may be reclassified
subsequently to profit or loss:
Foreign currency translation
differences - foreign operations
 

147,897

  -   (269,628)   -
Total comprehensive loss   $ (410,005)   $ (3,144,241)   $ (5,048,383)   $ (8,750,753)
 
Net loss per common share - basic $ (0.02) $ (0.09) $ (0.13) $ (0.24)
Weighted average number of common shares outstanding - basic 35,450,913 36,318,406 35,682,161 36,456,336
Net loss per common share - diluted $ (0.02) $ (0.09) $ (0.13) $ (0.24)
Weighted average number of common shares outstanding - diluted 35,450,913 36,318,406 35,682,161 36,456,336

Consolidated Balance Sheets

(In Canadian Dollars)

   

September 30, 2018

 

December 31, 2017

   
CURRENT ASSETS
Cash and cash equivalents $ 29,801,512 $ 38,813,911
Accounts receivable 10,048,392 6,792,420
Investment tax credits receivable 426,854 924,630
Prepaid expenses and other assets   1,110,493   841,617
41,387,251 47,372,578
 
Property, plant and equipment 1,710,156 2,046,905
Intangible assets 803,242 941,187
Goodwill   3,632,604   3,632,604
    $ 47,533,253   $ 53,993,274
 
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 2,855,119 $ 4,778,111
Provisions 187,136 -
Deferred revenue   3,403,201   3,345,828
6,445,456 8,123,939
Provisions   48,477   -
Total Liabilities 6,493,933 8,123,939
 
COMMITMENTS
SHAREHOLDERS' EQUITY
Share capital 122,960,778 123,738,952
Share based payments reserve 17,610,920 17,179,915
Accumulated other comprehensive loss (269,628) -
Deficit   (99,262,750)   (95,049,532)
    41,039,320   45,869,335
    $ 47,533,253   $ 53,993,274

Statements of Cash Flows

(In Canadian Dollars)

  Nine Months Ended

September 30,
2018

 

September 30,
2017

CASH (USED IN) PROVIDED BY  
OPERATING
Net loss $ (4,778,755) $ (8,750,753)
Items not affecting cash
Depreciation of property plant and equipment 350,649 349,232
Amortization of intangible assets 470,405 735,928
Share-based compensation expense 599,208 1,247,399
Business restructuring provisions 344,446 -
Provisions   -   (154,638)
(3,014,047) (6,572,832)
Changes in non-cash operating

working capital items

  (4,825,944)   4,089,909
    (7,839,991)   (2,482,923)
INVESTING
Purchase of equipment (111,853) (1,225,877)
Purchase of intangibles   (330,651)   (78,802)
    (442,504)   (1,304,679)
FINANCING
Options exercised 221,012 8,214
Share repurchase program   (1,167,389)   (1,239,112)
    (946,377)   (1,230,898)
Net cash and cash equivalents outflow (9,228,872) (5,018,500)
Cash and cash equivalents, beginning of period 38,813,911 43,047,878
Effects of exchange rates on cash and cash equivalents   216,473   -
Cash and cash equivalents, end of period   $ 29,801,512   $ 38,029,378
Supplementary information:
Taxes paid $ 273,019 $ 203,626

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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