Espial Reports 2014 Third Quarter Results

Espial Reports 2014 Third Quarter Results

OTTAWA, Oct. 22, 2014 /CNW/ - Espial(®) Group Inc. ("Espial" or the "Company"), (TSX:ESP), a leader in the delivery of on-demand TV software and services, today announced its third quarter financial results for the three and nine month periods ended September 30, 2014.

Espial Q3 Highlights


-- Q3 revenue increased 32% to a record $5.1 million from $3.8 million last
year.
-- Q3 EBITDA income increased to $0.7 million compared to $0.4 million last
year.
-- For the nine months ended September 30, 2014 revenue increased 71% to
$14.7 million, from $8.6 million last year.
-- For the nine months ended September 30, 2014, EBITDA income increased to
$2.6 million compared to a loss of $3.5 million last year.
-- Sharp Corporation expanded its deal with Espial to include new LED Smart
TV models.
-- Espial's G4 UX and RDK based STB Client received the Elite Diamond
Technology Review ranking by Broadband Technology Report (BTR).
-- Showcased DVB demonstrations, based on RDK set-top box, to European
cable operators at IBC in Amsterdam.
"We are pleased to report record revenue of $5.1m in Q3, and strong EBITDA performance. In Q3, we continued to innovate and demonstrate leadership around our RDK and HTML5 products. We made good progress this quarter, including showcasing European Digital Video Broadcast (DVB) at IBC which expands our ability to target European Pay TV service providers" said Jaison Dolvane, CEO, Espial. "In Q3, we also realized increased revenues from our Tier 1 North American Cable customer and from ongoing proof of concept projects with service providers. We continue to see growing interest from Pay TV service providers in open software solutions, like RDK & HTML5 solutions, for next generation set-top boxes. We believe our focus and investments in these areas will position us to lead the industry."

Financial Summary

For the three-month period ended September 30, 2014, the Company reported revenue of $5.1 million compared with revenue of $3.8 million for the three months ended September 30, 2013. Earnings before interest, foreign exchange, taxes, stock compensation, depreciation and amortization (EBITDA) for the third quarter of fiscal 2014 was $0.7 million compared to $0.4 million in the third quarter of fiscal 2013. Net income for the quarter was $0.2 million or $0.01 per share, compared with a net loss of $0.3 million last year, or $0.02 per share.

Q3 Financial Results


-- Revenue for the third quarter of fiscal 2014 was $5,057,826 compared
with revenue of $3,825,306 in the same period a year ago. Third quarter
software license revenue was $1,288,712 compared with software license
revenue of $2,209,553 in the third quarter of fiscal 2013. Professional
services revenue for the third quarters of 2014 and 2013 were $2,556,776
and $484,676 respectively. Maintenance and support revenue for the
third quarter was $1,212,338 compared with $1,131,077 last year.
-- North American revenue was $2,141,731 in the third quarter of fiscal
2014 compared to $835,138 in 2013. Asia revenue was $659,185in the third
quarter of 2014 compared to $1,876,137 in 2013. European revenue was
$2,256,910 in the third quarter of 2014 compared to $1,114,031 in 2013
-- Gross margin for the third quarter of fiscal 2014 was 72 percent
compared with 86 percent in the third quarter of fiscal 2013.
-- Operating expenses for the third quarter of fiscal 2014 were $3,501,456
compared with $3,185,697 in the third quarter of fiscal 2013.
-- Earnings for the third quarter of fiscal 2014 before interest, foreign
exchange, taxes, stock compensation, depreciation and amortization
(EBITDA) was $718,243 compared to $360,343 in the third quarter of
fiscal 2013.
-- Net income in the third quarter was $213,970 compared with a loss of
$273,284 last year.
-- Cash and cash equivalents on September 30, 2014, was $15,835,740.
A complete set of financial statements and management's discussion and analysis for the period ended September 30, 2014 will be available at http://www.sedar.com.

Conference Call

The Company will be hosting a conference call to discuss the Q3 2014 financial results on Wednesday, October 22nd at 5:00PM EDT and the phone number to join the results discussion is:


-- Toll Free line (Canada/US) 888-390-0546
-- Toll line (International/Local Ottawa) 613-627-2402
-- Toll line (International/Local Toronto) 416-764-8688
The playback for the call will be available until 11:59pm ET on November 21, 2014, at the following numbers and passcode:


-- Toll line: +1 416-764-8677, Passcode: 258268

-- Toll-free line: +1-888-390-0541, Passcode: 258268
About Espial (www.espial.com)

Espial is a leading supplier of digital TV and IPTV software and solutions to cable MSOs and telecommunications operators as well as consumer electronics manufacturers. Espial's middleware, video-on-demand, and browser products power a diverse range of pay-TV and Internet TV business models. Over 35 million licenses of its patented software are in use across the world. Espial is headquartered in Ottawa, Canada and has offices in the United States, Europe, and Asia. Visit www.espial.com or contact via phone at +1 613 230 4770.

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 year ended December 31, 2013 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

Earnings before interest, foreign exchange, taxes, stock compensation, depreciation and amortization (EBITDA) is a non-IFRS financial measure that does not have any prescribed meaning by IFRS and is therefore unlikely to be comparable to similar measures presented by other issuers. Management believes that this non-IFRS financial measure, when taken together with the corresponding consolidated IFRS measures, increases the transparency of the Company's current results and enables investors to more fully understand trends in its current and future performance. A reconciliation of net loss to earnings before interest, foreign exchange, taxes, stock compensation, dividends on redeemable preferred shares, depreciation and amortization is as follows:





September 30, September 30, September 30, September 30,

2014 2013 2014 2013

(3 months) (3 months) (9 months) (9 months)

(unaudited) (unaudited) (unaudited) (unaudited)
---------- ---------- ---------- ----------


Net income (loss) and Comprehensive loss $213,970 ($273,285) $1,333,116 ($5,678,369)

Add

Stock compensation 339,793 27,167 524,138 107,217

Depreciation of property and equipment 52,968 51,652 138,784 152,590

Amortization of intangibles 161,338 184,912 482,877 940,429
------- ------- ------- -------

768,069 (9,554) 2,478,915 (4,478,133)

Less (add)

Net interest income (expense) 34,796 (131,616) (59,823) (399,188)

Foreign exchange gain (loss) 52,252 (109,851) 73,712 (310,882)

Income taxes (37,223) (128,429) (160,988) (231,112)
------- -------- -------- --------


Earnings before interest, foreign $718,244 $360,342 $2,626,014 ($3,536,951)

exchange, taxes, stock compensation,

depreciation and amortization




Q3 Consolidated Statements of Income (Loss)





Three Months Ended

Nine Months Ended
-----------------

September 30, September 30, September 30, September 30,

2014 2013 2014 2013

Revenue

Software $1,288,712 $2,209,553 $5,825,331 $4,548,469

Professional services 2,556,776 484,676 5,328,557 987,272

Support and maintenance 1,212,338 1,131,077 3,591,276 3,111,130
----------------------- --------- --------- --------- ---------

Total revenue 5,057,826 3,825,306 14,745,164 8,646,871

Cost of revenue 1,392,225 542,997 3,457,073 1,560,644
--------------- --------- ------- --------- ---------


Gross margin 3,665,601 3,282,309 11,288,091 7,086,227
------------ --------- --------- ---------- ---------

Expenses

Sales and marketing 981,570 1,084,387 2,828,491 3,212,678

General and administrative 813,345 458,583 1,994,310 1,592,867

Research and development 1,545,203 1,457,814 4,502,197 5,028,221

Business restructuring charge - - - 1,049,222

Amortization of intangible assets 161,338 184,912 482,877 940,429
--------------------------------- ------- ------- ------- -------


3,501,456 3,185,696 9,807,875 11,823,417
--------- --------- --------- ----------

Income (loss) before other income (expense) 164,145 96,613 1,480,216 (4,737,190)

Interest income 34,796 2,706 46,340 13,173

Foreign exchange gain (loss) 52,252 (109,853) 73,712 (310,881)
(134,322)
Interest expense - (106,163) (412,361)
---------------- --- -------- --------


Income (loss) before taxes 251,193 (144,856) 1,494,105 (5,447,259)


Income tax expense (37,223) (128,429) (160,989) (231,110)
------------------ ------- -------- -------- --------

Net income (loss) and comprehensive income (loss) $213,970 $(273,285) $1,333,116 $(5,678,369)
================================================ ======== ========= ========== ===========


Income (loss) per common share - basic $0.01 $(0.02) $0.06 $(0.40)


Weighted average number of common shares outstanding - 24,486,904 14,056,834 21,658,206 14,056,834

basic


Income (loss) per common share - diluted $0.01 $(0.02) $0.05 $(0.02)


Weighted average number of common shares outstanding - 27,910,002 14,056,834 24,659,599 14,056,834

diluted




Consolidated Balance Sheets



September 30, 2014 December 31, 2013





CURRENT ASSETS

Cash and cash equivalents $15,835,740 $7,407,093

Accounts receivable 4,029,961 2,057,222

Investment tax credits receivable 237,402 312,027

Prepaid expenses and other assets 651,054 502,990
--------------------------------- ------- -------

20,754,157 10,279,332


Equipment 553,715 539,348

Intangible assets 1,646,231 2,099,398

Goodwill 3,340,808 3,340,808
-------- --------- ---------

$26,294,911 $16,258,886
=========== ===========


CURRENT LIABILITIES

Accounts payable and accrued
liabilities $2,424,456 $1,872,505

Provisions 70,814 281,813

Deferred revenue 3,000,653 4,052,700

Term Debt - 2,442,056
--------- --- ---------

5,495,923 8,649,074

Provisions 313,072 363,132
---------- ------- -------

Total Liabilities 5,808,995 9,012,206


COMMITMENTS

SHAREHOLDERS' EQUITY

Share capital 89,136,033 77,781,292

Warrants 1,463,246 1,436,004

Share based payments reserve 12,649,218 12,125,080

Deficit (82,762,581) (84,095,696)
------- ----------- -----------

20,485,916 7,246,680
========== =========

$26,294,911 $16,258,886
=========== ===========




Statements of Cash Flows



Nine months Ended
=================

September 30, September 30,

2014 2013
==== ====

CASH PROVIDED BY (USED IN) OPERATING

Net income (loss) $1,333,116 $(5,678,369)

Items not
affecting cash

Depreciation of property and
equipment 138,784 152,590

Amortization of intangible assets 482,877 940,429

Share-based compensation expense 524,138 107,218

Interest accretion on term debt 57,944 121,708

Provisions (261,059) 242,729
---------- -------- -------

2, 275,800 (4,113,695)

Changes in non-cash operating
working capital items (2,546,274) 122,211
------------------------------ ---------- -------

(270,474) (3,991,484)
-------- ----------

INVESTING

Purchase of property and equipment (153,151) (21,506)

Purchase of intangible software (29,710) (5,255)

Purchase of business - (2,120,412)

Redemption of short- term
investments - 8,094,551
-------------------------- --- ---------

(182,862) 5,947,378
-------- ---------

FINANCING

Operating line draw (repayment) - (2,008,493)

Repayment of term debt (2,500,000) -

Options exercised 9,963 -

Warrants exercised 798,583 -

Proceeds from equity financing 11,500,092 -

Costs of share issuance (926,655) -
----------------------- -------- ---

8,881,983 (2,008,493)
--------- ----------

Net cash and cash equivalents inflow 8,428,647 (52,599)

Cash and cash equivalents, beginning
of period 7,407,093 3,055,644
------------------------------------ --------- ---------

Cash and cash equivalents, end of
period $15,835,740 $3,003,045
================================= =========== ==========


Supplementary information:

Interest paid $(48,219) $(290,653)

Interest received 46,340 $13,173

Taxes paid 160,988 -




SOURCE Espial Group

Espial Group

CONTACT: 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

Web Site: http://www.espial.com


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