Espial Reports Fourth Quarter and Full Year 2016 Results
Ottawa, Ontario – February 23, 2017 – 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, 2016.
- Fourth quarter revenue of $12.7 million
- Fourth quarter adjusted EBITDA income of $3.2 million
- Increased revenue year-over-year by 15% to a record $28.6 million in 2016
- Adjusted EBITDA loss of $1.9 million in 2016
- Tele Columbus, a major German cable operator, introduced their “advanceTV” service, developed and integrated by Espial. This next generation 4K video service for set-top boxes, tablets, and smartphones was launched in January, 2017 across Germany within Tele Columbus’ network of almost 3.7 million homes
- NOS, Portugal’s primary cable operator, with approximately 1.6 million subscribers, launched their next-generation Hybrid IP video service, “UMA” in June 2016, developed and integrated by Espial. With high user ratings and reviews, NOS is now continuing to further deploy and scale their “UMA” service.
- Enhanced Espial’s market leading position in RDK with our Espial Elite system integration services and commercially proven RDK based Espial G4 Client and User Experience products.
- Acquired Whole Home Solution platform from ARRIS, which included a hosted video platform, 40+ customer relationships and a world class integration, operations and engineering team.
- Introduced Espial Elevate, a new cloud-based, turnkey, video-as-a-service solution that integrates assets acquired from ARRIS with Espial’s industry leading IP back office, client and user experience solutions. Announced 3 new Espial Elevate customers which include Easton Utilities, HBC, and Ritter Communications.
- Announced a global marketing and distribution partnership agreement with ARRIS, the world’s largest set-top box manufacturer. As part of this agreement, the two companies will jointly deliver end-to-end, IP video solutions to service providers
“I am very pleased with our business accomplishments and our latest Q4 and 2016 financial results,” said Jaison Dolvane, CEO, Espial. “In 2016, we achieved key customer deployments, cemented our leading position as a RDK solution provider, increased our scale and product portfolio and expanded our distribution channel through a global collaboration agreement with ARRIS. Our customers, NOS and Tele Columbus, introduced their “UMA” and “advanceTV” next generation Pay TV services to very positive reviews. We are proud of the great subscriber experiences that these service providers have achieved using Espial products and system integration services. In 2016, we also introduced Espial Elevate, a cloud based turn-key video-as-a-service solution that provides service providers with a seamless path to next generation user experiences, IP video services and rapid innovation. Our accomplishments in 2016 are significant for Espial, the industry and for the adoption of RDK. We demonstrated the carrier grade nature of Espial’s solutions that provide advanced features, low risk and time to market advantages to leading video service providers.”
For the three-month period ended December 31, 2016, revenue was $12.8 million compared with revenue of $5.2 million for the three months ended December 31, 2015. Adjusted EBITDA income for the fourth quarter of fiscal 2016 was $3.2 million compared to adjusted EBITDA loss of $0.6 million for the fourth quarter of fiscal 2015. Net income for the quarter was $2.5 million, compared with a net loss of $1.0 million for the fourth quarter of fiscal 2015.
For the fiscal year ended December 31, 2016, the Company reported revenue of $28.6 million compared with revenue of $24.8 million for the fiscal year ended December 31, 2015. Adjusted EBITDA loss for fiscal 2016 was $1.9 million compared to income of $2.9 million for fiscal 2015. Net loss for the year was $4.9 million, compared to net income of $1.3 million last year.
Q4 Financial Results
- Fourth quarter revenues were $12,753,702 compared with revenues of $5,209,206 in the same period a year ago. Fourth quarter software license and royalty revenues were $9,752,798 compared to $2,426,721 in the fourth quarter of fiscal 2015. Professional services for the fourth quarters of 2016 and 2015 were $1,096,363 and $1,576,139 respectively. Maintenance and support revenues for the fourth quarter were $1,904,540 compared to $1,206,346 last year.
- North American revenues were $7,758,240 in the fourth quarter of 2016 compared to $2,457,595 in 2015. Asia revenues were $782,797 in the fourth quarter of 2016 compared to $616,408 in 2015. European revenues were $4,212,664 in the fourth quarter of 2016 compared to $2,135,203 in 2015.
- Gross margin for the fourth quarter of fiscal 2016 was 82% compared with 66% in the fourth quarter of fiscal 2015.
- Operating expenses in the fourth quarter of fiscal 2016 were $7,986,116 compared to $4,639,271 in the fourth quarter of fiscal 2015.
- Earnings before interest, foreign exchange, taxes, stock compensation, depreciation and amortization (adjusted EBITDA) for the fourth quarter of fiscal 2016 was income of $3,244,668 compared to loss of $582,572 in fiscal 2015.
- Net income, which includes non-cash items like depreciation, amortization of intangibles and stock compensation, in the fourth quarter was $2,474,708 compared to a loss off $1,012,696 last year.
Fiscal 2016 Financial Results
- Total revenues for the fiscal year ended December 31, 2016 were $28,644,570 compared with revenues of $24,834,692, in the same period a year ago. Software license and royalty revenues for the 2016 fiscal year were $18,142,077 compared to $11,767,217 in fiscal 2015. Professional services for the fiscal years of 2016 and 2015 were $4,614,199 and $8,294,954 respectively. Maintenance and support revenues for the fiscal year ended December 31, 2016 were $5,888,294 compared to $4,772,521 last year.
- North American revenues were $11,383,936 in the 2016 fiscal year compared to $11,073,288 in 2015. Asia revenues were $3,330,831 in the 2016 fiscal year compared to $3,000,206 in 2015. European revenues were $13,929,803 in the 2016 fiscal year compared to $10,761,198 in 2015.
- Gross margin for the 2016 fiscal year was 75% compared with 74% in fiscal 2015.
- Operating expenses for the 2016 fiscal year were $26,028,495 compared to $17,873,415 in fiscal 2015.
- Adjusted EBITDA for the fiscal year ended December 31, 2016 was a loss of $1,899,798 compared to income of $2,907,404 in fiscal 2015.
- Net loss in the 2016 fiscal year was $4,874,769 compared to net income of $1,272,008 in 2015.
Cash and cash equivalents on December 31, 2016, was $43,047,878
A complete set of financial statements and management’s discussion and analysis for the period ended December 31, 2016 will be available at http://www.sedar.com.
The Company will be hosting a conference call to discuss the Q4 and full year 2016 financial results on February 23, 2017 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 March 24, 2017, at the following numbers and passcode:
Toll-free line: +1-800-585-8367 or +1-416-621-4642, Passcode: 71150010
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, cloud 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, with R&D centers in Seattle, Montreal, Silicon Valley, Cambridge, and Lisbon, and with sales offices in 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, 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, Espial’s ability to realize expected benefits and synergies from the acquisition of WHS, 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, 2015 and, when filed, 2016 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) which removes 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) and Adjusted EBITDA are not recognized, defined or standardized measures under IFRS. Our definition of Adjusted net income (loss) and Adjusted EBITDA will likely differ from that used by other companies and therefore comparability may be limited. Adjusted net income (loss) and 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 net income (loss) and Adjusted EBITDA to the most comparable IFRS financial measure as follows:
|Three months ended December 31, 2016||Three months ended December 31, 2015||Twelve months ended December 31, 2016||Twelve months ended December 31, 2015|
|Net income (loss)||$ 2, 474,708||$ (1,012,696)||$ (4,874,769)||$ 1,272,008|
|Amortization of intangibles||269,024||192,378||804,785||677,109|
|Adjusted net income (loss)||3,163,635||(492,516)||(2,514,800)||3,328,398|
|Net interest (income) expense||(69,299)||(89,339)||(322,691)||(309,407)|
|Other (income) expense||(64,599)||(131,826)||154,519||(647,961)|
|Adjusted EBITDA||$ 3,244,668||$ (582,572)||$ (1,899,798)||$2,907,404|
For inquiries from the financial press or analysts, contact:
Chief Financial Officer
Espial Group Inc.
Phone: +1 613-230-4770
Espial Group Inc.
Phone: +1-613-230-4770 x1145
Consolidated Statements of Income and
(In Canadian dollars)
|Three Months Ended||Twelve months Ended|
|December 31, 2016|
|December 31, 2015|
|December 31, 2016|
|December 31, 2015|
|Software||$9,752,798||$ 2,426,721||$18,142,077||$ 11,767,217|
|Support and maintenance||1,904,540||1,206,346||5,888,294||4,772,521|
|Cost of revenue||2,315,220||1,758,727||7,240,272||6,372,626|
|Sales and marketing||1,495,225||1,278,857||5,574,759||5,041,954|
|General and administrative||1,080,378||861,738||4,138,290||3,423,686|
|Research and development||5,141,489||2,306,297||15,510,661||8,730,666|
|Amortization of Intangible assets||269,024||192,378||804,785||677,109|
|Income (loss) before other income (expense)||2,452,365||(1,188,791)||(4,624,197)||588,651|
|Other income (expense)||64,599||131,826||(154,519)||647,959|
|Income (loss) before tax||2,586,263||(967,626)||(4,456,025)||1,546,018|
|Income taxes|| |
|Net income (loss) and comprehensive income (loss)|| |
|$ (1,012,695)||$(4,874,769)||$ 1,272,008|
|Earnings per common share – basic||$ 0.07||$ (0.03)||$(0.13)||$ 0.04|
|Earnings per common share – diluted||$ 0.07||$ (0.03)||$(0.13)||$ 0.04|
Consolidated Balance Sheets
|December 31, 2016|
|December 31, 2015|
|Cash and cash equivalents||$ 43,047,878||$ 49,947,096|
|Investment tax credits receivable||321,018||413,920|
|Prepaid expenses and other assets||653,055||734,906|
|$ 61,369,142||$ 65,847,628|
|Accounts payable and accrued liabilities||$ 4,542,527||$ 3,165,144|
|Share based payments reserve||15,601,861||14,059,806|
|$ 61,369,142||$ 65,847,628|
Statements of Cash Flows
|Twelve Months Ended|
|December 31, 2016|
|December 31, 2015|
|CASH PROVIDED BY (USED IN)|
|Net income (loss)||$ (4,874,769)||$ 1,272,008|
|Items not affecting cash|
|Depreciation of property and equipment||364,430||262,364|
|Amortization of intangible assets||804,785||677,109|
|Share-based compensation expense||1,555,184||1,379,281|
|Gain on acquisition||(325,966)||–|
| Changes in non-cash operating|
|Purchase of equipment||(443,556)||(532,511)|
|Purchase of intangibles||(250,531)||(95,492)|
|Purchase of business, net of cash acquired||162,769||(1,721,623)|
|Share repurchase program||(1,250,792)||–|
|Proceeds from equity financing||–||35,000,000|
|Costs of share issuance||–||(2,383,312)|
|Net cash and cash equivalents inflow (outflow)||(6,899,218)||31,835,772|
|Cash and cash equivalents, beginning of year||49,947,096||18,111,324|
|Cash and cash equivalents, end of year||$ 43,047,878||$ 49,947,096|