Espial Reports 2015 Third Quarter Results

Transforming the viewing experience worldwide, Espial® Group Inc. ("Espial" or the "Company"), (TSX:ESP), today announced its Third quarter financial results for the three and nine month periods ended September 30, 2015.

Espial Q3 Highlights

• Record quarterly revenue of $8.7 million
• Adjusted EBITDA income of $2.3 million
• Tele Columbus selected Espial to provide software and services for their next-generation, IP video services solution
• Debuted our G4 STB Client solution for IPTV/Telco operators at IBC in Amsterdam
• Integrated our G4 STB Client with Metrological, a leading provider of cloud-based applications to operators
• Record attendance at Espial’s 2015 Asia-Pac Seminar in Tokyo, Japan

"We had a very strong quarter with record revenue and EBITDA," said Jaison Dolvane, CEO, Espial. "In Q3, we secured a significant software license order for deployment by a North American cable operator, expanded our relationship with Tele Columbus, a major German cable operator customer, and launched our G4 product for Telcos. We continued to make progress on our pipeline and believe we are well situated for the change occurring in the industry."

“In Q3, we delivered software licenses for current generation and new 4k set-top boxes to a channel partner for deployment at a North American cable operator. The same operator is currently working on its next generation platform and we have been informed that this operator does not intend to deploy our software as previously contemplated and we are in discussions regarding this. We continue to work with our channel partner and operator to improve current user experience and deliver 4K Ultra High Definition on its current platform."

Financial Summary

For the three-month period ended September 30, 2015, the Company is reporting revenue of $8.7 million compared with revenue of $5.1 million for the three months ended September 30, 2014. Adjusted EBITDA income for the third quarter of fiscal 2015 was $2.3 million compared to $0.7 million for the third quarter of fiscal 2014. Net income for the quarter was $2.2 million, compared with net income of $0.2 million last year. Adjusted net income for the third quarter was $2.7 million compared to adjusted net income of $0.7 million last year.

Q3 Financial Results

• Third quarter revenues were $8,709,354 compared with revenues of $5,057,826 in the same period a year ago. Third quarter software license and royalty revenues were $5,217,518 compared to $1,288,712 in the third quarter of fiscal 2014. Professional services for the third quarters of 2015 and 2014 were $2,146,008 and $2,556,776 respectively. Maintenance and support revenues for the third quarter were $1,345,828 compared to $1,212,338 last year.
• North American revenues were $5,696,380 in the third quarter of 2015 compared to $2,141,731 in 2014. Asia revenues were $694,704 in the third quarter of 2015 compared to $659,185 in 2014. European revenues were $2,318,270 in the third quarter of 2015 compared to $2,256,910 in 2014.
• Gross margin for the third quarter of fiscal 2015 was 77% compared with 72% in the third quarter of fiscal 2014.
• Operating expenses in the third quarter of fiscal 2015 were $4,941,261 compared to $3,501,456 in the third quarter of fiscal 2014.
• Earnings before interest, foreign exchange, taxes, stock compensation, depreciation and amortization (adjusted EBITDA income) for the third quarter of fiscal 2015 was $2,333,471 compared to $718,244 in fiscal 2014.
• Net income, which includes non-cash items like depreciation, amortization of intangibles and stock compensation, in the third quarter was $2,203,314 compared to $213,970 last year.
• Cash, restricted cash and cash equivalents on September 30, 2015, was $47,516,284

A complete set of financial statements and management’s discussion and analysis for the quarter ended September 30, 2015 will be available at http://www.sedar.com.

Conference Call

The Company will be hosting a conference call to discuss the Q3 2015 financial results on October 28, 2015 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 November 28, 2015, at the following numbers and passcode:

Toll-free line: +1-855-859-2056 or +1-404-537-3406, Passcode: 61236138

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 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 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, 2013 and 2014 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

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:

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

Consolidated Balance Sheets

Statements of Cash Flows

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