Espial Reports Third Quarter 2018 Results
Strong SaaS Results Drives Positive EBITDA
Espial® 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 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 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 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, 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.
Espial Group Inc.
Carl Smith, +1 613-230-4770
Chief Financial Officer
csmith@espial.com
View source version on businesswire.com: https://www.businesswire.com/news/home/20181101006074/en/