Espial Group Inc.
TSX : ESP

Espial Group Inc.

November 13, 2007 08:30 ET

Espial Group Inc. Reports Third Quarter 2007 Results and Strategic Restructuring

OTTAWA, ONTARIO--(Marketwire - Nov. 13, 2007) - Espial Group Inc. ("Espial" or the "Company") (TSX:ESP), a leader in the delivery of IPTV middleware and applications, today announced its financial results for the three-month and nine-month periods ended September 30, 2007. The company also announced a strategic restructuring of its operations to reduce cost, and to maintain its balance sheet strength to navigate through the early phases of the expected high growth IPTV market.

For the three-month period ended September 30, 2007, the Company reported revenues of $1.7 million versus revenues of $2.8 million during the same period last year, and $2.0 million during the second quarter of 2007. Revenues during the third quarter were affected by continued delays in new service provider client contracts and network vendor channel development initiatives. This softness is representative of the industry as a whole, where majority of growth continues to be concentrated in only a small number of telecom carriers. Gross margin during the quarter amounted to $1.0 million compared to $2.3 million during the corresponding period in 2006. This decrease is largely attributable to lower software license sales and deployments which carries a higher gross margin than either Professional Services or Customer Support. For the three-month period, net loss amounted to $2.1 million, or $0.23 per share versus net loss of $2.2 million, or $5.19 per share, in the same period of 2006. The significant difference in loss per share amounts is due to the Company's issuance of shares in 2007 as part of its initial public offering.

For the nine-month period ended September 30, 2007, the Company reported revenues of $5.9 million versus $7.3 million during the same period last year. Gross margin during the nine-month period amounted to $4.0 million versus $5.3 million in the same period last year. Net loss excluding the one-time charge for stock-based compensation expense was $4.7 million, or $1.13 per share, versus $4.5 million, or $10.60 per share, during the corresponding period last year. Including the one-time stock-based compensation charge, Net Loss for the nine months was $8.8 million or $2.11 per share.

As of September 30, 2007, cash and short-term investments stood at $19.9 million.

"During the third quarter, Espial made good progress on the key 2nd half, 2007 business objectives which we outlined at the end of our second quarter. These were to secure one major service provider, which we announced last week, and one channel partner for our Evo IPTV Service Platform. However, during this period industry delays in integration and securing contracts and industry consolidation, have impacted deployments and revenues. We expect that these early market conditions, together with the complexity, timing and integration of individual contracts, will continue to impose significant variability in our quarterly revenue," noted Jaison Dolvane, President and CEO of Espial Group Inc. "We remain confident that service providers around the world believe that the delivery of video content is critical to their business and IPTV is an important platform to enable the success of video. Further, we believe that the opportunities in this industry are continuing to increase. To win we need to maintain a strong balance sheet and stay focused on accomplishing our key business objectives that provide us with the strong foundation to leverage the anticipated growth in the IPTV market."

Q3 HIGHLIGHTS:

- Significant progress towards closing a major European service provider customer for our Evo IPTV Service Platform, which culminated in our announcement of closing this contract on November 8, 2007.

- Licensing by Real Page of additional applications to extend their Evo IPTV Service Platform offering.

- Licensing of Evo Client software by a Japanese set-top box vendor

- Espial launched its enhanced Evo® DVR with updates to features including Evo® StartOver TV, the ability to record multiple programs simultaneously, and an advanced conflict resolution engine.

- Espial demonstrated at the recently completed IBC trade show new proof of concept innovations such as an HD user interface and new services including Evo® Timeshift TV and Evo mobile convergence capabilities.

STRATEGIC RESTRUCTURING:

The company also announced a strategic restructuring to reduce and align the company's cost structure with the pace of the IPTV market. We expect this strategy to maintain our balance sheet strength that will help us to navigate through the early phases of this market. "We regret that we have to reduce our workforce, but believe that these actions ensure the right timing and use of resources towards successfully achieving our key business objectives, preparing us to leverage the forthcoming higher growth that we anticipate in the industry" stated Mr. Dolvane.

The Company will be reducing its cash burn rate by an estimated $3.1 million annually or approximately 24% of its annual Operating Expenses by reducing its workforce by approximately 30%, including management positions. The majority of the reductions will occur at the Company's corporate headquarters in Ottawa. The restructuring will leave the Company with approximately 70 full-time equivalents. As a result, Espial will take an estimated $0.5 million charge for severance payments and other costs in the quarter ending December 31, 2007.

In addition, Bob Daly, its CFO, will leave the company in the first quarter of 2008. Mr. Dolvane stated "Mr. Daly joined the company as a part-time consultant and then transitioned into full-time to play a leading role in the completion of our IPO financing. Bob has since decided to return to his consulting practice, but will continue in his role as CFO through our fiscal 2007 reporting period and to assist in the recruiting and transition to a new CFO."

The Company will be hosting a conference call to discuss the third quarter financial results on November 14, 2007 at 10:00AM Eastern Standard Time (EST).

About Espial

Espial provides IPTV middleware and applications that enable superior quality of experience, fast application performance, carrier-grade scalability, and open extensibility, all at a lower total cost of ownership. Espial's Evo® IPTV Service Platform, which can be purchased as modular components or as part of a pre-integrated client-server solution, includes Evo Client, Evo Server, Evo Browser, Evo BML Browser, Evo Future-Proof Framework™ (FPF), Evo SkinTones™ and applications such as Electronic Program Guide, Video on Demand, Digital Video Recorder, Content Portal, Games, and Triple Play.

Forward Looking Statement

This press release contains statements that are forward-looking in nature. Statements preceded by the words believe, expect, anticipate, plan, intend, continue, estimate, may, will, and similar expressions are forward-looking statements. Forward-looking statements are based on Espial's beliefs and assumptions based on information available at the time the assumption was made. Forward-looking statements relate to, among other things, anticipated financial performance, business prospects, strategies, regulatory developments, new services, market forces, commitments and technological developments, relating to the Espial. By its nature, such forward-looking information is subject to various risks and uncertainties which could cause Espial's actual results and experience to differ materially from the anticipated results or other expectations expressed. Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date it is expressed in this document, and Espial undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise.

Contact Information

  • Espial Group Inc.
    Bob Daly
    Chief Financial Officer
    (613) 230-4770
    Email: bdaly@espial.com
    or
    Genoa Management Limited
    Ali Mahdavi
    Partner
    (416) 962-3300
    Email: amahdavi@genoa.ca