Espial Group Inc.
TSX : ESP

Espial Group Inc.

March 03, 2008 07:50 ET

Espial Group Inc. Reports 2007 Results

OTTAWA, ONTARIO--(Marketwire - March 3, 2008) - 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 period and the fiscal year ended December 31, 2007.

For the three-month period ended December 31, 2007, the Company reported revenues of $2.1 million versus $1.7 million during the third quarter of 2007 and revenues of $3.4 million during the same period last year. Revenues during the fourth quarter increased by $0.4 million from the third quarter, but continue to be affected by delays in awarding and closing of service provider client contracts and completing network vendor channel development initiatives. This is a result of a continued softness in the industry as a whole, where the majority of growth remains concentrated in a small number of service providers. Gross margin during the quarter amounted to $1.2 million compared to $2.8 million during the corresponding period in 2006. This decrease is largely attributable to the reduced revenues and a lower proportion of our revenue arising from software license revenue versus lower margin Professional Services or Customer Support revenue. For the three-month period, net loss amounted to $2.0 million, or $0.23 per share versus net loss of $0.9 million, or $5.19 per share, in the same period of 2006. Included in these results for the current quarter was a business restructuring charge of $0.7 million. 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 year ended December 31, 2007, the Company reported revenues of $8.0 million versus $10.7 million during the previous year. Gross margin for the year amounted to $5.2 million versus $8.1 million last year. Net loss excluding the one-time charge for stock-based compensation expense, a non-GAAP Measure, was $6.7 million, or $1.23 per share, versus $5.4 million, or $10.60 per share, during the corresponding period last year. Including the one-time stock-based compensation charge, GAAP Net Loss for the year was $10.8 million or $1.98 per share.

As of December 31, 2007, cash and short-term investments stood at $17.0 million.

The Company completed a strategic restructuring during the fourth quarter of the year. The objective of the restructuring was to reduce our cash burn rate by approximately $3 million annually, primarily by reducing our workforce by nearly 30%. We undertook these actions to ensure that we apply the appropriate resources to reaching our key business objectives so that we will be positioned to leverage the forthcoming higher growth that we anticipate in the industry and to ensure a continuing strength in our Balance Sheet. The costs of this restructuring were approximately $700,000 and were recorded in the fourth quarter of the year.

"During the fourth quarter, Espial continued to make good progress on the key 2007 business objectives that we outlined at the end of our second quarter" stated Jaison Dolvane, President and CEO of Espial. "These were to secure one major service provider customer, which we announced during the fourth quarter, and one channel partner for our Evo IPTV Service Platform which we announced last month. However, as we have previously commented, we expect significant variability to persist in our quarterly revenue due to the long integration and sales cycle, and variable timing of closing contracts" Mr. Dolvane continued. "We remain confident that our market opportunity will continue to expand as global service providers are increasingly seeing video delivery as a critical part of their survival."


Q4 HIGHLIGHTS:

- Secured a major European service provider customer for our Evo IPTV Service Platform for deployment on an existing cable network already passing 1.7 million homes.

- Completed reseller agreement with Avail Media, a leading U.S. provider of content aggregation and IPTV transport services to North American service providers.

- Completed strategic restructuring to reduce annual operating costs by approximately $3 million

The Company will be hosting a conference call to discuss these financial results on March 6, 2008 at 10:00AM Eastern Standard Time (EST).

CFO Appointment

"I am very pleased to welcome Carl Smith to Espial as our new Chief Financial Officer," said Mr. Dolvane. "Carl brings to Espial a wealth of experience in the areas of financial and operational control, mergers and acquisitions, and in building strong relationships within the investment community. His experience and successful track record position him well to make significant contributions to Espial's growth plans."

Mr. Smith, a Chartered Accountant, has more than 15 years experience in finance and executive leadership positions in public and private high technology companies. Most recently, he held the position of Chief Financial Officer at Nuvo Network Management, a public company traded on the TSX Venture that was acquired by a leading US based software company. Prior to Nuvo, Mr. Smith served as CFO of OZ Optics and held senior finance roles at JetForm Corporation, a TSX and NASDAQ listed software company.

Commenting on his appointment, Carl Smith added, "The IPTV market opportunity is exciting and I look forward to working with the Espial leadership team to build on their success to date. I am very impressed with their customer and partner base and believe the company is positioned well to take advantage of this growing market."

Mr. Smith is expected to assume his duties at Espial on March 24, 2008.

ABOUT ESPIAL GROUP, INC. (www.espial.com)

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 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.

Non-GAAP Financial Measures

In addition to our GAAP results, Espial discloses a "Net loss excluding the one-time charge for stock-based compensation expense", which is referred to as a "Non-GAAP Measure", which excludes the impact of stock-based compensation expenses incurred by the Company associated with the conversion of certain share purchase warrants and the introduction of a new Employee Stock Option Plan immediately prior to our initial public offering. Because the Non-GAAP Measure is not calculated in accordance with GAAP, it is used by management as a supplement to, and not an alternative to, or superior to, financial measures calculated in accordance with GAAP.

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