Espial Reports 2011 First Quarter Results

OTTAWA, May 12 /CNW/ - Espial(R) Group Inc. ("Espial" or the "Company"), (TSX:ESP), a leader in the delivery of TV software, today announced its first quarter financial results for the three month period ended March 31, 2011.

HIGHLIGHTS:

    <<
    -   Q1 2011 revenue of $3.0 million with an EBITDA loss of $0.57 million.

    -   Announced Espial WebKit TV Browser will be deployed across Hitachi's
        line of LCD TVs for Japanese consumers. Espial expects to see
        continued adoption of WebKit browsers for Connected TVs following the
        pattern of using WebKit by Apple, Google, RIM and other major mobile
        and TV platforms.

    -   Signed an OEM deal for our Video-On-Demand products with a major
        network equipment operator that is an important channel to Tier 1
        telco and cable operators worldwide.

    -   Received solid expansion orders from current customers for new
        subscribers adds and increased video-on-demand usage.

    -   Continued building the Espial brand in the US and Europe markets with
        participation at the following industry events: Consumer Electronics
        Show in Las Vegas; CSTB in Moscow; Cablelabs Winter Conference in
        Atlanta; and, IPTV World Forum in London.
    >>

For the three-month period ended March 31, 2011, the Company reported revenues of $3.0 million compared to revenues of $3.8 million for the three months ended March 31, 2010. Earnings before interest, foreign exchange, taxes, stock compensation, depreciation and amortization (EBITDA) for the first quarter of fiscal 2011 was a loss of $0.6 million compared to earnings of $0.1 million in the first quarter of fiscal 2010. Net loss for the quarter was $1.1 million or $0.07 per share, compared to a net loss of $0.4 million last year, or $0.03 per share.

We expect our business will continue to demonstrate growth on an annual basis, however, the pace of customer orders and deployments may vary significantly across quarters. As a result, our revenue and EBITDA will likely vary from quarter to quarter.

"We had a solid start to the fiscal year with new deployments and pipeline activity," said Jaison Dolvane, President and CEO. "We're very excited to announce Hitachi as a major customer in the connected LCD TV market segment for our WebKit based TV Browser products. We see a growing sales pipeline from major Tier 1 and Tier 2 service providers and consumer electronics manufacturers as they look towards introducing new connected, interactive and multiscreen services and products. We expect to benefit in 2011 from a robust market and our high performance suite of products that have been proven and deployed across Tier 1 customers worldwide."

According to a recent Parks Associates forecast, subscribers for multi-screen TV services will more than triple to 256 million by 2015. In addition, other market forecasts indicate Connected TV shipments are also slated to grow to over 100m units per year by 2014. Pay TV operators across the globe are in the process of evaluating and beginning upgrades of their television platforms that today serve over 500 million subscribers. These market trends represent significant opportunity in this very valuable market and we believe Espial is well positioned to capitalize on this opportunity.

Q1 Financial Results

First quarter revenues were $3,009,572 compared with revenues of $3,793,983 in the same period a year ago. First quarter software license and royalty revenues were $1,904,859 compared to software license and royalty revenues of $1,888,808 in the first quarter of fiscal 2010. Professional services for the first quarters of 2011 and 2010 were $382,821 and $1,152,587 respectively. Maintenance and support revenues for the first quarter were $721,892 compared to $752,588 last year.

Gross margin for the first quarter of fiscal 2011 was 75% compared with 71% in the first quarter of fiscal 2010.

Operating expenses in the first quarter of fiscal 2011 were $3,312,189 compared to $2,972,632 in the first quarter of fiscal 2010.

Earnings before interest, foreign exchange, taxes, stock compensation, depreciation and amortization (EBITDA) for the first quarter of fiscal 2011 was a loss of $569,090 compared to income of $133,921 in fiscal 2010.

Net loss in the first quarter was $1,113,171 compared to a loss of $387,483 last year.

Cash and cash equivalents at March 31, 2011 was $9,838,193.

Interim Financial Reporting

While the financial figures included in this preliminary interim earnings announcement have been computed in accordance with IFRS applicable to interim periods, this announcement does not contain sufficient information to constitute an interim financial report as that term is defined in IFRS. The Company expects to publish an interim report that complies with IFRS Interim Financial Reporting by June 14, 2011.

The Company will be hosting a conference call to discuss the first quarter financial results on Thursday, May 12th, 2011 at 5:00 PM Eastern Standard Time (EST). The phone number to join the results discussion is:

    <<
    -   Toll Free line (Canada/US) - 888-231-8191
    -   Toll Line (Local/International) - 647-427-7450
    >>

The playback for the call will be available until midnight on Friday, June 10th, 2011 at the following numbers and passcode:

    <<
    -   Toll line: 416-849-0833 - passcode: 64757291
    -   Toll free line: 1-800-642-1687- passcode: 64757291
    >>

About Espial (www.espial.com)

Espial provides scalable and open digital TV software to service providers in the cable, telecommunications and hospitality industries. Its middleware, Video-On-Demand and browser solutions provide superior service delivery, advanced service innovation tools and the ability to implement flexible business models. Espial serves a range of market segments including, IPTV, Cable, hybrid IP, over-the-top, multi-dwelling unit and enterprise. With over 7 million subscribers using Espial's patented solutions, Espial is a leading supplier of TV software. Espial is headquartered in Ottawa, Canada with offices around the world in USA, Europe and Asia. For more information please call +1.613.230.4770 or 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 about anticipated benefits of new customer and partner relationships, future opportunities for the company and products and any other statements regarding Espial's 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 risks and uncertainties, including Espial's ability to effectively develop its distribution channels, and generate increased demand for its products. Additional risks and uncertainties affecting Espial can be found in Espial's Annual Report for the fiscal year ended December 31, 2010 and in its most recent quarterly report 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. Espial assumes no obligation to update or revise any forward looking statements, whether as a result of new information, future events or otherwise. 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

Earnings before interest, foreign exchange, taxes, stock compensation, depreciation and amortization (EBITDA) is a non-IFRS financial measure that does not have any prescribed meaning by IFRS and is therefore unlikely to be comparable to similar measures presented by other issuers. Management believes that this non-IFRS financial measure, when taken together with the corresponding consolidated IFRS measures, increases the transparency of the Company's current results and enables investors to more fully understand trends in its current and future performance. A reconciliation of net loss to earnings before interest, foreign exchange, taxes, stock compensation, dividends on redeemable preferred shares, depreciation and amortization is as follows:

    <<
                                                      March 31      March 31
                                                          2011          2010
                                                   --------------------------
                                                     (3 months)    (3 months)
                                                    (Unaudited)   (Unaudited)

    Net loss and Comprehensive loss                ($1,113,171)    ($387,483)
    Add
      Stock compensation                               155,727        69,291
      Depreciation of property and equipment            43,971        53,785
      Amortization of intangibles                      286,122       283,083
    -------------------------------------------------------------------------
                                                      (627,351)       18,676
    Less (add)
    Interest income (expense)                         (116,790)       (3,976)
    Foreign exchange gain (loss)                        58,529      (111,268)
    -------------------------------------------------------------------------
    Earnings before interest, foreign exchange,
     taxes, stock compensation, depreciation
     and amortization                                ($569,090)     $133,920
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    ESPIAL GROUP INC.
    Consolidated Balance Sheet
    (in Canadian dollars)

    -------------------------------------------------------------------------
                                                                    March 31,
                                                                        2011
                                                                  (unaudited)
    -------------------------------------------------------------------------

    CURRENT ASSETS
      Cash and cash equivalents                                 $  9,838,193
      Short-term investments                                         110,000
      Accounts receivable                                          2,769,631
      Investment tax credits receivable                              375,000
      Prepaid expenses                                               344,608
    -------------------------------------------------------------------------
                                                                $ 13,437,432

    Property & equipment                                        $    600,940
    Intangible assets                                              3,004,783
    Goodwill                                                       3,340,808
    -------------------------------------------------------------------------
                                                                $ 20,383,963
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    CURRENT LIABILITIES
      Operating line                                            $  1,000,110
      Accounts payable and accrued liabilities                     1,974,180
      Deferred revenue                                             1,742,722
    -------------------------------------------------------------------------
                                                                $  4,717,012
    Long term debt                                                 2,972,621
    -------------------------------------------------------------------------
                                                                   7,689,633
    -------------------------------------------------------------------------
    SHAREHOLDERS' EQUITY
      Share capital                                             $ 74,859,576
      Warrants                                                       732,382
      Contributed surplus                                         11,188,862
      Deficit                                                    (74,086,490)
    -------------------------------------------------------------------------
                                                                $ 12,694,330
    -------------------------------------------------------------------------
                                                                $ 20,383,963
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    ESPIAL GROUP INC.
    Consolidated Statements of Loss and Comprehensive Loss
    (in Canadian dollars except share data)

                                                        Three Months Ended
    -------------------------------------------------------------------------
                                                      March 31,     March 31,
                                                          2011          2010
                                                    (unaudited)   (unaudited)
    -------------------------------------------------------------------------

    Revenue                                       $  3,009,572  $  3,793,983
    Cost of revenue                                    752,293     1,093,589
    -------------------------------------------------------------------------
    Gross margin                                     2,257,279     2,700,394
    -------------------------------------------------------------------------
    Expenses
      Sales and marketing                            1,150,803     1,125,391
      General and administrative                       433,468       504,486
      Research and development                       1,242,098       936,596
      Stock compensation expense                       155,727        69,291
      Depreciation of property and equipment            43,971        53,785
      Amortization of intangible assets                286,122       283,083
    -------------------------------------------------------------------------
                                                     3,312,189     2,972,632
    -------------------------------------------------------------------------
    Loss before other income (expense)              (1,054,910)     (272,238)
    -------------------------------------------------------------------------
    Other income (expense)
      Interest income (expense)                       (116,790)       (3,976)
      Foreign exchange gain (loss)                      58,529      (111,268)
    -------------------------------------------------------------------------
                                                       (58,261)     (115,244)
    -------------------------------------------------------------------------
    NET LOSS AND COMPREHENSIVE LOSS               $ (1,113,171) $   (387,482)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net loss per common share - basic
     and diluted                                  $      (0.08) $      (0.03)
    Weighted average number of common shares
     outstanding - basic and diluted                14,101,829    14,101,829
    >>

SOURCE ESPIAL GROUP

For further information: Inquiries from financial press or analysts: Carl Smith, Chief Financial Officer, Espial Group Inc., Email: csmith@espial.com, Phone: 613-230-4770; Kirk Edwardson, Director, Marketing, Espial Group Inc., Email: kedwardson@espial.com, Phone: +1-613-230-4770 x1145

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ESPIAL GROUP

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