Espial Reports 2008 Fourth Quarter and Fiscal Year Results



    OTTAWA, Feb. 26 /CNW Telbec/ - Espial(R) Group Inc. ("Espial" or the
"Company"), (TSX:ESP), a leader in the delivery of TV software, today
announced its fourth quarter and fiscal year financial results for the three
and twelve month periods ended December 31, 2008.

    
    2008 HIGHLIGHTS:

    - Fourth quarter revenue of $3.3 million, an increase of 56% from last
      year
    - Annual revenue of $10.1 million, an increase of 27% from last year
    - Acquired Kasenna, Inc. a leading Video on Demand software company based
      in California
    - Signed global software and distribution agreements with Motorola and a
      European based Network Equipment Vendor.
    - Delivered Evo Server Release 3.1.0 with complete support for a
      reference ecosystem of set-top boxes, VOD servers and DRM technology.
    - Appointed cable executive, Michael Lee, from Rogers Communications to
      the Espial board of directors
    

    For the three-month period ended December 31, 2008, the Company reported
revenues of $3.3 million compared to revenues of $2.1 million for the three
months ended December 31, 2007. For the year ended December 31, 2008, the
Company reported revenues of $10.1 million compared to revenues of $8.0
million for the year ended December 31, 2007.
    Earnings before interest, foreign exchange, taxes, stock compensation,
dividends on redeemable preferred shares, depreciation and amortization
(EBITDA) for the fourth quarter of fiscal 2008 was a loss of $1.2 million
compared to a loss of $2.2 million in the fourth quarter of fiscal 2007. Net
loss for the quarter was $1.3 million or $0.09 per share, compared to a net
loss of $2.0 million last year, or $0.22 per share. For the Year ended
December 31, 2008, EBITDA was a loss of $5.2 million compared to an EBITDA
loss of $7.1 million in 2007. Net loss for fiscal 2008 was $5.4 million
compared to a net loss of $10.9 million in 2007.
    "In 2008, we significantly broadened our customer base, distribution
channels, product and patent portfolio with the addition of Kasenna", said
Jaison Dolvane, President and CEO. "We are pleased with the integration of the
two companies and have successfully realized anticipated cost and revenue
synergies. The extended product portfolio allows us broader market reach into
various market segments within the global digital and IP TV market. Today,
Espial products service over 3 million IPTV subscribers worldwide and we
expect to further extend this market leadership through 2009".

    Q4 Financial Results

    Fourth quarter revenues were $3,279,368 compared with revenues of $
2,096,377 in the same period a year ago. Fourth quarter software license and
royalty revenues were $2,377,114 compared to software license and royalty
revenues of $1,245,474 in the fourth quarter of fiscal 2007. Professional
services for the fourth quarters of 2008 and 2007 were $410,943 and $502,563
respectively. Maintenance and support revenues for the fourth quarter were
$491,311 compared to $348,340 last year.
    Gross margins for the fourth quarter of fiscal 2008 were 79% compared
with 63% in the fourth quarter of fiscal 2007.
    Operating expenses in the fourth quarter of fiscal 2008 were $4,160,399
compared to $3,583,511 in the fourth quarter of fiscal 2007.
    Earnings before interest, foreign exchange, taxes, stock compensation,
dividends on redeemable preferred shares, depreciation and amortization
(EBITDA) for the fourth quarter of fiscal 2008 was a loss of $1,241,077
compared to a loss of $2,195,246 in fiscal 2007.
    Net loss in the fourth quarter was $1,325,525 compared to a loss of $
2,036,741 last year.

    Fiscal 2008 Financial Results

    Total revenues for the fiscal year ended December 31, 2008 were
$10,110,605 compared with revenues of $7,968,275 in the same period a year
ago. Software license and royalty revenues for the 2008 fiscal year were
$5,832,967 compared to software license and royalty revenues of $4,746,974 in
fiscal 2007. Professional services for the 2008 fiscal years of 2008 and 2007
were $2,623,004 and $ 1,592,392 respectively. Maintenance and support revenues
for the fiscal year ended December 31, 2008 were $1,654,634 compared to
$1,628,909 last year.
    Gross margins for the 2008 fiscal year were 71% compared with 69% in
fiscal 2007.
    Operating expenses for the 2008 fiscal year were $13,226,774 compared to
$17,121,889 in fiscal 2007.
    Earnings before interest, foreign exchange, taxes, stock compensation,
dividends on redeemable preferred shares, depreciation and amortization
(EBITDA) for the fiscal year ended December 31, 2008 was a loss of $5,203,257
compared to a loss of $7,085,367 in fiscal 2007.
    Net loss in the 2008 fiscal year was $5,368,853 compared to a loss of
$10,848,435 in 2007.
    Cash and cash equivalents at December 31, 2008 was $10,476,443.

    The Company will be hosting a conference call to discuss the fourth
quarter financial results on February 26, 2009 at 5:00 PM Eastern Standard
Time (EST). The phone number to join the results discussion is:

    - Toll line - 416-644-3418
    - Toll free line - 800-814-4890

    The playback for the call will be available until March 26, 2009 at the
following numbers and passcode:

    - Toll line: 416-640-1917 - passcode: 21298958#
    - Toll free line: 877-289-8525 - passcode: 21298958#

    About Espial (www.espial.com)

    Espial provides intelligent and open TV software to service providers in
the cable, telecommunications and hospitality industries. It's middleware and
video-on-demand solutions provide superior service delivery, advanced service
innovation tools and the ability to serve a wide range of market segments -
including over-the-top, IPTV, hybrid IP, multi-dwelling unit and enterprise.
With over 2.5 million licenses of its patented software technology in use,
Espial is a leading supplier of TV software. Espial is headquartered in
Ottawa, Canada. For more information please visit the Espial website @
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 theses terms or other similar expressions
concerning matters that are not historical facts. In particular, statements
about the benefits and synergies of the Kasenna acquisition transaction,
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 integrate Kasenna
operations and 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, 2007 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-GAAP Financial Measures

    Earnings before interest, foreign exchange, taxes, stock compensation,
dividends on redeemable preferred shares, depreciation and amortization
(EBITDA) is a non-GAAP financial measure that does not have any prescribed
meaning by GAAP and is therefore unlikely to be comparable to similar measures
presented by other issuers. Management believes that this non-GAAP financial
measure, when taken together with the corresponding consolidated GAAP
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:

    
                    December 31    December 31    December 31    December 31
                           2008           2007           2008           2007
                 -----------------------------  -----------------------------
                      (3 months)     (3 months)    (12 months)    (12 months)
                     (Unaudited)    (Unaudited)    (Unaudited)    (Unaudited)

    Net loss and
     Comprehensive
     loss           ($1,325,525)   ($2,036,740)   ($5,368,853)  ($10,848,435)
    Add
      Stock
       compensation      69,300        (18,131)       114,100      4,198,592
      Depreciation
       of property
       and equipment     81,359         82,962        282,955        303,543
    Amortization of
     intangibles        172,417              -        422,186              -
    -------------------------------------------------------------------------
                     (1,002,449)    (1,971,909)    (4,549,612)    (6,346,300)
    -------------------------------------------------------------------------
    Less (add)
    Dividends on
     redeemable
     preferred
     shares                   -              -              -       (713,381)
    Interest
     income              38,379        215,182        373,342        517,183
    Foreign
     exchange
     gain               200,249          8,155        280,303      1,435,904
    Interest on
     loan payable             -              -              -       (500,639)
                 ------------------------------------------------------------
                 ------------------------------------------------------------
    Earnings
     before
     interest,
     foreign
     exchange,
     taxes,
     stock
     compensation,
     dividends
     on
     redeemable
     preferred
     shares,
     depreciation
     and
     amortization   ($1,241,077)   ($2,195,246)   ($5,203,257)   ($7,085,367)
                 ------------------------------------------------------------
                 ------------------------------------------------------------


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

                                                  December 31,   December 31,
                                                         2008           2007
                                                   (unaudited)    (unaudited)
    -------------------------------------------------------------------------
    CURRENT ASSETS
      Cash and cash equivalents                   $10,476,443       $631,027
      Short-term investments                          122,246     16,402,949
      Accounts receivable                           2,269,251      1,950,267
      Investment tax credits receivable               363,424        626,815
      Prepaid expenses and other assets               209,974        243,034
    -------------------------------------------------------------------------

                                                   13,441,338     19,854,092
    Property and equipment                            899,734        806,305
    Intangible assets                               4,338,814              -
    Goodwill                                        4,489,077              -
    -------------------------------------------------------------------------
                                                  $23,168,963    $20,660,397
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    CURRENT LIABILITIES
      Accounts payable and accrued liabilities     $2,229,241     $1,714,774
      Deferred revenue                              1,270,407        668,485
    -------------------------------------------------------------------------
                                                    3,499,648      2,383,259
    DEFERRED REVENUE                                        -         51,719
    -------------------------------------------------------------------------
                                                    3,499,648      2,434,978
    -------------------------------------------------------------------------
    COMMITMENTS
    SHAREHOLDERS' EQUITY
      Share capital                                74,859,576     68,248,462
      Warrants                                        164,435         76,900
      Contributed surplus                          10,249,143     10,135,043
      Deficit                                     (65,603,839)   (60,234,986)
    -------------------------------------------------------------------------
                                                   19,669,315     18,225,419
    -------------------------------------------------------------------------
                                                  $23,168,963    $20,660,397
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

                    December 31    December 31    December 31    December 31
                           2008           2007           2008           2007
                 -----------------------------  -----------------------------
                      (3 months)     (3 months)    (12 months)    (12 months)
                     (Unaudited)    (Unaudited)    (Unaudited)    (Unaudited)

    Revenue          $3,279,368     $2,096,377    $10,110,605     $7,968,275
    Cost of revenue     681,411        772,945      2,904,618      2,432,459
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Gross margin      2,597,957      1,323,432      7,205,987      5,535,816
    -------------------------------------------------------------------------
    Expenses
      Sales and
       marketing      1,496,305      1,311,084      5,367,633      5,428,877
      General and
       administra-
       tive             681,880        467,984      2,481,369      1,916,526
      Research and
       development    1,659,138      1,043,415      4,558,531      4,578,155
      Stock
       compensation      69,300        (18,131)       114,100      4,198,592
      Restructuring           -        696,196              -        696,196
      Depreciation
       of property
       and equipment     81,359         82,962        282,955        303,543
    Amortization of
     intangibles        172,417              -        422,186              -
    -------------------------------------------------------------------------

                      4,160,399      3,583,510     13,226,774     17,121,889
    -------------------------------------------------------------------------
    Loss before
     other income
     (expense)       (1,562,442)    (2,260,078)    (6,020,787)   (11,586,073)
    -------------------------------------------------------------------------
    Other income
     (expenses)
      Dividends on
       redeemable
       preferred
       shares                 -              -              -       (713,381)
      Interest
       income            38,379        215,182        373,342        517,183
      Foreign
       exchange
       gain             200,249          8,155        280,303      1,435,904
      Interest
       on loan
       payable                -              -              -       (500,639)
      Loss on
       disposal
       of property
       and
       equipment         (1,711)             -         (1,711)        (1,429)
    -------------------------------------------------------------------------

                        236,917        223,338        651,934        737,638
    -------------------------------------------------------------------------
    NET LOSS AND
     COMPREHENSIVE
     LOSS           ($1,325,525)   ($2,036,740)   ($5,368,853)  ($10,848,435)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Net loss per
     common share -
     basic and
     diluted             ($0.09)        ($0.22)        ($0.46)        ($1.98)
    Weighted
     average number
     of common
     shares-basic
     and diluted     14,101,829      9,329,605     11,604,583      5,467,761
    
    %SEDAR: 00025301E




For further information:

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

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