Ottawa-based Espial’s shares plunge 13% as firm shutters multiple offices

Jaison Dolvane

Espial had its worst market opening to date in 2018 on Friday as the Ottawa-based firm announced significant revenue declines alongside numerous office closures and layoffs around the world.

Shares of Espial (TSX:ESP) dropped more than 13 per cent at market open on the Toronto Stock Exchange before recovering slightly. Espial’s stock was trading around $1.61, down 9.6 per cent, in late afternoon trading.

Total revenue was down for the quarter ending March 31 as the television platform developer looks to push its SaaS-based Espial Elevate solution to customers. Revenues were $5.9 million in the quarter, compared to $8.7 million over the same period a year ago.

The newly-introduced subscription vertical accounted for 19 per cent of revenue in the first quarter. The firm expects this figure to increase 10 to 15 per cent quarter-to-quarter.

The decline was steepest in the firm’s largest vertical, software licensing, which brought in $2 million this past quarter – $3 million less than last year. In financial filings, management attributes the drop to higher-than-expected license purchases from North American customers in the fourth quarter of 2017 rather than in the first quarter of 2018, and a large one-time order from a European customer in the same quarter a year ago.

On Espial’s earnings call Friday morning, CEO Jaison Dolvane said the licenses vertical will still be significant part of the firm’s total revenue, but SaaS will be the growth engine for the company going forward.

Also affecting Espial revenues was a newly-adopted set of accounting standards known as IFRS 15, which affects how and when the firm acknowledges revenue from customer contracts. Revenues would’ve been roughly $400,000 higher this quarter under the old standards.

Espial posted a net loss of $3.7 million compared to a loss of $1.9 million a year ago. A significant contributor to this loss was a one-time restructuring cost of $1.87 million as the firm focuses on its IP and cloud solutions.

Financial filings say this restructuring involves global layoffs and the closure of multiple offices as the company consolidates engineering operations. Costs are related to the termination of ongoing lease agreements but the company says it expects the cuts to result in $6 million of annual savings

These filings did not indicate which locations would be shuttered nor where layoffs were taking place. A spokesperson for the firm declined to provide OBJ with specifics at this time.

Espial’s website no longer lists its offices in Montreal, in Paris, France and in Cambridge, England, the latter of which was billed at the firm’s European headquarters. Archived versions of the firm’s website list these locations as recently as December, 2016.

Today, the company appears to retain offices in Ottawa, in Lisbon, Portugal, in Tokyo, Japan, in Kirkland, WA and in Santa Clara, CA.