Already under new ownership, Ottawa-based Espial Group is now preparing to make way for new leadership.
The downtown tech firm was officially acquired by Markham-based Enghouse Systems in a $56.5-million transaction that received final court approval last Friday, three days after Espial’s shareholders voted heavily in favour of the deal.
But Espial is shedding more than just its ESP ticker symbol on the Toronto Stock Exchange as a result. This week, co-founder and CEO Jaison Dolvane told OBJ he’ll stay on to help pave the way for the 22-year-old company’s integration into the Enghouse group but will leave the organization once that transition period is over.
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For Dolvane, who launched Espial in 1997 with longtime friend Kumanan Yogaratnam, exiting the venture that became a leader in the field of video streaming software will be bittersweet.
“It’s mixed emotions,” he said Wednesday. “We’ve done some very interesting things and we’ve had some great successes, and there’s certainly been ups and downs in our journey. Today, I think we’re well-positioned to continue to grow. We’ve successfully navigated at least the first phase of our SaaS transition, and I think there’s a lot more where that came from.”
Dolvane, a Mississauga native who studied computer science at Carleton University, said joining forces with a larger corporate entity will give his company access to new customers and markets and help steepen its growth curve.
Espial now employs 120 people – including about 50 at its Elgin Street headquarters – and Dolvane expects that number to rise under the new regime.
Greater marketing reach
“In terms of their distribution from a sales and marketing perspective, they have a far greater reach,” he said. “The fact that they were Canadian, I think made it easier and probably allowed us to feel more comfortable with it all.
“There’s always mixed emotions in these things, but I think it’s overall a very good thing.”
Dolvane, whose resumé also includes stints at Nortel, Entrust and Corel, said he’s proud of the resilience Espial has shown over the years as it persevered through a series of economic peaks and valleys and changes in its business model.
The company started out with the notion of selling software that would allow different computing devices to communicate with each other. After the dot-com bust in the early 2000s, it pivoted to providing on-demand video technology for hotels, installing its products in more than two million rooms across North America, before expanding into the telecom and cable TV space and raising $25 million in an initial public offering in 2007.
The company also weathered a couple other economic storms, including the Great Recession that saw its stock price plummet from $9 a share to just 25 cents in 2009.
Most recently, Espial has been navigating its way through a sometimes bumpy shift in its sales model.
Where the company once generated almost all of its revenue from one-time licensing fees, it’s now in the midst of shifting to a software-as-a-service approach in which customers pay monthly subscription charges to use its products.
While Dolvane is convinced the strategy will pay off in the long run, such transitions rarely come without a hefty dose of short-term pain.
Although the firm’s subscription revenues ballooned from just over $1 million in 2017 to more than $6 million a year later, its licensing revenues fell nearly 50 per cent – from $17.9 million to just over $9 million – in the same period.
In early 2018, the company laid off staff and shuttered offices in Montreal, Paris and Cambridge, England. Despite the cost-cutting efforts, Espial still posted a net loss of more than $4.5 million in fiscal 2018, down from $8.5 million the previous year.
The firm’s final stock price on the TSX was $1.57, up slightly from its low of $1.13 in March but a far cry from its five-year high of more than $4 in the spring of 2015.
Revenue ‘lumpiness’
“When you do that (transition), you tend to shed some licence revenue while gaining more recurring, higher-quality SaaS revenue,” Dolvane explained. “From a public markets context, that creates some lumpiness, which investors don’t tend to like a lot.”
Still, he believes Espial has positioned itself for a bright future.
Traditional cable companies are now using its platform to compete with streaming services such as Netflix and YouTube, and the veteran tech leader sees plenty of opportunities for growth in that vertical. Espial now has more than 30 operators using its platform with apps on Google, Amazon, Apple and Roku stores.
“That’s really where the whole SaaS model comes into play, that’s where our products come into play,” he said. “That’s why I feel like we’re well-positioned and we actually got out in front of that change in the industry.”
As for what’s next, Dolvane, like many a pending free agent, says he’ll consider all his options.
“I’ll take some time and think about it,” he told OBJ. “But certainly I am an entrepreneur at heart, so if I had the opportunity to start another company, that certainly would be an exciting thing for me to do in the future.”
Dolvane said the National Capital Region has all the ingredients to be a hub for emerging fields from autonomous vehicles to artificial intelligence, and he’s not about to sit on the sidelines.
“When you think about where Ottawa could be 10 years from now, it’s probably exponentially head of where we are today, just given the activity and the number of opportunities that are presenting themselves,” he said. “I think more importantly, there’s a lot of entrepreneurs and startups that are willing to go that route, and that’s an exciting thing.”
