Espial ‘cracks the code’ with doubled revenues, push into the black in Q1

Ottawa-based digital TV software provider Espial Group (TSX:ESP) doubled its revenues during the first quarter, helping the company to transform a multi-million dollar loss last year to just over $1 million in profits.

By Jacob Serebrin

“Our business has gotten significantly stronger,” said Carl Smith, the company’s CFO, speaking to investors on a conference call Thursday morning.

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While the company doesn’t provide guidance, he says that going forward “we’re pretty comfortable saying we’re going to be cashflow positive.”

However, he warned that because much of Espial’s revenue comes from licensing software to hardware manufacturers there will be some fluctuations.

The company, which develops digital television software for set-top boxes and smart TVs, reported revenue of just under $5 million during the three-month period that ended on March 31.

That’s almost double the $2.5 million the company reported during the same period last year.

The revenue increase pushed the company’s net income up to $1 million from a $3.3 million loss during the same period last year. It’s also up from the $148,944 in net income the company reported during the previous quarter.

The company’s North American revenues were up from $897,394 last year to $1.86 million. It credited that jump to an increase in shipments of set-top boxes that use software licensed from the company.

Espial’s revenue from Asia was also up, though by a smaller margin, from $897,385 to just over $1 million.

Mr. Smith said the majority of the company’s revenue from the region comes from television manufacturers that license the company’s smart TV software.

The company expects this market to grow, said Jaison Dolvane, Espial’s CEO.

While smart TVs only account for between 15 and 20 per cent of all televisions sold, “we believe that all TVs will eventually be smart and web Internet connectivity will be a baseline feature,” he said.

The company’s European operations also recorded a jump in revenue, increasing from $747,280 to $2.1 million. That was credited to existing customers who are expanding their offerings to include TV over multiple devices and using Espial software to do it.

Gross margins were up from 80 per cent last year to 85 per cent this year.

Mr. Dolvane said the company sees further opportunities to sell to cable operators looking to compete with over-the-top providers like Netflix. He says that while Netflix offers a better user experience, they don’t have the same premium content.

He said the company has focused its marketing efforts on the top 25 operators in the world and he says the company’s message is starting to get more traction.

He said he thinks cable companies and other pay TV providers are increasingly interested in the type of solution the company offers.

“We’ve cracked the code here,” said Mr. Dolvane. “It’s not easy for our competition to crack the code.

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