Espial focused on recent acquisition potential despite declining revenues

Espial Group Inc. (TSX:ESP) pitched the potential of its ARRIS Whole Home Solution acquisition during its third-quarter investors call early Tuesday evening as it posted a decline in revenue and a $2.4 million loss.

Espial’s revenues for the quarter ending Sept. 30 were $6 million, down from $8.7 million in the same period a year earlier.

Adjusted EBITDA for the third quarter, including acquisition costs, added up to a $1.9-million loss, compared to a $2.3-million profit in the third quarter of 2015.

Net loss for the most recent quarter came in at $2.4 million, a reversal from the $2.2 million profit the company recorded a year earlier.

Espial’s cash on hand stood at $44 million as of Sept. 30.

The quarter represented a come-down from the previous year’s record-breaking revenues in the third quarter.

The company, which makes software and interactive platforms for video service providers, announced in August that it had landed three new customers and partnered with ARRIS, a multibillion-dollar manufacturer of set-top boxes, to acquire its Whole Home Solution (WHS), integrating its extensive network of cloud-hosted services to the Espial Elevate product line. As part of the deal, ARRIS also became a reseller of Espial products.

In the call, Espial president and CEO Jaison Dolvane said that acquisition-related transaction costs were around $300,000 in the quarter, as reflected in EBITDA losses.

“Espial gains a broad base of new North American customer relationships and further scales the world class integration, operation and software development teams,” Mr. Dolvane said.

He says that with more than 40 customers at various stages of rolling out the ARRIS WHS, Espial has gained significant number of cumulative subscribers with its acquisition.

“From a financial perspective, this is the equivalent of a major tier-1 customer with approximately 2.5 million subscribers,” he said.

This is good news for the company that saw its North American revenues drop in the last quarter, down to $2.1 million from $5.7 million in the same quarter a year previous.

Across the pond, revenues in Europe were up, coming in at $3.3 million, an increase of about $1 million year-over-year. The company talked up its impending service roll-outs in Portugal and Germany as indicators of its growing success in the market.

In September, Jeff Huppertz – Espial’s vice-president of marketing – spoke to Techopia about how the ARRIS WHS acquisition would pave the way for new markets in Europe as well as reaching smaller operators in the television industry.

The WHS allows for Espial to adapt its product line to European broadcast standards, and the cloud-hosted management services provides a turnkey solution for customers who don’t necessarily have support assets of their own.

“Smaller operators don’t have the luxury of having that large staff, facilities, 24x7 redundancy and all that,” Mr. Huppertz said at the time.

The company also made a normal course issuer bid in August to take place over the next year, and announced then that its repurchase would not exceed 3,221,191 common shares representing 10 per cent of Espial’s public float.