UPDATE: Strong Q4 has Espial executives optimistic despite weaker fiscal year

Executives at Ottawa’s Espial say the company’s strong fourth quarter is a sign that the business is on the right track.

By Jacob Serebrin

“We made some important strategic decisions that are just now starting to show results,” said Jaison Dolvane, Espial’s CEO, in a conference call with investors on Thursday.

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He said that cable and satellite television providers are starting to recognize the need for innovation and new technology in order to “fight cord-cutting” and compete with “more nimble internet competitors like Netflix.”

He said that to do this the company has increased its focus on providing software products based around HTML5, an Internet markup language and the reference design kit, or RDK, a standardized open-source software system for digital set-top boxes.

And, according to Mr. Dolvane, cable providers are starting to pay attention.

“We go into 2014 with a good pipeline and we are optimistic,” he said.

Espial reported revenue of $3.9 million during its fourth quarter, up from $2.7 million during the same period last year.

Revenues from North America increased to $1,717,493 during the three-month period that ended Dec. 31. That’s a jump from $838,661 during the same period last year.

That increase was because of a contract with a set-top box manufacturer, said Carl Smith, Espial’s chief financial officer.

He said North American revenue is expected to grow again next quarter due to an October deal with what the company describes as a “tier 1 North American cable operator.”

The company’s revenue from Asia increased to $892,517 from $563,747 in 2012.

“We expect to see our Asian revenue continue to climb as more TVs become smart and as we win more customers,” said Mr. Smith.

The company’s European revenue declined during the quarter to $1,292,531 from $1,314,391 in 2012 but Mr. Smith said a deal with Norway’s largest cable provider, which began during the quarter, would help push that up in future months.

The increased revenue pushed the company’s net income for the quarter up to $148,944, up from a net loss of $1,273,082 during the same period last year.

Gross margin was up to 81 per cent from 71 per cent a year ago. Mr. Smith credited that to increased revenue from licensing, which he said has margins of over 90 per cent.

For the company’s fiscal year, which also ended Dec. 31, Espial reported revenue of $12.5 million, which is down from $13.3 million last year.

Coupled with an increase in operating expenses, from $12.5 million to $14.7 million, the lower revenue pushed the company’s net loss up to $2.9 million from $747,962.

The company’s earnings before interest, foreign exchange, taxes, stock compensation, depreciation and amortization (EBITDA) for the year fell to a loss of $2.9 million from a loss of $747,962 in 2012.

Mr. Smith said that was due to the acquisition of British TV software company ANT plc., which closed in February 2013, and an “overall slow first half of the year.”

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