Mr. Carl Smith reports

ESPIAL REPORTS 2015 THIRD QUARTER RESULTS

Espial Group Inc. has released its third quarter financial results for the three-month and nine-month periods ended Sept. 30, 2015.

Espial third quarter highlights:

• Record quarterly revenue of $8.7-million;
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) income of $2.3-million;
• Tele Columbus selected Espial to provide software and services for its next-generation IP (Internet protocol) video services solution;
• Debuted the company's G4 STB client solution for IP television/telecommunication operators at the International Broadcasting Convention (IBC) in Amsterdam;
• Integrated the company's G4 STB client with Metrological, a leading provider of cloud-based applications to operators;
• Record attendance at Espial's 2015 Asia-Pacific seminar in Tokyo, Japan.

"We had a very strong quarter with record revenue and EBITDA," said Jaison Dolvane, chief executive officer of Espial. "In the third quarter, we secured a significant software licence order for deployment by a North American cable operator, expanded our relationship with Tele Columbus (a major German cable operator customer) and launched our G4 product for telcos. We continued to make progress on our pipeline and believe we are well situated for the change occurring in the industry.

"In the third quarter, we delivered software licences for current generation and new 4K set-top boxes to a channel partner for deployment at a North American cable operator. The same operator is currently working on its next-generation platform, and we have been informed that this operator does not intend to deploy our software as previously contemplated, and we are in discussions regarding this. We continue to work with our channel partner and operator to improve current user experience and deliver 4K ultrahigh definition on its current platform."

Financial summary

For the three-month period ended Sept. 30, 2015, the company is reporting revenue of $8.7-million, compared with revenue of $5.1-million for the three months ended Sept. 30, 2014. Adjusted EBITDA income for the third quarter of fiscal 2015 was $2.3-million, compared with $700,000 for the third quarter of fiscal 2014. Net income for the quarter was $2.2-million, compared with net income of $200,000 last year. Adjusted net income for the third quarter was $2.7-million, compared with adjusted net income of $700,000 last year.

Third quarter financial results

Third quarter revenues were $8,709,354, compared with revenues of $5,057,826 in the same period a year ago. Third quarter software licence and royalty revenues were $5,217,518, compared with $1,288,712 in the third quarter of fiscal 2014. Professional services for the third quarters of 2015 and 2014 were $2,146,008 and $2,556,776, respectively. Maintenance and support revenues for the third quarter of 2015 were $1,345,828, compared with $1,212,338 last year.

North American revenues were $5,696,380 in the third quarter of 2015, compared with $2,141,731 in 2014. Asia revenues were $694,704 in the third quarter of 2015, compared with $659,185 in 2014. European revenues were $2,318,270 in the third quarter of 2015, compared with $2,256,910 in 2014.

Gross margin for the third quarter of fiscal 2015 was 77 per cent, compared with 72 per cent in the third quarter of fiscal 2014.

Operating expenses in the third quarter of fiscal 2015 were $4,941,261, compared with $3,501,456 in the third quarter of fiscal 2014.

Adjusted EBITDA income for the third quarter of fiscal 2015 was $2,333,471, compared with $718,244 in fiscal 2014.

Net income, which includes non-cash items like depreciation, amortization of intangibles and stock compensation, in the third quarter of 2015 was $2,203,314, compared with $213,970 last year.

Cash, restricted cash and cash equivalents on Sept. 30, 2015, were $47,516,284.

A complete set of financial statements and management discussion and analysis for the quarter ended Sept. 30, 2015, will be available on SEDAR.

Conference call

The company will be hosting a conference call to discuss the 2015 third quarter financial results on Oct. 28, 2015, at 5 p.m. EDT, and the phone numbers to join the results discussion are 877-201-0168 (toll-free Canada/United States) and 647-788-4901 (toll international/local).

The playback for the call will be available two hours after completion of the call and will be available until 11:59 p.m. ET on Nov. 28, 2015, at the following numbers and passcode.

Toll-free line:  1-855-859-2056 or 1-404-537-3406

Passcode:  61236138

                     CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

                                            Three months ended Sept. 30,          Nine months ended Sept. 30,
                                                 2015              2014               2015              2014
Revenue                                                                                                     
Software                                  $ 5,217,518       $ 1,288,712        $ 9,340,496    $    5,825,331
Professional services                       2,146,008         2,556,776          6,718,815         5,328,557
Support and maintenance                     1,345,828         1,212,338          3,566,175         3,591,276
Total revenue                               8,709,354         5,057,826         19,625,486        14,745,164
Cost of revenue                             1,971,800         1,392,225          4,613,899         3,457,073
Gross margin                                6,737,554         3,665,601         15,011,587        11,288,091
Expenses                                                                                                    
Sales and marketing                         1,414,264           981,570          3,763,098         2,828,491
General and administrative                    868,960           813,345          2,561,948         1,994,310
Research and development                    2,502,968         1,545,203          6,424,368         4,502,197
Amortization of intangible assets             155,069           161,338            484,730           482,877
                                            4,941,261         3,501,456         13,234,144         9,807,875
Income before other income (expense)        1,796,293           164,145          1,777,443         1,480,216
Interest income                                95,093            34,796            220,068            46,340
Foreign exchange gain                         410,628            52,252            516,135            73,712
Interest expense                                    -                 -                  -          (106,163)
Income before taxes                         2,302,014           251,193          2,513,646         1,494,105
Income tax expense                            (98,700)          (37,223)          (228,942)         (160,989)
Net income and comprehensive income       $ 2,203,314         $ 213,970        $ 2,284,704    $    1,333,116
Earnings per common share -- basic             $ 0.06            $ 0.01             $ 0.07            $ 0.06
Earnings per common share -- diluted           $ 0.06            $ 0.01             $ 0.07            $ 0.05

We seek Safe Harbor.