Espial Reports First Quarter 2019 Results

OTTAWA, Ontario–(BUSINESS WIRE)–Espial® Group Inc. (“Espial” or the “Company”), (TSX: ESP), today
announced its first quarter financial results for the three-month period
ended March 31, 2019.

Recent Highlights

• First quarter revenue was $6.1 million.
• Q1 2019 SaaS annualized recurring revenue (ARR) increased 62% to $7.6
  million from $4.7 million at the end of Q1 2018.
• First quarter adjusted EBITDA¹ was a loss of $0.6 million.
  Net loss was $1.5 million.
• Espial announced Alexa certification for 18 service providers using
  its Elevate TVaaS platform; an industry-first, bulk certification and
  introduction of intelligent voice services for search, discovery and
  navigation of the Elevate Pay-TV service.
• Espial was named one of the 20 Most Promising Media and Entertainment
  Solution Providers for 2019 by CIO Review.
• Espial and Enghouse Systems Limited, jointly announced that they have
  entered into an arrangement agreement pursuant to which Enghouse has
  agreed to acquire all of the issued and outstanding common shares of
  Espial.

“I’m pleased with the progress we continue to make on our Elevate SaaS
solution. Over the last few quarters, we have introduced a variety of
rich features on our Elevate IPTV and Cable platforms across set-top
boxes and a variety of consumer-owned devices. Recently, we also
announced a bulk certification of Amazon Alexa, a great example of how
multiple customers receive the immediate benefit of scale from the
Elevate SaaS video platform”, said Jaison Dolvane, CEO of Espial. “In
the first quarter, our SaaS revenue grew to $2.2 million. We continued
to add new SaaS wins in Q1, while growing our pipeline through our sales
and demand generation initiatives. We are excited about the combination
of Espial and Enghouse and the value this will bring to our customers
through the increased scale and expertise.”

Financial Summary

For the three-month period ended March 31, 2019, revenue was $6.1
million compared with revenue of $5.9 million for the three months ended
March 31, 2018. Adjusted EBITDA for the first quarter of fiscal 2019 was
a loss of $0.6 million compared to $1.7 million for the first quarter of
fiscal 2018. Net loss for the quarter was $1.5 million, compared to a
loss of $3.7 million in the first quarter of fiscal 2018.

Q1 Financial Results

• First quarter revenue was $6,079,347 compared with revenue of
  $5,932,257 in the same period a year ago. First quarter software
  license revenue was $1,938,395 compared to $2,024,498 in the first
  quarter of fiscal 2018. Software subscription revenue increased to
  $2,194,168 from $1,166,843 in the first quarter of 2018. Professional
  services revenue for the first quarters of 2019 and 2018 were $656,702
  and $906,072, respectively. Maintenance and support revenue for the
  first quarter was $1,290,082 compared to $1,834,844 last year.
• North American revenues were $3,854,130 in the first quarter of 2019
  compared to $3,229,789 in 2018. European revenues were $1,960,103 in
  the first quarter of 2019 compared to $1,938,810 in 2018. Asia
  revenues were $265,114 in the first quarter of 2019 compared to
  $763,658 in 2018.

• Gross margin as a percentage of sales for the first quarter of fiscal
  2019 increased to 73% from 71% in the first quarter of fiscal 2018.
• Operating expenses in the first quarter of fiscal 2019 were $5,524,475
  compared to $8,468,065 in the first quarter of fiscal 2018.
• Adjusted EBITDA for the first quarter of fiscal 2019 was a loss of
  $591,215, compared to a loss of $1,740,749 in fiscal 2018.

• Net loss in the first quarter was $1,478,584 compared to $3,736,385
  last year.

Cash and cash equivalents on March 31, 2019 was $30,718,941.

A complete set of financial statements and management’s discussion and
analysis for the period ended March 31, 2019 will be available at http://www.sedar.com.

Conference Call

The Company will be hosting a conference call to discuss the Q1 2019
financial results on May 2, 2019 at 5:00PM EDT and the phone number to
join the results discussion is:

• Toll Free line (Canada/US) 866-521-4909
• Toll line (International/Local) 647-427-2311

The playback for the call will be available two hours after the call’s
completion and will be available until 11:59PM ET on June 3, 2019, at
the following numbers and passcode:

Toll-free line: +1-800-585-8367 or +1-416-621-4642, Passcode: 8487041

About Espial (www.espial.com)

Espial is transforming viewing experiences worldwide by enabling video
services at web speed and web scale. From immersive user experience and
discovery solutions to advanced cloud-based platforms, Espial solutions
help service providers manage, deliver and monetize video and
entertainment services. Espial’s customers span six continents, have
deployed tens of million devices, and are serviced through Espial’s
global sales, support, and innovation centers across North America,
Europe, and Asia. www.espial.com

Forward Looking Statement

This press release contains information that is forward looking
information with respect to Espial within the meaning of Section
138.4(9) of the Ontario Securities Act (forward looking statements) and
other applicable securities laws. In some cases, forward-looking
information can be identified by the use of terms such as “may”, “will”,
“should”, “expect”, “plan”, “anticipate”, “believe”, “intend”,
“estimate”, “predict”, “potential”, “continue” or the negative of these
terms or other similar expressions concerning matters that are not
historical facts. In particular, statements or assumptions about,
economic conditions, ongoing or future benefits of existing and new
customer, and partner relationships or new board nominees, our position
or ability to capitalize on the move to more open systems by service
providers, existing or future opportunities for the company and products
(including our ability to successfully execute on market opportunities
and secure new customer wins) and any other statements regarding
Espial’s objectives (and strategies to achieve such objectives), future
expectations, beliefs, goals or prospects are or involve forward-looking
information.

Forward-looking information is based on certain factors and assumptions.
While the company considers these assumptions to be reasonable based on
information currently available to it, they may prove to be incorrect.
Forward-looking information, by its nature necessarily involves known
and unknown risks and uncertainties. A number of factors could cause
actual results to differ materially from those in the forward-looking
statements or could cause our current objectives and strategies to
change, including but not limited to changing conditions and other risks
associated with the on-demand TV software industry and the market
segments in which Espial operates, competition, Espial’s ability to
continue to supply existing customers and partners with its products and
services and avoid being displaced by competitive offerings, effectively
grow its integration and support capabilities, execute on market
opportunities, develop its distribution channels and generate increased
demand for its products, economic conditions, technological change,
unanticipated changes in our costs, regulatory changes, litigation, the
emergence of new opportunities, many of which are beyond our control and
current expectation or knowledge.

Additional risks and uncertainties affecting Espial can be found in
Management’s Discussion and Analysis of Results of Operations and
Financial Condition and its Annual Information Form for the fiscal years
ended December 31, 2018 and, when filed, 2019 on SEDAR at www.sedar.com.
If any of these risks or uncertainties were to materialize, or if the
factors and assumptions underlying the forward-looking information were
to prove incorrect, actual results could vary materially from those that
are expressed or implied by the forward-looking information contained
herein and our current objectives or strategies may change. Espial
assumes no obligation to update or revise any forward looking
statements, whether as a result of new information, future events or
otherwise, except as required by law. Readers are cautioned not to place
undue reliance on these forward-looking statements that speak only as of
the date hereof.

Non-IFRS Financial Measures

Adjusted EBITDA represents net income (loss) adjusted to exclude
shared-based compensation, amortization, depreciation, business
restructuring expenses, interest income, other expense (income), and
income tax expense. We use Adjusted EBITDA to provide investors with a
supplemental measure of our operating performance and thus highlight
trends in our core business that may not otherwise be apparent when
relying solely on IFRS financial measures. We believe that securities
analysts, investors and other interested parties frequently use non-IFRS
measures in the evaluation of issuers. Management also uses non-IFRS
measures in order to facilitate operating performance comparisons from
period to period, prepare annual operating budgets and assess our
ability to meet our capital expenditure and working capital requirements.

Adjusted EBITDA is not a recognized, defined or standardized measure
under IFRS. Our definition of Adjusted EBITDA will likely differ from
that used by other companies and therefore comparability may be limited.
Adjusted EBITDA should not be considered a substitute for or in
isolation from measures prepared in accordance with IFRS. Investors are
encouraged to review our financial statements and disclosures in their
entirety and are cautioned not to put undue reliance on non-IFRS
measures and view them in conjunction with the most comparable IFRS
financial measures. We have reconciled Adjusted EBITDA to the most
comparable IFRS financial measure as follows:

Consolidated Statements of Loss and
Comprehensive Loss
(In
Canadian dollars)

Consolidated Balance Sheets
(In Canadian Dollars)

Statements of Cash Flows
(In Canadian Dollars)

¹ Adjusted EBITDA is a non-IFRS measure. This measure is
defined in the “Non-IFRS Financial Measures” of this news release.

Contacts

For inquiries from the financial press or analysts, contact:
Carl
Smith
Chief Financial Officer
Espial Group Inc.
Email: csmith@espial.com
Phone:
+1 613-230-4770