Espial Reports 2011 Fourth Quarter and Fiscal Year Results

Record Revenue and Third Consecutive Quarter of Positive EBITDA

OTTAWA, March 1, 2012 /CNW/ - Espial^® Group Inc. ("Espial" or the "Company"), (TSX: ESP), a leader in the delivery of on-demand TV software and services, today announced its fourth quarter and fiscal year financial results for the three and twelve month periods ended December 31, 2011.

SELECTED Q4 AND 2011 HIGHLIGHTS:

• Achieved record quarterly revenue of $4.1 million in Q4 and record annual revenue of $14.7 million for the year.
• Third consecutive quarter of positive EBITDA.  For the year, EBITDA loss improved to $0.2 million compared to a loss of $1.2 million last year.
• RomTelecom, Romania's national telecom operator and OTE, Greece's national telecom operator, are now powering their nation-wide IPTV and on-demand video and content delivery network (CDN) using Espial MediaBase.
• Hitachi began shipments of its first Smart TVs in Japan powered by the Espial TV Browser, based on WebKit and HTML5.
• Vodafone Iceland selected Espial Media Service Platform and Espial MediaBase to power its nation-wide IPTV services.
• Secured wins with 3 major Tier 1 cable operators in Europe and Asia to power IPTV and TV Everywhere services using Espial MediaBase and Espial Media Service Platform.
• Secured wins for Espial TV browser, based on WebKit and HTML5, with a major Smart TV manufacturer as well as a North American gateway/set-top box vendor.

For the year ended December 31, 2011, the Company reported revenues of $14.7 million compared to revenues of $13.3 million for the year ended December 31, 2010, a 10% annual growth in revenues.  For the three-month period ended December 31, 2011, the Company reported revenues of $4.1 million compared to revenues of $3.5 million for the three months ended December 31, 2010, a 17% growth over Q4, 2011.

Earnings before interest, foreign exchange, taxes, stock compensation, depreciation and amortization (EBITDA) for the fourth quarter of fiscal 2011 was a gain of $0.2 million compared to a loss of $0.8 million in the fourth quarter of fiscal 2010. For the year ended December 31, 2011, EBITDA was a loss of $0.2 million compared to an EBITDA loss of $1.2 million in 2010, an 83% annual improvement in EBITDA. Net loss, which includes non-cash items like depreciation, stock compensation and amortization of intangibles, for the quarter was $0.6 million or $0.04 per share, compared to a net loss of $1.4 million last year, or $0.10 per share. Net loss for fiscal 2011 was $2.5 million compared to a net loss of $3.3 million in 2010.

"We are pleased with our 2011 achievements and financial results", said Jaison Dolvane, President and CEO. "We ended the year delivering record quarterly revenue and positive EBITDA.  In 2011, we deployed and secured major wins with operators and consumer electronics vendors addressing the Pay TV and Smart TV market segments.  There continues to be strong market interest in Espial's TV Everywhere and Smart TV solutions as our customers compete to address consumer demand for video services across TVs, PCs, mobile phones and tablets".

Q4 Financial Results

• Fourth quarter revenues were $4,072,848 compared with revenues of $3,459,503 in the same period a year ago. Fourth quarter software license and royalty revenues were $2,834,500 compared to $2,608,842 in the fourth quarter of fiscal 2010.  Professional services for the fourth quarters of 2011 and 2010 were $445,458 and $57,866 respectively.  Maintenance and support revenues for the fourth quarter were $792,890 compared to $792,795 last year.
• Gross margins for the fourth quarter of fiscal 2011 were 81% compared with 66% in the fourth quarter of fiscal 2010.
• Operating expenses in the fourth quarter of fiscal 2011 were $3,526,058 compared to $3,594,020 in the fourth quarter of fiscal 2010.
• Earnings before interest, foreign exchange, taxes, stock compensation, depreciation and amortization (EBITDA) for the fourth quarter of fiscal 2011 was a gain of $197,052 compared to a loss of $796,475 in fiscal 2010.
• Net loss, which includes non-cash items like depreciation, goodwill and intangibles, in the fourth quarter was $566,689 compared to a loss of $1,398,821 last year.

Fiscal 2011 Financial Results

• Total revenues for the fiscal year ended December 31, 2011 were $14,674,826 compared with revenues of $13,311,286, in the same period a year ago. Software license and royalty revenues for the 2011 fiscal year were $9,172,316 compared to $8,312,601 in fiscal 2010.  Professional services for the fiscal years of 2011 and 2010 were $2,440,408 and $1,821,623 respectively.  Maintenance and support revenues for the fiscal year ended December 31, 2011 were $3,062,102 compared to $3,177,062 last year.
• Gross margins for the 2011 fiscal year were 78% compared with 73% in fiscal 2010.
• Operating expenses for the 2011 fiscal year were $13,387,767 compared to $12,817,618 in fiscal 2010.
• Earnings before interest, foreign exchange, taxes, stock compensation, dividends on redeemable preferred shares, depreciation and amortization (EBITDA) for the fiscal year ended December 31, 2011 was a loss of $193,123 compared to a loss of $1,155,308 in fiscal 2010.
• Net loss in the 2011 fiscal year was $2,502,410 compared to a loss of $3,299,167 in 2010.
• Cash and cash equivalents at December 31, 2011 were $10,559,262.

The Company will be hosting a conference call to discuss the fourth quarter and fiscal year financial results on March 2, 2012 at 11:00 AM Eastern Standard Time (EST). The phone number to join the results discussion is:

• Toll Free line (Canada/US) - 888-231-8191
• Toll line (International/Local) - 647-427-7450

The playback for the call will be available until 11:39PM Eastern Standard Time (EST) on April 3, 2012 at the following numbers and passcode:

• Toll line: 416-849-0833 - passcode:  56554769
• Toll free line: 1-855-859-2056- passcode: 56554769

About Espial (www.espial.com)

Espial is a leading supplier of digital TV and IPTV software and solutions to cable MSOs and telecommunications operators as well as consumer electronics manufacturers. Espial's middleware, video-on-demand, and browser products power a diverse range of pay-TV and Internet TV business models. Over 10 million licenses of its patented software are in use across the world. Espial is headquartered in Ottawa, Canada and has offices in the United States, Europe, and Asia. Visit www.espial.com or contact via phone at [phone].

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 anticipated market trends, economic conditions, benefits of new customer and partner relationships, future opportunities for the company and products 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 on a stand-alone basis to effectively 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 for the fiscal year ended December 31, 2011 filed 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-GAAP Financial Measures

Earnings before interest, foreign exchange, taxes, stock compensation, depreciation and amortization (EBITDA) is a non-GAAP financial measure that does not have any prescribed meaning by GAAP and is therefore unlikely to be comparable to similar measures presented by other issuers.  Management believes that this non-GAAP financial measure, when taken together with the corresponding consolidated GAAP measures, increases the transparency of the Company's current results and enables investors to more fully understand trends in its current and future performance. A reconciliation of net loss to earnings before interest, foreign exchange, taxes, stock compensation, depreciation and amortization is as follows:

	December 31	December 31		December 31	December 31
	2011	2010		2011	2010
	(3 months)	(3 months)		(12 months)	(12 months)
	(Unaudited)	(Unaudited)		(Unaudited)	(Unaudited)
Net loss and Comprehensive loss	($566,689)	($1,398,821)		($2,502,410)	($3,299,167)
Add
Stock compensation	76,092	161,283		423,079	551,304
Depreciation of property and equipment	51,530	56,012		198,450	222,645
Amortization of intangibles	286,174	289,301		1,144,698	1,141,053
	(152,893)	(892,225)		(736,183)	(1,384,165)
Less (add)
Interest income	13,136	4,603		39,983	15,333
Interest expense	(129,774)			(514,850)
Foreign exchange gain (loss)	(233,307)	(100,353)		(68,193)	(244,190)
Earnings before interest, foreign exchange, taxes, stock compensation,  depreciation and amortization	$197,052	($796,475)		($193,123)	($1,155,308)

ESPIAL GROUP INC. Consolidated Balance Sheet (in Canadian dollars)
		December 31, 2011		December 31, 2010
CURRENT ASSETS
	Cash and cash equivalents	$  10,559,262		$  10,724,599
	Short-term investments	110,000		110,000
	Accounts receivable	3,420,583		3,201,585
	Investment tax credits receivable	300,000		300,000
	Prepaid expenses and other assets	192,873		261,134
		14,582,718		14,597,318
Property and equipment		605,623		623,385
Intangible assets		2,147,598		3,286,443
Goodwill		3,340,808		3,340,808
		$  20,676,747		$  21,847,954
CURRENT LIABILITIES
	Operating line	$  1,500,493		$    1,000,219
	Accounts payable and accrued liabilities	2,146,162		2,441,954
	Deferred revenue	2,361,014		1,821,947
		6,007,669		5,264,120
Long term debt		3,094,328		2,932,053
Total Liabilities		9,101,997		8,196,173
COMMITMENTS
SHAREHOLDERS' EQUITY
	Share capital	74,861,877		74,859,576
	Warrants	732,382		732,382
	Share based payment reserve	11,839,623		11,416,545
	Deficit	(75,859,132)		(73,356,722)
		11,574,750		13,651,781
		$  20,676,747		$  21,847,954

ESPIAL GROUP INC.
Consolidated Statement of Loss and Comprehensive Loss (in Canadian dollars except share data)
				Quarter Ended				Year Ended
				December 31, 2011		December 31, 2010		December 31, 2011		December 31, 2010
	Software			$  2,834,500		$  2,608,842		$ 9,172,316		$   8,312,601
	Professional services			445,458		57,866		2,440,408		1,821,623
	Support and maintenance			792,890		792,795		3,062,102		3,177,062
Revenue				4,072,848		3,459,503		14,674,826		13,311,286
Cost of revenue				763,535		1,168,554		3,246,401		3,563,985
Gross margin				3,309,313		2,290,949		11,428,425		9,747,301
Expenses
	Sales and marketing			1,004,680		1,267,207		4,266,003		4,460,201
	General and administrative			731,022		588,468		2,696,251		2,145,162
	Research and development			1,504,182		1,449,044		5,280,815		5,071,200
	Amortization of intangible assets			286,174		289,301		1,144,698		1,141,053
				3,526,058		3,594,020		13,387,767		12,817,616
Loss before other income (expense)				(216,745)		(1,303,071)		(1,959,342)		(3,070,315)
Other income (expense)
	Interest income			13,136		4,603		39,983		15,333
	Foreign exchange gain (loss)			(233,306)		(100,353)		(68,201)		(244,185)
	Interest expense			(129,774)		-		(514,850)		-
				(349,944)		(95,750)		(543,068)		(228,852)
Net loss and comprehensive loss				(566,689)		(1,398,821)		(2,502,410)		(3,299,167)
Net loss per common share - basic and diluted				$ (0.04)		$ (0.10)		$(0.18)		$(0.23)
Weighted average number of common shares - basic and diluted				14,106,829		14,101,829		14,105,089		14,101,829
ESPIAL GROUP INC.
Consolidated Statement of Cash Flows
				Quarters Ended				Year Ended
				December 31, 2011		December 31, 2010		December 31, 2011		December 31, 2010
CASH PROVIDED BY (USED IN)
	OPERATING
		Net loss		(545,337)		(1,398,821)		$  (2,502,410)		$  (3,299,167)
		Items not affecting cash
			Depreciation of property and equipment	51,530		56,738		198,450		222,645
			Amortization of intangible assets	286,174		289,301		1,144,698		1,141,053
			Share-based compensation expense	71,877		161,283		423,079		551,304
			Interest accretion on long-term debt	40,569		-		162,275		-
				(95,187)		(891,499)		(573,908)		(1,384,165)
			Changes in non-cash operating working capital items	1,486,170		796,827		92,539		(489,764)
				1,390,983		(94,672)		(481,369)		(1,873,929)
	INVESTING
		Purchase of property and equipment		(16,753)		(10,025)		(180,689)		(89,707)
		Purchase of intangibles		-		(35,888)		(5,853)		(35,885)
		Redemption of short-term investments		-		-		-		12,246
				(16,753)		(45,913)		(186,542)		(113,346)
	FINANCING
		Proceeds from operating line		329		(153)		500,274		500,175
		Proceeds from long term debt and warrants		-		3,500,000		-		3,500,000
		Proceeds from exercise of stock options		-		-		2,300		-
				329		3,499,847		502,574		4,000,175
	Net cash and cash equivalents inflow (outflow)			1,374,559		3,359,262		(165,337)		2,012,900
	Cash and cash equivalents, beginning of period			9,184,703		7,365,337		10,724,599		8,711,699
	Cash and cash equivalents, end of period			10,559,262		$   10,724,599		10,559,262		$   10,724,599

Inquiries from financial press or analysts:

Carl Smith
Chief Financial Officer
Espial Group Inc.
Email: [email protected]
Phone: [phone]

Kirk Edwardson
Director, Marketing
Espial Group Inc.
Email: [email protected]
Phone: [phone] x1145