Espial Group’s European deployments will lead to new customers, says Haywood

A quarter that was softer than he expected isn’t changing Haywood analyst Pardeep Sangha’s bullish view of Espial Group (Espial Stock Quote, Chart, News: TSX:ESP).

Yesterday, Espial reported its Q1, 2016 results. The company lost $1.96-million on revenue of $5.3-million, a topline that was down 1.6 per cent over the same period last year.

“In first quarter, we made major strides toward commercial deployment of our operator customers through real-world trials with their next-generation video services,” said CEO Jaison Dolvane. “Our priorities are focused on these operators to ensure they roll out successfully. We have a good pipeline of new prospects, and these deployment milestones provide a solid foundation to build additional customer wins. In addition, we continue to invest in our solution delivery capabilities and R&D to innovate on user experience and cloud software solutions that enable our customers to achieve competitive advantage.”

Sangha says Espial’s revenue came in below his expectations and the company’s Adjusted EBITDA loss was greater than he expected due to higher operating expenses.

Still the analyst believes an unnamed European customer, combined with the already public trials with German operator Tele Columbus, will soon lead to more business.

“We believe the two European deployments will lead to additional customer announcements,” says Sangha. “Espial continues to be in deeper engagements with six additional operators. Management also commented that the potential contract bid sizes are larger than before, partially due to the increasing complexity with these deployments and the need for greater professional services work.”

In a research update to clients today, Sangha maintained his “Buy” rating and one-year price target of $4.00 on Espial, implying a return of 108.3 per cent at the time of publication.

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