Haywood raises target on Espial Group after “exceptional” quarter

A fourth quarter that topped his expectations has Haywood analyst Pardeep Sangha feeling bullish about Espial Group (Espial Group Stock Quote, Chart, News: TSX:ESP).

Yesterday, Espial reported its fourth quarter and fiscal 2016 results. The company posted Q4 EBITDA of $3.2-million on revenue of $12.7-million, a topline that was up 144 per cent over the $5.2-million the company posted in the same period a year prior.

“I am very pleased with our business accomplishments and our latest Q4 and 2016 financial results,” said CEO Jaison Dolvane. “In 2016, we achieved key customer deployments, cemented our leading position as an RDK solution provider, increased our scale and product portfolio, and expanded our distribution channel through a global collaboration agreement with Arris. Our customers, NOS and Tele Columbus, introduced their UMA and advanceTV next-generation pay-TV services to very positive reviews. We are proud of the great subscriber experiences that these service providers have achieved using Espial products and system integration services. In 2016, we also introduced Espial Elevate, a cloud-based turnkey video-as-a-service solution that provides service providers with a seamless path to next-generation user experiences, IP video services and rapid innovation. Our accomplishments in 2016 are significant for Espial, the industry and for the adoption of RDK. We demonstrated the carrier-grade nature of Espial’s solutions that provide advanced features, low risk and time-to-market advantages to leading video service providers.”

Sangha notes that this quarter, which he describes as “exceptional” easily bested concensus estimates of an EBITDA loss of $1.2-million on revenue of $8.2-million. He says a one-time sale made a big impact, but even without it the quarter would have been solid.

“Results were positively impacted by one-time license revenue of $3.0M from a North American customer,” notes the analyst. “Software license revenue was up 301% YoY. Removing this one time license impact, Espial still had a strong quarter driven by WHS revenue performing better than expected, NOS continues to roll-out its service in Portugal and Tele Columbus purchased a block of licenses as it begins to start its rollout.”

In a research update to clients today, Sangha maintained his “Buy” rating, but raised his one-year price target on Espial from $3.75 to $4.25, implying a return of 86 per cent at the time of publication.

Sangha thinks Espial will post Adjusted EBITDA of $1.0-million on revenue of $41.7-million in fiscal 2017. He expects these numbers will improve to EBITDA of $8.5-million on a topline of $55-million the following year.

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