Canadian browser specialist Espial plans to be one of the first pure IPTV companies to go public after the recent two years slowdown in the industry caused by Alcatel and Microsoft’s recent dominance. Espial will IPO on the back of a Canadian $10.6 million year, where its IPTV revenues are up around 85%.
The company has filed a prospectus with the Canadian equivalent of the SEC, showing that it is down to its last C$1.1 million in the bank and that it wants to pay down some debt and tidy up its balance sheet and strengthen R&D.
Although the prospectus doesn’t say how many shares and at what price the IPO will execute at it is our guess, based on what it wants to spend the money on, that it will issue around 2 million shares at around C$5 a share, raising something like C$10 million, and diluting its existing 5 million shares by around 28% and giving it a valuation of something like C$35 million or 3.5 times revenues.
That makes it an ambitious valuation, but given that its prospectus is supported by research showing that IPTV revenues will grow annually at 92% until it is over ten times the current level, it may just be possible.
Espial says that it will spend around 25% of the proceeds on R&D over the next two years, 25% on expanding its distribution network and another 15% paying down debt, and the rest for working capital including potential acquisitions
Recently it stepped out of its browser only market and added middleware both on the set top and in the network and will work on a full IPTV offering (see diagram below) including DVR software, TV web browsing, TV web mail and advertising applications.
Espial makes the point that although its revenue only grew from C$8 million to C$10 million last year its IPTV revenues almost doubled as it changed its revenue mix. Last year it launched its Evo Server Middleware which resides at the head-end and coordinates various IPTV components such as VOD servers, DRM servers, EPG data sources, billing and other business systems, as well as managing communication between the set-top box and the head-end. At the set top it already offers applications like VOD, DVR, Radio TV, PPV, Web TV and Caller ID and boasts customers Belgacom, NTT and KPN, and minor deals Croatia, Poland and Sweden along with 30 small regional operators in the US. Espial employs 90 people, with 76 based in Ottawa,
The entire 100 company IPTV community will remain riveted to the final valuation of this offering as it will offer a lifeline to companies that have had a lean time of IPTV sales since Microsoft entered the market and snapped up many of the tier 1 incumbents in the US and Europe.