Espial’s SaaS drive attracts $42m Enghouse acquisition

Espial’s Elevate IPTV technology is changing hands again as Enghouse Systems plans to scoop the Canadian video software firm for C$56.5 million (US$42 million), following Espial’s inheritance of the business from Arris in June 2016. It’s possible Espial saw the writing on the wall after disappointing Q4 results revealed revenues down by 34% to $6.7 million – prompting it to seek out a buyer before its value diminished further.

While not exactly ground shattering, Espial has a number of tier 2 and 3 accounts in the US and Canada using its Elevate SaaS video platform and had shown promising signs of eventually making waves outside its core North American market. But most are probably pondering the same question as us – who on earth is Enghouse Systems?

Like Espial, Enghouse Systems is a Canadian software and services company, yet its website gives off an aura more akin to a bland venture capitalist firm – positioning acquisition profiles above its own product sales efforts. This emphasis on growth through acquisition rather than innovation and internal graft doesn’t bode well for the Espial brand. Enghouse says it seeks out companies that develop and sell customer-focused software solutions that are complementary to its existing businesses or offer opportunities for it to enter new vertical markets in fragmented industries.

Nevertheless, Enghouse spans three main sectors – Interactive, Networks and Transportation – none of which appear to specifically apply to video markets, instead aligning more with communications software for customer service use cases. Enghouse Systems’ expertise in software and services sounds promising though amid Espial’s evolution to a SaaS-based business model, which has hurt revenues initially but with the long-term aim of building robust recurring revenues with higher profitability compared to other business segments.

Espial’s software licensing sector took a substantial hit in the fourth quarter of last year, with revenues diving to $2.4 million from $6.1 million in the same period a year earlier. Maintenance and support revenues declined while a silver lining saw annualized software subscription sales rising from $1 million to $1.9 million in a year – trajectory in a business segment seemingly well suited to the Enghouse Systems mantra.

Faultline Online Reporter noted in the run up to IBC 2018 that Espial had been suspiciously quiet regarding Android TV operator tier since we know full well its Elevate technology can accommodate operator tier. Espial finally broke silence at the Amsterdam trade show, launching a managed TVaaS product for both Android TV operator tier set tops and Android TV retail devices.

Espial’s delay to market is illustrative of the North American scene, where resistance against Android TV is stronger than elsewhere, much in the same way Canadian operators were particularly hostile against Netflix. Since all the tier 1 players in Canada have now integrated Netflix, they have inadvertently removed one of their key reasons for rejecting Android TV.

So, Espial’s TVaaS product is designed to power Android TV operator experiences on any set top, including options for white-labelling low-cost devices. It comes with a custom Android TV Leanback Launcher for live TV, VoD, time-shift and network DVR, with full cloud control for operator branding. It also includes data visualization and analytics, drawing from trends to drive data-based decisions.

Most recently, Espial picked up a contract at Arkansas-based ISP Conway Corp, which is exactly the type of operator underpinning the rise of Android TV operator tier before it eventually boils over into North America’s tier 1 players.

The agreement with Enghouse Systems represents a 39% premium to the closing price of Espial shares and directors have unanimously approved the transaction and recommended shareholders to vote in favor of a sale. And we will aim to provide an update as soon as possible regarding the future of the Espial brand.