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Avigilon Corporation Announces Second Quarter 2012 Results

08/08/2012

VANCOUVER, Aug. 8, 2012 /CNW/ - Avigilon Corporation (TSX: AVO), a leader in high-definition (HD) surveillance systems, today announced its financial results for the three and six months ended June 30, 2012. All figures are stated in Canadian dollars unless otherwise noted.

Second Quarter 2012 Highlights

  • Revenue was $24.4 million, an increase of 52% over Q2 2011 revenue of $16.0 million.
  • Gross margin was 48%, compared to 42% a year earlier.
  • EBITDA was $2.1 million, compared to Q2 2011 EBITDA of $2.1 million. (See "Non-IFRS Measures" below.)
  • Net income was $1.3 million, an increase of 22% from $1.1 million in Q2 2011.

First Half 2012 Highlights

  • Revenue was $42.1 million in the first six months of 2012, an increase of 61% from $26.0 million in the same period last year.
  • Gross margin was 48%, up from 43% in the prior year.
  • EBITDA was $3.3 million, an increase of 23% over $2.7 million in the first half of 2011. (See "Non-IFRS Measures" below.)
  • Net income was $2.0 million, a 63% increase compared to $1.2 million a year earlier.

"Effective execution of our growth strategy has led to record revenues in the second quarter," said Alexander Fernandes, president and chief executive officer at Avigilon. "We have been expanding our global sales team, building awareness of our brand, and investing in product innovation.  I expect all these activities to continue to drive strong growth."

Financial Review

Avigilon reported revenue of $24.4 million in the three months ended June 30, 2012, an increase of $8.4 million, or 52%, compared to $16.0 million of revenue in the second quarter of 2011.   Revenue growth was broadly based, with five of the six regions growing by at least 47% year-over-year, and no single sale representing more than 5% of revenue.  In comparison, a one-time enterprise sale of $2.3 million was completed in Q2 2011, representing 14% of revenue.  Factoring out that enterprise sale, revenue in the current quarter grew 80% over the previous year.

Gross margin was $11.7 million in the second quarter, an increase of $5.0 million or 74% from $6.7 million the previous year. As a percentage of revenue, gross margin was 48% in Q2 2012 compared to 42% a year earlier.  The increased gross margin percentage has resulted primarily from a shift in sales mix.  In particular, the large enterprise sale in the second quarter of last year, referenced above, had a product mix that resulted in low gross margins.

Selling and marketing expenses were $6.6 million in the second quarter of 2012, a $3.7 million increase from $2.9 million a year earlier. The increase was primarily due to a higher number of sales personnel, as we continue to grow our global sales team to support revenue growth, and activities associated with the Company's recently expanded marketing program designed to promote the Avigilon brand.

Research and development expenses, net of related income tax credits, were $1.2 million in Q2 2012, a $0.5 million increase compared to $0.7 million in the prior year's second quarter.  The Company has increased its investment in R&D as it focuses on continuing to expand and enhance its product offering.

General and administrative expenses were $2.1 million in the second quarter, up $0.9 million from $1.2 million of G&A expense in Q2 2011. The increase was primarily due to additional personnel and their related expenses to support Avigilon's growth and its status as a public company.

EBITDA was $2.1 million in the second quarter, an increase of $19,000 or 1% from a year earlier.  The increases in revenue and gross margin were largely offset by planned spending on further growth, investments that typically drive results in future periods.

Net income was $1.3 million in Q2 2012, an increase of $0.2 million or 22% compared to net income of $1.1 million in the second quarter of 2011. Earnings per share were $0.04 (basic and diluted), compared to $0.06 (basic) and $0.04 (diluted) a year earlier.  Avigilon's basic share count at June 30, 2012 was 31,451,287.

Financial statements can be downloaded from the Avigilon website at http://ir.avigilon.com or SEDAR at http://www.sedar.com/.

Conference Call

Avigilon has scheduled a conference call to discuss these results on Wednesday, August 8, 2012, beginning at 5:00 p.m. EDT (2:00 p.m. PDT). To access the live call, dial 647-427-7450 or 1-888-231-8191, or view the webcast at http://ir.avigilon.com. A replay will be available for one year on the Company's website, and for one week by dialing 778-371-8506, 416-849-0833 or 1-855-859-2056, reference number 13629310.

Non-IFRS Measures

The term "EBITDA" refers to earnings before deducting interest, taxes, depreciation, amortization, foreign exchange gain or loss, and stock-based compensation. Management believes that EBITDA is a useful measure as it provides an indication of the operational results of the business prior to taking into consideration how those activities are financed and taxed and also prior to taking into consideration asset amortization. EBITDA does not have a standardized meaning prescribed by International Financial Reporting Standards (IFRS) and is not necessarily comparable to similar measures provided by other companies. Accordingly, investors are cautioned that EBITDA should not be construed as an alternative to operating income or net income determined in accordance with IFRS as an indicator of the Company's financial performance or as a measure of its liquidity and cash flows.

About Avigilon

Avigilon (TSX: AVO) is defining the future of protection through innovative high-definition surveillance solutions. Delivering the world's best image quality, our industry-leading HD network video management software and megapixel cameras are reinventing surveillance. Information about Avigilon can be found at www.avigilon.com.

Forward Looking Statements

Certain statements contained in this news release, including all statements that are not historical facts, contain forward-looking statements and forward-looking information within the meaning of applicable securities laws.  Often, but not always, forward-looking statements or information can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate" or "believes" or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. With respect to forward-looking statements and information contained herein, we have made numerous assumptions. Although our management believes that the assumptions made and the expectations represented by such statement or information are reasonable, there can be no assurance that any forward-looking statement or information referenced herein will prove to be accurate. Forward-looking statements and information by their nature are based on assumptions and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statement or information. Such risks, uncertainties and other factors include, among other things those risks identified in Avigilon's prospectus filed on SEDAR at www.sedar.com.

Although we have attempted to identify factors that would cause actual actions, events or results to differ materially from those disclosed in the forward-looking statements or information, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. Also, many of the factors are beyond the control of Avigilon. Accordingly, readers should not place undue reliance on forward-looking statements or information. Avigilon undertakes no obligation to reissue or update any forward-looking statements or information as a result of new information or events after the date hereof except as may be required by law. All forward-looking statements and information herein are qualified by this cautionary statement.

Condensed consolidated interim financial statements of

Avigilon Corporation

June 30, 2012
(Unaudited)

Avigilon Corporation
Consolidated Statements of Comprehensive Income
for the three and six months ended June 30, 2012 and 2011
(Expressed in thousands of Canadian dollars, except number of shares and per share amounts)
(Unaudited)

 
           Three months ended Six months ended
    June 30, June 30, June 30, June 30,
    2012 2011 2012 2011
    $ $ $ $
           
Sales   24,350 16,037 42,104 26,071
Cost of sales   (12,690) (9,353) (21,951) (14,990)
    11,660 6,684 20,153 11,081
           
Operating expenses          
           
Selling and marketing   6,550 2,938 10,892 5,318
Research and development   1,201 656 2,269 1,176
General and administrative   2,160 1,228 4,344 2,258
    9,911 4,822 17,505 8,752
Operating income   1,749 1,862 2,648 2,329
           
Other income (expense)          
           
Accretion expense   - (137) - (274)
Interest and other, net   19 (32) 50 (47)
Foreign exchange gain (loss)   94 (62) (44) (156)
    113 (231) 6 (477)
           
Income before taxes   1,862 1,631 2,654 1,852
Current tax expense   (70) - (70) -
Deferred tax expense   (480) (553) (625) (653)
Net income and total comprehensive income   1,312 1,078 1,959 1,199
           
Earnings per share          
Basic   0.04 0.06 0.06 0.07
Diluted   0.04 0.04 0.06 0.05
           
Weighted average number of shares outstanding (000s)          
Basic   31,367 17,248 31,209 17,248
Diluted   35,040 29,758 34,794 29,758

Avigilon Corporation
Consolidated Statements of Financial Position
as at June 30, 2012 and December 31, 2011
(Expressed in thousands of Canadian dollars except number of shares and per share data)
(Unaudited)

       
    June 30, December 31,
    2012 2011
    $ $
Assets      
Current assets      
  Cash and cash equivalents   12,403 12,418
  Trade and other receivables   15,103 13,291
  Inventories   9,755 11,254
  Other financial assets   - 88
  Prepaid expenses   1,087 605
  Research tax credits   973 973
    39,321 38,629
Non-current assets      
  Property and equipment   2,845 2,304
  Intangible assets   62 46
  Deposits   285 272
  Deferred tax assets   1,657 1,703
Total assets   44,170 42,954
       
Liabilities      
Current liabilities      
  Trade and other payables   6,310 7,765
  Other financial liabilities   115 -
  Leasehold incentive   59 59
    6,484 7,824
Non-current liabilities      
  Leasehold incentive   249 279
    6,733 8,103
       
Shareholders' equity      
Capital stock   37,920 37,251
Equity compensation reserve   4,057 4,099
Deficit   (4,540) (6,499)
    37,437 34,851
Total liabilities and shareholders' equity   44,170 42,954
       

Avigilon Corporation
Consolidated Statements of Changes in Equity
for the six months ended June 30, 2012 and 2011
(Expressed in thousands of Canadian dollars except number of shares and per share data)
(Unaudited)
 

 
      Equity   Total
  Capital stock compensation   shareholders'
  Shares Amount reserve Deficit equity
    $ $ $ $
           
Balance, January 1, 2011 17,248,202 9,559 3,753 (10,328) 2,984
Net income and total comprehensive income - - - 1,199 1,199
Deferred share issue costs - (296) - - (296)
Stock-based compensation - - 96 - 96
Balance, June 30, 2011 17,248,202 9,263 3,849 (9,129) 3,983
            
Balance, January 1, 2012 31,021,287 37,251 4,099 (6,499) 34,851
Net income and total comprehensive income - - - 1,959 1,959
Share issue costs - (27) - - (27)
Stock-based compensation - - 224 - 224
Issuance of common stock (Note 7) 430,000 430 - - 430
Transfer to capital stock on exercise of options - 266 (266) - -
Balance, June 30, 2012 31,451,287 37,920 4,057 (4,540) 37,437
           

Avigilon Corporation
Consolidated Statements of Cash Flows
for the six months ended June 30, 2012 and 2011
(Expressed in thousands of Canadian dollars except number of shares and per share data)
(Unaudited)

           
    Three months ended Six months ended
    June 30, June 30, June 30, June 30,
    2012 2011 2012 2011
    $ $ $ $
Cash flows from operating activities          
  Net income for the period   1,312 1,078 1,959 1,199
  Adjustments for non-cash items          
     Amortization   196 112 356 218
     Stock-based compensation   120 78 224 96
     Deferred tax expense   480 553 625 653
     Deferred tax credits   (304) - (579) -
     Unrealized foreign exchange loss (gain)   (91) 16 (63) 24
     Interest expense (income)   (19) 32 (50) 47
       1,694 1,869 2,472 2,237
  Changes in working capital          
     Increase in trade & other receivables   (1,795) (5,933) (1,500) (5,698)
     Decrease (increase) in deposits   (10) 2 (12) (442)
     Decrease (increase) in inventories   3,636 (1,210) 1,499 (3,748)
     Decrease (increase) in prepaid expenses and deposits   (501) 377 (484) (82)
     Increase in research tax credits   - (165) - (301)
    Increase (decrease) in trade and other payables   452 2,670 (1,066) 2,907
  Net changes in working capital   1,782 (4,259) (1,563) (7,364)
  Interest (paid) received   19 (32) 50 (47)
  Income taxes paid   (396) - (396) -
Net cash provided by (used in) operating activities   3,099 (2,422) 563 (5,174)
           
Cash flows from investing activities          
  Purchase of property and equipment   (458) (126) (907) (222)
  Disposal of property and equipment   - 2 - 2
  Purchase of intangible assets   (36) (7) (36) (7)
Net cash used in investing activities   (494) (131) (943) (227)
           
Cash flows from financing activities          
  Proceeds from bank loan   - 1,769 - 3,139
  Issuance of common stock   325 - 430 -
  Share issuance costs   (7) (296) (27) (296)
  Dividends paid on redeemable preferred shares   - 137 - 274
Net cash provided by financing activities   318 1,610 403 3,117
           
Effect of foreign exchange rate changes on cash   (18) (7) (38) (46)
           
Increase (decrease) in cash   2,905 (950) (15) (2,330)
Cash, beginning of period   9,498 950 12,418 2,330
Cash, end of period   12,403 - 12,403 -