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Avigilon Corporation Announces Second Quarter 2013 Results

08/08/2013

VANCOUVER, Aug. 8, 2013 /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, 2013. All figures are stated in Canadian dollars unless otherwise noted.

Second Quarter 2013 Financial Highlights

  • Revenue was $39.2 million, an increase of 61% over Q2 2012 revenue of $24.4 million.
  • Gross margin was 53%, up from 48% a year earlier.
  • EBITDA1 was $5.4 million, a 159% rise over Q2 2012 EBITDA of $2.1 million.
  • Net income was $3.4 million, a 159% increase from net income of $1.3 million in Q2 2012.

"The second quarter was another strong period for the company with 61% year-over-year revenue growth, reflecting the success of our growth strategies and the rapid rise in demand for high-definition surveillance systems," said Alexander Fernandes, president and CEO at Avigilon. "We continue to expand our sales and product development teams aggressively and invest in marketing to increase brand awareness - efforts we believe will allow us to maximize revenue growth and long-term profitability."

Mr. Fernandes continued: "Innovation is a hallmark of Avigilon, and in the second quarter we built on our track record with the introduction of the world's smallest HD dome camera and the release of our Avigilon Control Center (ACC) 5.0 software. We also acquired RedCloud Security, Inc., which has developed highly innovative web-based, physical and virtual access control systems. This acquisition provides complementary technology and an entry point to the growing access control market."

Financial Review
Avigilon reported Q2 2013 revenue of $39.2 million, an increase of 61%, or $14.8 million, compared with revenue of $24.4 million for Q2 2012. Revenue growth continues to be driven by a strong rise in product sales volumes worldwide, reflecting further penetration of new target market regions, greater customer adoption in existing markets, and sales of new products introduced throughout the previous year and the current quarter. Avigilon experienced strong year-over-year sales growth across all six of its key target geographic regions, with growth between 40% and 174% relative to the same period in 2012.    

Q2 2013 gross margin was $20.7 million (53% of revenue), compared with $11.7 million (48% of revenue) in Q2 2012. The increase in gross margin reflects a higher-than-typical mix of software sales in the period, as well as the ongoing impact of higher purchasing power, greater economies of scale and improved manufacturing efficiencies. Although the gross margin increased year-over-year, with the Company's near-term objective of rapid growth in revenue and market share, management does not expect additional gross margin expansion in 2013.

Q2 2013 selling and marketing expenses were $10.7 million, a 55% increase compared to $6.9 million in Q2 2012. The increase reflects planned investments to expand Avigilon's global sales team and increase marketing efforts, pillars of the Company's growth strategy. Further investment in these areas is a priority in 2013. As a result, sales and marketing expenses could increase as a percentage of revenue in the near term and start to decline by the end of the year. Over the longer term, the Company expects selling and marketing expenses as a percentage of revenue to decline.

Research and development (R&D) expenses, net of related income tax credits, were $2.4 million for Q2 2013, a $1.2 million, or 96%, increase compared to $1.2 million in Q2 2012. Gross R&D spending was $2.8 million in Q2 2013, compared to $1.5 million in the prior year. The increase in R&D expenses reflects additional headcount, in line with the Company's plan to expand its product development team to further enhance its product offering. There were a significant number of new hires in the second quarter. Avigilon expects to continue to increase its R&D expenses, as a percentage of revenue, to a level more typical with industry norms as the Company focuses on enhancing and expanding its product offerings. As with selling and marketing expenses, research and development expenses are incurred in advance of the related revenue from new products.

General and administrative expenses (G&A) for Q2 2013 were $3.4 million, an increase of $1.6 million, or 88%, from $1.8 million in Q2 2012. The increase was primarily due to higher share-based compensation expense, reflecting the general increase in the Company's headcount year-over-year and, more specifically, the issuance of options in 2012 and 2013 to a broader group of employees, which management views as an important tool for attracting and retaining talent.  . The Company expects G&A expenses to increase in support of its continued growth plans. However, Avigilon believes these expenses will increase at a slower rate than the Company's revenue growth.

The Company's total headcount at June 30, 2013 was 346, compared with 255 at December 31, 2012.

EBITDA was $5.4 million in Q2 2013, an increase of 159% compared to $2.1 million in Q2 2012. The year-over-year improvement largely reflects the Company's strong increase in revenue and improved gross margin, as well as the impact of delays in planned hiring in the quarter, which led to lower than expected personnel expenses in certain areas of the business for the quarter. The Company filled a number of these positions by the end of the quarter, with all planned hiring for the year expected to be filled before year-end. As a result, the Company expects to see some limited downward pressure on EBITDA margins in the near-term.

Q2 2013 net income was $3.4 million, up 161% compared with net income of $1.3 million in Q2 2012. Earnings per share were $0.09 (basic) and $0.08 (diluted) for Q2 2013, compared to $0.04 (basic and diluted) a year earlier.

As at June 30, 2013, Avigilon had cash and cash equivalents of $32.1 million, down from $49.9 million as at December 31, 2012. The decrease reflects the acquisition of RedCloud Security, Inc. in the second quarter.

At June 30, 2013, Avigilon had 39,935,059 basic and 42,601,199 diluted shares outstanding.

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 Thursday, August 8, 2013, 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 19295810.

1Non-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.

Avigilon Corporation
Consolidated income statement    
(Unaudited)
    Three months ended   Six months ended
    June 30, June 30, June 30, June 30,
    2013 2012 2013 2012
    $ $ $ $
Sales   39,217 24,350 71,244 42,104
Cost of sales   (18,473) (12,690) (34,151) (21,951)
    20,744 11,660 37,093 20,153
           
Operating expenses          
    Selling and marketing   10,713 6,926 18,208 11,580
    Research and development   2,349 1,201 4,067 2,269
    General and administrative   3,401 1,784 6,410 3,656
    16,463 9,911 28,685 17,505
Operating income   4,281 1,749 8,408 2,648
           
Other income (expense)          
    Interest and other, net   (44) 19 59 50
    Foreign exchange gain (loss)   337 94 190 (44)
    293 113 249 6
           
Income before taxes   4,574 1,862 8,657 2,654
Current tax expense   (754) (70) (1,479) (70)
Deferred tax expense   (428) (480) (989) (625)
Net income   3,392 1,312 6,189 1,959
           
Earnings per share          
Basic   0.09 0.04 0.16 0.06
Diluted   0.08 0.04 0.15 0.06
           
Weighted average number of shares outstanding               
Basic   39,108 31,367 38,676 31,209
Diluted   40,399 35,040 39,854 34,794
           
 
Consolidated statements of other comprehensive income
(Unaudited)
    Three months ended Six months ended
    June 30, June 30, June 30, June 30,
    2013 2012 2013 2012
    $ $ $ $
Net income   3,392 1,312 6,189 1,959
Income (loss) on translation of foreign subsidiaries   20 - 20 -
Total comprehensive income (loss)   3,412 1,312 6,209 1,959
           

Avigilon Corporation      
Consolidated statements of financial position
(Unaudited)
    June 30, 2013 December 31, 2012
    $ $
Assets      
Current assets      
 Cash and cash equivalents   32,105 49,859
 Trade and other receivables   25,950 18,453
 Inventories        14,701 11,906
 Prepaid expenses   1,493 1,283
    74,249 81,501
Non-current assets      
 Property and equipment   4,745 3,669
 Intangible assets   30 43
 Deposits and prepaid expenses       574 613
 Deferred tax assets     904 1,145
 Goodwill   17,776 -
    98,278 86,971
Liabilities      
Current liabilities      
 Trade and other payables     16,314 15,572
 Derivative financial instruments      620 -
 Short-term leasehold incentive     109 109
    17,043 15,681
Non-current liabilities      
 Long-term leasehold incentive      349 398
    17,392 16,079
Shareholders' equity      
Capital stock   70,337 66,559
Equity compensation reserve   3,670 3,663
Other comprehensive income   20 -
Surplus   6,859 670
    80,886 70,892
    98,278 86,971

Avigilon Corporation 
Consolidated statements of changes in equity
(Unaudited)
      Equity   Accumulated other Total
  Common Stock compensation Surplus/ comprehensive shareholders'
  Shares Amount reserve (Deficit) income equity
    $ $ $ $ $
January 1, 2012 31,021,287 37,251 4,099 (6,499) - 34,851
Net income - -   - 1,959 - 1,959
Share issue costs - (27) - - - (27)
Share-based payments - -   224 - 224
Issuance of common stock 430,000 430 - - 430
Transfer to capital stock upon exercise of options - 266 (266) - - -
Balance, June 30, 2012 31,451,287 37,920 4,057 (4,540) - 37,437
             
January 1, 2013 37,705,799 66,559 3,663 670 - 70,892
Net income - - - 6,189 - 6,189
Translation of foreign subsidiaries - - - - 20 20
Share-based payments - - 1,436 - - 1,436
Issuance of common stock 2,229,260 2,349 - - - 2,349
Transfer to capital stock upon exercise of options - 1,429 (1,429) - - -
Balance, June 30, 2013 39,935,059 70,337 3,670 6,859 20 80,886
             

Avigilon Corporation        
Consolidated statements of cash flows
(Unaudited)
    Three months ended Six months ended
    June 30, June 30, June 30, June 30,
    2013 2012 2013 2012
    $ $ $ $
Cash flows from operating activities          
 Net income for the period   3,392 1,312 6,189 1,959
 Adjustments for non-cash items          
  Depreciation   353 211 596 386
  Lease incentives amortized   (27) (15) (48) (30)
  Write off of intangible assets   64 - 64 -
  Share-based payments   850 120 1,436 224
  Deferred tax expense   428 480 989 625
  Current tax expense   754 70 1,479 70
  Investment tax credits   (428) (304) (748) (579)
  Unrealized foreign exchange (gain) loss   (827) (91) (707) (63)
  Change in fair value of derivative financial instrument   465   620  
  Interest income   (128) (19) (231) (50)
       4,896 1,764 9,639 2,542
 Movements in working capital          
  (Increase) in trade and other receivables   (5,804) (1,795) (6,716) (1,500)
  (Increase)/decrease in inventories      (1,529) 3,636 (2,762) 1,499
  (Increase)/decrease in prepaid expenses and deposits   334 (511) (84) (496)
  Increase/(decrease) in trade and other payables      252 382 (810) (1,136)
 Net movements in working capital   (6,747) 1,712 (10,372) (1,633)
 Interest (paid) received   128 19 231 50
 Income taxes paid   (864) (396) (1,164) (396)
Net cash provided by (used in) operating activities   (2,587) 3,099 (1,666) 563
           
Cash flows from investing activities          
 Acquisition net of cash acquired   (16,916) - (16,916) -
 Purchase of property and equipment   (875) (458) (1,639) (907)
 Purchase of intangible assets   - (36) (15) (36)
Net cash used in investing activities   (17,791) (494) (18,570) (943)
           
Cash flows from financing activities          
 Issuance of common stock   1,618 325 2,349 430
 Share issuance costs   - (7)   (27)
Net cash provided by financing activities   1,618 318 2,349 403
Effect of foreign exchange rate changes on cash   137 (18) 133 (38)
           
Increase (decrease) in cash   (18,623) 2,905 (17,754) (15)
Cash and cash equivalents, beginning of period   50,728 9,498 49,859 12,418
Cash and cash equivalents, end of period   32,105 12,403 32,105 12,403

 

SOURCE Avigilon Corporation

Investor relations:
Craig Armitage , TMX Equicom
T: (416) 815-0700 ext. 278
carmitage@tmxequicom.com

Media relations:
Angela St-Amour, Avigilon Corporation
T: (604) 630-3410
angela.stamour@avigilon.com