Avigilon Corporation Announces Fourth Quarter and Year-End 2013 Results

VANCOUVER, March 4, 2014 /CNW/ - Avigilon Corporation ("Avigilon" or the "Company") (TSX: AVO), a leader in high-definition ("HD") and megapixel surveillance systems, today announced its financial results for the three and 12 months ended December 31, 2013.  All figures are stated in Canadian dollars unless otherwise noted.

2013 Financial Highlights

  • Revenue was $178.3 million, an increase of 78% over 2012 revenue of $100.3 million.
  • Gross margin was 54%, up from 49% a year earlier.
  • EBITDA1 was $34.5 million, a 172% increase over 2012 EBITDA of $12.7 million.
  • Fully diluted Adjusted Earnings Per Share1 of $0.57, compared with $0.22 in 2012.
  • Net income rose to $21.6 million from net income of $7.2 million in 2012.

Fourth Quarter 2013 Financial Highlights

  • Revenue was $55.9 million, an increase of 71% over Q4 2012 revenue of $32.7 million.
  • Gross margin was 58%, up from 50% a year earlier.
  • EBITDA was $11.6 million, a 118% increase over Q4 2012 EBITDA of $5.3 million.
  • Fully diluted Adjusted Earnings Per Share of $0.17, compared with $0.08 in Q4 2012
  • Net income rose to $6.7 million, compared with net income of $3.0 million in Q3 2012.

"The fourth quarter was our highest revenue quarter to date and contributed to exceptional revenue and earnings growth for 2013," said Alexander Fernandes, founder, president, CEO and chairman of the Board of Avigilon. "These results reflect the impact of the growth investments we made in prior periods to expand our operations, particularly within sales, marketing and product development. The year was also highlighted by two strategic technology acquisitions, which add complementary products and technology to our industry leading, end-to-end HD surveillance solution and allow us to expand our business into other segments of the global security market."

Financial Review

Avigilon reported 2013 revenue of $178.3 million, an increase of 78%, or $78 million, compared to revenue of $100.3 million for 2012. Revenue growth continues to reflect increased product sales volumes worldwide, driven by greater customer adoption in existing markets, further penetration of new target regions and sales of new products introduced during the year. Revenue was strong across all regions, with year-over-year sales growth of between 63% and 98% in all six of the Company's target geographic regions.

Gross margin was $96.7 million in 2013 (54% of revenue), compared with $49.4 million (49% of revenue) in 2012. The year-over-year increase in gross margin percentage reflects the ongoing effects of greater purchasing power, economies of scale and improved manufacturing efficiencies. Although the Company's gross margin increased over 2012, management does not expect significant gross margin expansion in the near term due to the Company's focus on market share gain.

Selling and marketing expenses in 2013 were $41.5 million, a $16.5 million increase compared to $25.0 million in 2012. The increase reflects investments to continue to expand the Company's global sales team and brand awareness, which management believes will drive continued revenue growth. The Company anticipates that selling expenses will increase as a percentage of revenue in the short term as management continues to execute on its proven strategy for growth.

Research and development (R&D) expenses, net of related income tax credits, were $9.1 million for 2013, a $4.1 million increase compared to $5.0 million in 2012. Gross R&D spend was $11.8 million in 2013, compared to $6.4 million in the prior year. The growth in spending is consistent with the Company's plan to increase its development team to further enhance and expand its product offering. Avigilon expects to continue to increase its R&D investment, in dollars and as a percentage of revenue, to support new product development.

General and administrative expenses (G&A) for 2013 were $18.2 million, compared with $8.9 million in 2012. The increase is primarily due to additional personnel and their related expenses, including new headcount in customer support, human resources, finance and legal. G&A expenses for 2013 also include additional expenses related to the Company's acquisition activities during the year. The Company expects its administrative expenses to increase in the near term as it continues to build the infrastructure necessary to support planned growth, but believes these expenses will not increase in proportion to revenue growth.

EBITDA was $34.5 million in 2013, compared with $12.7 million in 2012. The year-over-year improvement largely reflects the Company's increase in revenue and improved gross margin.

Net income for 2013 was $21.6 million, up by $14.4 million, compared with net income of $7.2 million in 2012. Earnings per share were $0.54 (basic) and $0.53 (diluted) for 2013, compared to $0.22 (basic) and $0.20 (diluted) a year earlier.  Fully diluted Adjusted Earnings Per Share were $0.57 in 2013 compared with $0.22 in 2012.

In 2014, Avigilon plans to continue to invest significantly to expand sales reach, accelerate innovation and build brand awareness (please refer to "Avigilon Growth Strategy" in the annual MD&A), which the management believes will contribute to further revenue growth.  However, as the necessary investments are incurred in advance of associated revenue, these initiatives are expected to put pressure on the Company's EBITDA and net earnings. As many of these initiatives will be undertaken in the early part of the year, the impact on EBITDA and net earnings will be more pronounced in the first half of the year, with improvements expected in the latter half as the initiatives begin to generate additional revenue.

As at December 31, 2013, Avigilon had cash and cash equivalents of $104.9 million, and 39,625,401 basic and 40,709,249 diluted shares outstanding.

The Company's financial statements and MD&A can be downloaded from the Avigilon website at http://ir.avigilon.com or from the Company's profile on SEDAR at http://www.sedar.com/.

Conference Call

Avigilon has scheduled a conference call to discuss these results on Tuesday, March 4, 2014, 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 416-849-0833 or 1-855-859-2056, reference number 41709815.

1Non-IFRS Measures

Management uses certain non-IFRS measures that it believes are useful to investors in evaluating the performance and results of the Company. 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. Management also believes that analyzing operating results exclusive of significant non-cash items provides a useful measure of the Company's performance.  The term "Adjusted Earnings Per Share" refers to earnings per share before share-based payments, foreign exchange gain/loss, business acquisition costs and related tax effects. Please refer to the reconciliation table that accompanies the financial statements in this press release and which is included in the Company's Management's Discussion & Analysis for 2013. EBITDA and Adjusted Earnings Per Share do not have standardized meanings prescribed by International Financial Reporting Standards (IFRS) and are not necessarily comparable to similar measures provided by other companies. Accordingly, investors are cautioned that EBITDA and Adjusted Earnings Per Share 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 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.  Forward-looking statements normally contain words like believe, expect, anticipate, plan, intend, continue, estimate, may, will, should and similar expressions. Such statements are not guarantees of future performance. They are based on management's expectations and assumptions regarding historical trends, current conditions and expected future developments, as well as other factors that we believe are appropriate in the circumstances. Management has based these statements on estimates and assumptions that they believed were reasonable when the statements were prepared. Actual results could be substantially different because of the risks and uncertainties associated with the Company's business. Important risks that could cause such differences include, but are not limited to, the length of sales cycles, rapid technological advancement, competition, the availability of critical inputs, foreign exchange rate occurrences and doing business in foreign countries. Additionally, differences could arise because of events that are announced or completed after the date of this news release, including mergers, acquisitions, other business combinations and divestitures. More information about the risks and uncertainties affecting the Company's business can be found in the "Risk Factors" section of our final short form prospectus dated November 20, 2013 and of our Annual Information Form dated March 25, 2013 each of which is available on SEDAR (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 statements
  Year ended
  December 31 December 31
  2013 2012
  $ $
Sales   178,344 100,262
Cost of sales   (81,613) (50,844)
  96,731 49,418
 
Operating expenses 
  Selling and marketing   41,453 24,984
  Research and development   9,115 5,044
  General and administrative   18,245 8,919
  68,813 38,947
     
Operating income   27,918 10,471
     
Other income (expenses)
  Interest and other, net   411 177
  Foreign exchange gain (loss)   1,403 (193)
  1,814 (16)
     
Income before income taxes   29,732 10,455
Current tax expense   (8,998) (2,292)
Deferred tax income (expense)   822 (994)
Net Income   21,556 7,169
 
Earnings per share 
  Basic   0.54 0.22
  Diluted   0.53 0.20
 
Weighted average number of share outstanding (000's) 
  Basic   39,625 32,994
  Diluted   40,709 35,223
 
Consolidated statements of other comprehensive income
  Year ended
  December 31 December 31
  2013 2012
  $ $
Net Income   21,556 7,169
Items that may subsequently be reclassified to income:
  Gains on translation of foreign subsidiary, net of tax   547 -
  22,103 7,169

(Canadian Dollar amounts in 000's except per share amounts)

 

Avigilon Corporation
Consolidated statements of financial position
  Year ended
  December 31  December 31
  2013  2012
  $  $
Assets
Current assets
  Cash and cash equivalents   104,875  49,859
  Trade and other receivables   31,316  18,453
  Inventories   19,444 11,906
  Prepaid expenses   1,467  1,283
  157,102 81,501
Non-current assets
  Property and equipment   8,568 3,669
  Goodwill   6,558  -
  Intangible assets   14,791 43
  Deposits   586 613
  Deferred income tax   1,334 1,145
  188,939 86,971
 
Liabilities
Current Liabilities
  Trade and other payables   20,628 15,572
  Short-term lease incentives   190 109
  20,818 15,681
     
Non-current liabilities
  Deferred tax liability   1,740  - 
  Long-term leasehold incentives   673 398
  23,231 16,079
 
Shareholders' equity 
Capital stock   137,383 66,559
Equity compensation reserve   5,552 3,663
Accumulated other comprehensive income   547 -
Surplus   22,226 670
  165,708 70,892
  188,939 86,971

(Canadian Dollar amounts in 000's except per share amounts)

 

Avigilon Corporation
Consolidated statements of changes in equity            
          Accumulated  
      Equity   Other Total
  Capital Stock Compensation  Surplus/ Comprehensive Shareholders'
  Shares Amount Reserve (Deficit) Income Equity
    $  $  $  $  $
Balance, January 1, 2012  31,021,287 37,251 4,099 (6,499) - 34,851
Net income and total
  Comprehensive income  - -  - 7,169  - 7,169
Share-based payments  - - 1,178 -  - 1,178
Share issue costs  - (1,745) - - - (1,745)
Deferred income tax effect on
  share issuance costs  - 436  - -  - 436
Issuance of common stock  6,684,512 29,003 -  - -  29,003
Transfer to capital stock on
  Exercise of options  - 1,614 (1,614) - - -
Balance, December 31, 2012  37,705,799 66,559 3,663 670 - 70,892
Net income  -  - - 21,556 - 21,556
Share based payments  -  - 3,600  -  - 3,600
Gain on translation of foreign
  subsidiary   -  - -  -  621 621
Share issue costs  - (3,901) -  - -  (3,901)
Deferred income tax effect on
  share issuance costs  - 1,000 - - - 1,000
Deferred income tax effect on
  intercompany loan foreign exchange  -  -  -  (74)  (74)
Issuance of common stock  5,249,280  72,014  -  -  72,014
Transfer of capital stock on
  Exercise of options  - 1,711 (1,711)  -  -  -
Balance, December 31, 2013  42,955,079  137,383 5,552  22,226 547 165,708

(Canadian Dollar amounts in 000's except per share amounts)

 

Avigilon Corporation
Consolidated statements of cash flows
  Year ended
  December 31 December 31
  2013 2012
  $ $
Cash flows from operating activities
  Net income for the year   21,556 7,169
  Adjustments for non-cash items:
    Amortization   1,073 43
    Depreciation   1,534 831
    Lease incentives recognized   5 239
    Lease incentives amortized   (128) (70)
    Share-based payments   3,600 1,178
    Deferred tax expense (income)   (822) 994
    Current tax expense   8,998 2,292
    Investment tax credits   (2,301) (1,366)
    Unrealized foreign exchange gain   (886) (198)
    Change in fair value of derivative financial assets   - 88
    Interest income   (437) (177)
  32,192  11,023
  Net change in working capital items   (16,450) 2,352
  Interest received   401 177
  Income taxes paid   (4,840) (1,226)
Net cash provided by operating activities   11,303 12,326
Cash flows from investing activities
  Acquisition net of cash acquired   (17,609)  -
  Purchase of property and equipment   (6,201) (2,231)
  Disposal of property and equipment   - 33
  Purchase of intangible assets   (982)  (39)
Net cash used in investing activities   (24,792)  (2,237)
Cash flows from financing activities
  Issuance of common stock   72,014 29,003
  Share issuance costs   (3,731) (1,746)
Net cash provided by financing activities   68,283 27,257
Effect of foreign exchange rate changes on cash   222 95
Increase in cash and cash equivalents   55,016 37,441
Cash and cash equivalents, beginning of the year   49,859 12,418
Cash and cash equivalents, end of the year   104,875  49,859

(Canadian Dollar amounts in 000's except per share amounts)

 

SOURCE Avigilon Corporation

For further information:

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

Media relations:
Stephanie Von Zuben, Avigilon Corporation
T: (604) 629-5182, Ext 2206 
stephanie.vonzuben@avigilon.com