Avigilon Corporation Reports Record Fourth Quarter and Year-End 2015 Results

VANCOUVER, CANADA, March 1, 2016 /CNW/ - Avigilon Corporation ("Avigilon" or the "Company") (TSX: AVO), trusted provider of business intelligence and security solutions, today reported financial results for the three and twelve months ended December 31, 2015. All figures are in Canadian dollars unless otherwise stated.

Fourth Quarter 2015 Financial Highlights

  • Record revenue, Adjusted EBITDA*, Adjusted Earnings*, and diluted Adjusted Earnings Per Share*
  • Revenue was $109.1 million, an increase of 37% over Q4 2014 revenue of $79.5 million
  • Gross margin was 56%, down from 58% a year earlier
  • Adjusted EBITDA was $20.8 million, a 21% increase over Q4 2014 Adjusted EBITDA of $17.2 million
  • Adjusted Earnings were $12.3 million, a 3% increase over Q4 2014 Adjusted Earnings of $11.9 million
  • Diluted Adjusted Earnings Per Share of $0.28, compared with $0.25 in Q4 2014

2015 Financial Highlights

  • Record revenue, Adjusted EBITDA, Adjusted Earnings, and diluted Adjusted Earnings Per Share
  • Revenue was $369.4 million, an increase of 36% over 2014 revenue of $271.4 million
  • Gross margin was 57%, consistent with 57% a year earlier
  • Adjusted EBITDA was $66.3 million, a 22% increase over 2014 Adjusted EBITDA of $54.3 million
  • Adjusted Earnings were $39.6 million, a 6% increase over 2014 Adjusted Earnings of $37.2 million
  • Diluted Adjusted Earnings Per Share of $0.86, compared with $0.80 in 2014

"We're pleased to report record-setting financial results for our 2015 fourth quarter and year," said Alexander Fernandes, Avigilon's Founder, President, Chief Executive Officer and Chairman of the Board. "We're very proud of our financial performance, and look forward to setting new records in 2016."

Summary of Fourth Quarter and Year-end 2015 Financial Results





Three Months Ended

 Twelve Months Ended

(In thousands of Canadian dollars except margin

and per share amounts)

Q4 2015

Q4 2014

% Change

2015

2014

% Change


(December 31, 2015)

(December 31, 2014)


(December 31, 2015)

(December 31, 2014)



(Unaudited)

(Unaudited)


(Unaudited)

(Unaudited)









Revenue

109,134

79,508

37%

369,411

271,411

36%

Gross Profit

61,152

45,738

34%

211,978

153,708

38%

Gross Margin

56%

58%

NA

57%

57%

NA

Total Operating Expenses

49,415

33,645

47%

176,739

115,958

52%

Adjusted EBITDA

20,824

17,217

21%

66,330

54,282

22%

Adjusted EBITDA Margin

19%

22%

NA

18%

20%

NA

Net Income (IFRS)

5,754

12,965

-56%

28,252

35,135

-20%

Adjusted Earnings

12,290

11,897

3%

39,568

37,178

6%

Basic Earnings Per Share (IFRS)

0.13

0.28

-54%

0.62

0.77

-19%

Diluted Earnings Per Share (IFRS)

0.13

0.27

-52%

0.61

0.76

-20%

Diluted Adjusted Earnings Per Share

0.28

0.25

12%

0.86

0.80

7%

Detailed Financial Review

Avigilon reported Q4 2015 revenue of $109.1 million, an increase of 37% over revenue of $79.5 million in Q4 2014. Revenue for 2015 of $369.4 million represents an increase of 36%, or $98.0 million, compared with revenue of $271.4 million in 2014. Revenue growth for both Q4 and the full year 2015 reflects increased product sales worldwide, driven by greater customer adoption in existing markets, further penetration of new target regions and sales of new products. In 2015, revenue was strong across all regions, with year-over-year sales growth between 2% and 49% in all six of the Company's target geographic regions.

Gross profit was $61.2 million in Q4 2015 (56% of revenue), compared with $45.7 million (58% of revenue) in Q4 2014. Gross profit was $212.0 million in 2015 (57% of revenue), compared with $153.7 million (57% of revenue) in 2014. As a percentage of revenue, gross margins in Q4 2015 decreased by 2% compared to the same period in 2014 due to costs related to our recently opened US manufacturing facility.

Sales and marketing expenses in Q4 2015 were $25.1 million, an increase of 42% compared with $17.7 million in Q4 2014. Sales and marketing expenses in 2015 were $90.7 million, an increase of 45% compared with $62.4 million in 2014. The increase in Q4 2015 and the full year 2015 reflects investments to expand the Company's global sales and marketing team and initiatives, which management believes will drive continued revenue growth. In Q4 2015 and the full year 2015, sales and marketing expenses represented 23% and 25% of revenue respectively, compared with 22% and 23% of revenue respectively in Q4 2014 and the full year 2014.

Research and development ("R&D") expenses, net of related income tax credits and capitalized development costs, were $5.7 million in Q4 2015, compared with $3.9 million in Q4 2014, and $13.6 million in 2015, compared with $13.9 million in 2014. Gross R&D spend was $9.7 million in Q4 2015 (9% of revenue), compared with $6.8 million in Q4 2014 (9% of revenue), an increase of 44%. Gross R&D spend was $31.5 million in 2015 (9% of revenue), compared with $24.7 million in 2014 (9% of revenue), an increase of 28%. The increase in R&D spend is consistent with the Company's ongoing plan to further enhance and expand upon its product offerings.

General and administrative ("G&A") expenses in Q4 2015 were $13.5 million (12% of revenue), compared with $10.3 million in Q4 2014 (13% of revenue), an increase of 31%. G&A expenses in 2015 were $53.9 million (15% of revenue), compared with $33.3 million in 2014 (12% of revenue), an increase of 62%. The increase is primarily due to additional personnel and their related expenses to support business growth. The Company expects its G&A expenses to increase in the near term as it continues to invest in infrastructure to support planned growth, but believes these expenses will increase at a slower rate than revenue over time.

Amortization and depreciation in Q4 2015 and the full year 2015 were $5.1 million and $18.5 million respectively, compared with $1.8 million and $6.4 million respectively in 2014. The increase is driven by additions of acquired intangible assets and increased capitalized development costs.

Total operating expenses for Q4 2015 were $49.4 million, compared with $33.6 million in Q4 2014, an increase of 47%. Total operating expenses for 2015 were $176.7 million, compared with $116.0 million in 2014, an increase of 52%. The increase in operating expenses is driven by amortization of acquired intangible assets and investments to support growth.

Adjusted EBITDA increased 21% year-over-year to $20.8 million in Q4 2015, compared with $17.2 million in Q4 2014. Adjusted EBITDA increased 22% year-over-year to $66.3 million in 2015, compared with $54.3 million in 2014. The increase in Adjusted EBITDA largely reflects the Company's increase in sales volume.

Net income for Q4 2015 decreased 56% year-over-year to $5.7 million, compared with $13.0 million in Q4 2014. Net income for 2015 decreased 20% year-over-year to $28.3 million, compared with $35.1 million in 2014. Net income for Q4 2015 and for 2015 was impacted by: an increase in amortization and depreciation; a foreign exchange loss for Q4 2015 and a smaller foreign exchange gain for 2015 compared to the same periods in the prior year; and interest expense from long-term debt. Earnings Per Share in Q4 2015 were $0.13 (basic and diluted), compared with $0.28 (basic) and $0.27 (diluted) a year earlier. Earnings Per Share for 2015 were $0.62 (basic) and $0.61 (diluted) for 2015, compared with $0.77 (basic) and $0.76 (diluted) a year earlier.

Adjusted Earnings for Q4 2015 increased 3% year-over-year to $12.3 million, compared with $11.9 million in Q4 2014. Diluted Adjusted Earnings Per Share were $0.28 in Q4 2015, compared with $0.25 in Q4 2014. Adjusted Earnings for 2015 increased 6% year-over-year to $39.6 million, compared with $37.2 million in 2014. Diluted Adjusted Earnings Per Share were $0.86 in 2015, compared with $0.80 in 2014.

As at December 31, 2015, Avigilon had net working capital of $115.8 million, including cash and cash equivalents of $25.8 million. As at December 31, 2015, the Company had 43,231,653 common shares issued and outstanding. The weighted average number of common shares issued and outstanding for the 2015 year was approximately 45.4 million basic and approximately 46.2 million diluted. The Company's primary uses of cash-on-hand in 2015 were for: its acquisition of intangible assets, primarily related to US and international patents; repurchase of its common shares for cancellation under the Company's normal course issuer bid; costs related to implementing a new enterprise resource planning system; and additions to property, plant and equipment, primarily related to the purchase of an office building for our new global headquarters and completion of our US manufacturing facility.

Financial Outlook

Commencing with the release of our Q1 2016 financial statements, we will present our financial results in US dollars ("USD") instead of Canadian dollars. The change in presentation currency is intended to better reflect Avigilon's business activities and to improve investors' ability to compare the Company's financial results with other publicly traded industry participants. Accordingly, the following 2016 annual financial outlook is provided in USD, except for our annual run-rate revenue goal of CAD$500 million by the end of 2016.

Avigilon plans to continue executing on its successful strategy of delivering strong annual year-over-year revenue growth while remaining profitable. The Company expects to achieve its annual run-rate revenue goal of CAD$500 million by the end of 2016.

As of March 1, 2016, Avigilon expects the following for fiscal year 2016:

  • Revenue between USD$335 million and USD$365 million
  • Adjusted EBITDA margin between 15% and 20%
  • Adjusted Earnings Per Share between USD$0.66 and USD$0.88
  • Effective tax rate between 28% and 30%
  • Capital expenditures between USD$30 million and USD$35 million

The foregoing expectations constitute forward-looking information and are qualified in their entirety by the cautionary statement set out below.

Conference Call

Avigilon has scheduled a conference call to discuss these results on Tuesday, March 1, 2016, beginning at 5:00 p.m. ET (2:00 p.m. PT). To access the live call, dial 1-888-231-8191 or 647-427-7450, or view the webcast at http://ir.avigilon.com  or http://bit.ly/1QeL7Do. A replay will be available for 90 days on the Company's website, and for one week by dialing 1-855-859-2056 or 416-849-0833, reference number 34273791.

This news release is qualified in its entirety by the Company's consolidated financial statements for the years ended December 31, 2015 and 2014 and the associated Management's Discussion & Analysis respecting the same period, which 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/.

*Non-IFRS Measures

Management uses certain non-International Financial Reporting Standards ("IFRS") measures that it believes are useful to investors in evaluating the performance and results of the Company. The term "Adjusted EBITDA" refers to earnings before deducting interest, taxes, depreciation, amortization, foreign exchange gain or loss, business acquisition-related costs, restructuring costs, non-recurring legal costs, non-recurring lease termination costs, and share-based payments. Management believes that Adjusted 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, foreign exchange gain or loss, business acquisition-related costs, restructuring costs, non-recurring legal costs, non-recurring lease termination costs, and share-based payments.

Management also believes that analyzing operating results exclusive of significant non-cash and non-recurring items provides a useful measure of the Company's performance. The term "Adjusted Earnings" and "Adjusted Earnings Per Share" refers to net earnings and earnings per share, respectively, before share-based payments, foreign exchange gain or loss, business acquisition-related costs, financing costs, restructuring costs, non-recurring legal costs, non-recurring lease termination costs, amortization of acquired intangibles and related tax effects. Please refer to the Company's consolidated financial statements for the years ended December 31, 2015 and 2014 and the reconciliation table within the associated Management's Discussion & Analysis respecting the same period.

Adjusted EBITDA, Adjusted Earnings and Adjusted Earnings Per Share do not have standardized meanings prescribed by IFRS and are not necessarily comparable to similar measures provided by other companies.

Investors are cautioned that Adjusted EBITDA, Adjusted Earnings 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 Corporation, trusted provider of business intelligence and security solutions, develops, manufactures, and sells video analytics, network video management software and hardware, surveillance cameras, and access control solutions.

© 2016, Avigilon Corporation. AVIGILON and the AVIGILON logo are trademarks of Avigilon Corporation.

For further information:

Dennis Fong, Avigilon Corporation
T: (604) 629-5182, Ext 2515
investors@avigilon.com
www.avigilon.com

Forward-Looking Statements

Certain information and statements in this news release contain and constitute forward-looking information or forward-looking statements as defined under applicable securities laws (collectively, "forward-looking statements"). Forward-looking statements normally contain words like 'believe', 'expect', 'anticipate', 'plan', 'intend', 'continue', 'estimate', 'may', 'will', 'should', 'ongoing' and similar expressions, and within this news release include, without limitation, the information under the heading "Financial Outlook" and any statements (express or implied) respecting: Avigilon's mission, strategies, and objectives; projected growth, revenues, expenses, capital expenditures, and earnings; anticipated enhancement and expansion of product offerings and associated R&D plans; and expected investment and expansion of infrastructure. Forward-looking statements, including the Financial Outlook, are provided for the purpose of presenting information about management's current expectations and plans relating to the future and allowing investors and others to get a better understanding of our anticipated financial position, results of operations and operating environment. Readers are cautioned that such information may not be appropriate for other purposes.

Forward-looking statements are not guarantees of future performance, actions, or developments and are based on expectations, assumptions and other factors that management currently believes are relevant, reasonable and appropriate in the circumstances. The material expectations, assumptions and other factors used in developing the forward-looking statements set out herein include or relate to the following, without limitation: Avigilon will be able to successfully execute its mission, strategies and objectives; the business and economic conditions affecting Avigilon's operations will continue substantially in their current state, including with respect to industry conditions, general levels of economic activity, regulations, taxes, interest rates, and foreign exchange rates; there will be no adverse material changes to Avigilon's key personnel, facilities, production capabilities, supply chain, sales channels, reseller network, or contractual arrangements; Avigilon will be able to successfully manage cash flow, operating expenses, capital expenditures, and foreign exchange risk; Avigilon will change the currency in which it presents its financial results to USD on the timeline currently anticipated; existing and future financing will be available to Avigilon on favourable terms when and if required; Avigilon will keep pace with or outpace the growth, direction, and technological advancement in its industry; industry data and projections obtained from external sources are accurate and reliable; Avigilon will be able to design, manufacture and market new products and enhance its existing product lines; Avigilon will continue to generate revenues from patent licensing; Avigilon will be able to successfully integrate businesses, intellectual property, products, and technologies that it may acquire, if any; Avigilon will not face any material unexpected costs related to product liability or warranties; Avigilon's protection of its intellectual property against third party infringement or misappropriation is sufficient and its products and technology do not materially infringe third party intellectual property rights; Avigilon will be able to obtain necessary third party licenses on favourable terms; and Avigilon will not become involved in unexpected material litigation or otherwise subject to materially adverse claims.

Although management believes that the forward-looking statements are reasonable, actual results could be substantially different due to the risks and uncertainties associated with and inherent to Avigilon's business, as more particularly described in the "Risk Factors" section of Avigilon's Annual Information Form dated March 1, 2016, which is available under Avigilon's profile on SEDAR at www.sedar.com. Additional material risks and uncertainties applicable to the forward looking statements set out herein include, but are not limited to: unexpected changes to accounting policies, accounting standards or internal controls and procedures over financial reporting; and unforeseen events, developments or factors causing any of the aforesaid expectations, assumptions and other factors ultimately being inaccurate or irrelevant. Although Avigilon has attempted to identify important factors that could cause actual actions, events, or results to differ materially from those contained in any forward-looking statement, there may be other factors that cause actions, events or results not to be as anticipated, predicted, 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.

Avigilon undertakes no obligation to reissue or update any forward-looking statements as a result of new information or events after the date hereof except as may be required by law. All forward-looking statements contained in this news release are qualified by this cautionary statement.

SOURCE Avigilon Corporation


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