Avigilon Corporation Reports Record Third Quarter 2015 Results

VANCOUVER, Nov. 3, 2015 /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 nine months ended September 30, 2015. All figures are in Canadian dollars unless otherwise stated.

Third Quarter 2015 Financial Highlights

  • Company records set in revenue, Adjusted EBITDA*, Adjusted Earnings*, and Fully Diluted Adjusted Earnings Per Share*.
  • Revenue of $95.1 million, a 34% increase over Q3 2014 revenue of $71.0 million.
  • Gross margin percentage was 57%, consistent with the same period in the prior year.
  • Adjusted EBITDA of $18.9 million, a 15% increase over Q3 2014 Adjusted EBITDA of $16.4 million.
  • Adjusted Earnings of $12.2 million, a 9% increase over Q3 2014 Adjusted Earnings of $11.2 million.
  • Fully Diluted Adjusted Earnings Per Share were $0.27, a 13% increase over Q3 2014 Fully Diluted Adjusted Earnings Per Share of $0.24.
  • Trailing 12 months revenue ending Q3 2015 increased by 37% over the trailing 12 months revenue ending Q3 2014, gross margin percentage was 58%, and Adjusted EBITDA margin was 18%.

"We are pleased to report record setting revenue, Adjusted EBITDA, Adjusted Earnings, and Adjusted Earnings Per Share this quarter," said Alexander Fernandes, Avigilon's Founder, President, Chief Executive Officer and Chairman of the Board. "Avigilon's business fundamentals are strong, and we are well on track to achieve our stated goal of $500 million in annual run-rate revenue by the end of 2016."

Summary of Third Quarter 2015 Financial Results





Three Months Ended

Trailing Twelve Months Ended

(In thousands of Canadian dollars except per share

amounts unless otherwise stated)

Q3 2015

Q3 2014

% Change

Q3 2015

Q3 2014

% Change

 * Non-IFRS

(Sep 30, 2015)

(Sep 30, 2014)


(Sep 30, 2015)

(Sep 30, 2014)



(Unaudited)

(Unaudited)


(Unaudited)

(Unaudited)









Revenue

95,062

70,972

34%

339,785

247,846

37%

Gross Margin

54,048

40,129

35%

196,564

140,457

40%

Gross Margin percentage

57%

57%

NA

58%

57%

NA

Total Operating Expenses

42,820

28,457

50%

160,969

106,251

51%

Total Adjusted Operating Expenses*

37,703

26,613

42%

144,881

99,918

45%

Adjusted EBITDA*

18,887

16,381

15%

62,723

49,018

28%

Adjusted EBITDA Margin*

20%

23%

NA

18%

20%

NA

Net Income

9,179

11,622

-21%

35,463

28,914

23%

Adjusted Earnings*

12,189

11,183

9%

39,175

33,204

18%

Basic Earnings Per Share

0.21

0.25

-16%

0.78

0.65

20%

Diluted Earnings Per Share

0.20

0.25

-20%

0.75

0.64

17%

Fully Diluted Adjusted Earnings Per Share*

0.27

0.24

13%

0.84

0.74

14%

Detailed Financial Review

Avigilon reported Q3 2015 revenue of $95.1 million, an increase of 34% over revenue of $71.0 million in Q3 2014. Revenue growth for Q3 2015 reflects increased product sales driven by greater customer adoption in existing markets, further penetration of new target regions and sales of new products. On a constant currency basis, revenue in Q3 increased 16% year-over-year. In Q3 2015 revenue grew year-over-year in all regions in which we operate. Revenue in the United States grew 45%, EMEA grew 13%, Canada grew 28%, United Kingdom grew 5%, Asia Pacific grew 52%, and Latin America grew 38%.

Gross margin was $54.0 million in Q3 2015 (57% of revenue), compared with $40.1 million (57% of revenue) in Q3 2014. In Q3 2015, year-over-year gross margin percentage was positively impacted by a combination of product mix, foreign exchange, and greater economies of scale, offset by costs related to our new US manufacturing facility.

Sales and marketing expenses in Q3 2015 were $22.6 million, an increase of 54% compared with $14.7 million in Q3 2014. The increase in Q3 2015 reflects significant investments to expand the Company's global sales and marketing teams and initiatives, which management believes will drive continued revenue growth. In Q3 2015, sales and marketing expenses represented 24% of revenue, compared with 21% of revenue in Q3 2014.

Research and development ("R&D") expenses, net of related investment tax credits and capitalized development costs, were $2.9 million in Q3 2015, compared with $3.0 million in Q3 2014. Gross R&D spend was $7.2 million (8% of revenue) in Q3 2015 compared with $6.5 million in Q3 2014 (9% of revenue), an increase of 11%. The increase in gross R&D spend is consistent with the Company's ongoing growth plan to further enhance and expand upon its product offerings.

General and administrative ("G&A") expenses in Q3 2015 were $12.3 million (13% of revenue), compared with $9.0 million (13% of revenue) in Q3 2014, an increase of 37%. 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 Q3 2015 was $5.0 million, compared with $1.8 million in Q3 2014. The increase is primarily driven by amortization from acquired intangible assets and capitalized development costs.

Total operating expenses for Q3 2015 were $42.8 million, compared with $28.5 million in Q3 2014, an increase of 50%. Operating expenses include $5.1 million in Q3 2015, compared with $1.8 million in Q3 2014, of costs related to business acquisitions, financing, restructuring, and non-recurring legal expenses, and amortization of acquired intangible assets.

Adjusted EBITDA increased 15% year-over-year to $18.9 million in Q3 2015, compared with $16.4 million in Q3 2014. The year-over-year improvement in Q3 2015 largely reflects increases in sales volume and gross margin.

Net income for Q3 2015 decreased 21% year-over-year to $9.2 million, compared with $11.6 million in Q3 2014. Net income for Q3 2015 was negatively impacted by interest expense of $0.5 million and $5.1 million in business acquisition-related, financing, restructuring, and non-recurring legal expenses, and amortization of acquired intangible assets, compared to $1.8 million in similar costs in the prior year. Earnings Per Share in Q3 2015 were $0.21 (basic) and $0.20 (diluted), compared with $0.25 (basic and diluted) in Q3 2014.

Adjusted Earnings for Q3 2015 increased 9% year-over-year to $12.2 million, compared with $11.2 million in Q3 2014. Fully Diluted Adjusted Earnings Per Share were $0.27 in Q3 2015, compared with $0.24 in Q3 2014.

As at September 30, 2015, Avigilon had working capital of $154.3 million, including cash and cash equivalents of $81.1 million. Common shares issued and outstanding as at September 30, 2015 were 44,859,778.  The weighted average number of common shares issued and outstanding for the quarter were 44.7 million basic and 45.5 million diluted. The Company's primary use of cash-on-hand in Q3 2015 was $8.4 million in capital expenditures and $5.2 million repayment of long-term debt.

Financial Outlook

Avigilon plans to continue executing on its successful strategy of delivering strong annual year-over-year revenue growth while maintaining growth in profit. The Company remains on track toward its annual run-rate revenue goal of $500 million by the end of 2016.

For the full year 2015, Avigilon expects the following:

  • Revenue between $358 million and $368 million
  • Non-IFRS Adjusted Earnings Per Share between $0.76 and $0.82      
  • Effective tax rate between 28% and 30%         
  • Capital expenditures excluding the purchase of our new global headquarters between $30 million and $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, November 3, 2015, beginning at 5:00 p.m. ET (2:00 p.m. PT). To access the live call, dial 1-888-231-8191 or 1-647-427-7450, or view the webcast at http://ir.avigilon.com or http://bit.ly/1VFqH70. A replay will be available for 90 days on the Company's website, and for one week by dialing 1-855-859-2056 or international 1-416-849-0833, reference number 57698666.

This news release is qualified in its entirety by the Company's condensed consolidated interim financial statements for the three and nine months ended September 30, 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, 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, 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, amortization of acquired intangibles and related tax effects. Please refer to the reconciliation table that accompanies the financial statements discussed in this press release and which is included in the Company's Management's Discussion & Analysis for Q3 2015.

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.

© 2015, Avigilon Corporation. AVIGILON and the AVIGILON logo are trademarks of Avigilon Corporation.

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, including the purchase of a new global headquarters and increasing manufacturing capacity. 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; 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 3, 2015, which is available under Avigilon's profile on SEDAR at www.sedar.com. Material risks and uncertainties applicable to the forward looking statements set out herein include, but are not limited to: unforeseen events, developments or factors causing any of the aforesaid expectations, assumptions and other factors ultimately being inaccurate or irrelevant; increased competition; product development efforts may not result in the creation of new or enhanced products in a timely or cost-effective fashion or at all; unknown or unexpected defects with Avigilon's products that are not correctable in a timely or cost-effective fashion or at all; inability to recruit and retain qualified personnel; legal or regime changes, including changes to import and export requirements of foreign jurisdictions; information technology or product security breaches; Avigilon's real property facilities may not be acquired or retained on favourable terms or at all; and unexpected tax liabilities. Although Avigilon has attempted to identify factors that may cause actual actions, events or results to differ materially from those disclosed in the forward-looking statements, 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

For further information: Dennis Fong, Avigilon Corporation, T: (604) 629-5182, Ext 2515, dennis.fong@avigilon.com, www.avigilon.com

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