VANCOUVER, Nov. 5, 2013 /CNW/ - Avigilon Corporation ("Avigilon" or the "Company") (TSX: AVO), a leader in high-definition (HD) surveillance systems, today announced its financial results for the three and nine months ended September 30, 2013. All figures are stated in Canadian dollars unless otherwise noted.
Third Quarter 2013 Financial Highlights
- Revenue was $51.1 million, an increase of 101% over Q3 2012 revenue of $25.5 million.
- Gross margin was 53%, up from 51% a year earlier.
- EBITDA1 was $12.7 million, a 213% increase over Q3 2012 EBITDA of $4.1 million.
- Adjusted Earnings Per Share1 of $0.23, compared with $0.08 in Q3 2012
- Net income rose to $8.6 million, a 298% increase from net income of $2.2 million in Q3 2012.
"Demand for our systems worldwide continues to grow rapidly, which is clearly reflected in our financial performance for the third quarter as we reached a milestone of more than $50 million in quarterly revenue," said Alexander Fernandes, president and chief executive officer at Avigilon. "Our strategies are working, and we will continue to invest to expand our global sales team, expand our product portfolio, and increase marketing efforts. Combined with healthy underlying growth in the high-definition surveillance market, these strategic investments position us well to deliver sustainable long-term growth."
Avigilon reported Q3 2013 revenue of $51.1 million, an increase of 101%, or $25.6 million, compared with revenue of $25.5 million for Q3 2012. Revenue growth continued to be driven by a strong rise in product sales volumes worldwide, reflecting greater customer adoption in existing markets, further penetration of new target regions and sales of recently launched products. In Q3 2013, Avigilon experienced year-over-year sales growth between 46% and 115% in all six of its key target geographic regions.
Gross margin was $27.2 million in Q3 2013 (53% of revenue), compared with $13.0 million (51% of revenue) in Q3 2012. The increase in gross margin percentage reflects higher-than-typical mix of software sales in Q3 2013 due to the recent launch of Avigilon Control Center 5.0, as well as the ongoing effects of greater purchasing power, economies of scale and improved manufacturing efficiencies. Although the Company's gross margin increased year-over-year, management does not expect significant additional gross margin expansion in the near term due to the Company's focus on rapid growth in revenue and market share.
Selling and marketing expenses in Q3 2013 were $10.0 million, a $4.0 million increase compared to $6.0 million in Q3 2012. The increase reflects planned investments to significantly expand the Company's global sales team and brand awareness, which it believes will drive future revenue growth. As a result of these ongoing investments, sales and marketing expenses could increase as a percentage of revenue in the near-term, but 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 $2.3 million for Q3 2013, a $1.1 million increase compared to $1.2 million in Q3 2012. Gross R&D spend was $3.2 million in Q3 2013, compared to $1.7 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 to support new product development.
General and administrative expenses (G&A) for Q3 2013 were $3.9 million, an increase of $2.2 million from Q3 2012. The increase is primarily due to additional personnel in finance, customer service and related areas to support the Company's rapid growth. The Company expects continued increases in G&A expenses in line with its growth plans, but believes these increases will occur at a slower rate than revenue.
EBITDA was $12.7 million in Q3 2013, an increase of $8.7 million, or 213%, compared to $4.1 million in Q3 2012. The year-over-year improvement largely reflects the Company's increase in revenue and improved gross margin.
Q3 2013 net income was $8.6 million, up by $6.4 million, compared with net income of $2.2 million in Q3 2012. Earnings per share were $0.22 (basic) and $0.21 (diluted) for Q3 2013, compared to $0.07 (basic) and $0.06 (diluted) a year earlier. Adjusted earnings per share, which the Company defines as earnings before share-based payments, foreign exchange gain/loss, business acquisition costs and related tax effects, were $0.23 in Q23 2013 compared with $0.08 in Q3 2012.
As at September 30, 2013, Avigilon had cash and cash equivalents of $34.2 million, and 39,986,934 basic and 40,314,595 diluted shares outstanding.
Avigilon has scheduled a conference call to discuss these results on Tuesday, November 5, 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 74249481.
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 EPS" refers to earnings 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 is included in the Company's Management's Discussion & Analysis for Q3 2013.
EBITDA and Adjusted EPS 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 EPS 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.
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. Additional 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. 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 Final Short Form Prospectus dated August 29, 2012 and filed on the Company's profile 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.
|Consolidated income statement|
|Three months ended||Nine months ended|
|September 30,||September 30,|
|Cost of sales||(24,006)||(12,542)||(58,154)||(34,493)|
|Selling and marketing||9,975||6,014||28,184||17,595|
|Research and development||2,311||1,247||6,378||3,516|
|General and administrative||3,904||2,231||10,315||5,886|
|Other income (expense)|
|Interest and other, net||227||16||286||65|
|Foreign exchange gain (loss)||151||(498)||341||(542)|
|Income before taxes||11,339||2,992||19,996||5,645|
|Current tax expense||(1,806)||(60)||(3,285)||(130)|
|Deferred tax expense||(911)||(768)||(1,900)||(1,392)|
|Earnings per share|
|Weighted average number of shares outstanding|
| Consolidated statements of other comprehensive income
|Three months ended||Nine months ended|
|September 30,||September 30,|
|Income (loss) on translation of foreign subsidiaries||34||-||(14)||-|
|Total comprehensive income||8,656||2,164||14,797||4,123|
| Consolidated statements of financial position
| September 30,
| December 31,
|Cash and cash equivalents||34,209||49,859|
|Trade and other receivables||30,221||18,453|
|Property and equipment||6,927||3,669|
|Deposits and prepaid expenses||369||613|
|Deferred tax assets||904||1,145|
|Trade and other payables||17,417||15,572|
|Derivative financial instruments||158||-|
|Short-term leasehold incentive||149||109|
|Long-term leasehold incentive||287||398|
|Equity compensation reserve||4,430||3,663|
|Accumulated other comprehensive loss||(14)||-|
| Consolidated statements of changes in equity
|January 1, 2012||31,021,287||37,251||4,099||(6,499)||-||34,851|
|Share issue costs||-||(1,732)||-||-||-||(1,732)|
|Issuance of capital stock||5,152,812||27,471||-||-||-||27,471|
|Transfer to capital stock upon exercise of options||-||641||(641)||-||-||-|
|Deferred income tax effect on share issuance costs adjustments||433||433|
|Balance, September 30, 2012||36,174,099||64,064||4,015||(2,376)||-||65,703|
|January 1, 2013||37,705,799||66,559||3,663||670||-||70,892|
|Translation of foreign subsidiaries||-||-||-||-||(14)||(14)|
|Issuance of capital stock||2,281,135||2,660||-||-||-||2,660|
|Transfer to capital stock upon exercise of options||-||1,550||(1,550)||-||-||-|
|Balance, September 30, 2013||39,986,934||70,769||4,430||15,481||(14)||90,666|
| Consolidated statements of cash flows
| Three months ended
| Nine months ended
|Cash flows from operating activities|
|Net income for the period||8,622||2,164||14,811||4,123|
|Adjustments for non-cash items|
|Lease incentives amortized||(22)||(15)||(70)||(44)|
|Write off of intangible assets||-||-||45||-|
|Write off of property and equipment||-||20||-||20|
|Deferred tax expense||911||768||1,900||1,392|
|Current tax expense||1,806||60||3,285||130|
|Investment tax credits||(911)||(426)||(1,659)||(1,006)|
|Unrealized foreign exchange (gain) loss||631||240||(76)||237|
|Change in FV of derivative financial instrument||(462)||-||158||-|
|Movements in working capital|
|(Increase) in trade and other receivables||(4,809)||1300||(11,526)||(270)|
|(Increase)/decrease in inventories||(1,962)||238||(4,724)||1,739|
|(Increase)/decrease in prepaid expenses and deposits||77||(96)||(5)||(592)|
|Increase/(decrease) in trade and other payables||939||4,113||130||2,966|
|Net movements in working capital||(5,755)||5,555||(16,125)||3,843|
|Interest (paid) received||80||16||312||65|
|Income taxes paid||(1,520)||(130)||(2,684)||(526)|
|Net cash provided by (used in) operating activities||4,628||8,803||2,945||9,347|
|Cash flows from investing activities|
|Acquisition net of cash acquired||-||-||(16,915)||-|
|Purchase of property and equipment||(2,545)||(851)||(4,185)||(1,758)|
|Purchase of intangible assets||(338)||(1)||(335)||(37)|
|Net cash used in investing activities||(2,883)||(852)||(21,435)||(1,795)|
|Cash flows from financing activities|
|Issuance of capital stock||311||27,041||2,660||27,471|
|Share issuance costs||-||(1,704)||-||(1,732)|
|Net cash provided by financing activities||311||25,337||2,660||25,739|
|Effect of foreign exchange rate changes on cash||48||(139)||180||(157)|
|Increase (decrease) in cash||2,104||33,149||(15,650)||33,134|
|Cash and cash equivalents, beginning of period||32,105||12,403||49,859||12,418|
|Cash and cash equivalents, end of period||34,209||45,552||34,209||45,552|
SOURCE: Avigilon Corporation
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