Avigilon Corporation Announces First Quarter 2013 Results

VANCOUVER, May 9, 2013 /CNW/ - Avigilon Corporation (TSX: AVO), a leader in high-definition (HD) surveillance systems, today announced its financial results for the three months ended March 31, 2013.  All figures are stated in Canadian dollars unless otherwise noted.

First Quarter 2013 Financial Highlights

• Revenue was $32.0 million, an increase of 80% over Q1 2012 revenue of $17.8 million.
• Gross margin was 51%, up from 48% a year earlier.
• EBITDA¹ was $5.1 million, a 319% improvement over Q1 2012 EBITDA of $1.2 million.
• Net income was $2.8 million, a 332% increase from net income of $0.6 million in Q1 2012.

"Our strong start to 2013 demonstrates our continued success in capitalizing on the opportunities in front of us and gaining global market share," said Alexander Fernandes, president and chief executive officer at Avigilon. "We generated high double-digit revenue growth and delivered improved profitability, while increasing our strategic investments in the business."

Mr. Fernandes continued: "The transition from analog to high-definition surveillance technology is proceeding rapidly. For the first time, our industry will see high-definition surveillance sales outpace analog sales, and we continue to be at the forefront, leading this shift. With that in mind, we will add to our global sales team, continue to expand our product portfolio and invest in marketing to increase brand awareness. We believe these efforts best position Avigilon to maximize revenue growth and long-term profitability."

Financial Review

Avigilon reported Q1 2013 revenue of $32.0 million, an increase of 80%, or $14.3 million, compared with revenue of $17.8 million for Q1 2012. Revenue growth continues to be driven by a strong rise in product sales volumes worldwide, reflecting sales of newly launched products, further penetration of new target market regions and greater customer adoption in existing markets. Avigilon experienced strong year-over-year sales growth across all six of the Company's key target geographic regions.

Gross margin was $16.3 million in Q1 2013 (51% of revenue), compared with $8.5 million (48% of revenue) in Q1 2012. The year-over-year increase in gross margin reflects a sales mix shift toward more profitable products, as well as the 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 significant additional gross margin expansion through 2013.

Q1 2013 Selling and marketing expenses were $7.5 million, a $2.8 million, or 62%, increase compared to $4.7 million in selling and marketing expenses in Q1 2012. The increase reflects planned spending to significantly expand Avigilon's global sales team and marketing efforts, which the Company believes will drive future revenue growth. The Company plans to further expand its sales team and continue to strategically invest in marketing 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 $1.7 million for Q1 2013, a $0.6 million, or 61%, increase compared to $1.1 million in Q1 2012. Gross R&D spend was $2.0 million in Q1 2013, compared to $1.3 million in the prior year. The increase in spending is due to additional new hires, in line with the Company's plan to expand its product development team to further enhance its product offering. Avigilon expects to continue to increase its R&D investment to support new product development, bringing the Company to more typical industry levels for R&D as a percentage of revenue.

General and administrative expenses (G&A) for Q1 2013 were $3.0 million, an increase of $1.1 million, or 57%, from $1.9 million in general and administrative expenses for Q1 2012. The increase was primarily due to additional personnel and their related expenses to support Avigilon's growth and its public company status. 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.

EBITDA was $5.1 million in Q1 2013, an increase of 319%, or $3.9 million, compared to $1.2 million in Q1 2012. The year-over-year improvement largely reflects the Company's 80% increase in revenue and improved gross margin.  Q1 2013 EBITDA was also positively impacted by delays in planned hiring in the quarter, which led to lower than expected personnel related expenses in certain areas of the business for the quarter.  The Company filled a number of these positions by the end of the quarter or early in the second quarter, with the remaining positions expected to be filled during the year.  As such, the Company expects to see downward pressure on EBITDA margins in the near-term.

Q1 2013 net income was $2.8 million, up 332%, or $2.2 million, compared with net income of $0.6 million in Q1 2012. Earnings per share were $0.07 (basic) and $0.07 (diluted) for Q1 2013, compared to $0.02 (basic) and $0.02 (diluted) a year earlier.

As at March 31, 2013, Avigilon had cash and cash equivalents of $50.7 million, up from $50.0 million as at December 31, 2012.

At March 31, 2013, Avigilon had 38,240,043 basic and 40,551,338 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, May 9, 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 55318666.

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
Notes to consolidated financial statements
For the three months ended March 31, 2013 and 2012
(Expressed in thousands of Canadian dollars except number of shares and per share data)

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Avigilon Corporation
Consolidated statements of comprehensive income
For the three months ended March 31, 2013 and 2012
(Expressed in thousands of Canadian dollars except number of shares and per share data)
			Three months ended
			March 31,	March 31,
			2013	2012
			$	$
Sales			32,027	17,754
Cost of sales			(15,678)	(9,260)
			16,349	8,494
Operating expenses
	Selling and marketing		7,495	4,654
	Research and development		1,718	1,068
	General and administrative		3,009	1,873
			12,222	7,595
Operating income			4,127	899
Other income (expense)
	Interest and other, net		104	30
	Foreign exchange gain (loss)		(147)	(138)
			(43)	(108)
Income before income taxes			4,084	791
Current tax expense			(725)	-
Deferred tax expense			(561)	(144)
Net income and total comprehensive income			2,798	647
Earnings per share
	Basic		0.07	0.02
	Diluted		0.07	0.02
Weighted average number of shares outstanding (000's)
	Basic		38,240	31,051
	Diluted		40,551	34,832

Avigilon Corporation
Consolidated statements of financial position
As at March 31, 2013 and December 31, 2012
(Expressed in thousands of Canadian dollars except number of shares and per share data)
				March 31,	December 31,
				2013	2012
				$	$
Assets
Current assets
	Cash and cash equivalents			50,728	49,859
	Trade and other receivables			19,227	18,453
	Inventories			13,139	11,906
	Prepaid expenses			1,766	1,283
				84,860	81,501
Non-current assets
	Property and equipment			4,203	3,669
	Intangible assets			44	43
	Deposits and prepaid expenses			546	613
	Deferred tax assets			904	1,145
				90,557	86,971
Liabilities
Current liabilities
	Trade and other payables			14,909	15,572
	Derivative Financial Instrument			156	-
	Short-term leasehold incentive			109	109
				15,174	15,681
Non-current liabilities
	Long-term leasehold incentive			376	398
				15,550	16,079
Shareholders' equity
Capital stock				68,801	66,559
Equity compensation reserve				2,738	3,663
Surplus (deficit)				3,468	670
				75,007	70,892
				90,557	86,971

Avigilon Corporation
Consolidated statements of changes in equity
For the three months ended March 31, 2013 and 2012
(Expressed in thousands of Canadian dollars except number of shares and per share data)
			Equity		Total
	Common Stock		compensation	Surplus/	shareholders'
	Shares	Amount	reserve	(Deficit)	Equity
		$	$	$	$
Balance January 1, 2012	31,021,287	37,251	4,099	(6,499)	34,851
Net income and total comprehensive income	-	-	-	647	647
Share issue costs	-	(20)	-	-	(20)
Share-based payments	-	-	104	-	104
Issuance of common stock	105,000	105	-	-	105
Balance March 31, 2012	31,126,287	37,336	4,203	(5,852)	35,687
Balance January 1, 2013	37,705,799	66,559	3,663	670	70,892
Net income and total comprehensive income	-	-	-	2,798	2,798
Share-based payments	-	-	586	-	586
Issuance of common stock	816,500	731	-	-	731
Transfer to capital stock on exercise of options	-	1,511	(1,511)	-	-
Balance March 31, 2013	38,522,299	68,801	2,738	3,468	75,007

Avigilon Corporation
Consolidated statements of cash flows
For the three months ended March 31, 2013 and 2012
(Expressed in thousands of Canadian dollars except number of shares and per share data)
				Three months ended
				March 31,				March 31,
				2013				2012
				$				$
Cash flows from operating activities
	Net income for the period			2,798				647
	Adjustments for non-cash items
		Depreciation		282				175
		Lease incentives amortized		(22)				(15)
		Write off of property and equipment		-				-
		Share-based payments		586				104
		Deferred tax expense		561				-
		Current tax expense		725				144
		Investment tax credits		(320)				(276)
		Unrealized foreign exchange (gain) loss		118				29
		Change in fair value of derivative financial instrument		156				-
		Interest expense (income)		(104)				(30)
				4,780				778
	Movements in working capital
		(Increase) in trade and other receivables		(912)				296
		(Increase) in inventories		(1,233)				(2,137)
		(Increase) in prepaid expenses and deposits		(418)				15
		Increase in trade and other payables		(1,062)				(1,518)
	Net movements in working capital			(3,625)				(3,344)
	Interest (paid) received			104				30
	Income taxes paid			(300)				-
Net cash provided by (used in) operating activities				959				(2,536)
Cash flows from investing activities
	Purchase of property and equipment			(802)				(449)
	Purchase of intangible assets			(15)				-
Net cash used in investing activities				(817)				(449)
Cash flows from financing activities
	Issuance of common stock			731				105
	Share issuance costs			-				(20)
Net cash provided by financing activities				731				85
Effect of foreign exchange rate changes on cash				(4)				(20)
Increase (decrease) in cash				869				(2,920)
Cash, beginning of period				49,859				12,418
Cash, end of period				50,728				9,498

SOURCE: Avigilon Corporation

Investor relations:
Kristen Dickson, TMX Equicom
T: [phone] ext. 273
[email protected]

Media relations:
Angela St-Amour, Avigilon Corporation
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