Avigilon Corporation Announces First Quarter 2014 Results
VANCOUVER, May 7, 2014 /CNW/ - Avigilon Corporation ("Avigilon" or the "Company") (TSX: AVO), a leader in innovative end-to-end security solutions comprising industry-leading HD network video management software, megapixel cameras, access control and video analytics products, today announced its financial results for the three months ended March 31, 2014. All figures are stated in Canadian dollars unless otherwise noted.
First Quarter 2014 Financial Highlights
- Revenue was $55.8 million, an increase of 74% over Q1 2013 revenue of $32.0 million.
- Gross margin percentage was 57%, up from 51% a year earlier.
- EBITDA* was $10.9 million, a 114% increase over Q1 2013 EBITDA of $5.1 million.
- Net income rose to $8.0 million, compared with net income of $2.8 million in Q1 2013.
- Fully Diluted Adjusted Earnings Per Share* of $0.19, compared with $0.08 in Q1 2013.
"The first quarter of 2014 was an excellent start to the year for Avigilon, with the strong year-over-year gains in revenue, gross margins and EBITDA reflecting the continued successful execution of our growth plan," said Alexander Fernandes, founder, president, CEO and chairman of the Board of Avigilon. "We continued to grow our team globally, especially in sales, marketing, and product development, to drive continued growth. The quarter was also highlighted by important new product innovations, including our next-generation HD Pro series of cameras, and Access Control Manager (ACM) 5.0. In addition, we completed the acquisition of VideoIQ and are on track with the integration of its operations and technology. Subsequent to quarter end, we launched Avigilon Control Center (ACC) 5.2, and strengthened our balance sheet by completing a bought deal financing for gross proceeds of $100 million."
Financial Review
Avigilon reported Q1 2014 revenue of $55.8 million, an approximate increase of 74%, or $23.8 million, compared to revenue of $32.0 million for Q1 2013. 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. Revenue was strong across all regions, with year-over-year sales growth of between 46% and 116% in the Company's six target geographic regions.
Revenue for Q1 2014 also benefited from foreign exchange gains, and included the contribution from VideoIQ from January 13 to March 31, 2014.
Gross margin was $31.8 million in 2014 (57% of revenue), compared with $16.3 million (51% of revenue) in Q1 2013. The year-over-year increase in gross margin percentage mainly reflects the ongoing effects of greater purchasing power, economies of scale, and improved manufacturing efficiencies, as well as the favourable impact of foreign exchange gains.
Selling and marketing expenses in Q1 2014 were $12.5 million, an approximate increase of 66% compared to $7.5 million in Q1 2013. The increase reflects planned growth spending to expand the Company's global sales and marketing team, which management believes will drive continued revenue growth. In Q1 2014, selling expenses represented 20% of revenue, compared with 17% in 2013. 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 and capitalized development costs, were $2.7 million for Q1 2014, a $1.0 million increase compared to $1.7 million in Q1 2013. Gross R&D spend was $5.0 million in Q1 2014, compared with $2.0 million in the same period last 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 accelerated product development.
General and administrative expenses (G&A) for Q1 2014 were $8.1 million, compared with $3.0 million in Q1 2013. 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 Q1 2014 also include $0.8 million in expenses related to the Company's acquisition activities. 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 more than doubled year-over-year to $10.9 million in Q1 2014, compared with $5.1 million in Q1 2013. The year-over-year improvement largely reflects the Company's increase in revenue and improved gross margin, as well as the positive impact of foreign exchange gains.
Net income for Q1 2014 was $8.0 million, up by $5.2 million compared with net income of $2.8 million in Q1 2013. Earnings Per Share were $0.19 (basic) and $0.18 (diluted) for Q1 2014, compared to $0.07 (basic and diluted) a year earlier. Fully Diluted Adjusted Earnings Per Share were $0.19 in Q1 2014 compared with $0.08 in Q1 2013.
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 MD&A), which 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 at March 31, 2014, Avigilon had working capital of $112.3 million, including cash and cash equivalents of $60.1 million. The weighted average number of common shares outstanding for the quarter was 43.0 million basic and 44.5 million diluted. On April 8, 2014, the Company completed a bought deal financing, issuing 3,448,280 common shares at a price of $29.00 per share for gross proceeds of $100 million.
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 Wednesday, May 7, 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 30835105.
*Non-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 Q1 2014. 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 Corporation is defining the future of protection through innovative end-to-end security solutions. Avigilon's industry-leading HD network video management software, megapixel cameras, access control and video analytics products are reinventing the security market. 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 March 31, 2014 and of our Annual Information Form dated March 28, 2014 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 | |||||||||||
| (Unaudited) | |||||||||||
| Three months ended | |||||||||||
| March 31 | March 31 | ||||||||||
| 2014 | 2013 | ||||||||||
| $ | $ | ||||||||||
| Sales | 55,750 | 32,027 | |||||||||
| Cost of sales | (23,953) | (15,678) | |||||||||
| 31,797 | 16,349 | ||||||||||
| Operating expenses | |||||||||||
| Selling and marketing | 12,450 | 7,495 | |||||||||
| Research and development | 2,669 | 1,718 | |||||||||
| General and administrative | 8,097 | 3,009 | |||||||||
| 23,216 | 12,222 | ||||||||||
| Operating income | 8,581 | 4,127 | |||||||||
| Other income (expenses) | |||||||||||
| Interest and other, net | 130 | 104 | |||||||||
| Foreign exchange gain (loss) | 1,744 | (147) | |||||||||
| 1,874 | (43) | ||||||||||
| Income before income taxes | 10,455 | 4,084 | |||||||||
| Current tax expense | (2,560) | (725) | |||||||||
| Deferred tax income (expense) | 145 | (561) | |||||||||
| Net income | 8,040 | 2,798 | |||||||||
| Earnings per share | |||||||||||
| Basic | 0.19 | 0.07 | |||||||||
| Diluted | 0.18 | 0.07 | |||||||||
| Weighted average number of shares outstanding (000's) | |||||||||||
| Basic | 42,962 | 38,240 | |||||||||
| Diluted | 44,498 | 40,551 | |||||||||
| Consolidated statements of other comprehensive income | ||||||||||
| (Unaudited) | ||||||||||
| Three months ended | ||||||||||
| March 31 | March 31 | |||||||||
| 2014 | 2013 | |||||||||
| $ | $ | |||||||||
| Net Income | 8,040 | 2,798 | ||||||||
| Items that may subsequently be reclassified to income: | ||||||||||
| Gains on translation of foreign subsidiaries, net of tax | 656 | - | ||||||||
| 8,696 | 2,798 | |||||||||
| Avigilon Corporation | ||||||||||||||||
| Consolidated statements of financial position | ||||||||||||||||
| March 31 | December 31 | |||||||||||||||
| 2014 | 2013 | |||||||||||||||
| (Unaudited) | (Audited) | |||||||||||||||
| $ | $ | |||||||||||||||
| Assets | ||||||||||||||||
| Current assets | ||||||||||||||||
| Cash and cash equivalents | 60,125 | 104,875 | ||||||||||||||
| Trade and other receivables | 33,699 | 31,316 | ||||||||||||||
| Inventories | 32,523 | 19,444 | ||||||||||||||
| Prepaid expenses | 4,470 | 1,467 | ||||||||||||||
| 130,817 | 157,102 | |||||||||||||||
| Non-current assets | ||||||||||||||||
| Property and equipment | 9,657 | 8,568 | ||||||||||||||
| Goodwill | 37,372 | 6,558 | ||||||||||||||
| Intangible assets | 16,617 | 14,791 | ||||||||||||||
| Deposits | 637 | 586 | ||||||||||||||
| Deferred tax asset | 1,211 | 1,334 | ||||||||||||||
| 196,311 | 188,939 | |||||||||||||||
| Liabilities | ||||||||||||||||
| Current liabilities | ||||||||||||||||
| Trade and other payables | 18,331 | 20,628 | ||||||||||||||
| Short-term leasehold incentives | 192 | 190 | ||||||||||||||
| 18,523 | 20,818 | |||||||||||||||
| Non-current liabilities | ||||||||||||||||
| Deferred tax liability | 1,659 | 1,740 | ||||||||||||||
| Long-term leasehold incentives | 632 | 673 | ||||||||||||||
| 20,814 | 23,231 | |||||||||||||||
| Shareholders' equity | ||||||||||||||||
| Capital stock | 137,540 | 137,383 | ||||||||||||||
| Equity compensation reserve | 6,488 | 5,552 | ||||||||||||||
| Accumulated other comprehensive income | 1,203 | 547 | ||||||||||||||
| Surplus | 30,266 | 22,226 | ||||||||||||||
| 175,497 | 165,708 | |||||||||||||||
| 196,311 | 188,939 | |||||||||||||||
| Avigilon Corporation | |||||||||||||||
| Consolidated statements of changes in equity | |||||||||||||||
| (Unaudited) | |||||||||||||||
| Accumulated | |||||||||||||||
| Equity | other | Total | |||||||||||||
| Capital Stock | compensation | comprehensive | shareholders' | ||||||||||||
| Shares | Amount | reserve | Surplus | income | equity | ||||||||||
| $ | $ | $ | $ | $ | |||||||||||
| 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 | |||||||||
| Balance, January 1, 2014 | 42,955,079 | 137,383 | 5,552 | 22,226 | 547 | 165,708 | |||||||||
| Net income | - | - | - | 8,040 | - | 8,040 | |||||||||
| Share based payments | - | - | 998 | - | - | 998 | |||||||||
| Gain on translation of foreign subsidiary | - | - | - | - | 744 | 744 | |||||||||
| Share issue costs | - | (54) | - | - | - | (54) | |||||||||
| Deferred income tax effect on share issuance costs | - | 14 | - | - | - | 14 | |||||||||
| Deferred income tax effect on intercompany loan foreign exchange |
- | - | - | - | (88) | (88) | |||||||||
| Issuance of common stock | 23,865 | 135 | - | - | - | 135 | |||||||||
| Transfer of capital stock on exercise of options | - | 62 | (62) | - | - | - | |||||||||
| Balance, March 31, 2014 | 42,978,944 | 137,540 | 6,488 | 30,266 | 1,203 | 175,497 | |||||||||
| Avigilon Corporation | ||||||||||
| Consolidated statements of cash flows | ||||||||||
| (Unaudited) | ||||||||||
| Three months ended | ||||||||||
| March 31 | March 31 | |||||||||
| 2014 | 2013 | |||||||||
| $ | $ | |||||||||
| Cash flows from operating activities | ||||||||||
| Net income for the period | 8,040 | 2,798 | ||||||||
| Adjustments for non-cash items: | ||||||||||
| Amortization | 455 | 14 | ||||||||
| Depreciation | 735 | 268 | ||||||||
| Lease incentives amortized | (48) | (22) | ||||||||
| Share-based payments | 998 | 586 | ||||||||
| Deferred tax (income) expense | (145) | 561 | ||||||||
| Current tax expense | 2,560 | 725 | ||||||||
| Investment tax credits | (710) | (320) | ||||||||
| Unrealized foreign exchange (gain) loss | (304) | 118 | ||||||||
| Change in fair value of derivative financial instruments | - | 156 | ||||||||
| Interest income | (128) | (104) | ||||||||
| 11,453 | 4,780 | |||||||||
| Movements in working capital | ||||||||||
| Increase in trade and other receivables | (1,535) | (912) | ||||||||
| Increase in inventories | (10,689) | (1,233) | ||||||||
| Increase in prepaid expenses and deposits | (2,727) | (418) | ||||||||
| Decrease in trade and other payables | (2,352) | (1,062) | ||||||||
| Net movements in working capital | (17,303) | (3,625) | ||||||||
| Interest received | 128 | 104 | ||||||||
| Income taxes paid | (3,718) | (300) | ||||||||
| Net cash (used in) provided by operating activities | (9,440) | 959 | ||||||||
| Cash flows from investing activities | ||||||||||
| Consideration paid for subsidiary, net of cash acquired | (32,753) | - | ||||||||
| Purchase of property and equipment | (1,627) | (802) | ||||||||
| Purchase of intangible assets | (1,690) | (15) | ||||||||
| Net cash used in investing activities | (36,070) | (817) | ||||||||
| Cash flows from financing activities | ||||||||||
| Issuance of common stock | 135 | 731 | ||||||||
| Share issuance costs | (54) | - | ||||||||
| Net cash provided by financing activities | 81 | 731 | ||||||||
| Effect of foreign exchange rate changes on cash and cash equivalents | 679 | (4) | ||||||||
| (Decrease) Increase in cash and cash equivalents | (44,750) | 869 | ||||||||
| Cash and cash equivalents, beginning of period | 104,875 | 49,859 | ||||||||
| Cash and cash equivalents, end of period | 60,125 | 50,728 | ||||||||
SOURCE: Avigilon Corporation
Investor relations:
Craig Armitage, TMX Equicom
T: (416) 815-0700 ext. 278
[email protected]
Media relations:
Stephanie Von Zuben, Avigilon Corporation
T: (604) 629-5182, Ext 2206
[email protected]
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