Avigilon Corporation Announces Fourth Quarter and Year-End 2013 Results

VANCOUVER, March 4, 2014 /CNW/ - Avigilon Corporation ("Avigilon" or the "Company") (TSX: AVO), a leader in high-definition ("HD") and megapixel surveillance systems, today announced its financial results for the three and 12 months ended December 31, 2013.  All figures are stated in Canadian dollars unless otherwise noted.

2013 Financial Highlights

• Revenue was $178.3 million, an increase of 78% over 2012 revenue of $100.3 million.
• Gross margin was 54%, up from 49% a year earlier.
• EBITDA¹ was $34.5 million, a 172% increase over 2012 EBITDA of $12.7 million.
• Fully diluted Adjusted Earnings Per Share¹ of $0.57, compared with $0.22 in 2012.
• Net income rose to $21.6 million from net income of $7.2 million in 2012.

Fourth Quarter 2013 Financial Highlights

• Revenue was $55.9 million, an increase of 71% over Q4 2012 revenue of $32.7 million.
• Gross margin was 58%, up from 50% a year earlier.
• EBITDA was $11.6 million, a 118% increase over Q4 2012 EBITDA of $5.3 million.
• Fully diluted Adjusted Earnings Per Share of $0.17, compared with $0.08 in Q4 2012
• Net income rose to $6.7 million, compared with net income of $3.0 million in Q3 2012.

"The fourth quarter was our highest revenue quarter to date and contributed to exceptional revenue and earnings growth for 2013," said Alexander Fernandes, founder, president, CEO and chairman of the Board of Avigilon. "These results reflect the impact of the growth investments we made in prior periods to expand our operations, particularly within sales, marketing and product development. The year was also highlighted by two strategic technology acquisitions, which add complementary products and technology to our industry leading, end-to-end HD surveillance solution and allow us to expand our business into other segments of the global security market."

Financial Review

Avigilon reported 2013 revenue of $178.3 million, an increase of 78%, or $78 million, compared to revenue of $100.3 million for 2012. 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 introduced during the year. Revenue was strong across all regions, with year-over-year sales growth of between 63% and 98% in all six of the Company's target geographic regions.

Gross margin was $96.7 million in 2013 (54% of revenue), compared with $49.4 million (49% of revenue) in 2012. The year-over-year increase in gross margin percentage reflects the ongoing effects of greater purchasing power, economies of scale and improved manufacturing efficiencies. Although the Company's gross margin increased over 2012, management does not expect significant gross margin expansion in the near term due to the Company's focus on market share gain.

Selling and marketing expenses in 2013 were $41.5 million, a $16.5 million increase compared to $25.0 million in 2012. The increase reflects investments to continue to expand the Company's global sales team and brand awareness, which management believes will drive continued revenue growth. 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, were $9.1 million for 2013, a $4.1 million increase compared to $5.0 million in 2012. Gross R&D spend was $11.8 million in 2013, compared to $6.4 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, in dollars and as a percentage of revenue, to support new product development.

General and administrative expenses (G&A) for 2013 were $18.2 million, compared with $8.9 million in 2012. 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 2013 also include additional expenses related to the Company's acquisition activities during the year. 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 was $34.5 million in 2013, compared with $12.7 million in 2012. The year-over-year improvement largely reflects the Company's increase in revenue and improved gross margin.

Net income for 2013 was $21.6 million, up by $14.4 million, compared with net income of $7.2 million in 2012. Earnings per share were $0.54 (basic) and $0.53 (diluted) for 2013, compared to $0.22 (basic) and $0.20 (diluted) a year earlier.  Fully diluted Adjusted Earnings Per Share were $0.57 in 2013 compared with $0.22 in 2012.

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 annual MD&A), which the 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 many of these initiatives will be undertaken in the early part of the year, the impact on EBITDA and net earnings will be more pronounced in the first half of the year, with improvements expected in the latter half as the initiatives begin to generate additional revenue.

As at December 31, 2013, Avigilon had cash and cash equivalents of $104.9 million, and 39,625,401 basic and 40,709,249 diluted shares outstanding.

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 Tuesday, March 4, 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 41709815.

¹Non-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 2013. 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 (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 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 November 20, 2013 and of our Annual Information Form dated March 25, 2013 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
		Year ended
		December 31	December 31
		2013	2012
		$	$
Sales		178,344	100,262
Cost of sales		(81,613)	(50,844)
		96,731	49,418
Operating expenses
	Selling and marketing	41,453	24,984
	Research and development	9,115	5,044
	General and administrative	18,245	8,919
		68,813	38,947
Operating income		27,918	10,471
Other income (expenses)
	Interest and other, net	411	177
	Foreign exchange gain (loss)	1,403	(193)
		1,814	(16)
Income before income taxes		29,732	10,455
Current tax expense		(8,998)	(2,292)
Deferred tax income (expense)		822	(994)
Net Income		21,556	7,169
Earnings per share
	Basic	0.54	0.22
	Diluted	0.53	0.20
Weighted average number of share outstanding (000's)
	Basic	39,625	32,994
	Diluted	40,709	35,223
Consolidated statements of other comprehensive income
		Year ended
		December 31	December 31
		2013	2012
		$	$
Net Income		21,556	7,169
Items that may subsequently be reclassified to income:
	Gains on translation of foreign subsidiary, net of tax	547	-
		22,103	7,169

(Canadian Dollar amounts in 000's except per share amounts)

 

Avigilon Corporation
Consolidated statements of financial position
		Year ended
		December 31	December 31
		2013	2012
		$	$
Assets
Current assets
	Cash and cash equivalents	104,875	49,859
	Trade and other receivables	31,316	18,453
	Inventories	19,444	11,906
	Prepaid expenses	1,467	1,283
		157,102	81,501
Non-current assets
	Property and equipment	8,568	3,669
	Goodwill	6,558	-
	Intangible assets	14,791	43
	Deposits	586	613
	Deferred income tax	1,334	1,145
		188,939	86,971
Liabilities
Current Liabilities
	Trade and other payables	20,628	15,572
	Short-term lease incentives	190	109
		20,818	15,681
Non-current liabilities
	Deferred tax liability	1,740	-
	Long-term leasehold incentives	673	398
		23,231	16,079
Shareholders' equity
Capital stock		137,383	66,559
Equity compensation reserve		5,552	3,663
Accumulated other comprehensive income		547	-
Surplus		22,226	670
		165,708	70,892
		188,939	86,971

(Canadian Dollar amounts in 000's except per share amounts)

 

Avigilon Corporation
Consolidated statements of changes in equity
						Accumulated
				Equity		Other	Total
		Capital Stock		Compensation	Surplus/	Comprehensive	Shareholders'
		Shares	Amount	Reserve	(Deficit)	Income	Equity
			$	$	$	$	$
Balance, January 1, 2012		31,021,287	37,251	4,099	(6,499)	-	34,851
Net income and total
	Comprehensive income	-	-	-	7,169	-	7,169
Share-based payments		-	-	1,178	-	-	1,178
Share issue costs		-	(1,745)	-	-	-	(1,745)
Deferred income tax effect on
	share issuance costs	-	436	-	-	-	436
Issuance of common stock		6,684,512	29,003	-	-	-	29,003
Transfer to capital stock on
	Exercise of options	-	1,614	(1,614)	-	-	-
Balance, December 31, 2012		37,705,799	66,559	3,663	670	-	70,892
Net income		-	-	-	21,556	-	21,556
Share based payments		-	-	3,600	-	-	3,600
Gain on translation of foreign
	subsidiary	-	-	-	-	621	621
Share issue costs		-	(3,901)	-	-	-	(3,901)
Deferred income tax effect on
	share issuance costs	-	1,000	-	-	-	1,000
Deferred income tax effect on
	intercompany loan foreign exchange	-	-	-	-	(74)	(74)
Issuance of common stock		5,249,280	72,014	-	-	-	72,014
Transfer of capital stock on
	Exercise of options	-	1,711	(1,711)	-	-	-
Balance, December 31, 2013		42,955,079	137,383	5,552	22,226	547	165,708

(Canadian Dollar amounts in 000's except per share amounts)

 

Avigilon Corporation
Consolidated statements of cash flows
			Year ended
			December 31	December 31
			2013	2012
			$	$
Cash flows from operating activities
	Net income for the year		21,556	7,169
	Adjustments for non-cash items:
		Amortization	1,073	43
		Depreciation	1,534	831
		Lease incentives recognized	5	239
		Lease incentives amortized	(128)	(70)
		Share-based payments	3,600	1,178
		Deferred tax expense (income)	(822)	994
		Current tax expense	8,998	2,292
		Investment tax credits	(2,301)	(1,366)
		Unrealized foreign exchange gain	(886)	(198)
		Change in fair value of derivative financial assets	-	88
		Interest income	(437)	(177)
			32,192	11,023
	Net change in working capital items		(16,450)	2,352
	Interest received		401	177
	Income taxes paid		(4,840)	(1,226)
Net cash provided by operating activities			11,303	12,326
Cash flows from investing activities
	Acquisition net of cash acquired		(17,609)	-
	Purchase of property and equipment		(6,201)	(2,231)
	Disposal of property and equipment		-	33
	Purchase of intangible assets		(982)	(39)
Net cash used in investing activities			(24,792)	(2,237)
Cash flows from financing activities
	Issuance of common stock		72,014	29,003
	Share issuance costs		(3,731)	(1,746)
Net cash provided by financing activities			68,283	27,257
Effect of foreign exchange rate changes on cash			222	95
Increase in cash and cash equivalents			55,016	37,441
Cash and cash equivalents, beginning of the year			49,859	12,418
Cash and cash equivalents, end of the year			104,875	49,859

(Canadian Dollar amounts in 000's except per share amounts)

 

SOURCE: Avigilon Corporation

Investor relations:
Craig Armitage, TMX Equicom
T: [phone] ext. 278
[email protected] 

Media relations:
Stephanie Von Zuben, Avigilon Corporation
T: [phone], Ext 2206 
[email protected]