Avigilon Corporation Announces Third Quarter 2013 Results

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."

Financial Review

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.

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, 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.

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 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.

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. 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.

Avigilon Corporation
Consolidated income statement
(Unaudited)
			Three months ended							Nine months ended
			September 30,							September 30,
			2013		2012					2013	2012
			$		$					$	$
Sales			51,157		25,508					122,400	67,612
Cost of sales			(24,006)		(12,542)					(58,154)	(34,493)
			27,151		12,966					64,246	33,119
Operating expenses
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
			16,190		9,492					44,877	26,997
Operating income			10,961		3,474					19,369	6,122
Other income (expense)
Interest and other, net			227		16					286	65
Foreign exchange gain (loss)			151		(498)					341	(542)
			378		(482)					627	(477)
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)
Net income			8,622		2,164					14,811	4,123
Earnings per share
Basic			0.22		0.07					0.38	0.13
Diluted			0.21		0.06					0.37	0.12
Weighted average number of shares outstanding
Basic			39,973		32,710					39,114	31,713
Diluted			41,370		36,436					40,315	34,754
Consolidated statements of other comprehensive income (Unaudited)
				Three months ended						Nine months ended
				September 30,						September 30,
				2013		2012				2013	2012
				$		$				$	$
Net income				8,622		2,164				14,811	4,123
Income (loss) on translation of foreign subsidiaries				34		-				(14)	-
Total comprehensive income				8,656		2,164				14,797	4,123

Avigilon Corporation
Consolidated statements of financial position (Unaudited)
			September 30, 2013			December 31, 2012
			$			$
Assets
Current assets
	Cash and cash equivalents		34,209			49,859
	Trade and other receivables		30,221			18,453
	Inventories		16,660			11,906
	Prepaid expenses		1,622			1,283
			82,712			81,501
Non-current assets
	Property and equipment		6,927			3,669
	Intangible assets		285			43
	Deposits and prepaid expenses		369			613
	Deferred tax assets		904			1,145
	Goodwill		17,480			-
			108,677			86,971
Liabilities
Current liabilities
	Trade and other payables		17,417			15,572
	Derivative financial instruments		158			-
	Short-term leasehold incentive		149			109
			17,724			15,681
Non-current liabilities
	Long-term leasehold incentive		287			398
			18,011			16,079
Shareholders' equity
Capital stock			70,769			66,559
Equity compensation reserve			4,430			3,663
Accumulated other comprehensive loss			(14)			-
Surplus			15,481			670
			90,666			70,892
			108,677			86,971

Avigilon Corporation
Consolidated statements of changes in equity (Unaudited)
						Equity				Accumulated other		Total
		Capital Stock				compensation		Surplus/		comprehensive		shareholders'
		Shares		Amount		reserve		(Deficit)		loss		equity
				$		$		$		$		$
January 1, 2012		31,021,287		37,251		4,099		(6,499)		-		34,851
Net income		-		-		-		4,123		-		4,123
Share issue costs		-		(1,732)		-		-		-		(1,732)
Share-based payments		-		-		557		-		-		557
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
Net income		-		-		-		14,811		-		14,811
Translation of foreign subsidiaries		-		-		-		-		(14)		(14)
Share-based payments		-		-		2,317		-		-		2,317
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

Avigilon Corporation
Consolidated statements of cash flows (Unaudited)
				Three months ended September 30,				Nine months ended September 30,
				2013		2012		2013		2012
				$		$		$		$
Cash flows from operating activities
	Net income for the period			8,622		2,164		14,811		4,123
	Adjustments for non-cash items
		Depreciation		448		234		1,044		621
		Lease incentives amortized		(22)		(15)		(70)		(44)
		Write off of intangible assets		-		-		45		-
		Write off of property and equipment		-		20		-		20
		Share-based payments		880		333		2,316		557
		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		-
		Interest income		(80)		(16)		(312)		(65)
				11,823		3,362		21,442		6,840
	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

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]