Avigilon Corporation Announces Year-end and Fourth Quarter 2012 Results

VANCOUVER, Feb. 28, 2013 /CNW/ - Avigilon Corporation (TSX: AVO), a leader in high-definition (HD) surveillance systems, today announced its financial results for the three and 12 months ended December 31, 2012.  All figures are stated in Canadian dollars unless otherwise noted.

2012 Financial Highlights

• Revenue was $100.3 million, an increase of 67% from $60.0 million in 2011.
• Gross margin was 49%, up from 46% in 2011.
• EBITDA was $12.7 million, a 92% improvement over $6.6 million in 2011. (See "Non-IFRS Measures" below.)
• Net income was $7.2 million, an 87% increase compared to $3.8 million in 2011.

Fourth Quarter 2012 Financial Highlights

• Revenue was $32.6 million, an increase of 73% over Q4 2011 revenue of $18.8 million.
• Gross margin was 50%, in line with 50% a year earlier.
• EBITDA was $5.3 million, a 120% improvement over Q4 2011 EBITDA of $2.4 million. (See "Non-IFRS Measures" below.)
• Net income was $3.0 million, an 88% increase compared with net income of $1.6 million in Q4 2011.

"We are very pleased with our 2012 performance," said Alexander Fernandes, president and chief executive officer at Avigilon. "We delivered substantial top line improvements and nearly doubled both EBITDA and net income, while also strategically investing in the business to support our ongoing growth plans. There are significant growth opportunities in the worldwide surveillance market. As such, we remain highly focused on further expanding our global sales team, continuing to deliver innovative products and investing in marketing to build more brand awareness."

Financial Review

Avigilon reported 2012 annual revenue of $100.3 million, an increase of 67%, or $40.3 million, compared with revenue of $60 million for 2011. Revenue growth continues to be driven by a strong rise in product sales volumes worldwide, reflecting sales of new product offerings the Company introduced throughout 2012, entry into new global markets 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, particularly in areas where the Company expanded sales staff over the past year.

Gross margin was $49.4 million in 2012 (49% of revenue), compared with $27.5 million (46% of revenue) the previous year. 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 throughout the year, with the Company's near-term objective of rapid growth in revenue and market share, management does not expect significant additional margin growth through 2013.

Annual selling and marketing expenses were $25.0 million in 2012, a $10.7 million, or 75%, increase compared to $14.2 million in selling and marketing expenses in 2011. 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 earlier part of the year 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 $5.0 million for 2012, a $1.9 million, or 65%, increase compared to $3.1 million in 2011. Gross R&D spend was $6.4 million in 2012, compared to $4.0 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 continue to 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 for 2012 were $8.9 million, an increase of $4.5 million, or 102%, from $4.4 million in general and administrative expenses for 2011. 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 general and administrative expenses to increase in support of its continued growth plans. However, Avigilon believes these expenses will not increase in proportion to revenue growth.

EBITDA was $12.7 million in 2012, an increase of 92%, or $6.1 million, compared to $6.6 million in 2011. The year-over-year improvement primarily reflects increased revenue. 2012 net income was $7.2 million, up 100%, or $3.4 million, compared with net income of $3.8 million in 2011. Earnings per share were $0.22 (basic) and $0.20 (diluted) for 2012, compared to $0.20 (basic) and $0.14 (diluted) a year earlier.

As at December 31, 2012, Avigilon had cash and cash equivalents of $50 million, up from $12.4 million as at December 31, 2011.

At December 31, 2012, Avigilon had 37,705,799 basic and 41,857,199 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, February 28, 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 90516745.

Non-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
Consolidated statements of comprehensive income
For the years ended December 31, 2012 and 2011
(Expressed in thousands of Canadian dollars except number of shares and per share data)
			Year ended
			December 31,	December 31,
			2012	2011
			$	$
Sales			100,262	60,033
Cost of sales			(50,844)	(32,576)
			49,418	27,457
Operating expenses
	Selling and marketing		24,984	14,254
	Research and development		5,044	3,066
	General and administrative		8,919	4,402
			38,947	21,722
Operating income			10,471	5,735
Other income (expense)
	Accretion expense		-	(470)
	Interest and other, net		177	(93)
	Foreign exchange gain (loss)		(193)	311
			(16)	(252)
Income before income taxes			10,455	5,483
Current tax expense			(2,292)	(602)
Deferred tax expense			(994)	(1,052)
Net income and total comprehensive income			7,169	3,829
Earnings per share
	Basic		0.22	0.20
	Diluted		0.20	0.14
Weighted average number of shares outstanding (000's)
	Basic		32,994	19,234
	Diluted		35,223	30,770

Avigilon Corporation
Consolidated statements of financial position
As at December 31, 2012 and 2011
(Expressed in thousands of Canadian dollars except number of shares and per share data)
				December 31,	December 31,
				2012	2011
				$	$
Assets
Current assets
	Cash and cash equivalents			49,859	12,418
	Trade and other receivables			18,453	13,291
	Inventories			11,906	11,254
	Derivative financial instruments			-	88
	Prepaid expenses			1,283	605
	Investment tax credits			-	973
				81,501	38,629
Non-current assets
	Property and equipment			3,669	2,304
	Intangible assets			43	46
	Deposits and prepaid expenses			613	272
	Deferred tax assets			1,145	1,703
				86,971	42,954
Liabilities
Current liabilities
	Trade and other payables			15,572	7,765
	Short-term leasehold incentive			109	59
				15,681	7,824
Non-current liabilities
	Long-term leasehold incentive			398	279
				16,079	8,103
Shareholders' equity
Capital stock				66,559	37,251
Equity compensation reserve				3,663	4,099
Surplus (deficit)				670	(6,499)
				70,892	34,851
				86,971	42,954

Avigilon Corporation
Consolidated statements of changes in equity
For the years ended December 31, 2012 and 2011
(Expressed in thousands of Canadian dollars except number of shares and per share data)
			Equity		Total
	Common Stock		compensation		shareholders'
	Shares	Amount	reserve	Deficit	Equity
		$	$	$	$
Balance, January 1, 2011	17,248,202	9,559	3,753	(10,328)	2,984
Net income and total comprehensive income	-	-	-	3,829	3,829
Share issue costs	-	(3,022)	-	-	(3,022)
Share-based payments	-	-	346	-	346
Conversion of preferred shares	9,148,639	9,149	-	-	9,149
Issuance of common stock	4,624,446	20,810	-	-	20,810
Deferred income tax effect on share  issuance cost	-	755	-	-	755
Balance, December 31, 2011	31,021,287	37,251	4,099	(6,499)	34,851
Net income and total comprehensive income	-	-	-	7,169	7,169
Share issue costs	-	(1,745)	-	-	(1,745)
Share-based payments	-	-	1,178	-	1,178
Issuance of common stock	6,684,512	29,003	-	-	29,003
Transfer to capital stock on exercise of options	-	1,614	(1,614)	-	-
Deferred income tax effect on share  issuance cost	-	436	-	-	436
Balance, December 31, 2012	37,705,799	66,559	3,663	670	70,892

Avigilon Corporation
Consolidated statements of cash flows
For the years ended December 31, 2012 and 2011
(Expressed in thousands of Canadian dollars except number of shares and per share data)
				Year ended
				December 31,				December 31,
				2012				2011
				$				$
Cash flows from operating activities
	Net income for the year			7,169				3,829
	Adjustments for non-cash items
		Depreciation		874				428
		Lease incentives recognized		239				-
		Lease incentives amortized		(70)				(5)
		Write off of property and equipment		-				102
		Share-based payments		1,178				346
		Accretion expense		-				470
		Deferred tax expense		994				1,052
		Current tax expense		2,292				602
		Investment tax credits		(1,366)				(937)
		Unrealized foreign exchange (gain) loss		(198)				(156)
		Change in fair value of derivative financial asset		88				-
		Interest expense (income)		(177)				93
				11,023				5,824
	Movements in working capital
		(Increase) in trade and other receivables		(5,030)				(5,274)
		(Increase) in inventories		(652)				(5,947)
		(Increase) in prepaid expenses and deposits		(1,020)				(543)
		(increase) decrease in investment tax credits		997				(394)
		Increase in trade and other payables		8,057				3,127
	Net movements in working capital			2,352				(9,031)
	Interest (paid) received			177				(93)
	Income taxes paid			(1,226)				(134)
Net cash used in operating activities				12,326				(3,434)
Cash flows from investing activities
	Purchase of property and equipment			(2,231)				(1,306)
	Disposal of property and equipment			33				-
	Purchase of intangible assets			(39)				(52)
Net cash used in investing activities				(2,237)				(1,358)
Cash flows from financing activities
	(Repayment of) proceeds from bank loan			-				(1,760)
	Issuance of common stock			29,003				20,810
	Share issuance costs			(1,746)				(2,551)
	Dividends paid on redeemable preferred shares			-				(1,658)
Net cash provided by financing activities				27,257				14,841
Effect of foreign exchange rate changes on cash				95				39
Increase in cash				37,441				10,088
Cash, beginning of year				12,418				2,330
Cash, end of year				49,859				12,418

 

 

 

SOURCE: Avigilon Corporation

Investor relations:
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Media relations:
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