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Avigilon Corporation Reports First Quarter 2015 Results - Q1 Revenue Up 35% to $75.4 Million, Net Income Up 42%
Wednesday, May 6, 2015Company Profile | Follow Company
Vancouver, BC, May 6, 2015--(T-Net)--Avigilon Corporation (TSX: AVO), a leading global provider of end-to-end security solutions, today reported financial results for the three months ended March 31, 2015. All figures are in Canadian dollars unless otherwise stated.
First Quarter 2015 Financial Highlights
“Avigilon delivered strong revenue growth and record gross margin in the first quarter, a testament to our competitive differentiation and proven business model” said Alexander Fernandes, Avigilon's Founder, President, Chief Executive Officer, and Chairman of the Board. “We also continued to make substantial investments in the business to drive ongoing growth, as we remain committed to achieving our stated goal of $500 million in annual run-rate revenue by the end of 2016.”
Summary of First Quarter 2015 Financial Results
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Three Months Ending |
Trailing Twelve Months Ending |
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(In thousands of Canadian dollars except margin and per share amounts) |
Q1 2015 |
Q1 2014 |
% Change |
Q1 2015 |
Q1 2014 |
% Change |
|
(March 31, 2015) |
(March 31, 2014) |
|
(March 31, 2015) |
(March 31, 2014) |
|
|
(Unaudited) |
(Unaudited) |
|
(Unaudited) |
(Unaudited) |
|
|
|
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Revenue |
75,421 |
55,750 |
35% |
291,082 |
202,067 |
44% |
Gross Margin |
44,739 |
31,797 |
41% |
166,650 |
112,179 |
49% |
Gross Margin percentage |
59% |
57% |
NA |
57% |
56% |
NA |
Total Operating Expenses |
39,999 |
23,599 |
69% |
132,358 |
80,190 |
65% |
Adjusted EBITDA |
11,233 |
11,521 |
-2% |
53,994 |
41,375 |
30% |
Adjusted EBITDA Margin |
15% |
21% |
NA |
19% |
20% |
NA |
Net Income (IFRS) |
11,061 |
7,769 |
42% |
38,427 |
26,527 |
45% |
Adjusted Earnings |
7,870 |
8,375 |
-6% |
36,673 |
29,425 |
25% |
Basic Earnings Per Share (IFRS) |
0.24 |
0.18 |
33% |
0.83 |
0.65 |
28% |
Diluted Earnings Per Share (IFRS) |
0.23 |
0.17 |
35% |
0.81 |
0.63 |
29% |
Fully Diluted Adjusted Earnings Per Share |
0.17 |
0.19 |
-11% |
0.78 |
0.70 |
11% |
Detailed Financial Review
Avigilon reported Q1 2015 revenue of $75.4 million, an increase of 35% over revenue of $55.8 million in Q1 2014. Revenue growth for Q1 2015 reflects increased product sales worldwide, driven by greater customer adoption in existing markets, further penetration of new target regions and sales of new products. In Q1 2015, Avigilon generated year-over-year sales growth between 14% and 47% in five of the Company's target geographic regions, and saw sales for the United Kingdom decrease by 8%.
Gross profit was $44.7 million in Q1 2015 (59% of revenue), compared with $31.8 million (57% of revenue) in Q1 2014. The year-over-year increase in gross profit in Q1 2015 largely reflects the favourable impact of foreign exchange gains as well as the ongoing effects of greater purchasing power, economies of scale, product mix, and improved manufacturing efficiencies. The Company has historically experienced variability in quarter-to-quarter gross margin percentage.
Sales and marketing expenses in Q1 2015 were $20.9 million, an increase of 72% compared with $12.2 million in Q1 2014. The increase in Q1 2015 reflects significant investments to expand the Company's global sales and marketing teams and initiatives, which management believes will drive continued revenue growth. In Q1 2015, sales and marketing expenses represented 28% of revenue, compared with 22% of revenue in Q1 2014.
Research and development (“R&D”) expenses, net of related income tax credits and capitalized development costs, were $1.7 million in Q1 2015, compared with $2.7 million in Q1 2014. Gross R&D spend was $7.3 million in Q1 2015 compared with $5.0 million in Q1 2014, an increase of 47%. The increase in gross R&D spend is consistent with the Company's ongoing plan to further enhance and expand upon its product offerings.
General and administrative (“G&A”) expenses in Q1 2015 were $13.2 million, compared with $7.4 million in Q1 2014, an increase of 80%. The increase is primarily due to additional personnel and their related expenses, including new headcount in customer support, human resources, information technology, facilities, finance and legal. The Company expects its G&A expenses to increase in the near term as it continues to invest in infrastructure to support planned growth.
Amortization and depreciation in Q1 2015 was $4.1 million, compared with $1.4 million in Q1 2014. The increase is primarily due to the amortization of intangible assets acquired from ObjectVideo, Inc. and four other unrelated vendors.
Total operating expenses for Q1 2015 were $40.0 million, compared with $23.6 million in Q1 2014, an increase of 69%. Operating expenses include $3.0 million in business acquisition-related and non-recurring legal expenses, including amortization of acquired intangible assets, compared with $1.5 million in Q1 2014.
Adjusted EBITDA decreased 2% year-over-year to $11.2 million in Q1 2015, compared with $11.5 million in Q1 2014. The year-over-year decrease in Q1 2015 reflects increased spend for future growth.
Net income for Q1 2015 increased 42% year-over-year to $11.1 million, compared with $7.8 million in Q1 2014. Net income for Q1 2015 was positively impacted by a foreign exchange gain of $8.8 million and negatively impacted by $3.0 million in business acquisition-related and non-recurring legal expenses, including amortization of acquired intangible assets. Earnings Per Share in Q1 2015 were $0.24 (basic) and $0.23 (diluted), compared with $0.18 (basic) and $0.17 (diluted) in Q1 2014.
Adjusted Earnings for Q1 2015 decreased 6% year-over-year to $7.9 million, compared with $8.4 million in Q1 2014. Fully Diluted Adjusted Earnings Per Share were $0.17 in Q1 2015, compared with $0.19 in Q1 2014.
As at March 31, 2015, Avigilon had working capital of $122.6 million, including cash and cash equivalents of $50.1 million. The weighted average number of common shares issued and outstanding for the quarter was 46.6 million basic and 47.6 million diluted. The Company's primary use of cash-on-hand in Q1 2015 was for the acquisition of patents from third parties.
On April 7, 2015, the Company entered into a new multi-tranche USD$200 million senior secured syndicated credit facility (the “Credit Facility”). The Credit Facility has a three year term and includes a USD$100 million multi-currency revolving acquisition facility (the “Acquisition Facility”), a USD$60 million multi-currency revolving line, and a USD$40 million real estate term loan. The Company has drawn USD$80.3 million from the Acquisition Facility in order to retroactively fund the December 17, 2014 acquisition of the entire patent portfolio and the patent licensing program of ObjectVideo, Inc. The initial draw will replenish and increase the cash and cash equivalents balance by approximately $100 million.
Outlook
Avigilon plans to continue executing on its successful strategy of delivering strong annual year-over-year revenue growth while maintaining growth in profit. The Company believes market share consolidation across the industry will continue. The Company remains on track towards an annual revenue run rate goal of $500 million by the end of 2016. To achieve this growth, Avigilon plans to invest globally in all departments of the Company, and expects operating expenses as a percentage of revenue to increase modestly in 2015, as they did in 2014.
Conference Call
This news release is qualified in its entirety by the Company's condensed consolidated interim financial statements for the three months ended March 31, 2015 and 2014 and the associated Management's Discussion & Analysis respecting the same period, which 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/.
*Non-IFRS Measures
Management uses certain non- International Financial Reporting Standards (“IFRS”) measures that it believes are useful to investors in evaluating the performance and results of the Company. The term “Adjusted EBITDA” refers to earnings before deducting interest, taxes, depreciation, amortization, foreign exchange gain or loss, business acquisition-related costs, non-recurring legal costs and share-based payments. Management believes that Adjusted 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 and non-recurring items provides a useful measure of the Company's performance. The term “Adjusted Earnings” and “Adjusted Earnings Per Share” refers to net earnings and earnings per share, respectively, before share-based payments, foreign exchange gain or loss, business acquisition-related costs, non-recurring legal costs, amortization of acquired intangibles and related tax effects. Please refer to the reconciliation table that accompanies the financial statements discussed in this press release and which is included in the Company's Management's Discussion & Analysis for Q1 2015. Adjusted EBITDA, Adjusted Earnings and Adjusted Earnings Per Share do not have standardized meanings prescribed by IFRS and are not necessarily comparable to similar measures provided by other companies.
Investors are cautioned that Adjusted EBITDA, Adjusted Earnings 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.
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