Avigilon Corporation recently announced its financial results for the three and six months ended June 30, 2014. All figures are stated in Canadian dollars unless otherwise noted.
August 13, 2014 By Staff
Second Quarter 2014 Financial Highlights
– Revenue was $65.2 million, an increase of 66% over Q2 2013 revenue of $39.2 million.
– Gross margin percentage was 55%, up from 53% a year earlier.
– Adjusted EBITDA was $8.7 million, a 61% increase over Q2 2013 Adjusted EBITDA of $5.4 million.
– Net income was $2.8 million, compared with net income of $3.4 million in Q2 2013.
– Adjusted Earnings* was $5.7 million, a 49% increase over Q2 2013 Adjusted Earnings of $3.8 million.
– Fully Diluted Adjusted Earnings Per Share* of $0.12, compared with $0.10 in Q2 2013.
“It was another quarter of profitable growth for Avigilon, highlighted by record revenue and increased EBITDA, while we made significant investments for future growth,” said Alexander Fernandes, founder, president, CEO and chairman of the Board of Avigilon. “At our current annualized run rate, we are more than halfway to our target of $500 million by the end of 2016. To achieve this target, we are continuing our successful strategy of expanding our sales team, enhancing marketing and brand awareness, and increasing research and development activities. With a view to augmenting our organic growth, we continue to evaluate acquisitions of complementary technologies in the security space.”
Avigilon reported Q2 2014 record revenue of $65.2 million, an increase of 66%, or $26.0 million, compared to revenue of $39.2 million in Q2 2013. Revenue growth continues to reflect increased product sales 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 ranging up to 123% in the Company’s six target geographic regions.
Gross margin was $36.0 million in Q2 2014 (55% of revenue), compared with $20.7 million (53% of revenue) in Q2 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.
Sales and marketing expenses in Q2 2014 were $18.1 million, an increase of 69% compared to $10.7 million in Q2 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 Q2 2014, sales and marketing expenses represented 28% of revenue, compared with 27% in Q2 2013.
Research and development (R&D) expenses, net of related income tax credits and capitalized development costs, were $4.4 million in Q2 2014, compared to $2.3 million in Q2 2013. Gross R&D spend was $6.4 million in Q2 2014, a $3.6 million increase compared with $2.8 million in Q2 2013. The growth in spending is consistent with the Company’s plan to increase its R&D 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) in Q2 2014 were $7.8 million, compared with $3.4 million in Q2 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 in Q2 2014 also include $0.7 million in business acquisition-related costs. The Company expects its administrative expenses to increase in the near term as it continues to expand infrastructure to support planned growth, but believes these expenses will increase at a slower rate than revenue.
Adjusted EBITDA increased 61% year-over-year to $8.7 million in Q2 2014, compared with $5.4 million in Q2 2013. The year-over-year improvement largely reflects the Company’s increase in revenue and improved gross margin.
Net income for Q2 2014 was $2.8 million, compared with net income of $3.4 million in Q2 2013. Net income for Q2 2014 was impacted by a foreign exchange loss of $1.9 million, compared with a $0.3 million gain in the same period last year, and $1.5 million in acquisitions related expenses.
Removing the effects of foreign exchange and acquisition related expenses, Adjusted Earnings increased 49% year-over-year to $5.7 million in Q2 2014, compared with $3.8 million in Q2 2013.
Earnings Per Share were $0.06 (basic and diluted) for Q2 2014, compared to $0.09 (basic) and $0.08 (diluted) a year earlier. Fully Diluted Adjusted Earnings Per Share were $0.12 in Q2 2014, compared with $0.10 in Q2 2013.
In 2014, Avigilon plans to continue to invest significantly to expand sales reach, accelerate innovation and build brand awareness, which management believes will contribute to further revenue growth. In the short term, however, as the necessary investments are incurred in advance of associated revenue, these initiatives are expected to put pressure on the Company’s Adjusted EBITDA and net income.
As at June 30, 2014, Avigilon had working capital of $208.8 million, including cash and cash equivalents of $156.7 million. The weighted average number of common shares outstanding for the quarter was 46.2 million basic and 47.0 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 $100.0 million.
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