OREANDA-NEWS.  Avigilon Corporation ("Avigilon" or the "Company") (TSX: AVO), trusted provider of business intelligence and security solutions, today reported financial results for the three and nine months ended September 30, 2015. All figures are in Canadian dollars unless otherwise stated.

Third Quarter 2015 Financial Highlights

  • Company records set in revenue, Adjusted EBITDA*, Adjusted Earnings*, and Fully Diluted Adjusted Earnings Per Share*.
  • Revenue of $95.1 million, a 34% increase over Q3 2014 revenue of $71.0 million.
  • Gross margin percentage was 57%, consistent with the same period in the prior year.
  • Adjusted EBITDA of $18.9 million, a 15% increase over Q3 2014 Adjusted EBITDA of $16.4 million.
  • Adjusted Earnings of $12.2 million, a 9% increase over Q3 2014 Adjusted Earnings of $11.2 million.
  • Fully Diluted Adjusted Earnings Per Share were $0.27, a 13% increase over Q3 2014 Fully Diluted Adjusted Earnings Per Share of $0.24.
  • Trailing 12 months revenue ending Q3 2015 increased by 37% over the trailing 12 months revenue ending Q3 2014, gross margin percentage was 58%, and Adjusted EBITDA margin was 18%.

"We are pleased to report record setting revenue, Adjusted EBITDA, Adjusted Earnings, and Adjusted Earnings Per Share this quarter," said Alexander Fernandes, Avigilon's Founder, President, Chief Executive Officer and Chairman of the Board. "Avigilon's business fundamentals are strong, and we are well on track to achieve our stated goal of $500 million in annual run-rate revenue by the end of 2016."

Summary of Third Quarter 2015 Financial Results

     
 

Three Months Ended

Trailing Twelve Months Ended

(In thousands of Canadian dollars except per share

amounts unless otherwise stated)

Q3 2015

Q3 2014

% Change

Q3 2015

Q3 2014

% Change

 * Non-IFRS

(Sep 30, 2015)

(Sep 30, 2014)

  

(Sep 30, 2015)

(Sep 30, 2014)

  
 

(Unaudited)

(Unaudited)

  

(Unaudited)

(Unaudited)

  
             

Revenue

95,062

70,972

34%

339,785

247,846

37%

Gross Margin

54,048

40,129

35%

196,564

140,457

40%

Gross Margin percentage

57%

57%

NA

58%

57%

NA

Total Operating Expenses

42,820

28,457

50%

160,969

106,251

51%

Total Adjusted Operating Expenses*

37,703

26,613

42%

144,881

99,918

45%

Adjusted EBITDA*

18,887

16,381

15%

62,723

49,018

28%

Adjusted EBITDA Margin*

20%

23%

NA

18%

20%

NA

Net Income

9,179

11,622

-21%

35,463

28,914

23%

Adjusted Earnings*

12,189

11,183

9%

39,175

33,204

18%

Basic Earnings Per Share

0.21

0.25

-16%

0.78

0.65

20%

Diluted Earnings Per Share

0.20

0.25

-20%

0.75

0.64

17%

Fully Diluted Adjusted Earnings Per Share*

0.27

0.24

13%

0.84

0.74

14%

Detailed Financial Review

Avigilon reported Q3 2015 revenue of $95.1 million, an increase of 34% over revenue of $71.0 million in Q3 2014. Revenue growth for Q3 2015 reflects increased product sales driven by greater customer adoption in existing markets, further penetration of new target regions and sales of new products. On a constant currency basis, revenue in Q3 increased 16% year-over-year. In Q3 2015 revenue grew year-over-year in all regions in which we operate. Revenue in the United States grew 45%, EMEA grew 13%, Canada grew 28%, United Kingdom grew 5%, Asia Pacific grew 52%, and Latin America grew 38%.

Gross margin was $54.0 million in Q3 2015 (57% of revenue), compared with $40.1 million (57% of revenue) in Q3 2014. In Q3 2015, year-over-year gross margin percentage was positively impacted by a combination of product mix, foreign exchange, and greater economies of scale, offset by costs related to our new US manufacturing facility.

Sales and marketing expenses in Q3 2015 were $22.6 million, an increase of 54% compared with $14.7 million in Q3 2014. The increase in Q3 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 Q3 2015, sales and marketing expenses represented 24% of revenue, compared with 21% of revenue in Q3 2014.

Research and development ("R&D") expenses, net of related investment tax credits and capitalized development costs, were $2.9 million in Q3 2015, compared with $3.0 million in Q3 2014. Gross R&D spend was $7.2 million (8% of revenue) in Q3 2015 compared with $6.5 million in Q3 2014 (9% of revenue), an increase of 11%. The increase in gross R&D spend is consistent with the Company's ongoing growth plan to further enhance and expand upon its product offerings.

General and administrative ("G&A") expenses in Q3 2015 were $12.3 million (13% of revenue), compared with $9.0 million (13% of revenue) in Q3 2014, an increase of 37%. The increase is primarily due to additional personnel and their related expenses to support business growth. The Company expects its G&A expenses to increase in the near term as it continues to invest in infrastructure to support planned growth, but believes these expenses will increase at a slower rate than revenue over time.

Amortization and depreciation in Q3 2015 was $5.0 million, compared with $1.8 million in Q3 2014. The increase is primarily driven by amortization from acquired intangible assets and capitalized development costs.

Total operating expenses for Q3 2015 were $42.8 million, compared with $28.5 million in Q3 2014, an increase of 50%. Operating expenses include $5.1 million in Q3 2015, compared with $1.8 million in Q3 2014, of costs related to business acquisitions, financing, restructuring, and non-recurring legal expenses, and amortization of acquired intangible assets.

Adjusted EBITDA increased 15% year-over-year to $18.9 million in Q3 2015, compared with $16.4 million in Q3 2014. The year-over-year improvement in Q3 2015 largely reflects increases in sales volume and gross margin.

Net income for Q3 2015 decreased 21% year-over-year to $9.2 million, compared with $11.6 million in Q3 2014. Net income for Q3 2015 was negatively impacted by interest expense of $0.5 million and $5.1 million in business acquisition-related, financing, restructuring, and non-recurring legal expenses, and amortization of acquired intangible assets, compared to $1.8 million in similar costs in the prior year. Earnings Per Share in Q3 2015 were $0.21 (basic) and $0.20 (diluted), compared with $0.25 (basic and diluted) in Q3 2014.

Adjusted Earnings for Q3 2015 increased 9% year-over-year to $12.2 million, compared with $11.2 million in Q3 2014. Fully Diluted Adjusted Earnings Per Share were $0.27 in Q3 2015, compared with $0.24 in Q3 2014.

As at September 30, 2015, Avigilon had working capital of $154.3 million, including cash and cash equivalents of $81.1 million. Common shares issued and outstanding as at September 30, 2015 were 44,859,778.  The weighted average number of common shares issued and outstanding for the quarter were 44.7 million basic and 45.5 million diluted. The Company's primary use of cash-on-hand in Q3 2015 was $8.4 million in capital expenditures and $5.2 million repayment of long-term debt.

Financial 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 remains on track toward its annual run-rate revenue goal of $500 million by the end of 2016.

For the full year 2015, Avigilon expects the following:

  • Revenue between $358 million and $368 million
  • Non-IFRS Adjusted Earnings Per Share between $0.76 and $0.82      
  • Effective tax rate between 28% and 30%         
  • Capital expenditures excluding the purchase of our new global headquarters between $30 million and $35 million

About Avigilon

Avigilon Corporation, trusted provider of business intelligence and security solutions, develops, manufactures, and sells video analytics, network video management software and hardware, surveillance cameras, and access control.