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 twelve months ended December 31, 2015. All figures are in Canadian dollars unless otherwise stated.

Fourth Quarter 2015 Financial Highlights

  • Record revenue, Adjusted EBITDA*, Adjusted Earnings*, and diluted Adjusted Earnings Per Share*
  • Revenue was $109.1 million, an increase of 37% over Q4 2014 revenue of $79.5 million
  • Gross margin was 56%, down from 58% a year earlier
  • Adjusted EBITDA was $20.8 million, a 21% increase over Q4 2014 Adjusted EBITDA of $17.2 million
  • Adjusted Earnings were $12.3 million, a 3% increase over Q4 2014 Adjusted Earnings of $11.9 million
  • Diluted Adjusted Earnings Per Share of $0.28, compared with $0.25 in Q4 2014

2015 Financial Highlights

  • Record revenue, Adjusted EBITDA, Adjusted Earnings, and diluted Adjusted Earnings Per Share
  • Revenue was $369.4 million, an increase of 36% over 2014 revenue of $271.4 million
  • Gross margin was 57%, consistent with 57% a year earlier
  • Adjusted EBITDA was $66.3 million, a 22% increase over 2014 Adjusted EBITDA of $54.3 million
  • Adjusted Earnings were $39.6 million, a 6% increase over 2014 Adjusted Earnings of $37.2 million
  • Diluted Adjusted Earnings Per Share of $0.86, compared with $0.80 in 2014

"We're pleased to report record-setting financial results for our 2015 fourth quarter and year," said Alexander Fernandes, Avigilon's Founder, President, Chief Executive Officer and Chairman of the Board. "We're very proud of our financial performance, and look forward to setting new records in 2016."

Summary of Fourth Quarter and Year-end 2015 Financial Results

     
 

Three Months Ended

 Twelve Months Ended

(In thousands of Canadian dollars except margin

and per share amounts)

Q4 2015

Q4 2014

% Change

2015

2014

% Change
 

(December 31, 2015)

(December 31, 2014)

  

(December 31, 2015)

(December 31, 2014)

  
 

(Unaudited)

(Unaudited)

  

(Unaudited)

(Unaudited)

  
             

Revenue

109,134

79,508

37%

369,411

271,411

36%

Gross Profit

61,152

45,738

34%

211,978

153,708

38%

Gross Margin

56%

58%

NA

57%

57%

NA

Total Operating Expenses

49,415

33,645

47%

176,739

115,958

52%

Adjusted EBITDA

20,824

17,217

21%

66,330

54,282

22%

Adjusted EBITDA Margin

19%

22%

NA

18%

20%

NA

Net Income (IFRS)

5,754

12,965

-56%

28,252

35,135

-20%

Adjusted Earnings

12,290

11,897

3%

39,568

37,178

6%

Basic Earnings Per Share (IFRS)

0.13

0.28

-54%

0.62

0.77

-19%

Diluted Earnings Per Share (IFRS)

0.13

0.27

-52%

0.61

0.76

-20%

Diluted Adjusted Earnings Per Share

0.28

0.25

12%

0.86

0.80

7%

Detailed Financial Review

Avigilon reported Q4 2015 revenue of $109.1 million, an increase of 37% over revenue of $79.5 million in Q4 2014. Revenue for 2015 of $369.4 million represents an increase of 36%, or $98.0 million, compared with revenue of $271.4 million in 2014. Revenue growth for both Q4 and the full year 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 2015, revenue was strong across all regions, with year-over-year sales growth between 2% and 49% in all six of the Company's target geographic regions.

Gross profit was $61.2 million in Q4 2015 (56% of revenue), compared with $45.7 million (58% of revenue) in Q4 2014. Gross profit was $212.0 million in 2015 (57% of revenue), compared with $153.7 million (57% of revenue) in 2014. As a percentage of revenue, gross margins in Q4 2015 decreased by 2% compared to the same period in 2014 due to costs related to our recently opened US manufacturing facility.

Sales and marketing expenses in Q4 2015 were $25.1 million, an increase of 42% compared with $17.7 million in Q4 2014. Sales and marketing expenses in 2015 were $90.7 million, an increase of 45% compared with $62.4 million in 2014. The increase in Q4 2015 and the full year 2015 reflects investments to expand the Company's global sales and marketing team and initiatives, which management believes will drive continued revenue growth. In Q4 2015 and the full year 2015, sales and marketing expenses represented 23% and 25% of revenue respectively, compared with 22% and 23% of revenue respectively in Q4 2014 and the full year 2014.

Research and development ("R&D") expenses, net of related income tax credits and capitalized development costs, were $5.7 million in Q4 2015, compared with $3.9 million in Q4 2014, and $13.6 million in 2015, compared with $13.9 million in 2014. Gross R&D spend was $9.7 million in Q4 2015 (9% of revenue), compared with $6.8 million in Q4 2014 (9% of revenue), an increase of 44%. Gross R&D spend was $31.5 million in 2015 (9% of revenue), compared with $24.7 million in 2014 (9% of revenue), an increase of 28%. The increase in 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 Q4 2015 were $13.5 million (12% of revenue), compared with $10.3 million in Q4 2014 (13% of revenue), an increase of 31%. G&A expenses in 2015 were $53.9 million (15% of revenue), compared with $33.3 million in 2014 (12% of revenue), an increase of 62%. 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 Q4 2015 and the full year 2015 were $5.1 million and $18.5 million respectively, compared with $1.8 million and $6.4 million respectively in 2014. The increase is driven by additions of acquired intangible assets and increased capitalized development costs.

Total operating expenses for Q4 2015 were $49.4 million, compared with $33.6 million in Q4 2014, an increase of 47%. Total operating expenses for 2015 were $176.7 million, compared with $116.0 million in 2014, an increase of 52%. The increase in operating expenses is driven by amortization of acquired intangible assets and investments to support growth.

Adjusted EBITDA increased 21% year-over-year to $20.8 million in Q4 2015, compared with $17.2 million in Q4 2014. Adjusted EBITDA increased 22% year-over-year to $66.3 million in 2015, compared with $54.3 million in 2014. The increase in Adjusted EBITDA largely reflects the Company's increase in sales volume.

Net income for Q4 2015 decreased 56% year-over-year to $5.7 million, compared with $13.0 million in Q4 2014. Net income for 2015 decreased 20% year-over-year to $28.3 million, compared with $35.1 million in 2014. Net income for Q4 2015 and for 2015 was impacted by: an increase in amortization and depreciation; a foreign exchange loss for Q4 2015 and a smaller foreign exchange gain for 2015 compared to the same periods in the prior year; and interest expense from long-term debt. Earnings Per Share in Q4 2015 were $0.13 (basic and diluted), compared with $0.28 (basic) and $0.27 (diluted) a year earlier. Earnings Per Share for 2015 were $0.62 (basic) and $0.61 (diluted) for 2015, compared with $0.77 (basic) and $0.76 (diluted) a year earlier.

Adjusted Earnings for Q4 2015 increased 3% year-over-year to $12.3 million, compared with $11.9 million in Q4 2014. Diluted Adjusted Earnings Per Share were $0.28 in Q4 2015, compared with $0.25 in Q4 2014. Adjusted Earnings for 2015 increased 6% year-over-year to $39.6 million, compared with $37.2 million in 2014. Diluted Adjusted Earnings Per Share were $0.86 in 2015, compared with $0.80 in 2014.

As at December 31, 2015, Avigilon had net working capital of $115.8 million, including cash and cash equivalents of $25.8 million. As at December 31, 2015, the Company had 43,231,653 common shares issued and outstanding. The weighted average number of common shares issued and outstanding for the 2015 year was approximately 45.4 million basic and approximately 46.2 million diluted. The Company's primary uses of cash-on-hand in 2015 were for: its acquisition of intangible assets, primarily related to US and international patents; repurchase of its common shares for cancellation under the Company's normal course issuer bid; costs related to implementing a new enterprise resource planning system; and additions to property, plant and equipment, primarily related to the purchase of an office building for our new global headquarters and completion of our US manufacturing facility.

Financial Outlook

Commencing with the release of our Q1 2016 financial statements, we will present our financial results in US dollars ("USD") instead of Canadian dollars. The change in presentation currency is intended to better reflect Avigilon's business activities and to improve investors' ability to compare the Company's financial results with other publicly traded industry participants. Accordingly, the following 2016 annual financial outlook is provided in USD, except for our annual run-rate revenue goal of CAD$500 million by the end of 2016.

Avigilon plans to continue executing on its successful strategy of delivering strong annual year-over-year revenue growth while remaining profitable. The Company expects to achieve its annual run-rate revenue goal of CAD$500 million by the end of 2016.

As of March 1, 2016, Avigilon expects the following for fiscal year 2016:

  • Revenue between USD$335 million and USD$365 million
  • Adjusted EBITDA margin between 15% and 20%
  • Adjusted Earnings Per Share between USD$0.66 and USD$0.88
  • Effective tax rate between 28% and 30%
  • Capital expenditures between USD$30 million and USD$35 million

The foregoing expectations constitute forward-looking information and are qualified in their entirety by the cautionary statement set out below.