~Strong product and patent licensing revenue
contribute towards record quarterly and annual results~
VANCOUVER, CANADA, February 28, 2017 /CNW/ - Avigilon
Corporation ("Avigilon" or the "Company") (TSX: AVO),
provider of trusted security solutions, today reported financial
results for the three and twelve months ended December 31, 2016. All figures are in
United States ("US")
dollars unless otherwise stated.
Fourth Quarter 2016 Highlights
- Record revenue, gross profit*, Adjusted EBITDA*, Adjusted
Earnings*, diluted Adjusted EPS*, and cash flow from
operations.
- Record revenue of $102.2 million,
compared with $81.4 million in Q4
2015, resulting from record unit volume, success of H4 camera
platform, and contributions from the Avigilon Patent License
Program ("Patent License Program"). Avigilon's revenue
growth continued to outpace that of the industry.
- Record gross profit of $52.1
million, compared with $45.6
million in Q4 2015.
- Gross margin percentage* of 51%, in line with management's plan
to increase unit volume to drive greater revenue, gross profit, and
cash flow from operations.
- Record Adjusted EBITDA of $20.8
million, compared with $15.5
million in Q4 2015.
- Record Adjusted Earnings of $11.5
million, compared with $9.1
million in Q4 2015.
- Record diluted Adjusted EPS of $0.26, compared with $0.21 in Q4 2015.
- Record cash flow from operations of $18.8 million, compared with cash used in
operations of $8.8 million in Q4
2015.
- Recognized by Deloitte as one of North America's Fastest Growing
Companies.
- Announced listing of office tower to explore potential sale and
leaseback.
- Expanded H4 camera platform with new products featuring video
analytics.
Fiscal Year 2016 Financial Highlights
- Record revenue, gross profit, Adjusted EBITDA, and cash flow
from operations.
- Record revenue of $353.6 million,
compared with $287.6 million in
2015.
- Record gross profit of $184.0
million, compared with $165.1
million in 2015.
- Record Adjusted EBITDA of $54.4
million, compared with $51.3
million in 2015.
- Adjusted Earnings and diluted Adjusted EPS were $27.0 million and $0.61, respectively, compared with $30.4 million and $0.66 in 2015. 2016 results were impacted by
increases in non-cash amortization, interest expense and
investments to expand the Company's sales and marketing initiatives
and product portfolio. In the second half of the year, these items
were offset by an increase in gross profit as a result of the
Pricing Adjustment and increased contributions from the Patent
License Program.
- Record cash flow from operations of $43.0 million, compared with cash used in
operations of $1.8 million in
2015.
"Once again, we've set new quarterly and annual records for
revenue and gross profit while generating record cash flow from
operations," said Alexander
Fernandes, Avigilon's Founder, President, Chief Executive
Officer and Chairman of the Board. "We have a robust pipeline of
groundbreaking new products and video analytics launching this
year, and global demand for our solutions is stronger than
ever."
Summary of Fourth Quarter and Fiscal Year 2016 Financial
Results
|
Three Months
Ended
|
Twelve
Months Ended
|
(In thousands of US
dollars except margin and per share amounts)
|
Q4
2016
|
Q4
2015
|
%
Change
|
2016
|
2015
|
%
Change
|
|
(December 31,
2016)
|
(December 31,
2015)
|
|
(December 31,
2016)
|
(December 31,
2015)
|
|
|
(Unaudited)
|
(Unaudited)
|
|
(Audited)
|
(Audited)
|
|
|
|
|
|
|
|
|
Revenue
|
102,191
|
81,439
|
25%
|
353,622
|
287,561
|
23%
|
Gross
profit
|
52,102
|
45,620
|
14%
|
183,970
|
165,076
|
11%
|
Gross margin
percentage
|
51%
|
56%
|
NA
|
52%
|
57%
|
NA
|
Total operating
expenses
|
39,509
|
36,968
|
7%
|
164,015
|
138,116
|
19%
|
Adjusted
EBITDA(1)
|
20,812
|
15,462
|
35%
|
54,399
|
51,254
|
6%
|
Adjusted EBITDA
Margin* percentage(1)
|
20%
|
19%
|
NA
|
15%
|
18%
|
NA
|
Net income
(IFRS)
|
4,368
|
4,207
|
4%
|
7,190
|
22,031
|
-67%
|
Adjusted
Earnings(1)
|
11,453
|
9,127
|
25%
|
26,961
|
30,416
|
-11%
|
Basic earnings per
share (IFRS)
|
0.10
|
0.10
|
0%
|
0.17
|
0.49
|
-65%
|
Diluted earnings per
share (IFRS)
|
0.10
|
0.09
|
11%
|
0.16
|
0.48
|
-67%
|
Diluted Adjusted
EPS(1)
|
0.26
|
0.21
|
24%
|
0.61
|
0.66
|
-8%
|
(1)Non IFRS measures are unaudited
Detailed Financial Review
Avigilon reported Q4 2016 record revenue of $102.2 million, an increase of 25% over revenue
of $81.4 million in Q4 2015. Record
revenue for FY 2016 of $353.6 million
represents an increase of 23%, or $66.1
million, compared with revenue of $287.6 million for FY 2015. Revenue growth for Q4
2016 and FY 2016 reflects increased unit volume as a result of the
Pricing Adjustment (as defined below), greater customer adoption in
existing markets, further penetration of target regions, new
product introductions, greater adoption of video analytics, and
increased contributions from the Patent License Program. On a
constant currency basis, revenue grew 27% for the fourth quarter
and 24% for the year ended December 31,
2016 compared to the same periods in 2015.
Gross profit increased to $52.1
million in Q4 2016 from $45.6
million in Q4 2015, an increase of $6.5 million or 14%. Gross profit increased to
$184.0 million in FY 2016, compared
with $165.1 million in FY 2015, a
growth of $18.9 million or 11%.
Record gross profit was achieved for the quarter and year,
primarily from the success of the H4 camera platform, the Pricing
Adjustment, and the Patent License Program. In the second quarter
of 2016, management reduced prices on the H3 camera line and select
Network Video Recorders to drive unit volume and revenue, expand
addressable market, and capture additional market share (the
"Pricing Adjustment"). As a result of the Pricing
Adjustment, gross margin percentage was strategically exchanged for
increased unit volume to drive greater revenue, gross profit, and
cash flow from operations. Over time, the Company expects gross
margin percentage to increase due to growing contributions from the
Patent License Program, greater economies of scale from leveraging
our previous investments in manufacturing facilities to support
larger unit volumes, and increasing adoption of video
analytics.
Sales and marketing expenses in Q4 2016 were $18.8 million, consistent with $18.7 million in Q4 2015. Benefiting from
operating leverage, sales and marketing expenses decreased from 23%
of revenue in Q4 2015 to 18% of revenue in Q4 2016. Sales and
marketing expenses in FY 2016 were $76.7
million or 22% of revenue compared with $70.8 million or 25% of revenue in FY 2015.
Overall, Management believes sales and marketing expenses as a
percentage of revenue will decrease year over year as the Company
focuses on increasing profitability, and benefits from efficiencies
arising from the enterprise resource planning ("ERP") system
and economies of scale from its previous investments in global
sales and marketing teams.
Research and development ("R&D") expenses, net of
related income tax credits and capitalized development costs, were
$4.4 million in Q4 2016, compared
with $4.2 million in Q4 2015, and
$16.9 million in FY 2016, compared
with $10.6 million in FY 2015. Gross
R&D expenses were $8.3 million in
Q4 2016 (8% of revenue), compared with $7.2
million in Q4 2015 (9% of revenue) and $32.5 million for FY 2016 (9% of revenue),
compared with $24.7 million in FY
2015 (9% of revenue). The increase in gross R&D for both the
quarter and year ended December 31,
2016 compared to the same periods in 2015 is consistent with
the Company's ongoing plan to further enhance and expand upon its
product offering and intellectual property portfolio.
General and administrative ("G&A") expenses in Q4
2016 were $10.4 million (10% of
revenue), compared with $10.2 million
in Q4 2015 (12% of revenue). G&A expenses in FY 2016 were
$49.2 million (14% of revenue),
compared with $42.3 million in FY
2015 (15% of revenue). The decrease in G&A, as a percentage of
revenue for the quarter and year ended December 31, 2016, was primarily due to operating
leverage on previous investments in personnel, infrastructure and
our ERP system to support business growth. Management expects the
Company's G&A expenses to increase at a slower rate over time
as the Company focuses on increasing profitability.
Amortization and depreciation in Q4 2016 and FY 2016 were
$5.9 million and $21.2 million, respectively, compared with
$3.8 million and $14.5 million, respectively, in Q4 2015 and FY
2015. The increase in amortization and depreciation for both the
quarter and year ended December 31,
2016 compared to the same periods in 2015 reflected previous
investments in, among other things, global sales offices, R&D,
patent portfolio and the ERP system. As these investments are now
substantially completed, the Company plans to focus on increasing
profitability.
IFRS net income for Q4 2016 was $4.4
million, compared with $4.2
million in Q4 2015. IFRS net income for FY 2016 was
$7.2 million, compared with
$22.0 million in FY 2015. IFRS
earnings per share in Q4 2016 were $0.10 (basic and diluted), compared with
$0.10 (basic) and $0.09 (diluted) in Q4 2015. IFRS earnings per
share in FY 2016 were $0.17 (basic)
and $0.16 (diluted), compared with
$0.49 (basic) and $0.48 (diluted) in FY 2015. Net income and
earnings per share for FY 2016 were impacted by non-operational
items, including deferred tax, a foreign exchange loss compared to
a foreign exchange gain, non-recurring costs, and share-based
payments.
Adjusted EBITDA was $20.8 million
in Q4 2016, compared with $15.5
million in Q4 2015. Adjusted EBITDA was $54.4 million in FY 2016, compared with
$51.3 million in FY 2015. The
increase in Adjusted EBITDA for the quarter and year ended
December 31, 2016 was primarily due
to increased unit volume as a result of the Pricing Adjustment, new
product introductions, greater adoption of video analytics, and
increased contributions from the Patent License Program.
Adjusted Earnings for Q4 2016 increased 25% year over year to
$11.5 million, compared with
$9.1 million in Q4 2015. Diluted
Adjusted EPS were $0.26 in Q4 2016,
compared with $0.21 in Q4 2015. The
increase in Adjusted Earnings and diluted Adjusted EPS in the
fourth quarter ended December 31,
2016 compared to the same periods in 2015 was primarily due
to increased operating leverage, a reduction in corporate
expenditures, increased unit volume as a result of the Pricing
Adjustment, new product introductions, greater adoption of video
analytics, and increased contributions from the Patent License
Program.
Adjusted Earnings and diluted Adjusted EPS for FY 2016 were
$27.0 million and $0.61, respectively, compared with $30.4 million and $0.66, respectively, in FY 2015. FY 2016 results
were impacted by increases in non-cash amortization, interest
expense and investments to expand the Company's sales and marketing
initiatives and product portfolio. In the second half of the year,
these items were offset by an increase in gross profit as a result
of the Pricing Adjustment and increased contributions from the
Patent License Program.
As at December 31, 2016, Avigilon
had net working capital of $105.4
million, including cash and cash equivalents of $30.0 million. Net cash from operating activities
for 2016 was $43.0 million, an
increase of $44.7 million when
compared to net cash used in operating activities of $1.8 million in 2015. This increase was the
result of the Pricing Adjustment and the resultant record unit
volume, and increased contributions from the Patent License
Program.
As at December 31, 2016, the
Company had 43,597,364 common shares issued and outstanding. The
weighted average number of common shares issued and outstanding for
the quarter was approximately 43.6 million basic and 44.5 million
diluted and for the year was approximately 43.4 million basic and
44.4 million diluted.
Financial Outlook
As of February 28, 2017, Avigilon
expects the following for fiscal year 2017:
- Revenue between $390 million and $425
million
- Adjusted EBITDA Margin between 13% and 17%
The foregoing expectations constitute forward-looking
information and are qualified in their entirety by the cautionary
statement set out below.
Conference Call
Avigilon has scheduled a conference call to discuss these
results on Tuesday February 28, 2017,
beginning at 5:00 p.m. ET
(2:00 p.m. PT). To access the live
call, dial 1-888-231-8191 or +1 647-427-7450, or view the webcast
at http://ir.avigilon.com or http://bit.ly/2iRm80R. A replay will
be available for 90 days on the Company's website, and for one week
by dialing 1-855-859-2056 or +1 416-849-0833, reference number
49950613.
This news release is qualified in its entirety by the Company's
consolidated financial statements for the years ended December 31, 2016 and 2015 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 and Additional IFRS Financial
Measures
Management uses certain non-International Financial Reporting
Standards ("IFRS") and additional IFRS measures that it
believes are useful to investors in evaluating the performance and
results of the Company. The terms "Adjusted EBITDA" and "Adjusted
EBITDA Margin" refer to earnings and earnings as a percentage of
revenue, respectively, before deducting interest, taxes,
depreciation, amortization, foreign exchange gain or loss, business
acquisition-related costs, restructuring costs, non-recurring legal
costs, non-recurring lease termination costs, revaluation gain on
contingent consideration receivable, 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, foreign exchange gain or loss, business
acquisition-related costs, restructuring costs, non-recurring legal
costs, revaluation gain on contingent consideration receivable,
non-recurring lease termination costs, and share-based
payments.
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 terms "Adjusted
Earnings" and "Adjusted Earnings Per Share" ("Adjusted EPS")
refer to net earnings and earnings per share, respectively, before
share-based payments, foreign exchange gain or loss, business
acquisition-related costs, financing costs, restructuring costs,
non-recurring legal costs, non-recurring lease termination costs,
amortization of acquired intangibles, revaluation gain on
contingent consideration receivable and related tax effects. Please
refer to the Company's consolidated financial statements for the
years ended December 31, 2016 and
2015 and the reconciliation table within the associated
Management's Discussion & Analysis respecting the same
period.
The terms "gross profit" and "gross margin percentage" refer to
revenue less cost of sales and gross profit as a percentage of
revenue, respectively. Management considers gross profit and gross
margin percentage to be key measures as they demonstrate the
Company's profitability and its ability to cover its operating
expenses from normal operations.
Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Earnings and
Adjusted EPS 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 or Adjusted
Earnings, respectively, should not be construed as an alternative
to operating income or net income, respectively, 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 Corporation provides trusted security solutions to the
global market. Avigilon designs, develops, and manufactures video
analytics, network video management software and hardware,
surveillance cameras, and access control solutions. To learn more
about Avigilon, visit avigilon.com.
© 2017, Avigilon Corporation. All rights reserved. AVIGILON, and
the AVIGILON logo are trademarks of Avigilon Corporation.
For further information:
Darren Seed
Vice President, Capital Markets & Communications
T: (604) 629-5182
investors@avigilon.com
Forward-Looking Statements
Certain information and statements in this news release
contain and constitute forward-looking information or
forward-looking statements as defined under applicable securities
laws (collectively, "forward-looking statements"). Forward-looking
statements normally contain words like 'believe', 'expect',
'anticipate', 'plan', 'intend', 'continue', 'estimate', 'may',
'will', 'should', 'ongoing' and similar expressions, and within
this news release include, without limitation, the
information under the heading "Financial Outlook" and any
statements (express or implied) respecting:
Avigilon's future plans, strategies, and objectives; projected
growth, revenues, gross margin percentage,
Adjusted EBITDA Margin and profitability, expenses,
capital expenditures, and earnings; anticipated enhancement and
expansion of product offerings and associated R&D plans;
expected investment and expansion of infrastructure; the pursuit of
the proposed office tower sale and leaseback and resulting effects,
when and if completed; the impact and benefits of Avigilon's new
ERP system; and the expected benefits of the Pricing
Adjustment. Forward-looking statements, including the
Financial Outlook, are provided for the purpose of
presenting information about management's current expectations and
plans relating to the future and allowing investors and others to
get a better understanding of our anticipated financial position,
results of operations and operating environment. Readers are
cautioned that such information may not be appropriate for other
purposes.
Forward-looking statements are not guarantees
of future performance, actions, or developments and are based on
expectations, assumptions and other factors that management
currently believes are relevant, reasonable and appropriate in the
circumstances. The material expectations, assumptions and other
factors used in developing the forward-looking statements set out
herein include or relate to the following, without limitation:
Avigilon will be able to successfully execute its plans, strategies
and objectives; the business and economic conditions
affecting Avigilon's operations will continue substantially in
their current state, including with respect to industry conditions,
general levels of economic activity, regulations, taxes, interest
rates, and foreign exchange rates; there will be no adverse
material changes to Avigilon's key personnel, facilities,
production capabilities, supply chain, sales channels, reseller
network, or contractual arrangements; Avigilon will be able to
leverage its past investments to support growth and focus on
increasing profitability; Avigilon will be able to successfully
manage cash flow, operating expenses, interest expenses, capital
expenditures, working capital, and credit, liquidity, and market
risks; future financing will be available to Avigilon on favorable
terms when and if required; Avigilon will keep pace with or outpace
the growth, direction, and technological advancement in its
industry; industry data and projections obtained from external
sources are accurate and reliable; Avigilon will be able to design,
develop, and manufacture new products and enhance its existing
product lines; Avigilon will be able to enhance and expand its
intellectual property portfolio; Avigilon will continue to generate
revenues from patent licensing; Avigilon will be able to
successfully integrate businesses, intellectual property, products,
and technologies that it may acquire, if any; Avigilon will
continue to pursue the proposed office tower sale and leaseback;
Avigilon will not face any material unexpected costs related to
product liability or warranties; Avigilon's protection of its
intellectual property against third party infringement or
misappropriation is sufficient and its products and technology do
not materially infringe third party intellectual property rights;
Avigilon will be able to obtain necessary third party licenses on
favorable terms; Avigilon will not become involved in unexpected
material litigation or otherwise subject to materially adverse
claims; Avigilon's ERP system will operate and function as
intended; the lower prices of Avigilon's products under the Pricing
Adjustment will continue to drive unit volume and revenues, expand
addressable market and capture additional market share;
Avigilon's plans respecting the pricing of its products and
services, including without limitation under the Pricing
Adjustment, will proceed in substantially their present form; and
Avigilon will be able to achieve greater economies of scale and
cost savings from previous investments in infrastructure and in its
global sales and marketing teams.
Although management
believes that the forward-looking statements are reasonable, actual
results could be substantially different due to the risks and
uncertainties associated with and inherent to Avigilon's business,
as more particularly described in the "Risk Factors" section of
Avigilon's Annual Information Form dated February 28, 2017, which is
available under Avigilon's profile on SEDAR at
www.sedar.com. Additional material risks and
uncertainties applicable to the forward-looking statements set out
herein include, but are not limited to: unexpected changes to
accounting policies, accounting standards or internal controls and
procedures over financial reporting; and unforeseen events,
developments or factors causing any of the aforesaid expectations,
assumptions and other factors ultimately being inaccurate or
irrelevant. Although Avigilon has attempted to identify important
factors that could cause actual actions, events, or results to
differ materially from those contained in any forward-looking
statement, there may be other factors that cause actions, events or
results not to be as anticipated, predicted, estimated, or
intended. Many of these factors are beyond the control of Avigilon.
Accordingly, readers should not place undue reliance on
forward-looking statements.
Avigilon undertakes no
obligation to reissue or update any forward-looking statements as a
result of new information or events after the date hereof except as
may be required by law. All forward-looking statements contained in
this news release are qualified by this cautionary
statement.
SOURCE Avigilon Corporation