First Quarter 2013 Financial Highlights
• Revenue was $32.0 million, an increase of 80% over Q1 2012 revenue of $17.8 million.
• Gross margin was 51%, up from 48% a year earlier.
• EBITDA1 was $5.1 million, a 319% improvement over Q1 2012 EBITDA of $1.2 million.
• Net income was $2.8 million, a 332% increase from net income of $0.6 million in Q1 2012.
“Our strong start to 2013 demonstrates our continued success in capitalizing on the opportunities in front of us and gaining global market share,” said Alexander Fernandes, president and chief executive officer at Avigilon. “We generated high double-digit revenue growth and delivered improved profitability, while increasing our strategic investments in the business.”
Mr. Fernandes continued: “The transition from analog to high-definition surveillance technology is proceeding rapidly. For the first time, our industry will see high-definition surveillance sales outpace analog sales, and we continue to be at the forefront, leading this shift. With that in mind, we will add to our global sales team, continue to expand our product portfolio and invest in marketing to increase brand awareness. We believe these efforts best position Avigilon to maximize revenue growth and long-term profitability.”
Avigilon reported Q1 2013 revenue of $32.0 million, an increase of 80%, or $14.3 million, compared with revenue of $17.8 million for Q1 2012. Revenue growth continues to be driven by a strong rise in product sales volumes worldwide, reflecting sales of newly launched products, further penetration of new target market regions and greater customer adoption in existing markets. Avigilon experienced strong year-over-year sales growth across all six of the Company’s key target geographic regions.
Gross margin was $16.3 million in Q1 2013 (51% of revenue), compared with $8.5 million (48% of revenue) in Q1 2012. The year-over-year increase in gross margin reflects a sales mix shift toward more profitable products, as well as the impact of higher purchasing power, greater economies of scale and improved manufacturing efficiencies. Although the gross margin increased year-over-year, with the Company’s near-term objective of rapid growth in revenue and market share, management does not expect significant additional gross margin expansion through 2013.
Q1 2013 Selling and marketing expenses were $7.5 million, a $2.8 million, or 62%, increase compared to $4.7 million in selling and marketing expenses in Q1 2012. The increase reflects planned spending to significantly expand Avigilon’s global sales team and marketing efforts, which the Company believes will drive future revenue growth. The Company plans to further expand its sales team and continue to strategically invest in marketing in 2013. As a result, sales and marketing expenses could increase as a percentage of revenue in the near-term and start to decline by the end of the year. Over the longer-term, the Company expects selling and marketing expenses as a percentage of revenue to decline.
Research and development (R&D) expenses, net of related income tax credits, were $1.7 million for Q1 2013, a $0.6 million, or 61%, increase compared to $1.1 million in Q1 2012. Gross R&D spend was $2.0 million in Q1 2013, compared to $1.3 million in the prior year. The increase in spending is due to additional new hires, in line with the Company’s plan to expand its product development team to further enhance its product offering. Avigilon expects to continue to increase its R&D investment to support new product development, bringing the Company to more typical industry levels for R&D as a percentage of revenue.
General and administrative expenses (G&A) for Q1 2013 were $3.0 million, an increase of $1.1 million, or 57%, from $1.9 million in general and administrative expenses for Q1 2012. The increase was primarily due to additional personnel and their related expenses to support Avigilon’s growth and its public company status. The Company expects G&A expenses to increase in support of its continued growth plans. However, Avigilon believes these expenses will increase at a slower rate than the Company’s revenue growth.
EBITDA was $5.1 million in Q1 2013, an increase of 319%, or $3.9 million, compared to $1.2 million in Q1 2012. The year-over-year improvement largely reflects the Company’s 80% increase in revenue and improved gross margin. Q1 2013 EBITDA was also positively impacted by delays in planned hiring in the quarter, which led to lower than expected personnel related expenses in certain areas of the business for the quarter. The Company filled a number of these positions by the end of the quarter or early in the second quarter, with the remaining positions expected to be filled during the year. As such, the Company expects to see downward pressure on EBITDA margins in the near-term.
Q1 2013 net income was $2.8 million, up 332%, or $2.2 million, compared with net income of $0.6 million in Q1 2012. Earnings per share were $0.07 (basic) and $0.07 (diluted) for Q1 2013, compared to $0.02 (basic) and $0.02 (diluted) a year earlier.
As at March 31, 2013, Avigilon had cash and cash equivalents of $50.7 million, up from $50.0 million as at December 31, 2012.
At March 31, 2013, Avigilon had 38,240, 043 basic and 40,551, 338 diluted shares outstanding.
Financial statements can be downloaded from the Avigilon website at ir.avigilon.com or SEDAR at sedar.com/.
Avigilon has scheduled a conference call to discuss these results on Thursday, May 9, 2013, beginning at 5:00 pm. EDT (2:00 pm. PDT). To access the live call, dial 647-427-7450 or 1-888-231-8191, or view the webcast at ir.avigilon.com. A replay will be available for one year on the Company’s website, and for one week by dialing 778-371-8506, 416-849-0833 or 1-855-859-2056, reference number 55318666.
The term "EBITDA" refers to earnings before deducting interest, taxes, depreciation, amortization, foreign exchange gain or loss, and stock-based compensation. Management believes that 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. EBITDA does not have a standardized meaning prescribed by International Financial Reporting Standards (IFRS) and is not necessarily comparable to similar measures provided by other companies. Accordingly, investors are cautioned that EBITDA 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.
Tags: Q1, 2013, financials, quarterly results