Avigilon announced its financial results for the three and six months ended June 30, 2013. All figures are stated in Canadian dollars unless otherwise noted.
Avigilon announced its financial results for the three and six months ended June 30, 2013. All figures are stated in Canadian dollars unless otherwise noted.
Second Quarter 2013 Financial Highlights
- Revenue was $39.2 million, an increase of 61% over Q2 2012 revenue of $24.4 million.
- Gross margin was 53%, up from 48% a year earlier.
- EBITDA1 was $5.4 million, a 159% rise over Q2 2012 EBITDA of $2.1 million.
- Net income was $3.4 million, a 159% increase from net income of $1.3 million in Q2 2012.
"The second quarter was another strong period for the company with 61% year-over-year revenue growth, reflecting the success of our growth strategies and the rapid rise in demand for high-definition surveillance systems," said Alexander Fernandes, president and CEO at Avigilon. "We continue to expand our sales and product development teams aggressively and invest in marketing to increase brand awareness - efforts we believe will allow us to maximize revenue growth and long-term profitability."
Mr. Fernandes continued: "Innovation is a hallmark of Avigilon, and in the second quarter we built on our track record with the introduction of the world's smallest HD dome camera and the release of our Avigilon Control Center (ACC) 5.0 software. We also acquired RedCloud Security, Inc., which has developed highly innovative web-based, physical and virtual access control systems. This acquisition provides complementary technology and an entry point to the growing access control market."
Financial Review
Avigilon reported Q2 2013 revenue of $39.2 million, an increase of 61%, or $14.8 million, compared with revenue of $24.4 million for Q2 2012. Revenue growth continues to be driven by a strong rise in product sales volumes worldwide, reflecting further penetration of new target market regions, greater customer adoption in existing markets, and sales of new products introduced throughout the previous year and the current quarter. Avigilon experienced strong year-over-year sales growth across all six of its key target geographic regions, with growth between 40% and 174% relative to the same period in 2012.
Q2 2013 gross margin was $20.7 million (53% of revenue), compared with $11.7 million (48% of revenue) in Q2 2012. The increase in gross margin reflects a higher-than-typical mix of software sales in the period, as well as the ongoing 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 additional gross margin expansion in 2013.
Q2 2013 selling and marketing expenses were $10.7 million, a 55% increase compared to $6.9 million in Q2 2012. The increase reflects planned investments to expand Avigilon's global sales team and increase marketing efforts, pillars of the Company's growth strategy. Further investment in these areas is a priority 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 $2.4 million for Q2 2013, a $1.2 million, or 96%, increase compared to $1.2 million in Q2 2012. Gross R&D spending was $2.8 million in Q2 2013, compared to $1.5 million in the prior year. The increase in R&D expenses reflects additional headcount, in line with the Company's plan to expand its product development team to further enhance its product offering. There were a significant number of new hires in the second quarter. Avigilon expects to continue to increase its R&D expenses, as a percentage of revenue, to a level more typical with industry norms as the Company focuses on enhancing and expanding its product offerings. As with selling and marketing expenses, research and development expenses are incurred in advance of the related revenue from new products.
General and administrative expenses (G&A) for Q2 2013 were $3.4 million, an increase of $1.6 million, or 88%, from $1.8 million in Q2 2012. The increase was primarily due to higher share-based compensation expense, reflecting the general increase in the Company's headcount year-over-year and, more specifically, the issuance of options in 2012 and 2013 to a broader group of employees, which management views as an important tool for attracting and retaining talent. . 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.
The Company's total headcount at June 30, 2013 was 346, compared with 255 at December 31, 2012.
EBITDA was $5.4 million in Q2 2013, an increase of 159% compared to $2.1 million in Q2 2012. The year-over-year improvement largely reflects the Company's strong increase in revenue and improved gross margin, as well as the impact of delays in planned hiring in the quarter, which led to lower than expected personnel expenses in certain areas of the business for the quarter. The Company filled a number of these positions by the end of the quarter, with all planned hiring for the year expected to be filled before year-end. As a result, the Company expects to see some limited downward pressure on EBITDA margins in the near-term.
Q2 2013 net income was $3.4 million, up 161% compared with net income of $1.3 million in Q2 2012. Earnings per share were $0.09 (basic) and $0.08 (diluted) for Q2 2013, compared to $0.04 (basic and diluted) a year earlier.
As at June 30, 2013, Avigilon had cash and cash equivalents of $32.1 million, down from $49.9 million as at December 31, 2012. The decrease reflects the acquisition of RedCloud Security, Inc. in the second quarter.