Quarter Avigilon earns $7.19M (U.S.) in 2016
Avigilon Corp (C:AVO)
Shares Issued 43,597,364
Last Close 2/28/2017 $15.05
Tuesday February 28 2017 - News Release
Mr. Darren Seed reports
AVIGILON CORPORATION REPORTS FOURTH QUARTER AND YEAR-END 2016 RESULTS WITH RECORD REVENUE AND PROFIT
Avigilon Corp. has provided its financial results for the three and 12 months ended Dec. 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
(In thousands of US dollars except margin and per share amounts)Q4 2016 Q4 2015 % Change
(December 31, 2016)(December 31, 2015)
(Unaudited) (Unaudited)
Revenue 102,191 81,439 25%
Gross profit 52,102 45,620 14%
Gross margin percentage 51% 56% NA
Total operating expenses 39,509 36,968 7%
Adjusted EBITDA(1) 20,812 15,462 35%
Adjusted EBITDA Margin* percentage (1) 20% 19% NA
Net income (IFRS) 4,368 4,207 4%
Adjusted Earnings(1) 11,453 9,127 25%
Basic earnings per share (IFRS) 0.10 0.10 0%
Diluted earnings per share (IFRS) 0.10 0.09 11%
Diluted Adjusted EPS(1) 0.26 0.21 24%
Summary of Fourth Quarter and Fiscal Year 2016 Financial Results
Twelve Months Ended
(In thousands of US dollars except margin and per share amounts)2016 2015 % Change
(December 31, 2016)(December 31, 2015)
(Audited) (Audited)
Revenue 353,622 287,561 23%
Gross profit 183,970 165,076 11%
Gross margin percentage 52% 57% NA
Total operating expenses 164,015 138,116 19%
Adjusted EBITDA(1) 54,399 51,254 6%
Adjusted EBITDA Margin* percentage (1) 15% 18% NA
Net income (IFRS) 7,190 22,031 -67%
Adjusted Earnings(1) 26,961 30,416 -11%
Basic earnings per share (IFRS) 0.17 0.49 -65%
Diluted earnings per share (IFRS) 0.16 0.48 -67%
Diluted Adjusted EPS(1) 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%