ObjectVideo $18 Million Patent Licensing Revenue, Avigilon Reveals

By John Honovich, Published Mar 03, 2015, 12:00am EST

ObjectVideo is making millions on patents.

And Avigilon will now look to build on that momentum.

New financial disclosures as part of Avigilon's OV patent deal shows this. In this note, we break down the financials and examine what this means for manufacturers and the industry at large.

Business Acquisition Report

Source: Avigilon's Business Acquisition Report for the OV patent deal.

Key Financial Metrics

In the past 2.75 years (2012 - Q3 2014), Object Video patent licensing division generated ~$18 million total revenue with:

  • $8.9 million 2012 revenue
  • $1.9 million 2013 revenue
  • $7.4 million Q1-Q3 2014 revenue

In comparison, expenses and profit/loss were:

  • 2012: $9.3 million expenses and $0.4 million loss
  • 2013: $3.8 million expenses and $1.9 million loss
  • 2014: $3.2 million expenses and $4.2 million profit

Note, 2012 was the initial year of lawsuits, reflecting the heaviest expenses.

We suspect the overwhelming majority of the expenses herein are for litigation / legal services.

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Few Manufacturers - 85% of Revenue

Just a few manufacturers, likely 4, account for ~85% of all revenue generated so far.

  • In 2012, one manufacturer paid OV ~$8.4 million USD, representing 94% of the year's revenue.
  • In 2013, one manufacturer paid OV ~$750,000 USD, representing 39% of the year's revenue.
  • In 2014 (Q1-Q3), two manufacturers combined paid OV $6.2 million USD, representing 84% of the year's revenue.

OV / Avigilon publicly cites 19 licenses, but a fraction of those represent almost all of the revenue. Who the top paying manufacturers are is not disclosed.

From the report, we believe those are all lump-sum payments, likely providing 10+ years of patent coverage across multiple patents, meaning that they are unlikely to need to pay again in the future.

Impact for Avigilon

Since revenue is dominated by a few payments, it is hard to project what this means for Avigilon's future revenue stream. For example, in 2015, will they get one 'whale' payment or 5 or 8? Compounding this is not knowing who the manufacturers who already paid are (i.e., if that was known it might be able to estimate what other manufacturers of proportionate size might pay).

However, there are lots of manufacturers, and if Avigilon can secure ~$3 million from each of them, it does not take that many to pay back the $80 million acquisition cost.

Nonetheless, given the amount of the payments, it might be worthwhile for a larger manufacturer to spend the money to try to invalidate key Avigilon payments through the re-examination process.

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