Avigilon Accounting Issues Alert

Can you say VAPOR SALES, boys and girls?

Did the report mention revenue recognition from sales of support programs?

The reason I ask is that they can only recognize revenue of support programs on a monthly basis. For example, if they booked $12 million in support programs last month, they have to bank it seperately and recognize $1 million per month. If they booked it and recognized all $12 million they are in hot water. If they bundle it together on the front end and then seperate it out on the back-end, Avigilon might be making "adjustments" to the value/formulas it assigns to support, another red flag for a forensic team to look into. This is one way a CFO can become ill btw...

So am I reading this correctly? Channel Stuffing would be forcing product to the Integrators? Would this be in the form of "Here are 100 cameras, go sell them now?" Because I have never known a Mnaufacturer to drop off 100 cameras to an Integrator without a PO or payment. And if they received payment, would that not be revenue?

I can tell you, Avigilon has not been shippng me product for no reason...

You have just been Schmodied! After all this time, not one of Brain Schnode's minions have ever moved up to a coporate postion? Why? Because he has trainined his minions to stuff the channel... Mr. Schmode has built his success on playing the pawn game?

We have all seen what happens if you question his authority and/or style? Yup, out you go with the countless others who have received the boot... The covers are coming off.... The truth will be exposed eventually!

I agree with many of the posters here from the integration side that it is just not good business to add inventory to the shelves that is not directly tied to run rate replacements/adds or to a specific project. Cash flow is always, or should be, top of mind and that certainly doesn't point to sustainable business practices.

Having led manufacturring businesses (although I am not a CFO) my undertanding is that aggressive revenue recognition would show up in the returns reserve and an unusually high DSO (days sales outstanding) in the company's accounts payable. In other words, if they are allowing integrators unusally liberal return rights and providing extended terms past 90 days, then they would have to reflect that (or should) in their returns reserve and there would be an increased amount held back from revenue.

I would suspect that in Avigilon's case if there is channel stuffing, then it is most likely with their international distributors where international trade and tariff laws may make it more advantageous to ship larger quantity of product and irrevocable transfer of ownership. It would be interesting to see if the international gross margin is trending lower which may suggest post-sale adjustments to the non-moving inventory in the form of credits.

* disclaimer - this is generalized information only and not specific to any company

One of the ways channel stuffing could occur is based on sales levels to their dealers. In this scenario a dealer who is at a "Silver level" may want to move to the Gold Discount level but does not have a specific project to order the cams for. His RSM may offer to ship him ___ # of cams to achieve that level and include extended payment terms (net 6 months for example)

The best way to identify this would be to look at the order backlog of the manufacturer and compare that to previous quarters and years.

If there is a significant decline in backlog vs previous years it means the orders are not there

Another thing that should be looked at is inventory levels vs previous years. If inventory % is significantly higher than the growth years vs. sales it could also signal that things are slowing down

Then you deserve to be "stuffed" and will likely be out of business in short order with bad decisions like that.

"Many of our integrators if not most don’t stock Avigilon product."

That sure sounds like a denial - but is it?

Disregarding the clunky sentence structure in the narrative, if Avigilon has 2000 dealers, but only 900 of them stock product get stuffed, then this statement is still true.