Avigilon Profit and Stock Price Drops Q2 2014

By: John Honovich, Published on Aug 11, 2014

Battered by the controversy over their CFO's badly timed exit and a report questioning their revenue recognition, Avigilon further disappointed investors with their Q2 2014 performance.

In this note, we examine these results including 2 geographic areas where growth declined sharply and concerns about slowing expansion.

******** ** *** *********** over ********'* ***** ***** ******* * ***************** ***** ******* ***********, ******** ******* ************ investors **** ***** ** 2014 ***********.

** **** ****, ** examine ***** ******* ********* 2 ********** ***** ***** growth ******** ******* *** concerns ***** ******* *********.

[***************]

Q2 **** ******* **********

*** **** ******** ****** of********'* ********* ********** *** **** ******* up **% **** **** year, ** $**.* ******* USD *** *** *******. However, **** *** ***** some *******'* **********.

*** **** ********** ********* aspect *** *** ******* dropping ** **** **** nearly **% ** ** 2013 *** ***** *% for **** *******. ******, despite ******* ******* **%, total ******* **** ***** this ******* **** *** year ***. ** *** contrary, ********'* ********** ********* to ********* **** *** line ****** ** *** focus, *** ***** **** profits.

Drivers ** ****** ****

******* ******* ********* ******* operating ******** (****) ********* faster **** ******* (**% vs **%).

***** *** ********* ***** increased ** ******** **** than *******. *******, ** ** not ******* ***** ** *** two **** ****** ******* Avigilon **** ******* ********* sales *** ********* ***** separately. **** *****, ***** on ****** *******, ** appears ********* ***** **** trending **** ***** ***** are ********** **********.

*** **** ******** ** operating ***** ******* ** be **** *** ******* and ******** ************, ***** added ** **** *&* and *********** *****. *&* costs **** ** ***% while ***** *&* ******** were ** ***%.

***** ********* ** ******** may ********** ***** **** investments *** *** ******* but ** ******* ********* investors *** **** ********* significantly ****** *******. 

Hiring ****** *** ** ********* ****

******* ******** ********** * 'rough ********' ** ********* in ****, ******** **** added ** ***** ********* in ** ****, ** just *% *** *** quarter (*** ** ***).

******** ********* **** **** is, "********* ** ****** A ******* *** * players **** ** **** we *** ******* **** A ******* *** ** its ******* ***** *** quantity ******." ** ******, they **** ***** ****** (A, *, ***.) ** maintain ***** ****** ****. It ***** ** **** Avigilon ****** ***** ** do * ****** *** of *********** ** ** may ** **** * players, ********** ** *****, are ********* ***** *** company's **********.

** *** ***** ** the ****** ********, ******** has **** * *** HR *********. ******** *** not ******** ***** ********* *** **** ** ***** ****. *** job ******* ** ***** open [**** ** ****** available], ***, **********, *** ******** ** ****** *** posted **, **** **** Avigilon ******* [**** ** longer *********]. ***** *** join ******* ** ****** manager *** **** ********** Team ********'* #* *** who **** ******** **** [link ** ****** *********]. With ** **** ** people *******, **** ** likely ** ****** ****** efforts. 

Growth ******* **** - ***** ******* *** ******

*** *** ************* ******* were ******, **** ** industry ******* **% ****, and ***** *******, **** a *** ***** *******, 12%. ******, ***** ******** and **** ******, ** likely ******** **********. *******, Latin *******, **** ** annual *** **** ** less **** $* ******* is ** ********* ****** market *** ********. **** will **** ** **** in *** ****** ******* here. ****** *******, *** Avigilon ***** ******** ** Latin ******* **** [**** no ****** *********] ** May.

US ****** ******

** *** ******** ****, US ******* *** ** an ********** **%, ** $35 ******* *** *** quarter, *** ************ **% of ********'* ***** *******. What **** ** *********** to *** ** *** much **** *** ** revenue ****, ***** ******** has ************ ********* *** US **** ****** ** RSMs. *** *******, ******** now *** * ****** RSM ********* ** **** North ******** [**** ** longer *********] ********** ** *** ******** populated ********* / ***** Michigan ****** [**** ** longer *********].

Underwater *******

******** ******* ***,*** ******* in *** ***** **** of ****. *************, **** an ******* ****** ***** of $**.**, **** *** significantly **********.

****** *** *******'* ********** trumpet *** **** ******** has **** *** *********, the ******* ***** ***** decline, ** ** *********, will **** * ********** impact ** ******** ************ and ******** ** *** company. ******** **** *** company's ****** ************* ** its **-********* (*,*) *** **** ***** hurt *********** *** *********.

Enterprise ***** ******

******** *** *** **** ever ******* ** *********** sales,with $**.* ******* ** total ********** *****, **% of *** *******. ******** defines **** ***** ** "projects **** **** ****** spend ** * ****** design **** ***** *** $250,000 ** *******."

** ****** ******** ******** noted **** ********** ***** percentage *** ** **** as **% *** *** as *%, **********, "**** ******* could ****** ** **** percent ** ** ***** be **% **’* ****** very ***** * ***** if *** **** ** it ****-****-**** ***** ** are ******** **."

********** *****, *******, ** an **** **** *** company *** **** ******** on *******.

Channel ******** ******

** ******** ** *** forensic ********** ************ *********** ***** ** channel ********, ********'* *** ****** it:

"**** ** *** *********** if *** **** ***’* stock ******** *******. *** that’s *** ** *** competitive **********, ** **** they ***’* **** *** outlay ** **** *** so *** ****** ** there ** *** **** to ***** **** ******* there *********** ** ** stocking ** ******** ********* in *** *******, *********** we *** ***** ** they **** ** ** filled. ** ********* **** ordered ****** **-***** *** we ********* **** ********* and **** ******* **** installed ********* ****** **** of ********."

Comments (9)

Note: Stock price was down 11% on Friday and another 7% on Monday. Prior to the results, stock was ~$25 but end of Monday was at $20.38

BusinessWeek has a new article about Avigilon following the Q2 2014 results. A few notable points:

  • Calls Avigilon "one of Canada’s worst-performing stocks"
  • Avigilon's CEO says that investments into future growth are more important and valuable than short term cost cutting
  • The article suggests that investors are concerned / nervous about sacrificing profitability to get growth, e.g, "investors are waiting to see if the company can execute on its revenue goal without damaging its potential to make profit"
  • Avigilon's CEO owns 10% of the company (worth ~$100million) [Bloomberg earlier reported 3.2%

Article says he owns 10% not 3% I think. I wish I owned 10%!

Mark, that article was changed from 3.2 to 10% after i posted my comment above. I've updated my comment to reflect the change.

[“We’re not waiting around for competitors to copy our stuff, and they will,” said Fernandes]

What stuff is he talking about? JPEG2000 recording?

What happend to all the posts?

Alex, what posts are you referring to? Please clarify.

DISCLOSURE - WE ARE AN AVIGILON PARTNER

I think the stock should have gone down because it was OVERPRICED and that's the main issue. Avigilon is profitable and have a ton of cash but not as profitable as investors would like because their valuation was ridiculous. I think the stock now more accurately reflects where Avigilon is currently.

I'm not sure what more you could ask of a company in this industry... Is any other company performing this well in this industry? They are making money and investing in future technology and growth. Their products are excellent and their support is great.

They are continuing to grow in sales but they show they made less money this quarter than last year - however, they have invested more money in ramping up their acquisitions which to me is a good thing. As a partner I am excited to see the resource investment in properly integrating the acquired access control and video analytics into the Avigilon platform. I would be worried if they were not spending the money and resources to do this.

You could say their stock underperformed because it was overvalued. However, Avigilon as a company keeps outperforming their competitors in almost every area and I think for those familiar with the industry it would be safe to say that they keep outperforming the expectations of most every industry professional that follows them.

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