Avigilon Accelerates Growth

Author: John Honovich, Published on May 08, 2013

Avigilon grew revenues a massive 80% year over year for Q1 2013. That's an incredible pace, faster even than what they did last year. Equally important, both gross margin and net margins raised substantially, closing their historic gap with market leaders.

Avigilon's stock price surged in the past 2 weeks, up ~25% from ~$11 CAD to $14 CAD per share, giving Avigilon a half billion dollar market capitalization.

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Comments (13)

Wait... this isn't a negative Avigilon article! Who are you, and what have you done with John? Everyone knows the real John Honovich only has bad things to say about Avigilon!

Ha! I am waiting to see who the first Avigilon dealer will be claiming this article is biased against them!

Given the consistent growth of at least 2X the IP market I am curious to the theories on why? A) Integrated system (cameras, VMS, NVR hardware) that is easy to use/setup B) Edge storage architecture with minimal compression and good streaming C) Some other reason????

Integrated system, good quality, low price, protected channel, with a pinch of super megapixel magic to get buyers excited.

A lot of companies selling end to end offerings have 2 or 3 of these elements but really nobody has all of them, except for Avigilon.

Protected channel? I've seen Avigilon deny/stagnate partner pricing approval so they had the flexibility to give a lead to another partner. These results just show that growth is the only thing they're focused on.

To clarify, by protected, I mean it's protected from Internet sales, i.e., Avigilon's aggressive about stopping companies from re-selling their products online. That part is different from most manufacturers.

I believe the pinch of super mega pixel magic is enhanced by keeping the bits on the edge with their NVRs. Other major players do not make this as easy. By keeping the bits on the edge (not compressing much nor clogging the network) the actual detail is available to view versus being thrown away.

Aaron, Avigilon does not have any edge storage (a la Axis / Camera Companion, Mobotix / Control Center, etc.). They have a classic architecture of IP cameras to NVR recorders and/or VMS servers or COTS hardware.

I am almost always suspect of any explosive growth pattern that:

A. Isn't from a brand new company (i.e. 80% increases are easy [and more normal] when you are starting at zero.

B. Not supported by something new, and/or significantly better/different than competitors offerings.

While I will stipulate John's points above about their competitive differentiators;

A. Avigilon isn't a new company starting from zero

B. Avigilon products are not significantly better/different than competitors offerings

Dramatic increases in sales are exactly what I would expect when spending dramatically increases. 100% and 70% spending increases are certainly not sustainable over anything but the short-term.

While it's unprecedented for any surveillance company to grow 80% at $100+ million revenue levels, they are not simply 'buying' revenue. Their profitability margins actually increased at the same time. This is not a case of them 'selling a dollar for 75 cents'.

There are many factors that contribute to profitability... especially over only a one year period.

Do you find the Avigilon growth model to be sustainable?

The business model looks sustainable. The 'growth' model - I don't think anyone can maintain 80% growth at that levels for long. But that's not necessary for them anyway. The big issue is whether they can maintain 30 / 40 / 50 growth and for how long.

We had this discussion last year when Avigilon announced their $500 million revenue goal.

there are many items that contribute to avigilon's success... product and service aside i think a big bonus for the company is their approach to sales ie. direct to dealer/dealership only sales... in my opinion this creates a sense of product/company ownership amongst dealers (and sensitivity to criticism as we are aware of from discussions on this site)... through this ownership is a desire to be progressive and promote the company... sales and product training/certification allows for increased product knowledge for dealers and this translates into potential customers being more comfortable with dealers because they know their product...

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