Avigilon CFO Out and Q1 2014 Financials Reviewed

By: John Honovich, Published on May 08, 2014

Avigilon's revenue increased 74% year over year, powered by foreign exchange rate swings and the inclusion of VideoIQ revenue.

Avigilon's CFO exited the day before, the 4th executive gone in 6 months (after marketing, operations and HR), triggering fears and a stock price 'slam'.

In this note, we examine the financial details and implications of these results.

Our preliminary estimate is that organic, local currency, revenue growth was in the range of 55% to 60%. This is still very strong, though notably lower than the past year.

Results Skewed / Strengthened by Weak Canadian Dollar

As Avigilon explained in their financial report:

"Revenue in the first quarter also reflects the impact of a weak Canadian dollar. A large portion of our revenue is denominated in US dollars (“USD”), British pounds (“GBP”) or Euros (“EUR”), depending on the region, although our exposure to the US dollar is the most significant. As discussed in our MD&A for the fourth quarter of 2013, based on our projected results for 2014, every $0.01 change in the exchange rate of Canadian dollars  (“CAD”) per USD has an estimated $0.9 million impact on our EBITDA and a $0.65 million impact on net
income."

Year over year, there was a roughly 9 cent shift, as shown in this USD - CAD exchange rate chart [link no longer available]:

At Avigilon's own metric of $0.65 million impact on net income that would mean a benefit / gain of $5.85 million annual, estimated for just this quarter that is ~$1.5 million, notable compared to total quarterly net income of $8.04 million and to total quarterly revenue of $55.7 million. [NOTE: Adjusted from earlier version that estimated this annually rather than quarterly].

Get Notified of Video Surveillance Breaking News
Get Notified of Video Surveillance Breaking News

VideoIQ Impact

VideoIQ added $2.45 million for the quarter (and an annual pace of ~$10 million), which was not present / accounted for in the comparable Q1 2013 quarter.

Net Income Best Ever But Skewed By Exchange Rates

Avigilon touted its best ever net income of $8 million and 14.3%. However, as explained above, exchange ratio shifts explain most of the increase.

Note, factoring in exchange ratio shifts is important because they can just as easily swing the other way at any time, so gains (or losses) there does little to demonstrate the underlying business strength.

Sales Spending Up, Marketing Spending Down

Sales spending were nearly doubled that of the previous year, also reflecting expansion of the sales team for future growth.

However, marketing expenses were actually notably down, with Avigilon explaining:

"Marketing expenses in the first quarter of 2014 were $0.5 million, or 24%, lower than marketing expenses in the same period of last year. This decrease is the result of a reduction in certain activities following a reassessment of marketing priorities following the changeover in executive responsibility for marketing at the end of 2013, as well as the delay of certain programs until this reassessment was complete. We anticipate that these programs will go forward in the coming quarters, largely in the second quarter of 2014, however the overall growth in marketing expense in 2014 is anticipated to be lower than in 2013."

Avigilon CFO Out

The day before earnings release, Avigilon announced that their CFO, Brad Baruda [link no longer available] "is no longer with the Company." The previous CFO (until 2012) and current Director, Wan Jung [link no longer available], will be interim CFO until a headhunter can find a permanent replacement.

Avigilon said Baruda's exit is "in connection with a personal health issue."

In the past 6 months, executives in charge of operations, finance, marketing and human resources have all exited Avigilon.

CFO Exit Sparks Investor Scare

Avigilon's stock price dived down the morning after the CFO exit announcement ('slammed'), going as low as -20%, before ending the day down -8.73%, as shown in this 5 day stock chart:

Volume was a record one day high of ~4 million shares traded.

The circumstances clearly caused concerns, such as:

  • Why would they announce this 24 hours before the quarterly financial results were released?
  • If he is sick, why is he not simply taking a leave of absence, rather than being 'no longer with the company'?
  • Is there a pattern of executives leaving Avigilon and what does this say about the company?

The quarterly financial numbers certainly subsided fears and helped a rebound. However, it is unclear whether the CFO exit announcement was simply a PR blunder or it points to more significant structural concerns.

A number of analysts raised concerns with one opining, "Maybe there is no fire, but certainly some smoke."

At the end of the investor's call, one analyst asked if disagreements or issues with accounting procedures factored into the CFO's exit. Avigilon's CEO said this had no impact nor relation at all to the CFO.

Employee Growth

Avigilon added 101 new employees over the past 3 months, growing from 455 to 556, an increase of 22%.

The US had the most notable employee expansion, increasing 62% from 71 to 115 people. However, that number includes the added VideoIQ employees.

Options Under Water

Avigilon's stock price peaked at ~$34 in February. It is now trading in the $21 to $26 range, after sliding for the last 2 months and the dip after the CFO announcement.

This is a practical matter for current and prospective employees as a rising stock price typically mean extra money via stock options. However, for the first time, a significant number of new Avigilon employee options are now underwater as demonstrated by the chart below:

Getting its stock price moving back up is important not only for investors but employee expansion.

Termination Benefits

Avigilon reported $435,000 in paid benefits to terminated key management personnel. Though no details were provided, known terminated key managers in Q1 include the Operations executive and the HR executive.

When asked on the call about any termination benefits for the CFO, Avigilon's CEO did not give a direct answer either way.

Conference Call Notes

Here are notes from the investor's conference call (audio recording MP3 link [link no longer available]):

  • The conference call lead off commenting on the CFO leaving but with no new details or commentary.
  • Sales expansion focus in Latin America and Asia Pacific
  • For the $100 million fundraising, emphasized that they are regularly presented with acquisition opportunities and this cash allows them to aggressively take advantage of good opportunities.
  • "Focus for 2014 is unwavering"
  • Analyst asking about executive changes: HR position still open, Operations executive still open, senior marketing position still open
  • Says formal search for CFO started 'now'
  • Access control product sales are 'hitting new records high' month after month but no more granular detail
  • Enterprise sales only 6% of sales in Q1 2014, compared to 12% in Q4 2013, emphasized that such deals are 'lumpy'
  • "Business has never been as strong ... in the history of the company"
  • Cancelled direct mailing program - was not producing acceptable results
  • 24 - 36 month window to implement new SAP ERP system, implication that it is not a rush
  • Access control sold as a one time software license with no maintenance fee
  • Says 'no price pessure' as they still 'have lower total cost of ownership'

15 reports cite this report:

Avigilon President Henderson Is Out on Jul 09, 2019
Avigilon's President and COO James Henderson is out, abruptly, after a remarkable ascension over the past 8 years, Motorola VP Jack Molloy has...
Avigilon Weakest Quarter Ever (Q1 2016) on May 11, 2016
Just 2 years ago, Avigilon revenue grew an astounding 74%. Now, that feels like 20 years ago. Avigilon's growth rate continues to fall, while...
Avigilon Weakest Quarter Ever (Q1 2016) on May 11, 2016
Just 2 years ago, Avigilon revenue grew an astounding 74%. Now, that feels like 20 years ago. Avigilon's growth rate continues to fall, while...
Avigilon Poison Pill Preps For Sale on Jan 12, 2016
Avigilon soon may no longer be an independent company, but Avigilon's CEO is determined to control his own destiny. After 2 years of punishing...
Milestone CEO Book: Why He Aborted the IPO and Chose Canon on Sep 15, 2015
Milestone's CEO just published [link no longer available] a 205-page book titled 'Business Magnetism'. Why? No idea. Would assume he had better...
Avigilon SVP Sales "Resigns" on Aug 05, 2015
Another Avigilon executive is out. This time it is the head of sales. Things are starting to get pretty bloody at Avigilon. In this note, we...
Manufacturers: Get Paying or Get Sued - Avigilon Patent Licensing Program on Jul 29, 2015
The new Avigilon 'patent licensing program' is starting to roll out, confirmed Avigilon's CEO on today's earnings call. This is just a month after...
Avigilon Growth Down, Expenses Up, Stock Slammed (Q1 2015) on May 04, 2015
Avigilon growth rate continues to slow down sharply yet the company's aggressive spending continues. Because of that, the stock market is...
Avigilon 2014 Financials Disappoint Investors on Mar 04, 2015
Hikvision admits their equipment got hacked in a large government deployment - stock down just 7.5% Avigilon announces revenue up 42% - stock down...
Avigilon Q3 2014 Growth Rate Down Sharply on Nov 04, 2014
The past 6 months have been extremely tough for Avigilon. The company has suffered their CFO exit, surrounding controversy, an earnings miss the...
Why is Avigilon's Stock Falling Like a Knife? on Oct 08, 2014
A week ago, a prominent Avigilon investor admitted, "Nobody wants to hold [Avigilon stock]. Everybody wants to sell it." He then recommended buying...
Avigilon CEO Looks To Rebuild Investor Confidence on Jul 02, 2014
Avigilon's CEO has been making the circuits seeking to rebuild investor confidence following their shock CFO departure. Here he is on Canadian...
Avigilon Analyst's Theory On Ex-Execs: "Road to Riches" on Jun 23, 2014
Avigilon's stock tumbled after their CFO departed, a culmination of 4 executives out in half a year. Many investors and financial press...
Falling Down: The 2014 Mid-Year Guide on Jun 02, 2014
Falling down - the theme of the 2014 video surveillance industry. This is the toughest stretch for the industry overall, since at least the...
Avigilon Dirty Tricks on Jan 15, 2014
Avigilon's products are strong but their marketing is consistently and utterly irresponsible - one dirty trick after another. While their rapid...
Comments (12) : Members only. Login. or Join.

Related Reports

Hikvision Global Revenue Falls, Hit By Coronavirus on Apr 27, 2020
Hikvision's global revenue fell in the first quarter of 2020 due to the coronavirus, with Hikvision stating uncertainty for 2020 "is greater than...
Coronavirus Hits Manufacturers, Standing Now, Worse To Come on Apr 06, 2020
Coronavirus is hitting security manufacturers, though overall modestly for now, with worse expected to come, new IPVM survey results...
The Booming Multi-Billion Coronavirus Fever Camera Market on Apr 21, 2020
The market for elevated body temperature detection cameras, aka 'coronavirus cameras' aka 'fever detectors', may be worth billions of dollars this...
Worst Over But Integrators Still Dealing With Coronavirus Problems (June Statistics) on Jun 30, 2020
While numbers of integrators very impacted by Coronavirus continue to drop, most are still moderately dealing with the pandemic's problems, June...
Integrators Rising Against Coronavirus on May 27, 2020
IPVM integrator statistics make it clear - Coronavirus's impact on business is lessening and many are anticipating even better news in weeks...
Masks Cause Major Facial Recognition Problems on Feb 24, 2020
Coronavirus is spurring an increase in the use of medical masks, which new IPVM test results show cause major problems for facial recognition...
Integrators Hard Hit By Coronavirus on Mar 18, 2020
Integrators are already being hard hit by Coronavirus as brand new IPVM survey results show. Inside this report, we share statistics and dozens...
Anyvision Layoffs on Mar 19, 2020
Anyvision has conducted a layoff, citing the impact of coronavirus, joining a growing number of tech companies doing so, but the first within video...
Fever Camera Sales From Integrators Surveyed on Jun 01, 2020
Fever cameras are the hottest trend in video surveillance currently but how much are integrators selling them? 220 integrators answered the...
Verkada Raises $80 Million, Triples Valuation To $1.6 Billion on Jan 30, 2020
Verkada's rocketing valuation continues. 9 months ago, they got a half-billion valuation and now they have announced more than triple that, at $1.6...

Most Recent Industry Reports

Ban Rules Released: Use Dahua or Hikvision, No Government Contracts on Jul 13, 2020
The US government has released the rules implementing the "Prohibition on Contracting with Entities Using" Dahua, Hikvision, and Huawei based...
JCI Sues Genetec For Patent Infringement on Jul 13, 2020
Surprisingly, security giant JCI has sued their partner, security software developer Genetec, for patent infringement. Inside this note,...
Remove Dahua and Hikvision Equipment "Immediately" Or Else Banned From US Government Contracts on Jul 10, 2020
The US government has directed contractors to remove covered equipment, such as Dahua, Hikvision, and Huawei Hisilicon products, "immediately." If...
ZeroEyes Presents Firearm Detection Video Analytics on Jul 09, 2020
ZeroEyes presented its Firearm detection Video Analytics system at the May 2020 IPVM Startups show. A 30-minute video from ZeroEyes...
Directory of 164 "Fever" Camera Suppliers on Jul 09, 2020
This directory provides a list of "Fever" scanning thermal camera providers to help you see and research what options are available. There are...
Clinton Public View Monitor (PVM) Mask Detection Tested on Jul 09, 2020
Face mask detection, or more specifically not wearing one, is expanding amidst the pandemic. Clinton Electronics has added this capability to their...
These Florida Real Estate Agents Are Now Selling "SafeCheck USA" Temperature Detectors on Jul 09, 2020
The "Kakon Brothers", William and Nathan, are self-described "south Florida Power Agents specializing in Luxury Real Estate" who "have closed over...
Avigilon ACC Cloud Tested on Jul 08, 2020
Avigilon merged Blue and ACC, adding VSaaS features to its on-premise VMS, offering remote video and health monitoring that was previously limited...
Hikvision's India Dominance Faces Threat on Jul 08, 2020
While Hikvision has become a dominant video surveillance provider in India, recent tension between the governments of India and the PRC is...
The US Fight Over Facial Recognition Explained on Jul 08, 2020
The controversy around facial recognition has grown significantly in 2020, with Congress members and activists speaking out against it while video...