Avigilon Weak Profits Continue - Q2 2015

By: John Honovich, Published on Aug 03, 2015

After spending $39 million buying back their own stock, one would think (or hope) Avigilon would report great earnings.

Alas, no.

Avigilon's weak profits continue along with lower growth, fostering concerns about the company's long-term prospects and pulling the stock down more.

In this note, we review Avigilon's Q2 2015 financials, examining growth trends, earnings challenges, the Avigilon CFO ambush, the patent monetization push, and industry trends impacting them. 

************* $** ******* ****** back ***** *** *****, *** ***** ***** (or ****) ******** ***** report ***** ********.

****, **.

********'* **** ******* ******** along **** ***** ******, fostering ******** ***** *** company's ****-**** ********* *** pulling *** ***** **** more.

** **** ****, ** review********'* ** **** **********, ********* ****** ******, earnings **********, *** ******** CFO ******, ********* ****************, *** ******** ****** impacting ****. 

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

Avigilon ****** ************

**** ****, ** **, revenue ****** *** ** 66%. **** ****, ** Q2, ****** *** ** 38%.

*******, **** ******* ****** is ***** ****** / helped ************* ** ******** exchange ************. ******* ****, measured ** ******** ********, growth *** ** **%. And ******* ****** ** somewhat *****, ** **** 26% ******** *** ************* from *** ** ******* purchased ** *** *** of **** ****.

** *** ******** ****, low ** ***-******** ******* revenue ****** ** ***** competitively **** ****. ** contrast, **** ******* ******** shrunk *% ** *** same *******. *******, *********'* H1 **** ******* *** up **%, *** ********* Avigilon **** ** ****** rate *** ***** ****** increase.

Earnings ******** / **** ********

*** ****** ********* **% year **** ****. *** income ********** *** **** 2.5%

*** ****** *** ****** though, ** ******** ******** fluctuations. **** ******** ********, revenue ***** **** **** $8 ******* ****, ************* reducing income *******. 

********, ****** ******** ***** R&D ******** **** **** ~13%, **** **** **** tripled *** **** ** those **** ***********. **** further ****** *****-**** *** income, ******* ***** *****:

**** *******,******** ******. **** ******* (** 2015), *** **** *** more ****** *******. *** most ******* ******** *** a ***% ***** ** G&A ********, ***** *****:

** ******* **** * significant ******* ** **** comes **** ******** *** manufacturing ******** ** *****, including *** ****** ** 48 ******* *** ****. The ****** ** **** is ********** ********** ******** for ******* / ********.

Commoditization ********

********'* *** *********** *** ******* of ************* ******* *** falling ******* ****** *** emphasized **** ** ** not ********* ****:

"*** *** ******* ** the ******* *************** ** hardware ... ***** *****'* really ********** ****** *** business, ******* ** *** not * ******** ******* nor *** ** * camera *******, ** *** a ***-**-*** ******** ********, and ** ** **** partner **** *** **** majority ** **** ** low **** ************* *** there."

** ******, ******** ** ********* heavily ** ******** * facility **** ***** ********. And ** ******** ***** really ***** ******* ***** low-cost ****** *************, ** will ***** ***** ******** model. *** ** ********'* revenue ****** ** ****** the ***** ****, *** a ***** ***** **** Genetec ****. ******* ***********, selling ******** ******* ******** to ************ *** ****** ******* fees**** ***** **** **** competitive ******* *********** **** Genetec *** *********. ***** Avigilon ***** *********** '*******' with ***-**** ************* **** Hikvision, **** ****** ****** to **** ** ***** parts ** *** ***** to ****. *******, ** our ******** ** ********* **** shows, ******** ** **** at *** *** *** of *** ****** ******.

Industry ********

*** ****** ***** ** beyond ********. *** ******** is ** * **** / ********* *****.

*** ******* ************* ******** to *** **** ******** pressure ** ****** ******* while *** ********* ** IP ** ****** ********** done ** *** *** to ****-***, ********* *** market ** *********** *********** / ********* ******.

******* ******** *** ****** products, *** ***** *** factors **** **** **** against ***** *********** ******* brand. ******** ****** ** better **** ****, *** that ***** ****** ** 10% ** **% ****** (constant ********) ******, ******* of ******* ** ** 50%.

Avigilon *** ********

********'* *** *********** ** ******** ********* TV ****** ** ******* *** results, ** *** ****** you **** ** **** bad *** ***. ******* these ********** *** **** pieces, *** **** *** stock ********** ** ******* and ********* ***** ***** the **** ** ********, the **** **** ***** him. *** *** ******** CFO, ******* ****** *** * month ***, ****** *** ********** to *********** ******** **. What ** ** *** understand ** *** ********'* CEO *** *** **** this *********.

****** *** ********* ******, these ***** ** ****** decrease ******** ********** ** the ******* (*******, ******** '************ **********' / 'Authoritarian' ***).

Wearing ****

******** *** **** ******* with ***** *** ********* PR ******** *** * quarters ***, ******** **** the '****' *** ******. The ********** ********, **** the ***** ********* *** again ***** ***** ******** were ********. ***, **** are ******** ** **** up ******* ********* **************** ** ***** ***********.

*** ** *** ******* strengths ** ******** *** been ***** ******* ** 'run ****', *** ** until **** **** **** was ******** **** ********* success ** **** ********. But *** *** **** has ******* ****** *** pusing **** ** *** face ** ********** ******** will **** ****** **** difficult.

*** ******* *** **** from *** ****** ********* if **** *** **** that *****, *** *** risks *** ********.

Comments (6)

Posting results like these and little to show for a strategy to improve, it's no surprise the CEO is running for cover and letting the new CFO take the bullets. When all else fails and there's not much by way of a glimmer of light at the end of the tunnel it's time to leverage IP. Don't have any? Buy it! Seems like a very costly short term plan to generate revenue.

What a trial by fire! A bit overzealous.

Maybe Alex F. had to cancel at the last moment, disappointing 'The Close'. That might explain the extra venom from the host, as well as the un-tailored shirt.

Though put under intense pressure to explain why Avigilon won't be affected by the corporate 'purse being snapped shut', Ric admirably never mentions patents nor describes the license program as ramping/lawyering up. I wonder if that was intentional...

I used to admire Avigilon from afar. Good product and very aggressive marketing. I admired the great strides they made but thought the end game was to get big, get bought, and get out ...but they didnt/haven't.

The increasingly negative feedback/buzz both internally and externally about them, the lingerig OV/patent 'troll' issue, and now this. It all seems a bit...

https://en.wikipedia.org/wiki/George_Armstrong_Custer

'The battle is popularly known in American history as "Custer's Last Stand." Custer and his men were defeated so decisively at the Little Bighorn that it has overshadowed all of his prior achievements'

I wouldnt work there for all the tea in Chi ...maple syrup in Canada

"thought the end game was to get big, get bought, and get out ...but they didnt/haven't."

From what we hear from investors, Avigilon is definitely opened to be acquired. However, the price point they want is at or close to Canon / Axis levels. Related, Avigilon has recently started to market / talk about reaching a billion in revenue.

Of course, they can want whatever they want, the problem is whether someone will pay the price. At the beginning of last year, they had a ton of momentum and double the market valuation, which would have made a deal a lot easier. Now, not so much...

However, the price point they want is at or close to Canon / Axis levels.

Ironically, since they are an end-to-end total solution, they don't appeal as much to someone buying ala carte...

Someone who already is a major camera or VMS manufacturer might not want to pay for something they already have, as well as the integration headaches that would come along with it.

So maybe most value for the Google/Microsoft/Apple/Intel* crowd and less for the Hikua, Hanwha and Honeywell sort.

*Culture clash aside - <edit>

Also, the former group of companies have a lot more cash on hand and willigness to pay high valuations. Now, will Google, Microsoft, Apple, etc. buy Avigilon or any surveillance mnufacturer? Probably not but Avigilon only needs one company who wants to make a costly gambit like Canon did for Axis.

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