Avigilon Doubles Revenue, Breaks Billion Valuation (Q3 2013)

Author: IPVM Team, Published on Nov 05, 2013

Utterly unprecedented for a surveillance company Avigilon's size, Avigilon reported doubling revenue in Q3 2012 over the previous year, doing $51.1 million revenue for the quarter, putting them at a $200+ million annual pace, with their market capitalization breaking $1 billion, up 25% alone the day after the announcement. In this note, we break down what is driving their growth and the key details of their performance.

Here is the Q3 2013 financial report.

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Comments (20)

Doubling is really unprecedented. Question to all: What is enabling this?

At their size, doubling has to be more than simply marketing and product. While both of those are key, it's hard to imagine even being perfect at both doubling revenue to a $200 million annual rate.

Considering that they are really excelling at the mid market (rather than huge enterprise deals), I suspect their protected dealer / no Internet sales policy is playing a huge role in cementing integrator loyalty and thereby driving sales. Are there any other quality 'solutions' that have similar protection? There's a bunch of expensive offerings (NICE, Verint, IndigoVision, etc.) that are equally protected, but far less attractive for the mid market. Yes/no?

john I believe you are correct with the thoughts regarding dealer loyalty and protected channel... I often wonder why their isn't another company with a similar target or method... I suspect it it won't take much longer for another company to offer end to end solutions with a model similar to avigilon...

seeing that enterprise sales are down in 2013, 2014 should be a good measure to see if the roll out of red cloud will drive more enterprise sales... seems as though that was a major motivating factor behind the purchase...

I do not think enterprise sales are down as much as non enterprise continues to expand so rapidly.

Avigilon says traditionally 80% of customers were small to medium size business with 20% enterprise, but now enterprise is down to around 10% though they say they are pushing enterprise deals. The largest enterprise deal in Q3 was $1 million.

john i was referring to the article where it states a drop in enterprise customers from 20% to 10%... i may have misread it...

This is incorrect - re-listen to the call. They said the market is ~20%, they are at ~10%, up from ~5%

That's correct. They say the market is 80/20. And they are at 90/10.

So the company appears to grow and its not clear how it did it. Could they have incorrectly reported for a few years and now they have cleaned house? Other than that, I am sceptical about the product line. As one would say it may not be wise to put all of ones eggs in one basket.

It's pretty clear why they are growing. It's just not clear how any surveillance manufacturer already doing $100 million annual revenue can double that in a year.

As for being skeptical about putting all of one's eggs in one basket, there are a lot of security users (and certainly integrators) who actually prefer it because it makes initial installation easier.

I can see benefits of sticking with known brands but from the IPVideo course I found a lot of information that tells me that not all makers provide all solutions and one must choose the right solution for the situation. I am not opposed to a few key vendors and most end users will do this to ensure competitiveness as well as reducing system risk based on one single vendor.

Just to add to this, we are an enterprise customer so for us multiple vendors is preferred. But for small businesses, a single vendor would be an effecient way to go.

Vasiles, yes, I think this is what is happening. Users with 20 - 40 - 60 cameras and integrators who serve them are looking for offerings that are fast to set up, easy to use, etc. The bigger the customer / system gets, the more those concerns are offset by other priorities.

"It's pretty clear why they are growing. It's just not clear how any surveillance manufacturer already doing $100 million annual revenue can double that in a year."

Honestly, I don't think it's *that* hard. Not easy, but not impossible either.

The products that have the most potential for rapid growth in the CCTV segment (IMO) are those that are positioned to capture a large chunk of the mass market. Some optimal things (again, IMO):

1) Diverse product portfolio, various indoor and outdoor cams, a couple of encoders, high and low price points - I think Avigilon easily covers this.

2) Solid VMS that is easy to use and doesn't require a server farm or convoluted license management - Not super familiar with ACC, but I think they hit this.

3) LOTS of sales people in the field, ability to handle pre-and post sales meetings, ability to meet with and train people at all these regional offices, basically have a solid presence - check

4) Solid margins, or at least a solid discounting program - The larger integrators are going to want preferred pricing, and since Avigilon doesn't go through distribution, they have that extra layer of discounting they can offer.

Avigilon started with a really solid product portfolio that can cover a mjority of the common installs, from small stores to large enterprises. Then they built out a marketing team to hammer their message into every available channel, and then hired a sales army to take meetings. I don't think this is radically different from what GE Security did back when they were the "Avigilon" of the security industry. If Avigilon manages to keep their cutting edge "cool" profile, they'll double again in a couple of years. If they get complacent and lazy, a bunch of guys will get drunk one night and decide to "take over" the security industry and we'll watch this same story play out again under a new brand.

Specifically on 4 ("since Avigilon doesn't go through distribution, they have that extra layer of discounting they can offer.") I think the distribution layer elimination is far less a factor than the no online sales aspect. Distributors don't take that much, and the savings from not having one is offset by needing to have your own internal staff to handle the role. That said, I do think many integrators (not just larger ones) love that their quotes cannot be shopped online (which is a much bigger killer of integrator margin / markups).

Griffon Systems has doubled our sales in Avigilon this year so I will take a lot of credit for the uptic lol

Literally, you are just average ;)

In addition the the quality of their IP Cameras and VMS software, dealers are very attracted to the fact that their channel is protected. i.e. you can't buy Avigilon in box stores or online. They are proving to the industry that the dealer channel is still the best go to market strategy and that you can't be scattered and uncommitted with your sales approach.

Sal, I agree about the importance of them protecting their channel. What helps here is that almost all other major manufacturers have taken the opposite approach, so for the many dealers who value that protection, they have very few options, of which Avigilon is certainly the most attractive for the mid market.

John,

The way that Avigilon plays the market by layering in vertical sales specialists with RSMs opens them up to opportunities only the much larger manufacturers typically go after or hear about.

For example: Let's take a look at retail, how many physical security manufacturers spend money at NRF and other Loss Prevention trade shows to try and have some type of presence in this segment? How much more success could they have with a full time specialist to develop the retail market?

This strategy typically burns cash at a rapid rate during the first 18-24 months yet if the right person has been hired to develop a segment the ROI will come. A CEO has to be patient with the RSM/Vertical Specialist strategy and give it time to bloom. This strategy scales well and is employed by many of the larger security manufacturers and is one of the key differentiators between mid-market and large companies.

We are an Avigilon Partner and we keep doubling our sales. Some things I really benefit from:

1. Great marketing and publicity. Most of our potential clients go to their web site and do the research before they come for demos. This is the fastest growing company in Canada right now.

2. Great products and software. Does it really matter if they are the absolute best? What matters to me is that my clients are happy and that the cameras work extremely well with the Avigilon VMS. Also easy to use and are robust. Our techs love it and even those with minimal I.T. Skills can successfully deploy it.

3. Great service and tech support. The client or our techs can call directly and get a live voice. The tech can log into the Server if needed. Cases are not closed until a solution is found.

4. No online resellers advertising the cost we pay. We are able to keep budgeted profit margins.

In the past 4 years we've completely changed out our product offering from less expensive Asian products to mainly Avigilon for the reasons above. Our company has received numerous recognitions for our service levels and this is a much better fit.

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