Avigilon Strong Growth Continues Q2 2013

Author: John Honovich, Published on Aug 08, 2013

Continuing to buck the trends of the broader surveillance market, Avigilon's revenue was up 61% year over year for Q2 2013. Here is the full financial report. [Bonus - at the end, we break down the revenue of Avigilon's recent acquisition of RedCloud.]

Here are a few details gleaned from Avigilon's Q2 call:

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Comments (13)

Avigilon deserves such growth...

Most economical yet evident end to end surveillance solution in security industry in recent years.

How is Avigilon more cost effective then Arecont + Axis/Panasonic cameras managed with Milestone/Exacq/Aimetis/Luxriot?

The cost of just about any of the above combinations will be more economical then Avigilon.

I don't get what the fuss is about with Avigilon?

I think they just have very good marketing people, as reflected in the quality of their website.

Please correct me if I have been naive and wrong.

Do I need to write a post "Why Avigilon is So Wonderful"? :)

We've talked about this before but it's a number of things, in no particular order:

  • Having the 11MP / 16MP / 29MP cameras is a nice differentiator and starting point.
  • Having a restricted dealer channel is a big plus for many integrators, because even if their cost is the same, they probably can make more on Avigilon vs Axis (or Arecont or Pelco or anyone else that can be bought on the Internet).
  • Being an end to end solution is a plus. While there are a lot of other ones, most are from lower quality players (indeed all the companies you mentioned are primarily one side or the other).
  • Their analog / migration pricing is attractive with the encoders and the licensing deal (see encoders vs hybrid DVRs).
  • Their IR cameras are quite strong.

Super & Correct Answer John.

Totally Agree.

Hey, when I say good things about Avigilon, I am super and correct. It's only when I say negative things that I am biased and stupid!

Unless you're looking from a camera only perspective it's hard to compare Avigilon to Axis, Arecont, etc. I think Avigilon compares more to Exacq, both have awesome growth and a solid product. If exacq sold cameras as well that were good quality would they be in same boat as Avigilon?

Avigilon enable the integrator to deliver an end to end solution in a shorter time period, with less uncertainty, and with functionality promised and expected by the end user. By using a combination of technologies there always longer set up periods, unexpected integration "work arounds" etc. Avigilon leads to more certain installation and shorter time on site = lower total cost of installation. Added to this less uncertainty around installation is more stable margins.

For example switching 150 analogue cameras over to Avigilon in a week and starting the client on IP migration.

All the above makes this business owner an Avigilon "fan boy"

Undisclosed Integrator: what you wrote actually makes a lot of sense.

Avigilon really does have a broader end-to-end solution than others I know of.

It definitely is a great business model.

Question: is there no other company that does this - the Avigilon concept is great but I don't see why Axis can't do the same - they have there own VMS and encoders and I am sure they can knockup a multi sensor camera and a 29MP camera here and there.

What I found intriguing is the 29MP + LPR camera + multi sensor panoramic strategy - because it really does seem like these three product categories are positioning Avigilon as THE end-to-end providor.

--> Is it the "reassuring that these exotic options are available" or the "we want to deploy these next gen technologies" factor that makes this USP attractive to dealers and end-users?

Finally the protected channel - surely a SINGLE integrator cannot possibly service ALL the clients in an area? Won't they run out of time and manpower? It seems this part of the Avigilon USP is not a very sustainable aspect in the medium to long term? From the client point of view though I would say this is actually a positive - as the end-user does not have to waste any time (i.e. money) quote shopping.

I would imagine it takes a lot of work. You need to find programmers, project amangers, etc. Not just any people but the right people to ensure you produce a quality product. It's a pretty daunting proposition, if you put all that money into doing that and it fails you face possible bankruptcy. Plus Axis and others have a model of working with other VMS manufacturers and if they all of the sudden put together their own VMS and hardware they would damage those relationships. Avigilon is great but VMS with third party cameras is very strong and that model isn't going away anytime soon.

Bohan, interesting questions, thanks.

  • Why can't Axis do the same? On the VMS side, it's clearly a fear of upsetting partners. Why doesn't ACS support ONVIF? Why do they sell AVHS through a crazy multi-tier dealer structure? Why doesn't Camera Companion support Axis one click? Axis certainly has the skill to rectify these problems, but they are clearly done not to upset existing partners.
  • Regarding Axis and others (Sony, Panasonic) not doing a 29MP camera. I think they clearly made a mistake here. They typically justify that decision by pointing out technical limitations (poor low light sensitivity, super low frame rate, super inefficient bandwidth consumption, etc.). While those things are largely true, not having their own makes them appear to be technological laggards, especially to those you simply equate more megapixels with higher quality. And it's not as if Avigilon's 29MP cameras are some form of exotic technology that cannot be replicated. But Avigilon grasped the marketing benefits of such positioning while their rivals did not.
  • How can Avigilon scale with a protected channel? It's not a single integrator per territory. I don't what the max number is, and I suppose it varies with the density of the market (i.e., New York has more dealers than New Mexico). That said, I agree with you that a protected channel hits scalability limits. If Avigilon chooses to add more dealers in a region, than it increases competition, likely drives down prices and demotivates dealers. However, if they do not add dealers, they will certainly miss opportunities that are driven or won by non Avigilon integrators. I am not sure how it will all play out but it's a fascinating element.

"Avigilon enable the integrator to deliver an end to end solution in a shorter time period, with less uncertainty, and with functionality promised and expected by the end user.

Shorter time period, less uncertainty = cookie cutter solution + lower integration w/3rd party. There simply is no other way to achieve this 'goal'.

"..functionality promised and expected by the end user."

You mean like that convenience store, 1 camera-covers-all, 'not an actual image' ad they stopped using after being crushed to dust right here on IPVM?

"By using a combination of technologies there always longer set up periods, unexpected integration "work arounds" etc."

This is generally because end-user customers sometimes have other systems that they wish to integrate with their security apparatus.

These end-user customers are able to justify the margins they pay their chosen integrators because the integrator is the well-trained party with the experience, skills, and knowledge to provide robust solutions that sometimes require troubleshooting interoperability with the customers disparate systems.

Lacking that, just show the customer some fancy uber-MP cameras that have limited practical use and hope they don't notice they could've done everything the installer did, all by themselves (if they were allowed to buy the stuff themselves - which they are not)...

Value is the key word - and there are different levels of perceived value.

'End to end' is a better fit for certain solutions, and not for others.

The Avigilon scheme works, simply because there are numerous dealers who value simplicity and marketing hype over multi-system, robust solutions.

Hello Mr. Purvis, thank you for good analysis.

By the way, I don't understand how to calculate net profitability.

Could you make me clear how the 8.6% comes from?

Undisclosed, the formula for Profit Margin is Net Income divided by Sales Revenue. In this case it was $6,189,000 over $71,244,000 (see pg. 2 of Avigilon's financial report).

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