Milestone's 2014 Financials Revealed

Before becoming a Canon subsidiary, Milestone made a big deal of releasing their annual financials.

Now, Milestone has stopped this.

However, IPVM has found Milestone's 2014 financials. Inside, we examine and explain critical details including:

• Growth rate problems
• The impact of their Husky NVR sales
• The decline in their total gross profits
• The millions spent on an 'aborted IPO'

Growth Rate Problems

Milestone reported 17.5% year over year net revenue growth. The key problems were:

(1) Like Axis, Milestone benefited from significant positive exchange rates swings. Unlike Axis, Milestone does not report revenue growth in local currencies, obscuring the lower true growth.

(2) More importantly, 2014 was the first year Milestone widely sold their Husky NVR lines, which should have boosted total revenue significantly. Since Milestone traditionally was software only and Husky includes hardware, even if they do not increase total cameras / channels served, the roughly twice as expensive Husky units should drive significant revenue growth.

Decline in Profits

Given Milestone's emphasis on Husky appliances in 2014, it is not surprising that gross margin percentages dropped. However, the drop was more than 11 percentage points, as shown in this excerpt:

This is especially significant given that historically Milestone's reported gross margins have been around 60% for years.

The drop in percentages is so steep, that Milestone actually made less total gross profits in 2014 than they did in 2013:

This is important because increasing total revenue while decreasing total gross profits is bad. It is those total gross profits that pay overhead and generate profits, not profitless revenue growth.

Appliance sales are essentially always going to be lower gross margin percentage offerings. That is not a problem in itself. However, a viable appliance business will generate more gross profit dollars per unit sold than software only, which will increase total gross profits. According to these results, Milestone did not achieve this in 2014.

$6.5 Million Spent on 'Aborted IPO'

The IPO that Milestone lied about preparing cost Milestone $6.5 million USD, as shown in the excerpt below:

Milestone spent ~10% of their 2014 net revenue on the aborted IPO.

OnSSI

As in years past, Milestone made no mention of OnSSI in their financials. OnSSI is minimally a non-trivial percentage of Milestone's revenues given their long-standing OEM arrangement. Though 2014 financial results would no have no impact, now that OnSSI bought Seetec, this will likely be a negative driver on Milestone's revenue and profits as OnSSI funnels users to their own 'recorder engine'.

Milestone Report

Here is the full Milestone Systems Annual Report 2014.