BC Business
Avigilon CEO Alexander Fernandes | BCBusiness
Vancouver’s Avigilon Corp. is the darling of TSX tech stocks these days (TSX:AVO). A leader in the HD security camera industry, the company’s revenue increased a bumper 78 per cent in 2013 over 2012 to $178.3 million, with a gross margin of 54 per cent. BCBusiness chatted with CEO Alexander Fernandes about his company’s success and what he has up his sleeves next.
How important is R&D to your company’s growth strategy?
As one of our three key pillars, it is extremely important. We have three main thrusts to fuel our growth that we have been executing since day one so it is a proven business model. Those are: growing sales, by penetrating new markets; expanding our global reach; and increasing penetration in existing markets. To put those pillars in context, last year we did roughly $178 million in revenue and that represented roughly one per cent of [industry] market share globally, so even in our domestic markets there is a tremendous opportunity to see growth. The second main thrust of our growth strategy is investing in innovation and products development. R&D is one of our greatest competitive advantages; some people think naively that a patent will solve a problem, but there is always ways around patents. Patents are by themselves not a good way to keep a secret because you actually have to disclose the invention, and so people can copy your invention. Would you say Avigilon’s disruption of the surveillance industry is comparable to Tesla’s disruption of the automotive industry?
Maybe in some ways. I don’t know if Tesla is a profitable company, but we are very profitable. So I don’t know if that is really a fair comparison. We are certainly innovators and we are very fast moving. Last year we were ranked the fastest growing company in all of Canada. But what sets us apart is not just the fast growth by itself, because there are plenty of other fast growing technology companies, but the fact that we are consistently profitable year after year and increasing profit. Most of the companies on Deloitte or Profit Magazine’s rankings, these high-speed rankings, they typically are ignoring the bottom line and so it’s no surprise that the majority of fast growing companies aren’t profitable because they are basically just buying their customers.
So profitability factors pretty high into your goals as CEO.
Absolutely. The question with fast growing tech companies that are not profitable, is: Will they ever be profitable? There is inherently a lot of risk because the day may never come, because the business model may be flawed. This is where businesses fail: they just never get the profitability right. A case in point would be a Ballard Power or other companies where they have neat technology, but no revenue. What you have is a dream of a business one day but you don’t actually have a sustainable business. When you’re not profitable you are basically not sustainable. You are at the whim and the mercy of investors. It’s not a question of “if”, it is simply a question of when they are going to cut it off. Given your rapid growth rate, have you seen an increase in competitors in your industry?
The answer there is no. It’s a very slow moving industry. I am a little bit surprised we have had such a long runway. We have now been selling six years and no one has really taken a run at us yet. Nothing has really changed–the competitive landscape hasn’t really changed in any significant way. And the other interesting thing to note about the market is it’s very crowded and fragmented so its unlike other large markets that have been around for a long time. You’ve set your revenue target at $500 million. Are you on track to reach that goal by 2016?
The short answer is yes. Even though that’s a big number, it’s conservative. Our first year of sales was 2008, so if you go from that year up to and including 2013, we are growing at an annual compound rate in excess of 100 per cent per year. If you do the math of our last year’s revenue and you keep compounding that, we have to decelerate down to 50 per cent per year growth in order to get to $500 million in the time frame we set out. So I guess what I am really saying is, I don’t want to come across as too bullish, but there is a high probability that we’ll achieve that goal well in advance of the stated time frame. But you know my business style is to under-promise and over-deliver.