Avigilon CEO Alexander Fernandes is photographed alongside a screen displaying a live video feed of himself by one of the Vancouver-based company’s high-definition surveillance cameras.Rafal Gerszak/The Globe and Mail
Investors flooded the order book for Avigilon Corp.'s latest share sale, proving there is hefty demand for companies that demonstrate solid growth even if they aren't resource-oriented.
The technology company set out to raise $75-million Monday to help fund its near-term growth plans. On Tuesday morning the deal was upsized to $100-million after the order book was roughly four times oversubscribed, according to someone familiar with the offering.
Clearly it helps that Avigilon tapped investors for fresh funds when the markets are scorching hot. Several equity issues were oversubscribed on Monday. But Avigilon stands out because it is a rare Canadian technology success story. While there has been hype around the company for some time, it continues to deliver promising results and that has investors excited.
The Vancouver-based company, which makes high-definition surveillance equipment, saw its market value soar to $1.3-billion in 2013, up from $450-million at the start of the year. Its success paved the way for its inclusion in the S&P/TSX composite index. And when Avigilon reported its fiscal 2013 earnings two weeks ago, revenue was 78 per cent over the year prior, while profit popped to $22-million, up from $7-million in 2012.
The success stems from a big push in sales and marketing. Avigilon knows it needs to get its name out in more regions of the world, so it's added sales and support staff. At the end of 2013 the company had 455 employees, most of whom are in Canada, up from 255 at the end of 2012.
The company also inked two acquisitions last year, helping to broaden its product offerings.
But management wants to keep growing, and that's why it needs new funds. The way they see it, the company needs to spend money to make more of it. The plan now is to keep adding to the sales force; build better brand awareness by showing up at places like trade shows; and spend on product innovation.
Currently the company makes its money from clients such as casinos and health care centres, and this year it wants to add sales strength in the finance and energy markets.
That investors were willing to cough up so much cash for the company's shares proves that they believe in the growth story. Moreover, the willing buyers aren't just tech specialists, according to someone close to the deal. While the venerable tech investors are around the name, generalist funds who want to invest in good growth stories are also showing interest.
However, Avigilon has cautioned them from getting too excited. Because the company is planning on spending heavily in the near term, it already warned that cash flow and profit will take a hit this year – especially in the first six months. The big question is whether the investments will pay dividends sooner rather than later.