Net Insight Revenue Grows 25% in Q1 2016, Driven by M&A

Analysis, Quarterly Results | Posted by Josh Stinehour
Apr 28 2016

Video transport technology provider Net Insight reported its Q1 2016 results.  Revenue was SEK 110.0 million, up 25.3% versus Q1 2015.  On a constant currency basis revenue for the quarter increased 24.1%. logo-net-insight

The vast majority of the year-over-year growth was attributable to the acquisition of ScheduALL in September 2015.  Organic growth in Q1 2016 amounted to 3.5% versus the year earlier period.

Net income for the quarter was SEK 14.0 million or (0.04 earnings per share), an increase of 250% over the net income of SEK 4.0 million (0.01 earnings per share) from Q1 2015.

Gross margins for Q1 2016 were 61.7%, a slight increase above the 60.1% from the previous year’s quarter.  Operating margins were 7.1%, which is approximately the same as Q1 2015.

Revenue by Geography

  • Sales from Western Europe were SEK 47.8 million, an increase of 26.6% versus Q1 2015. The region contributed 43% of total revenue for the quarter.  In Q1 2015, Western Europe also represented 43% of overall sales
  • The Americas contributed SEK 35.2 million or 32% of Net Insight’s revenue in the quarter (versus 41% in the Q1 2015). This was a slight decrease in performance of 1% versus the revenues from Americas in the year earlier period.  When excluding the revenue contribution from ScheduALL, revenues in the Americas decreased 31% (SEK -10.8 million) in the quarter.  Management attributed the organic decline to a large order recognized during Q1 2015 within the US.
  • Rest of World sales were SEK 26.9 million, an increase of 88% versus the year earlier period.  As a percentage of total sales, Rest of World contributed 25% in the quarter versus 16% during Q1 2015

 

Revenue by Product Type

  • Sales attributed to Net Insight’s hardware products were SEK 44.7 million in the quarter, a decrease of 17.5% versus the previous year. As a percentage of total sales, hardware products were 41% of the quarter’s sales versus 62% during Q1 2015.
  • Software licenses accounted for SEK 30.0 million of revenue in the quarter, a substantial increase of 94% over the year earlier period. Software contributed 27% of overall revenue during the quarter versus 18% in Q1 2015.
  • Support and services sales were SEK 35.5 million during the quarter, an increase of 110% versus the year earlier quarter. Support and services were 32% of overall revenue in the quarter, an increase from the 19% contribution in Q1 2015.

 

Net Insight’s sales by product type have been transitioning towards software and services and away from hardware for the past several quarters.  This was further accelerated with the acquisition of ScheduALL.  The trend is highlighted by the below chart from Net Insight’s earnings release.

Capture

 

Revenue by Customer Vertical

  • Sales in the Broadcast & Media (BMN) customer vertical were SEK 89.1 million, an 25% increase over the prior year’s quarter. BMN was responsible for 81% of Net Insight’s revenue in the quarter, less on a percentage basis than the 86% in Q1 2015.
  • Sales in the Digital Terristrial TV (DTT) vertical were SEK 18.7 million, an increase of 64% over Q1 2015. On a percentage basis, DTT represented 17% of overall revenue in Q1 2016, compared to 13% in Q1 2015.
  • The CATV/IPTV vertical was 2% of total sales in Q1 2016. It was 1% of total sales during Q1 2015.

 

Net Insight ended the first quarter with 204 employees a substantial increase over the 138 employees from a year earlier.  The acquisition of ScheduALL is the primary cause for the increase.

Cash and cash equivalents was SEK 170 million at the end of the quarter, up slightly from the SEK 164 million balance as of December 31, 2015.

Commenting on the results for the quarter, Net Insight CEO Fredrik Tumegård stated, “Sales increased by 25 per cent in the quarter with a stable operating margin of 7 per cent. The quarter has been characterized by continuous market penetration of our solution for true Live OTT, integration of last year’s acquisition of ScheduALL and both activities are progressing according to plan.”

 

 

Related Content:

Press Release: Net Insight releases Interim Report for January – March 2016

 

 

© Devoncroft Partners 2009-2016.  All Rights Reserved.

 

 

 

Francisco Partners Acquires SintecMedia

Analysis, Broadcast Vendor M&A | Posted by Josh Stinehour
Apr 27 2016

Sintec and FP logo

Francisco Partners has acquired SintecMedia, a well-known provider of broadcast business management software.

Financial details of the transaction were not made public. However, according to Reuters, the deal was valued at approximately $400 million.

Francisco Partners is a technology-focused private equity firm.  Francisco has existing familiarity with the media technology sector having purchased Grass Valley from Technicolor in January 2011 .  Francisco operated Grass Valley for nearly four years before exiting the investment in 2014 with Grass Valley’s sale to Belden.

SintecMedia had been owned by private equity firm Riverwood Capital.  Riverwood acquired SintecMedia in 2010 from existing venture capital investors including Walden Israel and Sequoia Capital.  Riverwood then supported SintecMedia through a series of acquisitions including Argo Systems , StorerTV , and more recently Broadway Systems.  In early 2014 Riverwood provided almost half the financing to support Sintec’s acquisition of competitor Pilat Media in a transaction valued at $103.5 million.

In the press release announcing the transaction, CEO and co-Founder of SintecMedia Amotz Yarden, stated, “Nothing is changing in SintecMedia’s business operations. We will continue to play a pivotal role in the way advertising is bought, sold and managed in the diverse media industry and our customers will continue to receive future-proof technological continuity combined with our innovative aptitude and deep domain expertise. I look forward to many years of exciting growth.”

Matt Spetzler from Francisco Partners added, “We have followed SintecMedia for over six years and are thrilled to back the company and its management team as they continue to consolidate their leading position in helping media companies monetize their assets. The broadcast and media industries are entering a phase of innovation and change and SintecMedia is uniquely positioned to help customers capitalize on this opportunity with a strong market position and new products.”

 

Related Content:

Press Release: Francisco Partners Acquires SintecMedia

 

 

© Devoncroft Partners 2009 – 2016. All Rights Reserved.

 

 

Don’t Miss The Media Technology Business Summit at the 2016 NAB Show

Analysis, broadcast industry technology trends, broadcast industry trends, Broadcast technology vendor financials, Broadcast Vendor M&A, Conference Sessions, technology trends | Posted by Joe Zaller
Apr 16 2016

Media Technology Business Summit

1:00pm – 5:00pm, Sunday, April 17, 2016

Las Vegas Convention Center, Room N249

Open to all 2016 NAB Show Registrants

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2016 Devoncroft NAB Media Technology Busienss Summit

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Conference Agenda

1:00pm – Strategic Industry Analysis: Valuations, M&A, and Equity Finance

  • Joshua Stinehour, Principal Analyst Devoncroft

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1:25pm – Follow the Money: Trends Driving Media Investment

  • Joe Zaller, Founder & President Devoncroft

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1:50pm – Change is the New Normal: Transforming for Business Success in the New Media Landscape

  • Ulf Ewaldsson, SVP, Group CTO, & Head of Group Function Ericsson

 

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2:10pm – The Vendor C-Suite: Strategies for an Evolving Market

  • Louis Hernandez, Jr., President & CEO Avid
  • Charlie Vogt, CEO Imagine Communications
  • Larry Kaplan, Founder & CEO SDVI
  • Dan Castles, CEO Telestream

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2:50pm – The Broadcaster C-Suite: Trends Driving Investment Decisions

  • John Honeycutt, CTO Discovery Communications
  • Renu Thomas, EVP Media Operations, Engineering & IT Disney/ABC Television Group
  • Richard Friedel, EVP and GM Fox Network Engineering and Operations
  • Håvard Myklebust, CTO TV2 Norway

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3:30pm – Leveraging Hyperscale IT Infrastructure for Next-Generation Media Workflows

  • Michelle Munson, President, CEO, and Co-Founder Aspera, an IBM Company
  • Michael Koons, VP, Worldwide Systems Engineering Cisco Systems
  • Tom Burns, CTO, Media & Entertainment EMC/Isilon
  • Ulf Ewaldsson, SVP, Group CTO, & Head of Group Function Ericsson

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4:00pm – Service Provider C-Suite: Perspectives on Industry Trends

  • Chris Walters, CEO Encompass Digital Media
  • Ramki Sankaranarayanan, Founder & CEO Prime Focus Technologies
  • Avi Cohen, CEO RR Media

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4:30pm – AWS Keynote – “All In”: Cloud Transformation of the Media Industry

  • Alex Dunlap, General Manager AWS CloudFront
  • Sam Blackman, CEO and Co-Founder Elemental Technologies

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We look forward to seeing you there. Additional information on the Summit is available from the Devoncroft Partners website and the NAB Show website.

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© Devoncroft Partners 2009 – 2016. All Rights Reserved.

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Download New Devoncroft Partners Report: 2016 NAB Show – Observations and Analysis of the Media Technology Industry

Analysis, broadcast industry technology trends, broadcast industry trends, broadcast technology market research | Posted by Josh Stinehour
Apr 16 2016

Ahead of the 2016 NAB Show, Devoncroft Partners has published an analysis of the trends and strategic drivers in the broadcast and media technology sector.

A link to download this report can be found at the bottom of this page.

NABShow-Cover-2016

The report covers and provides commentary on a variety of significant market trends, drivers, and events, including:

  • Media Revenue Models Transitioning
  • Digital Monetization Challenges
  • Media Restructuring Announcements
  • Changing Customer Budgets
  • Review of Technology Investments by Large Media Customers
  • Key Trends Driving Investment Activity
  • Media Technology Industry Market Performance 2009 – 2015
  • Technology Vendor Results in 2015
  • Consolidation Across Media Value Chain
  • Implications of Market Developments on Technology Vendors

 

In addition, the analysis includes preliminary excerpts from the 2016 Big Broadcast Survey (BBS), the largest and most comprehensive study of technology trends, buyer behavior, and vendor brands in the broadcast and media technology sector.

We are interested in your feedback, comments, and questions on this report.

If you would like to schedule a meeting at the NAB Show, please let us know as soon as possible.  We are in the process of finalizing the NAB Show schedule for the Devoncroft team, and have limited availability remaining.

We hope to see you in Las Vegas.

 

Please click here to download a PDF copy (10 MB) NAB Show 2016 – Observations and Analysis of the Media Technology Industry from Devoncroft Partners (registration required).

 

 

© Devoncroft Partners 2009 – 2016. All Rights Reserved.

 

 

Media Technology CTOs to Discuss What Drives Their Investment Strategies at 2016 NAB Show Conference

Analysis, broadcast industry technology trends, broadcast industry trends, broadcast technology market research, Broadcast Vendor M&A, Conference Sessions, technology trends | Posted by Joe Zaller
Apr 11 2016

If you want to understand what’s driving media technology investments, don’t miss The Broadcaster C-Suite: Trends Driving Investment Decisions” at the 2016 NAB Show.

This moderated panel discussion about how evolving business models will drive media technology spending features four top executives: Richard Friedel- EVP and GM FOX NE&O; Håvard Myklebust – CTO of TV2 in Norway;  John Honeycutt – CTO of Discovery Communications; and Renu Thomas – EVP Media Operations, Engineering and IT at the Disney/ABC Television Group.

 

Devoncroft NAB 2016 Broadcaster Panel

 

This panel is just one of the sessions in the 2016 Media Technology Business Summit, produced by Devoncroft Partners and the NAB Show.

Designed to be a thought-provoking kickoff to the 2016 NAB Show, this half-day conference examines the “the business of the media business” from the perspective of all levels of the media value chain.  It is also an opportunity to network with the media technology executive community ahead of the start of the exhibition.

The Media Technology Business Summit is a half-day conference.  It starts at 1pm on Sunday April 17th, 2016 in room N249 of the Las Vegas Convention Center.

This event has been standing-room only for the past four years.  So please come early if you want a seat.

Admission is open to all registered 2016 NAB Show attendees (remember to bring your NAB Show badge).

Full details are available here, and on the NAB Show website.

 

 

 

© Devoncroft Partners 2009 – 2016. All Rights Reserved.

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Speakers Announced for the 2016 NAB Show Media Technology Business Summit

Conference Sessions | Posted by Josh Stinehour
Apr 04 2016

We are pleased to announce the full agenda and speaker lineup for the fifth annual Media Technology Business Summit at the upcoming 2016 NAB Show.

As a reminder, the Summit starts at 1pm on Sunday April 17th and is located in room N249 of the Las Vegas Convention Center.  The event is co-produced by Devoncroft Partners and the organizers of the NAB Show.  Admission is available to all NAB Show exhibitors and registered attendees (remember to bring your NAB Show badge).

Designed to be a thought-provoking kickoff to the 2016 NAB Show, this half-day conference examines the “the business of the media business” from the perspective of all levels of the media value chain.  It is also an opportunity to network with the media technology executive community ahead of the start of the exhibition.

An overview of the conference is included below.  Full details are available on the NAB Show website.

 

2016 NAB Show Media Technology Business Summit

 

1:00pm – Welcome and Introductions

Presenter:

  • Joe Zaller, President Devoncroft Partners

 

1:05pm – Strategic Industry Analysis: Valuations, M&A, and Equity Finance

Josh Stinehour of Devoncroft will take the podium for his annual (enthusiastic) presentation on developments in the media technology sector.  If you have any final announcements you would like Josh to consider for his presentation, let him know.

Here is a link to the NAB Show website individual session listing.

Presenter:

  • Josh Stinehour, Principal Analyst Devoncroft Partners

 

1:25pm – Follow the Money: Trends Driving Media Investment

Devoncroft founder Joe Zaller will present a summary of key data derived from a variety of broadcast market intelligence projects including the 2016 Big Broadcast Survey, the industry’s definitive demand-side market study. This market data will highlight the technology investments made in 2015, expectations for technology spend in 2016, and key trends driving technology investments.

Here is a link to the NAB Show website individual session listing.

Presenter:

  • Joe Zaller, President Devoncroft Partners

 

1:50pm – Change is the new normal: Transforming for business success in the new Media landscape

As the Media industry undergoes massive transformation, only the strongest or most considered will survive. To win at a time when change is the constant requires technology shifts, operational re-organizations and completely new business models that address the challenges of the new Media landscape of consolidated customers, and ever more fickle consumers.

Ericsson’s SVP and Group CTO, Ulf Ewaldsson, will reflect on how Ericsson’s own transformation, and that of Telecoms and ICT, has parallels with the Media industry, and why Ericsson has invested to become one of the largest global TV & Media providers of products and services. The session will also highlight some of the latest technologies that underpin success, and just how different a business mindset is needed to excel.

Here is a link to the NAB Show website individual session listing.

Presenter:

Ulf

2:10pm – The Vendor C-Suite: Strategies for an Evolving Market

CEOs from four leading media technology suppliers will debate the most important commercial issues facing the industry, and discuss their strategies to position their companies for success in a rapidly evolving marketplace.  The panelists will also offer opinions on how changes in the business environment are impacting vendors and customers.

Here is a link to the NAB Show website individual session listing.

Moderator:

  • Joe Zaller, President Devoncroft Partners

Panelists:

NAB 2016 Devoncroft Vendor CEO Panel

 

2:50pm – The Broadcaster C-Suite: Trends Driving Investment Decisions

Senior technology executives from leading broadcasters will offer informed perspectives on the most significant industry trends affecting technology budgets and the technology purchase decision.  The audience will benefit from an emphasis on the business implications of technology decisions to broadcasters.

Here is a link to the NAB Show website individual session listing.

Moderator:

  • Joe Zaller, President Devoncroft Partners

Panelists:

NAB 2016 Devoncroft Broadcaster CTO Panel

 

3:30pm – Leveraging Hyperscale IT Infrastructure for Next-Generation Media Workflows

A panel of executives from well-known IT vendors operating in the media technology sector will offer the IT community perspective on developments in the media sector. Participants will also share opinions on the implications of broader technology advancements to the sector. In particular the discussion will focus on the role of the IT vendor in the ongoing transition of the media technology sector to take advantage of technologies such as IP and virtualization.

Here is a link to the NAB Show website individual session listing.

Moderator:

  • Al Kovalick, Media Systems Consulting

Panelists:

NAB 2016 Devoncroft IT Panel

 

4:00pm – The Service Provider Perspective on Industry Trends

A panel of executives from leading media service providers will discuss views on both technology developments and deployment considerations for media organizations.  Discussion topics will include solutions for multi-platform content delivery, the economics of outsourcing, how service providers can leverage their scale to deliver increased performance and agility, and how next-generation data center architecture may impact the media ecosystem.

Here is a link to the NAB Show website individual session listing.

Moderator:

  • Josh Stinehour, Principal Analyst Devoncroft Partners

Panelists:

NAB 2016 Devoncroft Service Provider Panel

 

4:30pm – AWS Keynote – “All In”: Cloud Transformation of the Media Industry 

Amazon Web Services and Elemental leaders discuss the unprecedented impact of the cloud on media and entertainment industry business models. Alex Dunlap, general manager of Amazon CloudFront, and Sam Blackman, CEO and co-founder of Elemental, will share insights about media leaders who are going “all in the cloud”. The session will discuss cutting edge end-to-end media workflows, the advantages of video processing and delivery from the cloud, and how Amazon’s 2015 acquisition of Elemental represents the future of the media industry.

Here is a link to the NAB Show website individual session listing.

Presenters:

NAB 2016 Devoncroft AWS Keynote

 

 

© Devoncroft Partners 2009 – 2016. All Rights Reserved.

 

 

Share Your Opinions on the State of the Media Technology Industry in 2016

broadcast technology market research | Posted by Josh Stinehour
Mar 28 2016

If you haven’t already taken Devoncroft’s 2016 Big Broadcast Survey (BBS), then we hope you will take the time to share your opinions on market trends, project deployments, and technology suppliers. BBS Logo

Click here to register for the 2016 Big Broadcast Survey.

Once you complete the short registration process (necessary in an age of web-crawling spam bots), we’ll send you a link to participate in the 2016 BBS, the largest and most comprehensive annual study of the broadcast and media technology industry.

A summary of the responses received prior to the 2016 NAB Show will be presented during the “Media Technology Business Summit” on Sunday (April 17th) ahead of the NAB Show exhibition. We hope to see you there.

Why your feedback is important

Your thoughtful feedback is a critical tool for media technology strategists.

The BBS takes a scientific approach that provides independent third-party validation a wide range of important topics. It allows both buyers and suppliers of media technology to benchmark themselves against their peers on a global basis.

That’s why technology vendors, broadcasters, service providers, and finance professionals rely on the BBS as one of the most important reference tools for the media technology industry.

We recognize your time is valuable, so in return for completing the 2016 Big Broadcast Survey you will receive the following:

  • A 100-page summary of Devoncroft’s most recent global study of the market (as soon as you complete the survey)

 

  • A strategic analysis of important developments in the media and broadcast industry prior to the 2016 NAB Show

 

  • A 100+ page summary of the 2016 BBS results, as soon as it is available

 

  • An entry into a random drawing for a chance to win 1 of 5 prizes (your choice of Apple iPad Air 2 WiFi 128GB; OR Shure SE846 Sound Isolating Earphones; OR USD $750 Marriot/Ritz Carlton worldwide hotel voucher). Please see terms and conditions.

 

Click here to register for the 2016 Big Broadcast Survey.

 

 

© Devoncroft Partners 2009 – 2016. All Rights Reserved.

 

 

Don’t Miss the Fifth Annual “Media Technology Business Summit” at the 2016 NAB Show

Conference Sessions | Posted by Josh Stinehour
Mar 28 2016

Whether you are a supplier, buyer, or investor in the media technology sector, you won’t want to miss the “Media Technology Business Summit” at the upcoming NAB Show.

Now in its fifth installment at the annual NAB Show, this half day session will take place on the afternoon of Sunday April 17th from 1pm to 5pm in room N249 of the Las Vegas Convention Center.

 

Summit-Collateral

 

Similar to prior years, the event will feature executive panel discussions across the entire media value chain.  C-level executives from leading broadcasters, service providers, media technology vendors, and IT vendors will offer candid assessments of the business impact of market developments on their business models, operational practices, and strategic decision making.

As a complement to the panel discussions and keynote presentations, we will also review excerpts from the latest findings of Devoncroft’s Big Broadcast Survey, the industry’s definitive demand-side study of the broadcast and media sector.

We are in the process of confirming the event’s lineup of speakers and panelists.  Once complete, we will post the full agenda.  A preliminary agenda is available from the NAB Show website.

This conference is intended for senior executives from technology vendors, end-users, and investment firms in the media technology sector.  A NAB Show badge is required for admission.

Approximately 500 executives attended this standing-room only event at the NAB Show 2015. We hope to see you there in April 2016.

 

 

© Devoncroft Partners 2009 – 2016. All Rights Reserved.

 

 

Vislink Reduces Headcount 26% in Communications Division. Reports 2015 Results.

Analysis, Broadcast technology vendor financials, Quarterly Results | Posted by Josh Stinehour
Mar 25 2016

UK-based Vislink plc, which owns broadcast industry brands Advent, Link, MRC Gigawave, and Pebble Beach, announced full year 2015 results.  2015 revenue was £57.8 million, a decline of 6.7% versus 2014 revenue. vislink

The revenue decline was attributable to Vislink’s surveillance business, which completed a large one-time order in the first half of 2015.

Net income for 2015 was (£0.9) or (0.7p) per share, compared to net income of £3.7 or 3.2p per share in 2014.

2015 operating income was (£0.8) versus operating income of £5.5 during 2014.  It is important to note management capitalizes a portion of R&D expense, which is therefore not reflected in the current period’s operating expenses and instead amortized over future periods.

R&D expenses recognized in 2015 were £5.8, a 3.6% increase over 2014.  As a percentage of revenue, R&D expense was 10%, a slight increase from the 9% in 2014.  The increase was attributable to the addition of a full 12 months of Pebble Beach (acquired in March of 2014).

Sales and marketing (S&M) expenses were £9.4, a rise of 6.8% against 2014 S&M.  On a percentage of revenue basis S&M was 16.3%, an increase over the 14.2% of revenue from 2014.

Administrative expenses were £6.1, a decrease of 10% versus 2014 levels.  The decrease in administrative expenses was the result of a restructuring of the Vislink Communications Systems division.

Headcount for the Communications System division decreased from 250 at the end of 2014 to 185 at the end of 2015 – a 26% decline for the year.  The Company incurred a charge of £2.5 related to the restructuring.

In contrast, the headcount of Vislink’s Pebble Beach increased from 63 at the start of the year to 75 at the end of the year.

Vislink ended 2015 with a cash balance of £3.3, down from £8.4 at the end of 2014.

Broadcast Performance:

Vislink’s broadcast revenue for the 2015 year was £50.2, a 9% increase versus broadcast revenue in 2014.  The gain was primarily related to the inclusion a full 12 months of Pebble Beach.

Pebble Beach revenue for 2015 was £10.9 million.  Vislink acquired Pebble Beach in March of the 2014, so year-over-year comparisons are not appropriate.  During the earning release, management highlighted a $2.0 million (USD) order received from Scripps Group in 2015.

Broadcast revenue for Vislink’s Communications Systems division was £39.3 million for 2015, an increase of 4% over the prior year.

Broadcast Regional Performance:

The table below from Vislink’s earning release shows a complete breakdown of the Company’s broadcast revenue by geographic region.

vislink-geo-table-2015

Business Outlook:

In a December 8, 2015 press release Vislink had alluded to an upcoming acquisition, stating “the Company is in advanced discussions with a small bolt-on acquisition, which would provide software to broadcasters and be highly complementary to Pebble Beach Systems’ existing broadcast solutions.”  There was no acquisition announcement as part of Vislink’s release.

Within the earnings release, management cited recent product releases positioning Vislink to benefit from technology transitions related to IP and virtualized software.

Executive Chairman of Vislink, John Hawkins said “We continue to transition to a software and services business represented by the evolving profit mix within the business. Pebble Beach Systems has had a strong financial performance in 2015 as it continues to expand its sales activities through its key partnerships and increasing geographic presence.  In its core broadcast markets Vislink Communication Systems found market conditions in 2015 challenging and they are expected to remain variable in 2016. However, the significant restructuring of Vislink Communication Systems, coupled with the investment and launch of new products and an increasing order pipeline, provides an encouraging platform for improved results from Vislink Communication Systems.”

 

Related Content:

Vislink 2015 Earnings Press Release

Vislink 2015 Earnings Presentation

 

 

© Devoncroft Partners 2009 – 2016. All Rights Reserved.

 

 

Avid 2015 Revenue and Profitability Decrease with Continued Transformation

Analysis, Annual Results, Broadcast technology vendor financials, Quarterly Results | Posted by Josh Stinehour
Mar 21 2016

Avid Technology announced full year 2015 results.  Management also provided long-term guidance for financial performance through 2018. Avid Logo_ white background

Total revenue for 2015 was $505.6 million, a decrease of 4.6% versus 2014 revenue.  Product revenue for the year was $336.4 million, a decline of 11.1% against 2014.  Products represented 66.5% of overall revenue in 2015.  Services revenue was $169.2 million, an increase of 11.6% versus the year prior.  Services contributed 33.5% of total revenue for the year.

Net income was $2.4 million or $0.06 per share.  This compares to 2014 net income of $14.7 million, which was $0.38 per share.

Gross margins for 2015 were 60.9%, a slight decline versus the 61.4% from 2014.

Operating income for 2015 was $6.9 million, a decrease of 64.6% versus 2014 operating income.  2015 Operating income included a restructuring cost of $6 million.

R&D expense for the year was $95.8 million, a 6.1% increase over 2014 R&D levels.  As a percentage of total revenue, R&D expenses were 18.9%, compared to 17% of total revenue in 2014.

Sales and marketing costs for 2015 were $122.5 million, representing a 7.8% decline versus 2014 sales and marketing levels.  Sales and marketing expenses were 24.2% of 2015 revenue, a slight decline versus 25.1% of total revenue in 2014.

G&A expense was $74.1 million for 2015, a decline of 8.7% versus the prior year.  Expressed in terms of total revenue, G&A expense was 14.6% of sales in 2015 versus 15.3% in 2014.

When considering the 2015 figures included six months of Orad’s operations, the decline in S&M and G&A illustrates the impact of anticipated cost synergies from the acquisition and Avid’s restructuring initiatives.

There are many one-time expenses and non-cash items in Avid’s income statement results.  To provide a more normalized view of profitability Avid cites adjusted EBITDA, which is defined as operating income plus add-backs for costs attributed to amortization, restructuring, restatements, stock-based compensation, acquisitions, integration activities, and efficiency program costs.  Adjusted EBITDA was 2015 $41.5M, a decline of 26% versus the same figure in 2014.

Cash used in operations for 2015 was $34 million.  The net effect of financing events, capital expenditures, and the Orad acquisition left Avid with $17.9 million of cash at the end of 2015.  The balance sheet does not account for the recent financing initiative announced by Avid in February.

Several factors have combined to complicate Avid’s financial disclosures. Most notable, the restatement in late 2014 introduced a considerable amount of amortized revenue from prior financial periods.  Though this revenue is now recognized in Avid’s income statement, it does not represent any actual cash received from clients.  In other words, it is non-cash revenue with 100% gross margins.  In aggregate, changes in deferred revenue represented a negative cash adjustment (versus net income) of $65 million in 2015 and $51.9 million in 2014.  Adding to this complexity are the effects of recent restructuring initiatives, the impact of the Orad acquisition, and the ongoing transition to a subscription model.

CEO Louis Hernandez, Jr. commented on these challenges during Avid’s earnings call, noting “…I know that it would be nicer if the financial expression were more clear and didn’t have the noise of a couple of the variables, the non-marketed products, the amortization, that pre-2010 revenue or that even the shift to recurring.”

Management is aware of this difficulty and has attempted to introduce new metrics to allow analysts to better understand the transition of the business.

Update on Transformation:

Highlighting the progress was bookings growth of 26% in Q4 2015 driven by the largest transaction in Avid history with Sinclair Broadcast Group and the positive impact of the Orad acquisition.  Bookings related to recurring revenue were approximately 38% of total 2015 bookings, a substantial increase over the 26% from 2014.

Below is a chart from Avid’s investor presentation illustrating the recent positive trend in Avid’s bookings in the context of the Company’s continued transformation.

Avid-transformation

Management also disclosed several metrics on the adoption of Avid’s MediaCentral platform.  At the end of 2015 MediaCentral had over 32,000 users, a 54% increase above 2014 levels.  More than 25,000 of the users are paying subscribers.  This represents an increase of 400% in paying subscribers since the beginning of 2015.

Business Outlook:

Contained in Avid’s earning release was full year guidance for 2016 along with longer term guidance for 2017 and 2018.  These figures are provided in the below tables taken from Avid’s earnings release.

Commenting on both 2015 performance and the business outlook, Louis Herandez, Jr added, “Avid is in the final stretches of its dramatic transformation and the benefits of Avid’s Platform approach to solving the media industry’s more pressing needs is reflected in both a solid close to 2015 and dramatically improved financial expectations for 2016 and beyond.  We are on track to complete the transformation and position Avid for long term sustainable and profitable growth with an improved financial model.”

Avid-tables

 

Related Content:

Press Release on Avid’s 2015 Financial Results

Presentation on Avid’s 2015 Financial Results

 

 

© Devoncroft Partners 2009 – 2016. All Rights Reserved.

 

 

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