Avid Posts $8 Million Net Loss for Q3 2011, Announces 10 Percent Workforce Reduction

Posted by Joe Zaller
Oct 28 2011

Avid announced that its revenue for the third quarter of 2011 was $165m, flat versus the same period a year ago, and up 2% compared to the previous quarter. The revenue number came in slightly below the $165.3m that was expected by equity analysts.

The company posted a GAAP net loss of $8m for the quarter versus a GAAP net loss of $10m during the same period a year ago, and a GAAP net loss of $12.9m last quarter.

On a non-GAAP basis, the company posted a net profit of $385,000 for the quarter, compared to a non-GAAP net income of $1.6m last year
and a non-GAAP net loss of $3.9m last quarter.

As with the previous quarter, the company attributed its performance to softness in the European market, saying that the macro-economic situation in the region remains very fragile.  Avid chairman and CEO Gary Greenfield said that European broadcast customers clearly want to make changes, and the company is making strong progress in the region.  However these customers are still holding back from placing orders.  Nevertheless, despite the lower year-over-year revenue from EMEA, orders in region actually increased during the quarter.

Commenting on other regions, Greenfield said Avid had a strong quarter in the Americas and Asia-Pac regions.  The company also reported an increase in services revenue.

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Company restructuring announced – including 10% staff reduction

On the company’s earnings conference call with equity analyst, Greenfield outlined restructuring actions that the company says it is taking to re-align its cost structure and to accelerate its objective of expanding the company’s operating margins.

These actions were also announced as part of a form 8-K filing with the Securities and Exchange Commission.

As part of this restructuring, Avid is planning to reduce its headcount by approximately 10%, with the majority of the reduction expected immediately.  The company said will also close a facility in Irwindale, CA.

At the end of the third quarter, Avid had 1944 employees and 505 contractors, so the planned layoffs will impact approximately 200 staff.

“We believe that Avid should be able to achieve non-GAAP operating margins in the mid teens,” said Greenfield.  “While this profit level will require revenue growth, we continue to take actions to streamline and improve our operations while increasing our investments in areas of the business with higher growth potential.”

“These actions allow us to continue to invest in our core business as well as shift some resources to areas of the business that we believe offer better revenue growth for the company.”

Greenfield says the anticipated cost of this restructuring is approximately $10m-$11m, and will result in an annualized cost savings of approximately $25m-$30m.

On the company’s earnings call, Greenfield said the cuts were made across the board, with the exception of sales and marketing where the company continues to invest.

This is the second set of major layoffs at Avid in the past year. In December of 2010, Avid announced that it planned to restructure its operations during the first half of 2011 by eliminating positions “in lower growth geographies and markets,” while reinvesting in “more strategic areas with greater opportunity for growth.”

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Highlights for the third quarter:

  • Video revenue in the quarter was $98.4m, a decrease of2% versus the same period a year ago, and an increase of 2% versus the previous quarter.  Video revenue accounted for 60% of the total revenue during the quarter, versus 60% last quarter.

 

  • Audio revenue in the quarter was $66.5, up 3% versus the same period a year ago, and up 2% versus the previous quarter.

 

  • Revenue from products was $131.9m, a decrease of 2% versus the same period a year ago, and up 2% versus the previous quarter.  Product revenue accounted for 80% of the total revenue during the quarter, the same as last quarter.

 

  • Service revenue in the quarter was $33.1m, an increase of 7% versus last year, and an increase of 3% versus the previous quarter.

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Year-to-date performance:

For the first nine months of 2011, Avid’s revenue was $492.6m, an increase of 2% versus the same period in 2010.  The GAAP net loss for
the first nine months of 2011 was $20.6m, compared to a GAAP net loss of $31.4m for the same period in 2010.  On a non-GAAP basis, the company’s net loss for the first nine months of 2011 was $4.4m, compared to a non-GAAP net loss of $5m for the first half of 2010.

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Full year guidance lowered

Due to what Avid CFO Ken Sexton called a challenging macro environment remains the company lowered its financial guidance.  Sexton said the company is expecting full year revenue to be in the range of $665m-$675m with a non-GAAP operating profit margin of 1.5% – 3% of revenue.  Sexton also said that the company expects to achieve a year-on-year improvement in non-GAAP gross margins.

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“The third quarter results showed sequential improvement in revenue and profit,” said Greenfield. “We continue our sharp focus on providing our customers with the products and solutions that help them succeed. In addition, we have taken actions which should accelerate improvement in our financial performance.”

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Related Content:

Press Release: Avid Announces Results for Third Quarter 2011

Avid 8K Filing Detailing Plans for Restructuring

Previous Qtr: Avid Announces Disappointing Q2 2011 Results

Previous Avid Layoffs Avid to Cut Jobs, Close Some Facilities During First Half of 2011

Previous Year: Avid Losses Narrow as Company Posts “Strongest Financial Quarter Since 2007”

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