Avid reported that its revenue for the second quarter of 2012 was $157.4m, down 3% versus the same period a year ago, and up 3% versus the previous quarter. The GAAP net loss for the second quarter was $39.0m, or $1.01 per share, compared to a GAAP net loss of $11.1m, or $0.29 per share, in the second quarter of 2011. On a non-GAAP basis, the net loss for the quarter was $4.1m, or $0.11 per share, compared to non-GAAP net loss of $3.4m, or $0.09 per share, for the second quarter of 2011.
The results were ahead of analysts revenue expectations of $156.4m, but below the expected net loss of 7 cents per share.
Backing out Avid’s consumer business, which the company divested earlier this month, Q2 revenue from the professional audio and video business was $143.7m and, an increase of 5% versus the same period a year ago.
GAAP gross margins in the quarter were 46.9%, versus 51% last year, and 50% last quarter. Avid CFO Ken Sexton said attributed the reduced gross margins to revenue and inventory provisions related to the divestiture of the company’s consumer business, changes in exchange rates, and sales mix. Non GAAP gross margins were 49.6%, down 1.9 percentage points versus last year. Approximately half of the gross margin decline was attributable to divested products, with the remainder coming from currency fluctuations and sales mix.
Operating expenses were $111.7m, up $18.2m versus last year, and up $20.4m versus last quarter. This includes a $15.8m restructuring charge, and a $10m loss provision relating to the asset write-downs associated with the company’s divestiture of consumer assets. Sexton said that the company expects the charges for restructuring associated with the divestiture of consumer assets to be $27m to $29m.
Non-GAAP operating expenses for the quarter were $81.7m, a decrease of $4.8m versus last year, and a decrease of $3.2m versus last quarter. The non-GAAP operating loss for the quarter was $2.1m, versus a loss of $3.1m last year.
The company ended the quarter with 1,172 employees and 406 contractors, versus 1,790 employees and 447 contractors at the end of last quarter. The difference includes both the divestiture of consumer products as well as the recently announced 20% headcount reduction. Sexton said that at the end of the third quarter of 2012 with about 1,425 employees and a reduced number of contractors.
At the end of the quarter, Avid had a cash balance of $59.4m, up approximately $10m. The company generated $13.5 in cash from operations during the quarter.
Highlights for the second quarter:
- Video revenue from ongoing products in the quarter was $95.8m, up 9% versus the same period a year ago, and up 14% versus the previous quarter. Video revenue accounted for 61% of the total revenue during the quarter, versus 55% last quarter. Most service revenue is associated with video. Video product revenue during the quarter was $62.7m, up almost 10% versus last year.
- Ongoing audio revenue in the quarter was $48m, down 3% versus the same period a year ago. The company’s revenue from live systems and control surfaces declined in the quarter. Pro Tools HD grew by almost 10% versus last year.
- Revenue from products was $125.9m, a decrease of 3% versus the same period a year ago, and an increase of 5% versus the previous quarter Product revenue accounted for 80% of the total revenue during the quarter, versus 79% last quarter. Excluding divested businesses, product revenue was $109.3m, up 4% versus last year.
- Service revenue in the quarter (including maintenance support, professional services revenue, and training) was $34.4m, an increase of 7% versus last year and up 7% versus last quarter. Service revenue was not impacted by the divestiture.
Sexton said he expects the gross margins for the second half of 2012 to be at 55% or higher, and that the company expects operating expenses in the second half of the year to decrease by 17% – 20% versus last year. Although the company did not give forward looking revenue guidance, Sexton did say that if product revenue in the second half of 2012 comes in was flat with last year ($308m), Avid will report revenue of almost $620m, and non-GAAP operating margins in the low teens for the period and 5% for the full year – consistent with previous guidance. On this same basis Sexton says that the company would expect to report a GAAP net loss of $30m to $36m. The company had said previously that it could break even for the year on a GAAP basis.
“Our results for the second quarter were encouraging with 5% year-on-year revenue growth for our ongoing business and a $10 million sequential increase in our cash balance,” said Avid CEO Gary Greenfield. “This performance reinforced the strategic direction we took earlier this month and we are excited about our prospects for the second half of the year.”
Press Release: Avid Announces Results for Second Quarter 2012
Previous Year: Avid Announces Disappointing Q2 2011 Results
© Devoncroft Partners. All Rights Reserved.