Posts Tagged ‘Gary Greenfield’

Avid Delays Filing of Q2 2013 Financial Results and Form 10-Q

Broadcast technology vendor financials, Quarterly Results, SEC Filings | Posted by Joe Zaller
Aug 13 2013

Avid said that due to an ongoing internal audit of past treatment of software upgrades, it “is not able to complete and cannot file its quarterly report on Form 10-Q for the quarter ended June 30, 2013 by the prescribed due date or by August 14, 2013.” The disclosure was made in a regulatory filing with the SEC. The company has also delayed the filing of its Q2 2013 earnings.

The focus of Avid’s internal audit is the past accounting treatment of certain software upgrades that the company previously made available to certain of its customers at no-charge. Avid management has now determined that these upgrades should have been accounted for as “implied post-contract customer support” under US GAAP accounting rules.

As a result, Avid is currently in the process of restating its financial statements for the fiscal years ended December 31, 2011, 2010 and 2009 and for its quarterly periods ended September 30, 2012 and 2011, June 30, 2012 and 2011, and March 31, 2012 and 2011.

Because the work required to review and restate historical transactions has not yet been completed, the company says it is not in a position at this time to compare results of operations for the quarters ended June 30, 2012 and 2013 respectively, resulting in the delayed filing of its 10-Q for the second quarter of 2013.

It’s worth noting that the work being done by the company is an internal accounting review that focuses on the timing of revenue recognition, not the validity or overall amount of revenue received.

Avid says that although the restatement adjustments will impact previously reported revenue and operating results for prior periods, they are “not expected to affect the amount of total revenue ultimately to be earned, or the amount or timing of cash received or to be received, from the sales transactions or the company’s liquidity or cash flow for any prior period.”

After reviewing current and previous regulatory filings, it appears that the crux of the matter is that in past periods Avid recognized the revenue received for the software upgrades in question at the time the upgrade was performed, rather than over the “implied post-contract customer support period” specified in GAAP accounting rules.

Given the fact that Avid is presumably be going back over every single transaction for the three-year period from 2009 to 2011, this process is going to take some time.

Indeed, the audit has been ongoing for many months and has already resulted in the delayed filing of Avid’s Q4 2012 results, 2012 10-K filing, and Q1 2013 results.  In May 2013, the company received notice of potential delisting from the NASDAQ stock market for failure to submit its 10-K filing for 2012.

Avid has not disclosed the value of the software upgrades in question. It also says that at this time it “cannot estimate the full impact of the adjustments of revenue and costs, and the related impact on income taxes, on any previously issued financial statements for any individual reporting period, although it may be significant.”  Avid also said that “the timing of recognition of certain costs related to these customer arrangements may also be impacted, along with the timing of related income taxes.”

Avid has not disclosed how much it has spent on the ongoing audit. However, in July 2013, the company said in a filing that “expects that additional cash expenditures related to the ongoing accounting evaluation through the fiscal year ending December 31, 2013 will amount to approximately $11 million to $14 million.”  This includes up to $1.7 million for a potential Remediation Bonus that will be paid once the company has filed its 2012 Form 10-K with securities regulators.

During this process, Avid has made significant changes to its finance team during the past six months.  In July 2012 the company said that Karl Johnsen, the company’s chief accounting officer & controller has left the company. In April 2013 Avid announced that John Frederick, who joined the company in February 2013 as Chief of Staff became CFO, replacing Ken Sexton, who has been Avid’s CFO since 2008 under previous CEO Gary Greenfield. Prior to joining Avid, Frederick was the Corporate EVP and CFO at Open Solutions, where he served under current Avid CEO Louis Hernandez.

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Avid 2013 Remediation Bonus Plan

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Greenfield Resigns from Avid Board of Directors

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© Devoncroft Partners 2009 – 2013. All Rights Reserved.

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Avid Replaces Chief Accounting Officer

Broadcast technology vendor financials, SEC Filings | Posted by Joe Zaller
Aug 01 2013

Avid said that Karl Johnsen, the company’s chief accounting officer & controller has left the company and has been replaced on an interim basis by John Frederick, Avid’s EVP, CFO & Chief Administrative Officer.

Frederick, who joined Avid in February 2013 as Chief of Staff became CFO in April 2013, replacing Ken Sexton, who has been Avid’s CFO since 2008 under previous CEO Gary Greenfield. Prior to joining Avid, Frederick was the Corporate EVP and CFO at Open Solutions, where he served under current Avid CEO Louis Hernandez.

The company said “no additional arrangement or understanding with Mr. Frederick was entered into in connection with Mr. Frederick becoming the Company’s Principal Accounting Officer.”

This latest change in the company’s high level finance personnel comes during a time where Avid is in the middle of a major review of its previous accounting practices.

In February 2013, Avid announced that it would delay the release of its Q4 and full-year 2012 results in order “to provide additional time for the company to evaluate its current and historical accounting treatment related to bug fixes, upgrades and enhancements to certain products which the company has provided to certain customers.”

Because of this review, Avid also delayed the filing its annual 10-K with securities regulators. As a result, Avid was notified by NASDAQ in March 2013 that the company no longer complies with NASDAQ Marketplace Rule 5250(c)(1), which requires timely filing of periodic reports with the SEC.  Failure to comply with this rule could result in the delisting of Avid’s shares from the NASDAQ Global Select Market.

At that time, Avid said it was “working diligently to complete the review and continues to focus its efforts on completing the Form 10-K filing as soon as possible,” and that it intends to submit a plan to NASDAQ staff as to how it intends to regain compliance with continued listing requirements.

Under NASDAQ’s rules, the company has until May 20, 2013 to submit this plan.

 

According to the filing, Johnsen will transition to a consulting role for three months and receive six months’ salary continuation, and other customary provisions.

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Related Content:

Avid Replaces Chief Financial Officer

Avid Says its 2009 – 2011 Financial Statements No Longer Reliable

Avid Delays Release of Q4 and Full Year 2012 Results, Shares Fall

Avid Receives Notice of Potential Delisting From NASDAQ for Failure to Submit 10-K Filing

Greenfield Resigns from Avid Board of Directors

Johnsen consulting and severance agreement

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© Devoncroft Partners 2009 – 2013. All Rights Reserved.

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Greenfield Resigns from Avid Board of Directors

Broadcast technology vendor financials, Quarterly Results, SEC Filings | Posted by Joe Zaller
May 20 2013

Former Avid CEO Gary Greenfield has resigned from the company’s board of directors.

Greenfield, who was replaced as CEO and president of Avid by Louis Hernandez in February 2013 remained a board member of the company after stepping down from his executive role.

According to a regulatory filing, Greenfield’s term as director was scheduled to expire at the company’s 2013 annual meeting of stockholders.

However, in February 2013, Avid announced that it would delay the release of its Q4 and full-year 2012 results in order “to provide additional time for the company to evaluate its current and historical accounting treatment related to bug fixes, upgrades and enhancements to certain products which the company has provided to certain customers.”

Avid subsequently postponed its 2013 annual meeting of shareholders.

Avid said that because its annual meeting has been delayed, Greenfield decided to resign from his position as director of the Company so that he could attend to other commitments.  Greenfield submitted his resignation as a director on May 15, 2013, effective immediately.

Avid said that Greenfield’s decision to resign was mutually agreeable and amicable and not a result of any disagreement or dispute with the company or its management.

Greenfield’s departure as CEO was followed in April 2013 by the departure of Ken Sexton, who had served as CFO under Greenfield. At that time, Avid said Sexton would continue on in a consulting capacity, for an initial period ending September 30, 2013, and work closely with Frederick in order to ensure a smooth transition.

Sexton was replaced as CFO by John Frederick, who joined the company in February 2013 as Chief of Staff.  Prior to joining Avid, Frederick was the Corporate EVP and CFO at Open Solutions, where Hernandez was previously CEO.

In addition to postponing its annual shareholder meeting due to its accounting review, Avid also delayed the filing its annual 10-K with securities regulators. As a result, Avid was notified by NASDAQ in March 2013 that the company no longer complies with NASDAQ Marketplace Rule 5250(c)(1), which requires timely filing of periodic reports with the SEC.  Failure to comply with this rule could result in the delisting of Avid’s shares from the NASDAQ Global Select Market.

At that time, Avid said it was “working diligently to complete the review and continues to focus its efforts on completing the Form 10-K filing as soon as possible,” and that it intends to submit a plan to NASDAQ staff as to how it intends to regain compliance with continued listing requirements.

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Related Content:

Avid 8-K Filing: Greenfield Resigns From Avid Board

Avid Replaces Chief Financial Officer

Avid Receives Notice of Potential Delisting From NASDAQ for Failure to Submit 10-K Filing

Avid Delays Release of Q4 and Full Year 2012 Results, Shares Fall

Greenfield Out as Avid CEO, Replaced by Louis Hernandez

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Avid Replaces Chief Financial Officer

Broadcast technology vendor financials, SEC Filings | Posted by Joe Zaller
Apr 25 2013

Avid announced that John Frederick, who joined the company in February 2013 as Chief of Staff, has assumed the role of CFO.  Prior to joining Avid, Frederick was the Corporate EVP and CFO at Open Solutions.

Frederick replaces Ken Sexton, who has been Avid’s CFO since 2008 under previous CEO Gary Greenfield.  Avid says that Sexton, who, earned $2.4m in 2011 according to Bloomberg Business Week, will continue on in a consulting capacity and work closely with Frederick in order to ensure a smooth transition.

New Avid president and CEO Louis Hernandez, who previously worked with Frederick at Open Solutions said: “John is a seasoned financial executive with extensive experience directing the strategic performance of high-growth technology companies. I previously worked with John at Open Solutions, and John’s leadership and financial acumen were instrumental in our successful sale to Fiserv. I am thrilled to have him be part of the team at Avid, as we take the company into its next phase of growth.”

Hernandez added, “On behalf of the Avid community, I also would like to thank Ken Sexton for his guidance, leadership, and years of service to Avid. We are fortunate to be able to retain him in a consulting capacity, and to insure a smooth transition of his responsibilities.”

While it’s not unusual for a new CEO to bring in a CFO with whom he’s worked with previously, Frederick’s appointment may draw extra attention because Avid is in the middle of a major review of its previous accounting practices.

In February 2013, Avid announced that it would delay the release of its Q4 and full-year 2012 results in order “to provide additional time for the company to evaluate its current and historical accounting treatment related to bug fixes, upgrades and enhancements to certain products which the company has provided to certain customers.”

Because of this review, Avid also delayed the filing its annual 10-K with securities regulators. As a result, Avid was notified by NASDAQ in March 2013 that the company no longer complies with NASDAQ Marketplace Rule 5250(c)(1), which requires timely filing of periodic reports with the SEC.  Failure to comply with this rule could result in the delisting of Avid’s shares from the NASDAQ Global Select Market.

At that time, Avid said it was “working diligently to complete the review and continues to focus its efforts on completing the Form 10-K filing as soon as possible,” and that it intends to submit a plan to NASDAQ staff as to how it intends to regain compliance with continued listing requirements.

Under NASDAQ’s rules, the company has until May 20, 2013 to submit this plan.

 

According to Avid, the company has signed a five year employment agreement with Frederick that provides for (i) an annual base salary of $425,000, (ii) a signing and a relocation bonus totaling $200,000, (iii) an annual incentive bonus target equal to 100% of annual base salary (up to a maximum of 135% of annual base salary), (iv) an annual travel and housing allowance of approximately $134,000 subject to normal tax withholding and (v) a long term equity award consisting of time vesting stock options and restricted stock unit awards and performance vesting options (which vest upon attainment of specified targets relating to the Company’s return on equity).  Frederick also received 65,000 time vesting options and 65,000 time vesting restricted stock unit awards, as well as 400,000 performance vesting options. Frederick must repay the signing bonus of $150,000 to the Company in full if he is terminated for cause or resigns without good reason prior to February 11, 2014.

The company also said that it has entered into an agreement with former CFO Sexton to provide consulting services for an initial period ending September 30, 2013. According to the agreement Sexton will be paid $15,000 per month and commit 45% of his time to assisting the company with the ongoing accounting evaluation, and other matters relating to the transition of duties to Frederick, and other projects specified by the company.

The company also said that as part of his separation from the company, Sexton will receive (i) payment of his accrued and unpaid salary and benefits, (ii) salary continuation for twelve months in the aggregate amount of $433,000, (iii) remaining eligible for a prorated annual incentive bonus for the fiscal years 2012 and 2013 if the company pays bonuses on account of such years to executives who remain employed with the Company, (iv) payment in respect of COBRA premiums, (v) outplacement services and (vi) thirteen months additional vesting on his time-vesting equity awards which are unvested as of the Transition Date.

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Related Content:

Press Release: Avid Announces New Chief Financial Officer

Bloomberg Business Week Profile of Ken Sexton

Avid Receives Notice of Potential Delisting From NASDAQ for Failure to Submit 10-K Filing

Avid Delays Release of Q4 and Full Year 2012 Results, Shares Fall

Greenfield Out as Avid CEO, Replaced by Louis Hernandez

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Avid Receives Notice of Potential Delisting From NASDAQ for Failure to Submit 10-K Filing

Broadcast technology vendor financials, SEC Filings | Posted by Joe Zaller
Mar 21 2013

Avid said that it received notification from NASDAQ that, due to the delay in the filing of its annual 10-K report, the company no longer complies with NASDAQ Marketplace Rule 5250(c)(1), which requires timely filing of periodic reports with the SEC.

Failure to comply with Rule 5250(c)(1) could result in the delisting of Avid’s shares from the NASDAQ Global Select Market.

Avid said the notification was expected, and that the notice “has no immediate effect on the listing of its stock” on the NASDAQ market.

In February 2013, Avid announced that it would delay the release of its Q4 and full-year 2012 results in order “to provide additional time for the company to evaluate its current and historical accounting treatment related to bug fixes, upgrades and enhancements to certain products which the company has provided to certain customers.”  The announcement was made about two weeks after Avid said it had named Louis Hernandez to replace Gary Greenfield as the company’s president and CEO.

The company has now revealed that it has been conducting a forensic accounting process, the primary focus of which has been to determine whether certain software updates that were previously classified as “bug fixes” actually meet the definition of post-contract customer support under the rules of US GAAP.  Avid has not disclosed the size and scope of these charges, but it appears that if the company is successful in its efforts, it will be able to re-classify these costs and any associated revenue as customer support.

Avid says it is “working diligently to complete the review and continues to focus its efforts on completing the Form 10-K filing as soon as possible,” and that it intends to submit a plan to NASDAQ staff as to how it intends to regain compliance with continued listing requirements.

Under NASDAQ’s rules, the company has until May 20, 2013 to submit this plan.  If NASDAQ accepts Avid’s plan, the company expects to have up to 180 calendar days from the initial due date for the Form 10-K, or until September 16, 2013, to regain compliance. If Avid’s plan is not accepted, Avid says it will have the opportunity to appeal that decision to a NASDAQ Hearings Panel.

Avid says that during this evaluation, it “plans to continue to invest in its product innovation and execute on its growth strategy. The company has no debt and ample cash to support it in these efforts and believes it is well positioned to support its customers’ ongoing success.”

Despite its financial woes over the past few years, our research shows that Avid continues to enjoy a strong brand reputation and customer loyalty.  With new management in place and the 2013 NAB Show just around the corner, it will be interesting to see what strategies the company adopts to meet the needs of its customers and return to profitability.

Avid is not the only broadcast technology vendor to have received a notice of potential delisting from NASDAQ. Chyron received a notice of potential delisting from NASDAQ in November 2012 when its closing share price fell below $1.00 for more than 30 days. In that instance, Chyron’s share rose enough to enable the company to regain compliance with NASDAQ’s listing rules, and the company said the matter was closed.  In March 2013 Chyron received another notice of potential delisting from NASDAQ for failure to comply with NASDAQ Listing Rule 5450(b)(1)(A),which requires companies listed on the NASDAQ Global Market to maintain a minimum of $10,000,000 in stockholders’ equity.

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Related Content:

Press Release: Avid Announces Receipt of Anticipated NASDAQ Letter

Avid Delays Release of Q4 and Full Year 2012 Results, Shares Fall

Greenfield Out as Avid CEO, Replaced by Louis Hernandez

Avid SEC Filings Disclose Details of Greenfield’s Separation Agreement and New CEO Contract

Avid Warns of Lower Than Expected Revenue and Profit in Q3 2012

Chyron Receives Another Delisting Notice From NASDAQ

Rising Share Price Helps Chyron Avoid NASDAQ Delisting

Chyron Receives Notice of Potential Delisting From NASDAQ

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Avid Delays Release of Q4 and Full Year 2012 Results, Shares Fall

Broadcast technology vendor financials, Quarterly Results | Posted by Joe Zaller
Feb 25 2013

Avid today announced that it is postponing the release of its Q4 and full year 2012 financial results and conference call in order “to provide additional time for the company to evaluate its current and historical accounting treatment related to bug fixes, upgrades and enhancements to certain products which the company has provided to certain customers.”

Avid was originally scheduled to issue its results on Tuesday February 26, 2013.

The company said that the need to evaluate the accounting treatment arose during its normal review of its financial results for the fourth quarter and full year 2012, and that it is “working diligently to complete its evaluation, but is currently unable to estimate when the evaluation will be completed.”

Investors did not like the news, and sent the company’s shares down more than 11 percent following the announcement.

The news comes two weeks after Avid said it had named Louis Hernandez to replace Gary Greenfield as the company’s president and CEO.

At that time, Hernandez said “It is an exciting opportunity to lead Avid at this very important juncture in the company’s history. The company is well positioned for growth and global expansion in this fast-moving marketplace. It is exciting to be working with the Avid team, as we drive results and value for our customers, employees, and shareholders.”

Avid is one of the most storied names in the broadcast industry and the company has been at the forefront of technological innovation for 25 years.  However, the company has struggled to achieve profitability over the past several years and has gone through multiple rounds of layoffs.

Today’s announcement is not the first time the company in recent memory that Avid has made pre-announcements about its quarterly results. Last year, the company issued a profit warning prior to the release of its results for the first quarter of 2012, and then subsequently sold off its consumer audio and video businesses, which contributed $91m in revenue, for approximately $19m.

Avid issued a second profit warning prior to the release of its results for the third quarter of 2012, when it posted a loss of $17.4m after its revenue dropped 23 percent versus the previous year and 19% versus the previous quarter.

Despite its financial woes over the past few years, our research shows that Avid continues to enjoy a strong brand reputation and customer loyalty.  With new management in place and the 2013 NAB Show just around the corner, it will be interesting to see what strategies the company adopts to meet the needs of its customers and return to profitability.

 

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Related Content:

Press Release: Avid Postpones its Fourth Quarter Earnings Release

Greenfield Out as Avid CEO, Replaced by Louis Hernandez

Avid SEC Filings Disclose Details of Greenfield’s Separation Agreement and New CEO Contract

Avid Warns of Lower Than Expected Revenue and Profit in Q3 2012

Avid Pre-Announces Nine Percent Revenue Decline in Q1 2012 Due to Lower Sales in Consumer Segment

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Avid SEC Filings Disclose Details of Greenfield’s Separation Agreement and New CEO Contract

SEC Filings | Posted by Joe Zaller
Feb 13 2013

Following the announcement that Gary Greenfield has been replaced CEO of Avid by Louis Hernandez, the company published filings securities with securities regulators that provides details of the separation agreement with former CEO Gary Greenfield, the employment contract with new CEO Louis Hernandez, and the stock options granted to Hernandez.

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Related Content:

Greenfield Out as Avid CEO, Replaced by Louis Hernandez

Avid SEC filing: Gary Greenfield Separation Agreement

Avid SEC Filing: Louis Hernandez Employment Contract

Avid SEC Filing: Louis Hernandez Stock Options

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Avid Posts $17.4 Million Loss in Q3 2012 as Revenue Drops 23 Percent

Broadcast technology vendor financials, Quarterly Results | Posted by Joe Zaller
Oct 30 2012

Avid announced that its revenue for the third quarter of 2012 was $127.2m, down 23% versus the same period a year ago, and down 19% versus the previous quarter. The GAAP net loss for the third quarter was $17.4m, or $0.45 per share, compared to a GAAP net loss of $7.6m, or $0.20 per share, last year, and a GAAP net loss of $39.0m, or $1.01 per share, last quarter.

The results were at the high end of the range provided by the company last week when it pre-announced a profit warning for the quarter.  At that time Avid attributed the lower than expected results to “sales execution in the Americas region and some transitional issues related to the implementation of the strategic actions announced by the company in July 2012.”

On a non-GAAP basis, the net loss for the third quarter of 2012 was $3m, or $0.08 per share, compared to non-GAAP net income of $842,000, or $0.02 per share, for the third quarter of 2011, and a non-GAAP net loss of $4.1m, or $0.11 per share, last quarter.

Excluding revenue attributable to Avid’s legacy consumer products that were divested earlier this year, Q3 2011 revenue from the professional audio and video business was $123m down 14% compared to on-going revenue for the third quarter of 2011.  Last quarter, Avid’s pro audio and video revenue was $143.7m.

GAAP gross margins were 52.6%, down from 54% last year, and up significantly from 46.9% last quarter.  Non-GAAP gross margins were 53.2%, down 1% percentage points versus last year, and up from 49.6% last quarter.  Avid CFO Ken Sexton said margins were impacted by exchange rates and the final sell-through of divested products still in the channel at the time of the sale of Avid’s consumer businesses. Sexton believes gross margins will improve over time because the divested consumer products had lower gross margins than the rest of the portfolio, so the company should experience margin expansion in the future.

GAAP operating expenses in the quarter was $83.3m down 10% year-over-year. Non-GAAP operating expenses were $68.9m, down 18% versus last year and down 16% versus last quarter q primarily as a result of divestment of consumer businesses

The GAAP operating loss for the third quarter of 2012 was $16.4m, and the non-GAAP operating loss for the third quarter was $2.2m.

The company ended the quarter with 1,480 employees and 360 full-time contractors, a net decline of 360 staff versus the previous quarter.

At the end of the quarter, Avid had a cash balance of $71m, up approximately $12m versus last quarter.

 

“During the third quarter we completed the majority of the changes we announced earlier this summer,” said Gary Greenfield, chairman and CEO of Avid. “Despite the transitional issues we experienced in the quarter, we remain focused on executing the business strategy we outlined in July as the path to returning the business to sustained profitability.”

 

Highlights for the third quarter of 2012:

On a geographic basis:

  • Revenue in the Americas was down 19% versus last year, due to slow sales to media and enterprise customers, and sales execution issues in the region

 

  • European revenue was down 6% on a year-over-year basis.  However the company said that when the changes in exchange rates are excluded, revenue from Europe was up 7% versus last year and up 1% versus the previous quarter.  The company said it had relatively strong sales to European media and enterprise customers during the third quarter of 2012.

 

  • Revenue from the Asia-Pacific region was down for the quarter, but is essentially flat for the year on a constant currency basis.

 

 

On a segment basis:

  • Video revenue from ongoing products in the quarter was $81.8m, down 18% versus the same period a year ago, and down 15% versus the previous quarter.  Video revenue accounted for 64% of total revenue in the quarter versus 61% last quarter.  Video product revenue during the quarter was $46.1m, down 24% versus last year and down 26% versus last quarter. The company attributed the lower video product revenue to weaker sales to media and enterprise customers in the Americas, and the continued transition of the company’s professional editing  platform from hardware based systems to software-only solutions

 

  • Revenue from products was $89m, a decrease of 32% versus the same period a year ago, and a decrease of 29% versus the previous quarter.  Product revenue accounted for 70% of the total revenue during the quarter, versus 80% last quarter.

 

  • Ongoing audio revenue in the quarter was $42m, down 15% versus last year and down 13% versus last quarter. Sexton said that almost half the year-over-year decline in audio was related to entry-level professional audio interfaces, and that the company’s flagship Pro Tools HD platform continues to grow with strong adoption of HDX hardware.

 

  • Service revenue in the quarter (including maintenance support, professional services revenue, and training) was $36.3m, an increase of 10% versus last year and up 6% versus last quarter. The company said that most of its service revenue is related to professional video products and was therefore not impacted by the divestiture of Avid’s consumer product businesses. Service revenue was 29% of overall ongoing revenue for the quarter.

 

 

Guidance:

Although Avid did not provide specific forward looking guidance, the company said it expects revenue in the fourth quarter to improve relative to Q3, but be down compared to Q4 2011, further impacting the company’s expected GAAP net loss for the full year.

Sexton pointed out that the divestment of the consumer business and the recent restructuring had lowered the company’s operating expenses and improved its operating leverage.  The company expects these actions will result in a 15% to 20% decrease in non-GAAP operating expenses in Q4 2012.  As a results of this, Avid expects to report a non-GAAP operating profit for the fourth quarter, but might not reach breakeven for the full year 2012.

The full-year 2012 non-GAAP operating profit or loss excludes $55m to $60m of charges relating to stock-based compensation, amortization of intangibles, restructuring, divestitures, acquisitions, and loss on assets held for sale.

Last quarter, the company said that if product revenue in the second half of 2012 comes in was flat with 2011, Avid would report revenue non-GAAP operating margins in the low teens for the period and 5% for the full year, and post a GAAP net loss of $30m to $36m.  Earlier this year the company said it believed it could break even for the year on a GAAP basis.

 

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Related Content:

Press Release: Avid Announces Results for Third Quarter 2012

Avid Q3 2012 Earnings Presentation

Avid Warns of Lower Than Expected Revenue and Profit in Q3 2012

Previous Quarter: Avid Q2 2012 Revenue Declines Three Percent

Avid Divests Consumer Business, Announces 20 Percent Staff Reduction

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

Avid Divests Consumer Business, Announces 20 Percent Staff Reduction

Avid Pre-Announces Nine Percent Revenue Decline in Q1 2012 Due to Lower Sales in Consumer Segment

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Avid Q2 2012 Revenue Declines Three Percent

Broadcast technology vendor financials | Posted by Joe Zaller
Jul 31 2012

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.

 

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Guidance:

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.”

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Related Content:

Press Release: Avid Announces Results for Second Quarter 2012

Avid Q2 2012 Earnings Call Presentation

Avid Divests Consumer Business, Announces 20 Percent Staff Reduction

Avid Pre-Announces Nine Percent Revenue Decline in Q1 2012 Due to Lower Sales in Consumer Segment

Previous Quarter: Avid Revenue Drops Nine Percent in Q1 2012 Due to Weakness in Consumer Business

Previous Year: Avid Announces Disappointing Q2 2011 Results

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© Devoncroft Partners. All Rights Reserved.

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Avid Divests Consumer Business, Announces 20 Percent Staff Reduction

Broadcast Vendor M&A | Posted by Joe Zaller
Jul 02 2012

Avid announced that it is selling off its struggling consumer business in a series of separate transactions.  Avid also said that it is undertaking a 20 percent workforce reduction, which includes the employees being transferred as part of the sale of its consumer business.

Avid says that these actions will enable it to focus on its media enterprise and post production, and to drive improved operating performance. The company also said it will keep its Pro Tools audio processing product line.

Avid will sell its consumer business through a series of transactions, including the following:

  • A group of audio assets will be sold to inMusic, the parent company of Akai Professional, Alesis and Numark, among others for approximately $13.9m, subject to adjustment for closing inventory levels, with approximately $2 million to be held in escrow as security for the representations, warranties, covenants and agreements. The products involved in this transaction include M-Audio brand keyboards, controllers, interfaces, speakers and digital DJ equipment and other product lines.

 

  • A group of video assets will be sold to Corel Corporation for $3m, with $600,000 to be held in escrow as security for the representations, warranties, covenants and agreements. The products involved in this transaction include Avid Studio, Pinnacle Studio, and the Avid Studio App for the Apple iPad®, as well as other legacy video capture products. Avid bought Pinnacle in 2005 for $462m in cash & stock.

 

 

The divested product lines contributed approximately $91 million of Avid’s 2011 revenue of $677 million. As part of the transactions, certain employees of Avid will transfer to each acquiring company.

Both asset sales are expected to be consummated on July 2, 2012.

Avid will continue to develop and sell its industry-leading Pro Tools line of software and hardware, as well as associated I/O devices including Mbox and Fast Track.

Avid’s consumer business has been a drag on the company’s performance for some time, even as it improved its standing in professional markets. Historically, the consumer business accounted for approximately 20% of Avid’s overall revenue, but this has been declined to 17% of total revenue in the first quarter of 2012.

For the first quarter of 2012, Avid’s consumer business was down 27% versus the same period a year ago. In the first quarter of 2012, the product mix in the consumer segment was approximately 85% audio and 15% video.

 

20 Percent Workforce Reduction

Avid also said it will reduce its overall headcount by approximately 20 percent, including the staff transferred through the sales of its audio assets.  Avid said it will complete this program during the third quarter of 2012, and expects to incur total expenses relating to termination benefits and facility costs associated with the reduction in force and related actions of approximately $19 million to $23 million, which primarily represent cash expenditures.

In addition to the termination of rank and file employees, two top Avid executives will also be leaving the company as part of this process. Company COO Kirk Arnold, and VP finance Jason Burke will also be leaving the company.  The COO position will not be replaced, but the company said it will be appointing a new VP of finance.

 Avid says the sale of its consumer assets , combined with the workforce reduction will save it approximately $80m on an annualized basis.  The company says these savings will impact both its cost of sales and operating expenses, and will improve its overall gross margins in the second half of 2012 and further improve in 2013.

 

This is the third set of major layoffs at Avid in the couple of years. 

  • In October 2011, Avid announced that was reducing its staff by 10%, and closing a facility in Irwindale, CA

 

  •  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.”

 

“The changes we are announcing today make Avid a more focused and agile company,” said Gary Greenfield, CEO of Avid. “By streamlining and simplifying operations, we expect to deliver improved financial performance and partner more closely with our enterprise and professional customers. Our objective remains to provide these customers with the innovative solutions that allow them to create the most listened to, most watched and most loved media in the world. I’m excited about our future prospects.”

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Related Content:

Press release: Avid Divests Consumer Businesses and Streamlines Operations

Avid Revenue Drops Nine Percent in Q1 2012 Due to Weakness in Consumer Business

Avid To Cut Workforce by 10%, Close Facility, Take Q4 Charge of $10m-11m

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

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© Devoncroft Partners 2012. All Rights Reserved.

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