Posts Tagged ‘Ken Sexton’

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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Related Content:

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New Avid Bonus Plan Contemplates “Reorganization Event”

Avid 8-K July 25 2013 — VP Finance Transition and Remediation Bonus

Avid 2013 Remediation Bonus Plan

Amended and Restated 2005 Stock Incentive Plan

Avid Replaces Chief Accounting Officer

Avid Replaces Chief Financial Officer

Avid Says its 2009 – 2011 Financial Statements No Longer Reliable

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

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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© Devoncroft Partners. All Rights Reserved.

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

Broadcast technology vendor financials, Quarterly Results, SEC Filings | Posted by Joe Zaller
Apr 27 2012

Avid reported that its revenue for the first quarter of 2012 was $152.1m, down 9% versus the same period a year ago, and down 18% compared to the previous quarter.

The results were inline with Avid’s negative pre-announcement earlier this month. Prior to the company’s pre-announcement, the consensus analyst estimate for the quarter was revenue of $161.1m.

Avid said the results were preliminary and pending an investigation of prior tax and accounting treatment of an intercompany loan made in 2007 between two of its international subsidiaries, which could impact Avid’s final financial results for the first quarter of 2012 and the results of prior periods. Based on the current status of its review, which is in its initial stages and subject to change, Avid currently believes that the impact of this matter could increase tax expenses by approximately $4.5m. Avid also currently believes it would recover approximately $3.8m of this amount in a subsequent period, resulting in a net tax expense of approximately $700,000 on a cumulative basis.

The company’s results were hurt by continued weakness in the consumer enthusiast (CE) segment.  Avid said its CE business, which historically accounted for approximately 20% of its overall revenue, contributed approximately 17% of total revenue in the first quarter of 2012.

Avid said its CE business was down 27% versus the same period a year ago. On the company’s conference call with equity analysts, the company provided more detail on the consumer business than it has previously disclosed.  Avid said its CE business is largely handled through retail distribution and focuses on solutions for consumers.  In the first quarter of 2012, the product mix in the CE segment was approximately 85% audio and 15% video. The audio portion of the CE business was negatively impacted by product transitions and the discontinuation of certain underperforming products, as well as by weakness in consumer demand.  Year-over-year weakness in CE video revenue was attributed to a very strong Q1 last year when Avid introduced Avid Studio and Pinnacle Studio v15.

On a geographic basis, the company said it experienced year-over-year growth in APAC during the quarter, but that sales in Europe and the Americas declined versus last year.

The GAAP net loss for the first quarter was $15.6m, compared to a GAAP net loss of $5.1m last year, and GAAP net income of $1.2m last quarter. On a non-GAAP basis the net loss for the quarter was $9.4m, compared to non-GAAP net loss of $840,000 last year and non-GAAP net income $14.6m last quarter.

Gross margins in the quarter were 50%, versus 52.1% last year, and 54.1% last quarter.  Avid CFO Ken Sexton attributed the reduced gross margins to lower revenue to cover fixed manufacturing and logistics costs, product mix weighted towards lower margin products, and incentives that were offered during the quarter to help sell older products. Service gross margins were up 8% versus last year.

Operating expenses were $91.3m, up $1.2m versus last year. Compensation expenses declined by almost $5m versus last year, primarily as a result of the company’s restructuring program that was announced in October of 2011.  Avid disclosed that it has reduced its headcount by 212 people since the end of September 2011.  The company currently has 1,790 employees and 447 contractors. The cost savings from the headcount reduction was offset by $2.3m of merit pay increases and professional service charges relating to SEC filings.

The GAAP operating loss for the quarter was $15.2m, compared to a GAAP operating loss of $3.4m last year. On a non-GAAP basis the operating loss for the quarter was $8.5m, versus a non-GAAP operating profit of $940,000 last year.

 

Highlights for the fourth quarter:

  • Video revenue in the quarter was $84m, down 11% versus the same period a year ago, and down 28% versus the previous quarter. Video revenue accounted for 55% of the total revenue during the quarter, versus 63% last quarter. Although service revenue was strong in video, Avid had a 20% decline in video product sales versus last year. In the pro video market, overall video editing unit sales were up by more than 30% versus last year, but because of a larger percentage of software sales, the overall the revenue from these sales was 30% lower than the same period a year ago due to lower hardware sales. Shared storage and workflow systems were strong in the quarter, growing 8% versus last year.

 

  • Audio revenue in the quarter was $68.1m, down 5% versus the same period a year ago, and down 1% versus the previous quarter. Although Avid had a significant revenue decline in consumer audio, professional audio sales were up 8% versus the same quarter a year ago, thanks to strong demand for Pro Tools HD and associated hardware. Avid’s Live audio systems business was up over 15% versus last year.

 

  • Revenue from products was $119.9m, a decrease of 13% versus the same period a year ago, and a decrease of 19% versus the previous quarter Product revenue accounted for 79% of the total revenue during the quarter, versus 80% as last quarter.

 

  • Service revenue in the quarter (including maintenance support, professional services revenue, and training) was $32.2m, an increase of 11% versus last year and down 14% versus last quarter.

 

Guidance:

Avid CFO Ken Sexton said he expects the company’s revenue for 2012 to be “relatively flat to a modest growth” versus 2011, but that demand in the creative enthusiast business will remain challenging in 2012. The company expects gross margins and non-GAAP operating margins to improve during the year.  Despite the slow start to the year, Sexton reaffirmed the guidance he gave last quarter saying he expects non-GAAP operating margins to be 5% of revenue for the year (versus 2.2% of revenue in 2011) assuming the company’s 2012 revenue is relatively flat with 2011.  Sexton said that “based on these expectations, we could report break even for our GAAP net income for the full year 2012.”

 

“While revenues were down from last year primarily related to the creative enthusiast portion of our business, we see positive signs in the post and professional and our media enterprise markets as customers seek to become more competitive by moving to more seamless workflows,” said Gary Greenfield, chairman and CEO of Avid. “Our balance sheet is solid, ending the quarter with $50 million of cash and we remain committed to delivering sustained profitability.”

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Related Content:

Press Release: Avid Announces Results for First Quarter 2012

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

Previous Quarter: Avid Posts First GAAP Net Profit Since 2007 in Q4 2011, Driving Shares Up 20 Percent

Previous Year: Avid Reports 5th Consecutive Quarter of Year-on-Year Revenue Growth

Avid 2011 10-K Filing

Avid 8-K Filing Details Executive Bonus Plan

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

Avid One of Five Companies Google Should Buy in 2012 – Forbes

Avid Brings Its “Pro-sumer” Video Editing App to iPad

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© Devoncroft Partners. All Rights Reserved.

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

Broadcast technology vendor financials, Quarterly Results | Posted by Joe Zaller
Apr 11 2012

Avid said that it expects its revenue for the first quarter of 2012 to be approximately $152m, down 9% from the same period a year ago, and down 18% versus the previous quarter when Avid posted its first GAAP net profit since 2007.

The consensus analyst estimates for the quarter was revenue of $161.1m.

The company attributed the results to weaker demand in its creative enthusiast (consumer) business, where revenue declined approximately 30 percent compared to the same period a year ago. The company said that revenue in the rest of its businesses was down modestly compared to last year.

Avid expects to report a GAAP operating loss of approximately $15m in the first quarter. Excluding charges of approximately $7m, Avid says its non-GAAP operating for the quarter is expected to be approximately $8m, versus a non-GAAP operating profit of $900,000 last year.

Avid did not say how these results will impact its results for the full year 2012.  Avid most recently provided guidance on its Q4 2011 conference call with equity analysts when CFO Ken Sexton said he expects the company’s 2012 revenue to grow in the “low single digits” driven by growth from media enterprise customers. At that time, Sexton said Avid could achieve a non-GAAP operating profit of 5% for the year even if revenue is flat, and that it “could report a GAAP net income for 2012.” 

Avid said it ended the quarter with a cash balance of approximately $50m and no bank debt.

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Related Content:

Press Release: Avid Provides Preliminary First Quarter 2012 Results

Previous Quarter: Avid Posts First GAAP Net Profit Since 2007 in Q4 2011, Driving Shares Up 20 Percent

Previous Year: Avid Reports 5th Consecutive Quarter of Year-on-Year Revenue Growth

Avid 2011 10-K Filing

Avid 8-K Filing Details Executive Bonus Plan

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

Avid One of Five Companies Google Should Buy in 2012 – Forbes

Avid Brings Its “Pro-sumer” Video Editing App to iPad

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© Devoncroft Partners. All Rights Reserved.

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Avid Posts First GAAP Net Profit Since 2007 in Q4 2011, Driving Shares Up 20 Percent

Broadcast technology vendor financials, Quarterly Results | Posted by Joe Zaller
Feb 08 2012

Avid reported that its revenue for the fourth quarter of 2011 was $185.3m, down 5% versus the same period a year ago, and up 12% compared to the previous quarter.

Significantly, the company generated $14.4m in cash from operations during the quarter, and posted GAAP net income of $1.2m, Avid’s first positive GAAP net income since 2007.  On a non-GAAP basis Avid posted a profit of $14.6m, or 38 cents a share, versus non-GAAP net income of $14.2m last year.

The results exceeded the consensus estimates of analysts who were looking for revenues of $176.34m, and non-GAAP earnings of 16 cents per share.  The strong performance pleased investors who drove the company’s stock up more than 20% on the news.

The results were helped by a variety of factors including the impact of a previously announced restricting program, increased spending for the 2012 Olympics, and ongoing success with converting Apple Final Cut Pro (FCP) users to Avid’s Media Composer platform.  The company said that it had converted approximately 6,000 FCP users to Avid since Apple launched the FCP-X system in June of 2011.

On a geographic basis, the company said it experienced year-over-year growth in Europe during the quarter, but that sales in the Americas and Asia-Pac region declined versus last year.

Gross margins in the quarter were 54.1%, the highest since 2005, thanks to a favorable product mix, operational efficiencies and increased support revenues on modest spending growth.

Operating expenses for the quarter were $101.3m, down 7% versus last year.

Non-GAAP operating expenses were $88m, a $3.9m decrease year on year primarily related to the reduction in workforce announced in October of 2011 and lower variable compensation due to lower bonus payments.  This is the lowest non-GAAP operating expense figure that Avid has posted since the fourth quarter of 2004.

Avid says it will continue to ensure than spending is lower than revenue growth, and pointed out that it has reduced headcount by 600 people over the last four years, while increasing less expensive off-shore contractors.

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Highlights for the fourth quarter:

  • Video revenue in the quarter was $116.2m, down 1% versus the same period a year ago, and up 18% versus the previous quarter.  Video revenue accounted for 63% of the total revenue during the quarter, versus 60% last quarter.  The company said that professional editing had strong unit sales and that there was a year-on-year increase in Media Composer software revenue.  Shared storage and workflow systems were also strong in the quarter. However video revenue was down slightly overall because of lower hardware sales.

 

  • Audio revenue in the quarter was $69.1m, down 11% versus the same period a year ago, and up 4% versus the previous quarter. Revenue from Pro Tools declined on a year-over-year basis due to a very strong Q4 performance last year, when the first open version of the product was released.  Control surfaces and Pro Tools HD also experienced growth, but audio revenue declined in the “creative enthusiast” market, due mainly to weak demand in consumer markets as well as discontinued products.

 

  • Revenue from products was $148m, a decrease of 9% versus the same period a  year ago, and up 12% 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 (including maintenance support, professional services revenue, and training) was $37.3m, an increase of 15% versus last year.  The company said this was a record result for service revenue.

 

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Full year results:

Revenue for the full year 2011 was $677.9m, flat with 2010, and above previously issued guidance of $665m-$675m.

The GAAP net loss for the year was $23.8m, an improvement on the GAAP net loss of $37m in 2010. On a non-GAAP basis, the company’s net income for 2011 was $10.2m, versus non-GAAP income of $9.2m in 2010.

Gross margins for the year were 53% versus 52% in 2010, the highest they have been since 2005. Operating expenses for the full year were $386.9m, 2% lower than in 2010.

 

Guidance for 2012

Avid CFO Ken Sexton said he expects the company’s 2012 revenue to grow in the “low single digits” driven by growth from media enterprise customers.  The company says it is could achieve a non-GAAP operating profit of 5% for the year even if revenue is flat, and that it “could report a GAAP net income for 2012.”

 

Avid CEO Gary Greenfield issued an upbeat statement saying ““Our results for the fourth quarter were encouraging and reflect our continued efforts to streamline our operations and improve execution across the business.  For the quarter, we reported positive GAAP net income for the first time since 2007, positive cash flow from operations and the highest gross margin as a percent of revenue since 2005. In addition, we have implemented the restructuring we announced in October and expect to see additional benefit from these actions in 2012. We continue to identify and implement changes across the Company to help improve our operational performance and remain sharply focused on improving profitability while driving revenue growth.”

 

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Related Content:

Press Release: Avid Announces Results for Fourth Quarter 2011

Replay of Avid Earning Conference Call with Equity Analysts

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

Previous Year: Avid Announces Full Year Results, Nears Q4 Break Even as Revenue Increases 12 Percent

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

Avid One of Five Companies Google Should Buy in 2012 – Forbes

Avid Brings Its “Pro-sumer” Video Editing App to iPad

 

© Devoncroft Partners. All Rights Reserved.

 

 

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

Broadcast technology vendor financials | 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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