AVG Q3 Earnings: Managed Workplace, MSP Software Results

AVG Technologies isn't growing as quickly as expected and there are concerns about the company's search-oriented revenues. But during a Q3 2013 earnings call, AVG spoke highly of its SMB and MSP-oriented Managed Workplace business.

Joe Panettieri, Former Editorial Director

November 7, 2013

3 Min Read
AVG CFO John Little
AVG CFO John Little

AVG Technologies is growing — but not as fast as Wall Street had hoped. The company, which acquired Level Platforms’ MSP software business in June 2013, announced Q3 2013 earnings today and also provided a Q4 revenue forecast. Wall Street is a bit concerned about slowing company growth and revenue from the search market, but AVG sees promise with its SMB strategy. Here’s why.

For is Q3 2013, total AVG revenues were $100.1 million, compared to $95.3 million in Q3 2012. “Revenue was at the low end of our outlook and EPS [earnings per share] was at the high end of the outlook we provided,” said CFO John Little during an earnings call this evening.

Looking ahead, AVG’s Q4 2013 earnings and revenue forecast is a bit lower than Wall Street had expected, noted StreetInsider.com. The result: The company’s stock fell about 10 percent in after-hours trading.

SMB and Managed Services

The Level Platforms buyout — now branded as AVG Managed Workplace  — generated positive comments during the earnings call. Said Little:

“Our SMB business also continued its positive trends demonstrated over recent quarters, accelerated by AVG Managed Workplace. AVG Managed Workplace delivered over 1,500 new…resellers and contributed approximately 500,000 new users to our paid user count in the third quarter. Through AVG Managed Workplace, combined with our CloudCare platform, we continue to transition our SMB business to the cloud and have now returned to year-over-year revenue growth in SMB. Overall, the subscription business continues to contribute well to our revenue and net income performance, and we expect this to be a key piece of future growth.”

Indeed, AVG’s subscription business represented 66 percent of company revenue during Q3, ahead of plan, Little said.

Still, it’s difficult to say exactly how well Managed Workplace is performing as a growth driver. When Little mentioned the 1,500 “new” resellers Managed Workplace delivered to AVG, I think he was referring to Level Platforms’ existing installed base of MSPs rather than new organic growth.

No doubt, AVG has made changes to the Managed Workplace team since acquiring Level Platforms. Multiple Level Platforms executives exited the company shortly after the M&A deal. But new leaders — including N-able veteran Marco La Vechia and Dell PacketTrap veteran Mike Byrne — have joined the AVG channel team in recent weeks.

For MSPs that are trying to understand AVG’s overall revenue stream, keep a close eye on how the company generates sales from Internet search relationships.

Indeed, AVG’s platform business apparently leans heavily on search relationships. Changing Google guidelines hurt the business more than expected, forcing AVG to lean even more heavily on relationships with Yahoo and Yandex (in Turkey).

During the earnings call, Wall Street analysts asked numerous questions about AVG’s search-oriented revenue stream. The SMB effort and the Managed Workplace business were not mentioned during that portion of the call.

AVG is set to attend IT Nation 2013 next week in Orlando, Fla. MSPmentor will catch up with the company there.

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About the Author(s)

Joe Panettieri

Former Editorial Director, Nine Lives Media, a division of Penton Media

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