AVG SMB, Managed Workplace Business Slips
AVG Technologies‘ overall business remains healthy, but the company’s SMB segment — which includes cloud and managed services software — suffered a revenue decline in Q4, according to executive statements during a Feb. 24 earnings call.
AVG has spent more than a year striving to push beyond its core consumer security market. Platforms like CloudCare and Managed Workplace (acquired in 2013 from Level Platforms) are core to the SMB push. But so far, the results haven’t met expectations.
AVG’s overall Q4 2015 revenue was $109.5 million, up 9 percent from Q4 2014. Shareholders were impressed with the company’s performance, and shares rose on the news.
But in the SMB segment, revenues were $14.5 million in Q4 2015 — down from $15.4 million in Q4 2014, CFO John Little said. The company also took a $1.1 million one-time adjustment related to SMB acquisitions.
“Overall, this business [i.e., the SMB segment] hasn’t met our original growth expectations for the second half of 2015,” said Little. “But we believe we have taken the appropriate steps to succeed in this market in the future.”
2015 SMB Changes
Those steps included about 35 staff cuts and new SMB leadership, AVG announced back in November 2015. Looking forward to 2016, AVG expects its SMB business to be “flat to slightly up” — delivering $65 million to $70 million in revenues. AVG is expecting “double digit bookings growth” but the actual revenue from those 2016 bookings may not arrive until 2017.
The SMB segment “has been a journey,” said CEO Gary Kovacs. “We had a good collection of products and a good start to the business. But we had products that weren’t tied together and we lacked a cohesive strategy.” That changed at the end of Q3 and in Q4 2015, he said, when AVG named new management to lead the SMB group.
Asked by a financial analyst if AVG needs to make more SMB changes, Kovacs said: “I think we have everything we need in place today. The stuff that was broken and not executing well has been fixed.” He said an “A-team” has been in place for over a quarter, and “you’ll start to see the bookings grow.”
Will MSPs Stick Around?
Overall, it sounds like AVG has stopped the bleeding in its SMB business, and now expects bookings to grow consistently in 2016.
Still, promoting Managed Workplace and CloudCare to resellers and MSPs could be a difficult challenge over the long haul. MSP-focused rivals like Autotask, ConnectWise, Continuum, LogicNow and SolarWinds N-able are driving double-digit growth. Some of the players are growing 40 percent or more annually, sources say.
Among the missing pieces in AVG’s strategy: A community-driven organization that engages MSPs face-to-face at conferences and events. That level of engagement seemingly disappeared once AVG acquired Managed Workplace. And more recently, sources say, AVG has focused mainly on distributor-led Managed Workplace sales.
Of course, there are multiple paths to software success. And AVG’s CEO sounds confident that an SMB turnaround is underway.