AVG Technologies is still losing money in the SMB market, but CEO Gary Kovacs says a turnaround is showing progress, and the channel-driven SMB effort should generate break-even results for the year. Kovacs even pointed to Managed Workplace 10 -- the company's latest RMM (remote monitoring and management) platform for MSPs -- as a sign of major progress.
Those thoughts and more emerged yesterday during a quarterly earnings call with Wall Street analysts. Overall, AVG's Q1 revenues grew 5 percent to $107.9 million. SaaS revenues also grew strongly, reaching $23.4 million for the quarter, up from about $15 million for the corresponding quarter last year. Generally speaking, the results impressed Wall Street.
AVG's SMB and MSP Strategy
Still, AVG's SMB business and its channel efforts remain a work in progress. The company delivered weak SMB results in mid-2015; made some staff cuts; hired new leadership; and promised to regain traction in 2016. It's too early to say AVG's SMB business is truly rebounding but Kovacs sounded upbeat on the call.
Asked if the SMB business will be break-even in 2016, Kovacs said:
"Yeah, we are expecting to reach break-even for the year. SMB was very heavily loaded in terms of expense in the previous years for product and then, of course, rebuilding the team. And we now have a lot of those in place. This quarter, we launched or announced Managed Workplace 10. Just to give you a sense of the scale, it required two years of engineering effort. We basically rebuilt the product inside out. And we put that team in place and rounded out the middle management layer. So both of those are in place and we're executing. Obviously, it takes a little time to get them all engaged, but that's the focus for the rest of the year."
Indeed, Managed Workplace 10 is the latest upgrade to an RMM platform that AVG acquired as part of the Level Platforms buyout in 2013. The deal got off to a bumpy start amid staff turnover and some MSP defections to other platforms. Meanwhile, RMM rivals like Autotask, ConnectWise (LabTech), Continuum, LogicNow and SolarWinds N-able have been in rapid growth mode. In some cases, those rivals have software suites -- a portfolio of automation products -- designed for MSPs.
AVG even went silent with the channel media for a bit in late 2015 as the company retrenched internally. But gradually, the AVG team has reemerged to describe the channel strategy and Managed Workplace 10's benefits in the market.
AVG's Overall Channel Strategy
During yesterday's earnings call, an analyst asked Kovacs for an update on the channel strategy. His reply:
"SMB is an interesting space for us. We have signed up many partners globally as you've noted. And the next phase isn't necessarily sign up more channel partners. to do a much more precise segmentation of them. So, a big part of the upgrade last year was the systems to be able to capture who is selling what and what end customers are associated with what channel partners and what class of channel partners are producing. And as a result, we have been able to tailor our channel strategies much more precisely. Not only the strategy, but also point our telesales group at the top tier partners who actually are making the biggest impact and the theory, of course, is that we help them and they drive even additional ."
Now for the twist. In recent months, there have been rumors that AVG has been leaning heavily on distributors rather than AVG's own sales team to engage MSPs. That could be a tricky move, since MSPs require high-touch support when they adopt and leverage RMM software -- namely Managed Workplace 10.
During a portion of the call, Kovacs seemed to be confirming the shift to automated or distributor-led sales rather than high-touch MSP support. He said:
"So the rest of the channel group, of course, we don't want to abandon. But they're going to be assisted much more through the channel website and the partner website rather than on the direct touch. And so both of those changes will need to or will allow us to implement on a much more cost effective basis, a way to help our channel and then additionally, drive increases in the funnel."
Bottom line: AVG's SMB business remains a work in progress. Kovacs concedes 2015 was a year of transition and rebuilding. But he's betting Managed Workplace 10 and other offerings will help push AVG from the red to break-even in the SMB space for 2016.
We'll keep watching to track AVG's progress against that goal.
