Sunday, March 01, 2015

AVG Technologies Financial Results 2014 – An Alternative View (some quick thoughts on issues for 2015) and AVG ME

AVG Technologies released their financial results in February.  As usual, the focus was on revenue.  Per their announcement,   “Subscription revenue increased 12% to $281.6 million from $250.8 million year over year. Our consumer subscription business grew 11% to $223.1 million and our small business segment by 18.7% to $58.5 million. For the fiscal year 2014, total revenue was $374.1 million”

Looking at the numbers versus fiscal 2013 and Q4 2013 versus 2014 is a little troubling, as a lot of red is involved in the changes.

With the exception of Subscription Revenue, all other figures above were lower in  Q4 and for 2014 overall versus 2013.  Much of the drop in platform derived revenue was expected, however.  The increase in subscription revenue didn’t make up for the decline in platform derived revenue.  AVG’s focus is going to be on subscription revenue.

In the transcript to the press conference, CEO Kovacs commented that, “We have also exceeded a very important user count milestone, as we came in at over 101 million mobile users, to give a total user count reached of 197 million. Both of these are well on our way to the important milestones

Two potential red flags with this.  There may be double counting of users, if a user has AVG product installed on both a smart phone and a laptop.  Also, several years ago, AVG promoted that they had  on the order of 130 million users. This was before they acquired their way into the mobile business (Israeli based company acquisition).   Doing the math, they may have lost, market share on the order of   34 million desktop users.  That’s quite a bit.   How user is/was defined may have changed over the years.  5 million of the additional users were through the acquisition of Location Labs. 

Paid user count for 2014 on the desktop was approximately 19 million.  The means the majority of the consumer base was free, which means zero switching costs and the possibility for churn.

2014 acquisitions by AVG included acquisitions of Locations Labs, Norman Safeground and Winco.  Revenue from these were not broken out separately.

Some Threats for 2015


In 2014, AVG’s SMB revenue grew by an impressive 18.7% to $58.5 million. On February 24th, AVG competitor Avast announced their free Avast for Business.  This product is designed to protect small and medium-sized businesses (SMBs) against viruses and cyber attacks.   

Avast pointed out as part of the introduction  that it plans to introduce programs for MSPs and resellers that enable them "to benefit from the power of free." This could pose a risk to AVG’s growth with their SMB product.  To build their presence in the business marketplace, Avast recruited AVG’s VP of Sales and Operations in June, 2014.

In the Desktop and Android Market

  • AVG has not tested well in some product tests by well known vendors.  This could impact market share growth.
  • AV-Test ( released a report in December on “The best antivirus software for Windows Home Users”.   AVG’s products tested came in 18 and 22 out of the 27 tested.
  • AV-Comparatives ( ) - In AV-Comparatives’ September “File Detection Test”, AVG was awarded 1 star. 18 products were awarded 2 or 3 stars.
  • However,  in the summary report for 2014, AVG  was one of nine vendors to receive a Top Rated designation. Bitdefender won Product of the Year.
  • Av-Test ( ) released a report on “The Best Antivirus SW for Android”.  31 products are in the report.  28 products scored higher the free AVG offering that was tested.
  • AVG was not part of the AV-Compasrative September “Mobile Security Review”.
To jump start even further installations on mobiles, AVG may need to do something like they did with Huawei  and give away paid AVG product. They did this with   Huawei mobiles in the India market, and with Samsung phones in the UK market. This was a  couple of years ago. 

The rumor mill has AVG Introducing “AVG ME”  sometime in the first ½ of this year , potentially as soon as March.   With this product, AVG ME will be providing publishers and advertisers access to validated user data (gathered with customer permission).  Revenue from this is TBD.

The Usual Acquisition Stories

In November, the Wall Street Journal reported that AVG Technologies had been approached by potential buyers.  Nothing has really been in the press about this since then.


NJTrout said...

Craig, have you taken into account the conversation / value of the Euro? Or are these numbers reported in USD.

Andy Hayter

kensek_discourses said...

These are the US dollar figures