AVG Reports Strong Second Quarter Financial Results

AMSTERDAM, Aug. 1, 2013 /PRNewswire/ -- AVG Technologies N.V. (NYSE: AVG), the provider of Internet and mobile security, privacy and optimization to 155 million active users, today reported results for the second quarter ended June 30, 2013. 

Revenue for the second quarter of 2013 was $100.4 million, compared with $82.5 million in the second quarter of 2012, an increase of 22 percent.

Net income for the second quarter of 2013 was $21.7 million, or $0.39 per diluted ordinary share.  This compares with net income of $11.0 million, or $0.20 per diluted ordinary share in the prior year's second quarter, an increase of 95 percent per diluted ordinary share.

Non-GAAP adjusted net income for the second quarter of 2013 was $29.4 million, or $0.54 per diluted ordinary share.  This compares with non-GAAP adjusted net income of $17.3 million, or $0.32 per diluted ordinary share, for the same period of the prior year, an increase of 69 percent per diluted ordinary share¹.

Unlevered free cash flow was $41.2 million for the quarter, compared with $29.7 million for the same period in the prior year, an increase of 39 percent.  At June 30, 2013, deferred revenue was $188.2 million and net cash was $5.0 million.

During the second quarter, we completed the acquisitions of the businesses of PrivacyChoice LLC and of LPI Level Platforms Inc., strengthening our consumer and SMB offerings respectively.

"It has been a strong quarter for AVG in many areas.  First, we are excited to welcome Gary Kovacs as our new CEO.  His vision and expertise across all areas of the business will help us accelerate the delivery of our products to Internet users everywhere," commented John Little, CFO of AVG Technologies.

"We have again reported strong financial results for the quarter and delivered solid growth in our subscription business. Our platform business contributed well, following a record first quarter. We closed the quarter with 155 million active users, a year over year increase of 21 percent, including 44 million mobile users, up nicely over the first quarter. We remain confident in the opportunity ahead with mobile as the cornerstone of our multi-platform, multi-screen strategy," concluded Little.

¹ Non-GAAP results for the second quarter of 2013 exclude $1.6 million in share based compensation expense, $2.3 million in acquisition amortization, $3.0 million in "one-off items" together with a $4.8 million adjustment to normalize to a tax rate of 14 percent, as described in the Reconciliation of GAAP measures to non-GAAP measures.

Financial Outlook

Based on information available as of August 1, 2013, AVG is raising its outlook for fiscal 2013 as follows:

• Revenue is expected to be in the range of $416 million to $427 million.
• Net income is expected to be in the range of $75 million to $86 million; diluted EPS is expected to be in the range of $1.35 to $1.55.
• Non-GAAP adjusted net income is expected to be in the range of $110 million to $116 million; non-GAAP diluted EPS is expected to be in the range of $2.00 to $2.10.
• Operating cash flow is expected to be in the range of $165 million to $170 million; non-GAAP unlevered free cash flow is expected to be in the range of $150 million to $155 million.

Similarly, AVG is providing the following financial outlook for the third quarter of 2013:

• Revenue is expected to be in the range of $100 million to $104 million.
• Net income is expected to be in the range of $15 million to $19 million; diluted EPS is expected to be in the range of $0.26 to $0.35.
• Non-GAAP adjusted net income is expected to be in the range of $25 million to $27 million; non-GAAP diluted EPS is expected to be in the range of $0.44 to $0.49.

AVG's expectation of non-GAAP adjusted net income for the third quarter of 2013 and fiscal year 2013 excludes share-based compensation expense, acquisition amortization and certain other adjustments, and assumes a normalized tax rate of 14 percent.  For the purpose of calculating diluted EPS and non-GAAP diluted EPS, the Company assumes approximately 56 million weighted-average diluted ordinary shares outstanding for the third quarter and approximately 55 million weighted-average diluted ordinary shares outstanding for the full year. 

Conference Call Information

AVG will hold its quarterly conference call today at 23:00 CET/5:00 p.m. ET/2:00 p.m. PT to discuss its second quarter 2013 financial results, business highlights and outlook.  The conference call may be accessed via webcast at http://investors.avg.com or by calling +1 (877) 941-1428 (United States and Canada) or +1 (480) 629-9665 (International).

A replay of the webcast can be accessed via http://investors.avg.com.  Additionally, an audio replay of the conference call will be available through August 8, 2013 by calling +1 (800) 406-7325 (United States and Canada) or +1 (303) 590-3030 (International), conference passcode required: 4630301#.

Use of Non-GAAP Financial Information

This press release contains supplemental non-GAAP financial measures including the following: non-GAAP adjusted net income, non-GAAP adjusted net income per diluted ordinary share and non-GAAP unlevered free cash flow.  The presentation of this supplemental non-GAAP financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with generally accepted accounting principles in the United States.  In particular, adjusted net income, adjusted net income per diluted ordinary share and unlevered free cash flow should not be considered as measurements of the Company's financial performance or liquidity under U.S. GAAP, as alternatives to income, operating income, cash flow from operations or any other performance measures derived in accordance with U.S. GAAP or as alternatives to cash flow from operating activities as a measure of the Company's liquidity.  Adjusted net income, adjusted net income per diluted ordinary share and unlevered free cash flow have limitations as analytical tools and should not be considered in isolation from, or as substitutes for, analysis of AVG's results of operations, including its cash flows, as reported under U.S. GAAP.  Some of the limitations of adjusted net income, adjusted net income per diluted ordinary share and unlevered free cash flow as financial measures are:

• they do not reflect the Company's future requirements for capital expenditure or contractual commitments, nor, in the case of the income measures, do they reflect the actual cash contributions received from customers;
• except in the case of unlevered free cash flow, they do not reflect changes in, or cash requirements for, the Company's working capital needs;
• they do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on the Company's debt;
• although amortization and share-based compensation are non-cash charges, the assets being amortized will often have to be replaced in the future and such measures do not reflect any cash requirements for such replacements; and
• other companies in AVG's industry may calculate these measures differently than AVG does, limiting their usefulness as comparative measures.

Because of these limitations, investors should rely on AVG's consolidated financial statements prepared in accordance with U.S. GAAP and treat the Company's non-GAAP financial measures as supplemental information only. 

AVG is providing these non-GAAP financial measures because it believes that such measures provide important supplemental information to management and investors about the Company's core operating results, primarily because the non-GAAP financial measures exclude certain expenses and other amounts that management does not consider to be indicative of the Company's core operating results or business outlook.  AVG management uses these non-GAAP financial measures, in addition to the corresponding U.S. GAAP financial measures, in evaluating the Company's operating performance, in planning and forecasting future periods, in making decisions regarding business operations and allocation of resources, and in comparing the Company's performance against its historical performance.

For a reconciliation of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with U.S. GAAP, please see "Reconciliation of GAAP to non-GAAP financial measures".  All non-GAAP financial measures should be read in conjunction with the comparable information presented in accordance with U.S. GAAP. 

Forward-Looking Statements

This press release contains forward-looking statements within the Private Securities Litigation Reform Act of 1995, including those relating to an expected range of revenue, net income, EPS, operating cash flow, non-GAAP adjusted net income, non-GAAP EPS and non-GAAP unlevered free cash flow for the three months ending September 30, 2013 and/or the fiscal year ending December 31, 2013 and/or future periods, as well as those relating to the expectation that the nomination of the Company's new Chief Executive Officer will be approved by a general meeting of shareholders, the timing and outcome of the transition regarding the Company's new Chief Executive Officer, and the future prospects of AVG.  Words such as "expects," "expectation," "intends," "assumes," "believes" and "estimates," variations of such words and similar expressions are also intended to identify forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those contemplated herein. Factors that could cause or contribute to such differences include but are not limited to: voting results at the Company's general meetings of shareholders; changes in the Company's growth strategies; changes in the Company's future prospects, business development, results of operations and financial condition; changes to the online and computer threat environment and the endpoint security industry; competition from local and international companies, new entrants in the market and changes to the competitive landscape; the adoption of new, or changes to existing, laws and regulations; flaws in the assumptions underlying the calculation of the number of the Company's active users; potential effects of changes in the applicable search guidelines of our search partners; the termination of or changes to the Company's relationships with its partners, including Google, Yahoo!, and other third parties; changes in the Company's and its partners' responses to privacy concerns; the ability for the Company to successfully diversify its portfolio of search partners; the Company's plans to launch new products and online services and monetize its full user base; the Company's ability to attract and retain active and subscription users; the Company's ability to retain key personnel and attract new talent; the Company's ability to adequately protect its intellectual property; flaws in the Company's internal controls or IT systems; the Company's geographic expansion plans; the anticipated costs and benefits of the Company's acquisitions; the outcome of ongoing or any future litigation or arbitration, including litigation or arbitration relating to intellectual property rights; the Company's legal and regulatory compliance efforts; and worldwide economic conditions and their impact on demand for the Company's products and services.  Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements.

Further information on these factors and other risks that may affect the Company's business is included in filings AVG makes with the U.S. Securities and Exchange Commission (SEC) from time to time, including its Annual Report on Form 20-F, particularly under the heading "Risk Factors".

The financial information contained in this press release should be read in conjunction with the consolidated financial statements and notes thereto to be included in the Company's reports on Form 6-K and Form 20-F.  The Company's results of operations for the second quarter ended June 30, 2013 are not necessarily indicative of the Company's operating results for any future periods.

These documents are available online from the SEC or in the Investor Relations section of the Company's website at http://investors.avg.com.  Information on the AVG website is not part of this release.  All forward-looking statements in this press release are based on information currently available to the Company, and AVG assumes no obligation to update these forward-looking statements in light of new information or future events.

(Logo: http://photos.prnewswire.com/prnh/20120306/SF65434LOGO)

About AVG

AVG's mission is to simplify, optimize and secure the Internet experience, providing peace of mind to a connected world.  AVG's powerful yet easy‐to‐use software and online services put users in control of their Internet experience.  By choosing AVG's software and services, users become part of a trusted global community that benefits from inherent network effects, mutual protection and support.  AVG has grown its user base to 155 million active users as of June 30, 2013 and offers a product portfolio that targets the consumer and small business markets and includes Internet security, PC performance optimization, online backup, mobile security, identity protection and family safety software. www.avg.com

SOURCE AVG Technologies N.V.

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