Avid Technology Inc (AVID) 2011 Q3 法說會逐字稿

Good day, and welcome, everyone, to the Avid third quarter earnings results conference call. Today's call is being recorded. For opening remarks and introductions, I would like to turn the call over to the Director of Investor Relations, Mr. Tom Fitzsimmons. Please go ahead.

Good afternoon. I'm Tom Fitzsimmons, Director of Investor Relations for Avid. I'd like to welcome you to today's call. With me today are Gary Greenfield, Avid's Chairman and CEO, and Ken Sexton, Executive Vice President, Chief Financial and Administrative Officer.

Before we begin, please note that this call will include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including statements that relate to future results or events and are based on Avid's current estimates and assumptions. Forward-looking statements may be identified by the use of forward-looking words such as anticipate, should, believe, could, estimate, and expect, or similar expressions.

There are a number of factors that could cause actual events or results in future periods to differ materially from those indicated by these forward-looking statements, such as our ability to execute our strategic plan and meet customer needs, our ability to produce innovative products in response to changing market demand, particularly in the media industry, competitive factors, fluctuations in our revenue based on, among other things, Avid's performance in particular geographies or adverse changes in economic conditions. Other important risk factors and uncertainties appear in our periodic reports and other filings with the SEC.

In addition, our forward-looking statements represent our estimates only as of today, Thursday, October 27, 2011, and should not be relied upon as representing our estimates or views on any subsequent date. We undertake no obligation to review or update these forward-looking statements even if the estimates change.

During this call, we'll be referring to non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles and may not be comparable to similar non-GAAP measures used or reported by other companies. The non-GAAP measures do not reflect all the costs associated with the Company's operations determined in accordance with GAAP.

The most directly comparable financial measures calculated in accordance with GAAP and a reconciliation of GAAP to non-GAAP measures are contained in our press release announcing this quarter's results and are available on the Investor Relations section of our website at www.avid.com.

For the purpose of understanding our future business model, we will also provide some forward-looking analysis on this call on a non-GAAP and GAAP basis. Some of our GAAP financial measures are not accessible on a forward-looking basis, and the differences between our future GAAP and non-GAAP financial measures could be substantial. And now, I'd like to turn the call over to Gary.

Thank you, Tom, and welcome to our conference call for the third quarter of 2011. The results for the third quarter were an improvement over the second quarter. Revenues for the third quarter were $165 million, which is up sequentially and essentially flat with the third quarter of 2010.

We had a strong third quarter in the Americas and saw an improvement in our bookings in Europe. We returned to profitability on a non-GAAP basis. In addition, we recently announced actions which we believe will better align our cost structure and accelerate our objective to expand operating margins.

I will talk more about the business, as well as provide you with more information on these actions in a moment, but first, let me turn the call over to Ken to discuss our financial results in a bit more detail. Ken?

Thank you, Gary, and welcome to everyone on today's call. Revenues for the third quarter were $165 million, compared to $165.1 million for the same period in 2010, up sequentially from $161.3 million reported for the second quarter.

The GAAP net loss for the third quarter was $8 million, or $0.21 per share. This compares to a GAAP net loss in the third quarter of last year of $10 million, or $0.26 per share. The GAAP net loss for the third quarter of 2011 includes amortization of intangible assets of $2.8 million, stock-based compensation of $3.5 million, restructuring costs of $2.7 million, mostly related to the darkening of 2 sites, a legal settlement in acquisition-related cost of $163,000, and a related tax adjustment of $815,000.

Excluding these items, which total $8.4 million, the third quarter non-GAAP net income was $385,000, or $0.01 per share. This compares to a non-GAAP net income of $1.6 million, or $0.04 per share for the third quarter of 2010.

I'll now discuss the third quarter results in greater detail. Our revenue for the quarter, while essentially flat year-on-year, showed good growth in Americas, but we were down in Europe and Asia. Changes in currency exchange rates benefited the third quarter of 2011.

On a constant dollar basis, revenue for the third quarter were down approximately 3% year-on-year. Our products revenue for the third quarter were $131.9 million, down 2% year-on-year. Service revenues, which includes maintenance support, professional services, and training were $33.1 million, up 7% compared to last year's third quarter.

Video revenue for the third quarter were $98.4 million, down 2% compare to the third quarter of 2010. Our Interplay and share storage revenue were up year-over-year, as well as on a year-to-date basis. Our professional editing business had strong unit sales and a year-on-year increase in Media Composer software revenue, largely driven by our Final Cut Pro trade-in program.

However, revenue was down overall for professional editing, compared to the prior year due to less bundled software/hardware sales. As I mentioned earlier, service revenue, which was up year-on-year, was largely driven by maintenance contract revenue in the video portion of our business.

Now looking at audio. Audio third quarter revenues were $66.5 million, up 3% compared to last year. We continue to see good growth for control surfaces especially our Artist Series of products. Our live sound, or VENUE product line, was up considerably year-on-year for the quarter and is up over 20% over the last 12 months.

The release of Sibelius Version 12 helped drive a strong sequential and year-on-year growth in this part of the business. These growth areas were offset somewhat by declines in our Pro Tools Hardware related sales.

Now, I will discuss our third quarter results beyond revenue in both GAAP and a non-GAAP basis. On a GAAP basis, we reported gross margins as a percentage of revenue of 53.2%, up 1.3 percentage points year-on-year and over 2 points sequentially.

Our non-GAAP gross margin was 53.7%, up 1.1 percentage point year-on-year and up 2% percentage points sequentially. The year-on-year improvement was primarily attributable to 3 factors; improved margins on our maintenance support business with higher revenue and lower direct delivery cost; improved product margins related to favorable product mix and operational efficiencies; and, changes in currency exchange rates benefited gross margins year-on-year.

Our GAAP operating expense was $92.5 million for the third quarter, which is down modestly year-on-year and down $1.5 million sequentially. The GAAP operating expense for the third quarter of this year included $2.7 million of restructuring charges.

Our non-GAAP operating expenses for the third quarter was $84.2 million, which represents a $2.2 million year-on-year increase, but a $2.7 million decrease on a sequential basis. The expenses for the third quarter last year included a $1 million reduction related to a gain on the sale of asset.

The remainder of the year-on-year increase was mostly driven by changes in currency exchange rates. The sequential decrease in operating expenses was mostly related to lower compensation-related costs. Overall, headcounts remained relatively flat compared with our second quarter of this year.

The GAAP operating loss for the quarter was $4.7 million, an improvement of about $2.3 million year-on-year. Excluding the items I mentioned earlier, the non-GAAP operating profit for the third quarter was $4.5 million, compared to a $4.9 million non-GAAP operating profit in the third quarter of 2010.

While taxes for the full year are relatively unchanged from our prior guidance, the majority of our annual tax provision was recorded in the third quarter, due to the SKU of profitability in our taxable subsidiaries.

Now turning to the balance sheet. We ended the quarter with $33.7 million of cash, down $37.6 million, as of June 30, 2011. The drawdown of $13 million on our line of credit remained unchanged for the quarter.

Our cash net of the credit line balance was $20.7 million, which is down $3.9 million from the beginning of the quarter. We used about $400,000 of cash from operations, which included $3.2 million of restructuring payments.

We were pleased with the sequential decrease in both inventory and accounts receivable balances on higher revenue. Our inventory at the end of the third quarter was $126 million, which is down $3.8 million from the beginning of the quarter.

We expect our inventory levels to continue to come down further by the end of 2011, as we better optimize our supply chain. The annualized inventory turns for the third quarter were 2.6 turns.

Our accounts receivable balance of $92.9 million was down $5.5 million sequentially and represents 51 days sales outstanding. Our aging remains healthy. On the personnel side, we ended the quarter with 1,944 employees and 505 contractors. And now, I'd like to hand things back over to Gary, who will provide an update on the business.

Thanks, Ken. Our results for the third quarter reflect improvement over the prior quarter. We reported non-GAAP net earnings for the first time in 2011, a non-GAAP operating margin of 3% and had modest non-GAAP operating profit year-to-date.

While we have been able to demonstrate progress this year, we're not yet where we want to be. Before I provide some context on the progress we made in the quarter and discuss some of the business highlights, I would like to discuss the restructuring announced today in our 8-K filing.

As we have discussed in the past, we believe that Avid should be able to achieve non-GAAP operating margins in the mid-teens. While this profit level will require revenue growth, we continue to take actions to streamline and improve our operations while increasing investments in areas of the business with higher growth potential.

In our filing today, we announced plans to reduce our headcount by approximately 10% with the majority of the reduction expected immediately. We have made these reductions after careful consideration of the impact to our customers, partners, and employees.

These actions allow us to continue to invest in our core business as well as shift some resources into areas of the business that we believe offer better revenue growth for the Company. The cost of this action is approximately $10 million to $11 million and should result in an annualized cost savings of approximately $25 million to $30 million.

Now, I would like to provide an update on the business. As I mentioned at the beginning of our call, we experienced strong growth in the Americas and an increase to bookings in Europe during the third quarter. This increase in Europe can be viewed as a positive sign in that last quarter's realignment of our European sales force into smaller, more regionally-focused teams has started to take hold.

We remain optimistic about the global opportunities within our Media Enterprise customer segment, but there's no question that we need to closely monitor both business and economic conditions that might impact this.

Now, I'd like to discuss our key customer segments. Our Media Enterprise customer segment continues to be strong in the Americas and in emerging markets. In particular, some domestic broadcast companies continue to experience healthy growth with, for example, companies such as CBS reporting a rise in their second quarter net income, and News (inaudible) reporting year-on-year double-digit percentage increase in advertising revenue and a year-on-year increase in net income.

In June 2011, PWC reported that spinning on digital platforms currently accounts for 26% of all global entertainment and media spin, and they forecast that number will rise to as much as 34% by 2015. The broadcast market continues the move toward file-based work flows, multi-screen distribution and is beginning to show signs of success in terms of monetizing online content.

Viewers are consuming more media on more devices than ever before and choosing when, where, and how they consume it. These changes in viewership and the demand for high quality content are helping to boost demand for technology capabilities that help broadcasters manage their assets more effectively, create content for multi-format distribution, and gain a foothold on digital rights management.

We believe Avid is uniquely positioned to take advantage of this growth with products that meet the demands of the ever-changing media production process. Our Integrated Media Enterprise strategy continues to gain momentum as companies look for new ways to link all of their production tools, infrastructure, and enterprise media management capabilities and interplay both their media operations and business management processes.

At IBC 2011 last month, we showcased our leading, integrated news production system highlighting the release of Avid Interplay Central 1.0, a browser-based client that gives customers the ability to create, edit, and publish stories all from a web browser. We also showed the latest version of NewsVision, our turnkey news production system that lets customers create and deliver high impact news, promotional, and long-form content. Customers, including Canal 75, a leading Swedish production company, are already turning to Avid for solutions to help stream their work flows and manage and monetize assets which include thousands of hours of footage.

Also at IBC, we unveiled Avid Motion Graphics, our next-generation graphics platform that provides users with a revolutionary, real-time 2D and 3D graphics rendering engine. News of our release of Avid Motion Graphics was received very positively by our existing Deko customers as well as their new customers.

We also released a new version of our shared storage system, ISIS 7000, featuring increased storage capacity and aggregate performance to meet the growing media demands of Media Enterprises. As mentioned earlier, our shared storage revenues were up year-over-year as well as on a year-to-date basis.

During the latter part of the third quarter, we implemented marketing campaigns to help build pipeline and demand for these and other solutions for our Media Enterprise customers. The marketing team at Avid was selected from a competitive field of nearly 200 submissions across 20 categories for an [Elacroix Marky] Award recognizing sales and marketing leadership for integration, innovation by [Elacroix] Systems, the leading provider of on-demand, revenue performance management solutions.

We also initiated our Global Executive Briefing Series, a new, high-touch senior executive level program that features Avid's thought leadership with the objective of informing current and potential new customers about our solutions for today's most challenging projects. The briefings have been well received by our customers, and we have already seen new business including a deal with the WWE.

During the third quarter, we conducted the Avid Executive Briefing Series in New York City, Los Angeles, London, and Munich, with additional meetings scheduled this quarter in Beijing, Tokyo, Washington, DC, and Paris. These events highlighted our Integrated Media Enterprise strategy, featuring customers who discuss the results as well as our new White Papers on the media cloud and the AS-02 standard.

The AS-02 standard is a file format specification designed to streamline versioning of content for multiple distribution channels. These efforts by Avid and others to standardize on core file-based workflow technologies, are critical to the future development of content creation, management, and distribution for multiple screens.

In our Post and Professional segment, we had revenue growth for the quarter and growth on a year-to-date basis. The disruption in the professional video editing community due to the release of Final Cut Pro X continues to fuel momentum in our Post and Professional customer segment.

Due to the success of the second quarter promotion encouraging FCP users to switch to Avid Media Composer, we extended that special $995 pricing promotion to the end of September, and we are happy to report that we saw even stronger uptake during Q3. With this perceived shift in Apple's strategic direction, we are seeing an increase in post secondary education institutions with programs in video, film, and journalism worldwide who want to engage with us to discuss how to add or expand their programs for the Avid Media Composer.

In particular, we have received inquiries from decision makers and thought leaders who attended the University Film and Video Association Conference at Emerson College. We have also seen a spike in the number of educators who are attending our Avid-certified instructor courses in North America.

During the third quarter, we also had a successful launch of Sibelius 7, our latest version of music notation software, and even with the downward pressure on education spending in the US, we are seeing continued worldwide adoptions of complete Avid audio, video, and music solutions in this sector with an emphasis on Sibelius and Pro Tools.

The momentum we experienced in the prior quarter for our controlled surfaces, particularly our Artist Series of products, remains strong. The same holds true for our VENUE product line which is up significantly both year-on-year for the quarter and over the last 12 months.

In fact, the SSC.] Audio Group, a major UK rental company, selected VENUE as the standard system at front-of-house for the current and (inaudible) festival season. In 2011, these included British summer festivals such as Download, Oxygen Tea in the Park, as well as Reading and Leeds.

We have just returned from a very successful show at the Audio Engineering Society Convention in New York City, where we demonstrated our continued commitment to the professionals, our customers, during our global, live streaming press conference where we announced the release of Pro Tools HDX, the next generation of Pro Tools HD Hardware, and Pro Tools Version 10, the next generation of the world's leading audio recording software.

More than 35 press representatives attended in person, and more than 3,200 attendees watched the live event to learn more about how these solutions can help them take the gigantic leap in speed and sound, as our campaign says.

We also had the chance to host a special event for our customers. The event, set against the backdrop of a purple-lit Empire State Building featured Pro Tools user, Alicia Keys, at (inaudible) Studios, one of the most celebrated studios in New York City, renowned for its design, views, and state-of-the-art equipment including Pro Tools HD, Icon S5 Fusion, and soon, HDX.

The initial reaction to the announcement about Pro Tools HDX, and Pro Tools 10 software has been very positive. In fact, while at AES, Pro Tools received 3 awards. Our Pro Tools HDX and Pro Tools 10 both were named a Mix Certified Hit by the editors of Mix Magazine.

Pro Tools 10 received the Air Users Blog Editors' Choice Award, and Pro Tools 10 received the Best in Show Award from the Pro Sound Network, which includes the Pro Sound News, Pro Audio Review, and the AES Show Daily Online Edition. For the second year in a row, we captured Top Tweet for our Pro Tools launch, with more than 1,600 tweets for our gigantic tweet-linking to Pro Tools 10.

Continued economic uncertainty into the consumer market appears to be affecting growth in our Creative Enthusiasts segment which is primarily served through retail channels. Although we remain one of the top 2 players in the consumer video editing space, we did not see the anticipated revenue growth for these products in the third quarter. We believe this is a transitional issue, as we work to help customers understand the differences and advantages of the Avid and Pinnacle Studio brands.

Our studio monitors continue to show promise. During the third quarter, we were able to narrow the gap with our competition and hope to see this trend continue with the recent launch of our new BX Delta 2 studio monitor line.

Though growth for the MI market, overall, was slower than we would have liked, we are encouraged by the strong sales of our Oxygen 49, Axiom 61, and the KeyStudio bundled products. We believe the release in strong demand for the new KeyStation Mini 32, a full-featured keyboard with full keyboard functionality and an ultra-portable design, and the launch of the highly anticipated Fast Track C400 and C600 interfaces will bolster our Creative Enthusiast business as we move forward.

Now, I would like to shift the focus for a moment and talk briefly about our customers. We're honored to work with truly amazing customers and are delighted to see them receive the recognition they deserve. The majority of the more than 90 Emmy nominees in major programming in technical categories this year used one or more Avid systems such as Media Composer, Pro Tools, and Sibelius on productions including Mad Men, [Mildred Purse], Modern Family -- among others -- to achieve their creative vision.

At the 63rd Emmy Awards this year, Avid customers took home prestigious statuettes in technical categories, such as outstanding sound mixing for nonfiction programming, outstanding picture editing for reality programming, and outstanding sound editing for [nonfiction] programming, as well as major programming categories such as Outstanding Drama Series, Outstanding Comedy Series, and Outstanding Reality program. We're committed to providing our customers the solutions that help them create the stories that inspire television audiences around the world.

Ramping up, we remain committed to our customers and are optimistic that we can take advantage of the growth opportunities available in our markets. We are confident that the steps we announced today, as well as those we have taken throughout the year, will accelerate improvement in our top and bottom line performance. With that, I'd like to turn the call back to Ken, who will discuss our financial outlook for the remainder of 2011.

Thank you, Gary. I would like to take this opportunity to provide an update to our guidance provided on July 21, 2011. Similar to prior years, we expect the fourth quarter to be the strongest quarter in fiscal year 2011.

The seasonality of our business, along with the timing of large transactions, should contribute to a sequential improvement in revenue and non-GAAP operating profit in the fourth quarter.

However, the overall macroenvironment remains challenging. As a result, we are lowering our full-year guidance below the levels provided in July. As of today, October 27, 2011, we expect full-year revenue for the Company to be in the range of $665 million to $675 million with a non-GAAP operating profit margin of 1.5% to 3% of revenue for the full year.

We continue to expect a year-on-year improvement in our non-GAAP gross margins as a percentage of revenue and expect our non-GAAP operates expenses to be up modestly year-on-year. We continue to expect our non-GAAP taxes and net interest expense to be around $7 million to $9 million for the full year of 2011.

The non-[GAAP] net income I just outlined would exclude stock-based compensation, amortization of intangibles, restructuring and other charges, acquisition costs, legal settlements, gain or loss on sale of assets, and related tax adjustments. Based on what we know today, we expect these items to result in a $36 million to $39 million of charges for 2011.

The increase from our prior range is primarily due to the adoption of the newly announced restructuring plan. The cost of this action is approximately $10 million to $11 million, most of which will be recognized in the fourth quarter of 2011. At the midpoint of our range, including these costs, would result in a GAAP net loss for 2011. This conclude our remarks, and we would now be happy to take your questions.

(Operator Instructions) We'll take our first question from Mike Olson with Piper Jaffray.

Good afternoon. Ken, can you just repeat what you just said about pro forma operating margin guidance? I just missed that part.

Sure. I've indicated that it would be 1.5% to 3% of revenue, and I stated that the revenue would be in that $665 million to $675 million range for the full year. (multiple speakers) Right, so it's not 1.5% to 3% for the fourth quarter, but for the full year, which means it would be higher for the fourth quarter.

Yes, okay. Cool. And then, as far as the headcount reductions, what are the primary areas where headcount will be cut?

Yes, they were cut really in many areas of the business, Mike. I would say that the area that we are -- as I mentioned in my comments -- that we are investing in is that we do believe that we should continue to invest in sales and marketing. So, I'd say, in the absence of sales and then marketing supported, cuts were across the business.

Okay. And then, last one. As far as the impact from Final Cut, you've mentioned in the past that there is definitely an uptick in interest and demand based on the Final Cut stuff, but you've also suggested that the pricing that you've been giving to gain market share during this time hasn't necessarily allowed that to translate into higher revenue. Is that still the case -- that even though there may be an opportunity to gain share in that you're gaining maybe share from a unit perspective, that the pricing that they're offering right now is attractive enough that it's not translating into potential for revenue upside?

I really think there's a couple of things to the point that you're raising. One is that we clearly did offer some attractive pricing, and I will say we sold a record number of units. For MC soft, we did have -- for Media Composer software, we did have very strong revenue for the quarter. What Ken indicated is that we didn't -- we're not getting as [much in] system sales.

I would say that is really a reflection of a couple of things. One is that, one of the things that we have done, and that, as you know, you all have asked us about on many occasions is we have opened up Media Composer to work with other I/O. No surprise that people using Final Cut Pro already had existing I/O, aka video monitoring when we say I/O. One of the things that encouraged them wasn't just attractive pricing of the software, it was that they could reuse their specialized video -- specialized I/O experience that they had. So, there's not system sales. We knew that would be the case. This is about making a long-term investment in terms of creating a very strong ecosystem of Media Composer users.

We have -- that price, by the way, did end on September 30. So, we have extended a permanent cross-grade price of $1,499 beginning -- I said October 1 -- September 30 that price ended. Starting October 1, we have a permanent cross-grade price of $1,499, and we actually are continuing to see some sales there. The 2 big potentials for Final Cut 10, or for people moving to Final Cut 7 over to Media Composer will be -- or 3, one will be units; 2 will be that those units will translate into long-term, more from Avid.

But the third thing, which will take longer to get, is when we actually will get post houses to make that transition to Media Composer, and we're having several very active conversations. The reason for that is that they do care more about the integrated work flow that Avid will offer them. Doubtlessly, some of them will reuse their I/O, but they will want Avid storage. Some of them will want Avid I/O.

I know that a lot of folks were looking, and have asked us -- gee, expecting us to suddenly, because of this change. Well, a post house that is posting a film or posting a fall TV series isn't going to switch in the middle of the TV series. They have something that is working. It's not like the new model of the car came out, and last year's model suddenly stopped working. So, this is about a longer term, and I will say we are engaged in many very positive conversations regarding post houses that are going to make that switch.

I will tell you some schools did make that switch already. Some major universities that had been training in Final Cut 7 did make the switch. It did line up nicely with their ability to make that switch with their fall semester. And so, we are seeing some momentum for the high-end professional workflows to move towards Media Composer.

Thanks a lot.

Thanks, Mike.

And we'll take our next question from Steven Frankel with Dougherty & Company.

Good afternoon. Last quarter, you talked about efforts that were underway to try to get more share in some MI categories like keyboards. And wanted to know if you felt like you were successful? And if so, why aren't inventories coming down more rapidly?

Well, let me, first of all, say, yes, I think we are maintaining a very strong presence in the controller category. The [Mini] has been very successful for us, as an example, but that was released later in the quarter. I think, in general, we have seen some weakness, but the instruments and controller category for us was up about 30%. So, certain categories are up, certain categories were down, without going through the details, but it was introduced later in the quarter. The inventories haven't -- that Creative Enthusiast category as a whole [consumer] has been tough around the world. Inventories did come down, but we had a lot of new products introduced during the quarter, and those new products were brought into the inventory towards the end of the quarter.

This is Ken. I would say that a lot of the inventory didn't necessarily relate to keyboards, in particular. I would say some of our hardware and I/O devices that we rolled out were where some of the -- primarily in the audio business is where we had a little bit of higher inventory levels than we like. Actually, we were quite pleased with the decrease we achieved in this quarter, and expect to make a lot -- further progress in the fourth quarter.

Yes, and controllers themselves were up sequentially, which is the category -- which is what you asked about.

Okay. On the consumer video business -- it's been a perennial thorn in Avid's side for years. And Apple -- and at the same time, Apple's gone from a niche market product to the dominant product in the consumer category. Do you feel like the investment you've been putting in that business still has a worthwhile ROI?

Well, Steve, it continues to be an important part of our business. It does have a very positive contribution to the Company, but I think you're comparing apples and oranges. Apple is on a Mac; we only offer products on Windows.

Right, but consumer has switched from being a Windows-centric consumer --.

They have not -- that's not the case, Steve. There are clearly a lot of Macs out there, but there's also one hell of a lot of Windows that is out there as well. A Mac is an expensive computer; I don't care whether you're buying a Notebook or not buying a Notebook. And there's a lot of price-conscious consumers that are out there. We are sensitive to that investment that is there, and we have -- I mean, we've not invested in -- we continue to market our hardware, but we, as an example, one shouldn't be surprised, because we have said for some time that our hardware sales -- our consumer hardware sales would be coming down. We actually expected them to come down much more rapidly than they have, and they continue to be an important part of our business. So, to be clear, we need to separate out -- it's falling -- and where we're making our investment. We've cut our investment back a long time ago in that category.

Okay, great. Thank you.

So, we are watching it carefully.

We'll take our next question from Andrew Abrams with Avian Securities.

Hello, guys, I wonder if you could talk a little bit about Europe, what the progress is there? I wasn't quite sure what you said. First, I thought you said that Europe was weak -- or initially, that Europe was weak? And then, perhaps I read it wrong, and you said it was strong. Maybe you could just bring us up to date on that?

The answer is what we said on -- I think what we said on both of those is an accurate statement. It was up sequentially. We did find the -- we did see it growing sequentially for us as we went through it. But it continues to be macroeconomic -- there continues to be a macroeconomic effect over there that's tough.

Now, what we did see that was very positive is that bookings were up in the rough range of 20%-plus. And remember that one of the things that, as we take a look at our transactions, bookings frequently lead the revenue -- that's by the way year on year -- bookings lead revenue. So, that is a -- what we were saying is that is a very positive sign that our return to regional-based organizations seems to be working in terms of translating into bookings with our customers. But the macroeconomic situation, as you guys know, remains very fragile. Now, maybe the market responded very well today to the deal that's been reached for the Euro banks. But I can tell you that I have spent about -- I have been over there about 4 times in the last couple of months, and it remains a market that is clearly wanting to make changes where we've actually had quite a bit of success, but afraid to sign on the dotted line.

In fact, at IBC, attendance was up at IBC, which is a reflection of the macroenvironment in our particular industry. For our standpoint, we were booked solid in terms of customer meetings. So, it feels bullish, but we need less volatility in the economy, and Europe in particularly. But we did feel like we made very, very strong forward progress on a sequential basis in that quarter, albeit Europe was down year on year, it was up sequentially. And, in fact, an important area for us, which we are tracking, which is Media Enterprise, we were up sequentially -- excuse me, we were up year on year in that category, even in revenue.

Okay. Maybe we could talk a little more about the retail side. From your perspective, is this totally macro-based -- the slowness in retail? Or is it a conceptual change among the retail client base? And how do you approach this going forward? If it's macro, that's one thing. If it's a structural change, how do you focus the product line against that change?

Yes, so, I think there's a few things to that -- a few items to that question. One is, I do think there's some macro, but I don't want to say everything is macro. As we know, at least in the States, the American consumer has been saving at a much higher rate than they had been saving before, in terms of what they have been spending. But I don't want to say everything about is the macro ever. We had built into some of our plans downward -- while we're not doing as well as we thought we would do in consumer video, we had planned, on example, for consumer hardware, video hardware to be coming down.

In addition to that, I think that our -- the unbundling -- when we speak to retail as opposed to strictly Creative Enthusiasts, which is where we do sell a lot of Pro Tools along with Pro Tools hardware, the unbundling has increased, and we have commented on this in prior quarters -- increased the amount of Pro Tools software we have been selling. But the unbundling has had -- I'm not sure, you know, either I can use my built-in audio hardware, or I can -- in some cases, I'm sure some people choose competitive hardware that's out there. So, I think we've seen a few trends in that regard. So, I think it's a combination of macro, combination of some expectation for some product categories, and some unbundling we have done. And I will say, I think there's some execution issues that we have that we certainly need to do a better job on. I will tell you, if you take a look at where we began our expectation for the quarter on retail, we continue to see softness appearing over the course of the quarter in Europe that we did not see appear in Americas.

Got it. That's at the retail level you're talking about?

At the retail level.

Right. Great.

Yes. We actually --. Correct.

Thanks.

(Operator Instructions) Our next question is from Barbara Coffey with Brigantine.

Hi, good afternoon. I have a couple of quick questions. When you take a look at the macro issues that are causing you to slightly reduce your guidance, can you go bucket by bucket of saying -- this is what the broadcasters [bring in], this is what the post market is seeing? We just hit retail, so I don't necessarily need a re-flyby on that.

It's really very simple, Barbara. First of all, it's in Europe, and sometimes people talk about cautious optimism. It's simple -- there's caution in Europe when you talk to anyone, and I've spoken to peer companies; I've spoken to many others. We'll see how they actually report. There is cautious pessimism right now in Europe. There's been an absolute fear that there would be contagion. It wasn't about, someone said -- Gary, you talked about Greece; how much business do you do in Greece? Well, not much. But the concern wasn't about Greece. The concern was about the banks that held the debt and about the possible contagion. It's as simple as that in the communities in EMEA.

I actually -- again, we had, as Tom pointed out, we felt very good about our growth. And we felt very good about our growth in the Americas this past quarter, and you all saw the numbers there, that were there in the Americas. I was out in LA last week, and I will tell you that the folks are saying -- hey, it's not back to where we were in 2008, but we're feeling much better. We feel like we have business. In fact, last year, which is where the most recent information is available, there was 169 pilots shot in LA, which is more pilots -- it's a record number of pilots, and that's because there's more distribution channels that are out there.

So, if you take the translation of all that, what was up, what was down, in the Americas we grew 11%. The problems, as Ken highlighted, were in EMEA where we did grow sequentially. Bookings up substantially, even on a year-on-year basis, but we continue to have the revenue challenges over there. And I will say, Professional Post in Europe did grow for us year on year. It did grow for us year on year. And the Creative Enthusiasts, which is what a lot of the retail is, was down for us. And Media Enterprise, is the ones that are just (inaudible) -- some of them were -- because we didn't have the bookings in the prior quarter, we weren't able to translate into revenue in that quarter. But we had strong bookings year on year.

Okay, thank you.

And APAC, small numbers. APAC is -- it is what it is, but it is small numbers. One deal moves APAC around considerably.

Okay, thank you.

That concludes the question-and-answer session. I will turn it back over to Mr. Fitzsimmons for any closing remarks.

Thank you, all. This is actually Gary. Thank you all for joining us today. Should you have any further questions, all of us are available for follow-up after today's call. We look forward to speaking with you next quarter. Thank you, all.

That concludes today's conference call. We thank you for your participation.