Ross Video plans to go ahead with an initial public offering within the next two years despite failing to hit its fiscal 2023 sales targets, the company says.
The Ottawa-based manufacturer of broadcasting and live-event production equipment laid off nine per cent of its workforce, or about 140 employees, on Tuesday after sales fell short of expectations this year amid a widespread economic slowdown.
“I think doing a layoff, especially of people you know, is one of the most difficult things, other than shutting down a business, for a business owner or a manager to ever have to do,” chief executive David Ross told OBJ this week.
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Ross, who is also the family- and employee-owned firm’s majority shareholder, said the company is continuing to lay the groundwork for an IPO in the near future.
Ross Video could have potentially entered the public markets in 2024, he said, but costs associated with the job cuts will likely delay those plans until the following year.
“That doesn’t make a lot of sense for going into an IPO in 2024, but because we’ve taken action and rightsized the company for 2024, I think our books in 2024 should look good enough,” Ross explained. “I think that still leaves us right on track for 2025.”
Ross Video now employs about 1,400 people at 20 global offices, including its Ottawa headquarters and its main production facility in Iroquois, south of the capital.
Ross said initial calculations based on Ross Video’s sales pipeline heading into 2023 and its typical contract win rate suggested sales would grow by more than 40 per cent this year, an unusually high figure.
“When we looked at the numbers for this year, it was startling,” he said.
Ross said he personally “culled” the projected growth figure down to 30 per cent out of an abundance of caution, and Ross Video hired hundreds of workers based on that projection.
But Ross said it soon became apparent that some customers were delaying planned expenditures as inflation remained stubbornly high and interest rates continued to rise. That forced the company to dramatically scale back its original forecast as the fiscal year, which ends Oct. 31, went on.
“By the end of the third quarter, we realized the growth (rate) was going to be 15 per cent and not 30,” he said.
Ross said sales projections are educated guesses, and knowing how much to expand a company’s workforce is never an exact science.
If all the contracts had come through and Ross Video didn’t have enough staff to fulfil them on time, “customers might not get their projects done or they have to go elsewhere or a stadium could get delayed or a newsroom might not go on the air when it needs to,” he explained.
“We would end up with employees that are working ridiculous hours trying to keep up with demands when all the signs were that we were supposed to hire and we didn’t. It’s a no-win situation when the math and the forecasts are saying one thing and your gut is saying another.”
Meanwhile, Ross Video is in the midst of a $236-million, multi-year project to develop a full suite of cloud-based event production software platforms.
The federal government has invested $49 million in the project through Innovation, Science and Economic Development Canada’s Strategic Innovation Fund.
Ross said the company’s hiring and revenue growth commitments under the agreement were “well under 15 per cent” for the next several years. The company expects to meet or exceed all those targets, and research and development of the hybrid cloud products will continue as planned, he added.
“From the point of view of what we promised for (the Strategic Innovation Fund), we’re actually right on track,” Ross said.