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Avid Reports Third Quarter 2007 Results
GAAP net loss in the third quarter of 2007 includes $21.0 million of amortization, stock-based compensation, restructuring costs, other costs and related tax adjustments. Excluding these items, non-GAAP earnings per diluted share were $.37. For the third quarter of 2006, there was $14.3 million of amortization, stock-based compensation, restructuring recoveries, in-process research and development, and related tax adjustments included in GAAP net income. Excluding these items, non-GAAP earnings per diluted share were $.42 in the third quarter of 2006.
The company's cash balance increased to $197.2 million at September 30, 2007 primarily due to operating cash flow.
"Given the initiatives we have undertaken, we are pleased with this quarter's results," said Nancy Hawthorne, Avid's interim chief executive officer. "We remain focused on enhancing Avid's profitability by improving all aspects of the company's operations.
"Our professional video business had a solid quarter with stable revenue and improved profitability sequentially as we recognized some large deals from our backlog and had a modest increase in our run rate business," continued Hawthorne. "Audio performed well as strength in studio and live mixing consoles and products serving the home/hobbyist studio market offset weakness in core Pro Tools|HD upgrades and M-Audio. Finally, in consumer the PC-based TV viewing products were strong and the launch of the Studio 11 consumer video editor continued to go well."
Revenue for the nine-month period ended September 30, 2007 was $671.1 million, compared to revenue of $671.5 million for the same period in 2006. GAAP net loss for the first nine months of 2007 was $11.8 million, or $.29 per share, compared to GAAP net income of $9.6 million, or $.22 per diluted share, for the same period in 2006. GAAP net loss for the nine-month period ended September 30, 2007 includes $45.8 million of amortization, stock-based compensation, restructuring costs, other costs and related tax adjustments. Excluding these items, non-GAAP earnings per share were $.82 per diluted share for the first nine months of 2007. GAAP net income for the nine-month period ended September 30, 2006 includes $38.9 million of amortization, stock-based compensation, restructuring costs, in-process research and development, and related tax adjustments. Excluding these items, non-GAAP earnings per diluted share were $1.13 for the first nine months of 2006.
Use of Non-GAAP Financial Measures
This press release contains "non-GAAP financial measures" under the rules of the U.S. Securities and Exchange Commission. This non-GAAP information supplements, and is not intended to represent a measure of performance in accordance with, disclosures required by generally accepted accounting principles, or GAAP. The reconciliation for net income and diluted earnings per share for the three- and nine-month periods ended September 30, 2007 and 2006 are in the tables attached to this press release.
We use non-GAAP financial measures internally to manage our business, for example, in establishing our annual operating budget, in assessing segment operating performance and for measuring performance under our employee incentive compensation plans. Non-GAAP financial measures are used by our management in its operating and financial decision-making because management believes these measures reflect our ongoing business in a manner that allows meaningful period-to-period comparisons. Accordingly, we believe it is useful for our investors and others to review both GAAP and non-GAAP measures in order to (a) understand and evaluate our current operating performance and future prospects in the same manner as management does and (b) compare in a consistent manner the company's current financial results with our past financial results. The primary limitations associated with our use of non-GAAP financial measures are that these measures may not be directly comparable to the amounts reported by other companies and they do not include all items of income and expense that affect our operations. Our management compensates for these limitations by considering the company's financial results as determined in accordance with GAAP and by providing a detailed reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures in this press release.
Conference Call
A conference call to discuss Avid's third quarter 2007 financial results will be held today, October 25, 2007, at 5:00 p.m. EDT. The call will be open to the public and can be accessed by dialing (719) 457-2617 and referencing confirmation code 8148060. The call and subsequent replay will also be available on Avid's website. To listen via this alternative, go to the Investor Relations page under the About Us menu at www.avid.com for complete details prior to the start of the conference call.
Use of Forward-Looking Statements
The above release is subject to the completion and filing of our Quarterly Report on Form 10-Q. This release includes forward-looking statements, as defined by the Private Securities Litigation Reform Act of 1995, about Avid's performance. There are a number of factors that could cause actual events or results to differ materially from those indicated by such forward-looking statements, such as Avid's ability to meet customer needs, market acceptance of Avid's existing and new products, Avid's ability to recognize revenue in a timely manner, competitive factors, pricing pressures, delays in product shipments and other important events and factors disclosed previously and from time to time in Avid's filings with the U.S. Securities and Exchange Commission. In addition, the forward-looking statements contained herein represent Avid's estimate only as of today and should not be relied upon as representing the company's estimate as of any subsequent date. While Avid may elect to update these forward-looking statements at some point in the future, Avid specifically disclaims any obligation to do so, even if the estimates change.
About Avid Technology, Inc.
Avid Technology, Inc. is the world leader in digital nonlinear media creation, management and distribution solutions, enabling film, video, audio, animation, games and broadcast professionals to work more efficiently, productively and creatively. For more information about the company's Oscar®, Grammy® and Emmy® award-winning products and services, please visit: www.avid.com.
© 2007 Avid Technology, Inc. All rights reserved. Avid, Digidesign, Film Composer and Pro Tools are either registered trademarks or trademarks of Avid Technology, Inc. or its subsidiaries in the United States and/or other countries. Avid received an Oscar statuette representing the 1998 Scientific and Technical Award for the concept, design and engineering of the Avid® Film Composer® system for motion picture editing. Digidesign, Avid's audio division, received an Oscar statuette representing the 2003 Scientific and Technical Award for the design, development and implementation of its Pro Tools® digital audio workstation. Oscar is a trademark and service mark of the Academy of Motion Picture Arts and Sciences. Emmy is a registered trademark of ATAS/NATAS. Grammy is a trademark of the National Academy of Recording Arts and Sciences, Inc. All other trademarks contained herein are the property of their respective owners.
AVID TECHNOLOGY, INC
Condensed Consolidated Statements of Operations
(unaudited - in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Net revenues:
Products $198,817 $203,274 $583,630 $595,597
Services 28,009 27,959 87,420 75,932
--------- --------- --------- ---------
Total net revenues 226,826 231,233 671,050 671,529
Cost of revenues:
Products 93,397 99,202 279,100 284,382
Services 16,054 13,968 49,487 41,095
Amortization of intangible
assets 4,096 6,208 13,329 16,304
Restructuring costs 2,797 - 2,797 -
--------- --------- --------- ---------
Total cost of revenues 116,344 119,378 344,713 341,781
--------- --------- --------- ---------
Gross profit 110,482 111,855 326,337 329,748
--------- --------- --------- ---------
Operating expenses:
Research and development 36,471 35,250 112,657 106,363
Marketing and selling 48,832 50,641 157,031 153,136
General and administrative 20,514 16,021 56,064 47,011
Amortization of intangible
assets 3,432 3,298 10,295 10,940
Restructuring costs
(recoveries), net 6,297 (1,620) 8,072 (554)
In-process research and
development - 569 - 879
--------- --------- --------- ---------
Total operating expenses 115,546 104,159 344,119 317,775
Operating income (loss) (5,064) 7,696 (17,782) 11,973
Interest and other income
(expense), net 1,980 1,832 5,898 5,683
--------- --------- --------- ---------
Income (loss) before income
taxes (3,084) 9,528 (11,884) 17,656
Provision for (benefit from)
income taxes, net 2,769 5,935 (52) 8,018
--------- --------- --------- ---------
Net income (loss) $ (5,853) $ 3,593 $(11,832) $ 9,638
========= ========= ========= =========
Net income (loss) per common
share - basic $ (0.14) $ 0.09 $ (0.29) $ 0.23
Net income (loss) per common
share - diluted $ (0.14) $ 0.08 $ (0.29) $ 0.22
Weighted-average common shares
outstanding - basic 40,798 41,531 40,963 41,978
Weighted-average common shares
outstanding - diluted 40,798 42,281 40,963 42,845
AVID TECHNOLOGY, INC
(unaudited - in thousands, except per share data)
Segment revenue and operating
income (loss):
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Professional Video:
Revenues $118,855 $126,579 $351,844 $361,642
Operating income 9,976 14,711 13,892 33,111
Audio:
Revenues $ 77,320 $ 74,189 $233,006 $221,199
Operating income 7,797 8,391 21,495 26,481
Consumer Video:
Revenues $ 30,651 $ 30,465 $ 86,200 $ 88,688
Operating loss (1,877) (2,625) (5,210) (7,006)
Total:
Total segment revenues $226,826 $231,233 $671,050 $671,529
Total segment operating
income 15,896 20,477 30,177 52,586
Reconciliation of GAAP
operating income (loss) to
Non-GAAP operating income:
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Consolidated GAAP operating
income (loss) $ (5,064) $ 7,696 $(17,782) $ 11,973
Adjustments to reconcile to
Non-GAAP operating income:
Amortization of intangible
assets 7,528 9,506 23,624 27,244
Stock-based compensation 3,988 4,326 12,091 13,044
Restructuring costs
(recoveries), net 9,094 (1,620) 10,869 (554)
Other costs 350 - 1,375 -
In-process research and
development - 569 - 879
--------- --------- --------- ---------
Total operating income for
reportable segments $ 15,896 $ 20,477 $ 30,177 $ 52,586
========= ========= ========= =========
Reconciliation of GAAP net
income (loss) to Non-GAAP net
income:
GAAP net income (loss) $ (5,853) $ 3,593 $(11,832) $ 9,638
Adjustments to reconcile to
Non-GAAP net income:
Amortization of intangible
assets 7,528 9,506 23,624 27,244
Stock-based compensation 3,988 4,326 12,091 13,044
Restructuring costs
(recoveries), net 9,094 (1,620) 10,869 (554)
Other costs 350 - 1,375 -
In-process research and
development - 569 - 879
Related tax adjustments 74 1,494 (2,140) (1,757)
--------- --------- --------- ---------
Non-GAAP net income $ 15,181 $ 17,868 $ 33,987 $ 48,494
========= ========= ========= =========
Weighted-average common
shares outstanding - diluted 41,234 42,281 41,521 42,845
Non-GAAP net income per
common share - diluted $ 0.37 $ 0.42 $ 0.82 $ 1.13
Stock-based compensation,
which relates to the adoption
of SFAS 123R, the acquisition
of M-Audio, and the issuance
of restricted stock and
restricted stock units in
2006 and 2007, is comprised
of the following:
Three Months Ended Nine Months Ended
Stock-based compensation September 30, September 30,
included in:
---------------------------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Cost of products revenues $ 182 $ 128 $ 505 $ 398
Cost of services revenues 248 196 696 623
Research and development
expense 1,018 1,252 3,415 3,802
Marketing and selling expense 1,092 1,190 3,228 3,638
General and administrative
expense 1,448 1,560 4,247 4,583
--------- --------- --------- ---------
$ 3,988 $ 4,326 $ 12,091 $ 13,044
========= ========= ========= =========
AVID TECHNOLOGY, INC
Condensed Consolidated Balance Sheets
(unaudited - in thousands)
September 30, December 31,
2007 2006
------------- ------------
ASSETS:
Current assets:
Cash, cash equivalents and marketable
securities $ 197,239 $ 172,107
Accounts receivable, net of allowances
of $19,164 and $23,087 at September 30,
2007 and December 31, 2006,
respectively 140,363 138,578
Inventories 133,732 144,238
Prepaid and other current assets 33,336 29,016
------------- ------------
Total current assets 504,670 483,939
Property and equipment, net 45,780 40,483
Intangible assets, net 78,425 102,048
Goodwill 360,550 360,143
Other assets 11,983 10,421
------------- ------------
Total assets $ 1,001,408 $ 997,034
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 35,442 $ 34,108
Accrued expenses and other current
liabilities 91,262 88,331
Deferred revenues 82,159 73,743
------------- ------------
Total current liabilities 208,863 196,182
Long-term liabilities 19,029 20,471
------------- ------------
Total liabilities 227,892 216,653
------------- ------------
Stockholders' equity:
Common stock 423 423
Additional paid-in capital 964,330 952,763
Accumulated deficit (158,799) (134,708)
Treasury stock at cost, net of
reissuances (44,536) (43,768)
Accumulated other comprehensive income 12,098 5,671
------------- ------------
Total stockholders' equity 773,516 780,381
------------- ------------
Total liabilities and stockholders'
equity $ 1,001,408 $ 997,034
============= ============
CONTACT: Avid Technology, Inc.
Dean Ridlon, 978-640-5309
Investor Relations Director
Investor_Relations@avid.com
SOURCE: Avid Technology, Inc.