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Avid Technology Announces Q3 2019 Results
Third Quarter 2019 Financial and Business Highlights
- Results were in line with preliminary results provided on
October 31, 2019 . - Revenue was
$93.5 million , down (10.2%) year-over-year from$104.0 million in Q3 2018. - Gross margin was 61.9%, up 360 basis points year-over-year. Non-GAAP Gross Margin was 62.1%, up 190 basis points year-over-year.
- Operating expenses were
$49.5 million , a decrease of (7.7%) year-over-year. Non-GAAP Operating Expenses were$47.3 million , a decrease of (6.8%) year over year. - Operating income was
$8.4 million , up 19.5% year-over-year. Non-GAAP Operating Income was$10.7 million , a decrease of (9.6%) year-over-year. - Adjusted EBITDA was
$12.8 million , a decrease of (12.3%) year-over-year. Adjusted EBITDA Margin was 13.7%, down (30) basis points year-over-year. - Net income per common share was
$0.07 , up from net income per common share of$0.02 in Q3 2018. Non-GAAP Net Income per Share was$0.10 , down from Non-GAAP Net Income per Share of$0.13 in Q3 2018. - Net cash (used in) operating activities was
($2.6) million in Q3 2019, an improvement of$1.1 million compared to Net cash (used in) operating activities of($3.7) million in Q3 2018. - Free Cash Flow was
($4.6) million , an improvement of$1.8 million compared to Free Cash Flow of($6.4) million in Q3 2018. - Software revenue from subscriptions was
$10.3 million , an increase of 17% year-over-year, with approximately 170,000 cloud-enabled software subscriptions as ofSeptember 30, 2019 , up 46% year-over-year. - Software subscriptions billings were up 49% year-over-year.
- Maintenance revenue was
$33.4 million , a decrease of($1.7) million year-over-year, but up$1.7 million sequentially from Q2 2019. - Recurring Revenue was 59.4% of the Company’s revenue in the twelve months ended
September 30, 2019 , up 560 basis points from 53.8% in the twelve months endedSeptember 30, 2018 . - Annual Contract Value was
$258 million at the end of Q3 2019, up 3.7% from$249 million at the end of Q3 2018.
“As we indicated in our preliminary earnings release last week, while we are disappointed with our performance during the third quarter, we remain enthusiastic about the long-term trajectory of the Company and the opportunity for improving growth and profitability,” said
Explanations regarding our use of non-GAAP financial measures and operational metrics and related definitions, and reconciliations of our GAAP and non-GAAP measures, are provided in the sections below entitled "Non-GAAP Financial Measures and Operational Metrics" and "Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures".
Full Year 2019 Guidance
Avid is also reaffirming its guidance for Revenue, Adjusted EBITDA, Free Cash Flow and Non-GAAP Net Income Per Share for full-year 2019 that was issued on
($ millions, except per share amounts) | Full-Year 2019 |
Revenue | $405 - $415 |
Adjusted EBITDA | $55 - $60 |
Free Cash Flow | $12 - $17 |
Non-GAAP Net Income Per Share | $0.50 - $0.60 |
All guidance presented by the Company is inherently uncertain and subject to numerous risks and uncertainties. Avid’s actual future results of operations could differ materially from those shown in the table above. For a discussion of some of the key assumptions underlying the guidance, as well as the key risks and uncertainties associated with these forward-looking statements, please see “Forward-Looking Statements” below as well as the
Conference Call
Avid will host a conference call to discuss its financial results for the third quarter on
2019 Investor Day
Avid will host an Investor Day on
Non-GAAP Financial Measures and Operational Metrics
Avid includes non-GAAP financial measures in this press release, including Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Non-GAAP Gross Profit, Non-GAAP Gross Margin, Non-GAAP Operating Expenses, Non-GAAP Operating Income, Non-GAAP Net Income (Loss) and Non-GAAP Net Income (Loss) per Share. The Company also includes the operational metrics of Billings, Cloud-enabled software subscriptions, Recurring Revenue and Annual Contract Value in this release. Avid believes the non-GAAP financial measures and operational metrics provided in this release provide helpful information to investors with respect to evaluating the Company’s performance. Unless noted, all financial and operating information is reported based on actual exchange rates. Definitions of the non-GAAP financial measures and operational metrics are included in our Form 8-K filed today. Reconciliations of the non-GAAP financial measures presented in this press release to the Company's comparable GAAP financial measures for the periods presented are set forth below and are also included in the supplemental financial and operational data sheet available on our investor relations webpage at ir.avid.com, which also includes definitions of all operational metrics.
This earnings press release also includes forward-looking non-GAAP financial measures, including Adjusted EBITDA, Free Cash Flow, and Non-GAAP Net Income Per Share. Reconciliations of these forward-looking non-GAAP financial measures are not included in the earnings release due to the high variability and difficulty in making accurate forecasts and projections of some of the excluded information, together with some of the excluded information not being ascertainable or accessible at this time. As a result, the Company is unable to quantify certain amounts that would be required to be included in the most directly comparable GAAP financial measure without unreasonable efforts.
Forward-Looking Statements
Certain information provided in this press release, including the tables attached hereto, include forward-looking statements that involve risks and uncertainties, including projections and statements about our anticipated plans, objectives, expectations and intentions. Among other things, this press release includes estimated results of operations for the year ending
About Avid
Avid delivers the most open and efficient media platform, connecting content creation with collaboration, asset protection, distribution, and consumption. Avid’s preeminent customer community uses Avid’s comprehensive tools and workflow solutions to create, distribute and monetize the most watched, loved and listened to media in the world—from prestigious and award-winning feature films to popular television shows, news programs and televised sporting events, and celebrated music recordings and live concerts. With the most flexible deployment and pricing options, Avid’s industry-leading solutions include Media Composer®, Pro Tools®, Avid NEXIS®, MediaCentral®, iNEWS®, AirSpeed®, Sibelius®, Avid VENUE™, Avid FastServe®™, Maestro™, and PlayMaker™. For more information about Avid solutions and services, visit www.avid.com, connect with Avid on
© 2019
Contacts | ||
Investor contact: Whit Rappole Avid ir@avid.com (978) 275-2032 |
PR contact: Jim Sheehan Avid jim.sheehan@avid.com (978) 640-3152 |
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, | ||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||
Net revenues: | |||||||||||||||||
Products | $ | 42,911 | $ | 52,133 | $ | 147,633 | $ | 144,922 | |||||||||
Services | 50,550 | 51,913 | 147,848 | 155,676 | |||||||||||||
Total net revenues | 93,461 | 104,046 | 295,481 | 300,598 | |||||||||||||
Cost of revenues: | |||||||||||||||||
Products | 23,877 | 27,042 | 79,535 | 79,684 | |||||||||||||
Services | 11,726 | 14,443 | 36,408 | 42,414 | |||||||||||||
Amortization of intangible assets | - | 1,950 | 3,738 | 5,850 | |||||||||||||
Total cost of revenues | 35,603 | 43,435 | 119,681 | 127,948 | |||||||||||||
Gross profit | 57,858 | 60,611 | 175,800 | 172,650 | |||||||||||||
Operating expenses: | |||||||||||||||||
Research and development | 14,860 | 15,873 | 46,325 | 47,543 | |||||||||||||
Marketing and selling | 22,334 | 23,461 | 73,341 | 77,352 | |||||||||||||
General and administrative | 12,034 | 13,660 | 38,543 | 41,656 | |||||||||||||
Amortization of intangible assets | - | 363 | 695 | 1,089 | |||||||||||||
Restructuring costs, net | 229 | 226 | 518 | 3,401 | |||||||||||||
Total operating expenses | 49,457 | 53,583 | 159,422 | 171,041 | |||||||||||||
Operating income (loss) | 8,401 | 7,028 | 16,378 | 1,609 | |||||||||||||
Interest and other expense, net | (5,519 | ) | (5,725 | ) | (23,994 | ) | (17,362 | ) | |||||||||
Income (loss) before income taxes | 2,882 | 1,303 | (7,616 | ) | (15,753 | ) | |||||||||||
Provision for income taxes | (283 | ) | 425 | 155 | 824 | ||||||||||||
Net income (loss) | $ | 3,165 | $ | 878 | $ | (7,771 | ) | $ | (16,577 | ) | |||||||
Net income (loss) per common share - basic and diluted | $ | 0.07 | $ | 0.02 | $ | (0.18 | ) | $ | (0.40 | ) | |||||||
Weighted-average common shares outstanding - basic | 42,913 | 41,792 | 42,510 | 41,596 | |||||||||||||
Weighted-average common shares outstanding - diluted | 43,674 | 42,226 | 42,510 | 41,596 | |||||||||||||
AVID TECHNOLOGY, INC. | |||||||||||||||||
Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures | |||||||||||||||||
(unaudited - in thousands) | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
GAAP revenue | 2019 | 2018 | 2019 | 2018 | |||||||||||||
GAAP revenue | $ | 93,461 | $ | 104,046 | $ | 295,481 | $ | 300,598 | |||||||||
Amortization of acquired deferred revenue | - | - | - | - | |||||||||||||
Total net revenues | $ | 93,461 | $ | 104,046 | 295,481 | 300,598 | |||||||||||
Non-GAAP Gross Profit | |||||||||||||||||
GAAP gross profit | 57,858 | 60,611 | 175,800 | 172,650 | |||||||||||||
Amortization of acquired deferred revenue | - | - | - | - | |||||||||||||
Amortization of intangible assets | - | 1,950 | 3,738 | 5,850 | |||||||||||||
Stock-based compensation | 185 | 95 | 420 | 222 | |||||||||||||
Non-GAAP Gross Profit | $ | 58,043 | $ | 62,656 | 179,958 | 178,722 | |||||||||||
Non-GAAP Gross Margin | 62.1 | % | 60.2 | % | 60.9 | % | 59.5 | % | |||||||||
Non-GAAP Operating Expenses | |||||||||||||||||
GAAP operating expenses | 49,457 | 53,583 | 159,422 | 171,041 | |||||||||||||
Less Amortization of intangible assets | - | (363 | ) | (695 | ) | (1,089 | ) | ||||||||||
Less Stock-based compensation | (1,860 | ) | (1,981 | ) | (5,368 | ) | (4,109 | ) | |||||||||
Less Restructuring costs, net | (229 | ) | (226 | ) | (518 | ) | (3,401 | ) | |||||||||
Less Restatement costs | - | (223 | ) | 2 | (815 | ) | |||||||||||
Less Acquisition, integration and other costs | (32 | ) | (17 | ) | (458 | ) | (61 | ) | |||||||||
Less Efficiency program costs | (33 | ) | (2 | ) | (191 | ) | (80 | ) | |||||||||
Non-GAAP Operating Expenses | $ | 47,303 | $ | 50,771 | 152,194 | 161,486 | |||||||||||
Non-GAAP Operating Income | |||||||||||||||||
GAAP operating income (loss) | 8,401 | 7,028 | 16,378 | 1,609 | |||||||||||||
Amortization of acquired deferred revenue | - | - | - | - | |||||||||||||
Amortization of intangible assets | - | 2,313 | 4,433 | 6,939 | |||||||||||||
Stock-based compensation | 2,045 | 2,076 | 5,788 | 4,331 | |||||||||||||
Restructuring costs, net | 229 | 226 | 518 | 3,401 | |||||||||||||
Restatement costs | - | 223 | (2 | ) | 815 | ||||||||||||
Acquisition, integration and other costs | 32 | 17 | 458 | 61 | |||||||||||||
Efficiency program costs | 33 | 2 | 191 | 80 | |||||||||||||
Non-GAAP Operating Income | $ | 10,740 | $ | 11,885 | 27,764 | 17,236 | |||||||||||
Adjusted EBITDA | |||||||||||||||||
Non-GAAP Operating Income (from above) | 10,740 | 11,885 | 27,764 | 17,236 | |||||||||||||
Depreciation | 2,045 | 2,693 | 7,037 | 8,967 | |||||||||||||
Adjusted EBITDA | $ | 12,785 | $ | 14,578 | 34,801 | 26,203 | |||||||||||
Adjusted EBITDA Margin | 13.7 | % | 14.0 | % | 11.8 | % | 8.7 | % | |||||||||
Non-GAAP Net Income (Loss) | |||||||||||||||||
Non-GAAP Operating Income (from above) | 10,740 | 11,885 | 27,764 | 17,236 | |||||||||||||
Less: Non-GAAP Interest and other expense | (5,519 | ) | (5,725 | ) | (16,623 | ) | (17,362 | ) | |||||||||
Less: Income tax impact of Non-GAAP adjustments | (663 | ) | (597 | ) | (1,119 | ) | (1,076 | ) | |||||||||
Non-GAAP Net Income (Loss) | $ | 4,558 | $ | 5,563 | $ | 10,022 | $ | (1,202 | ) | ||||||||
Weighted-average common shares outstanding - diluted | 43,674 | 42,226 | 42,510 | 41,596 | |||||||||||||
Non-GAAP Earnings (Loss) Per Share | $ | 0.10 | $ | 0.13 | $ | 0.24 | $ | (0.03 | ) | ||||||||
Free Cash Flow | |||||||||||||||||
GAAP net cash (used in) provided by operating activities | (2,551 | ) | (3,747 | ) | 1,112 | (4,248 | ) | ||||||||||
Capital expenditures | (2,052 | ) | (2,652 | ) | (5,629 | ) | (7,540 | ) | |||||||||
Free Cash Flow | $ | (4,603 | ) | $ | (6,399 | ) | (4,517 | ) | (11,788 | ) | |||||||
Free Cash Flow conversion of Adjusted EBITDA | -36.0 | % | -43.9 | % | -13.0 | % | -45.0 | % | |||||||||
These non-GAAP measures reflect how Avid manages its businesses internally. Avid’s non-GAAP measures may vary from how other companies present non-GAAP measures. Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles. 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. Non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP. | |||||||||||||||||
AVID TECHNOLOGY, INC. | |||||||
Condensed Consolidated Balance Sheets | |||||||
(unaudited - in thousands) | |||||||
September 30, | December 31, | ||||||
2019 | 2018 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 52,289 | 56,103 | ||||
Restricted cash | 1,664 | 8,500 | |||||
Accounts receivable, net of allowances of $598 and $1,339 | |||||||
at September 30, 2019 and December 31, 2018, respectively | 53,718 | 67,754 | |||||
Inventories | 32,168 | 32,956 | |||||
Prepaid expenses | 13,140 | 8,853 | |||||
Contract assets | 14,418 | 16,513 | |||||
Other current assets | 6,559 | 5,917 | |||||
Total current assets | 173,956 | 196,596 | |||||
Property and equipment, net | 20,140 | 21,582 | |||||
Intangible assets, net | - | 4,432 | |||||
Goodwill | 32,643 | 32,643 | |||||
Right of use assets | 31,467 | ||||||
Long-term deferred tax assets, net | 2,006 | 1,158 | |||||
Other long-term assets | 6,009 | 9,432 | |||||
Total assets | $ | 266,221 | 265,843 | ||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 35,554 | 39,239 | ||||
Accrued compensation and benefits | 16,601 | 21,967 | |||||
Accrued expenses and other current liabilities | 36,531 | 37,547 | |||||
Income taxes payable | 2,170 | 1,853 | |||||
Short-term debt | 29,705 | 1,405 | |||||
Deferred revenues | 71,224 | 85,662 | |||||
Total current liabilities | 191,785 | 187,673 | |||||
Long-term debt | 199,593 | 220,590 | |||||
Long-term deferred revenues | 13,757 | 13,939 | |||||
Long-term lease liabilities | 28,930 | - | |||||
Other long-term liabilities | 5,081 | 10,302 | |||||
Total liabilities | 439,146 | 432,504 | |||||
Stockholders' deficit: | |||||||
Common stock | 429 | 423 | |||||
Additional paid-in capital | 1,025,796 | 1,028,924 | |||||
Accumulated deficit | (1,194,781 | ) | (1,187,010 | ) | |||
Treasury stock at cost | - | (5,231 | ) | ||||
Accumulated other comprehensive loss | (4,369 | ) | (3,767 | ) | |||
Total stockholders' deficit | (172,925 | ) | (166,661 | ) | |||
Total liabilities and stockholders' deficit | $ | 266,221 | 265,843 | ||||
AVID TECHNOLOGY, INC. | ||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||
(unaudited - in thousands) | ||||||||
Nine Months Ended | ||||||||
September 30, | ||||||||
2019 | 2018 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (7,771 | ) | $ | (16,577 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 11,469 | 15,905 | ||||||
(Recovery from) provision for doubtful accounts | (156 | ) | 61 | |||||
Stock-based compensation expense | 5,788 | 4,331 | ||||||
Non-cash provision for restructuring | - | 1,083 | ||||||
Non-cash interest expense | 7,054 | 8,697 | ||||||
Loss on extinguishment of debt | 2,878 | |||||||
Unrealized foreign currency transaction loss (gain) | 237 | (794 | ) | |||||
Deferred tax provision | (886 | ) | 6 | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 14,192 | 10,129 | ||||||
Inventories | 788 | 294 | ||||||
Prepaid expenses and other assets | (3,526 | ) | 3,724 | |||||
Accounts payable | (3,661 | ) | 3,467 | |||||
Accrued expenses, compensation and benefits and other liabilities | (13,035 | ) | (12,453 | ) | ||||
Income taxes payable | 372 | 423 | ||||||
Deferred revenue and contract assets | (12,631 | ) | (22,544 | ) | ||||
Net cash provided by (used in) operating activities | 1,112 | (4,248 | ) | |||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (5,629 | ) | (7,540 | ) | ||||
Increase in other long-term assets | - | (25 | ) | |||||
Net cash used in investing activities | (5,629 | ) | (7,565 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from long-term debt | 79,286 | 22,688 | ||||||
Repayment of debt | (1,113 | ) | (7,808 | ) | ||||
Payments for repurchase of outstanding Notes | (76,269 | ) | ||||||
Proceeds from the issuance of common stock under employee stock plans | 309 | 266 | ||||||
Common stock repurchases for tax withholdings for net settlement of equity awards | (3,444 | ) | (957 | ) | ||||
Partial unwind capped call cash receipt | 27 | - | ||||||
Payments for credit facility issuance costs | (5,979 | ) | - | |||||
Net cash (used in) provided by financing activities | (7,183 | ) | 14,189 | |||||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (615 | ) | (358 | ) | ||||
Net (decrease) increase in cash, cash equivalents, and restricted cash | (12,315 | ) | 2,018 | |||||
Cash, cash equivalents and restricted cash at beginning of the period | 68,094 | 60,433 | ||||||
Cash, cash equivalents and restricted cash at end of the period | $ | 55,779 | $ | 62,451 | ||||
Supplemental information: | ||||||||
Cash and cash equivalents | $ | 52,289 | $ | 50,460 | ||||
Restricted cash | 1,664 | 8,500 | ||||||
Restricted cash included in other long-term assets | 1,826 | 3,491 | ||||||
Total cash, cash equivalents and restricted cash shown in the statement of cash flows | $ | 55,779 | $ | 62,451 | ||||
AVID TECHNOLOGY, INC. | |||||||||||||||
Supplemental Revenue Information | |||||||||||||||
(unaudited - in millions) | |||||||||||||||
Sept 30, | June 30, | Sept 30, | |||||||||||||
2019 | 2019 | 2018 | |||||||||||||
Revenue Backlog* | |||||||||||||||
Deferred Revenue | $ | 85.0 | $ | 93.5 | $ | 88.2 | |||||||||
Other Backlog | 358.6 | 351.3 | 370.9 | ||||||||||||
Total Revenue Backlog | $ | 443.6 | $ | 444.8 | $ | 459.1 | |||||||||
The expected timing of recognition of revenue backlog as of September 30, 2019 is as follows: | |||||||||||||||
2019 | 2020 | 2021 | Thereafter | Total | |||||||||||
Deferred Revenue | $ | 31.4 | $ | 39.4 | $ | 8.4 | $ | 5.8 | $ | 85.0 | |||||
Other Backlog | 50.4 | 117.2 | 62.2 | 128.8 | $ | 358.6 | |||||||||
Total Revenue Backlog | $ | 81.8 | $ | 156.6 | $ | 70.6 | $ | 134.6 | $ | 443.6 | |||||
*A definition of Revenue Backlog is included in our Form 8-K filed today and the supplemental financial and operational data sheet available on our investor relations webpage at ir.avid.com. | |||||||||||||||
Contacts Investor contact:Whit Rappole Avid ir@avid.com (978) 275-2032 PR contact:Jim Sheehan Avid jim.sheehan@avid.com (978) 640-3152
Source: Avid Technology, Inc.