UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 15, 2018
AVID TECHNOLOGY, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware | 1-36254 | 04-2977748 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||
75 Network Drive, Burlington, Massachusetts 01803
(Address of Principal Executive Offices) (Zip Code)
(978) 640-6789
(Registrant’s Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
⎕ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
⎕ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
⎕ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
⎕ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.
Emerging growth company ⎕
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ⎕
Item 2.02. Results of Operations and Financial Condition.
On March 15, 2018, the Company issued a press release announcing its financial results for the fiscal quarter and full year ended December 31, 2017 (the “Press Release”). The full text of the Press Release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
Item 7.01 Regulation FD Disclosure.
The information contained in Item 2.02 is incorporated by reference herein.
Non-GAAP and Operational Measures. The attached Press Release includes the following non-GAAP financial measures: non-GAAP revenue, non-GAAP operating income (loss), non-GAAP operating expenses, non-GAAP gross margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Free Cash Flow, Free Cash Flow, and Adjusted Free Cash Flow conversion of Adjusted EBITDA. Non-GAAP operating income (loss), non-GAAP operating expenses, Adjusted EBITDA and Adjusted EBITDA margin exclude restructuring costs, stock-based compensation, amortization of intangibles as well as other unusual items such as costs related to the restatement, M&A related activity, efficiency program and impact of significant legal settlements. Avid defines non-GAAP revenue as GAAP revenue plus revenue eliminated through the application of purchase accounting, which requires acquired deferred revenue to be recorded at fair value rather than the amount paid by customers. Avid defines Adjusted EBITDA as non-GAAP operating income (loss) excluding depreciation expense. Avid defines Adjusted EBITDA margin as Adjusted EBITDA divided by non-GAAP revenue. Avid defines Adjusted Free Cash Flow conversion of Adjusted EBITDA as Adjusted Free Cash Flow divided by Adjusted EBITDA. Avid defines Adjusted Free Cash Flow as GAAP operating cash flow less capital expenditures and excludes from free cash flow payments or receipts related to M&A, significant legal settlements, restructuring, restatement or other non-operational or non-recurring events. Reconciliations of these non-GAAP financial measures to their most comparable GAAP measures are contained in the tables accompanying the Press Release. The attached Press Release also includes forward-looking non-GAAP financial measures, including Adjusted EBITDA and Free Cash Flow. Reconciliations of these forward-looking non-GAAP financial measures are not included in the attached Press 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.
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.
The attached Press Release also includes operational measures, such as bookings, recurring revenue bookings and revenue backlog. Definitions of these measures are included in the supplemental financial and operational data sheet available on our investor relations webpage at ir.avid.com.
Limitation on Incorporation by Reference. The information furnished in Items 2.02 and 7.01, including the Press Release attached hereto as Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Cautionary Note Regarding Forward-Looking Statements. This Form 8-K, and the Press Release attached as Exhibit 99.1 contain forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these statements. Please refer to the cautionary notes in the Press Release regarding these forward-looking statements.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit Number | Description |
99.1 | |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
AVID TECHNOLOGY, INC. | |
(Registrant) | |
Date: March 15, 2018 | By: /s/ Brian E. Agle Name: Brian E. Agle Title: Senior Vice President and CFO |
Exhibit 99.1
Avid Technology Announces Q4 and Full Year 2017 Results and
Issues Q1 and Full Year 2018 Guidance
Exceeded guidance for bookings and adjusted free cash flow, met guidance on all other metrics
Second consecutive quarter of sequential revenue and adjusted EBITDA growth
Positive free cash flow in 2017 and expect continued growth of free cash flow in 2018
BURLINGTON, Mass., March 15, 2018 Avid® (NASDAQ:AVID) today announced its fourth quarter and full year 2017 financial results and provided guidance for its first quarter and full year 2018. The company posted its second consecutive quarter of sequential revenue and adjusted EBITDA growth and exceeded guidance for bookings and adjusted free cash flow while meeting guidance on all other metrics.
Highlights of Fourth Quarter 2017 Results
• | Bookings excluding Greater China were $140.8 million and Constant Currency Bookings were $145.9 million, both above guidance. |
• | GAAP Revenue was $107.3 million, in line with guidance. |
• | GAAP Gross Margin was 54.5%. Non-GAAP Gross Margin was 56.0%. |
• | GAAP Operating Expenses were $53.7 million. Non-GAAP Operating Expenses were $48.2 million, in line with guidance. |
• | GAAP Net Loss was $881,000. |
• | Adjusted EBITDA was $15.0 million, in line with guidance. |
• | GAAP Net Cash Provided by Operating Activities was $2.8 million. |
• | Adjusted Free Cash Flow was $4.8 million, above guidance. This is the fifth consecutive quarter of positive Adjusted Free Cash Flow. For the full year 2017, Adjusted Free Cash Flow was up $59 million compared to 2016. |
2017 Highlights
• | Grew total revenue backlog to $536.1 million as of the end of 2017, up 25% from $429.3 million the year prior. |
• | Completed multi-year business transformation. |
• | Launched strategic alliance with Microsoft to develop and market cloud-based solutions and services for the media and entertainment industry. |
• | Generated positive free cash flow. |
Avid Progressing on Strategic Growth Objectives
• | Enterprise: During the fourth quarter, Avid signed several large multi-year commercial agreements. As of December 31, 2017, total licenses for the MediaCentral platform were approximately 53,700, up 26% year-over-year. |
• | Individual: Digital sales, primarily targeted at individual creative professionals, were up 24% year-over-year. Cloud-enabled software subscriptions are now over 93,500, up 54% year-over-year. |
“Our strategy is yielding improved financial results as customers are embracing our products and solutions,” said Jeff Rosica, Chief Executive Officer and President of Avid. “Looking ahead, I’m excited about the opportunity before us and our plan to continue to improve business performance, while further leveraging the unique position we’ve established, including our ability to lead customers and the industry into the cloud.”
“We are pleased with our financial performance this year having met key objectives for 2017, including meeting or exceeding guidance on all metrics each quarter and delivering a substantial improvement in free cash flow generation,” said Brian E. Agle, Senior Vice President and Chief Financial Officer of Avid. “In the second half of 2017, our results showed improvement as we delivered two consecutive quarters of revenue and adjusted EBITDA growth, excluding the impact of pre-2011 amortization and elimination of implied PCS revenue. We look forward to building on this momentum in 2018, as we remain focused on growing revenue, managing expenses and further increasing free cash flow.”
First Quarter and Full Year 2018 Guidance
Avid’s first quarter and full year 2018 financial guidance is provided in the table below. This guidance reflects the expected estimated impact of the adoption of the new revenue recognition standard ASC 606 as of January 1, 2018. In 2018, the Company will be refining its guidance practices to focus only on Revenue, Adjusted EBITDA and Free Cash Flow. Annual Free Cash Flow guidance will replace the Adjusted Free Cash Flow guidance previously provided quarterly.
Guidance under ASC 606 | ||
(in $ millions) | 2018 | Q1 2018 |
Revenue | $404 - $434 | $95 - $105 |
Adjusted EBITDA | $39 - $51 | $3 - $9 |
Free Cash Flow (Annual) | $2 - $14 | |
The adoption of ASC 606 as of January 1, 2018 is estimated to unfavorably impact revenue and Adjusted EBITDA by $11 million and $2 million in 2018 and Q1 2018, respectively.
A reconciliation of guidance under the ASC 606 and ASC 605 standards is provided for comparison purposes in the supplemental tables included in this press release.
All guidance presented by the Company is inherently uncertain and subject to numerous risks and uncertainties. Avid’s actual future results of operations and cash flows 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 Avid Technology Q4 2017 Business Update presentation posted on Avid’s Investor Relations website.
Non-GAAP Financial Measures
Avid includes non-GAAP financial measures in this press release, including Adjusted EBITDA, Adjusted Free Cash Flow, Free Cash Flow, non-GAAP Operating Income (loss), non-GAAP Operating Expenses, non-GAAP Gross Margin, Adjusted EBITDA margin and Adjusted Free Cash Flow conversion of Adjusted EBITDA. The Company also includes the operational metrics of bookings, revenue backlog and recurring revenue bookings 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 information is reported based on
actual exchange rates. Definitions of the non-GAAP financial measures are included in our Form 8-K filed today. Reconciliations of the non-GAAP financial measures in this 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 the operational metrics.
The earnings release also includes forward-looking non-GAAP financial measures, including Adjusted EBITDA, and Free Cash Flow. 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.
Conference Call
Avid will host a conference call to discuss its financial results for the fourth quarter and full year 2017 on Thursday, March 15, 2018 at 5:00 p.m. ET. The call will be open to the public and can be accessed by dialing 323-994-2083 and referencing confirmation code 7939066. You may also listen to the call on the Avid Investor Relations website. To listen via the website, go to the events tab at ir.avid.com for complete details prior to the start of the conference call. A replay of the call will also be available on the Avid Investor Relations website shortly after the completion of the call.
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 December 31, 2018 and first quarter ending March 31, 2018, which estimates are based on a variety of assumptions about key factors and metrics that will determine our future results of operations, including, for example, anticipated market uptake of new products, realization of identified efficiency programs and market-based cost inflation. Other forward-looking statements include, without limitation, statements based upon or otherwise incorporating judgments or estimates relating to future performance such as future operating results and expenses; earnings; backlog; revenue backlog conversion rate; product mix and free cash flow; our future strategy and business plans; our product plans, including products under development, such as cloud and subscription based offerings; our liquidity and ability to raise capital and our liquidity. The projected future results of operations, and the other forward-looking statements in this release, are based on current expectations as of the date of this release and subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including but not limited to the effect on our sales, operations and financial performance resulting from: our liquidity; our ability to execute our strategic plan, and meet customer needs; our ability to retain and hire key personnel; our ability to produce innovative products in response to changing market demand, particularly in the media industry; our ability to successfully accomplish our product development plans; competitive factors; history of losses; fluctuations in our revenue based on, among other things, our performance and risks in particular geographies or markets; our higher indebtedness and ability to service it and meet the obligations thereunder; restrictions in our credit facilities; our move to a subscription model and related effect on our revenues and ability to predict future revenues; elongated sales cycles; fluctuations in foreign currency exchange rates; seasonal factors; adverse changes in economic conditions; variances in our revenue backlog and the realization thereof; and the possibility of legal proceedings adverse to our company. Moreover, the
business may be adversely affected by future legislative, regulatory or changes, including tax law changes, as well as other economic, business and/or competitive factors. The risks included above are not exhaustive. Other factors that could adversely affect our business and prospects are set forth in our public filings with the SEC. Forward-looking statements contained herein are made only as to the date of this press release and we undertake no obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required by law.
About Avid
Through Avid Everywhere™, 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 Facebook, Instagram, Twitter, YouTube, LinkedIn, or subscribe to Avid Blogs.
© 2018 Avid Technology, Inc. All rights reserved. Avid, the Avid logo, Avid Everywhere, Avid Artist | DNxIV, Avid NEXIS, Avid FastServe, AirSpeed, iNews, Maestro, MediaCentral, Media Composer, PlayMaker, Pro Tools, Avid VENUE, and Sibelius are trademarks or registered trademarks of Avid Technology, Inc. or its subsidiaries in the United States and/or other countries. All other trademarks are the property of their respective owners. Product features, specifications, system requirements and availability are subject to change without notice.
Investor Contact:
Dean Ridlon
Avid
dean.ridlon@avid.com
(978) 640-3379
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 | Twelve Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net revenues: | |||||||||||||||
Products | $ | 56,481 | $ | 59,269 | $ | 209,461 | $ | 283,110 | |||||||
Services | 50,777 | 56,026 | 209,542 | 228,820 | |||||||||||
Total net revenues | 107,258 | 115,295 | 419,003 | 511,930 | |||||||||||
Cost of revenues: | |||||||||||||||
Products | 32,128 | 29,174 | 112,606 | 111,579 | |||||||||||
Services | 14,734 | 14,702 | 56,481 | 59,828 | |||||||||||
Amortization of intangible assets | 1,950 | 1,950 | 7,800 | 7,800 | |||||||||||
Total cost of revenues | 48,812 | 45,826 | 176,887 | 179,207 | |||||||||||
Gross profit | 58,446 | 69,469 | 242,116 | 332,723 | |||||||||||
Operating expenses: | |||||||||||||||
Research and development | 16,308 | 18,773 | 68,212 | 81,564 | |||||||||||
Marketing and selling | 25,776 | 21,311 | 106,257 | 110,338 | |||||||||||
General and administrative | 10,624 | 13,112 | 53,892 | 61,471 | |||||||||||
Amortization of intangible assets | 362 | 363 | 1,450 | 2,498 | |||||||||||
Restructuring costs, net | 595 | 4,959 | 7,059 | 12,837 | |||||||||||
Total operating expenses | 53,665 | 58,518 | 236,870 | 268,708 | |||||||||||
Operating income | 4,781 | 10,951 | 5,246 | 64,015 | |||||||||||
Interest and other expense, net | (5,203 | ) | (4,622 | ) | (18,668 | ) | (18,671 | ) | |||||||
(Loss) income before income taxes | (422 | ) | 6,329 | (13,422 | ) | 45,344 | |||||||||
Provision for (benefit from) income taxes | 459 | 1,108 | 133 | (2,875 | ) | ||||||||||
Net (loss) income | $ | (881 | ) | $ | 5,221 | $ | (13,555 | ) | $ | 48,219 | |||||
Net (loss) income per common share – basic and diluted | $ | (0.02 | ) | $ | 0.13 | $ | (0.33 | ) | $ | 1.20 | |||||
Weighted-average common shares outstanding – basic | 41,216 | 40,637 | 41,020 | 40,021 | |||||||||||
Weighted-average common shares outstanding – diluted | 41,216 | 40,746 | 41,020 | 40,176 | |||||||||||
AVID TECHNOLOGY, INC.
Reconciliations of GAAP financial measures to Non-GAAP financial measures
(unaudited - in thousands)
Three Months Ended | Twelve Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Non-GAAP revenue | |||||||||||||||
GAAP revenue | $ | 107,258 | $ | 115,295 | $ | 419,003 | $ | 511,930 | |||||||
Amortization of acquired deferred revenue | — | — | — | 594 | |||||||||||
Non-GAAP revenue | 107,258 | 115,295 | 419,003 | 512,524 | |||||||||||
Pre-2011 Revenue | 78 | 2,268 | 985 | 24,772 | |||||||||||
Elim PCS | — | 8,100 | 1,700 | 52,900 | |||||||||||
Non-GAAP Revenue w/o Pre-2011 and Elim | 107,180 | 104,927 | 416,318 | 434,852 | |||||||||||
Non-GAAP gross profit | |||||||||||||||
GAAP gross profit | 58,446 | 69,469 | 242,116 | 332,723 | |||||||||||
Amortization of acquired deferred revenue | — | — | — | 594 | |||||||||||
Amortization of intangible assets | 1,950 | 1,950 | 7,800 | 7,800 | |||||||||||
Stock-based compensation | (305 | ) | (48 | ) | 242 | 440 | |||||||||
Non-GAAP gross profit | 60,091 | 71,371 | 250,158 | 341,557 | |||||||||||
Pre-2011 Revenue | 78 | 2,268 | 985 | 24,772 | |||||||||||
Elim PCS | — | 8,100 | 1,700 | 52,900 | |||||||||||
Non-GAAP gross profit w/o Pre-2011 and Elim | 60,013 | 61,003 | 247,473 | 263,885 | |||||||||||
Non-GAAP operating expenses | |||||||||||||||
GAAP operating expenses | 53,665 | 58,518 | 236,870 | 268,708 | |||||||||||
Less Amortization of intangible assets | (362 | ) | (363 | ) | (1,450 | ) | (2,498 | ) | |||||||
Less Stock-based compensation | (2,741 | ) | (1,847 | ) | (8,069 | ) | (7,475 | ) | |||||||
Less Restructuring costs, net | (595 | ) | (4,959 | ) | (7,059 | ) | (12,837 | ) | |||||||
Less Restatement costs | (558 | ) | (109 | ) | (1,284 | ) | (295 | ) | |||||||
Less Acquisition, integration and other costs | (266 | ) | (129 | ) | (163 | ) | (587 | ) | |||||||
Less Efficiency program costs | (931 | ) | (967 | ) | (3,985 | ) | (4,305 | ) | |||||||
Non-GAAP operating expenses | 48,212 | 50,144 | 214,860 | 240,711 | |||||||||||
Non-GAAP operating income | |||||||||||||||
GAAP operating income | 4,781 | 10,951 | 5,246 | 64,015 | |||||||||||
Amortization of acquired deferred revenue | — | — | — | 594 | |||||||||||
Amortization of intangible assets | 2,312 | 2,313 | 9,250 | 10,298 | |||||||||||
Stock-based compensation | 2,436 | 1,799 | 8,311 | 7,915 | |||||||||||
Restructuring costs, net | 595 | 4,959 | 7,059 | 12,837 | |||||||||||
Restatement costs | 558 | 109 | 1,284 | 295 | |||||||||||
Acquisition, integration and other costs | 266 | 129 | 163 | 587 | |||||||||||
Efficiency program costs | 931 | 967 | 3,985 | 4,305 | |||||||||||
Non-GAAP operating income | 11,879 | 21,227 | 35,298 | 100,846 | |||||||||||
Adjusted EBITDA | |||||||||||||||
Non-GAAP operating income (from above) | 11,879 | 21,227 | 35,298 | 100,846 | |||||||||||
Depreciation | 3,093 | 3,997 | 13,087 | 15,181 | |||||||||||
Adjusted EBITDA | 14,972 | 25,224 | 48,385 | 116,027 | |||||||||||
Adjusted EBITDA margin | 14 | % | 22 | % | 12 | % | 23 | % | |||||||
Pre-2011 Revenue | 78 | 2,268 | 985 | 24,772 | |||||||||||
Elim PCS | — | 8,100 | 1,700 | 52,900 | |||||||||||
Adjusted EBITDA w/o Pre-2011 and Elim | 14,894 | 14,856 | 45,700 | 38,355 | |||||||||||
Adjusted EBITDA w/o Pre-2011 and Elim margin | 14 | % | 14 | % | 11 | % | 9 | % | |||||||
Adjusted free cash flow | |||||||||||||||
GAAP net cash provided by (used in) operating activities | 2,833 | (270 | ) | 8,936 | (49,195 | ) | |||||||||
Capital expenditures | (1,752 | ) | (1,322 | ) | (7,877 | ) | (11,003 | ) | |||||||
Free Cash Flow | 1,081 | (1,592 | ) | 1,059 | (60,198 | ) | |||||||||
Non-Operational / One-time Items | |||||||||||||||
Restructuring payments | 2,599 | 1,959 | 12,139 | 10,940 | |||||||||||
Restatement payments | 455 | 153 | 834 | 153 | |||||||||||
Acquisition, integration and other payments | 120 | 24 | 313 | 1,841 | |||||||||||
Efficiency program payments | 500 | 1,412 | 3,863 | 6,942 | |||||||||||
Sub-Total Non-Operational / One-Time Items | 3,674 | 3,548 | 17,149 | 19,876 | |||||||||||
Adjusted free cash flow | $ | 4,755 | $ | 1,956 | $ | 18,208 | $ | (40,322 | ) | ||||||
Adjusted free cash flow conversion of adjusted EBITDA | 32 | % | 8 | % | 38 | % | (35 | )% | |||||||
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)
December 31, | December 31, | ||||||
2017 | 2016 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 57,223 | $ | 44,948 | |||
Accounts receivable, net of allowances of $11,142 and $8,618 at December 31, 2017 and 2016, respectively | 40,134 | 43,520 | |||||
Inventories | 38,421 | 50,701 | |||||
Prepaid expenses | 8,208 | 6,031 | |||||
Other current assets | 10,341 | 5,805 | |||||
Total current assets | 154,327 | 151,005 | |||||
Property and equipment, net | 21,903 | 30,146 | |||||
Intangible assets, net | 13,682 | 22,932 | |||||
Goodwill | 32,643 | 32,643 | |||||
Long-term deferred tax assets, net | 1,318 | 1,245 | |||||
Other long-term assets | 10,811 | 11,610 | |||||
Total assets | $ | 234,684 | $ | 249,581 | |||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 30,160 | $ | 26,435 | |||
Accrued compensation and benefits | 25,466 | 25,387 | |||||
Accrued expenses and other current liabilities | 31,549 | 34,088 | |||||
Income taxes payable | 1,815 | 1,012 | |||||
Short-term debt | 5,906 | 5,000 | |||||
Deferred revenues | 121,184 | 146,014 | |||||
Total current liabilities | 216,080 | 237,936 | |||||
Long-term debt | 204,498 | 188,795 | |||||
Long-term deferred tax liabilities, net | — | 913 | |||||
Long-term deferred revenues | 73,429 | 79,670 | |||||
Other long-term liabilities | 9,247 | 12,178 | |||||
Total liabilities | 503,254 | 519,492 | |||||
Stockholders’ deficit: | |||||||
Preferred stock, $0.01 par value, 1,000 shares authorized; no shares issued or outstanding | — | — | |||||
Common stock, $0.01 par value, 100,000 shares authorized; 42,339 shares issued, and 41,356 shares and 40,727 shares outstanding at December 31, 2017 and 2016, respectively | 423 | 423 | |||||
Additional paid-in capital | 1,035,808 | 1,043,063 | |||||
Accumulated deficit | (1,284,703 | ) | (1,271,148 | ) | |||
Treasury stock at cost, net of reissuances, 983 shares and 1,612 shares at December 31, 2017 and 2016, respectively | (17,672 | ) | (32,353 | ) | |||
Accumulated other comprehensive loss | (2,426 | ) | (9,896 | ) | |||
Total stockholders’ deficit | $ | (268,570 | ) | $ | (269,911 | ) | |
$ | 234,684 | $ | 249,581 | ||||
AVID TECHNOLOGY, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited - in thousands)
Twelve Months Ended | |||||||
December 31, | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities: | |||||||
Net (loss) income | $ | (13,555 | ) | $ | 48,219 | ||
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: | |||||||
Depreciation and amortization | 22,337 | 25,479 | |||||
(Recovery) provision for doubtful accounts | (340 | ) | 886 | ||||
Stock-based compensation expense | 8,311 | 7,916 | |||||
Non-cash provision for restructuring | 3,191 | 1,137 | |||||
Non-cash interest expense | 8,951 | 9,620 | |||||
Unrealized foreign currency transaction losses (gains) | 7,336 | (2,599 | ) | ||||
Benefit from deferred taxes | (873 | ) | (1,842 | ) | |||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 3,800 | 14,321 | |||||
Inventories | 12,280 | (2,628 | ) | ||||
Prepaid expenses and other assets | (7,567 | ) | (1,839 | ) | |||
Accounts payable | 3,606 | (18,959 | ) | ||||
Accrued expenses, compensation and benefits and other liabilities | (8,189 | ) | (6,280 | ) | |||
Income taxes payable | 800 | (9 | ) | ||||
Deferred revenues | (31,152 | ) | (122,617 | ) | |||
Net cash provided by (used in) operating activities | 8,936 | (49,195 | ) | ||||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (7,877 | ) | (11,003 | ) | |||
Increase in other long-term assets | (36 | ) | (30 | ) | |||
Decrease (increase) in restricted cash | 1,790 | (4,544 | ) | ||||
Net cash used in investing activities | (6,123 | ) | (15,577 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from long-term debt | 16,694 | 100,000 | |||||
Repayment of debt | (6,735 | ) | (3,750 | ) | |||
Proceeds from the issuance of common stock under employee stock plans | 445 | 6,184 | |||||
Common stock repurchases for tax withholdings for net settlement of equity awards | (1,329 | ) | (941 | ) | |||
Proceeds from revolving credit facilities | — | 25,000 | |||||
Payments on revolving credit facilities | — | (30,000 | ) | ||||
Payments for credit facility issuance costs | (700 | ) | (5,041 | ) | |||
Net cash provided by financing activities | 8,375 | 91,452 | |||||
Effect of exchange rate changes on cash and cash equivalents | 1,087 | 366 | |||||
Net increase in cash and cash equivalents | 12,275 | 27,046 | |||||
Cash and cash equivalents at beginning of year | 44,948 | 17,902 | |||||
Cash and cash equivalents at end of year | $ | 57,223 | $ | 44,948 | |||
AVID TECHNOLOGY, INC.
Supplemental Revenue Information
(unaudited - in thousands)
December 31, | September 30, | December 31, | ||||||||||||||
Revenue Backlog* | 2017 | 2017 | 2016 | |||||||||||||
Pre-2011 | $ | 112 | $ | 190 | $ | 1,095 | ||||||||||
Post-2010 | $ | 194,501 | $ | 194,376 | $ | 224,589 | ||||||||||
Deferred Revenue | $ | 194,613 | $ | 194,566 | $ | 225,684 | ||||||||||
Other Backlog | $ | 341,475 | $ | 293,387 | $ | 203,625 | ||||||||||
Total Revenue Backlog | $ | 536,088 | $ | 487,953 | $ | 429,309 | ||||||||||
The expected timing of recognition of revenue backlog as of December 31, 2017 is as follows: | ||||||||||||||||
2018 | 2019 | 2020 | Thereafter | Total | ||||||||||||
Orders executed prior to January 1, 2011 | $ | 112 | $ | — | $ | — | $ | — | $ | 112 | ||||||
Orders executed or materially modified on or | $ | 95,028 | $ | 36,713 | $ | 25,310 | $ | 37,450 | $ | 194,501 | ||||||
after January 1, 2011 | ||||||||||||||||
Other Backlog | $ | 147,550 | $ | 67,301 | $ | 40,427 | $ | 86,197 | $ | 341,475 | ||||||
Total Revenue Backlog | $ | 242,690 | $ | 104,014 | $ | 65,737 | $ | 123,647 | $ | 536,088 | ||||||
*A definition of Revenue Backlog is included in the supplemental financial and operational data sheet available on our investor relations webpage at ir.avid.com. | ||||||||||||||||
Note: current estimates could change based on a number of factors, including (i) the timing of delivery of products and services, (ii) customer cancellations or change order, (iii) changes in the estimated period of time Implied Maintenance Release PCS is provided to customers, including as a result of changes in business practices. | ||||||||||||||||
In connection with the adoption of ASU No. 2014-09, Revenue from Contracts with Customers, on January 1, 2018, which will require more of our product sales to be recognized as revenue upon delivery rather than over an extended period of time, we expect approximately $105 million of the deferred revenue component of revenue backlog recorded as of December 31, 2017 will be eliminated. | ||||||||||||||||
AVID TECHNOLOGY, INC.
Supplemental Information Related to Guidance
(unaudited - in millions)
2018 Guidance | |||||||
ASC 605 | |||||||
2018 Guidance | ASC 606 | 2018 Comparison | Actual | ||||
($M) | Low | High | Add Back | Low | High | 2017 | |
Revenue | $404 | $434 | $11 | $415 | $445 | $419 | |
Revenue excl. Pre-2011 & Elim PCS | 404 | 434 | 11 | 415 | 445 | 416 | |
Pre-2011 & Elim PCS | 0 | 0 | 0 | 0 | 3 | ||
Adjusted EBITDA | 39 | 51 | 11 | 50 | 62 | 48 | |
Adj EBITDA excl. Pre-2011 & Elim PCS | 39 | 51 | 11 | 50 | 62 | 46 | |
Free Cash Flow | $2 | $14 | $0 | $2 | $14 | $1 | |
Q1 2018 Guidance | |||||||
Q1 2018 | ASC 605 | ||||||
Guidance | ASC 606 | Q1'18 Comparison | Actual | ||||
($M) | Low | High | Add Back | Low | High | Q1 2017 | Q4 2017 |
Revenue | $95 | $105 | $2 | $97 | $107 | $104 | $107 |
Revenue excl. Pre-2011 & Elim PCS | 95 | 105 | 2 | 97 | 107 | 102 | 107 |
Pre-2011 & Elim PCS | 0 | 0 | 0 | 0 | 0 | 2 | 0 |
Adjusted EBITDA | 3 | 9 | 2 | 5 | 11 | 13 | 15 |
Adj EBITDA excl. Pre-2011 & Elim PCS | $3 | $9 | $2 | $5 | $11 | $11 | $15 |
PR Contact
Jim Sheehan
Avid
jim.sheehan@avid.com
978.640.3152
Investor Contact
Dean Ridlon
Avid
dean.ridlon@avid.com
978.640.3379