Delaware | 1-36254 | 04-2977748 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
• | Non-GAAP Net Revenue is defined 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. |
• | Non-GAAP Gross Margin is defined as GAAP gross margin, excluding amortization of intangible assets and stock-based compensation expense. |
• | Non-GAAP Operating Expenses are defined as GAAP operating expense excluding 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, and efficiency program. |
• | Non-GAAP operating income (loss) is defined as GAAP operating income (loss) excluding 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, and efficiency program. |
• | Adjusted EBITDA is defined as non-GAAP operating income (loss) excluding depreciation expense. |
• | Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by non-GAAP Net Revenue. |
• | Free Cash Flow is defined as GAAP operating cash flow less capital expenditures. |
• | Adjusted Free Cash Flow is defined as Free Cash Flow excluding payments to the restructuring and other unusual items such as the restatement, M&A activity, and efficiency program. |
• | Bookings is defined as the amount of revenue we expect to earn from an agreement between Avid and a customer for goods and services over the course of the agreement. To count as a booking, we expect there to be persuasive evidence of an agreement between us and our customer and that the collectability of the amounts payable under the arrangement are reasonably assured. |
• | Cloud-enabled software subscriptions as of the end of a quarter represent the number of paid subscription licenses under an active contract as of that date, excluding any licenses that may be receiving service under an active contract but that are not paid for at that time by the customer, whether due to a promotion, cancellation or otherwise. For comparison purposes, subscription numbers for previous quarters have been adjusted from previously published numbers to (i) include multi-year and multi-seat licenses, and (ii) exclude certain terminated subscription licenses. |
• | Recurring Revenue is defined as the sum of subscription revenue, maintenance revenue and revenue under our long-term contractual agreements. |
• | Annual Contract Value is defined, as of a given date, as the sum of the following three components: (i) the annual value of all long-term contractual agreements in effect on such date, calculated by dividing the total value of each contract (excluding expected maintenance revenue included in (ii) below and expected subscription revenue included in (iii) below) divided by the total number of years of such contract, (ii) maintenance revenue for the quarter ended on such date, multiplied by four, and (iii) subscription revenue for the quarter ended on such date, multiplied by four. |
• | Revenue Backlog consists of firm orders received and includes both (i) orders where the customer has paid in advance of our performance obligations being fulfilled and (ii) orders for future product deliveries or services that have not yet been invoiced by us. |
Exhibit Number | Description |
99.1 |
AVID TECHNOLOGY, INC. | |
(Registrant) | |
Date: March 14, 2019 | By: /s/ Kenneth Gayron Name: Kenneth Gayron Title: Executive Vice President and CFO |
• | Revenue was $112.7 million, an increase of 5% year-over-year and 8% sequentially. Revenue excluding non-cash revenue was $112.4 million, an increase of 7% year-over-year and 10% sequentially. |
• | Gross Margin was 59.0%, up 450 basis points year-over-year. Non-GAAP Gross Margin was 60.8%, up 480 basis points year-over-year. |
• | Operating Expenses were $54.4 million, an increase of 1% year-over-year and 2% sequentially largely driven by a $5.2M legal settlement recognized as a credit in Q4 2017 offset by savings from operational efficiency initiatives. Excluding the non-recurring settlement, operating expenses declined by $4.4 million year-over year. |
• | Operating Income was $12.1 million, an improvement of $7.3 million year-over-year and $5.0 million sequentially. |
• | Adjusted EBITDA was $21.3 million, an increase of 42% year-over-year and 46% sequentially. Adjusted EBITDA Margin was 18.9%, up 490 basis points year-over-year and sequentially. |
• | GAAP net income per common share was $0.14, up from net loss per common share of ($0.02) in Q4 2017. |
• | Net cash provided by operating activities was $20.1 million. |
• | Free Cash Flow was $17.7 million. |
• | Software revenue from subscriptions increased 77% year-over-year, surpassing $10 million in the quarter. |
• | Revenue through the Company’s e-commerce activities was up 50% year-over-year. |
• | Revenue was $413.3 million, a decrease of 1% year-over-year. Revenue, excluding non-cash revenue, was $407.1 million, an increase of 5% year-over-year. |
• | Gross Margin was 57.9%, up 10 basis points year-over-year. Non-GAAP Gross Margin was 59.8%, up 10 basis points year-over-year. |
• | Operating Expenses were $225.5 million, a decrease of 5% year-over-year largely driven by savings from operational efficiency initiatives. |
• | Operating Income was $13.7 million, an increase of 161%, or $8.4 million, year-over-year. |
• | Adjusted EBITDA was $47.5 million, a decrease of 2% year-over-year. Adjusted EBITDA Margin was 11.5%, flat with 2017. |
• | GAAP net loss per common share of ($0.26), up from GAAP net loss per common share of ($0.33) in 2017. |
• | Net cash provided by operating activities was $15.8 million. |
• | Free Cash Flow was $5.9 million, an increase of $4.8 million from the prior year. |
• | Software revenue from subscriptions increased 78% year-over-year, with approximately 125,000 cloud-enabled software subscriptions at the end of 2018. |
• | Revenue through the Company’s e-commerce activities was up 52% year-over-year, surpassing $50 million for the year. |
• | Recurring Revenue was 56% of the Company’s revenue in 2018 up from 49% in 2017. |
• | Annual Contract Value (ACV) was $248 million at the end of 2018 up from $216 million at the end of 2017, reflecting continuing growth in Avid’s high-margin subscription revenue plus maintenance revenues and revenues under long-term agreements. |
(in $ millions) | Q1 2019 | Full Year 2019 |
Revenue | $96 - $104 | $420 - $430 |
Adjusted EBITDA | $7 - $12 | $60 - $65 |
Free Cash Flow | $12 - $17 |
Three Months Ended | Twelve Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net revenues: | |||||||||||||||
Products | $ | 60,185 | $ | 56,481 | $ | 205,107 | $ | 209,461 | |||||||
Services | 52,499 | 50,777 | 208,175 | 209,542 | |||||||||||
Total net revenues | 112,684 | 107,258 | 413,282 | 419,003 | |||||||||||
Cost of revenues: | |||||||||||||||
Products | 31,074 | 32,128 | 110,758 | 112,606 | |||||||||||
Services | 13,146 | 14,734 | 55,560 | 56,481 | |||||||||||
Amortization of intangible assets | 1,950 | 1,950 | 7,800 | 7,800 | |||||||||||
Total cost of revenues | 46,170 | 48,812 | 174,118 | 176,887 | |||||||||||
Gross profit | 66,514 | 58,446 | 239,164 | 242,116 | |||||||||||
Operating expenses: | |||||||||||||||
Research and development | 14,836 | 16,308 | 62,379 | 68,212 | |||||||||||
Marketing and selling | 23,921 | 25,776 | 101,273 | 106,257 | |||||||||||
General and administrative | 13,574 | 10,624 | 55,230 | 53,892 | |||||||||||
Amortization of intangible assets | 361 | 362 | 1,450 | 1,450 | |||||||||||
Restructuring costs, net | 1,747 | 595 | 5,148 | 7,059 | |||||||||||
Total operating expenses | 54,439 | 53,665 | 225,480 | 236,870 | |||||||||||
Operating income | 12,075 | 4,781 | 13,684 | 5,246 | |||||||||||
Interest and other expense, net | (5,725 | ) | (5,203 | ) | (23,087 | ) | (18,668 | ) | |||||||
Income (loss) before income taxes | 6,350 | (422 | ) | (9,403 | ) | (13,422 | ) | ||||||||
Provision for income taxes | 447 | 459 | 1,271 | 133 | |||||||||||
Net income (loss) | $ | 5,903 | $ | (881 | ) | $ | (10,674 | ) | $ | (13,555 | ) | ||||
Net income (loss) per common share – basic and diluted | $ | 0.14 | $ | (0.02 | ) | $ | (0.26 | ) | $ | (0.33 | ) | ||||
Weighted-average common shares outstanding – basic | 41,860 | 41,216 | 41,662 | 41,020 | |||||||||||
Weighted-average common shares outstanding – diluted | 42,430 | 41,216 | 41,662 | 41,020 |
Three Months Ended | Twelve Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Non-GAAP revenue | |||||||||||||||
GAAP revenue | $ | 112,684 | $ | 107,258 | $ | 413,282 | $ | 419,003 | |||||||
Amortization of acquired deferred revenue | — | — | — | — | |||||||||||
Non-GAAP revenue | 112,684 | 107,258 | 413,282 | 419,003 | |||||||||||
Pre-2011 Revenue | — | 78 | — | 985 | |||||||||||
Elim PCS | — | — | — | 1,700 | |||||||||||
Non-GAAP Revenue w/o Pre-2011 and Elim | 112,684 | 107,180 | 413,282 | 416,318 | |||||||||||
Non-GAAP gross profit | |||||||||||||||
GAAP gross profit | 66,514 | 58,446 | 239,164 | 242,116 | |||||||||||
Amortization of intangible assets | 1,950 | 1,950 | 7,800 | 7,800 | |||||||||||
Stock-based compensation | 99 | (305 | ) | 321 | 242 | ||||||||||
Non-GAAP gross profit | 68,563 | 60,091 | 247,285 | 250,158 | |||||||||||
Pre-2011 Revenue | — | 78 | — | 985 | |||||||||||
Elim PCS | — | — | — | 1,700 | |||||||||||
Non-GAAP gross profit w/o Pre-2011 and Elim | 68,563 | 60,013 | 247,285 | 247,473 | |||||||||||
Non-GAAP operating expenses | |||||||||||||||
GAAP operating expenses | 54,439 | 53,665 | 225,480 | 236,870 | |||||||||||
Less Amortization of intangible assets | (361 | ) | (362 | ) | (1,450 | ) | (1,450 | ) | |||||||
Less Stock-based compensation | (1,828 | ) | (2,741 | ) | (5,937 | ) | (8,069 | ) | |||||||
Less Restructuring costs, net | (1,747 | ) | (595 | ) | (5,148 | ) | (7,059 | ) | |||||||
Less Restatement costs | (11 | ) | (558 | ) | (826 | ) | (1,284 | ) | |||||||
Less Acquisition, integration and other costs | (300 | ) | (266 | ) | (361 | ) | (163 | ) | |||||||
Less Efficiency program costs | (14 | ) | (931 | ) | (94 | ) | (3,985 | ) | |||||||
Non-GAAP operating expenses | 50,178 | 48,212 | 211,664 | 214,860 | |||||||||||
Non-GAAP operating income | |||||||||||||||
GAAP operating income | 12,075 | 4,781 | 13,684 | 5,246 | |||||||||||
Amortization of intangible assets | 2,311 | 2,312 | 9,250 | 9,250 | |||||||||||
Stock-based compensation | 1,927 | 2,436 | 6,258 | 8,311 | |||||||||||
Restructuring costs, net | 1,747 | 595 | 5,148 | 7,059 | |||||||||||
Restatement costs | 11 | 558 | 826 | 1,284 | |||||||||||
Acquisition, integration and other costs | 300 | 266 | 361 | 163 | |||||||||||
Efficiency program costs | 14 | 931 | 94 | 3,985 | |||||||||||
Non-GAAP operating income | 18,385 | 11,879 | 35,621 | 35,298 | |||||||||||
Adjusted EBITDA | |||||||||||||||
Non-GAAP operating income (from above) | 18,385 | 11,879 | 35,621 | 35,298 | |||||||||||
Depreciation | 2,924 | 3,093 | 11,891 | 13,087 | |||||||||||
Adjusted EBITDA | 21,309 | 14,972 | 47,512 | 48,385 | |||||||||||
Adjusted EBITDA margin | 18.9 | % | 14.0 | % | 11.5 | % | 11.5 | % | |||||||
Pre-2011 Revenue | — | 78 | — | 985 | |||||||||||
Elim PCS | — | — | — | 1,700 | |||||||||||
Adjusted EBITDA w/o Pre-2011 and Elim | 21,309 | 14,894 | 47,512 | 45,700 | |||||||||||
Adjusted EBITDA w/o Pre-2011 and Elim margin | 18.9 | % | 13.9 | % | 11.5 | % | 11.0 | % | |||||||
Adjusted free cash flow | |||||||||||||||
GAAP net cash provided by operating activities | 20,070 | 2,833 | 15,822 | 8,936 | |||||||||||
Capital expenditures | (2,396 | ) | (1,752 | ) | (9,936 | ) | (7,877 | ) | |||||||
Free Cash Flow | 17,674 | 1,081 | 5,886 | 1,059 | |||||||||||
Non-Operational / One-time Items | |||||||||||||||
Restructuring payments | 714 | 2,599 | 5,741 | 12,139 | |||||||||||
Restatement payments | 146 | 455 | 1,133 | 834 | |||||||||||
Acquisition, integration and other payments | 63 | 120 | 53 | 313 | |||||||||||
Efficiency program payments | — | 500 | 134 | 3,863 | |||||||||||
Sub-Total Non-Operational / One-Time Items | 923 | 3,674 | 7,061 | 17,149 | |||||||||||
Adjusted free cash flow | $ | 18,597 | $ | 4,755 | $ | 12,947 | $ | 18,208 | |||||||
Adjusted free cash flow conversion of adjusted EBITDA | 87 | % | 32 | % | 27 | % | 38 | % |
December 31, | December 31, | ||||||
2018 | 2017 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 56,103 | $ | 57,223 | |||
Restricted cash | 8,500 | — | |||||
Accounts receivable, net of allowances of $1,339 and $11,142 at December 31, 2018 and 2017, respectively | 67,754 | 40,134 | |||||
Inventories | 32,956 | 38,421 | |||||
Prepaid expenses | 8,853 | 8,208 | |||||
Contract assets | 16,513 | — | |||||
Other current assets | 5,917 | 10,341 | |||||
Total current assets | 196,596 | 154,327 | |||||
Property and equipment, net | 21,582 | 21,903 | |||||
Intangible assets, net | 4,432 | 13,682 | |||||
Goodwill | 32,643 | 32,643 | |||||
Long-term deferred tax assets, net | 1,158 | 1,318 | |||||
Other long-term assets | 9,432 | 10,811 | |||||
Total assets | $ | 265,843 | $ | 234,684 | |||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 39,239 | $ | 30,160 | |||
Accrued compensation and benefits | 21,967 | 25,466 | |||||
Accrued expenses and other current liabilities | 37,547 | 31,549 | |||||
Income taxes payable | 1,853 | 1,815 | |||||
Short-term debt | 1,405 | 5,906 | |||||
Deferred revenues | 85,662 | 121,184 | |||||
Total current liabilities | 187,673 | 216,080 | |||||
Long-term debt | 220,590 | 204,498 | |||||
Long-term deferred revenues | 13,939 | 73,429 | |||||
Other long-term liabilities | 10,302 | 9,247 | |||||
Total liabilities | 432,504 | 503,254 | |||||
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 41,948 shares and 41,356 shares outstanding at December 31, 2018 and 2017, respectively | 423 | 423 | |||||
Additional paid-in capital | 1,028,924 | 1,035,808 | |||||
Accumulated deficit | (1,187,010 | ) | (1,284,703 | ) | |||
Treasury stock at cost, net of reissuances, 391 shares and 983 shares at December 31, 2018 and 2017, respectively | (5,231 | ) | (17,672 | ) | |||
Accumulated other comprehensive loss | (3,767 | ) | (2,426 | ) | |||
Total stockholders’ deficit | (166,661 | ) | (268,570 | ) | |||
Total liabilities and stockholders’ deficit | $ | 265,843 | $ | 234,684 |
Twelve Months Ended | |||||||
December 31, | |||||||
2018 | 2017 (1) | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (10,674 | ) | $ | (13,555 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization | 21,142 | 22,337 | |||||
Provision for (recovery from) doubtful accounts | 119 | (340 | ) | ||||
Stock-based compensation expense | 6,258 | 8,311 | |||||
Non-cash provision for restructuring | 1,083 | 3,191 | |||||
Non-cash interest expense | 8,987 | 8,951 | |||||
Unrealized foreign currency transaction (gains) losses | (996 | ) | 7,336 | ||||
Provision for (benefit from) deferred taxes | 113 | (873 | ) | ||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (6,689 | ) | 3,800 | ||||
Inventories | (551 | ) | 12,280 | ||||
Prepaid expenses and other assets | 5,832 | (7,567 | ) | ||||
Accounts payable | 9,148 | 3,606 | |||||
Accrued expenses, compensation and benefits and other liabilities | (8,853 | ) | (8,189 | ) | |||
Income taxes payable | 38 | 800 | |||||
Deferred revenue and contract assets | (9,135 | ) | (31,152 | ) | |||
Net cash provided by operating activities | 15,822 | 8,936 | |||||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (9,936 | ) | (7,877 | ) | |||
Decrease (increase) in other long-term assets | 19 | (36 | ) | ||||
Net cash used in investing activities | (9,917 | ) | (7,913 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from long-term debt | 22,688 | 16,694 | |||||
Repayment of debt | (18,451 | ) | (6,735 | ) | |||
Proceeds from the issuance of common stock under employee stock plans | 355 | 445 | |||||
Common stock repurchases for tax withholdings for net settlement of equity awards | (998 | ) | (1,329 | ) | |||
Partial retirement of the Notes conversion feature and capped call option unwind | (58 | ) | — | ||||
Payments for credit facility issuance costs | (1,000 | ) | (700 | ) | |||
Net cash provided by financing activities | 2,536 | 8,375 | |||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (780 | ) | 1,087 | ||||
Net increase in cash, cash equivalents and restricted cash | 7,661 | 10,485 | |||||
Cash, cash equivalents and restricted cash at beginning of year | 60,433 | 49,948 | |||||
Cash, cash equivalents and restricted cash at end of year | $ | 68,094 | $ | 60,433 | |||
Supplemental information: | |||||||
Cash and cash equivalents | $ | 56,103 | $ | 57,223 | |||
Restricted cash | 8,500 | — | |||||
Restricted cash included in other long-term assets | 3,491 | 3,210 | |||||
Total cash, cash equivalents and restricted cash shown in the statement of cash flows | $ | 68,094 | $ | 60,433 |
Backlog Disclosure for Quarter Ended December 31, 2018 | |||||||||||||||||
December 31, 2017 | |||||||||||||||||
As Previously | ASC 606 | As | September 30, | December 31, | |||||||||||||
Reported | Adj. | Adjusted | 2018 | 2018 | |||||||||||||
Revenue Backlog* | |||||||||||||||||
Deferred Revenue | $194.6 | ($96.6 | ) | (1) | $98.0 | $88.2 | $99.6 | ||||||||||
Other Backlog | 341.5 | (6.6 | ) | (2) | 334.9 | 370.9 | 357.2 | ||||||||||
Total Revenue Backlog | $536.1 | ($103.2 | ) | $432.9 | $459.1 | $456.8 | |||||||||||
The expected timing of recognition of revenue backlog as of December 31, 2018 is as follows: | |||||||||||||||||
2019 | 2020 | 2021 | Thereafter | Total | |||||||||||||
Deferred Revenue | $80.4 | $12.6 | $3.9 | $2.7 | $99.6 | ||||||||||||
Other Backlog | 109.5 | 66.9 | 64.4 | 116.4 | 357.2 | ||||||||||||
Total Revenue Backlog | $189.9 | $79.5 | $68.3 | $119.1 | $456.8 | ||||||||||||
*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. | |||||||||||||||||
(1) The reduction is primarily attributable to the elimination of the requirement to have vendor specific objective evidence of fair value for undelivered elements that existed under ASC 605, the prior applicable accounting guidance, for software products, which no longer precludes revenue recognition under ASC 606. The impact of the adoption of ASC 606 reported in our Form 10-Q for the three months ended March 31, 2018 has been revised to reflect an additional reduction to deferred revenue and accumulated deficit as of January 1, 2018 of $3.8 million. | |||||||||||||||||
(2) For subscription contracts, we are now required under ASC 606 to record contract assets for annual and multi-year subscriptions that are billed monthly, resulting in an increase in contract assets at the date of adoption. In addition, some of our enterprise agreements have fixed payment schedules whereas the timing of the fulfillment of performance obligations under the contracts can vary, which can result in the fulfillment of performance obligations exceeding contract billings, which also results in contract assets. |