Avid Technology, Inc.
May 10, 2017

Avid Technology Announces Q1 2017 Results and Issues Q2 2017 Guidance

Exceeded Guidance for Bookings and Adjusted Free Cash Flow; In-Line on All Other Metrics

Performance Drives Positive Free Cash Flow and Sequential Improvement in Liquidity

Record Recurring Revenue Bookings and Strong Revenue Backlog Provide Revenue Visibility

BURLINGTON, Mass., May 10, 2017 (GLOBE NEWSWIRE) -- Avid® (NASDAQ:AVID) announced its first quarter 2017 financial results today, provided second quarter 2017 financial guidance and reaffirmed its guidance for the full year 2017.

Highlights of First Quarter 2017 Results

Avid Everywhere Momentum Continues

"We are pleased to have once again met or exceeded quarterly guidance for all of our metrics and delivered positive Free Cash Flow, which resulted in a sequential increase in our liquidity position," said Louis Hernandez, Jr., Chairman and CEO of Avid. "In addition, the commercial agreement for Greater China that we signed with Jetsen during the quarter is further advancing our shift to recurring revenue, driving growth through guaranteed minimums and providing greater visibility with a larger backlog."

Mr. Hernandez continued, "Excluding Greater China, bookings grew 9% year-over-year on the strength of NEXIS, digital and recurring revenue bookings. The growth of recurring revenue bookings was driven by gains in subscription and maintenance, which continue to benefit from our strategy for enterprises and individuals. Execution of our efficiency program drove a 17% year-over-year reduction in Non-GAAP Operating Expenses, which, combined with revenue less impacted by pre-2011 amortization and elimination of implied PCS revenue, yielded an Adjusted EBITDA margin of 12% and Adjusted Free Cash Flow conversion of Adjusted EBITDA of 52%."

"As we reach the closing stages of our transformation, I am proud of the strategic, operational and financial achievements that we have made. This work has ensured that Avid is ready to fully capitalize on the growth opportunities made available by its Cloud strategy, including leveraging the Strategic Cloud Alliance announced with Microsoft last month at Avid Connect, our annual customer event." Mr. Hernandez concluded.

Financial Guidance

Avid's second quarter 2017 financial guidance is set forth in the table below.

"We are pleased to reaffirm our full year 2017 guidance and provide Q2 2017 guidance, which demonstrates a continued improvement in the conversion of bookings to revenue, significant year-over-year reduction in non-GAAP operating expenses, healthy EBITDA margin and Adjusted Free Cash Flow that is approximately neutral at the mid-point, a considerable improvement from a year ago. We continue to be encouraged by the financial performance resulting from Avid's transformation and remain focused on delivering a predictable financial model which generates cash and can scale as Avid transitions to its next phase of growth," said Brian E. Agle, Avid's Senior Vice President and Chief Financial Officer.

Second Quarter 2017 Guidance

 (in $ millions) 
Bookings (Constant Currency)$95-$109
Bookings$87-$101
Revenue$93-$103
Non-GAAP Operating Expenses$53-$57
Adjusted EBITDA$6-$12
Adjusted Free Cash Flow($4)-$4


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 tables 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 Fourth Quarter and Full Year 2016 Business Update presentation posted on Avid's investor relations website.

Avid includes non-GAAP financial measures in this press release, including Adjusted EBITDA, Adjusted 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, non-GAAP Operating Expenses and Adjusted Free Cash Flow. Reconciliations of these forward-looking non-GAAP financial measures were 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

A conference call to discuss Avid's financial results for the first quarter 2017 will be held on Wednesday, May 10, 2017 at 8:30 a.m. ET. The call will be open to the public and can be accessed by dialing 719-325-2278 and referencing confirmation code 2768857. 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 2017, 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; bookings; backlog; revenue backlog conversion rate; product mix and free cash flow; our long-term and recent cost savings initiatives and the anticipated benefits therefrom; 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, including cost savings initiatives, 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; the identified material weaknesses in our internal control over financial reporting; 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 Pro Tools®, Media Composer®, Avid NEXIS™, Interplay®, ProSet™ and RealSet™, Maestro™, PlayMaker™, and Sibelius®. For more information about Avid solutions and services, visit www.avid.com, connect with Avid on FacebookInstagram, Twitter, YouTubeLinkedIn, or subscribe to Avid Blogs.

© 2017 Avid Technology, Inc. All rights reserved. Avid, the Avid logo, Avid Everywhere, Avid NEXIS, iNEWS, Interplay, AirSpeed, MediaCentral, Media Composer, PhraseFind, Pro Tools, ScriptSync and Sibelius are trademarks or registered trademarks of Avid Technology, Inc. or its subsidiaries in the United States and/or other countries. The Interplay name is used with the permission of the Interplay Entertainment Corp. which bears no responsibility for Avid products. Product features, specifications, system requirements and availability are subject to change without notice.

PR Contact:
Sara Griggs
Avid
sara.griggs@avid.com
310-907-6909

Investor Contact:
Robert Roose
Avid
robert.roose@avid.com 

AVID TECHNOLOGY, INC. 
Condensed Consolidated Statements of Operations 
(unaudited - in thousands, except per share data) 
        
   Three Months Ended  
   March 31,  
    2017   2016   
        
Net revenues:      
 Products $  51,006  $  84,509   
 Services    53,101     59,038   
   Total net revenues    104,107     143,547   
        
Cost of revenues:      
 Products    24,504     27,124   
 Services    14,094     14,409   
 Amortization of intangible assets     1,950     1,950   
   Total cost of revenues    40,548     43,483   
        
Gross profit    63,559     100,064   
        
Operating expenses:      
 Research and development    18,888     21,405   
 Marketing and selling    25,811     31,619   
 General and administrative    14,431     17,719   
 Amortization of intangible assets    363     786   
 Restructuring costs, net    983     2,777   
   Total operating expenses    60,476     74,306   
        
Operating income    3,083     25,758   
        
Interest and other expense, net    (4,846)    (4,183)  
(Loss) income before income taxes    (1,763)    21,575   
        
Provision for income taxes    152     635   
Net (loss) income $  (1,915) $  20,940   
        
Net (loss) income per common share - basic and diluted $  (0.05) $  0.53   
        
Weighted-average common shares outstanding - basic  40,772   39,566   
Weighted-average common shares outstanding - diluted  40,772   39,640   
        

 

AVID TECHNOLOGY, INC. 
Reconciliations of GAAP financial measures to Non-GAAP financial measures
(unaudited - in thousands) 
  Three Months Ended  
  March 31,  
Non-GAAP revenue  2017   2016   
GAAP revenue $   104,107   $   143,547    
Amortization of acquired deferred revenue    -     269   
Non-GAAP revenue    104,107      143,816    
Pre-2011 Revenue    405     9,338   
Elim PCS    1,700     17,600   
Non-GAAP Revenue w/o Pre-2011 and Elim    102,002      116,878    
       
Non-GAAP gross profit      
GAAP gross profit    63,559      100,064    
Amortization of acquired deferred revenue    -     269   
Amortization of intangible assets    1,950     1,950   
Stock-based compensation    64     179   
Non-GAAP gross profit    65,573      102,462    
Pre-2011 Revenue    405     9,338   
Elim PCS    1,700     17,600   
Non-GAAP gross profit w/o Pre-2011 and Elim    63,468      75,524    
       
Non-GAAP operating expenses      
GAAP operating expenses    60,476      74,306    
Less Amortization of intangible assets    (363)    (786)  
Less Stock-based compensation    (1,347)    (1,908)  
Less Restructuring costs, net    (983)    (2,777)  
Less Restatement costs    (122)    (80)  
Less Acquisition, integration and other costs    (2)    (515)  
Less Efficiency program costs    (1,522)    (716)  
Non-GAAP operating expenses    56,137      67,524    
       
Non-GAAP operating income      
GAAP operating income    3,083      25,758    
Amortization of acquired deferred revenue    -     269   
Amortization of intangible assets    2,313     2,736   
Stock-based compensation    1,411     2,087   
Restructuring costs, net    983     2,777   
Restatement costs    122     80   
Acquisition, integration and other costs    2     515   
Efficiency program costs    1,522     716   
Non-GAAP operating income    9,436      34,938    
       
Adjusted EBITDA      
Non-GAAP operating income (from above)    9,436      34,938    
Depreciation    3,570     3,611   
Adjusted EBITDA    13,006      38,549    
Adjusted EBITDA margin  12%  27%  
Pre-2011 Revenue    405     9,338   
Elim PCS    1,700     17,600   
Adjusted EBITDA w/o Pre-2011 and Elim    10,901      11,611    
       
Adjusted free cash flow      
GAAP net cash provided by (used in) operating activities   3,534      (11,209)  
Capital expenditures    (1,729)    (4,518)  
Free Cash Flow     1,805      (15,727)  
       
Non-Operational / One-time Items      
Restructuring payments    3,294     3,533   
Restatement payments    59     -   
Acquisition, integration and other payments    15     773   
Efficiency program payments    1,585     1,981   
Sub-Total Non-Operational / One-Time Items    4,953     6,287   
       
Adjusted free cash flow $   6,758   $   (9,440)  
Adjusted free cash flow conversion of adjusted EBITDA  52%  -24%  
       
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) 
       
  March 31, December 31,  
   2017   2016   
ASSETS      
Current assets:      
  Cash and cash equivalents $  47,014  $  44,948   
  Accounts receivable, net of allowances of $8,886 and $8,618 at March 31, 2017 and December 31, 2016, respectively     43,626     43,520   
  Inventories    49,128     50,701   
  Prepaid expenses    12,008     6,031   
  Other current assets    5,733     5,805   
  Total current assets  157,509   151,005   
       
  Property and equipment, net    28,414     30,146   
  Intangible assets, net    20,620     22,932   
  Goodwill    32,643     32,643   
  Long-term deferred tax assets, net    1,265     1,245   
  Other long-term assets    9,913     11,610   
  Total assets $  250,364  $  249,581   
       
LIABILITIES AND STOCKHOLDERS' DEFICIT      
Current liabilities:      
  Accounts payable $  28,844  $  26,435   
  Accrued compensation and benefits    27,843     25,387   
  Accrued expenses and other current liabilities    31,929     34,088   
  Income taxes payable    1,162     1,012   
  Short-term debt    5,000     5,000   
  Deferred revenues    144,425     146,014   
  Total current liabilities  239,203   237,936   
       
  Long-term debt  189,302   188,795   
  Long-term deferred tax liabilities, net    543     913   
  Long-term deferred revenues    78,608     79,670   
  Other long-term liabilities    11,644     12,178   
  Total liabilities  519,300   519,492   
       
Stockholders' deficit:      
  Common stock    423     423   
  Additional paid-in capital    1,041,005     1,043,063   
  Accumulated deficit    (1,273,063)    (1,271,148)  
  Treasury stock at cost    (29,255)    (32,353)  
  Accumulated other comprehensive loss    (8,046)    (9,896)  
  Total stockholders' deficit  (268,936)  (269,911)  
  Total liabilities and stockholders' deficit $  250,364  $  249,581   
       

 

AVID TECHNOLOGY, INC.      
Condensed Consolidated Statements of Cash Flows      
(unaudited - in thousands)      
           
     Three Months Ended   
     March 31,   
      2017   2016    
           
Cash flows from operating activities:      
 Net (loss) income$  (1,915) $  20,940    
 Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:      
  Depreciation and amortization   5,815     6,347    
  (Recovery) provision for doubtful accounts   (110)    319    
  Stock-based compensation expense   1,411     2,087    
  Non-cash interest expense   3,131     3,878    
  Unrealized foreign currency transaction losses   1,722     2,936    
  Benefit from deferred taxes   (374)    (784)   
  Changes in operating assets and liabilities:      
   Accounts receivable   14     14,800    
   Inventories   1,573     (3,579)   
   Prepaid expenses and other assets   (5,850)    (4,061)   
   Accounts payable   2,388     (14,216)   
   Accrued expenses, compensation and benefits and other liabilities   (1,773)    (960)   
   Income taxes payable   164     1,093    
   Deferred revenues   (2,662)    (40,009)   
Net cash provided by (used in) operating activities   3,534     (11,209)   
           
Cash flows from investing activities:      
 Purchases of property and equipment   (1,729)    (4,518)   
 Increase in other long-term assets   (7)    (8)   
 Decrease (Increase) in restricted cash   1,700     (4,544)   
Net cash used in investing activities   (36)    (9,070)   
           
Cash flows from financing activities:      
 Proceeds from long-term debt   -     100,000    
 Repayment of debt   (1,250)    -    
 Proceeds from the issuance of common stock under employee stock plans   2     -    
 Common stock repurchases for tax withholdings for net settlement of equity awards   (372)    (307)   
 Proceeds from revolving credit facilities   -     25,000    
 Payments on revolving credit facilities   -     (30,000)   
 Payments for credit facility issuance costs   -     (4,919)   
Net cash (used in) provided by financing activities   (1,620)    89,774    
           
Effect of exchange rate changes on cash and cash equivalents   188     433    
Net increase in cash and cash equivalents   2,066     69,928    
Cash and cash equivalents at beginning of the period   44,948     17,902    
Cash and cash equivalents at end of the period$  47,014  $  87,830    
           

 

AVID TECHNOLOGY, INC. 
Supplemental Revenue Information 
(unaudited - in thousands) 
            
  March 31, December 31, March 31,     
 Revenue Backlog* 2017  2016  2016     
            
 Pre-2011$  691 $  1,095 $  16,529     
 Post-2010$  222,342 $  224,589 $  291,893     
 Deferred Revenue$  223,033 $  225,684 $  308,422     
 Other Backlog$  271,184 $  203,625 $  188,550     
   Total Revenue Backlog$  494,217 $  429,309 $  496,972     
            
            
 The expected timing of recognition of revenue backlog as of March 31, 2017 is as follows:  
            
   2017  2018  2019 Thereafter Total 
 Orders executed prior to January 1, 2011$  547 $  144 $  -  $  -  $  691 
 Orders executed or materially modified on or after January 1, 2011$  112,131 $  51,853 $  24,591 $  33,767 $  222,342 
 Other Backlog$  83,463 $  82,512 $  57,396 $  47,813 $  271,184 
   Total Revenue Backlog$   196,141  $   134,509  $   81,987  $   81,580  $   494,217  
            
 *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.