Avid Technology, Inc.
Aug 3, 2017

Avid Technology Announces Q2 2017 Results and Issues Q3 2017 Guidance

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

Strong Revenue Backlog and Continued Expense Management Creates Better Visibility

Continued Execution Drives Positive Free Cash Flow and Improvement in Liquidity

BURLINGTON, Mass., Aug. 03, 2017 (GLOBE NEWSWIRE) --  Avid® (NASDAQ:AVID) today announced its second quarter 2017 financial results, provided third quarter 2017 financial guidance and reaffirmed its guidance for the full year 2017.

Highlights of Second Quarter 2017 Results

Avid Everywhere Momentum Continues

"I am proud we have achieved a substantial milestone in Avid's history, completing the transformation we began four years ago. We could not have done it without the support of our customers, partners and investors, but most of all our employees, who believed in Avid throughout this incredible journey," said Louis Hernandez, Jr., Chairman and CEO of Avid. "The company has emerged from this transformation phase positioned for growth with a superior product suite, leaner cost structure and a more profitable business model driving positive adjusted free cash flow over the last three quarters."

Mr. Hernandez continued, "Avid offers the only cloud-enabled enterprise platform specifically designed to address the challenges facing the media industry and this uniquely positions the company to capitalize on the opportunities ahead. I am excited by what Avid can achieve in the future as we work to accelerate growth."

Financial Guidance

Avid's third quarter 2017 financial guidance is provided in the table below.

"We're pleased that our performance to date gives us the confidence to reaffirm our full-year 2017 guidance," said Brian E. Agle, Senior Vice President and Chief Financial Officer of Avid. "The first half of 2017 reflects strong EBITDA to cash conversion, significant year-over-year reduction in non-GAAP operating expenses, expanding EBITDA margin, and increasing free cash flow.  As the company moves into its growth phase, we will remain focused on creating a more predictable, scalable and profitable financial model to further increase free cash flow and liquidity."

Third Quarter 2017 Guidance

 (in $ millions) 
Bookings (Constant Currency)$95 - $109
Bookings$87 - $101
Revenue$94 - $104
Non-GAAP Operating Expenses$52 - $56
Adjusted EBITDA$8 - $14
Adjusted Free Cash Flow($7) — $1
  

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 Second Quarter and Full Year 2017 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 second quarter 2017 will be held on Thursday, August 3, 2017 at 5:00 p.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 the quarter ending September 30, 2017 for 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, Interplay, Maestro, Media Composer, Pro Tools, ProSet, RealSet 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.


AVID TECHNOLOGY, INC.        
Condensed Consolidated Statements of Operations        
(unaudited - in thousands, except per share data)        
         
  Three Months Ended Six Months Ended
  June 30, June 30,
   2017   2016   2017   2016 
         
Net revenues:        
Products $47,655  $75,592  $98,661  $160,101 
Services  54,718   58,477   107,819   117,515 
Total net revenues  102,373   134,069   206,480   277,616 
         
Cost of revenues:        
Products  26,489   28,488   50,993   55,612 
Services  14,181   15,832   28,275   30,241 
Amortization of intangible assets  1,950   1,950   3,900   3,900 
Total cost of revenues  42,620   46,270   83,168   89,753 
         
Gross profit  59,753   87,799   123,312   187,863 
         
Operating expenses:        
Research and development  16,991   21,433   35,879   42,838 
Marketing and selling  29,018   30,177   54,829   61,796 
General and administrative  13,644   16,818   28,075   34,537 
Amortization of intangible assets  363   782   726   1,568 
Restructuring costs, net  6,063   (213)  7,046   2,564 
Total operating expenses  66,079   68,997   126,555   143,303 
         
Operating (loss) income  (6,326)  18,802   (3,243)  44,560 
         
Interest and other expense, net  (3,918)  (5,159)  (8,764)  (9,342)
(Loss) income before income taxes  (10,244)  13,643   (12,007)  35,218 
         
Provision for income taxes  587   703   739   1,338 
Net (loss) income $(10,831) $12,940  $(12,746) $33,880 
         
Net (loss) income per common share - basic $(0.26) $0.33  $(0.31) $0.86 
Net (loss) income per common share - diluted $(0.26) $0.33  $(0.31) $0.85 
         
Weighted-average common shares outstanding - basic  40,953   39,678   40,863   39,622 
Weighted-average common shares outstanding - diluted  40,953   39,734   40,863   39,691 

 

AVID TECHNOLOGY, INC.       
Reconciliations of GAAP financial measures to Non-GAAP financial measures    
(unaudited - in thousands)       
 Three Months Ended Six Months Ended
 June 30, June 30,
Non-GAAP revenue 2017   2016   2017   2016 
GAAP revenue$   102,373   $   134,069   $   206,480   $   277,616  
Amortization of acquired deferred revenue -   325   -   594 
Non-GAAP revenue   102,373      134,394      206,480      278,210  
Pre-2011 Revenue 360   7,798   765   17,136 
Elim PCS -   15,200   1,700   32,800 
Non-GAAP Revenue w/o Pre-2011 and Elim   102,013      111,396      204,015      228,274  
        
Non-GAAP gross profit       
GAAP gross profit   59,753      87,799      123,312      187,863  
Amortization of acquired deferred revenue -   325   -   594 
Amortization of intangible assets 1,950   1,950   3,900   3,900 
Stock-based compensation 420   152   484   332 
Non-GAAP gross profit   62,123      90,226      127,696      192,689  
Pre-2011 Revenue 360   7,798   765   17,136 
Elim PCS -   15,200   1,700   32,800 
Non-GAAP gross profit w/o Pre-2011 and Elim   61,763      67,228      125,231      142,753  
        
Non-GAAP operating expenses       
GAAP operating expenses   66,079      68,997      126,555      143,303  
Less Amortization of intangible assets (363)  (782)  (726)  (1,568)
Less Stock-based compensation (1,563)  (2,149)  (2,909)  (4,056)
Less Restructuring costs, net (6,063)  213   (7,046)  (2,564)
Less Restatement costs (320)  (68)  (442)  (148)
Less Acquisition, integration and other costs (138)  (279)  (140)  (794)
Less Efficiency program costs (1,049)  (1,286)  (2,571)  (2,001)
Non-GAAP operating expenses   56,583      64,646      112,721      132,172  
        
Non-GAAP operating income       
GAAP operating (loss) income   (6,326)    18,802      (3,243)    44,560  
Amortization of acquired deferred revenue -   325   -   594 
Amortization of intangible assets 2,313   2,732   4,626   5,468 
Stock-based compensation 1,983   2,301   3,393   4,388 
Restructuring costs, net 6,063   (213)  7,046   2,564 
Restatement costs 320   68   442   148 
Acquisition, integration and other costs 138   279   140   794 
Efficiency program costs 1,049   1,286   2,571   2,001 
Non-GAAP operating income   5,540      25,580      14,975      60,517  
        
Adjusted EBITDA       
Non-GAAP operating income (from above)   5,540      25,580      14,975      60,517  
Depreciation 3,335   3,811   6,906   7,422 
Adjusted EBITDA   8,875      29,391      21,881      67,939  
Adjusted EBITDA margin 9%  22%  11%  24%
Pre-2011 Revenue 360   7,798   765   17,136 
Elim PCS -   15,200   1,700   32,800 
Adjusted EBITDA w/o Pre-2011 and Elim   8,515      6,393      19,416      18,003  
        
Adjusted free cash flow       
GAAP net cash provided by (used in) operating activities   2,538      (33,806)    6,072      (45,016)
Capital expenditures (1,379)  (2,803)  (3,108)  (7,321)
Free Cash Flow    1,159      (36,609)    2,964      (52,337)
        
Non-Operational / One-time Items       
Restructuring payments 3,700   3,952   6,994   7,485 
Restatement payments 151   -   210   - 
Acquisition, integration and other payments 4   848   19   1,621 
Efficiency program payments 1,144   1,602   2,729   3,583 
Sub-Total Non-Operational / One-Time Items 4,999   6,402   9,952   12,689 
        
Adjusted free cash flow$   6,158   $   (30,207) $   12,916   $   (39,648)
Adjusted free cash flow conversion of adjusted EBITDA 69%  -103%  59%  -58%
        
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 representa measure of performance in accordance with, disclosures required by generally accepted accounting principles, or GAAP. Non-GAAP financial measures should be consideredin 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)    
     
  June 30, December 31,
   2017   2016 
ASSETS    
Current assets:    
Cash and cash equivalents $47,434  $44,948 
Accounts receivable, net of allowances of $8,445 and $8,618    
at June 30, 2017 and December 31, 2016, respectively  34,433   43,520 
Inventories  41,219   50,701 
Prepaid expenses  10,058   6,031 
Other current assets  4,920   5,805 
Total current assets  138,064   151,005 
     
Property and equipment, net  23,977   30,146 
Intangible assets, net  18,307   22,932 
Goodwill  32,643   32,643 
Long-term deferred tax assets, net  1,319   1,245 
Other long-term assets  10,427   11,610 
Total assets $224,737  $249,581 
     
LIABILITIES AND STOCKHOLDERS' DEFICIT    
Current liabilities:    
Accounts payable $27,495  $26,435 
Accrued compensation and benefits  29,141   25,387 
Accrued expenses and other current liabilities  30,130   34,088 
Income taxes payable  1,958   1,012 
Short-term debt  5,000   5,000 
Deferred revenues  129,858   146,014 
Total current liabilities  223,582   237,936 
     
Long-term debt  189,857   188,795 
Long-term deferred tax liabilities, net  173   913 
Long-term deferred revenues  74,181   79,670 
Other long-term liabilities  11,699   12,178 
Total liabilities  499,492   519,492 
     
Stockholders' deficit:    
Common stock  423   423 
Additional paid-in capital  1,038,093   1,043,063 
Accumulated deficit  (1,283,894)  (1,271,148)
Treasury stock at cost  (24,270)  (32,353)
Accumulated other comprehensive loss  (5,107)  (9,896)
Total stockholders' deficit  (274,755)  (269,911)
Total liabilities and stockholders' deficit $224,737  $249,581 

 

AVID TECHNOLOGY, INC.   
Condensed Consolidated Statements of Cash Flows   
(unaudited - in thousands)   
     
  Six Months Ended
  June 30,
   2017   2016 
     
Cash flows from operating activities:   
Net (loss) income$(12,746) $33,880 
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:   
Depreciation and amortization 11,531   12,890 
(Recovery) provision for doubtful accounts (214)  367 
Stock-based compensation expense 3,393   4,388 
Non-cash provision for restructuring 2,477   - 
Non-cash interest expense 5,214   5,394 
Unrealized foreign currency transaction losses 4,763   1,578 
Benefit from deferred taxes (746)  (1,365)
Changes in operating assets and liabilities:   
Accounts receivable 9,343   13,683 
Inventories 9,482   (5,829)
Prepaid expenses and other assets (3,287)  (3,994)
Accounts payable 980   (10,373)
Accrued expenses, compensation and benefits and other liabilities (3,419)  (13,910)
Income taxes payable 991   (510)
Deferred revenues (21,690)  (81,215)
Net cash provided by (used in) operating activities 6,072   (45,016)
     
Cash flows from investing activities:   
Purchases of property and equipment (3,108)  (7,321)
Increase in other long-term assets (23)  (12)
Decrease (Increase) in restricted cash 1,700   (4,544)
Net cash used in investing activities (1,431)  (11,877)
     
Cash flows from financing activities:   
Proceeds from long-term debt -   100,000 
Repayment of debt (2,500)  (1,250)
Proceeds from the issuance of common stock under employee stock plans 217   285 
Common stock repurchases for tax withholdings for net settlement of equity awards (497)  (441)
Proceeds from revolving credit facilities -   25,000 
Payments on revolving credit facilities -   (30,000)
Payments for credit facility issuance costs -   (4,971)
Net cash (used in) provided by financing activities (2,780)  88,623 
     
Effect of exchange rate changes on cash and cash equivalents 625   733 
Net increase in cash and cash equivalents 2,486   32,463 
Cash and cash equivalents at beginning of the period 44,948   17,902 
Cash and cash equivalents at end of the period$47,434  $50,365 

 

AVID TECHNOLOGY, INC.         
Supplemental Revenue Information         
(unaudited - in thousands)         
          
 June 30, March 31, June 30,    
Revenue Backlog* 2017   2017   2016     
          
Pre-2011$331  $691  $8,732     
Post-2010$203,708  $222,342  $258,420     
Deferred Revenue$204,039  $223,033  $267,152     
Other Backlog$283,765  $271,184  $197,591     
Total Revenue Backlog$487,804  $494,217  $464,743     
          
          
The expected timing of recognition of revenue backlog as of June 30, 2017 is as follows:    
          
  2017   2018   2019  Thereafter Total
Orders executed prior to January 1, 2011$220  $112  $-  $- $331 
Orders executed or materially modified on or$73,221  $55,460  $30,583  $44,444 $203,708 
after January 1, 2011         
Other Backlog$76,862  $91,361  $55,156  $60,385 $283,765 
Total Revenue Backlog$   150,303   $   146,933   $   85,739   $   104,829  $   487,804  
          
*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.


PR Contact:
Jim Sheehan
Avid 
jim.sheehan@avid.com 
(978) 640-3152

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