Avid Technology, Inc.
Mar 15, 2018

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 (GLOBE NEWSWIRE) -- 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

2017 Highlights

Avid Progressing on Strategic Growth Objectives

"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)2018Q1 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 FacebookInstagram, TwitterYouTubeLinkedIn, 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.

 

 

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,  
Non-GAAP revenue  2017   2016   2017   2016   
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 December 31, 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)  
        Total liabilities and stockholders' deficit $  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 the period   44,948     17,902    
Cash and cash equivalents at end of the period$  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 GuidanceASC 6062018 ComparisonActual 
($M)LowHighAdd BackLowHigh 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  
 GuidanceASC 606Q1'18 ComparisonActual
($M)LowHighAdd BackLowHighQ1 2017Q4 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

 

Investor Contact:
Dean Ridlon
Avid
dean.ridlon@avid.com
(978) 640-3379

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