Avid Technology, Inc.
Feb 4, 2011

Avid Announces Fourth Quarter and Full Year 2010 Results

Q4 Revenue Growth of 12%, Highest Since 2006

BURLINGTON, Mass.--(BUSINESS WIRE)-- Avid® (NASDAQ: AVID) today reported revenues of $195.3 million for the three-month period ended December 31, 2010, compared to $174.7 million for the same period in 2009. The GAAP net loss for the fourth quarter was $571 thousand, or $0.01 per share, compared to a GAAP net loss of $17.9 million, or $0.48 per share, in the fourth quarter of 2009.

The GAAP net loss for the fourth quarters of 2010 and 2009 included amortization of intangible assets, stock-based compensation, restructuring and other charges, gains on asset sales, acquisition-related costs and related tax adjustments collectively totaling $14.8 million and $16.5 million, respectively. Excluding these items, non-GAAP net income for the fourth quarter of 2010 was $14.2 million, or $0.37 per share, compared to a non-GAAP net loss of $1.4 million, or $0.04 per share, for the fourth quarter of 2009.

"We are pleased to end 2010 on a positive note with year-on-year revenue growth for the quarter and for the year," said Gary Greenfield, chairman and CEO at Avid. "Our return to non-GAAP net income for 2010 is a significant milestone in the transformation of the business and we feel well positioned from a product and financial standpoint as we move into 2011."

Revenues for the twelve-month period ended December 31, 2010 were $678.5 million, compared to revenues of $629.0 million for the same period in 2009. GAAP net loss for 2010 was $37.0 million, or $0.98 per share, compared to a GAAP net loss of $68.4 million, or $1.83 per share, for 2009. GAAP net loss for 2010 and 2009 included amortization of intangible assets, stock-based compensation, restructuring and other charges, gains on asset sales, acquisition-related costs, a legal settlement and related tax adjustments collectively totaling $46.2 million and $55.7 million, respectively. Excluding these items, non-GAAP net income for 2010 was $9.2 million, or $0.24 per share, compared to a non-GAAP net loss of $12.7 million, or $0.34 per share, for 2009.

GAAP operating loss for 2010 was $36.2 million including amortization of intangible assets, stock-based compensation, restructuring and other charges, a gain on asset sales, acquisition-related costs and a legal settlement collectively totaling $49.8 million. Excluding these items, our non-GAAP operating profit for 2010 was $13.6 million or 2% of revenue.

A reconciliation of GAAP to non-GAAP results is included in the tables attached to this release.

Use of Non-GAAP Financial Measures

This press release contains "non-GAAP financial measures" under the rules of the U.S. Securities and Exchange Commission. 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 reconciliation of the GAAP to non-GAAP financial measures that we provide is in the tables attached to this press release.

We consider both GAAP and non-GAAP financial results in managing our business. Non-GAAP financial measures are used internally, for example, in establishing annual operating budgets, in assessing operating performance and for measuring performance under incentive compensation plans. Non-GAAP financial measures are also used in operating and financial decision-making because we believe these measures reflect our ongoing business and allow meaningful period-to-period comparisons. We believe it is useful for investors and others to also review both GAAP and non-GAAP measures in order to understand and evaluate our current operating performance and future prospects in the same manner as management and to compare in a consistent manner the company's current financial results with past financial performance. The primary limitations associated with our use of non-GAAP financial measures are that they may not include all items of income and expense that affect our operations and that the non-GAAP financial measures we use may not be directly comparable to those reported by other companies. For example, the terms used in this press release, non-GAAP operating profit and non-GAAP net income, do not have standardized meanings. Other companies may use the same or similarly named measures, but exclude different items, which may not provide investors with a comparable view of our performance in relation to other companies. We seek to compensate for this limitation by providing a detailed reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures in the tables attached to this press release.

Conference Call

A conference call to discuss Avid's fourth quarter 2010 financial results will be held today, February 4, 2011 at 8:00 a.m. EDT. The call will be open to the public and can be accessed by dialing 719.457.2617 and referencing confirmation code 4569475. The call and subsequent replay will also be available on Avid's website. To listen via this alternative, go to the Investors tab at www.avid.com for complete details prior to the start of the conference call.

Use of Forward-Looking Statements

The contents of this release are subject to the completion and filing of our Annual Report on Form 10-K. This release includes forward-looking statements, as defined by the Private Securities Litigation Reform Act of 1995. Statements in this press release that relate to future results or events are forward-looking statements and are based on Avid's current estimates and assumptions. Forward-looking statements may be identified by use of forward-looking words, such as "anticipate," ‘believe," "could," "estimate," "expect," "intend," "confidence," "may," "plan," "feel," "should," "will" and "would," or similar expressions. Actual results and events in future periods may differ materially from those expressed or implied by these forward-looking statements because of a number of risks, uncertainties and other factors, including: Avid's ability to execute on its corporate strategy and meet customer needs, including the ability to produce innovative products in response to rapidly evolving market demand; general economic conditions and conditions within the media industry specifically; competitive factors; pricing pressures; delays in product shipments; and other risk factors and uncertainties disclosed previously and from time to time in Avid's filings with the U.S. Securities and Exchange Commission. In addition, the forward-looking statements contained herein represent Avid's estimates only as of today and should not be relied upon as representing the company's estimates as of any subsequent date. While Avid may elect to update these forward-looking statements at some point in the future, Avid specifically disclaims any obligation to do so, even if the estimates change.

About Avid

Avid creates the digital audio and video technology used to make the most listened to, most watched and most loved media in the world — from the most prestigious and award-winning feature films, music recordings, television shows, live concert tours and news broadcasts, to music and movies made at home. Some of Avid's most influential and pioneering solutions include Media Composer®, Pro Tools®, Interplay®, ISIS®, VENUE, Oxygen 8, Sibelius®, System 5, and Pinnacle Studio™. For more information about Avid solutions and services, visit www.avid.com, del.icio.us, Flickr, Twitter and YouTube; connect with Avid on Facebook; or subscribe to Avid Industry Buzz.

© 2010 Avid Technology, Inc. All rights reserved. Avid, the Avid Logo, Interplay, ISIS, Media Composer, Pinnacle Studio, Pro Tools 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 Interplay Entertainment Corp., which bears no responsibility for Avid products. All other trademarks are the property of their respective owners.

                 
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,
2010 2009 2010 2009
Net revenues:
Products $ 162,863 $ 140,140 $ 559,907 $ 509,215
Services   32,484     34,539     118,615     119,755  
Total net revenues   195,347     174,679     678,522     628,970  
 
Cost of revenues:
Products 74,458 66,588 267,985 243,362
Services 15,117 16,239 56,490 59,754
Amortization of intangible assets 642 568 3,299 2,033
Restructuring costs   -     -     -     799  
Total cost of revenues 90,217 83,395 327,774 305,948
       
Gross profit   105,130     91,284     350,748     323,022  
 
Operating expenses:
Research and development 30,881 30,015 120,229 120,989
Marketing and selling 47,759 46,121 177,178 173,601
General and administrative 16,166 21,322 64,345 61,087
Amortization of intangible assets 2,186 2,732 9,743 10,511
Restructuring and other costs, net 14,918 9,741 20,450 26,873
Gain on sales of assets   (3,502 )   (3,553 )   (5,029 )   (155 )
Total operating expenses   108,408     106,378     386,916     392,906  
 
Operating loss (3,278 ) (15,094 ) (36,168 ) (69,884 )
 
Interest and other income (expense), net   (258 )   (94 )   (390 )   (123 )
Loss before income taxes (3,536 ) (15,188 ) (36,558 ) (70,007 )
 
(Benefit from) provision for income taxes, net   (2,965 )   2,733     396     (1,652 )
 
Net loss   ($571 )   ($17,921 )   ($36,954 )   ($68,355 )
 
Net loss per common share - basic and diluted   ($0.01 )   ($0.48 )   ($0.98 )   ($1.83 )
 
Weighted-average common shares outstanding - basic and diluted 38,101 37,415 37,895 37,293
                   
AVID TECHNOLOGY, INC.
(unaudited - in thousands, except per share data)
 
Change in Financial Presentation
Beginning January 1, 2010, we are reporting based on a single reporting segment. Comparative results for the 2009 periods have been updated to reflect this new business structure.
 
Reconciliations of GAAP financial measures to Non-GAAP financial measures:
 

Three Months Ended December 31, 2010

 
Gross Operating Operating Tax Net
Profit Expenses (Loss) Income   (Benefit) Provision   (Loss) Income
GAAP $ 105,130 $ 108,408 ($3,278 ) ($2,965 ) ($571 )
 
Amortization of intangible assets 642 (2,186 ) 2,828 2,828
Restructuring and other costs, net (14,918 ) 14,918 14,918
Gain on sales of assets 3,502 (3,502 ) (3,502 )
Tax adjustment 2,752 (2,752 )
Stock-based compensation included in:
Cost of products revenues 162 162 162
Cost of services revenues 232 232 232
Research and development expenses (523 ) 523 523
Marketing and selling expenses (956 ) 956 956
General and administrative expenses (1,434 ) 1,434 1,434
         
Non-GAAP $ 106,166 $ 91,893 $ 14,273 ($213 ) $ 14,228
 
Weighted-average shares outstanding - diluted 38,182
 
Non-GAAP net income per share - diluted $ 0.37
 

Three Months Ended December 31, 2009

 
Gross Operating Operating Tax Net
Profit Expenses (Loss) Income   Provision Loss
GAAP $ 91,284 $ 106,378 ($15,094 ) $ 2,733 ($17,921 )
 
Amortization of intangible assets 568 (2,732 ) 3,300 3,300
Restructuring and other costs, net (9,741 ) 9,741 9,741
Acquisition-related costs (a) (4,159 ) 4,159 4,159
Gain on sales of assets 3,553 (3,553 ) (3,553 )
Tax adjustment 585 (585 )
Stock-based compensation included in:
Cost of products revenues 193 193 193
Cost of services revenues 286 286 286
Research and development expenses (717 ) 717 717
Marketing and selling expenses (1,074 ) 1,074 1,074
General and administrative expenses (1,216 ) 1,216 1,216
         
Non-GAAP $ 92,331 $ 90,292 $ 2,039 $ 3,318 ($1,373 )
 
Weighted-average shares outstanding - diluted 37,415
 
Non-GAAP net loss per share - diluted ($0.04 )
 
(a) Represents costs included in general and administrative expenses
                   
AVID TECHNOLOGY, INC.
(unaudited - in thousands, except per share data)
 
Reconciliations of GAAP financial measures to Non-GAAP financial measures:
 
Twelve Months Ended December 31, 2010
 
Gross Operating Operating Tax Net
Profit Expenses (Loss) Income Provision (Loss) Income
GAAP $ 350,748 $ 386,916 ($36,168 ) $ 396 ($36,954 )
 
Amortization of intangible assets 3,299 (9,743 ) 13,042 13,042
Restructuring and other costs, net (a) (20,450 ) 20,450 20,450
Acquisition-related costs (b) (825 ) 825 825
Legal settlement (b) (5,600 ) 5,600 5,600
Gain on sales of assets 4,029 (4,029 ) (4,029 )
Tax adjustment 3,606 (3,606 )
Stock-based compensation included in:
Cost of products revenues 724 724 724
Cost of services revenues 1,054 1,054 1,054
Research and development expenses (2,227 ) 2,227 2,227
Marketing and selling expenses (4,109 ) 4,109 4,109
General and administrative expenses (5,807 ) 5,807 5,807
         
Non-GAAP $ 355,825 $ 342,184 $ 13,641 $ 4,002 $ 9,249
 
Weighted-average shares outstanding - diluted 37,963
 
Non-GAAP net income per share - diluted $ 0.24
 
Twelve Months Ended December 31, 2009
 
Gross Operating Operating Tax Net
Profit Expenses Loss (Benefit) Provision   Loss
GAAP $ 323,022 $ 392,906 ($69,884 ) ($1,652 ) ($68,355 )
 
Amortization of intangible assets 2,033 (10,511 ) 12,544 12,544
Restructuring and other costs, net 799 (26,873 ) 27,672 27,672
Acquisition-related costs (b) (4,159 ) 4,159 4,159
Gain on sales of assets 155 (155 ) (155 )
Tax adjustment 1,942 (1,942 )
Stock-based compensation included in:
Cost of products revenues 859 859 859
Cost of services revenues 1,154 1,154 1,154
Research and development expenses (2,454 ) 2,454 2,454
Marketing and selling expenses (3,596 ) 3,596 3,596
General and administrative expenses (5,331 ) 5,331 5,331
         
Non-GAAP $ 327,867 $ 340,137 ($12,270 ) $ 290 ($12,683 )
 
Weighted-average shares outstanding - diluted 37,293
 
Non-GAAP net loss per share - diluted ($0.34 )
 
(a) Includes costs of $3.7 million related to exiting our former Tewksbury, Massachusetts headquarters lease
(b) Represents costs included in general and administrative expenses
 
 
Revenue Summary: Three Months Ended Twelve Months Ended
December 31,   December 31,
2010   2009 2010 2009
Video revenues $ 117,793 $ 106,192 $ 395,853 $ 375,010
Audio revenues   77,554   68,487     282,669     253,960  
Total net revenues $ 195,347 $ 174,679   $ 678,522   $ 628,970  
AVID TECHNOLOGY, INC.
Condensed Consolidated Balance Sheets
(unaudited - in thousands)
       
December 31, December 31,
2010 2009
ASSETS:
Current assets:
Cash and cash equivalents $ 42,782 $ 91,517
Marketable securities - 17,360
Accounts receivable, net of allowances of $17,403 and $16,347
at December 31, 2010 and 2009, respectively
101,171 79,741
Inventories 108,357 77,243
Deferred tax assets, net 1,068 770
Prepaid expenses 7,688 7,789
Other current assets   16,130     22,516  
Total current assets 277,196 296,936
 
Property and equipment, net 62,519 37,217
Intangible assets, net 29,750 29,235
Goodwill 246,221 227,195
Other assets   10,109     20,455  
 
Total assets $ 625,795   $ 611,038  
 
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 47,340 $ 30,230
Accrued compensation and benefits 41,101 25,281
Accrued expenses and other current liabilities 40,673 55,591
Deferred tax liabilities, net 313 -
Income taxes payable 4,640 3,228
Deferred revenues   40,585     39,107  
Total current liabilities 174,652 153,437
 
Long-term liabilities   25,309     14,483  
Total liabilities   199,961     167,920  
 
Stockholders' equity:
Common stock 423 423
Additional paid-in capital 1,005,198 992,489
Accumulated deficit (496,030 ) (444,661 )
Treasury stock at cost, net of reissuances (91,025 ) (112,389 )
Accumulated other comprehensive income   7,268     7,256  
Total stockholders' equity   425,834     443,118  
 
Total liabilities and stockholders' equity $ 625,795   $ 611,038  
AVID TECHNOLOGY, INC.                  
Condensed Consolidated Statements of Cash Flows
(unaudited - in thousands)
 
Three Months Ended Twelve Months Ended
December 31, December 31,
2010 2009 2010 2009
Cash flows from operating activities:
Net loss ($571 ) ($17,921 ) ($36,954 ) ($68,355 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization

8,521

8,072

33,547

32,130
(Recoveries of) provision for doubtful accounts (91 ) 276 194 1,930
Non-cash provision for restructuring 89 1,042 380 3,140
Gain on sales of assets (3,502 ) (3,553 ) (5,029 ) (155 )
(Gain) loss on disposal of fixed assets (8 ) (3 ) (78 ) 43
Compensation expense from stock grants and options 3,307 3,486 13,921 13,394
Changes in deferred tax assets and liabilities, excluding initial effects of acquisitions 233 381 (1,160 ) (1,634 )

Changes in operating assets and liabilities, excluding initial effects of acquisitions

Accounts receivable (11,510 ) 5,449 (17,847 ) 24,771
Inventories (12,328 ) 14,453 (27,672 ) 17,766
Prepaid expenses and other current assets

2,358

1,521

8,778

8,980
Accounts payable 2,109 7,471 15,941 739
Accrued expenses, compensation and benefits and other liabilities 25,739 14,295 718 (13,517 )
Income taxes payable (621 ) 391 1,669 (6,330 )
Deferred revenues   (5,947 )   (16,824 )   816     (26,373 )
Net cash provided by (used in) operating activities  

7,778

    18,536    

(12,776

)   (13,471 )
 
Cash flows from investing activities:
Purchases of property and equipment (2,930 ) (9,058 ) (28,856 ) (18,689 )
Increase in other long-term assets

(634

) (9,848 )

(523

) (11,432 )

Payments for business acquisitions, net of cash acquired

- - (27,008 ) (4,413 )
Proceeds from sales of assets 3,502 3,502 4,502 3,502
Proceeds from notes receivable - 511 - 2,500
Purchases of marketable securities - (3,149 ) (2,250 ) (55,741 )
Proceeds from sales of marketable securities   -     10,642     19,605     64,318  
Net cash used in investing activities  

(62

)   (7,400 )  

(34,530

)   (19,955 )
 
Cash flows from financing activities:

Payments related to stock option purchase

- - - (526 )

Proceeds from the issuance of common stock under employee stock plans, net

797 535 736 646

Proceeds from revolving credit facilities

5,000

-

5,000

-

Payments on revolving credit facilities

(5,000

)

-

(5,000

)

-

Payments for credit facility issuance costs

 

(870

)

 

-

   

(1,063

)

 

-

 
Net cash provided by financing activities  

(73

)

  535    

(327

)

  120  
 
Effect of exchange rate changes on cash and cash equivalents   778     1,728     (1,102 )   3,031  
Net increase (decrease) in cash and cash equivalents 8,421 13,399 (48,735 ) (30,275 )
Cash and cash equivalents at beginning of period   34,361     78,118     91,517     121,792  
Cash and cash equivalents at end of period $ 42,782   $ 91,517   $ 42,782   $ 91,517  
 
Non-cash investing activities:
Landlord allowance for leasehold improvements - - $ 6,036 -
Issuance of common stock for business acquisition - - $ 5,000 -

Avid
Investor Contact:
Tom Fitzsimmons, 978-640-3346
tom.fitzsimmons@avid.com
or
Media Contact:
Carter Holland, 978-640-3172
carter.holland@avid.com

Source: Avid

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