Avid Technology, Inc.
Jul 21, 2011

Avid Announces Results for Second Quarter

BURLINGTON, Mass.--(BUSINESS WIRE)-- Avid® (NASDAQ: AVID) today reported revenues of $161.3 million for the three-month period ended June 30, 2011, compared to $162.2 million for the same period in 2010. The GAAP net loss for the second quarter was $11.9 million, or $0.31 per share, compared to a GAAP net loss of $12.9 million, or $0.34 per share, in the second quarter of 2010.

The GAAP net loss for the second quarter of 2011 and 2010 included amortization of intangible assets, stock-based compensation, loss on asset sales, a legal settlement, acquisition-related costs, restructuring recoveries and charges and related tax adjustments collectively totaling $8.0 million and $10.9 million, respectively. Excluding these items, the non-GAAP net loss for the second quarter of 2011 was $3.9 million, or $0.10 per share, compared to a non-GAAP net loss of $2.0 million, or $0.05 per share, for the second quarter of 2010.

"While Q2 was difficult, I believe our business is sound," said Gary Greenfield, chairman and CEO at Avid. "Our customer focus is unwavering and I believe we'll succeed by continuing to listen to them and responding with innovative, open tools to help video and audio professionals and enthusiasts around the world create great content they can distribute anywhere, anytime."

Revenues for the six-month period ended June 30, 2011 were $327.7 million, compared to revenues of $318.1 million for the same period in 2010. The GAAP net loss for the first six months of 2011 was $17.0 million, or $0.44 per share, compared to a GAAP net loss of $26.4 million, or $0.70 per share, for the same period in 2010. The GAAP net loss for the six-month period ended June 30, 2011 included $12.2 million of amortization of intangible assets, stock-based compensation, net restructuring recoveries, loss on asset sales, a legal settlement, acquisition-related costs and related tax adjustments. Excluding these items, the non-GAAP net loss was $4.8 million, or $0.12 per share, for the first half of 2011. The GAAP net loss for the six-month period ended June 30, 2010 included $19.8 million of amortization of intangible assets, stock-based compensation, restructuring charges, acquisition-related costs and related tax adjustments. Excluding these items, the non-GAAP net loss was $6.6 million, or $0.17 per share, for the first half of 2010.

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

Conference Call

A conference call to discuss Avid's second quarter 2011 financial results will be held today, July 21, 2011 at 4:30 p.m. ET. 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 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.

Management considers 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, such as non-GAAP net loss, 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.

Use of Forward-Looking Statements

The contents of this release are subject to the completion and filing of our Quarterly Report on Form 10-Q. 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 the 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 changing market demand; general economic conditions and conditions within the rapidly evolving media industry specifically; competitive factors; fluctuations in Avid's revenues, based on, among other things, Avid's performance in particular geographies; 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.

© 2011 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
June 30,
Six Months Ended
June 30,
2011   2010   2011   2010  
Net revenues:
Products $129,190 $134,134 $266,525 $262,813
Services 32,154   28,026   61,142   55,303  
Total net revenues 161,344   162,160   327,667   318,116  
 
Cost of revenues:
Products 62,964 65,837 127,615 129,106
Services 15,312 13,139 29,699 27,179
Amortization of intangible assets 685   946   1,351   1,912  
Total cost of revenues 78,961 79,922 158,665 158,197

 

       
Gross profit 82,383   82,238   169,002   159,919  
 
Operating expenses:
Research and development 30,453 30,268 60,426 60,419
Marketing and selling 46,052 44,474 90,862 86,220
General and administrative 14,920 13,879 30,218 28,481
Amortization of intangible assets 2,161 2,417 4,306 5,274
Restructuring and other (recoveries) costs, net (163 ) 4,007 (2,379 ) 5,347
Loss on sales of assets 597   -   597   -  
Total operating expenses 94,020   95,045   184,030   185,741  
 
Operating loss (11,637 ) (12,807 ) (15,028 ) (25,822 )
 
Interest and other income (expense), net (768 ) (102 ) (1,068 ) (102 )
Loss before income taxes (12,405 ) (12,909 ) (16,096 ) (25,924 )
 
(Benefit from) provision for income taxes, net (543 ) (3 ) 883   464  
 
Net loss ($11,862 ) ($12,906 ) ($16,979 ) ($26,388 )
 
Net loss per common share - basic and diluted ($0.31 ) ($0.34 ) ($0.44 ) ($0.70 )
 
Weighted-average common shares outstanding - basic and diluted 38,413 37,909 38,323 37,714
                           
 
AVID TECHNOLOGY, INC.
(unaudited - in thousands, except per share data)
 
Reconciliations of GAAP financial measures to Non-GAAP financial measures:
 

Three Months Ended June 30, 2011

 
Gross
Profit
Operating
Expenses
Operating
Loss
Tax
Benefit
Net
Loss
GAAP $82,383 $94,020 ($11,637 ) ($543 ) ($11,862 )
 
Amortization of intangible assets 685 (2,161 ) 2,846 2,846
Restructuring recoveries, net 163 (163 ) (163 )
Acquisition-related costs (a) (200 ) 200 200
Legal settlement (a) (192 ) 192 192
Loss on sales of assets (597 ) 597 597
Tax adjustment 245 (245 )
Stock-based compensation included in:
Cost of products revenues 110 110 110
Cost of services revenues 277 277 277
Research and development expenses (427 ) 427 427
Marketing and selling expenses (1,356 ) 1,356 1,356
General and administrative expenses (2,355 ) 2,355 2,355
         
Non-GAAP $83,455 $86,895 ($3,440 ) ($298 ) ($3,910 )
 
Weighted-average shares outstanding - diluted 38,413
 
Non-GAAP net income per share - diluted ($0.10 )
 
 

Three Months Ended June 30, 2010

 

Gross
Profit

Operating
Expenses
Operating
Loss
Tax
(Benefit) Provision
Net
Loss
GAAP $82,238 $95,045 ($12,807 ) ($3 ) ($12,906 )
 
Amortization of intangible assets 946 (2,417 ) 3,363 3,363
Restructuring and other costs, net (4,007 ) 4,007 4,007
Acquisition-related costs (a) (83 ) 83 83
Tax adjustment 171 (171 )
Stock-based compensation included in:
Cost of products revenues 197 197 197
Cost of services revenues 282 282 282
Research and development expenses (547 ) 547 547
Marketing and selling expenses (1,107 ) 1,107 1,107
General and administrative expenses (1,531 ) 1,531 1,531
         
Non-GAAP $83,663 $85,353 ($1,690 ) $168 ($1,960 )
 
Weighted-average shares outstanding - diluted 37,909
 
Non-GAAP net loss per share - diluted ($0.05 )
 
(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:
 

Six Months Ended June 30, 2011

 
Gross
Profit
Operating
Expenses
Operating
Loss
Tax
Provision
Net
Loss
GAAP $169,002 $184,030 ($15,028 ) $883 ($16,979 )
 
Amortization of intangible assets 1,351 (4,306 ) 5,657 5,657
Restructuring recoveries, net 2,379 (2,379 ) (2,379 )
Acquisition-related costs (a) (200 ) 200 200
Legal settlement (a) (192 ) 192 192
Loss on sales of assets (597 ) 597 597
Tax adjustment 300 (300 )
Stock-based compensation included in:
Cost of products revenues 249 249 249
Cost of services revenues 545 545 545
Research and development expenses (899 ) 899 899
Marketing and selling expenses (2,574 ) 2,574 2,574
General and administrative expenses (3,995 ) 3,995 3,995
         
Non-GAAP $171,147 $173,646 ($2,499 ) $1,183 ($4,750 )
 
Weighted-average shares outstanding - diluted 38,323
 
Non-GAAP net income per share - diluted ($0.12 )
 
 

Six Months Ended June 30, 2010

 
Gross
Profit
Operating
Expenses
Operating
Loss
Tax
Provision
Net
Loss
GAAP $159,919 $185,741 ($25,822 ) $464 ($26,388 )
 
Amortization of intangible assets 1,912 (5,274 ) 7,186 7,186
Restructuring and other costs, net (b) (5,347 ) 5,347 5,347
Acquisition-related costs (a) (769 ) 769 769
Tax adjustment 455 (455 )
Stock-based compensation included in:
Cost of products revenues 386 386 386
Cost of services revenues 535 535 535
Research and development expenses (1,198 ) 1,198 1,198
Marketing and selling expenses (2,075 ) 2,075 2,075
General and administrative expenses (2,792 ) 2,792 2,792
         
Non-GAAP $162,752 $168,286 ($5,534 ) $919 ($6,555 )
 
Weighted-average shares outstanding - diluted 37,714
 
Non-GAAP net loss per share - diluted ($0.17 )
 
(a) Represents costs included in general and administrative expenses
(b) Includes costs of $3.7 million related to exiting our former Tewksbury, Massachusetts headquarters lease
 
 
Revenue Summary:
Three Months Ended Six Months Ended
June 30, June 30,
2011 2010   2011   2010
Video revenues $96,262 $93,521 $190,882 $177,874
Audio revenues 65,082 68,639   136,785   140,242
Total net revenues $161,344 $162,160   $327,667   $318,116
           
 
AVID TECHNOLOGY, INC.
Condensed Consolidated Balance Sheets
(unaudited - in thousands)
 
June 30, December 31,
2011   2010  
ASSETS:
Current assets:
Cash and cash equivalents $ 37,557 $ 42,782

Accounts receivable, net of allowances of $15,400 and $17,149
 at June 30, 2011 and December 31, 2010, respectively

98,386 101,171
Inventories 129,795 108,357
Deferred tax assets, net 1,144 1,068
Prepaid expenses 7,628 7,688
Other current assets   15,622     16,130  
Total current assets 290,132 277,196
 
Property and equipment, net 59,254 62,519
Intangible assets, net 24,625 29,750
Goodwill 247,520 246,997
Other assets   11,065     10,109  
 
Total assets $ 632,596   $ 626,571  
 
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Borrowings under revolving credit facilities $ 13,000 $ -
Accounts payable 44,777 47,340
Accrued compensation and benefits 31,834 41,101
Accrued expenses and other current liabilities 35,560 40,986
Income taxes payable 2,801 4,640
Deferred revenues   49,341     40,585  
Total current liabilities 177,313 174,652
 
Long-term liabilities   28,036     25,309  
Total liabilities   205,349     199,961  
 
Stockholders' equity:
Common stock 423 423
Additional paid-in capital 1,012,348 1,005,198
Accumulated deficit (515,963 ) (495,254 )
Treasury stock at cost, net of reissuances (84,834 ) (91,025 )
Accumulated other comprehensive income   15,273     7,268  
Total stockholders' equity   427,247     426,610  
 
Total liabilities and stockholders' equity $ 632,596   $ 626,571  
                       
 
AVID TECHNOLOGY, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited - in thousands)
 
Three Months Ended Six Months Ended
June 30, June 30,
2011   2010   2011   2010  
Cash flows from operating activities:
Net loss ($11,862 ) ($12,906 ) ($16,979 ) ($26,388 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 7,903 8,194 15,875 16,497
Provision for (recoveries of) doubtful accounts 315 160 459 (10 )
Non-cash provision for restructuring - 249 125 249
Loss on sales of assets 597 - 597 -
Gain on disposal of fixed assets (1 ) (33 ) (6 ) (46 )
Compensation expense from stock grants and options 4,525 3,664 8,262 6,986
Unrealized foreign currency transaction losses (gains) 2,705 (2,684 ) 6,490 (5,248 )
Changes in deferred tax assets and liabilities, excluding initial effects of acquisitions (4 ) (250 ) (4 ) (250 )
Changes in operating assets and liabilities, excluding initial effects of acquisitions:
Accounts receivable (2,864 ) (15,028 ) 2,228 (17,521 )
Inventories (4,695 ) (3,959 ) (21,438 ) 1,744
Prepaid expenses and other current assets 1,738 5,358 (208 ) 5,269
Accounts payable (2,732 ) 18,117 (2,625 ) 20,920
Accrued expenses, compensation and benefits, and other liabilities (2,107 ) (2,880 ) (16,246 ) (18,482 )
Income taxes payable (1,427 ) (1,172 ) (2,031 ) (967 )
Deferred revenues 672   786   11,815   8,346  
Net cash used in operating activities (7,237 ) (2,384 ) (13,686 ) (8,901 )
 
Cash flows from investing activities:
Purchases of property and equipment (2,534 ) (12,500 ) (6,078 ) (22,509 )
(Increase) decrease in other long-term assets (350 ) (214 ) (574 ) 67
Payments for business acquisitions, net of cash acquired - (10,921 ) - (27,008 )
Purchases of marketable securities - (500 ) - (2,250 )
Proceeds from sales of marketable securities -   1,000   -   19,605  
Net cash used in investing activities (2,884 ) (23,135 ) (6,652 ) (32,095 )
 
Cash flows from financing activities:
Proceeds from (payments related to) the issuance of common stock under employee stock plans, net 1,222 405 1,349 (322 )
Proceeds from revolving credit facilities 13,000 - 21,000 -
Payments on revolving credit facilities -   -   (8,000 ) -  

Net cash provided by (used in) financing activities

14,222   405   14,349   (322 )
 
Effect of exchange rate changes on cash and cash equivalents

236

  (1,828 ) 764   (3,406 )
Net increase (decrease) in cash and cash equivalents 4,337 (26,942 ) (5,225 ) (44,724 )
Cash and cash equivalents at beginning of period 33,220   73,735   42,782   91,517  
Cash and cash equivalents at end of period $37,557   $46,793   $37,557   $46,793  

Avid
Investor Contact:
Tom Fitzsimmons, 978-640-3346
tom.fitzsimmons@avid.com
or
Media Contact:
Michele Perry, 978-640-5113
michele.perry@avid.com

Source: Avid

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