Avid Technology, Inc.
Jul 30, 2012

Avid Announces Results for Second Quarter 2012

Reports Year-on-Year Revenue Growth for Non-divested Business

BURLINGTON, Mass.--(BUSINESS WIRE)-- Avid® (NASDAQ: AVID) today reported GAAP revenues of $157.4 million for the three-month period ended June 30, 2012, compared to $161.8 million for the same period in 2011. The GAAP net loss for the second quarter was $39.0 million, or $1.01 per share, compared to a GAAP net loss of $11.1 million, or $0.29 per share, in the second quarter of 2011.

Excluding revenue from the consumer product lines divested on July 2nd, the revenue for the three-month period ended June 30, 2012 was $143.7 million and the revenue on the same basis for the three-month period ended June 30, 2011 was $137.3 million.

The GAAP net loss for the second quarter of 2012 and 2011 included amortization of intangible assets, stock-based compensation, restructuring costs and costs and allowances related to divestitures, acquisition and other costs, losses on assets held for sale and asset sales, legal settlement for 2011 only and related tax adjustments collectively totaling $34.9 million and $7.8 million, respectively. Excluding these items, the non-GAAP net loss for the second quarter of 2012 was $4.1 million, or $0.11 per share, compared to non-GAAP net loss of $3.4 million, or $0.09 per share, for the second quarter of 2011.

The GAAP operating loss for the second quarter of 2012 was $37.8 million and excluding the items identified above, except tax adjustments, the non-GAAP operating loss for the second quarter was $2.1 million.

"Our results for the second quarter were encouraging with 5% year-on-year revenue growth for our ongoing business and a $10 million sequential increase in our cash balance," said Gary Greenfield, chairman and CEO of Avid. "This performance reinforced the strategic direction we took earlier this month and we are excited about our prospects for the second half of the year."

Revenues for the six-month period ended June 30, 2012 were $309.6 million, compared to revenues of $327.5 million for the same period in 2011. The GAAP net loss for the first six months of 2012 was $52.0 million, or $1.34 per share, compared to a GAAP net loss of $15.9 million, or $0.42 per share, for the same period in 2011. The GAAP net loss for the six-month period ended June 30, 2012 included $40.5 million of amortization of intangible assets, stock-based compensation, restructuring costs and costs and allowances related to divestitures, acquisition and other costs, loss on asset sales and related tax adjustments. Excluding these items, the non-GAAP net loss was $11.5 million, or $0.30 per share, for the first half of 2012. The GAAP net loss for the six-month period ended June 30, 2011 included $13.2 million of amortization of intangible assets, stock-based compensation, restructuring costs, legal settlement, acquisition-related costs, loss on asset sales and related tax adjustments. Excluding these items, the non-GAAP net loss for the six-month period ended June 30, 2011 was $2.7 million or $0.07 per share.

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

The company's cash balance on June 30, 2012 was $59.4 million. The quarter-end cash balance excludes the proceeds from the sale of consumer product lines of $14.5 million, a portion of which is being held in escrow. It is expected that these proceeds will offset the majority of cash cost associated with the Company's 2012 restructuring plan.

The company continues to review certain estimates associated with the divestiture of consumer product lines and estimates related to the restructuring costs and costs and allowances related to divestitures. A change in those estimates could result in adjustments to the company's financial statements in its Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, which could be material.

Conference Call

A conference call to discuss Avid's second quarter 2012 financial results will be held today, July 30, 2012 at 5:00 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 join the webcast 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 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, terms referring to non-GAAP financial measures 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 financial results included in this release are preliminary and unaudited. The contents of this release are subject to the completion and filing of our Quarterly Report on Form 10-Q. This release may include 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," "should," "estimate," "expect," "intend," "confidence," "may," "plan," "feel," "could," "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: adjustments that may be made to Avid's preliminary financial results included in this release as a result of the review of certain estimates associated with the sale of Avid's consumer audio and video product lines and restructuring costs and costs and allowances related to divestitures; Avid's ability to execute its strategic plan and meet customer needs; Avid's ability to realize operational and financial benefits from the sale of its consumer audio and video product lines and the reduction in workforce announced earlier this month; Avid's ability to sell its professional products through retail sales channels following the divestiture of consumer products sold through those sales channels; its ability to produce innovative products in response to changing market demand, particularly in the media industry; competitive factors; fluctuations in its revenue, based on, among other things, Avid's performance in particular geographies or markets, fluctuations in foreign currency exchange rates, and seasonal factors; adverse changes in economic conditions; Avid's liquidity; 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, to live concert tours and news broadcasts. Some of Avid's most influential and pioneering solutions include Media Composer®, Pro Tools®, Interplay®, ISIS®, VENUE, Sibelius®, and System 5. For more information about Avid solutions and services, visit www.avid.com, Flickr, Twitter and YouTube; connect with Avid on Facebook; or subscribe to Avid Industry Buzz.

© 2012 Avid Technology, Inc. All rights reserved. Product features, specifications, system requirements and availability are subject to change without notice. All prices are MSRP for the U.S. and Canada only and are subject to change without notice. Contact your local Avid office or reseller for prices outside the U.S. and Canada. Avid, the Avid logo, Fast Track, Media Composer, Pro Tools, Interplay, ISIS, 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. 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 Six Months Ended
June 30, June 30,

2011
(Revised)

2011
(Revised)

  2012     2012  
Net revenues:
Products $ 125,874 $ 129,488 $ 245,812 $ 266,234
Services 34,405 32,295 66,607 61,301
Less allowances related to divestitures   (2,848 )     (2,848 )  
Total net revenues $ 157,431     161,783   $ 309,571     327,535  
 
Cost of revenues:
Products 66,637 64,023 127,850 127,888
Services 14,325 14,706 27,042 28,760
Amortization of intangible assets 649 685 1,294 1,351
Restructuring costs   1,913       1,913    
Total cost of revenues 83,524 79,414 158,099 157,999
       
Gross profit $ 73,907     82,369     151,472     169,536  
 
Operating expenses:
Research and development 26,900 30,453 54,381 60,426
Marketing and selling 43,454 45,851 89,380 90,917
General and administrative 14,324 14,234 29,214 29,219
Amortization of intangible assets 1,105 2,161 2,717 4,306
Restructuring costs (recoveries), net 15,841 162 16,009 (1,314 )
Loss on sales of assets   10,045     597     9,793     597  
Total operating expenses   111,669     93,458     201,494     184,151  
 
Operating loss ($37,762 ) (11,089 ) (50,022 ) (14,615 )
 
Interest and other income (expense), net   (379 )   (645 )   (573 )   (945 )
Loss before income taxes ($38,141 ) (11,734 ) (50,595 ) (15,560 )
 
Provision for (benefit from) income taxes, net   903     (590 )   1,426     367  
 
Net loss   ($39,044 )   ($11,144 )   ($52,021 )   ($15,927 )
 
Net loss per common share - basic & diluted   ($1.01 )   ($0.29 )   ($1.34 )   ($0.42 )
 
Weighted-average common shares outstanding - basic & diluted 38,778 38,413 38,720 38,323
 
                             
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, 2012

 
Gross Operating Operating Tax Net
Revenues COGS Profit Expenses Loss Provision Loss
GAAP $ 157,431 83,524 73,907 111,669 ($37,762 ) 903 ($39,044 )
Amortization of intangible assets (649 ) 649 (1,105 ) $ 1,754 1,754
Restructuring costs, and costs and allowances related to divestitures 2,848 (1,913 ) 4,761 (15,841 ) $ 20,602 20,602
Acquisition and other costs (a) (974 ) $ 974 974
Loss on assets held for sale (10,045 ) $ 10,045 10,045
Tax adjustment 674 (674 )
Stock-based compensation included in:
Cost of products revenues (110 ) 110 $ 110 110
Cost of services revenues (151 ) 151 $ 151 151
Research and development expenses (268 ) $ 268 268
Marketing and selling expenses 63 ($63 ) (63 )
General and administrative expenses         (1,776 ) $ 1,776     1,776  
Non-GAAP $ 160,279 $ 80,701 $ 79,578 $ 81,723 ($2,145 ) $ 1,577 ($4,101 )
Weighted-average shares outstanding - diluted 38,778
Non-GAAP net loss per share - diluted ($0.11 )
(a) Represents costs included in general and administrative expenses
 

Three Months Ended June 30, 2011 (Revised)

 
Gross Operating Operating Tax Net
Revenues COGS Profit Expenses Loss Provision Loss
GAAP 161,783 79,414 82,369 93,458 ($11,089 ) (590 ) ($11,144 )
Amortization of intangible assets (685 ) 685 (2,161 ) 2,846 2,846
Restructuring recoveries, net (162 ) 162 162
Legal settlement and acquisition-related costs (a) (392 ) 392 392
Loss on sales of assets (597 ) 597 597
Tax adjustment 245 (245 )
Stock-based compensation included in:
Cost of products revenues (111 ) 111 111 111
Cost of services revenues (277 ) 277 277 277
Research and development expenses (427 ) 427 427
Marketing and selling expenses (1,356 ) 1,356 1,356
General and administrative expenses         (1,846 )   1,846     1,846  
Non-GAAP 161,783 78,341 $ 83,442 $ 86,517 ($3,075 ) ($345 ) ($3,375 )
Weighted-average shares outstanding - diluted 38,413
Non-GAAP net loss per share - diluted ($0.09 )

(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, 2012

 
Gross Operating Operating Tax Net
Revenues COGS Profit Expenses Loss Provision (Loss) Income
GAAP 309,571 158,099 $ 151,472 $ 201,494 ($50,022 ) $ 1,426 ($52,021 )
Amortization of intangible assets (1,294 ) 1,294 (2,717 ) 4,011 4,011

Restructuring costs, and costs and allowances
related to divestitures

2,848 (1,913 ) 4,761 (16,009 ) 20,770 20,770
Acquisition and other costs (a) (1,457 ) 1,457 1,457
Loss on assets held for sale (9,793 ) 9,793 9,793
Tax adjustment 926 (926 )
Stock-based compensation included in:
Cost of products revenues (204 ) 204 204 204
Cost of services revenues (308 ) 308 308 308
Research and development expenses (575 ) 575 575
Marketing and selling expenses (1,198 ) 1,198 1,198
General and administrative expenses         (3,091 ) 3,091     3,091  
Non-GAAP $ 312,419 $ 154,380 $ 158,039 $ 166,654 ($8,615 ) $ 2,352 ($11,540 )
Weighted-average shares outstanding - diluted 38,720
Non-GAAP net loss per share - diluted ($0.30 )
(a) Represents costs included in general and administrative expenses
 

Six Months Ended June 30, 2011 (Revised)

 
Gross Operating Operating Tax Net
Revenues COGS Profit Expenses (Loss) Income   Provision Loss
GAAP 327,535 157,999 $ 169,536 $ 184,151 ($14,615 ) $ 367 ($15,927 )
Amortization of intangible assets (1,351 ) 1,351 (4,306 ) 5,657 5,657
Restructuring and other costs, net 1,314 (1,314 ) (1,314 )
Legal settlement and acquisition-related costs (a) (392 ) 392 392
Loss on sales of assets

 

(597 )

 

597

 

597
Tax adjustment 300 (300 )
Stock-based compensation included in:
Cost of products revenues (249 ) 249 249 249
Cost of services revenues (545 ) 545 545 545
Research and development expenses (899 ) 899 899
Marketing and selling expenses (2,574 ) 2,574 2,574
General and administrative expenses         (3,882 ) 3,882     3,882  
Non-GAAP 327,535 155,854 $ 171,681 $ 172,815 ($1,134 ) $ 667 ($2,746 )
Weighted-average shares outstanding - diluted 38,323
Non-GAAP net loss per share - diluted ($0.07 )
(a) Represents costs included in general and administrative expenses
 

Revenue Summary:

Three Months Ended Six Months Ended
June 30, June 30,
2011 2011
  2012   (Revised)   2012   (Revised)
Video revenues $ 98,942 $ 96,667 $ 182,948 $ 190,686
Audio revenues 61,337 65,116 129,471 136,849
Less allowances related to divestitures   (2,848 )     (2,848 )  
Total net revenues $ 157,431   $ 161,783   $ 309,571   $ 327,535  
 
 
AVID TECHNOLOGY, INC.
Condensed Consolidated Balance Sheets
(unaudited - in thousands)
            December 31,
June 30, 2011
2012 (Revised)
ASSETS:
Current assets:
Cash and cash equivalents $ 59,383 $ 32,855
Accounts receivable, net of allowances of $19,187 and $15,985
at June 30, 2012 and December 31, 2011, respectively 89,180 104,305
Inventories 77,813 111,397
Deferred tax assets, net 1,462 1,480
Prepaid expenses 8,580 7,652
Assets held for sale (a) 12,608 -
Other current assets   15,948     14,405  
Total current assets 264,974 272,094
 
Property and equipment, net 49,153 53,487
Intangible assets, net 10,996 18,524
Goodwill 238,338 246,592
Other assets   8,496     11,568  
 
Total assets $ 571,957   $ 602,265  
 
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable 38,990 42,533
Accrued compensation and benefits 26,411 31,447
Accrued expenses and other current liabilities 46,442 35,108
Income taxes payable 10,877 8,950
Deferred revenues   57,015     45,768  
Total current liabilities 179,735 163,806
 
Long-term liabilities   29,704     27,885  
Total liabilities   209,439     191,691  
 
Stockholders' equity:
Common stock 423 423
Additional paid-in capital 1,024,082 1,019,200
Accumulated deficit (588,219 ) (532,477 )
Treasury stock at cost, net of reissuances (78,008 ) (82,301 )
Accumulated other comprehensive income   4,240     5,729  
Total stockholders' equity   362,518     410,574  
 
Total liabilities and stockholders' equity $ 571,957   $ 602,265  
 
   

(a) - Assets held for sale comprise

10,703

Inventory

60

Prepaid expense

372

Capitalized Software

11,518

Intangibles and Goodwill

(10,045)

Less write down to Fair Value

12,608

 
 
AVID TECHNOLOGY, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited - in thousands)
                 
Three Months Ended Six Months Ended
June 30, June 30,
2011 2011
2012 (Revised) 2012 (Revised)
Cash flows from operating activities:
Net loss ($39,044 ) ($11,144 ) ($52,021 ) ($15,927 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization 10,549 7,983 18,123 15,875
Provision for doubtful accounts 15 315 (62 ) 459
Non-cash provision for restructuring (4,761 ) - (4,761 ) 125
(Gain)/Loss on Divestitures 10,045 - 10,045 -
(Gain)/Loss on Disposal of Fixed Assets (255 ) 596 (257 ) 591
Compensation expense from stock grants and options 2,242 4,016 5,375 8,149
Non-cash interest expense - (80 ) 73 -
Unrealized foreign currency transaction losses (3,146 ) 2,705 (848 ) 6,490
Changes in deferred tax assets and liabilities, excluding initial effects of acquisitions 451 (4 ) 823 (4 )
Changes in operating assets and liabilities, excluding initial effects of acquisitions:
Accounts receivable 495 (2,497 ) 17,352 2,783
Inventories 28,427 (5,285 ) 36,158 (22,161 )
Prepaid expenses and other current assets (13,891 ) 1,491 (14,866 ) (208 )
Accounts payable 1,845 (2,496 ) (3,531 ) (2,389 )
Accrued expenses, compensation and benefits, and other liabilities 17,820 (5,002 ) 5,482 (20,244 )
Income taxes payable 2,936 (1,490 ) 2,170 (2,031 )
Deferred revenues   (260 )   2,916     13,171     14,460  
Net cash provided by (used in) operating activities   13,468     (7,976 )   32,426     (14,032 )
 
Cash flows from investing activities:
Purchases of property and equipment (1,901 ) (2,300 ) (5,489 ) (5,845 )
Decrease (increase) in other long-term assets   (1,321 )   156     (3 )   (461 )
Net cash used in investing activities   (3,222 )   (2,144 )   (5,492 )   (6,306 )
 
Cash flows from financing activities:
(Payments related to) proceeds from the issuance of common stock under employee stock plans, net 252 1,222 80 1,349
Proceeds from revolving credit facilities - 13,000 1,000 21,000
Payments on revolving credit facilities   -     -     (1,000 )   (8,000 )
Net cash (used in) provided by financing activities   252     14,222     80     14,349  
 
Effect of exchange rate changes on cash and cash equivalents   (796 )   235     (486 )   764  
Net increase (decrease) in cash and cash equivalents 9,702 4,337 26,528 (5,225 )
Cash and cash equivalents at beginning of period   49,681     33,220     32,855     42,782  
Cash and cash equivalents at end of period $ 59,383   $ 37,557   $ 59,383   $ 37,557  
 
 
AVID TECHNOLOGY, INC.
(unaudited - in Thousands)
Supplemental Revenue Information
                                       

Twelve Months
Ended Dec 31,
2010

Three Months
Ended Mar 31,
2011

Three Months
Ended Jun 30,
2011

Three Months
Ended Sep 30,
2011

Three Months
Ended Dec 31,
2011

Twelve Months
Ended Dec 31,
2011

Three Months
Ended Mar 31,
2012

Three Months
Ended Jun 30,
2012

Six Months
Ended Jun 30,
2012

Percentage Change
Three Months Ended
June 30, 2011
compared to June 30,
2012

Revenue
Video
Product 281,898 66,510 64,612 67,605 79,548 278,276 53,422 65,017 118,439 0.6%
Services 113,429 27,508 31,001 31,829 36,177 126,515 30,584 33,048 63,632 6.6%
Sub-Total 395,327 94,018 95,613 99,434 115,726 404,791 84,006 98,065 182,071 2.6%
Audio
Product 279,409 70,253 65,002 64,002 67,919 267,176 66,516 58,009 124,525 -10.8%
Services 5,002 1,480 1,169 1,261 1,156 5,066 1,618 1,358 2,975 16.2%
Sub-Total 284,411 71,733 66,171 65,264 69,075 272,242 68,134 59,366 127,500 -10.3%
Total
Product 561,307 136,763 129,614 131,608 147,467 545,452 119,938 123,026 242,964 -5.1%
Services 118,430 28,988 32,170 33,090 37,333 131,581 32,201 34,406 66,607 7.0%
Total 679,737 165,751 161,783 164,698 184,800 677,033 152,139 157,431 309,571 -2.7%
 
Divested Consumer Product Lines
Video
Product 30,793 8,779 7,532 6,097 5,565 27,973 4,369 2,310 6,679 -69.3%
Services - -

 

- - - - - - -
Sub-Total 30,793 8,779 7,532 6,097 5,565 27,973 4,369 2,310 6,679 -69.3%
Audio
Product 72,694 16,258 16,939 15,364 14,881 63,442 12,884 11,392 24,276 -32.7%
Services - - - - - - - - -
Sub-Total 72,694 16,258 16,939 15,364 14,881 63,442 12,884 11,392 24,276 -32.7%
Total
Product 103,487 25,037 24,471 21,461 20,446 91,415 17,253 13,702 30,955 -44.0%
Services - - - - - - - - -
Total 103,487 25,037 24,471 21,461 20,446 91,415 17,253 13,702 30,955

-44.0%

 
On-going Business
Video
Product 251,105 57,731 57,080 61,508 73,983 250,303 49,053 62,707 111,760 9.9%
Services 113,429 27,508 31,001 31,829 36,177 126,515 30,584 33,048 63,632 6.6%
Sub-Total 364,534 85,239 88,081 93,337 110,161 376,818 79,637 95,755 175,391 8.7%
Audio
Product 206,715 53,995 48,063 48,638 53,038 203,734 53,632 46,617 100,249 -3.0%
Services 5,002 1,480 1,169 1,261 1,156 5,066 1,618 1,358 2,975 16.2%
Sub-Total 211,717 55,475 49,232 49,900 54,194 208,800 55,250 47,974 103,224 -2.6%
Total
Product 457,820 111,726 105,143 110,147 127,021 454,037 102,685 109,323 212,008 4.0%
Services 118,430 28,988 32,170 33,090 37,333 131,581 32,201 34,406 66,607 7.0%
Total 576,250 140,714 137,312 143,237 164,354 585,618 134,886 143,729 278,615 4.7%
 

Avid
PR Contact:
Ian Bruce, 978-640-5584
ian.bruce@avid.com
or
IR Contact:
Tom Fitzsimmons, 978-640-3346
tom.fitzsimmons@avid.com

Source: Avid

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