Avid Technology, Inc.
Nov 5, 2015

Avid Announces Financial Results for Third Quarter 2015

Transformation on Track and Expected to be Completed by Q2 2017; Continued Shift to Recurring Revenue Drives Year on Year Bookings Growth

BURLINGTON, Mass., Nov. 05, 2015 (GLOBE NEWSWIRE) -- Avid® (Nasdaq:AVID) announced today that it has released third quarter results and updated its 2015 full year guidance.  

Q3 2015 Highlights

"Avid continues to solidify its market leadership position by helping customers increase media workflow efficiencies in an industry that's seeing tremendous monetization pressures" said Louis Hernandez, Jr, Chairman, President, and CEO of Avid. "At the same time, Avid's own transformation is progressing well and we continue to drive towards a business with more recurring revenue streams and efficient operating model by 2017, when we expect our transformation to be largely complete, as evidenced by the fact that the headwinds from pre-2011 deferred revenue and non-marketed product bookings should have burned off and we should have completed our cost optimization projects".

"During Q3, we made good progress on our transformation, which was reflected in our year-on-year constant dollar bookings growth in Q3." said John Frederick, Chief Financial and Administrative Officer of Avid.   "We're continuing to work on our cost structure, build long term backlog and shift to higher margin products.  As our bookings growth converts to revenue and cash, we're looking forward to expanding margins and improved cash generation."

Avid includes non-GAAP financial measures, including adjusted EBITDA, adjusted free cash flow, non-GAAP operating income (loss), non-GAAP operating income per share, non-GAAP gross margin, and non-GAAP operating expenses, as well as operational metrics of bookings, marketed bookings, recurring revenue bookings and revenue backlog in this release. Definitions of the non-GAAP financial measures and the reconciliations to the Company's comparable GAAP financial measures for the periods presented are included in our Form 8-K filed today and 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. Unless noted, all financial information is as reported based on actual exchange rates.
             
Conference Call
A conference call to discuss Avid's financial results for the third quarter of 2015 will be held on Thursday, November 5, 2015 at 5:00 p.m. ET.  The call will be open to the public and can be accessed by dialing 719-457-2697 and referencing confirmation code 9388800.  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. Earnings documents, including slides to accompany Avid's management presentation and a supplemental financial and operational data sheet are posted to Avid's investor relations website in advance of the conference call for reference.

Forward-Looking Statements

The 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. Such statements include, without limitation, statements regarding our financial statements or other information included herein based upon or otherwise incorporating judgments or estimates relating to future performance such as future operating expenses; earnings; bookings; backlog; revenue backlog conversion rate; product mix and free cash flow; our cost savings initiatives; 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; the anticipated benefits of the Orad acquisition, including estimated synergies, and the effects of the transaction, including effects on future financial and operating results; and our liquidity. These forward-looking statements 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 described in the filings made by our company with the SEC.  We expressly disclaim any obligation or undertaking to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

About Avid

Through Avid Everywhere™, Avid delivers the industry's most open, innovative and comprehensive media platform connecting content creation with collaboration, asset protection, distribution and consumption. Media organizations and creative professionals use Avid solutions to create the most listened to, most watched and most loved media in the world—from the most prestigious and award-winning feature films, to the most popular television shows, news programs and televised sporting events, as well as a majority of today's most celebrated music recordings and live concerts. Industry leading solutions include Pro Tools®, Media Composer®, ISIS®, Interplay®, ProSet and RealSet, Maestro, PlayMaker, and Sibelius®. For more information about Avid solutions and services, visit www.avid.com, connect with Avid on FacebookInstagramTwitterYouTubeLinkedIn, or subscribe to Avid Blogs.

© 2015 Avid Technology, Inc. All rights reserved. Avid, the Avid logo, 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 Nine Months Ended
    September 30, September 30,
     2015   2014   2015   2014 
           
Net revenues:         
 Products  $  88,945  $  105,330  $  245,124  $  287,215 
 Services     48,491     37,099     121,665     114,840 
   Total net revenues     137,436     142,429     366,789     402,055 
           
Cost of revenues:         
 Products     32,256     37,807     92,416     107,898 
 Services     15,416     14,981     46,054     45,975 
 Amortization of intangible assets      1,950     -     2,113     50 
   Total cost of revenues     49,622     52,788     140,583     153,923 
           
Gross profit     87,814     89,641     226,206     248,132 
           
Operating expenses:         
 Research and development     25,225     22,154     71,708     67,178 
 Marketing and selling     31,564     31,410     92,420     98,522 
 General and administrative     15,834     20,644     52,646     58,959 
 Amortization of intangible assets     786     373     1,568     1,251 
 Restructuring costs (recoveries), net     -     -     539     (165)
   Total operating expenses     73,409     74,581     218,881     225,745 
           
Operating income      14,405     15,060     7,325     22,387 
           
Interest and other expense, net     (2,519)    (455)    (4,681)    (1,163)
Income before income taxes     11,886     14,605     2,644     21,224 
           
Provision for (benefit from) income taxes, net     768     365     (4,221)    1,427 
Net income     11,118     14,240     6,865     19,797 
           
Net income per common share - basic and diluted  $  0.28  $  0.36  $  0.17  $  0.51 
           
Weighted-average common shares outstanding - basic   39,231   39,133   39,417   39,117 
Weighted-average common shares outstanding - diluted   39,750   39,201   40,727   39,164 
           

 

         
AVID TECHNOLOGY, INC.        
Reconciliations of GAAP financial measures to Non-GAAP financial measures       
(unaudited - in thousands, except per share data)        
          
          
   Three Months Ended Nine Months Ended
   September 30, September 30,
    2015   2014   2015   2014 
          
 GAAP        
 Net revenues $   137,436   $   142,429   $   366,789   $   402,055  
 Cost of revenues    49,622     52,788     140,583     153,923 
 Gross profit    87,814      89,641      226,206      248,132  
 Operating expenses    73,409     74,581     218,881     225,745 
 Operating income    14,405      15,060      7,325      22,387  
 Interest and other expense, net    (2,519)    (455)    (4,681)    (1,163)
 Provision for (benefit from) income taxes, net    768     365     (4,221)    1,427 
 Net income $  11,118  $  14,240  $  6,865  $  19,797 
 Weighted-average common shares outstanding - basic  39,231   39,133   39,417   39,117 
 Weighted-average common shares outstanding - diluted  39,750   39,201   40,727   39,164 
 Net income per share - basic and diluted $   0.28   $   0.36   $   0.17   $   0.51  
          
 Adjustments to GAAP Results        
 Cost of revenues        
 Amortization of intangible assets    1,950     -     2,113     50 
 Stock-based compensation    183     78     652     394 
 Operating expenses        
 Amortization of intangible assets    786     373     1,568     1,251 
 Restructuring costs (recoveries), net    -     -     539     (165)
 Restatement costs     287     8,564     988     19,408 
 Acquisition and other costs    1,965     -     7,640     - 
 Stock-based compensation        
   R&D    73     96     225     336 
   Sales & Marketing    529     252     1,902     1,186 
   G&A    1,604     (1,107)    4,953     802 
 Other        
 Tax adjustment    -     4     -     (7)
          
 Non-GAAP         
 Net revenues    137,436      142,429      366,789      402,055  
 Cost of revenues    47,489     52,710     137,818     153,479 
 Gross profit    89,947     89,719     228,971     248,576 
 Operating expenses    68,165     66,403     201,066     202,927 
 Operating income    21,782      23,316      27,905      45,649  
 Interest and other expense, net    (2,519)    (455)    (4,681)    (1,163)
 Provision for (benefit from) income taxes, net    768     361     (4,221)    1,434 
 Net income    18,495     22,500     27,445     43,052 
 Net income per share - diluted $   0.47   $   0.57   $   0.67   $   1.10  
          
 Adjusted EBITDA        
 Non-GAAP operating income (from above)    21,782      23,316      27,905      45,649  
 Depreciation    3,168     3,968     10,257     12,294 
 Amortization of capitalized software development costs    -     28     -     127 
 Adjusted EBITDA    24,950      27,312      38,162      58,070  
          
 Adjusted Free Cash Flow        
 GAAP net cash used in operating activities    (9,873)    5,252      (36,087)    (20,830)
 Capital expenditures    (4,368)    (5,269)    (11,110)    (11,680)
 Restructuring payments    316     1,274     1,052     6,085 
 Restatement payments    -     6,814     3,624     22,902 
 Acquisition and other payments    3,368     -     4,958     - 
 Adjusted Free Cash Flow $   (10,557) $   8,071   $   (37,563) $   (3,523)
 
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)      
       
  September 30, December 31,  
   2015   2014   
ASSETS:      
Current assets:      
Cash and cash equivalents $  21,980  $  25,056   
Accounts receivable, net of allowances of $9,257 and $10,692 at September 30, 2015 and December 31, 2014, respectively    56,995     54,655   
Inventories    48,784     48,001   
Deferred tax assets, net    310     322   
Prepaid expenses    8,448     6,892   
Other current assets    12,954     17,932   
Total current assets  149,471   152,858   
       
Property and equipment, net    34,777     32,136   
Intangible assets, net    35,966     2,445   
Goodwill    33,905     -   
Long-term deferred tax assets, net    2,044     1,886   
Other long-term assets    8,013     2,274   
Total assets $  264,176  $  191,599   
       
LIABILITIES AND STOCKHOLDERS' DEFICIT:      
Current liabilities:      
Accounts payable $  39,232  $  32,951   
Accrued compensation and benefits    23,362     32,636   
Accrued expenses and other current liabilities    32,228     32,353   
Income taxes payable    3,176     5,480   
Short-term debt    10,000     -   
Deferred tax liabilities, net    316     -   
Deferred revenues    199,572     206,608   
Total current liabilities  307,886   310,028   
       
Long-term debt  94,605     -   
Long-term deferred tax liabilities, net    7,687     136   
Long-term deferred revenues    164,935     208,232   
Other long-term liabilities    16,674     14,273   
Total liabilities  591,787   532,669   
       
Stockholders' deficit:      
Common stock    423     423   
Additional paid-in capital  1,058,330   1,049,969   
Accumulated deficit  (1,314,933)  (1,321,798)  
Treasury stock at cost    (64,415)    (68,051)  
Accumulated other comprehensive loss    (7,016)    (1,613)  
Total stockholders' deficit  (327,611)  (341,070)  
Total liabilities and stockholders' deficit $  264,176  $  191,599   
       

 

AVID TECHNOLOGY, INC.     
Condensed Consolidated Statements of Cash Flows     
(unaudited - in thousands)     
          
      Nine Months Ended 
      September 30, 
       2015   2014  
          
Cash flows from operating activities:     
 Net income $  6,865  $  19,797  
 Adjustments to reconcile net income to net cash used in operating activities:     
  Depreciation and amortization    13,936     13,721  
  Recovery from doubtful accounts    (175)    (177) 
  Stock-based compensation expense    7,731     2,718  
  Non-cash interest expense    1,544     220  
  Unrealized foreign currency transaction gains    (5,098)    (494) 
  Deferred tax benefit    (6,504)    (6) 
  Changes in operating assets and liabilities, net of effects from acquisition:     
   Accounts receivable    6,844     931  
   Inventories    4,028     6,145  
   Prepaid expenses and other current assets    1,772     646  
   Accounts payable    4,932     585  
   Accrued expenses, compensation and benefits and other liabilities    (17,764)    (14,842) 
   Income taxes payable    1,268     (603) 
   Deferred revenues    (55,466)    (49,471) 
Net cash used in operating activities    (36,087)    (20,830) 
          
Cash flows from investing activities:     
 Purchases of property and equipment    (11,110)    (11,660) 
 Payments for business and technology acquisitions, net of cash acquired    (65,967)    -  
 Proceeds from divestiture of consumer business    -     1,500  
 (Increase) decrease in other long-term assets    (575)    51  
 Increase in restricted cash    (1,047)    -  
Net cash used in investing activities    (78,699)    (10,109) 
          
Cash flows from financing activities:     
 Proceeds from long-term debt, net of issuance costs    120,401     -  
 Payments for repurchase of common stock    (7,999)    -  
 Cash paid for capped call transaction    (10,125)    -  
 Proceeds from the issuance of common stock under employee stock plans    3,113     1  
 Common stock repurchases for tax withholdings for net settlement of equity awards    (1,442)    (318) 
 Proceeds from revolving credit facilities    49,500     20,500  
 Payments on revolving credit facilities    (39,500)    (12,500) 
 Payments of credit facilities issuance costs    (1,193)    -  
Net cash provided by financing activities    112,755     7,683  
          
Effect of exchange rate changes on cash and cash equivalents    (1,045)    (2,471) 
Net decrease in cash and cash equivalents    (3,076)    (25,727) 
Cash and cash equivalents at beginning of period    25,056     48,203  
Cash and cash equivalents at end of period $  21,980  $  22,476  
          

 

                 
AVID TECHNOLOGY, INC.                
Supplemental Revenue Information                
(unaudited - in thousands)                
                  
  September 30, June 30, September 30,           
 Revenue Backlog* 2015   2015   2014          
                  
 Pre-2011$  37,885  $  51,520  $  104,629            
 Post-2010$   326,622   $   341,279   $   312,708             
 Deferred Revenue$   364,507   $   392,799   $   417,337             
 Other Backlog$ 148,776  $  147,453  $  92,000            
   Total Revenue Backlog$513,283
  $  540,252  $  509,337            
                  
 Post 2010 $  475,398  $   488,732   $   404,708             
                  
 The expected timing of recognition of revenue backlog as of September 30, 2015 is as follows:           
                  
                  
  Q4 2015  2016   2017  Thereafter Total       
 Orders executed prior to January 1, 2011$  12,017  $  24,772  $  952  $  144  $  37,885        
 Orders executed or materially modified on or after January 1, 2011$  48,769  $  131,225  $  68,686  $  77,942  $  326,622        
 Other Backlog$ 51,449  $ 48,191  $ 30,338  $ 18,797  $ 148,776        
   Total Revenue Backlog$ 112,235  $  204,189  $  99,975  $ 96,883  $  513,283        
                  
 *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 
                  

 

         
AVID TECHNOLOGY, INC.        
2015 Outlook (a)        
(unaudited - in millions)        
         
 Bookings      
 As Reported Adjusted EBITDA Adjusted Free Cash Flow
 LowHigh LowHigh LowHigh
         
1st Half of 2015$   230  $   230   $   13  $   13   $   (27)$   (27)
         
- Estimated 2nd Half (including Orad product lines), using 1st Half run rates   250    252     18    18     (23)   (23)
- Estimated New Products and Growth Initiatives   15    21     18    20     16    18 
- Estimated Impact of Cost Initiatives   -     -      4    5     4    5 
- Estimated 2nd Half Seasonality and other   14    25     21    24     42    47 
         
Outlook 2015, August Guidance   509     528      74     80      12     20  
         
-Underperformance in Tier 3 Audio   (17)   (14)    (11)   (10)    (20)   (17)
-Mix Shift to Multi-Year Support Contracts   -     -      (4)   (4)    (15)   (14)
-Estimated 2nd Half Seasonality and other   -     -      -     -      (12)   (12)
- Currency and Other, Net   (2)   (11)    (4)   (6)    -     (3)
         
Outlook 2015 (a)   490     503      55     60      (35)   (26)
         
(a) As of November 5, 2015        
Note: The 2015 Outlook  is based on estimates as of the date of this press release and Avid expressly disclaims any obligation or undertaking to update such estimates; actual results may differ materially from those estimates as a result of a number of risks and uncertainties.  Please see the forward looking disclaimer included in the press release. Each range of values provided represents the expected low and high estimates for such financial or operating factor.
       

 

 

Media Contact	
Sara Griggs		
Avid			
310.821.0801		
sara.griggs@avid.com

Investor Contact
Jonathan Huang
Avid
978.640.5126
jonathan.huang@avid.com