Avid Technology, Inc.
Mar 15, 2016

Avid Announces Fourth Quarter and Full Year Financial Results, Financial Guidance for First Quarter and Full Year 2016 and Longer Term Financial Guidance for 2017 and 2018

Bookings, Revenue and Adjusted EBITDA All Increased in the Fourth Quarter        

Avid Everywhere Momentum Continues

Company Transformation on Track for Mid-2017 Completion

BURLINGTON, Mass., March 15, 2016 (GLOBE NEWSWIRE) -- Avid® (Nasdaq:AVID) announced today that it has released fourth quarter and full year 2015 results and provided financial guidance for both full year and first quarter 2016.  Additionally, Avid has shared financial guidance on a longer term basis for 2017 and 2018.

Fourth Quarter Highlights

            
Avid Everywhere Momentum Continues

Transformation on Track for Expected Mid-2017 Completion
Despite the continued negative impact of the pre-2011 revenue amortization run-off, which will provide approximately $33 million less revenue and adjusted EBITDA in 2016, the Company believes its momentum and platform strategy should enable improved growth rates in the key financial focus areas of adjusted EBITDA and adjusted free cash flow.  

"We're encouraged by the strong finish to 2015 as reflected by growth in many key metrics.  The continued momentum of the Avid MediaCentral Platform and Avid Everywhere demonstrates that the market is embracing our strategy.  Punctuated by the largest transaction in our history with Sinclair Broadcast Group, the world's largest and most sophisticated media companies are adopting our strategy.  We are only now beginning to fully leverage the power of the platform and realize the associated financial benefits." said Louis Hernandez, Jr, Chairman, President, and CEO of Avid.  "2016 will be marked by specific platform-enabled growth and efficiency initiatives, which will demonstrate our ability to generate a meaningful financial return for our shareholders."

The Company's guidance demonstrates the MediaCentral Platform's ability to drive higher growth and increase lifetime customer value while driving operational efficiency for both Avid and its customers.  The key platform-enabled growth strategies for 2016 include:

"Avid is in the final stretches of its dramatic transformation and the benefits of Avid's Platform approach to solving the media industry's more pressing needs is reflected in both a solid close to 2015 and dramatically improved financial expectations for 2016 and beyond" said Mr. Hernandez.  "We are on track to complete the transformation and position Avid for long term sustainable and profitable growth with an improved financial model."

Avid's 2016 full year and first quarter financial guidance, as well as its longer term 2017 and 2018 guidance are set forth in the tables below. A highlight of our guidance is the anticipated material increase in adjusted EBITDA and adjusted free cash flow on an annual basis and through 2018. Specifically, we anticipate annual adjusted EBITDA growth of 9% to 36% and improvement in annual adjusted free cash flow of $37 to $47 million.  The anticipated increases in adjusted EBITDA and adjusted free cash flow reflect what we believe is the power of the MediaCentral platform, as well as reflecting a full year of Orad operating results. Avid's investments are converting into new growth initiatives and incremental cost efficiencies to achieve a leaner and more directed cost structure, which are reflected in the guidance through 2018.  The first quarter 2016 guidance reflects normal cash flow seasonality and incorporates partial realization of the cost efficiency program.  The announced growth initiatives are expected to have a more pronounced positive financial impact in the second half of 2016 and the full impact is reflected in the 2017 and 2018 guidance.

 

2016 Full Year & Q1 Guidance

(in $ millions)Full YearQ1 2016
Bookings (Constant Currency)$530-$566$108-$118
Bookings$500-$536$100-$112
Non-GAAP Revenue$500-$525$120-$125
Adjusted EBITDA$60-$75$11-$14
Adjusted Free Cash Flow$2-$12($15)-($9)
Non-GAAP Gross Margin59.5%-60.5%60-61%
Adjusted Operating Expenses$250-$262$64-$66
   

2017 and 2018 Longer Term Guidance

(in $ millions)20172018
Bookings$515-$552$530-$569
Non-GAAP Revenue$515-$542$530-$560
Adjusted EBITDA$80-$95$90-$105
Adjusted Free Cash Flow$25-$40$40-$60
   

"The Company's 2015 financial performance reflects our focus on executing our strategic initiatives, including building the foundation to shift to a leaner, more directed cost structure and increasing the level of recurring revenue," said John Frederick, Chief Financial and Administrative Officer of Avid.  "Moving into 2016 and beyond, we expect to see material improvement in free cash flow generation and Adjusted EBITDA as our work begins to more visibly convert to an attractive financial model."

Guidance and Financial and Operational Metrics

All guidance presented by the Company is inherently uncertain and subject to numerous risks and uncertainties.  Our 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 2015 Business Update presentation posted on Avid's investor relations website.

Avid includes non-GAAP financial measures in this press release, including non-GAAP revenue, adjusted EBITDA, adjusted free cash flow, non-GAAP operating income (loss), non-GAAP operating income (loss) per share, adjusted operating expenses and non-GAAP gross margin. The Company also includes the operational metric 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.

Conference Call

A conference call to discuss Avid's financial results for the fourth quarter and full year of 2015 will be held on Tuesday, March 15, 2016 at 5:00 p.m. ET.  The call will be open to the public and can be accessed by dialing 719-325-2463 and referencing confirmation code 4563906.  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 2016, 2017 and 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, overall market growth rates in the range of 3.0-3.3%, 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; bookings; backlog; revenue backlog conversion rate; product mix and free cash flow; our long-term and recent cost savings initiatives and the anticipated benefits therefrom; 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, including effects on future financial and operating results; 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, 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 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.

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.

© 2016 Avid Technology, Inc. All rights reserved. Avid, the Avid logo, Avid Everywhere, iNEWS, Interplay, ISIS, AirSpeed, Media Composer, 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 the Interplay Entertainment Corp. which bears no responsibility for Avid products. 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, 
    2015
 2014
 2015
 2014
 
            
Net revenues:          
 Products  $91,247   $91,412  $336,371  $378,627  
 Services   47,559   36,784   169,224    151,624  
 Total net revenues   138,806   128,196   505,595   530,251  
            
Cost of revenues:          
 Products   39,465   35,867   131,881   143,765  
 Services   15,447   14,681    61,501   60,656  
 Amortization of intangible assets   1,950   -   4,063   50  
 Total cost of revenues   56,862   50,548   197,445   204,471  
            
Gross profit   81,944   77,648   308,150   325,780  
             
Operating expenses:          
 Research and development   24,190   23,212   95,898   90,390  
 Marketing and selling   30,091   34,527   122,511   133,049  
 General and administrative   21,463   22,222   74,109   81,181   
 Amortization of intangible assets   786   375   2,354   1,626  
 Restructuring costs (recoveries), net   5,766   -    6,305   (165) 
 Total operating expenses   82,296   80,336   301,177   306,081  
            
Operating (loss) income   (352)  (2,688)  6,973   19,699  
            
Interest and other expense, net   (1,727)  (1,620)  (6,408)  (2,783) 
(Loss) income before income taxes   (2,079)  (4,308)  565   16,916  
            
Provision for (benefit from) income taxes, net   2,306   761   (1,915)   2,188  
Net (loss) income   (4,385)   (5,069)  2,480   14,728  
            
(Loss) income per share - basic and diluted   (0.11)  (0.13)  0.06   0.38  
            
Weighted-average common shares outstanding - basic   39,439   39,234   39,423   39,147  
Weighted-average common shares outstanding - diluted   39,439   39,234   40,380    39,267  
            

 

AVID TECHNOLOGY, INC.        
Reconciliations of GAAP financial measures to Non-GAAP financial measures      
(unaudited - in thousands, except per share data)        
  Three Months Ended Twelve Months Ended
  December 31, December 31,
   2015   2014   2015   2014 
Non-GAAP Revenue        
GAAP revenue $    138,806   $   128,196   $   505,595   $   530,251  
Amortization of acquired deferred revenue    858     -     858     - 
Non-GAAP revenue    139,664      128,196      506,453      530,251  
         
Non-GAAP Gross Profit        
GAAP gross profit    81,944      77,648      308,150      325,780  
Amortization of acquired deferred revenue    858     -     858     - 
Amortization of intangible assets    1,950     -     4,063     50 
Stock-based compensation    171     282      823     675 
Non-GAAP gross profit    84,923      77,930      313,894      326,505  
         
Non-GAAP Operating Expenses         
GAAP operating expenses    82,296       80,336      301,177      306,081  
Less Amortization of intangible assets    (786)    (375)    (2,354)    (1,626)
Less Stock-based compensation    (1,612)    (8,513)    (8,691)    (10,837)
Less Restructuring (costs) recoveries, net    (5,766)    -     (6,305)    165 
Less Restatement costs     (51)    (3,919)    (1,039)    (23,327)
Less Acquisition, integration and other costs    (1,595)    -     (9,232)    - 
Less Efficiency program costs    (1,144)    -     (1,144)    - 
Non-GAAP operating expenses    71,342      67,529      272,412      270,456  
         
 Non-GAAP Operating Income        
GAAP operating (loss) income    (352)    (2,688)    6,973      19,699  
Amortization of acquired deferred revenue    858     -     858     - 
Amortization of intangible assets    2,736     375     6,417     1,676 
Stock-based compensation    1,783     8,795     9,514     11,512 
Restructuring costs (recoveries), net    5,766     -     6,305     (165)
Restatement costs     51     3,919     1,039     23,327 
Acquisition, integration and other costs    1,595     -     9,232     - 
Efficiency program costs    1,144     -     1,144     - 
Non-GAAP operating Income    13,581      10,401      41,482      56,049  
         
 Adjusted EBITDA         
Non-GAAP operating income (from above)    13,581      10,401      41,482      56,049  
Depreciation and amortization    3,416     3,858     13,672     16,278 
Adjusted EBITDA    16,997      14,259      55,154       72,327  
         
Adjusted Free Cash Flow        
GAAP net cash provided by (used in) operating activities    2,061      10,933      (34,026)    (9,897)
Capital expenditures    (4,220)    (1,632)    (15,330)    (13,292)
Restructuring payments    564     1,127     1,616     7,212 
Restatement payments    321     5,756     3,945     28,658 
Acquisition, integration and other payments    1,988     -     6,946     - 
Efficiency program payments    1,556     -     1,556     - 
Adjusted free cash flow $   2,270   $   16,184   $    (35,293) $   12,681  
         
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,
  2015 2014
ASSETS:    
Current assets:    
Cash and cash equivalents $17,902  $25,056 
Accounts receivable, net of allowances of $9,226 and $10,692        
at December 31, 2015 and 2014, respectively  58,807   54,655 
Inventories  48,073   48,001 
Prepaid expenses  6,548    6,892 
Other current assets  6,119    17,932 
Total current assets  137,449   152,536 
     
Property and equipment, net  35,481   32,136 
Intangible assets, net  33,219   2,445 
Goodwill  32,643   - 
Long-term deferred tax assets, net  2,011   2,208 
Other long-term assets  7,123   2,274 
Total assets $247,926  $191,599 
     
LIABILITIES AND STOCKHOLDERS' DEFICIT:    
Current liabilities:     
Accounts payable $45,511  $32,951 
Accrued compensation and benefits  28,124   32,636 
Accrued expenses and other current liabilities  35,354   32,353 
Income taxes payable  1,023   5,480 
Short-term debt  5,000   - 
Deferred revenues  189,887    206,608 
Total current liabilities  304,899   310,028 
     
Long-term debt, net of debt discount  95,950   - 
Long-term deferred tax liabilities, net  3,443   136 
Long-term deferred revenues  158,495   208,232 
Other long-term liabilities  14,711   14,273 
Total liabilities  577,498   532,669 
     
Stockholders' deficit:    
Common stock. $0.01 par value, 100,000 shares authorized; 42,339 shares         
and 42,339 shares issued and 39,530 shares and 39,294 shares outstanding         
at December 31, 2015 and 2014, respectively  423   423 
Additional paid-in capital  1,055,838   1,049,969 
Accumulated deficit  (1,319,318 )  (1,321,798)
Treasury stock at cost, net of reissuances, 2,809 shares        
and 3,045 shares at December 31, 2015 and 2014, respectively  (58,336)  (68,051)
Accumulated other comprehensive income  (8,179)  (1,613)
Total stockholders' deficit  (329,572)  (341,070)
Total liabilities and stockholders' deficit $247,926  $191,599 
 

 

AVID TECHNOLOGY, INC.    
Condensed Consolidated Statements of Cash Flows    
(unaudited - in thousands)    
         
      Twelve Months Ended
      December 31,
      2015
 2014
         
Cash flows from operating activities:    
 Net income $2,480  $14,728 
 Adjustments to reconcile net income to net cash used in operating activities:    
  Depreciation and amortization  20,088   17,954 
  Recovery for doubtful accounts  (23)  (143)
  Stock-based compensation expense  9,514   11,513 
   Non-cash interest expense  2,890   220 
   Unrealized foreign currency transaction gains  (7,013)  (6,730)
  (Benefit from) provision for deferred taxes  (6,693)  69 
  Changes in operating assets and liabilities:    
   Accounts receivable  (1,259)  2,258 
   Inventories  3,056   12,122 
   Prepaid expenses and other current assets  10,000   (2,130)
   Accounts payable  11,232   (947)
   Accrued expenses, compensation and benefits and other liabilities  (11,842)  (5,758)
   Income taxes payable  (1,041)  (1,090)
   Deferred revenues  (65,415)  (51,963)
Net cash used in operating activities  (34,026)  (9,897)
         
Cash flows from investing activities:     
 Purchases of property and equipment  (15,330)  (13,292)
 Change in other long-term assets  (43)  (8)
 Payments for business and technology acquisitions, net of cash acquired  (65,967)  - 
 Proceeds from divestiture of consumer business  -   1,500 
 Increase in restricted cash  (456)  - 
Net cash used in investing activities  (81,796)  (11,800)
         
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 transactions  (10,125)  - 
 Proceeds from the issuance of common stock under employee stock plans  5,035   252 
 Common stock repurchases for tax withholdings for net settlement of equity awards  (1,559)  (688)
 Proceeds from revolving credit facilities  70,500   25,500 
 Payments on revolving credit facilities  (65,500)  (25,500)
 Payments of credit facilities of issuance costs  (1,195)  - 
Net cash provided by (used in) financing activities  109,558   (436)
         
Effect of exchange rate changes on cash and cash equivalents  (890)  (1,014)
Net decrease in cash and cash equivalents  (7,154)  (23,147)
Cash and cash equivalents at beginning of period  25,056    48,203 
Cash and cash equivalents at end of period $17,902  $25,056 
         

 

AVID TECHNOLOGY, INC.         
Supplemental Revenue Information          
(unaudited - in thousands)         
           
  December 31, September 30, December 31,    
 Revenue Backlog*2015 2015 2014    
           
 Pre-2011$25,868  $37,885   $84,597     
 Post-2010$322,514  $326,622  $330,243     
 Deferred Revenue$   348,382    $   364,507   $   414,840      
 Other Backlog$203,704  $148,776  $124,670      
 Total Revenue Backlog$552,086  $513,283  $539,510     
           
 Post 2010 $   526,218   $   475,398   $   454,913      
            
 The expected timing of recognition of revenue backlog as of December 31, 2015 is as follows:    
           
  2016 2017 2018  Thereafter Total
 Orders executed prior to January 1, 2011$24,772  $952  $144  $-  $25,868 
 Orders executed or materially modified on or$148,218  $75,657  $47,751  $50,887  $322,513 
 after January 1, 2011         
 Other Backlog$95,894  $41,801  $20,260  $45,750  $203,705 
 Total Revenue Backlog$   268,884   $   118,410   $   68,155   $   96,637   $ 552,086  
           
 *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.
  
Media Contact

Sara Griggs

Avid

310.821.0801

sara.griggs@avid.com



Investor Contact

Jonathan Huang

Avid

978.640.5126

jonathan.huang@avid.com

Source: Avid Technology, Inc.

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