Avid Technology, Inc.
Aug 3, 2016

Avid Announces Second Quarter 2016 Results

Met or Exceeded Guidance for All Metrics

Updates Full-Year Guidance; Maintains Guidance for Bookings and for
Positive Adjusted Free Cash Flow

Avid Everywhere Momentum Continues to Build with MediaCentral Platform Licenses up
47% and Cloud-Enabled Subscriptions up 3.9x Year-over-Year

BURLINGTON, Mass., Aug. 03, 2016 (GLOBE NEWSWIRE) --  Avid® (Nasdaq:AVID) announced its second quarter 2016 financial results today, provided third quarter 2016 financial guidance and updated its guidance for full year 2016.

Second Quarter 2016 Financial Highlights

Avid Everywhere Momentum Continues

"We delivered bookings, adjusted free cash flow and non-GAAP operating expenses in line with guidance, and non-GAAP revenue and adjusted EBITDA above the guidance range," said Louis Hernandez, Jr, Chairman, President, and CEO of Avid. "Performance was driven by recurring revenue growth as well as improved conversion of bookings and revenue backlog to revenue, partly driven by new software releases. We also benefited from tight cost control and low material costs. We continue to build on the momentum of Avid Everywhere, our strategic vision for the industry, with the number of users of the Media Central platform now surpassing 38,000 as our global customer base embraces the efficiency and flexibility of our platform. We are also encouraged by the continued upward trajectory of our Alliance business, which benefits from cross-selling third-party applications into our expanded user base, and our Tier 3 business, focused on independent professionals, which generated double-digit growth in digital bookings and triple-digit growth in cloud-enabled subscriber bookings.

"We are raising our full-year guidance range for non-GAAP revenue and adjusted EBITDA. We are also improving our guidance range for non-GAAP operating expenses because we are increasing our annualized run-rate cost savings target to $76 million. We are on track to be cash flow positive for the full year as we continue to execute our efficiency program and growth initiatives. We are reaffirming guidance for bookings, although we expect to be at the lower end of the range, due to higher than expected volatility in the media enterprise market.

"Our financial results and operational performance this quarter underscore the progress we are making to transform our company into a service-platform business with strong positions in higher-growth categories and a greater proportion of recurring revenue. We have a clear path to complete this transformation by our target of mid-2017, which will enable us to accelerate growth, realize a more efficient cost structure, increase revenue visibility, and generate enhanced value for our shareholders over the long-term," Mr. Hernandez concluded. 

Financial Guidance
Q3 2016 Financial Guidance (in millions)
Bookings (Constant Currency) $105-$125
Bookings $100-$120
Non-GAAP Revenue $120-$135
Non-GAAP Operating Expenses $57-$62
Adjusted EBITDA $21-$29
Adjusted Free Cash Flow $(8)-$5
   

The Company also updated its full-year 2016 guidance, as originally provided on March 15, 2016. The Company is increasing its full-year guidance for non-GAAP Revenue and Adjusted EBITDA, as a result of higher conversion of bookings and revenue backlog to revenue, partly driven by new software releases, as well as tighter cost control. The Company is also improving its guidance range for non-GAAP operating expenses, as a result of increasing the target for its efficiency program to up to $76 million of annualized run-rate cost savings, most of which will be achieved in 2016. The Company is reaffirming its guidance for Adjusted Free Cash Flow and Bookings, but expects to be in the lower end of the range for Bookings due to higher than expected volatility in the media enterprise market.

Full-Year 2016 Financial Guidance (in millions)
Bookings (Constant Currency) $530-$566
Bookings $500-$536
Non-GAAP Revenue $535-$565
Non-GAAP Operating Expenses $247-$260
Adjusted EBITDA $118-$135
Adjusted Free Cash Flow $2-$12
   

All guidance presented by the Company is inherently uncertain and subject to numerous risks and uncertainties. Avid's actual future results of operations and cash flows could differ materially from those shown in the tables 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 Q2 2016 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 expenses and non-GAAP Gross Margin. The Company also includes the operational metric of bookings, revenue backlog and recurring revenue bookings in this release. The earnings release also includes forward-looking non-GAAP financial measures, including non-GAAP Revenue, Adjusted EBITDA, non-GAAP operating expenses and Adjusted Free Cash Flow. Reconciliations of these forward-looking non-GAAP financial measures were not included in the Earnings Release due to the high variability and difficulty in making accurate forecasts and projections of some of the excluded information, together with some of the excluded information not being ascertainable or accessible at this time. As a result, the Company is unable to quantify certain amounts that would be required to be included in the most directly comparable GAAP financial measure without unreasonable efforts. 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 second quarter of 2016 will be held on Wednesday, August 3, 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, 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, except as required by law.

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®, Avid NEXIS™, Interplay®, ProSet and RealSet, Maestro, PlayMaker, and Sibelius®. For more information about Avid solutions and services, visit www.avid.com, connect with Avid on Facebook, Instagram, Twitter, YouTube, LinkedIn, or subscribe to Avid Blogs.

© 2016 Avid Technology, Inc. All rights reserved. Avid, the Avid logo, Avid Everywhere, Avid NEXIS, iNEWS, Interplay, ISIS, AirSpeed, MediaCentral, 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 Six Months Ended
  June 30, June 30,
   2016   2015   2016   2015 
         
Net revenues:        
Products $75,592  $76,150  $160,101  $156,179 
Services  58,477   33,617   117,515   73,174 
Total net revenues  134,069   109,767   277,616   229,353 
         
Cost of revenues:        
Products  28,488   28,363   55,612   60,160 
Services  15,831   14,943   30,241   30,638 
Amortization of intangible assets  1,950   163   3,900   163 
Total cost of revenues  46,269   43,469   89,753   90,961 
         
Gross profit  87,800   66,298   187,863   138,392 
         
Operating expenses:        
Research and development  21,434   23,310   42,838   46,483 
Marketing and selling  30,177   32,811   61,796   60,856 
General and administrative  16,807   17,425   34,537   36,812 
Amortization of intangible assets  782   408   1,568   782 
Restructuring (recoveries) costs, net  (213)  539   2,564   539 
Total operating expenses  68,987   74,493   143,303   145,472 
         
Operating income (loss)  18,813   (8,195)  44,560   (7,080)
         
Interest and other expense, net  (5,159)  (1,439)  (9,342)  (2,162)
Income (loss) before income taxes  13,654   (9,634)  35,218   (9,242)
         
Provision for (benefit from) income taxes  703   (5,550)  1,338   (4,989)
Net income (loss) $12,951  $(4,084) $33,880  $(4,253)
         
Net income (loss) per common share - basic $0.33  $(0.10) $0.86  $(0.11)
Net income (loss) per common share - diluted $0.33  $(0.10) $0.85  $(0.11)
         
Weighted-average common shares outstanding - basic  39,678   39,635   39,622   39,512 
Weighted-average common shares outstanding - diluted  39,734   39,635   39,691   39,512 
         

 

AVID TECHNOLOGY, INC.            
Reconciliations of GAAP financial measures to Non-GAAP financial measures          
(unaudited - in thousands)            
  Three Months Ended Six Months Ended    
  June 30, June 30,    
Non-GAAP revenue  2016   2015   2016   2015     
GAAP revenue $   134,069   $   109,767   $   277,616   $   229,353      
Amortization of acquired deferred revenue  325   -   594   -     
Non-GAAP revenue    134,394      109,767      278,210      229,353      
             
Non-GAAP gross profit            
GAAP gross profit    87,800      66,298      187,863      138,392      
Amortization of acquired deferred revenue  325   -   594   -     
Amortization of intangible assets  1,950   163   3,900   163     
Stock-based compensation  152   215   332   469     
Non-GAAP gross profit    90,227      66,676      192,689      139,024      
             
Non-GAAP operating expenses            
GAAP operating expenses    68,987      74,493      143,303      145,472      
Less Amortization of intangible assets  (782)  (408)  (1,568)  (782)    
Less Stock-based compensation  (2,137)  (2,667)  (4,056)  (4,874)    
Less Restructuring recoveries (costs), net  213   (539)  (2,564)  (539)    
Less Restatement (costs) recoveries  (68)  1,106   (148)  (701)    
Less Acquisition, integration and other costs  (279)  (3,333)  (794)  (5,675)    
Less Efficiency program costs  (1,286)  -   (2,001)  -     
Non-GAAP operating expenses    64,648      68,652      132,172      132,901      
             
Non-GAAP operating income (loss)            
GAAP operating income (loss)    18,813      (8,195)    44,560      (7,080)    
Amortization of acquired deferred revenue  325   -   594   -     
Amortization of intangible assets  2,732   571   5,468   945     
Stock-based compensation  2,289   2,882   4,388   5,343     
Restructuring (recoveries) costs, net  (213)  539   2,564   539     
Restatement costs (recoveries)  68   (1,106)  148   701     
Acquisition, integration and other costs  279   3,333   794   5,675     
Efficiency program costs  1,286   -   2,001   -     
Non-GAAP operating income (loss)    25,579      (1,976)    60,517      6,123      
             
Adjusted EBITDA            
Non-GAAP operating income (loss) (from above)    25,579      (1,976)    60,517      6,123      
Depreciation and amortization  3,811   3,411   7,422   7,088     
Adjusted EBITDA    29,390      1,435      67,939      13,211      
             
Adjusted free cash flow            
GAAP net cash used in operating activities    (33,806)    (30,844)    (45,016)    (26,214)    
Capital expenditures  (2,803)  (3,802)  (7,321)  (6,742)    
Restructuring payments  3,952   308   7,485   736     
Restatement payments  -   1,507   -   3,624     
Acquisition, integration and other payments  848   1,590   1,621   1,590     
Efficiency program payments  1,602   -   3,583   -     
Adjusted free cash flow $   (30,207) $   (31,241) $   (39,648) $   (27,006)    
             
             
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)      
       
  June 30, December 31,  
   2016   2015   
ASSETS      
Current assets:      
Cash and cash equivalents $50,365  $17,902   
Accounts receivable, net of allowances of $7,807 and $9,226      
at June 30, 2016 and December 31, 2015, respectively  44,769   58,807   
Inventories  53,902   48,073   
Prepaid expenses  9,220   6,548   
Other current assets  7,179   6,119   
Total current assets  165,435   137,449   
       
Property and equipment, net  35,676   35,481   
Intangible assets, net  27,762   33,219   
Goodwill  32,643   32,643   
Long-term deferred tax assets, net  2,025   2,011   
Other long-term assets  10,169   7,123   
Total assets $273,710  $247,926   
       
LIABILITIES AND STOCKHOLDERS' DEFICIT      
Current liabilities:      
Accounts payable $35,121  $45,511   
Accrued compensation and benefits  22,814   28,124   
Accrued expenses and other current liabilities  24,871   35,354   
Income taxes payable  495   1,023   
Short-term debt  5,000   5,000   
Deferred revenues  165,623   189,887   
Total current liabilities  253,924   304,899   
       
Long-term debt  187,830   95,950   
Long-term deferred tax liabilities, net  2,088   3,443   
Long-term deferred revenues  101,529   158,495   
Other long-term liabilities  17,343   14,711   
Total liabilities  562,714   577,498   
       
Stockholders' deficit:      
Common stock  423   423   
Additional paid-in capital  1,054,641   1,055,838   
Accumulated deficit  (1,285,489)  (1,319,318)  
Treasury stock at cost  (52,858)  (58,336)  
Accumulated other comprehensive loss  (5,721)  (8,179)  
Total stockholders' deficit  (289,004)  (329,572)  
Total liabilities and stockholders' deficit $273,710  $247,926   
       

 

AVID TECHNOLOGY, INC.     
Condensed Consolidated Statements of Cash Flows     
(unaudited - in thousands)     
       
  Six Months Ended  
  June 30,  
   2016   2015   
       
Cash flows from operating activities:     
Net income (loss)$33,880  $(4,253)  
Adjustments to reconcile net income (loss) to net cash used in operating activities:     
Depreciation and amortization 12,890   8,014   
Provision (recovery) for doubtful accounts 367   (205)  
Stock-based compensation expense 4,388   5,344   
Non-cash interest expense 5,394   207   
Unrealized foreign currency transaction losses (gains) 1,578   (4,043)  
Benefit for deferred taxes (1,365)  (6,514)  
Changes in operating assets and liabilities, net of effects from acquisitions:     
Accounts receivable 13,683   8,935   
Inventories (5,829)  8,940   
Prepaid expenses and other current assets (3,994)  784   
Accounts payable (10,373)  347   
Accrued expenses, compensation and benefits and other liabilities (13,910)  (17,362)  
Income taxes payable (510)  770   
Deferred revenues (81,215)  (27,178)  
Net cash used in operating activities (45,016)  (26,214)  
       
Cash flows from investing activities:     
Purchases of property and equipment (7,321)  (6,742)  
Payments for business and technology acquisitions, net of cash acquired -   (65,967)  
Increase in other long-term assets (12)  (850)  
Increase in restricted cash (4,544)  (2,330)  
Net cash used in investing activities (11,877)  (75,889)  
       
Cash flows from financing activities:     
Proceeds from long-term debt 100,000   121,150   
Repayment of debt (1,250)  -   
Cash paid for capped call transaction -   (10,125)  
Proceeds from the issuance of common stock under employee stock plans 285   2,804   
Common stock repurchases for tax withholdings for net settlement of equity awards (441)  (1,299)  
Proceeds from revolving credit facilities 25,000   29,500   
Payments on revolving credit facilities (30,000)  (29,500)  
Payments for credit facility issuance costs (4,971)  (505)  
Net cash provided by financing activities 88,623   112,025   
       
Effect of exchange rate changes on cash and cash equivalents 733   (331)  
Net increase in cash and cash equivalents 32,463   9,591   
Cash and cash equivalents at beginning of period 17,902   25,056   
Cash and cash equivalents at end of period$50,365  $34,647   
       

 

AVID TECHNOLOGY, INC.              
Supplemental Revenue Information              
(unaudited - in thousands)              
               
 June 30, March 31, June 30,         
Revenue Backlog* 2016   2016   2015        
               
Pre-2011$8,732  $16,529  $51,520          
Post-2010$  258,420  $291,893  $  341,279          
Deferred Revenue$   267,152   $   308,422   $   392,799           
Other Backlog$197,591  $188,550  $147,453          
Total Revenue Backlog$464,743  $496,972  $540,252          
               
Post 2010 $   456,011   $   480,443   $   488,732           
               
The expected timing of recognition of revenue backlog as of June 30, 2016 is as follows:         
               
  2016   2017   2018  Thereafter Total     
Orders executed prior to January 1, 2011$7,636  $952  $144  $-  $8,732      
Orders executed or materially modified on or$117,314  $82,290  $19,983  $38,833  $258,420      
after January 1, 2011              
Other Backlog$62,776  $65,534  $24,541  $44,740  $197,591      
Total Revenue Backlog$   187,726   $   148,776   $   44,668   $   83,573   $   464,743       
               
*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
Robert Roose
Avid
978.640.3375
robert.roose@avid.com