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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
Fourth Quarter Highlights
- Bookings grew by 26% over Q4 2014 to
$193 million in the fourth quarter - Non-GAAP revenue grew by 9% over Q4 2014 to
$140 million in the fourth quarter - Adjusted EBITDA of
$17.0 million improved by 19% over Q4 2014 - Generated adjusted free cash flow of
$2.3 million , up from a use of$10.6 million in Q3 2015
Avid Everywhere Momentum Continues
- Over 32,000 users on the MediaCentral platform as of the end of 2015, a 54% increase over the end of 2014
- Added over 4,000 MediaCentral platform users in Q4, representing a 15% increase from the end of Q3 2015
- Over 25,000 paying subscribers as of the end of 2015, an increase of over 400% since the beginning of the year
- Added over 7,500 paying subscribers in Q4, representing a 43% increase from the end of Q3 2015
- Post-2010 revenue backlog increased to
$526 million as ofDecember 31, 2015 , up 16% from the end of 2014 - Bookings attributable to recurring revenue, or recurring revenue bookings, represented approximately 38% of total 2015 bookings up from 26% in 2014
- Q4 2015 Recurring revenue bookings were 55% of total 2015 bookings up from 42% in Q4 2014
- Non-GAAP operating expense declined by approximately 4% annually after normalizing for impact of the Orad acquisition (increased 0.7% on an as reported basis, which includes Orad)
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
- Anticipated 2016 annual adjusted EBITDA growth of 9% - 36%
- Anticipated 2016 annual adjusted free cash flow improvement of
$37 to$47 million - Improved post-transformation financial model with accelerating growth of Adjusted EBITDA and adjusted free cash flow in 2017 and 2018
"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
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:
- Continue to drive MediaCentral platform adoption
- Grow wallet share with existing customers
- New internally developed and 3rd party applications through our Alliance partnership program, made possible by the connectivity and openness of the Platform
- Cross
& up-sell existing and new workflow products and services, including Orad graphic and live production solutions, to increase wallet share among existing customers
- New internally developed and 3rd party applications through our Alliance partnership program, made possible by the connectivity and openness of the Platform
- More powerfully leverage our recently enhanced global reseller network to efficiently deliver the right products and services to more customers
- Expand customer ecosystem by accessing partners' customer bases with our complementary products and solutions
"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
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
2016 Full Year & Q1 Guidance
(in $ millions) | Full Year | Q1 2016 | |
Bookings (Constant Currency) | |||
Bookings | |||
Non-GAAP Revenue | |||
Adjusted EBITDA | |||
Adjusted Free Cash Flow | ( | ||
Non-GAAP Gross Margin | 59.5%-60.5% | 60-61% | |
Adjusted Operating Expenses | |||
2017 and 2018 Longer Term Guidance
(in $ millions) | 2017 | 2018 | |
Bookings | |||
Non-GAAP Revenue | |||
Adjusted EBITDA | |||
Adjusted Free Cash Flow | |||
"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
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 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
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
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 Facebook, Instagram, Twitter,
© 2016
Condensed Consolidated Statements of Operations | |||||||||||||||||||
(unaudited - in thousands, except per share data) | |||||||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||||||
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 | |||||||||||||||
Reconciliations of GAAP financial measures to Non-GAAP financial measures | ||||||||||||||||
(unaudited - in thousands, except per share data) | ||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||
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. | ||||||||||||||||
Condensed Consolidated Balance Sheets | ||||||||
(unaudited - in thousands) | ||||||||
2015 | 2014 | |||||||
ASSETS: | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 17,902 | $ | 25,056 | ||||
Accounts receivable, net of allowances of | ||||||||
at | 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 | ||||||
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. | ||||||||
and 42,339 shares issued and 39,530 shares and 39,294 shares outstanding | ||||||||
at | 423 | 423 | ||||||
Additional paid-in capital | 1,055,838 | 1,049,969 | ||||||
Accumulated deficit | (1,319,318 | ) | (1,321,798 | ) | ||||
and 3,045 shares at | (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 | ||||
Condensed Consolidated Statements of Cash Flows | ||||||||||||
(unaudited - in thousands) | ||||||||||||
Twelve Months Ended | ||||||||||||
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 | ||||||||
Supplemental Revenue Information | ||||||||||||||||||||
(unaudited - in thousands) | ||||||||||||||||||||
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 | ||||||||||||||||||||
2016 | 2017 | 2018 | Thereafter | Total | ||||||||||||||||
Orders executed prior to | $ | 24,772 | $ | 952 | $ | 144 | $ | - | $ | 25,868 | ||||||||||
Orders executed or materially modified on or | $ | 148,218 | $ | 75,657 | $ | 47,751 | $ | 50,887 | $ | 322,513 | ||||||||||
after | ||||||||||||||||||||
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 ContactSource:Sara Griggs Avid 310.821.0801 sara.griggs@avid.com Investor ContactJonathan Huang Avid 978.640.5126 jonathan.huang@avid.com
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