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Avid Reports Second Quarter 2007 Results
Appoints Joel Legon as CFO
TEWKSBURY, Mass., Jul 26, 2007 (BUSINESS WIRE) -- Avid Technology, Inc. (NASDAQ: AVID) today reported revenue of $225.3 million for the three-month period ended June 30, 2007, compared to $222.2 million for the same period in 2006. GAAP net loss for the quarter was $6.0 million, or $.15 per share, compared to GAAP net income of $2.7 million, or $.06 per diluted share, in the second quarter of 2006.
GAAP net income in the second quarter of 2007 includes $14.2 million of amortization, stock-based compensation, restructuring charges, legal settlements and related tax adjustments. Excluding these items, non-GAAP earnings per diluted share were $.20. For the second quarter of 2006, there was $11.8 million of amortization, stock-based compensation and related tax adjustments included in GAAP net income. Excluding these items, non-GAAP earnings per share were $.34 in the second quarter of 2006.
Avid also announced the appointment of Joel Legon to serve as the company's vice president and chief financial officer. Since joining Avid in March 2006, Legon had served as vice president and corporate controller. He had additionally served as acting chief financial officer since March 2007.
"I am pleased to report a solid Q2, with revenue and profit that were in line with our expectations," said David Krall, who will be stepping down as president and chief executive officer on July 31. "Our Video division recognized several large deals out of backlog, including France 24, one of the largest orders in our history. In Audio, which is our most consistent and profitable segment, revenue was flat organically and up 3% year-on-year including revenue generated from Sibelius. In our Consumer segment, lower sales of the TV viewing line in Europe were counterbalanced by strong sales and market share growth of our flagship Studio 11 consumer video editor."
"With a strong balance sheet, innovative products and world-class customers, Avid is well positioned as a leader in the media and entertainment industry," said Nancy Hawthorne, who will take over as interim chief executive officer on August 1. "Our customers are looking to Avid to extend that leadership into new areas as their businesses evolve. By aligning ourselves more closely with our customers' business opportunities, and taking a fresh approach to our own business processes, we believe we can deliver more value to both our customers and our shareholders."
The company also announced a strategic realignment that will result in restructuring charges of between $8 and $10 million, $1.5 million of which was recorded in Q2. This action includes the transition of video server engineering from Mountain View, CA to existing Avid facilities in Edmonton, Canada and Tewksbury, MA; a reduction in space within certain facilities; and a reduction in force of approximately 150 positions, primarily, but not exclusively, in the company's Video business unit.
Revenue for the six-month period ended June 30, 2007 was $444.2 million, compared to revenue of $440.3 million for the same period in 2006. GAAP net loss for the first six months of 2007 was $6 million, or $.15 per share, compared to GAAP net income of $6.0 million, or $.14 per diluted share, for the same period in 2006. GAAP net loss for the six-month period ended June 30, 2007 includes $24.8 million of amortization, stock-based compensation, restructuring charges, legal settlements and related tax adjustments. Excluding these items, non-GAAP earnings per share were $.45 per diluted share for the first half of 2007. GAAP net income for the six-month period ended June 30, 2006 includes $24.6 million of amortization, stock-based compensation, restructuring charges, in-process research and development and related tax adjustments. Excluding these items non-GAAP earnings per share were $.71 for the first half of 2006.
Use of Non-GAAP Financial Measures
This press release contains "non-GAAP financial measures" under the rules of the U.S. Securities and Exchange Commission. 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. The reconciliation for net income and diluted earnings per share for the three and six-month periods ended June 30, 2007 and 2006 are in the tables attached to this press release.
We use non-GAAP financial measures internally to manage our business, for example, in establishing our annual operating budget, in assessing segment operating performance and for measuring performance under our employee incentive compensation plans. Non-GAAP financial measures are used by our management in its operating and financial decision-making because management believes these measures reflect our ongoing business in a manner that allows meaningful period-to-period comparisons. Accordingly, we believe it is useful for our investors and others to review both GAAP and non-GAAP measures in order to (a) understand and evaluate our current operating performance and future prospects in the same manner as management does and (b) compare in a consistent manner the company's current financial results with our past financial results. The primary limitations associated with our use of non-GAAP financial measures are that these measures may not be directly comparable to the amounts reported by other companies and they do not include all items of income and expense that affect our operations. Our management compensates for these limitations by considering the company's financial results as determined in accordance with GAAP and by providing a detailed reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures in this press release.
Conference Call
A conference call to discuss Avid's second quarter 2007 financial results will be held today, July 26, 2007, at 5:00 p.m. EDT. The call will be open to the public and can be accessed by dialing (719) 457-2727 and referencing confirmation code 2323418. The call and subsequent replay will also be available on Avid's website. To listen via this alternative, go to the Investor Relations page under the About Us menu at www.avid.com for complete details prior to the start of the conference call.
Use of Forward-Looking Statements
The above release is subject to the completion and filing of our Quarterly Report on Form 10-Q. This release includes forward-looking statements, as defined by the Private Securities Litigation Reform Act of 1995, about Avid's performance. There are a number of factors that could cause actual events or results to differ materially from those indicated by such forward-looking statements, such as Avid's ability to meet customer needs, market acceptance of Avid's existing and new products, Avid's ability to recognize revenue in a timely manner, competitive factors, including pricing pressures, delays in product shipments and other important events and factors disclosed previously and from time to time in Avid's filings with the U.S. Securities and Exchange Commission. In addition, the forward-looking statements contained herein represent Avid's estimate only as of today and should not be relied upon as representing the company's estimate as of any subsequent date. While Avid may elect to update these forward-looking statements at some point in the future, Avid specifically disclaims any obligation to do so, even if the estimate changes.
About Avid Technology, Inc.
Avid Technology, Inc. is the world leader in digital nonlinear media creation, management, and distribution solutions, enabling film, video, audio, animation, games and broadcast professionals to work more efficiently, productively and creatively. For more information about the company's Oscar®, Grammy®, and Emmy® award-winning products and services, please visit: www.avid.com.
© 2007 Avid Technology, Inc. All rights reserved. Avid, Digidesign, Film Composer and Pro Tools are either registered trademarks or trademarks of Avid Technology, Inc. or its subsidiaries in the United States and/or other countries. Avid received an Oscar statuette representing the 1998 Scientific and Technical Award for the concept, design, and engineering of the Avid® Film Composer® system for motion picture editing. Digidesign, Avid's audio division, received an Oscar statuette representing the 2003 Scientific and Technical Award for the design, development, and implementation of its Pro Tools® digital audio workstation. Oscar is a trademark and service mark of the Academy of Motion Picture Arts and Sciences. Emmy is a registered trademark of ATAS/NATAS. Grammy is a trademark of the National Academy of Recording Arts and Sciences, Inc. All other trademarks contained herein are the property of their respective owners.
AVID TECHNOLOGY, INC
Condensed Consolidated Statements of Operations
(unaudited - in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2007 2006 2007 2006
--------- -------- --------- --------
Net revenues
Products $192,370 $197,960 $384,813 $392,323
Services 32,956 24,266 59,411 47,973
--------- -------- --------- --------
Total net revenues 225,326 222,226 444,224 440,296
Cost of revenues
Products 92,991 93,819 185,703 185,180
Services 17,454 13,812 33,433 27,127
Amortization of intangible
assets 4,761 5,016 9,233 10,096
--------- -------- --------- --------
Total cost of revenues 115,206 112,647 228,369 222,403
--------- -------- --------- --------
Gross profit 110,120 109,579 215,855 217,893
--------- -------- --------- --------
Operating expenses
Research and development 38,444 35,617 76,186 71,113
Marketing and selling 56,505 52,583 108,199 102,495
General and administrative 17,698 15,853 35,550 30,990
Amortization of intangible
assets 3,431 3,977 6,863 7,642
Restructuring costs, net 1,517 - 1,775 1,066
In-process research and
development - - - 310
--------- -------- --------- --------
Total operating expenses 117,595 108,030 228,573 213,616
Operating income (loss) (7,475) 1,549 (12,718) 4,277
Interest and other income
(expense), net 2,023 1,881 3,918 3,852
--------- -------- --------- --------
Income (loss) before income
taxes (5,452) 3,430 (8,800) 8,129
Provision for (benefit from)
income taxes, net 547 731 (2,821) 2,084
--------- -------- --------- --------
Net income (loss) $ (5,999) $ 2,699 $ (5,979) $ 6,045
========= ======== ========= ========
Net income (loss) per common
share - basic $ (0.15) $ 0.06 $ (0.15) $ 0.14
Net income (loss) per common
share - diluted $ (0.15) $ 0.06 $ (0.15) $ 0.14
Weighted-average common shares
outstanding - basic 40,940 42,273 41,046 42,205
Weighted-average common shares
outstanding - diluted 40,940 43,057 41,046 43,126
AVID TECHNOLOGY, INC
(unaudited - in thousands, except per share data)
Segment revenue and operating income (loss):
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Professional Video
Revenue $120,318 $118,864 $232,989 $235,064
Operating income 2,340 7,297 3,916 18,400
Audio
Revenue $ 76,763 $ 74,262 $155,686 $147,009
Operating income 6,432 9,337 13,698 18,090
Consumer Video
Revenue $ 28,245 $ 29,100 $ 55,549 $ 58,223
Operating loss (962) (1,809) (3,333) (4,381)
Total
Total segment revenue $225,326 $222,226 $444,224 $440,296
Total segment operating
income 7,810 14,825 14,281 32,109
Reconciliation of GAAP operating income to Non-
GAAP operating income:
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Consolidated GAAP operating
income (loss) $ (7,475) $ 1,549 $(12,718) $ 4,277
Adjustments to reconcile to
Non-GAAP operating income:
Amortization of intangible
assets 8,192 8,993 16,096 17,738
Stock-based compensation 4,551 4,283 8,103 8,718
Restructuring costs, net 1,517 - 1,775 1,066
Legal Settlements 1,025 - 1,025 -
In-process research and
development - - - 310
--------- --------- --------- ---------
Total operating income for
reportable segments $ 7,810 $ 14,825 $ 14,281 $ 32,109
========= ========= ========= =========
Reconciliation of GAAP net income to Non-GAAP net
income:
GAAP net income (loss) $ (5,999) $ 2,699 $ (5,979) $ 6,045
Adjustments to reconcile to
Non-GAAP net income:
Amortization of intangible
assets 8,192 8,993 16,096 17,738
Stock-based compensation 4,551 4,283 8,103 8,718
Restructuring costs, net 1,517 - 1,775 1,066
Legal Settlements 1,025 - 1,025 -
In-process research and
development - - - 310
Related tax adjustments (1,099) (1,481) (2,214) (3,251)
--------- --------- --------- ---------
Non-GAAP net income $ 8,187 $ 14,494 $ 18,806 $ 30,626
========= ========= ========= =========
Weighted-average common
shares outstanding - diluted 41,517 43,057 41,653 43,126
Non-GAAP net income per
common share - diluted $ 0.20 $ 0.34 $ 0.45 $ 0.71
Stock-based compensation, which relates to the adoption of SFAS 123R,
the acquisition of M-Audio, and the issuance of restricted stock and
restricted stock units in 2006 and 2007, is comprised of the
following:
Three Months Ended Six Months Ended
Stock-based compensation June 30, June 30,
included in:
------------------- -------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Cost of products revenues $ 182 $ 131 $ 323 $ 270
Cost of services revenues 251 208 448 427
Research and development
expense 1,354 1,244 2,397 2,550
Marketing and selling expense 1,201 1,187 2,136 2,448
General and administrative
expense 1,563 1,513 2,799 3,023
--------- --------- --------- ---------
$ 4,551 $ 4,283 $ 8,103 $ 8,718
========= ========= ========= =========
AVID TECHNOLOGY, INC
Condensed Consolidated Balance Sheets
(unaudited - in thousands)
June 30, December 31,
2007 2006
---------- ------------
ASSETS:
Current assets:
Cash, cash equivalents and marketable
securities $ 160,048 $ 172,107
Accounts receivable, net of allowances of
$19,333 and $23,087 at June 30, 2007 and
December 31, 2006, respectively 138,450 138,578
Inventories 140,290 144,238
Prepaid and other current assets 35,772 29,016
---------- ------------
Total current assets 474,560 483,939
Property and equipment, net 45,004 40,483
Intangible assets, net 85,952 102,048
Goodwill 360,550 360,143
Other assets 10,713 10,421
---------- ------------
Total assets $ 976,779 $ 997,034
========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 32,090 $ 34,108
Accrued expenses and other current
liabilities 82,257 88,331
Deferred revenues 79,235 73,743
---------- ------------
Total current liabilities 193,582 196,182
Long-term liabilities 18,190 20,471
---------- ------------
Total liabilities 211,772 216,653
---------- ------------
Stockholders' equity:
Common stock 423 423
Additional paid-in capital 960,345 952,763
Accumulated deficit (146,298) (134,708)
Treasury stock at cost, net of reissuances (57,578) (43,768)
Accumulated other comprehensive income 8,115 5,671
---------- ------------
Total stockholders' equity 765,007 780,381
---------- ------------
Total liabilities and stockholders'
equity $ 976,779 $ 997,034
========== ============
SOURCE: Avid Technology, Inc.
Avid Technology, Inc.
Dean Ridlon, 978-640-5309
Investor Relations Director
Investor_Relations@avid.com