Press Release
<< Back
Avid Technology Announces Q1 2020 Results
Results Impacted by COVID-19 Global Pandemic and In-Line with
Subscription Revenue Growth of 50% Year-Over-Year Drove Double-Digit Growth in Recurring Revenue
Management Implemented
During the first quarter, the Company reported a record increase in cloud-enabled software subscriptions, stable maintenance revenue and growing contribution from long-term agreements with customers which resulted in the Recurring Revenue portion of the Company’s business growing 10% year-over-year and Annual Contract Value growing 11% year-over-year. In addition, the Company believes it is currently benefitting from a trend of large and medium sized media companies that are looking to Avid to support their needs for business continuity and work-from-home during the global pandemic. This trend appears to be accelerating adoption of the cloud-based solutions for media production workflows that Avid previously introduced.
Due to the rapid spread of the COVID-19 global pandemic in the second half of March, the non-Recurring Revenue portions of the Company’s business, which generally depend disproportionately on sales activity during the last few weeks of a given quarter, were down year-over-year in the first quarter. The COVID-19 global pandemic has caused the postponement or cancellation of many music festivals and major sporting events, and the suspension of many film and television productions, which negatively impacted the Company’s product sales for the first quarter. In addition, the travel restrictions put in place in many areas worldwide during March negatively impacted professional services revenue in the first quarter as the restrictions limited the Company’s ability to deliver certain professional services and to complete certain project milestones at the end of the quarter.
First Quarter 2020 Financial and Business Highlights
- Subscription revenue was
$14.0 million , up 50.4% year-over-year. - Record increase in cloud-enabled software subscriptions of approximately 30,000 during Q1 2020, to approximately 218,000 at
March 31, 2020 , an increase of 58.6% year-over-year in total paid subscriptions. - Subscription and Maintenance revenue was
$45.8 million , up 10.8% year-over-year, and above the original guidance range provided onMarch 7, 2020 . - Total revenue was
$86.5 million , down (16.3%) year-over-year primarily due to a reduction in non-recurring product and professional services revenue. - Recurring Revenue was
$62.9 million , an increase of 10.4% year-over-year. - Gross margin was 61.5%, up 220 basis points year-over-year. Non-GAAP Gross Margin was 61.7%, up 40 basis points year-over-year.
- Operating expenses were
$53.6 million , a decrease of (4.1%) year-over-year. Non-GAAP Operating Expenses were$51.3 million , a decrease of (3.4%) year-over-year. - Operating income was
($0.5) million , a decrease of (108.4%) year-over-year. Non-GAAP Operating Income was$2.0 million , a decrease of (80.0%) year-over-year. - Adjusted EBITDA was
$4.2 million , a decrease of (66.9%) year-over-year. Adjusted EBITDA Margin was 4.8%, down (740) basis points year-over-year. - Net loss per common share was (
$0.14 ), down from ($0.01 ) in Q1 2019. Non-GAAP Net Loss per Share was ($0.08 ), down from Non-GAAP Net Income per Share of$0.11 in Q1 2019. - Net cash (used in) operating activities was
($5.6) million in Q1 2020, a decrease of($12.0) million compared to Net cash provided by operating activities of$6.4 million in Q1 2019. - Free Cash Flow was
($7.1) million , a decrease of($11.7) million compared to$4.6 million in Q1 2019. - LTM Recurring Revenue was 66.3% of the Company’s revenue for the twelve months ended
March 31, 2020 , up 930 basis points from 57.0% for the twelve months endedMarch 31, 2019 . - Annual Contract Value was
$264 million at the end of Q1 2020, up 11.4% from$237 million at the end of Q1 2019.
Cost Saving Actions
Avid has put in place a plan to reduce its operating expenses, non-material cost of goods sold, and capital expenditures to offset its expectations for the decline in revenues for products and professional services due to the impact of the COVID-19 global pandemic. The Company has implemented actions that are expected to reduce Non-GAAP Operating Expenses by at least
Supply Chain Update
During the first quarter, the Company did not experience any material production issues related to its supply chain. In early May, the Company’s contract manufacturing partners in
Conference Call to Discuss First Quarter 2020 Results on
Avid will host a conference call to discuss its financial results for the first quarter of 2020 on
Non-GAAP Financial Measures and Operational Metrics
Avid includes non-GAAP financial measures in this press release, including Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Non-GAAP Gross Margin, Non-GAAP Operating Expenses, Non-GAAP Operating Income, and Non-GAAP Net Income (Loss) per Share. The Company also includes the operational metrics of Cloud-enabled software subscriptions, Recurring Revenue, LTM Recurring Revenue % and Annual Contract Value 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 and operating information is reported based on actual exchange rates. Definitions of the non-GAAP financial measures and operational metrics are included in our Form 8-K filed today. Reconciliations of the non-GAAP financial measures presented in this press 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 all operational metrics. Unless noted, all financial and operating information is reported based on actual exchange rates.
This earnings press release also includes forward-looking non-GAAP financial measures, including Non-GAAP Operating Expenses. Reconciliations of these forward-looking non-GAAP financial measures are not included in the earnings release due to the high variability and difficulty in making accurate forecasts and projections of some of the information excluded from the estimation of the non-GAAP financial measures, 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.
Forward-Looking Statements
Certain information provided in this press release includes forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. Examples of forward-looking statements include statements regarding our future financial performance or position, results of operations, business strategy, plans and objectives of management for future operations, and other statements that are not historical fact. You can identify forward-looking statements by their use of forward-looking words such as “may”, “will”, “anticipate”, “expect”, “believe”, “estimate”, “intend”, “plan”, “should”, “seek”, or other comparable terms.
Readers of this press release should understand that these forward-looking statements are not guarantees of performance or results. Forward-looking statements provide our current expectations and beliefs concerning future events and are subject to risks, uncertainties, and factors relating to our business and operations, all of which are difficult to predict and could cause our actual results to differ materially from the expectations expressed in or implied by such forward-looking statements.
These risks, uncertainties, and factors include, but are not limited to: our liquidity; our ability to execute our strategic plan including our cost saving strategies, and to 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; fluctuations in subscription and maintenance renewal rates; 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; risks related to the impact of the coronavirus (COVID-19) outbreak on our business, suppliers, consumers, customers and employees; risks related to the availability and prices of raw materials, including any negative effects caused by inflation, weather conditions, or health pandemics; disruptions or inefficiencies in our supply chain and/or operations, including from the COVID-19 outbreak; the costs, disruption, and diversion of management's attention due to the COVID-19 outbreak; the possibility of legal proceedings adverse to our Company; and other risks described in our reports filed from time to time with the
About Avid
Avid delivers the most open and efficient media platform, connecting content creation with collaboration, asset protection, distribution, and consumption. Avid’s preeminent customer community uses Avid’s comprehensive tools and workflow solutions to create, distribute and monetize the most watched, loved and listened to media in the world-from prestigious and award-winning feature films to popular television shows, news programs and televised sporting events, and celebrated music recordings and live concerts. With the most flexible deployment and pricing options, Avid’s industry-leading solutions include Media Composer®, Pro Tools®, Avid NEXIS®, MediaCentral®, iNEWS®, AirSpeed®, Sibelius®, Avid VENUE™, Avid FastServe®™, Maestro™, and PlayMaker™. For more information about Avid solutions and services, visit www.avid.com, connect with Avid on Facebook, Instagram, Twitter, YouTube, LinkedIn, or subscribe to
© 2020
Contacts | |
Investor contact: | PR contact: |
Avid | Avid |
ir@avid.com | jim.sheehan@avid.com |
(978) 275-2032 | (978) 640-3152 |
Consolidated Statements of Operations
(unaudited - in thousands, except per share data)
Three Months Ended | |||||||
2020 |
2019 |
||||||
Net revenues: | |||||||
Products | $ | 34,711 | $ | 54,396 | |||
Services | 51,742 | 48,923 | |||||
Total net revenues | 86,453 | 103,319 | |||||
Cost of revenues: | |||||||
Products | 20,962 | 27,600 | |||||
Services | 12,340 | 12,487 | |||||
Amortization of intangible assets | — | 1,950 | |||||
Total cost of revenues | 33,302 | 42,037 | |||||
Gross profit | 53,151 | 61,282 | |||||
Operating expenses: | |||||||
Research and development | 15,425 | 16,285 | |||||
Marketing and selling | 25,289 | 24,878 | |||||
General and administrative | 12,744 | 13,788 | |||||
Amortization of intangible assets | — | 363 | |||||
Restructuring costs, net | 145 | 558 | |||||
Total operating expenses | 53,603 | 55,872 | |||||
Operating (loss) income | (452 | ) | 5,410 | ||||
Interest and other expense, net | (5,283 | ) | (5,185 | ) | |||
(Loss) income before income taxes | (5,735 | ) | 225 | ||||
Provision for income taxes | 122 | 438 | |||||
Net loss | $ | (5,857 | ) | $ | (213 | ) | |
Net loss per common share – basic and diluted | $ | (0.14 | ) | $ | (0.01 | ) | |
Weighted-average common shares outstanding – basic and diluted | 43,254 | 42,046 | |||||
Reconciliations of GAAP financial measures to Non-GAAP financial measures
(unaudited - in thousands, except per share data)
Three Months Ended | |||||||
2020 | 2019 | ||||||
GAAP revenue | |||||||
GAAP revenue | $ | 86,453 | $ | 103,319 | |||
Non-GAAP Gross Profit | |||||||
GAAP gross profit | $ | 53,151 | $ | 61,282 | |||
Amortization of intangible assets | — | 1,950 | |||||
Stock-based compensation | 200 | 69 | |||||
Non-GAAP Gross Profit | $ | 53,351 | $ | 63,301 | |||
Non-GAAP Gross Margin | 61.7 | % | 61.3 | % | |||
Non-GAAP Operating Expenses | |||||||
GAAP operating expenses | $ | 53,603 | $ | 55,872 | |||
Less Amortization of intangible assets | (96 | ) | (363 | ) | |||
Less Stock-based compensation | (1,909 | ) | (1,669 | ) | |||
Less Restructuring costs, net | (145 | ) | (558 | ) | |||
Less Restatement costs | — | 8 | |||||
Less Acquisition, integration and other costs | 183 | (151 | ) | ||||
Less Efficiency program costs | (131 | ) | (3 | ) | |||
Less COVID-19 related expenses | (186 | ) | — | ||||
Non-GAAP Operating Expenses | $ | 51,319 | $ | 53,136 | |||
Non-GAAP Operating Income | |||||||
GAAP operating (loss) income | $ | (452 | ) | $ | 5,410 | ||
Amortization of intangible assets | 96 | 2,313 | |||||
Stock-based compensation | 2,109 | 1,738 | |||||
Restructuring costs, net | 145 | 558 | |||||
Restatement costs | — | (8 | ) | ||||
Acquisition, integration and other costs | (183 | ) | 151 | ||||
Efficiency program costs | 131 | 3 | |||||
COVID-19 related expenses | 186 | — | |||||
Non-GAAP Operating Income | $ | 2,032 | $ | 10,165 | |||
Adjusted EBITDA | |||||||
Non-GAAP Operating Income (from above) | $ | 2,032 | $ | 10,165 | |||
Depreciation | 2,142 | 2,428 | |||||
Adjusted EBITDA | $ | 4,174 | $ | 12,593 | |||
Adjusted EBITDA Margin | 4.8 | % | 12.2 | % | |||
Non-GAAP Net (Loss) Income | |||||||
Non-GAAP Operating Income (from above) | $ | 2,032 | $ | 10,165 | |||
Less Non-GAAP Interest and other expense | (5,276 | ) | (5,185 | ) | |||
Less Non-GAAP Income Tax | (132 | ) | (476 | ) | |||
Non-GAAP Net (Loss) Income | $ | (3,376 | ) | $ | 4,504 | ||
Weighted-average common shares outstanding - diluted | 43,254 | 42,585 | |||||
Non-GAAP (Loss) Earnings Per Share - diluted | $ | (0.08 | ) | $ | 0.11 | ||
Free Cash Flow | |||||||
GAAP net cash (used in) provided by operating activities | $ | (5,605 | ) | $ | 6,376 | ||
Capital expenditures | (1,479 | ) | (1,767 | ) | |||
Free Cash Flow | $ | (7,084 | ) | $ | 4,609 | ||
Free Cash Flow conversion of Adjusted EBITDA | (169.7 | )% | 36.6 | % | |||
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.
Consolidated Balance Sheets
(unaudited - in thousands)
2020 | 2019 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 81,182 | $ | 69,085 | |||
Restricted cash | 1,663 | 1,663 | |||||
Accounts receivable, net of allowances of |
59,965 | 73,773 | |||||
Inventories | 32,601 | 29,166 | |||||
Prepaid expenses | 10,101 | 9,425 | |||||
Contract assets | 22,162 | 19,494 | |||||
Other current assets | 7,147 | 6,125 | |||||
Total current assets | 214,821 | 208,731 | |||||
Property and equipment, net | 18,873 | 19,580 | |||||
32,643 | 32,643 | ||||||
Right of use assets | 29,002 | 29,747 | |||||
Long-term deferred tax assets, net | 7,640 | 7,479 | |||||
Other long-term assets | 5,456 | 6,113 | |||||
Total assets | $ | 308,435 | $ | 304,293 | |||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 34,989 | $ | 39,888 | |||
Accrued compensation and benefits | 19,185 | 19,524 | |||||
Accrued expenses and other current liabilities | 33,044 | 36,759 | |||||
Income taxes payable | 1,964 | 1,945 | |||||
Short-term debt | 31,400 | 30,554 | |||||
Deferred revenue | 82,441 | 83,589 | |||||
Total current liabilities | 203,023 | 212,259 | |||||
Long-term debt | 220,426 | 199,034 | |||||
Long-term deferred revenue | 12,971 | 14,312 | |||||
Long-term lease liabilities | 28,063 | 28,127 | |||||
Other long-term liabilities | 5,414 | 5,646 | |||||
Total liabilities | 469,897 | 459,378 | |||||
Stockholders’ deficit: | |||||||
Common stock | $ | 434 | $ | 430 | |||
Additional paid-in capital | 1,028,115 | 1,027,824 | |||||
Accumulated deficit | (1,185,266 | ) | (1,179,409 | ) | |||
Accumulated other comprehensive loss | (4,745 | ) | (3,930 | ) | |||
Total stockholders’ deficit | (161,462 | ) | (155,085 | ) | |||
Total liabilities and stockholders’ deficit | $ | 308,435 | $ | 304,293 | |||
Consolidated Statements of Cash Flows
(unaudited - in thousands)
Three Months Ended | |||||||
2020 | 2019 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (5,857 | ) | $ | (213 | ) | |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | |||||||
Depreciation and amortization | 2,142 | 4,740 | |||||
Allowance for (recovery from) doubtful accounts | 497 | (9 | ) | ||||
Stock-based compensation expense | 2,109 | 1,738 | |||||
Non-cash interest expense | 2,820 | 3,359 | |||||
Unrealized foreign currency transaction losses (gains) | 51 | (586 | ) | ||||
Benefit from deferred taxes | (207 | ) | (1 | ) | |||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 13,311 | 6,444 | |||||
Inventories | (3,435 | ) | (1,372 | ) | |||
Prepaid expenses and other assets | (1,631 | ) | (3,861 | ) | |||
Accounts payable | (4,858 | ) | (810 | ) | |||
Accrued expenses, compensation and benefits and other liabilities | (5,323 | ) | (2,837 | ) | |||
Income taxes payable | 40 | 261 | |||||
Deferred revenue and contract assets | (5,264 | ) | (477 | ) | |||
Net cash (used in) provided by operating activities | (5,605 | ) | 6,376 | ||||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (1,479 | ) | (1,767 | ) | |||
Net cash used in investing activities | (1,479 | ) | (1,767 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from revolving line of credit | 22,000 | — | |||||
Repayment of debt | (351 | ) | (3,928 | ) | |||
Proceeds from the issuance of common stock under employee stock plans | — | 309 | |||||
Common stock repurchases for tax withholdings for net settlement of equity awards | (1,818 | ) | (1,690 | ) | |||
Partial unwind capped call cash receipt | — | (22 | ) | ||||
Net cash provided by (used in) financing activities | 19,831 | (5,331 | ) | ||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (402 | ) | (55 | ) | |||
Net increase (decrease) in cash, cash equivalents and restricted cash | 12,345 | (777 | ) | ||||
Cash, cash equivalents and restricted cash at beginning of period | 72,575 | 68,094 | |||||
Cash, cash equivalents and restricted cash at end of period | $ | 84,920 | $ | 67,317 | |||
Supplemental information: | |||||||
Cash and cash equivalents | $ | 81,182 | $ | 55,326 | |||
Restricted cash | 1,663 | 9,020 | |||||
Restricted cash included in other long-term assets | 2,075 | 2,971 | |||||
Total cash, cash equivalents and restricted cash shown in the statement of cash flows | $ | 84,920 | $ | 67,317 | |||
Supplemental Revenue Information
(unaudited - in millions)
Backlog Disclosure for Quarter Ended |
|||||
2020 | 2019 | 2019 | |||
Revenue Backlog* | |||||
Deferred Revenue | |||||
Other Backlog | 339.6 | 342.3 | 358.4 | ||
Total Revenue Backlog | $435.0 | $440.2 | $459.7 | ||
The expected timing of recognition of revenue backlog as of |
|||||
2020 | 2021 | 2022 | Thereafter | Total | |
Deferred Revenue | |||||
Other Backlog | 102.0 | 99.3 | 75.7 | 62.6 | 339.6 |
Total Revenue Backlog | $176.2 | $114.0 | $79.8 | $65.0 | $435.0 |
*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. |
Source: Avid Technology, Inc.