14.1% Sequential Revenue Growth as End Markets Begin to Recover from COVID-19 Downturn

73.9% Year-Over-Year Subscription Revenue Growth Driven by Net Increase of Approximately 27,000 Paid Subscriptions in the Quarter

Operating Income Increased 56.1% Year-Over-Year Driven by Improved Gross Margin and Significantly Reduced Operating Expenses

$18.0 million in Net Cash Provided by Operating Activities Leading to Free Cash Flow of $15.5 million in the Quarter

BURLINGTON, Mass., Oct. 28, 2020 (GLOBE NEWSWIRE) -- Avid® (NASDAQ: AVID), a leading technology provider that powers the media and entertainment industry, today announced its financial results for the third quarter ended September 30, 2020.

Total revenue increased 14.1% sequentially in the third quarter, while declining slightly year-over-year, as many of Avid’s end markets showed initial signs of recovery from the COVID-19 pandemic. During the third quarter, the Recurring Revenue components of the Company’s business remained strong. The Company reported record subscription revenue of $17.9 million, up 73.9% year-over-year, resulting in 6.5% year-over-year growth in Annual Contract Value. Also, in the third quarter, Avid significantly improved its profitability as a result of a 250 basis point year-over-year improvement in gross margin coupled with a ($4.3) million reduction in operating expenses that yielded a 56.1% year-over-year improvement in operating income and an Adjusted EBITDA Margin of 21.4%. The strong operating results for the third quarter resulted in Free Cash Flow of $15.5 million.

The non-Recurring Revenue portions of the Company’s business related to product and professional services showed strong signs of sequential recovery during the third quarter, although they continued to be negatively impacted year-over-year by weaker demand as a result of the COVID-19 pandemic. Product revenue from perpetual software licenses and integrated solutions increased 29.5% sequentially to $35.8 million in the third quarter.

During the third quarter, the Company repaid the $22.0 million balance on its revolving credit facility using available cash. As of September 30, 2020, the Company had $49.1 million in cash and cash equivalents. The Company’s leverage ratio under its financing agreement decreased to 3.4x as of September 30, 2020 as a result of the repayment of borrowings under the revolving credit facility using the Company’s strong Free Cash Flow generation in the quarter, and the year-over-year increase in Adjusted EBITDA in the quarter.

Third Quarter 2020 Financial and Business Highlights

• Subscription revenue was $17.9 million, up 73.9% year-over-year.
  
• Paid Cloud-enabled software subscriptions increased by approximately 27,000 during the quarter, to approximately 269,000 at September 30, 2020, an increase of 58.1% year-over-year in total paid subscriptions.
  
• Subscription and Maintenance revenue was $48.7 million, up 11.6% year-over-year.
  
• Total revenue was $90.4 million, up 14.1% sequentially, and down (3.2%) year-over-year.
• Gross margin was 64.4%, up 250 basis points year-over-year. Non-GAAP Gross Margin was 64.9%, up 280 basis points year-over-year.
  
• Operating expenses were $45.1 million, a decrease of (8.7%) year-over-year.   Non-GAAP Operating Expenses were $41.4 million, a decrease of (12.6%) year-over-year.
  
• Operating income was $13.1 million, an increase of 56.1% year-over-year. Non-GAAP Operating Income was $17.3 million, an increase of 61.3% year-over-year.
  
• Adjusted EBITDA was $19.3 million, an increase of 51.2% year-over-year. Adjusted EBITDA Margin was 21.4%, up 770 basis points year-over-year.  
  
• Net income per common share was $0.18, up from $0.07 in the third quarter of 2019. Non-GAAP Net Income per Share was $0.27, up from $0.10 in the third quarter of 2019.
  
• Net cash provided by operating activities was $18.0 million in the quarter, an increase of $20.5 million compared to Net cash (used in) operating activities of ($2.6) million in the third quarter of 2019.
  
• Free Cash Flow was $15.5 million in the quarter, an increase of $20.2 million compared to Free Cash Flow of negative ($4.6) million in the third quarter of 2019.
  
• LTM Recurring Revenue % was 71.2% of the Company’s revenue for the 12 months ended September 30, 2020, up from 59.4% for the 12 months ended September 30, 2019.
  
• Annual Contract Value was $271.9 million as of September 30, 2020, up 6.5% from $255.3 million as of September 30, 2019.
  

Jeff Rosica, Avid’s CEO and President, stated, “We are pleased with the beginning of the demand turnaround we saw in our non-recurring business during the third quarter, and with the strength of the recurring revenue elements of our business driven by the continued growth of our creative software subscription business and the introduction of enterprise subscription. COVID-19 continued to have some temporary impact on customer demand for parts of our non-recurring product business, but we expect demand to continue the gradual recovery that started in Q3.”   Mr. Rosica added, “We have adjusted our strategy and investments to quickly respond to the changes in the market we’re seeing, focusing even more sharply on the parts of the business that we believe will drive more profitable growth. We also remain focused on ensuring we have the right cost structure moving forward so that Avid enters 2021 as a stronger and more profitable company.”

Ken Gayron, Executive Vice President and Chief Financial Officer of Avid, said, “We continued to make substantial progress in driving our higher margin revenue streams and improving our cost structure in the third quarter, yielding strong growth in profitability.” Mr. Gayron continued, “The improvement in profitability resulted in third quarter Free Cash Flow of $15.5 million, enabling us to fully repay the balance on our revolving credit facility and reduce our accounts payable, further strengthening our balance sheet. As we head into our seasonally highest Free Cash Flow generating quarter and with the improvements we achieved in our profitability during the third quarter, we believe Avid will generate strong Free Cash Flow as we conclude fiscal year 2020, which should enable us to improve our cost of capital and reduce our interest costs.”

Conference Call to Discuss Third Quarter 2020 Results on October 28, 2020

Avid will host a conference call to discuss its financial results for the third quarter of 2020 on Wednesday, October 28, 2020 at 5:30 p.m. ET. Participants may join the webcast in listen-only mode and access the presentation slides using the link on the Avid Investor Relations website, which can be found on the events tab at ir.avid.com. Participants who would like to ask a question can access the call by dialing +1 323-289-6576 and referencing confirmation code 4778505. Please connect at least 15 minutes in advance to ensure a timely connection to the call. A replay of the call will also be available for a limited time on the Avid Investor Relations website shortly after the completion of the call.

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 the 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 website at ir.avid.com, which also includes definitions of all operational metrics.

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. 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: risks related to the impact of the coronavirus (COVID-19) outbreak on our business, suppliers, consumers, customers and employees; 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 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 U.S. Securities and Exchange Commission. Moreover, the business may be adversely affected by future legislative, regulatory or other changes, including tax law changes, as well as other economic, business and/or competitive factors. The risks included above are not exhaustive. We caution readers not to place undue reliance on any forward-looking statements includes in this press release which speak only as to the date of this press release. We undertake no responsibility to update or revise any forward-looking statements, except as required by law.

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 Avid Blogs.

© 2020 Avid Technology, Inc. All rights reserved. Avid, the Avid logo, Avid NEXIS, Avid FastServe, AirSpeed, iNews, Maestro, MediaCentral, Media Composer, NewsCutter, PlayMaker, Pro Tools, Avid VENUE, and Sibelius are trademarks or registered trademarks of Avid Technology, Inc. or its subsidiaries in the United States and/or other countries.  All other trademarks are the property of their respective owners.  Product features, specifications, system requirements and availability are subject to change without notice.

Source: Avid Technology, Inc.