Exceeded guidance for bookings and adjusted free cash flow, met guidance on all other metrics

Second consecutive quarter of sequential revenue and adjusted EBITDA growth

Positive free cash flow in 2017 and expect continued growth of free cash flow in 2018

BURLINGTON, Mass., March 15, 2018 (GLOBE NEWSWIRE) -- Avid^® (NASDAQ: AVID) today announced its fourth quarter and full year 2017 financial results and provided guidance for its first quarter and full year 2018. The company posted its second consecutive quarter of sequential revenue and adjusted EBITDA growth and exceeded guidance for bookings and adjusted free cash flow while meeting guidance on all other metrics.

Highlights of Fourth Quarter 2017 Results

• Bookings excluding Greater China were $140.8 million and Constant Currency Bookings were $145.9 million, both above guidance.
• GAAP Revenue was $107.3 million, in line with guidance.
• GAAP Gross Margin was 54.5%. Non-GAAP Gross Margin was 56.0%.
• GAAP Operating Expenses were $53.7 million. Non-GAAP Operating Expenses were $48.2 million, in line with guidance.
• GAAP Net Loss was $881,000.
• Adjusted EBITDA was $15.0 million, in line with guidance.
• GAAP Net Cash Provided by Operating Activities was $2.8 million.
• Adjusted Free Cash Flow was $4.8 million, above guidance. This is the fifth consecutive quarter of positive Adjusted Free Cash Flow. For the full year 2017, Adjusted Free Cash Flow was up $59 million compared to 2016.

2017 Highlights

• Grew total revenue backlog to $536.1 million as of the end of 2017, up 25% from $429.3 million the year prior.
• Completed multi-year business transformation.
• Launched strategic alliance with Microsoft to develop and market cloud-based solutions and services for the media and entertainment industry.
• Generated positive free cash flow.

Avid Progressing on Strategic Growth Objectives

• Enterprise: During the fourth quarter, Avid signed several large multi-year commercial agreements. As of December 31, 2017, total licenses for the MediaCentral platform were approximately 53,700, up 26% year-over-year.
• Individual: Digital sales, primarily targeted at individual creative professionals, were up 24% year-over-year. Cloud-enabled software subscriptions are now over 93,500, up 54% year-over-year.

"Our strategy is yielding improved financial results as customers are embracing our products and solutions," said Jeff Rosica, Chief Executive Officer and President of Avid. "Looking ahead, I'm excited about the opportunity before us and our plan to continue to improve business performance, while further leveraging the unique position we've established, including our ability to lead customers and the industry into the cloud."

"We are pleased with our financial performance this year having met key objectives for 2017, including meeting or exceeding guidance on all metrics each quarter and delivering a substantial improvement in free cash flow generation," said Brian E. Agle, Senior Vice President and Chief Financial Officer of Avid. "In the second half of 2017, our results showed improvement as we delivered two consecutive quarters of revenue and adjusted EBITDA growth, excluding the impact of pre-2011 amortization and elimination of implied PCS revenue. We look forward to building on this momentum in 2018, as we remain focused on growing revenue, managing expenses and further increasing free cash flow."

First Quarter and Full Year 2018 Guidance
Avid's first quarter and full year 2018 financial guidance is provided in the table below.  This guidance reflects the expected estimated impact of the adoption of the new revenue recognition standard ASC 606 as of January 1, 2018. In 2018, the Company will be refining its guidance practices to focus only on Revenue, Adjusted EBITDA and Free Cash Flow. Annual Free Cash Flow guidance will replace the Adjusted Free Cash Flow guidance previously provided quarterly.

	Guidance under ASC 606
(in $ millions)	2018	Q1 2018
Revenue	$404 - $434	$95 - $105
Adjusted EBITDA	$39 - $51	$3 - $9
Free Cash Flow (Annual)	$2 - $14

The adoption of ASC 606 as of January 1, 2018 is estimated to unfavorably impact revenue and Adjusted EBITDA by $11 million and $2 million in 2018 and Q1 2018, respectively. A reconciliation of guidance under the ASC 606 and ASC 605 standards is provided for comparison purposes in the supplemental tables included in this press release. 

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 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 Technology Q4 2017 Business Update presentation posted on Avid's Investor Relations website.

Non-GAAP Financial Measures
Avid includes non-GAAP financial measures in this press release, including Adjusted EBITDA, Adjusted Free Cash Flow, Free Cash Flow, non-GAAP Operating Income (loss), non-GAAP Operating Expenses, non-GAAP Gross Margin, Adjusted EBITDA margin and Adjusted Free Cash Flow conversion of Adjusted EBITDA. The Company also includes the operational metrics 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.

The earnings release also includes forward-looking non-GAAP financial measures, including Adjusted EBITDA, and Free Cash Flow. 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 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.

Conference Call
Avid will host a conference call to discuss its financial results for the fourth quarter and full year 2017 on Thursday, March 15, 2018 at 5:00 p.m. ET. The call will be open to the public and can be accessed by dialing 323-994-2083 and referencing confirmation code 7939066. 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 the year ending December 31, 2018 and first quarter ending March 31, 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, anticipated market uptake of new products, 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; backlog; revenue backlog conversion rate; product mix and free cash flow; 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 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, 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; 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 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.

© 2018 Avid Technology, Inc. All rights reserved. Avid, the Avid logo, Avid Everywhere, Avid Artist | DNxIV, Avid NEXIS, Avid FastServe, AirSpeed, iNews, Maestro, MediaCentral, Media Composer, 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.

 

 

AVID TECHNOLOGY, INC.
Condensed Consolidated Statements of Operations
(unaudited - in thousands, except per share data)
			Three Months Ended								Twelve Months Ended
			December 31,								December 31,
				2017				2016				2017				2016
Net revenues:
	Products		$	56,481			$	59,269			$	209,461			$	283,110
	Services			50,777				56,026				209,542				228,820
	Total net revenues			107,258				115,295				419,003				511,930
Cost of revenues:
	Products			32,128				29,174				112,606				111,579
	Services			14,734				14,702				56,481				59,828
	Amortization of intangible assets			1,950				1,950				7,800				7,800
	Total cost of revenues			48,812				45,826				176,887				179,207
Gross profit				58,446				69,469				242,116				332,723
Operating expenses:
	Research and development			16,308				18,773				68,212				81,564
	Marketing and selling			25,776				21,311				106,257				110,338
	General and administrative			10,624				13,112				53,892				61,471
	Amortization of intangible assets			362				363				1,450				2,498
	Restructuring costs, net			595				4,959				7,059				12,837
	Total operating expenses			53,665				58,518				236,870				268,708
Operating income				4,781				10,951				5,246				64,015
Interest and other expense, net				(5,203	)			(4,622	)			(18,668	)			(18,671	)
(Loss) income before income taxes				(422	)			6,329				(13,422	)			45,344
Provision for (benefit from) income taxes				459				1,108				133				(2,875	)
Net (loss) income			$	(881	)		$	5,221			$	(13,555	)		$	48,219
Net (loss) income per common share - basic and diluted			$	(0.02	)		$	0.13			$	(0.33	)		$	1.20
Weighted-average common shares outstanding - basic				41,216				40,637				41,020				40,021
Weighted-average common shares outstanding - diluted				41,216				40,746				41,020				40,176

 

AVID TECHNOLOGY, INC.
Reconciliations of GAAP financial measures to Non-GAAP financial measures
(unaudited - in thousands)
		Three Months Ended								Twelve Months Ended
		December 31,								December 31,
Non-GAAP revenue			2017				2016				2017				2016
GAAP revenue		$	107,258			$	115,295			$	419,003			$	511,930
Amortization of acquired deferred revenue			-				-				-				594
Non-GAAP revenue			107,258				115,295				419,003				512,524
Pre-2011 Revenue			78				2,268				985				24,772
Elim PCS			-				8,100				1,700				52,900
Non-GAAP Revenue w/o Pre-2011 and Elim			107,180				104,927				416,318				434,852
Non-GAAP gross profit
GAAP gross profit			58,446				69,469				242,116				332,723
Amortization of acquired deferred revenue			-				-				-				594
Amortization of intangible assets			1,950				1,950				7,800				7,800
Stock-based compensation			(305	)			(48	)			242				440
Non-GAAP gross profit			60,091				71,371				250,158				341,557
Pre-2011 Revenue			78				2,268				985				24,772
Elim PCS			-				8,100				1,700				52,900
Non-GAAP gross profit w/o Pre-2011 and Elim			60,013				61,003				247,473				263,885
Non-GAAP operating expenses
GAAP operating expenses			53,665				58,518				236,870				268,708
Less Amortization of intangible assets			(362	)			(363	)			(1,450	)			(2,498	)
Less Stock-based compensation			(2,741	)			(1,847	)			(8,069	)			(7,475	)
Less Restructuring costs, net			(595	)			(4,959	)			(7,059	)			(12,837	)
Less Restatement costs			(558	)			(109	)			(1,284	)			(295	)
Less Acquisition, integration and other costs			(266	)			(129	)			(163	)			(587	)
Less Efficiency program costs			(931	)			(967	)			(3,985	)			(4,305	)
Non-GAAP operating expenses			48,212				50,144				214,860				240,711
Non-GAAP operating income
GAAP operating income			4,781				10,951				5,246				64,015
Amortization of acquired deferred revenue			-				-				-				594
Amortization of intangible assets			2,312				2,313				9,250				10,298
Stock-based compensation			2,436				1,799				8,311				7,915
Restructuring costs, net			595				4,959				7,059				12,837
Restatement costs			558				109				1,284				295
Acquisition, integration and other costs			266				129				163				587
Efficiency program costs			931				967				3,985				4,305
Non-GAAP operating income			11,879				21,227				35,298				100,846
Adjusted EBITDA
Non-GAAP operating income (from above)			11,879				21,227				35,298				100,846
Depreciation			3,093				3,997				13,087				15,181
Adjusted EBITDA			14,972				25,224				48,385				116,027
Adjusted EBITDA margin			14	%			22	%			12	%			23	%
Pre-2011 Revenue			78				2,268				985				24,772
Elim PCS			-				8,100				1,700				52,900
Adjusted EBITDA w/o Pre-2011 and Elim			14,894				14,856				45,700				38,355
Adjusted EBITDA w/o Pre-2011 and Elim margin			14	%			14	%			11	%			9	%
Adjusted free cash flow
GAAP net cash provided by (used in) operating activities			2,833				(270	)			8,936				(49,195	)
Capital expenditures			(1,752	)			(1,322	)			(7,877	)			(11,003	)
Free Cash Flow			1,081				(1,592	)			1,059				(60,198	)
Non-Operational / One-time Items
Restructuring payments			2,599				1,959				12,139				10,940
Restatement payments			455				153				834				153
Acquisition, integration and other payments			120				24				313				1,841
Efficiency program payments			500				1,412				3,863				6,942
Sub-Total Non-Operational / One-Time Items			3,674				3,548				17,149				19,876
Adjusted free cash flow		$	4,755			$	1,956			$	18,208			$	(40,322	)
Adjusted free cash flow conversion of adjusted EBITDA			32	%			8	%			38	%			-35	%
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)
		December 31,				December 31,
			2017				2016
ASSETS
Current assets:
Cash and cash equivalents		$	57,223			$	44,948
Accounts receivable, net of allowances of $11,142 and $8,618
at December 31, 2017 and December 31, 2016, respectively			40,134				43,520
Inventories			38,421				50,701
Prepaid expenses			8,208				6,031
Other current assets			10,341				5,805
Total current assets			154,327				151,005
Property and equipment, net			21,903				30,146
Intangible assets, net			13,682				22,932
Goodwill			32,643				32,643
Long-term deferred tax assets, net			1,318				1,245
Other long-term assets			10,811				11,610
Total assets		$	234,684			$	249,581
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable		$	30,160			$	26,435
Accrued compensation and benefits			25,466				25,387
Accrued expenses and other current liabilities			31,549				34,088
Income taxes payable			1,815				1,012
Short-term debt			5,906				5,000
Deferred revenues			121,184				146,014
Total current liabilities			216,080				237,936
Long-term debt			204,498				188,795
Long-term deferred tax liabilities, net			-				913
Long-term deferred revenues			73,429				79,670
Other long-term liabilities			9,247				12,178
Total liabilities			503,254				519,492
Stockholders' deficit:
Preferred stock, $0.01 par value, 1,000 shares authorized; no shares issued or outstanding			-				-
Common stock, $0.01 par value, 100,000 shares authorized; 42,339 shares issued, and 41,356 shares and 40,727 shares outstanding at December 31, 2017 and 2016, respectively			423				423
Additional paid-in capital			1,035,808				1,043,063
Accumulated deficit			(1,284,703	)			(1,271,148	)
Treasury stock at cost, net of reissuances, 983 shares and 1,612 shares at December 31, 2017 and 2016, respectively			(17,672	)			(32,353	)
Accumulated other comprehensive loss			(2,426	)			(9,896	)
Total stockholders' deficit			(268,570	)			(269,911	)
Total liabilities and stockholders' deficit		$	234,684			$	249,581

 

AVID TECHNOLOGY, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited - in thousands)
					Twelve Months Ended
					December 31,
						2017				2016
Cash flows from operating activities:
	Net (loss) income				$	(13,555	)		$	48,219
	Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
		Depreciation and amortization				22,337				25,479
		(Recovery) provision for doubtful accounts				(340	)			886
		Stock-based compensation expense				8,311				7,916
		Non-cash provision for restructuring				3,191				1,137
		Non-cash interest expense				8,951				9,620
		Unrealized foreign currency transaction losses (gains)				7,336				(2,599	)
		Benefit from deferred taxes				(873	)			(1,842	)
		Changes in operating assets and liabilities:
			Accounts receivable			3,800				14,321
			Inventories			12,280				(2,628	)
			Prepaid expenses and other assets			(7,567	)			(1,839	)
			Accounts payable			3,606				(18,959	)
			Accrued expenses, compensation and benefits and other liabilities			(8,189	)			(6,280	)
			Income taxes payable			800				(9	)
			Deferred revenues			(31,152	)			(122,617	)
Net cash provided by (used in) operating activities						8,936				(49,195	)
Cash flows from investing activities:
	Purchases of property and equipment					(7,877	)			(11,003	)
	Increase in other long-term assets					(36	)			(30	)
	Decrease (Increase) in restricted cash					1,790				(4,544	)
Net cash used in investing activities						(6,123	)			(15,577	)
Cash flows from financing activities:
	Proceeds from long-term debt					16,694				100,000
	Repayment of debt					(6,735	)			(3,750	)
	Proceeds from the issuance of common stock under employee stock plans					445				6,184
	Common stock repurchases for tax withholdings for net settlement of equity awards					(1,329	)			(941	)
	Proceeds from revolving credit facilities					-				25,000
	Payments on revolving credit facilities					-				(30,000	)
	Payments for credit facility issuance costs					(700	)			(5,041	)
Net cash provided by financing activities						8,375				91,452
Effect of exchange rate changes on cash and cash equivalents						1,087				366
Net increase in cash and cash equivalents						12,275				27,046
Cash and cash equivalents at beginning of the period						44,948				17,902
Cash and cash equivalents at end of the period					$	57,223			$	44,948

 

AVID TECHNOLOGY, INC.
Supplemental Revenue Information
(unaudited - in thousands)
		December 31,			September 30,			December 31,
	Revenue Backlog*		2017			2017			2016
	Pre-2011	$	112		$	190		$	1,095
	Post-2010	$	194,501		$	194,376		$	224,589
	Deferred Revenue	$	194,613		$	194,566		$	225,684
	Other Backlog	$	341,475		$	293,387		$	203,625
	Total Revenue Backlog	$	536,088		$	487,953		$	429,309
	The expected timing of recognition of revenue backlog as of December 31, 2017 is as follows:
			2018			2019			2020		Thereafter			Total
	Orders executed prior to January 1, 2011	$	112		$	-		$	-		$	-		$	112
	Orders executed or materially modified on or	$	95,028		$	36,713		$	25,310		$	37,450		$	194,501
	after January 1, 2011
	Other Backlog	$	147,550		$	67,301		$	40,427		$	86,197		$	341,475
	Total Revenue Backlog	$	242,690		$	104,014		$	65,737		$	123,647		$	536,088
	*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.
	**In connection with the adoption of ASU No. 2014-09, Revenue from Contracts with Customers, on January 1, 2018, which will require more of our product sales to be recognized as revenue upon delivery rather than over an extended period of time, we expect approximately $105 million of the deferred revenue component of revenue backlog recorded as of December 31, 2017 will be eliminated.

AVID TECHNOLOGY, INC.
Supplemental Information Related to Guidance
(unaudited - in millions)
2018 Guidance
							ASC 605
	2018 Guidance				ASC 606		2018 Comparison				Actual
($M)	Low		High		Add Back		Low		High		2017
Revenue		$404		$434	$11			$415		$445	$419
Revenue excl. Pre-2011 & Elim PCS		404		434	11			415		445	416
Pre-2011 & Elim PCS		0		0				0		0	3
Adjusted EBITDA		39		51	11			50		62	48
Adj EBITDA excl. Pre-2011 & Elim PCS		39		51	11			50		62	46
Free Cash Flow		$2		$14	$0			$2		$14	$1
Q1 2018 Guidance
	Q1 2018						ASC 605
	Guidance				ASC 606		Q1'18 Comparison				Actual
($M)	Low		High		Add Back		Low		High		Q1 2017		Q4 2017
Revenue		$95		$105	$2			$97		$107		$104		$107
Revenue excl. Pre-2011 & Elim PCS		95		105	2			97		107		102		107
Pre-2011 & Elim PCS		0		0	0			0		0		2		0
Adjusted EBITDA		3		9	2			5		11		13		15
Adj EBITDA excl. Pre-2011 & Elim PCS		$3		$9	$2			$5		$11		$11		$15

 

Investor Contact:
Dean Ridlon
Avid
dean.ridlon@avid.com
(978) 640-3379

PR Contact:
Jim Sheehan
Avid
jim.sheehan@avid.com
(978) 640-3152