avid-20200630
000089684112/312020Q2falsefalsefalsefalse2,1609583,0903,33468000008968412020-01-012020-06-30xbrli:shares00008968412020-06-30iso4217:USD0000896841us-gaap:ProductMember2020-04-012020-06-300000896841us-gaap:ProductMember2019-04-012019-06-300000896841us-gaap:ProductMember2020-01-012020-06-300000896841us-gaap:ProductMember2019-01-012019-06-300000896841us-gaap:ServiceMember2020-04-012020-06-300000896841us-gaap:ServiceMember2019-04-012019-06-300000896841us-gaap:ServiceMember2020-01-012020-06-300000896841us-gaap:ServiceMember2019-01-012019-06-3000008968412020-04-012020-06-3000008968412019-04-012019-06-3000008968412019-01-012019-06-300000896841avid:AmortizationofintangibleassetsMember2020-04-012020-06-300000896841avid:AmortizationofintangibleassetsMember2019-04-012019-06-300000896841avid:AmortizationofintangibleassetsMember2020-01-012020-06-300000896841avid:AmortizationofintangibleassetsMember2019-01-012019-06-30iso4217:USDxbrli:shares00008968412019-12-310000896841us-gaap:CommonStockMember2019-12-310000896841us-gaap:TreasuryStockMember2019-12-310000896841us-gaap:AdditionalPaidInCapitalMember2019-12-310000896841us-gaap:RetainedEarningsMember2019-12-310000896841us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310000896841us-gaap:CommonStockMember2020-01-012020-03-310000896841us-gaap:TreasuryStockMember2020-01-012020-03-310000896841us-gaap:AdditionalPaidInCapitalMember2020-01-012020-03-310000896841us-gaap:RetainedEarningsMember2020-01-012020-03-310000896841us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-03-3100008968412020-01-012020-03-310000896841us-gaap:CommonStockMember2020-03-310000896841us-gaap:TreasuryStockMember2020-03-310000896841us-gaap:AdditionalPaidInCapitalMember2020-03-310000896841us-gaap:RetainedEarningsMember2020-03-310000896841us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-3100008968412020-03-310000896841us-gaap:CommonStockMember2020-04-012020-06-300000896841us-gaap:TreasuryStockMember2020-04-012020-06-300000896841us-gaap:AdditionalPaidInCapitalMember2020-04-012020-06-300000896841us-gaap:RetainedEarningsMember2020-04-012020-06-300000896841us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-04-012020-06-300000896841us-gaap:CommonStockMember2020-06-300000896841us-gaap:TreasuryStockMember2020-06-300000896841us-gaap:AdditionalPaidInCapitalMember2020-06-300000896841us-gaap:RetainedEarningsMember2020-06-300000896841us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-300000896841us-gaap:CommonStockMember2018-12-310000896841us-gaap:TreasuryStockMember2018-12-310000896841us-gaap:AdditionalPaidInCapitalMember2018-12-310000896841us-gaap:RetainedEarningsMember2018-12-310000896841us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-3100008968412018-12-310000896841us-gaap:CommonStockMember2019-01-012019-03-310000896841us-gaap:TreasuryStockMember2019-01-012019-03-310000896841us-gaap:AdditionalPaidInCapitalMember2019-01-012019-03-310000896841us-gaap:RetainedEarningsMember2019-01-012019-03-310000896841us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-012019-03-3100008968412019-01-012019-03-310000896841us-gaap:CommonStockMember2019-03-310000896841us-gaap:TreasuryStockMember2019-03-310000896841us-gaap:AdditionalPaidInCapitalMember2019-03-310000896841us-gaap:RetainedEarningsMember2019-03-310000896841us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-03-3100008968412019-03-310000896841us-gaap:CommonStockMember2019-04-012019-06-300000896841us-gaap:TreasuryStockMember2019-04-012019-06-300000896841us-gaap:AdditionalPaidInCapitalMember2019-04-012019-06-300000896841us-gaap:RetainedEarningsMember2019-04-012019-06-300000896841us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-04-012019-06-300000896841us-gaap:CommonStockMember2019-06-300000896841us-gaap:TreasuryStockMember2019-06-300000896841us-gaap:AdditionalPaidInCapitalMember2019-06-300000896841us-gaap:RetainedEarningsMember2019-06-300000896841us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-06-3000008968412019-06-300000896841us-gaap:EmployeeStockOptionMember2020-01-012020-06-300000896841us-gaap:EmployeeStockOptionMember2019-01-012019-06-300000896841avid:NonVestedRestrictedStockAndRestrictedStockUnitsMember2020-01-012020-06-300000896841avid:NonVestedRestrictedStockAndRestrictedStockUnitsMember2019-01-012019-06-300000896841us-gaap:FairValueMeasurementsRecurringMember2020-06-300000896841us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2020-06-300000896841us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2020-06-300000896841us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2020-06-300000896841us-gaap:FairValueMeasurementsRecurringMember2019-12-310000896841us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2019-12-310000896841us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2019-12-310000896841us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2019-12-310000896841srt:MinimumMember2020-06-300000896841srt:MaximumMember2020-06-30xbrli:pure0000896841us-gaap:ResearchAndDevelopmentArrangementMember2020-04-012020-06-300000896841us-gaap:ResearchAndDevelopmentArrangementMember2020-06-300000896841us-gaap:StandbyLettersOfCreditMemberavid:OfficeSpaceBurlingtonMassachusettsMember2020-06-300000896841avid:OfficeSpaceOtherFacilitiesMemberus-gaap:StandbyLettersOfCreditMember2020-06-300000896841avid:OtherOperatingObligationsMemberus-gaap:StandbyLettersOfCreditMember2020-06-300000896841avid:A2016PlanMemberus-gaap:EmployeeSeveranceMember2020-04-012020-06-300000896841avid:A2016PlanMemberus-gaap:EmployeeSeveranceMember2019-04-012019-06-300000896841avid:A2016PlanMemberus-gaap:EmployeeSeveranceMember2020-01-012020-06-300000896841us-gaap:EmployeeSeveranceMember2020-04-012020-06-300000896841us-gaap:EmployeeSeveranceMember2019-04-012019-06-300000896841us-gaap:EmployeeSeveranceMember2020-01-012020-06-300000896841us-gaap:EmployeeSeveranceMember2019-01-012019-06-300000896841avid:FacilitiesRelatedMember2020-04-012020-06-300000896841avid:FacilitiesRelatedMember2019-04-012019-06-300000896841avid:FacilitiesRelatedMember2020-01-012020-06-300000896841avid:FacilitiesRelatedMember2019-01-012019-06-300000896841us-gaap:OtherRestructuringMember2020-04-012020-06-300000896841us-gaap:OtherRestructuringMember2019-04-012019-06-300000896841us-gaap:OtherRestructuringMember2020-01-012020-06-300000896841us-gaap:OtherRestructuringMember2019-01-012019-06-300000896841us-gaap:EmployeeSeveranceMember2019-12-310000896841us-gaap:EmployeeSeveranceMember2020-06-300000896841avid:ProductsAndSolutionsMember2020-04-012020-06-300000896841avid:ProductsAndSolutionsMember2020-01-012020-06-300000896841avid:SubscriptionsServicesMember2020-04-012020-06-300000896841avid:SubscriptionsServicesMember2019-04-012019-06-300000896841avid:SubscriptionsServicesMember2020-01-012020-06-300000896841avid:SubscriptionsServicesMember2019-01-012019-06-300000896841avid:SupportServicesMember2020-04-012020-06-300000896841avid:SupportServicesMember2019-04-012019-06-300000896841avid:SupportServicesMember2020-01-012020-06-300000896841avid:SupportServicesMember2019-01-012019-06-300000896841avid:ProfessionalServicesTrainingAndOtherServicesMember2020-04-012020-06-300000896841avid:ProfessionalServicesTrainingAndOtherServicesMember2019-04-012019-06-300000896841avid:ProfessionalServicesTrainingAndOtherServicesMember2020-01-012020-06-300000896841avid:ProfessionalServicesTrainingAndOtherServicesMember2019-01-012019-06-300000896841country:US2020-04-012020-06-300000896841country:US2019-04-012019-06-300000896841country:US2020-01-012020-06-300000896841country:US2019-01-012019-06-300000896841avid:OtherAmericasMember2020-04-012020-06-300000896841avid:OtherAmericasMember2019-04-012019-06-300000896841avid:OtherAmericasMember2020-01-012020-06-300000896841avid:OtherAmericasMember2019-01-012019-06-300000896841avid:EuropeMiddleEastAndAfricaMember2020-04-012020-06-300000896841avid:EuropeMiddleEastAndAfricaMember2019-04-012019-06-300000896841avid:EuropeMiddleEastAndAfricaMember2020-01-012020-06-300000896841avid:EuropeMiddleEastAndAfricaMember2019-01-012019-06-300000896841srt:AsiaPacificMember2020-04-012020-06-300000896841srt:AsiaPacificMember2019-04-012019-06-300000896841srt:AsiaPacificMember2020-01-012020-06-300000896841srt:AsiaPacificMember2019-01-012019-06-300000896841us-gaap:ProductMember2020-06-300000896841us-gaap:SubscriptionArrangementMember2020-06-300000896841us-gaap:SoftwareServiceSupportAndMaintenanceArrangementMember2020-06-300000896841us-gaap:NonsoftwareServiceSupportAndMaintenanceArrangementMember2020-06-300000896841us-gaap:SoftwareLicenseArrangementMember2020-06-300000896841srt:ScenarioForecastMemberus-gaap:NonsoftwareServiceSupportAndMaintenanceArrangementMember2020-12-310000896841srt:ScenarioForecastMemberus-gaap:NonsoftwareServiceSupportAndMaintenanceArrangementMember2021-12-310000896841srt:ScenarioForecastMemberus-gaap:NonsoftwareServiceSupportAndMaintenanceArrangementMember2022-12-310000896841srt:ScenarioForecastMemberus-gaap:NonsoftwareServiceSupportAndMaintenanceArrangementMember2023-12-310000896841srt:ScenarioForecastMemberus-gaap:NonsoftwareServiceSupportAndMaintenanceArrangementMember2024-12-310000896841srt:ScenarioForecastMemberus-gaap:NonsoftwareServiceSupportAndMaintenanceArrangementMember2025-12-310000896841avid:CerberusBusinessFinanceLLCMember2020-06-300000896841us-gaap:RevolvingCreditFacilityMember2020-06-300000896841us-gaap:FederalHomeLoanBankAdvances2020-06-300000896841us-gaap:OtherDebtSecuritiesMember2020-06-300000896841avid:CerberusBusinessFinanceLLCMemberus-gaap:LongTermDebtMember2016-02-260000896841avid:CerberusBusinessFinanceLLCMemberus-gaap:LineOfCreditMember2016-02-260000896841avid:CerberusBusinessFinanceLLCMember2016-02-252016-02-260000896841avid:CerberusBusinessFinanceLLCMember2017-11-090000896841us-gaap:LineOfCreditMemberavid:CerberusBusinessFinanceLLCMember2016-02-260000896841avid:CerberusBusinessFinanceLLCMember2018-05-102018-05-100000896841avid:CerberusBusinessFinanceLLCMember2019-04-082019-04-0800008968412019-04-082019-04-080000896841avid:CerberusBusinessFinanceLLCMemberus-gaap:LongTermDebtMember2020-04-012020-06-300000896841avid:CerberusBusinessFinanceLLCMemberus-gaap:LongTermDebtMemberus-gaap:RevolvingCreditFacilityMember2020-04-012020-06-300000896841us-gaap:FederalHomeLoanBankAdvancesMember2020-06-300000896841us-gaap:ConvertibleDebtMember2015-06-150000896841us-gaap:ConvertibleDebtMember2020-01-012020-06-3000008968412017-12-1500008968412015-06-1500008968412017-12-142017-12-1500008968412018-02-0800008968412019-01-2200008968412019-01-222019-01-2200008968412019-05-092019-05-1300008968412019-05-090000896841avid:CerberusBusinessFinanceLLCMemberus-gaap:LongTermDebtMember2020-06-300000896841avid:CerberusBusinessFinanceLLCMemberus-gaap:LongTermDebtMember2019-12-310000896841us-gaap:ConvertibleDebtMember2020-06-300000896841us-gaap:ConvertibleDebtMember2019-12-310000896841avid:TimeBasedVestingMemberus-gaap:EmployeeStockOptionMember2019-12-310000896841avid:PerformanceBasedVestingMemberus-gaap:EmployeeStockOptionMember2019-12-310000896841us-gaap:EmployeeStockOptionMember2019-12-310000896841avid:TimeBasedVestingMemberus-gaap:EmployeeStockOptionMember2020-01-012020-06-300000896841avid:PerformanceBasedVestingMemberus-gaap:EmployeeStockOptionMember2020-01-012020-06-300000896841us-gaap:EmployeeStockOptionMember2020-01-012020-06-300000896841avid:TimeBasedVestingMemberus-gaap:EmployeeStockOptionMember2020-06-300000896841avid:PerformanceBasedVestingMemberus-gaap:EmployeeStockOptionMember2020-06-300000896841us-gaap:EmployeeStockOptionMember2020-06-300000896841us-gaap:RestrictedStockUnitsRSUMemberavid:TimeBasedVestingMember2019-12-310000896841us-gaap:RestrictedStockUnitsRSUMemberavid:PerformanceBasedVestingMember2019-12-310000896841us-gaap:RestrictedStockUnitsRSUMember2019-12-310000896841us-gaap:RestrictedStockUnitsRSUMemberavid:TimeBasedVestingMember2020-01-012020-06-300000896841us-gaap:RestrictedStockUnitsRSUMemberavid:PerformanceBasedVestingMember2020-01-012020-06-300000896841us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-06-300000896841us-gaap:RestrictedStockUnitsRSUMemberavid:TimeBasedVestingMember2020-06-300000896841us-gaap:RestrictedStockUnitsRSUMemberavid:PerformanceBasedVestingMember2020-06-300000896841us-gaap:RestrictedStockUnitsRSUMember2020-06-300000896841avid:CostOfProductsRevenuesMember2020-04-012020-06-300000896841avid:CostOfProductsRevenuesMember2019-04-012019-06-300000896841avid:CostOfProductsRevenuesMember2020-01-012020-06-300000896841avid:CostOfProductsRevenuesMember2019-01-012019-06-300000896841avid:CostOfServicesRevenuesMember2020-04-012020-06-300000896841avid:CostOfServicesRevenuesMember2019-04-012019-06-300000896841avid:CostOfServicesRevenuesMember2020-01-012020-06-300000896841avid:CostOfServicesRevenuesMember2019-01-012019-06-300000896841us-gaap:ResearchAndDevelopmentExpenseMember2020-04-012020-06-300000896841us-gaap:ResearchAndDevelopmentExpenseMember2019-04-012019-06-300000896841us-gaap:ResearchAndDevelopmentExpenseMember2020-01-012020-06-300000896841us-gaap:ResearchAndDevelopmentExpenseMember2019-01-012019-06-300000896841us-gaap:SellingAndMarketingExpenseMember2020-04-012020-06-300000896841us-gaap:SellingAndMarketingExpenseMember2019-04-012019-06-300000896841us-gaap:SellingAndMarketingExpenseMember2020-01-012020-06-300000896841us-gaap:SellingAndMarketingExpenseMember2019-01-012019-06-300000896841us-gaap:GeneralAndAdministrativeExpenseMember2020-04-012020-06-300000896841us-gaap:GeneralAndAdministrativeExpenseMember2019-04-012019-06-300000896841us-gaap:GeneralAndAdministrativeExpenseMember2020-01-012020-06-300000896841us-gaap:GeneralAndAdministrativeExpenseMember2019-01-012019-06-30

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________

Commission File Number:  1-36254
__________________
Avid Technology, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware04-2977748
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
75 Network Drive
BurlingtonMassachusetts01803
   Address of Principal Executive Offices, Including Zip Code
(978) 640-6789
Registrant's Telephone Number, Including Area Code
__________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $.01 par valueAVIDNasdaq Global Select Market
Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  Yes x   No ¨
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes x   No ¨ 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 under the Exchange Act.
Large accelerated filer
o
Accelerated Filer
x
Non-accelerated filer  
o
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 under the Exchange Act).  
Yes    No x
The number of shares outstanding of the registrant’s Common Stock, as of July 24, 2020, was 43,953,142.



AVID TECHNOLOGY, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2020

TABLE OF CONTENTS
 Page
   
  
  
  




CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Form 10-Q”) includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained in this Form 10-Q that relate to future results or events are forward-looking statements. Forward-looking statements may be identified by use of forward-looking words, such as “anticipate,” “believe,” “confidence,” “could,” “estimate,” “expect,” “feel,” “intend,” “may,” “plan,” “should,” “seek,” “will,” and “would,” or similar expressions.

Forward-looking statements may involve subjects relating to, among others, the following:

the effects that the COVID-19 pandemic and its related consequences may have on the national and global economy and on our business and operations, revenues, cash flows and profitability, and capital resources;

our ability to successfully implement our strategy, including our cost saving measures and other actions implemented in response to the COVID-19 pandemic;

the anticipated trends and developments in our markets and the success of our products in these markets;

our ability to develop, market, and sell new products and services;

our ability to achieve our goal of expanding our market positions;

our ability to accelerate growth of our Cloud-enabled platform;

anticipated trends relating to our sales, financial condition or results of operations, including our shift to a recurring revenue model and complex enterprise sales with long sales cycles;

the expected timing of recognition of revenue backlog as revenue, and the timing of recognition of revenues from subscription offerings;

our ability to successfully consummate acquisitions or investment transactions and successfully integrate acquired businesses;

the anticipated performance of our products;

our ability to maintain adequate supplies of products and components, including through sole-source supply arrangements;

our plans to repatriate foreign earnings;

the outcome, impact, costs, and expenses of any litigation or government inquiries to which we are or become subject;

the effect of the continuing worldwide macroeconomic uncertainty on our business and results of operations, including Brexit;

our compliance with covenants contained in the agreements governing our indebtedness;

our ability to service our debt and meet the obligations thereunder;

seasonal factors;

fluctuations in foreign exchange and interest rates;

estimated asset and liability values and amortization of our intangible assets;




our ability to protect and enforce our intellectual property rights;

the expected availability of cash to fund our business and our ability to maintain adequate liquidity and capital resources, generally and in the wake of the COVID-19 pandemic; and

worldwide political uncertainty, in particular the risk that the United States may withdraw from or materially modify international trade agreements.

Actual results and events in future periods may differ materially from those expressed or implied by forward-looking statements in this Form 10-Q. There are a number of factors that could cause actual events or results to differ materially from those indicated or implied by forward-looking statements, many of which are beyond our control, including the risk factors discussed herein and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019, in Part II, Item 1A of this Quarterly Report on Form 10-Q, and in other documents we file from time to time with the U.S. Securities and Exchange Commission (“SEC”). In addition, the forward-looking statements contained in this Form 10-Q represent our estimates only as of the date of this filing and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update these forward-looking statements in the future, we specifically disclaim any obligation to do so, whether to reflect actual results, changes in assumptions, changes in other factors affecting such forward-looking statements, or otherwise.

We own or have rights to trademarks and service marks that we use in connection with the operation of our business.  “Avid” is a trademark of Avid Technology, Inc. Other trademarks, logos, and slogans registered or used by us and our subsidiaries in the United States and other countries include, but are not limited to, the following: Avid, Avid NEXIS, AirSpeed, FastServe, MediaCentral, Media Composer, Pro Tools, and Sibelius. Other trademarks appearing in this Form 10-Q are the property of their respective owners.





PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AVID TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data, unaudited)
Three Months EndedSix Months Ended
 June 30,June 30,
 2020201920202019
Net revenues:  
Products$27,635  $50,326  $62,346  $104,722  
Services51,646  48,375  103,388  97,298  
Total net revenues79,281  98,701  165,734  202,020  
Cost of revenues:  
Products16,954  28,058  37,916  55,658  
Services10,765  12,195  23,105  24,682  
Amortization of intangible assets  1,788    3,738  
Total cost of revenues27,719  42,041  61,021  84,078  
Gross profit51,562  56,660  104,713  117,942  
Operating expenses:  
Research and development13,068  15,180  28,493  31,465  
Marketing and selling19,690  26,129  44,979  51,007  
General and administrative10,604  12,721  23,348  26,509  
Amortization of intangible assets  332    695  
Restructuring costs, net140  (269) 285  289  
Total operating expenses43,502  54,093  97,105  109,965  
Operating income8,060  2,567  7,608  7,977  
Interest and other expense, net(5,498) (13,290) (10,781) (18,475) 
Income (loss) before income taxes2,562  (10,723) (3,173) (10,498) 
Provision for income taxes717    839  438  
Net income (loss)$1,845  $(10,723) $(4,012) $(10,936) 
Net income (loss) per common share – basic and diluted$0.04$(0.25)$(0.09)$(0.26)
Weighted-average common shares outstanding – basic43,719  42,560  43,486  42,305  
Weighted-average common shares outstanding – diluted44,180  42,560  43,486  42,305  
The accompanying notes are an integral part of the condensed consolidated financial statements.
1


AVID TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands, unaudited)
Three Months EndedSix Months Ended
 June 30,June 30,
 2020201920202019
Net income (loss)$1,845  $(10,723) $(4,012) $(10,936) 
Other comprehensive loss:
Foreign currency translation adjustments119  710  (696) 162  
Comprehensive income (loss)$1,964  $(10,013) $(4,708) $(10,774) 
The accompanying notes are an integral part of the condensed consolidated financial statements.


2


AVID TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, unaudited)
June 30,
2020
December 31,
2019
ASSETS  
Current assets:  
Cash and cash equivalents$55,662  $69,085  
Restricted cash
1,663  1,663  
Accounts receivable, net of allowances of $2,160 and $958 at June 30, 2020 and December 31, 2019, respectively52,909  73,773  
Inventories29,650  29,166  
Prepaid expenses9,658  9,425  
Contract assets18,246  19,494  
Other current assets5,588  6,125  
Total current assets173,376  208,731  
Property and equipment, net18,421  19,580  
Goodwill32,643  32,643  
Right of use assets28,876  29,747  
Long-term deferred tax assets, net7,078  7,479  
Other long-term assets4,974  6,113  
Total assets$265,368  $304,293  
LIABILITIES AND STOCKHOLDERS’ DEFICIT  
Current liabilities:  
Accounts payable$17,853  $39,888  
Accrued compensation and benefits22,347  19,524  
Accrued expenses and other current liabilities29,240  36,759  
Income taxes payable1,990  1,945  
Short-term debt3,385  30,554  
Deferred revenue74,193  83,589  
Total current liabilities149,008  212,259  
Long-term debt227,392  199,034  
Long-term deferred revenue11,530  14,312  
Long-term lease liabilities28,482  28,127  
Other long-term liabilities5,448  5,646  
Total liabilities421,860  459,378  
Commitments and contingencies (Note 7)
Stockholders’ deficit:
Common stock
437  430  
Additional paid-in capital1,030,303  1,027,824  
Accumulated deficit(1,183,421) (1,179,409) 
Accumulated other comprehensive loss(3,811) (3,930) 
Total stockholders’ deficit(156,492) (155,085) 
Total liabilities and stockholders’ deficit$265,368  $304,293  
The accompanying notes are an integral part of the condensed consolidated financial statements.
3


AVID TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(in thousands, unaudited)
Six Months Ended June 30, 2020
 Shares of
Common Stock
 Additional  Accumulated
Other
Total
 OutstandingIn
Treasury
Common
Stock
Paid-in
Capital
Accumulated
Deficit
Treasury
Stock
Comprehensive
Income (Loss)
Stockholders’
Deficit
Balances at January 1, 202043,150    430  1,027,824  (1,179,409)   (3,930) (155,085) 
Stock issued pursuant to employee stock plans398    4  (1,818)       (1,814) 
Stock-based compensation—  —  —  2,109  —  —  —  2,109  
Net income (loss)—  —  —  —  (5,857) —  —  (5,857) 
Other comprehensive loss—  —  —  —  —  —  (815) (815) 
Balances at March 31, 202043,548    434  1,028,115  (1,185,266)   (4,745) (161,462) 
Stock issued pursuant to employee stock plans368    3  (538)       (535) 
Stock-based compensation—  —  —  2,726  —  —  —  2,726  
Net income (loss)—  —  —  —  1,845  —  —  1,845  
Other comprehensive income—  —  —  —  —  —  934  934  
Balances at June 30, 202043,916    437  1,030,303  (1,183,421)   (3,811) (156,492) 
4


Six Months Ended June 30, 2019
 Shares of
Common Stock
 Additional  Accumulated
Other
Total
 OutstandingIn
Treasury
Common
Stock
Paid-in
Capital
Accumulated
Deficit
Treasury
Stock
Comprehensive
Income (Loss)
Stockholders’
Deficit
Balances at January 1, 201942,339  (391) 423  1,028,924  (1,187,010) (5,231) (3,767) (166,661) 
Stock issued pursuant to employee stock plans  391    (6,612)   5,231    (1,381) 
Stock-based compensation—  —  —  1,738  —  —  —  1,738  
Net income (loss)—  —  —  —  (213) —  —  (213) 
Other comprehensive loss—  —  —  —  —  —  (548) (548) 
Partial retirement of convertible senior notes conversion feature—  —  —  (23) —  —  —  (23) 
Partial unwind capped call cash receipt—  —  —  1  —  —  —  1  
Balances at March 31, 201942,339    423  1,024,028  (1,187,223)   (4,315) (167,087) 
Stock issued pursuant to employee stock plans381    4  (204)       (200) 
Stock-based compensation—  —  —  2,005  —  —  —  2,005  
Net income (loss)—  —  —  —  (10,723) —  —  (10,723) 
Other comprehensive loss—  —  —  —  —  —  710  710  
Partial retirement of convertible senior notes conversion feature—  —  —  (554) —  —  —  (554) 
Partial unwind capped call cash receipt—  —  —  26  —  —  —  26  
Balances at June 30, 201942,720    427  1,025,301  (1,197,946)   (3,605) (175,823) 

The accompanying notes are an integral part of the condensed consolidated financial statements.

5


AVID TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
Six Months Ended
 June 30,
 20202019
Cash flows from operating activities:  
Net loss$(4,012) $(10,936) 
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:  
Depreciation and amortization4,330  9,424  
Allowance for (recovery from) doubtful accounts1,205  (48) 
Stock-based compensation expense4,835  3,743  
Non-cash interest expense3,433  5,966  
Loss on extinguishment of debt  2,878  
Unrealized foreign currency transaction (gains) losses(112) 105  
Benefit from deferred taxes383  43  
Changes in operating assets and liabilities:  
Accounts receivable18,783  9,168  
Inventories(484) (1,149) 
Prepaid expenses and other assets(547) (1,095) 
Accounts payable(22,003) (167) 
Accrued expenses, compensation and benefits and other liabilities(4,057) (6,106) 
Income taxes payable66  (6) 
Deferred revenue and contract assets(10,932) (8,157) 
Net cash (used in) provided by operating activities(9,112) 3,663  
Cash flows from investing activities:  
Purchases of property and equipment(3,212) (3,576) 
Net cash used in investing activities(3,212) (3,576) 
Cash flows from financing activities:  
Proceeds from revolving line of credit22,000    
Proceeds from long-term debt7,800  79,289  
Repayment of debt(695) (714) 
Payments for repurchase of outstanding notes(28,867) (76,269) 
Proceeds from the issuance of common stock under employee stock plans  309  
Common stock repurchases for tax withholdings for net settlement of equity awards(2,357) (1,895) 
Unwind capped call cash receipt875  27  
Payments for credit facility issuance costs(289) (5,979) 
Net cash used in financing activities(1,533) (5,232) 
Effect of exchange rate changes on cash, cash equivalents and restricted cash682  (3) 
Net decrease in cash, cash equivalents and restricted cash(13,175) (5,148) 
Cash, cash equivalents and restricted cash at beginning of period72,575  68,094  
Cash, cash equivalents and restricted cash at end of period$59,400  $62,946  
Supplemental information:
Cash and cash equivalents$55,662  $50,955  
Restricted cash1,663  9,020  
Restricted cash included in other long-term assets2,075  2,971  
Total cash, cash equivalents and restricted cash shown in the statement of cash flows$59,400  $62,946  
Cash paid for income taxes$144  $557  
Cash paid for interest$8,976  $5,163  
The accompanying notes are an integral part of the condensed consolidated financial statements.
6


AVID TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. FINANCIAL INFORMATION

The accompanying condensed consolidated financial statements include the accounts of Avid Technology, Inc. and its wholly owned subsidiaries (collectively, “we” or “our”). These financial statements are unaudited. However, in the opinion of management, the condensed consolidated financial statements reflect all normal and recurring adjustments necessary for their fair statement. Interim results are not necessarily indicative of results expected for any other interim period or a full year. We prepared the accompanying unaudited condensed consolidated financial statements in accordance with the instructions for Form 10-Q and, therefore, include all information and footnotes necessary for a complete presentation of operations, comprehensive income (loss), financial position, changes in stockholders’ deficit, and cash flows in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying condensed consolidated balance sheet as of December 31, 2019 was derived from our audited consolidated financial statements and does not include all disclosures required by U.S. GAAP for annual financial statements. We filed audited consolidated financial statements as of and for the year ended December 31, 2019 in our Annual Report on Form 10-K for the year ended December 31, 2019, which included information and footnotes necessary for such presentation. The financial statements contained in this Form 10-Q should be read in conjunction with the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2019.

The consolidated results of operations for the three months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2020. The Company’s results of operations are affected by economic conditions, including macroeconomic conditions and levels of business and consumer confidence.

The COVID-19 pandemic has adversely affected the Company’s results of operations and financial condition, primarily due to reduced demand for our products and services which has led to lower net revenues, earnings, and cash flows. These economic impacts are the result of, but not limited to:

the postponement or cancellation of film and television productions, major sporting events, and live music events;
delays in purchasing and projects by our enterprise customers and channel partners;
disruption to the supply chain caused by distribution and other logistical issues, including disruptions arising from government restrictions; and
decreased productivity due to travel ban, work-from-home policies or shelter-in-place orders.

These effects are expected to continue, although the full impact of the COVID-19 pandemic on the Company’s consolidated results of operations and financial condition over the longer term is uncertain. The Company is actively managing its business to respond to this health crisis and will continue to evaluate the nature and extent of the impact. We expect that our business operations and results of operations, including our net revenues, earnings, and cash flows, will be adversely impacted by these developments for at least the balance of 2020, and possibly longer. To address actual and expected reductions in net revenues and cash flows, we have reduced our discretionary spending and reduced payroll costs, including through temporary employee furloughs and pay cuts. In addition, in May 2020 we received $7.8 million of funding under the U.S. government’s Paycheck Protection Program (the “PPP”) in the form of a low-interest loan that may be forgiven under certain conditions. We may be required to take additional remedial steps, depending on the duration and severity of the pandemic and its impact on our operations and cash flows, which could include, among other things (and where allowed by the lenders), (i) further cost reductions, (ii) seeking replacement financing, (iii) raising funds through the issuance of additional equity or debt securities or the incurrence of additional borrowings, (iv) disposing of certain assets or businesses, or (v) seeking additional funding under various programs implemented by the U.S. government in response to the COVID-19 pandemic. Such remedial actions, which may not be available on favorable terms or at all, could have a material adverse impact on our business, and/or could result in our not being in compliance with financial covenants in our financing agreements with lenders which, in the absence of a waiver or amendment, could result in an event of default under such financing agreements, which could permit acceleration of the outstanding indebtedness and require us to repay such indebtedness before the scheduled due date. If an event of default were to occur, we might not have sufficient funds available to make the payments required. If we are unable to repay amounts owed, the lenders may be entitled to foreclose on and sell substantially all of our assets, which secure our borrowings. We anticipate that we will have sufficient internal and external sources of liquidity to fund operations and anticipated working capital and other expected cash needs for at
7


least the next 12 months as well as for the foreseeable future. We also believe that our financial resources will allow us to manage the anticipated impact of COVID-19 on our business operations and cash flows for the foreseeable future, which could include reductions in revenue and delays in payments from customers and partners. The challenges posed by COVID-19 on our business are expected to evolve rapidly. Consequently, we will continue to evaluate our financial position in light of future developments, particularly those relating to COVID-19.

Our preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from our estimates.

Significant Accounting Policies - Revenue Recognition

We enter into contracts with customers that include various combinations of products and services, which are typically capable of being distinct and are accounted for as separate performance obligations. We account for a contract when (i) it has approval and commitment from both parties, (ii) the rights of the parties have been identified, (iii) payment terms have been identified, (iv) the contract has commercial substance, and (v) collectibility is probable. We recognize revenue upon transfer of control of promised products or services to customers, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts, in an amount that reflects the consideration we expect to receive in exchange for those products or services.

We often enter into contractual arrangements that have multiple performance obligations, one or more of which may be delivered subsequent to the delivery of other performance obligations. These arrangements may include a combination of products, support, training, and professional services. We allocate the transaction price of the arrangement based on the relative estimated standalone selling price of each distinct performance obligation.

See Note 9 for disaggregated revenue schedules and further discussion on revenue and deferred revenue performance obligations and the timing of revenue recognition.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

On January 1, 2019, we adopted ASC 842 using the modified retrospective transition approach, as provided by ASU No. 2018-11, Leases - Targeted Improvements (“ASU 2018-11”). We elected the package of practical expedients permitted under the transition guidance. Results for reporting periods beginning after January 1, 2019 are presented under ASC 842, while prior periods have not been adjusted and continue to be reported in accordance with our historic accounting under previous U.S. GAAP.

The primary impact of ASC 842 is that substantially all of our leases are recognized on the balance sheet, by recording right-of-use assets and short-term and long-term lease liabilities, both of which are material to our consolidated balance sheet. The new standard does not have a material impact on our consolidated statement of operations and cash flows, and the effect of applying ASC 842 as a cumulative-effect adjustment to retained earnings as of January 1, 2019 is immaterial.

Recent Accounting Pronouncements To Be Adopted

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 is intended to enhance and simplify aspects of the income tax accounting guidance in ASC 740 as part of the FASB's simplification initiative. This guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2020 with early adoption permitted. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements and related disclosures.

In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 is intended to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the
8


expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This guidance is effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements and related disclosures.

2. NET INCOME (LOSS) PER SHARE

Net income (loss) per common share is presented for both basic loss per share (“Basic EPS”) and diluted income (loss) per share (“Diluted EPS”). Basic EPS is based on the weighted-average number of common shares outstanding during the period. Diluted EPS is based on the weighted-average number of common shares and common share equivalents outstanding during the period.

The potential common shares that were considered anti-dilutive securities were excluded from the diluted earnings per share calculations for the relevant periods either because the sum of the exercise price per share and the unrecognized compensation cost per share was greater than the average market price of our common stock for the relevant periods, or because they were considered contingently issuable. The contingently issuable potential common shares result from certain stock options and restricted stock units granted to our employees that vest based on performance conditions, market conditions, or a combination of performance and market conditions.

The following table sets forth (in thousands) potential common shares that were considered anti-dilutive securities at June 30, 2020 and 2019.
 June 30, 2020June 30, 2019
Options465  599  
Non-vested restricted stock units3,177  3,223  
Anti-dilutive potential common shares3,642  3,822  

The following table sets forth (in thousands) the basic and diluted weighted common shares outstanding for the three months ended June 30, 2020.

June 30, 2020
Weighted common shares outstanding - basic43,719  
Net effect of common stock equivalents461  
Weighted common shares outstanding - diluted44,180  


3. FAIR VALUE MEASUREMENTS

Assets Measured at Fair Value on a Recurring Basis

We measure deferred compensation investments on a recurring basis. As of June 30, 2020 and December 31, 2019, our deferred compensation investments were classified as either Level 1 or Level 2 in the fair value hierarchy. Assets valued using quoted market prices in active markets and classified as Level 1 are money market and mutual funds. Assets valued based on other observable inputs and classified as Level 2 are insurance contracts.

9


The following tables summarize our deferred compensation investments measured at fair value on a recurring basis (in thousands):
  Fair Value Measurements at Reporting Date Using
 June 30,
2020
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
Significant
Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs
(Level 3)
Financial assets:    
Deferred compensation assets$459  $241  $218  $  
  Fair Value Measurements at Reporting Date Using
 December 31, 2019Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
Significant
Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs
(Level 3)
Financial assets:    
Deferred compensation assets$1,156  $338  $818  $  

Financial Instruments Not Recorded at Fair Value

The carrying amounts of our other financial assets and liabilities including cash, accounts receivable, accounts payable, and accrued liabilities approximate their respective fair values because of the relatively short period of time between their origination and their expected realization or settlement.

4. INVENTORIES

Inventories consisted of the following (in thousands):
 June 30, 2020December 31, 2019
Raw materials$7,977  $9,036  
Work in process357  371  
Finished goods21,316  19,759  
Total$29,650  $29,166  

As of June 30, 2020 and December 31, 2019, finished goods inventory included $2.2 million and $1.5 million, respectively, associated with products shipped to customers and deferred labor costs for arrangements where revenue recognition had not yet commenced.

5. LEASES

We have entered into a number of facility leases to support our research and development activities, sales operations, and other corporate and administrative functions in North America, Europe, and Asia, which qualify as operating leases under U.S. GAAP. We also have a limited number of equipment leases that also qualify as operating leases. We determine if contracts with vendors represent a lease or have a lease component under U.S. GAAP at contract inception. We do not have any finance leases as of June 30, 2020. Our leases have remaining terms ranging from less than one year to eight years. Some of our leases include options to extend or terminate the lease prior to the end of the agreed upon lease term. For purposes of calculating lease liabilities, lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise such options.

Operating lease right of use assets and liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the lease commencement date. As our leases generally do not provide an implicit rate, we
10


use an estimated incremental borrowing rate in determining the present value of future payments. The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease within a particular location and currency environment. We used an average incremental borrowing rate of 6% as of January 1, 2019, the adoption date of ASC 842, for our leases that commenced prior to that date. The operating leases are included in “Right of use assets,” “Accrued expenses and other current liabilities,” and “Long-term lease liabilities” on our condensed consolidated balance sheets as of June 30, 2020 and December 31, 2019.

The weighted-average remaining lease term of our operating leases is 6.7 years as of June 30, 2020. Lease costs for minimum lease payments is recognized on a straight-line basis over the lease term. Our total lease costs were $2.5 million and $2.3 million for the three months ended June 30, 2020 and June 30, 2019, respectively. Our total lease costs were $5.1 million and $4.8 million for the six months ended June 30, 2020 and June 30, 2019 respectively. Related cash payments were $2.2 million and $2.4 million for the three months ended June 30, 2020 and June 30, 2019, respectively. Related cash payments were $4.8 million and $4.9 million for the six months ended June 30, 2020 and June 30, 2019, respectively. Lease costs are included within research and development, marketing and selling, and general and administrative lines on the condensed consolidated statements of operations, and the related cash payments are included in the operating cash flows on the condensed consolidated statements of cash flows. Short-term lease costs, variable lease costs, and sublease income are not material.

The table below reconciles the undiscounted future minimum lease payments under non-cancelable leases with terms of more than one year to the total lease liabilities recognized on the condensed consolidated balance sheets as of June 30, 2020 (in thousands):
Year Ending December 31,Operating Leases
2020 (excluding six months ended June 30, 2020)$3,772  
20217,006  
20226,009  
20235,109  
20244,414  
Thereafter15,317  
Total future minimum lease payments$41,627  
Less effects of discounting(7,597) 
Total lease liabilities$34,030  
Reported as of June 30, 2020
Accrued expenses and other current liabilities$(5,548) 
Long-term lease liabilities(28,482) 
Total lease liabilities$(34,030) 


6. OTHER LONG-TERM LIABILITIES

Other long-term liabilities consisted of the following (in thousands):
 June 30, 2020December 31, 2019
Deferred compensation$5,142  $5,186  
Other306  460  
   Total$5,448  $5,646  


11


7. COMMITMENTS AND CONTINGENCIES

Commitments

We entered into a long-term agreement to purchase a variety of information technology solutions from a third party in the second quarter of 2020, which included an unconditional commitment to purchase a minimum of $32.2 million of products and services over the initial five years of the agreement. We have purchased $0.3 million of products and services pursuant to this agreement as of June 30, 2020.

We have letters of credit that are used as security deposits in connection with our leased Burlington, Massachusetts office space. In the event of default on the underlying leases, the landlords would, at June 30, 2020, be eligible to draw against the letters of credit to a maximum of $1.3 million in the aggregate. The letters of credit are subject to aggregate reductions provided that we are not in default under the underlying leases and meet certain financial performance conditions. In no case will the letters of credit amounts for the Burlington leases be reduced to below $