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Avid Technology Announces Q2 2017 Results and Issues Q3 2017 Guidance

Exceeded Guidance for Adjusted Free Cash Flow; In Line on All Other Metrics

Strong Revenue Backlog and Continued Expense Management Creates Better Visibility

Continued Execution Drives Positive Free Cash Flow and Improvement in Liquidity

/EIN News/ -- BURLINGTON, Mass., Aug. 03, 2017 (GLOBE NEWSWIRE) --  Avid® (NASDAQ:AVID) today announced its second quarter 2017 financial results, provided third quarter 2017 financial guidance and reaffirmed its guidance for the full year 2017.

Highlights of Second Quarter 2017 Results

  • GAAP Revenue was $102.4 million, in line with guidance.
  • GAAP Gross Margin was 58.4%, Non-GAAP Gross Margin was 60.7%.
  • GAAP Operating Expenses were $66.1 million, Non-GAAP Operating Expenses were $56.6 million, in line with guidance.
  • GAAP Net Loss was $10.8 million, Adjusted EBITDA was $8.9 million, in line with guidance.
  • GAAP Net Cash provided by Operating Activities was $2.5 million, Adjusted Free Cash Flow was $6.2 million, above the guidance range.
  • Bookings and Constant Currency Bookings were $98.1 million and $104.3 million, respectively, in line with the guidance range.

Avid Everywhere Momentum Continues

  • Increasing adoption of Avid’s cloud-enabled enterprise platform by large enterprise customers, with more than 48,000 enterprise users on the MediaCentral platform at the end of Q2 2017, representing a 27% increase year-over-year.
  • More than 78,000 paying individual, cloud-enabled subscribers, a substantial majority of whom are new customers to Avid in the quarter, were in place at the end of Q2 2017, representing a 91% increase year-over-year.
  • Reflecting the increase in both enterprise customers and subscriptions, bookings attributable to recurring revenue of $43 million represented 42% of total bookings in Q2 2017, up from 34% in Q2 2016, an increase of 19%.
  • Increasing recurring revenue is positively impacting Avid’s revenue backlog of $488 million, which grew $23 million year-over-year and is increasing visibility.
  • Further adoption of the shared services platform is helping to drive costs down and improve free cash flow.

“I am proud we have achieved a substantial milestone in Avid’s history, completing the transformation we began four years ago. We could not have done it without the support of our customers, partners and investors, but most of all our employees, who believed in Avid throughout this incredible journey,” said Louis Hernandez, Jr., Chairman and CEO of Avid. “The company has emerged from this transformation phase positioned for growth with a superior product suite, leaner cost structure and a more profitable business model driving positive adjusted free cash flow over the last three quarters.”

Mr. Hernandez continued, “Avid offers the only cloud-enabled enterprise platform specifically designed to address the challenges facing the media industry and this uniquely positions the company to capitalize on the opportunities ahead. I am excited by what Avid can achieve in the future as we work to accelerate growth.”

Financial Guidance

Avid’s third quarter 2017 financial guidance is provided in the table below.

“We’re pleased that our performance to date gives us the confidence to reaffirm our full-year 2017 guidance,” said Brian E. Agle, Senior Vice President and Chief Financial Officer of Avid. “The first half of 2017 reflects strong EBITDA to cash conversion, significant year-over-year reduction in non-GAAP operating expenses, expanding EBITDA margin, and increasing free cash flow.  As the company moves into its growth phase, we will remain focused on creating a more predictable, scalable and profitable financial model to further increase free cash flow and liquidity.”

Third Quarter 2017 Guidance

  (in $ millions)  
Bookings (Constant Currency) $95 - $109
Bookings $87 - $101
Revenue $94 - $104
Non-GAAP Operating Expenses $52 - $56
Adjusted EBITDA $8 - $14
Adjusted Free Cash Flow ($7) – $1
   

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 tables 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 Second Quarter and Full Year 2017 Business Update presentation posted on Avid’s investor relations website.

Avid includes non-GAAP financial measures in this press release, including Adjusted EBITDA, Adjusted 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, non-GAAP Operating Expenses and Adjusted Free Cash Flow. Reconciliations of these forward-looking non-GAAP financial measures were 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

A conference call to discuss Avid's financial results for the second quarter 2017 will be held on Thursday, August 3, 2017 at 5:00 p.m. ET. The call will be open to the public and can be accessed by dialing 719-325-2278 and referencing confirmation code 2768857. 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 quarter ending September 30, 2017 for 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; bookings; backlog; revenue backlog conversion rate; product mix and free cash flow; our long-term and recent cost savings initiatives and the anticipated benefits therefrom; 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, including cost savings initiatives, 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; the identified material weaknesses in our internal control over financial reporting; 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 Pro Tools®, Media Composer®, Avid NEXIS™, Interplay®, ProSet™ and RealSet™, Maestro™, PlayMaker™, and Sibelius®. For more information about Avid solutions and services, visit www.avid.com, connect with Avid on FacebookInstagram, Twitter, YouTubeLinkedIn, or subscribe to Avid Blogs.

© 2017 Avid Technology, Inc. All rights reserved. Avid, the Avid logo, Avid Everywhere, Avid NEXIS, Interplay, Maestro, Media Composer, Pro Tools, ProSet, RealSet and Sibelius are trademarks or registered trademarks of Avid Technology, Inc. or its subsidiaries in the United States and/or other countries. The Interplay name is used with the permission of the Interplay Entertainment Corp. which bears no responsibility for Avid products. 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   Six Months Ended
    June 30,   June 30,
      2017       2016       2017       2016  
                 
Net revenues:                
Products   $ 47,655     $ 75,592     $ 98,661     $ 160,101  
Services     54,718       58,477       107,819       117,515  
Total net revenues     102,373       134,069       206,480       277,616  
                 
Cost of revenues:                
Products     26,489       28,488       50,993       55,612  
Services     14,181       15,832       28,275       30,241  
Amortization of intangible assets     1,950       1,950       3,900       3,900  
Total cost of revenues     42,620       46,270       83,168       89,753  
                 
Gross profit     59,753       87,799       123,312       187,863  
                 
Operating expenses:                
Research and development     16,991       21,433       35,879       42,838  
Marketing and selling     29,018       30,177       54,829       61,796  
General and administrative     13,644       16,818       28,075       34,537  
Amortization of intangible assets     363       782       726       1,568  
Restructuring costs, net     6,063       (213 )     7,046       2,564  
Total operating expenses     66,079       68,997       126,555       143,303  
                 
Operating (loss) income     (6,326 )     18,802       (3,243 )     44,560  
                 
Interest and other expense, net     (3,918 )     (5,159 )     (8,764 )     (9,342 )
(Loss) income before income taxes     (10,244 )     13,643       (12,007 )     35,218  
                 
Provision for income taxes     587       703       739       1,338  
Net (loss) income   $ (10,831 )   $ 12,940     $ (12,746 )   $ 33,880  
                 
Net (loss) income per common share - basic   $ (0.26 )   $ 0.33     $ (0.31 )   $ 0.86  
Net (loss) income per common share - diluted   $ (0.26 )   $ 0.33     $ (0.31 )   $ 0.85  
                 
Weighted-average common shares outstanding - basic     40,953       39,678       40,863       39,622  
Weighted-average common shares outstanding - diluted     40,953       39,734       40,863       39,691  

 

AVID TECHNOLOGY, INC.              
Reconciliations of GAAP financial measures to Non-GAAP financial measures        
(unaudited - in thousands)              
  Three Months Ended   Six Months Ended
  June 30,   June 30,
Non-GAAP revenue   2017       2016       2017       2016  
GAAP revenue $    102,373     $    134,069     $    206,480     $    277,616  
Amortization of acquired deferred revenue   -       325       -       594  
Non-GAAP revenue     102,373         134,394         206,480         278,210  
Pre-2011 Revenue   360       7,798       765       17,136  
Elim PCS   -       15,200       1,700       32,800  
Non-GAAP Revenue w/o Pre-2011 and Elim     102,013         111,396         204,015         228,274  
               
Non-GAAP gross profit              
GAAP gross profit     59,753         87,799         123,312         187,863  
Amortization of acquired deferred revenue   -       325       -       594  
Amortization of intangible assets   1,950       1,950       3,900       3,900  
Stock-based compensation   420       152       484       332  
Non-GAAP gross profit     62,123         90,226         127,696         192,689  
Pre-2011 Revenue   360       7,798       765       17,136  
Elim PCS   -       15,200       1,700       32,800  
Non-GAAP gross profit w/o Pre-2011 and Elim     61,763         67,228         125,231         142,753  
               
Non-GAAP operating expenses              
GAAP operating expenses     66,079         68,997         126,555         143,303  
Less Amortization of intangible assets   (363 )     (782 )     (726 )     (1,568 )
Less Stock-based compensation   (1,563 )     (2,149 )     (2,909 )     (4,056 )
Less Restructuring costs, net   (6,063 )     213       (7,046 )     (2,564 )
Less Restatement costs   (320 )     (68 )     (442 )     (148 )
Less Acquisition, integration and other costs   (138 )     (279 )     (140 )     (794 )
Less Efficiency program costs   (1,049 )     (1,286 )     (2,571 )     (2,001 )
Non-GAAP operating expenses     56,583         64,646         112,721         132,172  
               
Non-GAAP operating income              
GAAP operating (loss) income     (6,326 )       18,802         (3,243 )       44,560  
Amortization of acquired deferred revenue   -       325       -       594  
Amortization of intangible assets   2,313       2,732       4,626       5,468  
Stock-based compensation   1,983       2,301       3,393       4,388  
Restructuring costs, net   6,063       (213 )     7,046       2,564  
Restatement costs   320       68       442       148  
Acquisition, integration and other costs   138       279       140       794  
Efficiency program costs   1,049       1,286       2,571       2,001  
Non-GAAP operating income     5,540         25,580         14,975         60,517  
               
Adjusted EBITDA              
Non-GAAP operating income (from above)     5,540         25,580         14,975         60,517  
Depreciation   3,335       3,811       6,906       7,422  
Adjusted EBITDA     8,875         29,391         21,881         67,939  
Adjusted EBITDA margin   9 %     22 %     11 %     24 %
Pre-2011 Revenue   360       7,798       765       17,136  
Elim PCS   -       15,200       1,700       32,800  
Adjusted EBITDA w/o Pre-2011 and Elim     8,515         6,393         19,416         18,003  
               
Adjusted free cash flow              
GAAP net cash provided by (used in) operating activities     2,538         (33,806 )       6,072         (45,016 )
Capital expenditures   (1,379 )     (2,803 )     (3,108 )     (7,321 )
Free Cash Flow      1,159         (36,609 )       2,964         (52,337 )
               
Non-Operational / One-time Items              
Restructuring payments   3,700       3,952       6,994       7,485  
Restatement payments   151       -       210       -  
Acquisition, integration and other payments   4       848       19       1,621  
Efficiency program payments   1,144       1,602       2,729       3,583  
Sub-Total Non-Operational / One-Time Items   4,999       6,402       9,952       12,689  
               
Adjusted free cash flow $    6,158     $    (30,207 )   $    12,916     $    (39,648 )
Adjusted free cash flow conversion of adjusted EBITDA   69 %     -103 %     59 %     -58 %
               
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 representa measure of performance in accordance with, disclosures required by generally accepted accounting principles, or GAAP. Non-GAAP financial measures should be consideredin 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)        
         
    June 30,   December 31,
      2017       2016  
ASSETS        
Current assets:        
Cash and cash equivalents   $ 47,434     $ 44,948  
Accounts receivable, net of allowances of $8,445 and $8,618        
at June 30, 2017 and December 31, 2016, respectively     34,433       43,520  
Inventories     41,219       50,701  
Prepaid expenses     10,058       6,031  
Other current assets     4,920       5,805  
Total current assets     138,064       151,005  
         
Property and equipment, net     23,977       30,146  
Intangible assets, net     18,307       22,932  
Goodwill     32,643       32,643  
Long-term deferred tax assets, net     1,319       1,245  
Other long-term assets     10,427       11,610  
Total assets   $ 224,737     $ 249,581  
         
LIABILITIES AND STOCKHOLDERS' DEFICIT        
Current liabilities:        
Accounts payable   $ 27,495     $ 26,435  
Accrued compensation and benefits     29,141       25,387  
Accrued expenses and other current liabilities     30,130       34,088  
Income taxes payable     1,958       1,012  
Short-term debt     5,000       5,000  
Deferred revenues     129,858       146,014  
Total current liabilities     223,582       237,936  
         
Long-term debt     189,857       188,795  
Long-term deferred tax liabilities, net     173       913  
Long-term deferred revenues     74,181       79,670  
Other long-term liabilities     11,699       12,178  
Total liabilities     499,492       519,492  
         
Stockholders' deficit:        
Common stock     423       423  
Additional paid-in capital     1,038,093       1,043,063  
Accumulated deficit     (1,283,894 )     (1,271,148 )
Treasury stock at cost     (24,270 )     (32,353 )
Accumulated other comprehensive loss     (5,107 )     (9,896 )
Total stockholders' deficit     (274,755 )     (269,911 )
Total liabilities and stockholders' deficit   $ 224,737     $ 249,581  

 

AVID TECHNOLOGY, INC.      
Condensed Consolidated Statements of Cash Flows      
(unaudited - in thousands)      
         
    Six Months Ended
    June 30,
      2017       2016  
         
Cash flows from operating activities:      
Net (loss) income $ (12,746 )   $ 33,880  
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:      
Depreciation and amortization   11,531       12,890  
(Recovery) provision for doubtful accounts   (214 )     367  
Stock-based compensation expense   3,393       4,388  
Non-cash provision for restructuring   2,477       -  
Non-cash interest expense   5,214       5,394  
Unrealized foreign currency transaction losses   4,763       1,578  
Benefit from deferred taxes   (746 )     (1,365 )
Changes in operating assets and liabilities:      
Accounts receivable   9,343       13,683  
Inventories   9,482       (5,829 )
Prepaid expenses and other assets   (3,287 )     (3,994 )
Accounts payable   980       (10,373 )
Accrued expenses, compensation and benefits and other liabilities   (3,419 )     (13,910 )
Income taxes payable   991       (510 )
Deferred revenues   (21,690 )     (81,215 )
Net cash provided by (used in) operating activities   6,072       (45,016 )
         
Cash flows from investing activities:      
Purchases of property and equipment   (3,108 )     (7,321 )
Increase in other long-term assets   (23 )     (12 )
Decrease (Increase) in restricted cash   1,700       (4,544 )
Net cash used in investing activities   (1,431 )     (11,877 )
         
Cash flows from financing activities:      
Proceeds from long-term debt   -       100,000  
Repayment of debt   (2,500 )     (1,250 )
Proceeds from the issuance of common stock under employee stock plans   217       285  
Common stock repurchases for tax withholdings for net settlement of equity awards   (497 )     (441 )
Proceeds from revolving credit facilities   -       25,000  
Payments on revolving credit facilities   -       (30,000 )
Payments for credit facility issuance costs   -       (4,971 )
Net cash (used in) provided by financing activities   (2,780 )     88,623  
         
Effect of exchange rate changes on cash and cash equivalents   625       733  
Net increase in cash and cash equivalents   2,486       32,463  
Cash and cash equivalents at beginning of the period   44,948       17,902  
Cash and cash equivalents at end of the period $ 47,434     $ 50,365  

 

AVID TECHNOLOGY, INC.                  
Supplemental Revenue Information                  
(unaudited - in thousands)                  
                   
  June 30,   March 31,   June 30,        
Revenue Backlog*   2017       2017       2016          
                   
Pre-2011 $ 331     $ 691     $ 8,732          
Post-2010 $ 203,708     $ 222,342     $ 258,420          
Deferred Revenue $ 204,039     $ 223,033     $ 267,152          
Other Backlog $ 283,765     $ 271,184     $ 197,591          
Total Revenue Backlog $ 487,804     $ 494,217     $ 464,743          
                   
                   
The expected timing of recognition of revenue backlog as of June 30, 2017 is as follows:        
                   
    2017       2018       2019     Thereafter   Total
Orders executed prior to January 1, 2011 $ 220     $ 112     $ -     $ -   $ 331  
Orders executed or materially modified on or $ 73,221     $ 55,460     $ 30,583     $ 44,444   $ 203,708  
after January 1, 2011                  
Other Backlog $ 76,862     $ 91,361     $ 55,156     $ 60,385   $ 283,765  
Total Revenue Backlog $    150,303     $    146,933     $    85,739     $    104,829   $    487,804  
                   
*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.


PR Contact:
                    Jim Sheehan
                    Avid 
                    jim.sheehan@avid.com 
                    (978) 640-3152
                    
                    Investor Contact:
                    Robert Roose
                    Avid
                    robert.roose@avid.com

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