Revenue and bookings exceed guidance, met guidance on all other key metrics
Strong improvement in adjusted EBITDA drives fourth consecutive quarter of positive adjusted free cash flow
Financial performance fueled by achieving key strategic growth objectives including subscription, digital and enterprise agreements
BURLINGTON, Mass., Nov. 09, 2017 (GLOBE NEWSWIRE) -- Avid® (NASDAQ:AVID) today announced its third quarter 2017 financial results and provided its guidance for the fourth quarter of 2017.
Highlights of Third Quarter 2017 Results
Bookings were $102.8 million, above the upper end of guidance. Constant Currency Bookings were $107.9 million, in line with guidance.
GAAP Revenue was $105.3 million, above the upper end of guidance.
GAAP Gross Margin was 57.3%. Non-GAAP Gross Margin was 59.3%.
GAAP Operating Expenses were $56.7 million. Non-GAAP Operating Expenses were $53.9 million, in line with guidance.
GAAP Net Income was $72,000.
Adjusted EBITDA was $11.5 million, in line with guidance.
GAAP Net Cash provided by Operating Activities was $31,000.
Adjusted Free Cash Flow was $0.5 million, at the upper end of guidance. This is the fourth consecutive quarter of positive Adjusted Free Cash Flow. For the first nine months of 2017, Adjusted Free Cash Flow was up $55.7 million compared to the same period in 2016.
Avid Progressing on Strategic Growth Objectives
Enterprise: During the third quarter, Avid signed several multi-year enterprise deals with large customers, including Viacom and NHK, Japan’s national public broadcaster; total licenses for the MediaCentral platform as of the end of the third quarter were nearly 51,000, up 27% year-over-year.
Individual: Direct digital bookings, primarily with individual creative professionals, were up 35% year-over-year; individual subscriptions surpassed 84,000, up 69% year-over-year.
Visibility: Increasing recurring revenue bookings is positively impacting Avid’s revenue backlog of $488 million, which grew $51 million year-over-year and is increasing visibility.
“We are pleased to have delivered another quarter of meeting or exceeding our guidance for all our key metrics,” said Louis Hernandez, Jr., Chairman and Chief Executive Officer of Avid. “The completion of the transformation in the second quarter of 2017 has positioned us to drive profitable growth, increase revenue visibility and cash flow. In the third quarter, we achieved meaningful growth across bookings, revenue excluding pre-2011 and eliminating PCS, adjusted EBITDA and adjusted free cash flow.”
Mr. Hernandez continued, “Customers ranging from the largest media enterprises to individual artists continue to adopt Avid’s innovative new solutions. With our cloud-enabling MediaCentral platform, enterprises are unlocking greater strategic value from their Avid partnership as we help them to achieve new economies of scale while they work to engage audiences on any device with increasing amounts of content. Individual creatives and teams are empowered with Avid’s tools and value-added communities to answer the escalating demand for content. I am excited about Avid’s future as we work to continue our growth, further improve our profitability and increase our free cash flow.”
Expanded Loan Facility
On November 9, 2017, Avid and Cerberus agreed to increase the existing term loan by $15.0 million and expand the amount of revolving credit by $5.0 million for a $20.0 million total increase in available liquidity. The amended loan facility provides Avid an option to purchase $15.0 million of its convertible bonds. In addition, the Company and Cerberus agreed to a revised calculation for the leverage ratio requirement in order to reflect the non-cash revenue impact related to the Company’s adoption of the new revenue standard (Accounting Standards Codification 606).
Financial Guidance
Avid’s fourth quarter 2017 financial guidance is provided in the table below.
“We’re pleased with our third quarter and year-to-date performance,” said Brian E. Agle, Senior Vice President and Chief Financial Officer of Avid. “Our quarter represents an important step toward growth. We will continue our focused execution on growing revenue, managing expenses and further increasing free cash flow and liquidity.”
Fourth Quarter 2017 Guidance
(in $ millions)
Bookings (Constant Currency)
$118 - $132
Bookings
$112 - $126
Revenue
$103 - $113
Non-GAAP Operating Expenses
$48 - $52
Adjusted EBITDA
$14 - $20
Adjusted Free Cash Flow
$(4) - $4
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 Third Quarter and Full Year 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, 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
Avid will host a conference call to discuss its financial results for the third quarter 2017 on Thursday, November 9, 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 December 31, 2017, 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 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.
Weighted-average common shares outstanding - basic
41,133
40,194
40,954
39,814
Weighted-average common shares outstanding - diluted
41,355
40,476
40,954
39,950
AVID TECHNOLOGY, INC.
Reconciliations of GAAP financial measures to Non-GAAP financial measures
(unaudited - in thousands)
Three Months Ended
Nine Months Ended
September 30,
September 30,
Non-GAAP revenue
2017
2016
2017
2016
GAAP revenue
$
105,265
$
119,019
$
311,745
$
396,635
Amortization of acquired deferred revenue
-
-
-
594
Non-GAAP revenue
105,265
119,019
311,745
397,229
Pre-2011 Revenue
142
5,368
907
22,504
Elim PCS
-
12,000
1,700
44,800
Non-GAAP Revenue w/o Pre-2011 and Elim
105,123
101,651
309,138
329,925
Non-GAAP gross profit
GAAP gross profit
60,358
75,391
183,670
263,254
Amortization of acquired deferred revenue
-
-
-
594
Amortization of intangible assets
1,950
1,950
5,850
5,850
Stock-based compensation
63
157
547
488
Non-GAAP gross profit
62,371
77,498
190,067
270,186
Pre-2011 Revenue
142
5,368
907
22,504
Elim PCS
-
12,000
1,700
44,800
Non-GAAP gross profit w/o Pre-2011 and Elim
62,229
60,130
187,460
202,882
Non-GAAP operating expenses
GAAP operating expenses
56,650
66,887
183,205
210,190
Less Amortization of intangible assets
(362
)
(567
)
(1,088
)
(2,135
)
Less Stock-based compensation
(2,418
)
(1,571
)
(5,327
)
(5,628
)
Less Restructuring costs, net
582
(5,314
)
(6,464
)
(7,878
)
Less Restatement costs
(284
)
(38
)
(726
)
(186
)
Less Acquisition, integration and other costs
244
336
104
(458
)
Less Efficiency program costs
(483
)
(1,338
)
(3,054
)
(3,338
)
Non-GAAP operating expenses
53,929
58,395
166,650
190,567
Non-GAAP operating income
GAAP operating (loss) income
3,708
8,504
465
53,064
Amortization of acquired deferred revenue
-
-
-
594
Amortization of intangible assets
2,312
2,517
6,938
7,985
Stock-based compensation
2,481
1,728
5,874
6,116
Restructuring costs, net
(582
)
5,314
6,464
7,878
Restatement costs
284
38
726
186
Acquisition, integration and other costs
(244
)
(336
)
(104
)
458
Efficiency program costs
483
1,338
3,054
3,338
Non-GAAP operating income
8,442
19,103
23,417
79,619
Adjusted EBITDA
Non-GAAP operating income (from above)
8,442
19,103
23,417
79,619
Depreciation
3,088
3,762
9,994
11,184
Adjusted EBITDA
11,530
22,865
33,411
90,803
Adjusted EBITDA margin
11
%
19
%
11
%
23
%
Pre-2011 Revenue
142
5,368
907
22,504
Elim PCS
-
12,000
1,700
44,800
Adjusted EBITDA w/o Pre-2011 and Elim
11,388
5,497
30,804
23,499
Adjusted free cash flow
GAAP net cash provided by (used in) operating activities
31
(3,909
)
6,103
(48,925
)
Capital expenditures
(3,017
)
(2,360
)
(6,125
)
(9,681
)
Free Cash Flow
(2,986
)
(6,269
)
(22
)
(58,606
)
Non-Operational / One-time Items
Restructuring payments
2,546
1,496
9,540
8,981
Restatement payments
169
-
379
-
Acquisition, integration and other payments
174
196
193
1,817
Efficiency program payments
634
1,947
3,363
5,530
Sub-Total Non-Operational / One-Time Items
3,523
3,639
13,475
16,328
Adjusted free cash flow
$
537
$
(2,630
)
$
13,453
$
(42,278
)
Adjusted free cash flow conversion of adjusted EBITDA
5
%
-12
%
40
%
-47
%
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)
September 30,
December 31,
2017
2016
ASSETS
Current assets:
Cash and cash equivalents
$
44,094
$
44,948
Accounts receivable, net of allowances of $10,494 and $8,618
at September 30, 2017 and December 31, 2016, respectively
40,864
43,520
Inventories
41,160
50,701
Prepaid expenses
8,537
6,031
Other current assets
9,925
5,805
Total current assets
144,580
151,005
Property and equipment, net
23,273
30,146
Intangible assets, net
15,995
22,932
Goodwill
32,643
32,643
Long-term deferred tax assets, net
1,355
1,245
Other long-term assets
7,404
11,610
Total assets
$
225,250
$
249,581
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable
$
28,620
$
26,435
Accrued compensation and benefits
32,734
25,387
Accrued expenses and other current liabilities
32,848
34,088
Income taxes payable
806
1,012
Short-term debt
5,072
5,000
Deferred revenues
122,475
146,014
Total current liabilities
222,555
237,936
Long-term debt
191,300
188,795
Long-term deferred tax liabilities, net
-
913
Long-term deferred revenues
72,091
79,670
Other long-term liabilities
9,726
12,178
Total liabilities
495,672
519,492
Stockholders' deficit:
Common stock
423
423
Additional paid-in capital
1,038,308
1,043,063
Accumulated deficit
(1,283,822
)
(1,271,148
)
Treasury stock at cost
(22,238
)
(32,353
)
Accumulated other comprehensive loss
(3,093
)
(9,896
)
Total stockholders' deficit
(270,422
)
(269,911
)
Total liabilities and stockholders' deficit
$
225,250
$
249,581
AVID TECHNOLOGY, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited - in thousands)
Nine Months Ended
September 30,
2017
2016
Cash flows from operating activities:
Net (loss) income
$
(12,674
)
$
42,998
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization
16,932
19,169
(Recovery) provision for doubtful accounts
(158
)
890
Stock-based compensation expense
5,874
6,116
Non-cash provision for restructuring
3,191
1,137
Non-cash interest expense
7,255
7,935
Unrealized foreign currency transaction losses
6,885
2,021
Benefit from deferred taxes
(925
)
(5,187
)
Changes in operating assets and liabilities:
Accounts receivable
2,877
17,057
Inventories
9,542
(7,561
)
Prepaid expenses and other assets
(3,958
)
(1,493
)
Accounts payable
2,065
(19,627
)
Accrued expenses, compensation and benefits and other liabilities
543
(4,384
)
Income taxes payable
(161
)
347
Deferred revenues
(31,185
)
(108,343
)
Net cash provided by (used in) operating activities
6,103
(48,925
)
Cash flows from investing activities:
Purchases of property and equipment
(6,125
)
(9,681
)
Increase in other long-term assets
(24
)
(17
)
Decrease (Increase) in restricted cash
1,790
(4,544
)
Net cash used in investing activities
(4,359
)
(14,242
)
Cash flows from financing activities:
Proceeds from long-term debt
912
100,000
Repayment of debt
(3,750
)
(2,500
)
Proceeds from the issuance of common stock under employee stock plans
219
5,914
Common stock repurchases for tax withholdings for net settlement of equity awards
(732
)
(803
)
Proceeds from revolving credit facilities
-
25,000
Payments on revolving credit facilities
-
(30,000
)
Payments for credit facility issuance costs
-
(5,020
)
Net cash (used in) provided by financing activities
(3,351
)
92,591
Effect of exchange rate changes on cash and cash equivalents
753
391
Net (decrease) increase in cash and cash equivalents
(854
)
29,815
Cash and cash equivalents at beginning of the period
44,948
17,902
Cash and cash equivalents at end of the period
$
44,094
$
47,717
AVID TECHNOLOGY, INC.
Supplemental Revenue Information
(unaudited - in thousands)
September 30,
June 30,
September 30,
Revenue Backlog*
2017
2017
2016
Pre-2011
$
190
$
331
$
3,364
Post-2010
$
194,376
$
203,708
$
236,644
Deferred Revenue
$
194,566
$
204,039
$
240,008
Other Backlog
$
293,387
$
283,765
$
197,153
Total Revenue Backlog
$
487,953
$
487,804
$
437,161
The expected timing of recognition of revenue backlog as of September 30, 2017 is as follows:
2017
2018
2019
Thereafter
Total
Orders executed prior to January 1, 2011
$
78
$
112
$
-
$
-
$
190
Orders executed or materially modified on or
$
39,191
$
68,016
$
30,872
$
56,297
$
194,376
after January 1, 2011
Other Backlog
$
46,470
$
118,321
$
62,329
$
66,267
$
293,387
Total Revenue Backlog
$
85,739
$
186,449
$
93,201
$
122,564
$
487,953
*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.