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Avid Technology Announces Q3 2017 Results and Issues Q4 2017 Guidance
[November 09, 2017]

Avid Technology Announces Q3 2017 Results and Issues Q4 2017 Guidance


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 FacebookInstagram, TwitterYouTubeLinkedIn, or subscribe to Avid Blogs.

© 2017 Avid Technology, Inc. All rights reserved. Avid, the Avid logo, Avid Everywhere, Avid Artist | DNxIV, Avid NEXIS, Avid FastServe, AirSpeed, iNews, Maestro, MediaCentral, Media Composer, PlayMaker, Pro Tools, Avid VENUE, and Sibelius are trademarks or registered trademarks of Avid Technology, Inc. or its subsidiaries in the United States and/or other countries.  All other trademarks are the property of their respective owners.  Product features, specifications, system requirements and availability are subject to change without notice.

 

         
AVID TECHNOLOGY, INC.        
Condensed Consolidated Statements of Operations        
(unaudited - in thousands, except per share data)        
          
   Three Months Ended Nine Months Ended
   September 30, September 30,
    2017   2016   2017   2016 
          
Net revenues:        
 Products $  54,319  $  63,740  $  152,980  $  223,841 
 Services    50,946     55,279     158,765     172,794 
   Total net revenues    105,265     119,019     311,745     396,635 
          
Cost of revenues:        
 Products    29,485     26,793     80,478     82,405 
 Services    13,472     14,885     41,747     45,126 
 Amortization of intangible assets     1,950     1,950     5,850     5,850 
   Total cost of revenues    44,907     43,628     128,075     133,381 
          
Gross profit    60,358     75,391     183,670     263,254 
          
Operating expenses:        
 Research and development    16,025     19,953     51,904     62,791 
 Marketing and selling    25,652     27,231     80,481     89,027 
 General and administrative    15,193     13,822     43,268     48,359 
 Amortization of intangible assets    362     567     1,088     2,135 
 Restructuring (recoveries) costs, net    (582)    5,314     6,464     7,878 
   Total operating expenses    56,650     66,887     183,205     210,190 
          
Operating income    3,708     8,504     465     53,064 
          
Interest and other expense, net    (4,701)    (4,707)    (13,465)    (14,049)
(Loss) income before income taxes    (993)    3,797     (13,000)    39,015 
          
Benefit from income taxes    (1,065)    (5,321)    (326)    (3,983)
Net income (loss) $  72  $  9,118  $  (12,674) $  42,998 
          
Net income (loss) per common share - basic  $  0.00  $  0.23  $  (0.31) $  1.08 
Net income (loss) per common share - diluted $  0.00  $  0.23  $  (0.31) $  1.08 
          
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.
           


Investor Contact:

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

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


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