Exceeded guidance for bookings and adjusted free cash flow, met guidance on all other metrics
Second consecutive quarter of sequential revenue and adjusted EBITDA growth
Positive free cash flow in 2017 and expect continued growth of free cash flow in 2018
BURLINGTON, Mass., March 15, 2018 (GLOBE NEWSWIRE) -- Avid® (NASDAQ: AVID) today announced its fourth quarter and full year 2017 financial results and provided guidance for its first quarter and full year 2018. The company posted its second consecutive quarter of sequential revenue and adjusted EBITDA growth and exceeded guidance for bookings and adjusted free cash flow while meeting guidance on all other metrics.
Highlights of Fourth Quarter 2017 Results
Bookings excluding Greater China were $140.8 million and Constant Currency Bookings were $145.9 million, both above guidance.
GAAP Revenue was $107.3 million, in line with guidance.
GAAP Gross Margin was 54.5%. Non-GAAP Gross Margin was 56.0%.
GAAP Operating Expenses were $53.7 million. Non-GAAP Operating Expenses were $48.2 million, in line with guidance.
GAAP Net Loss was $881,000.
Adjusted EBITDA was $15.0 million, in line with guidance.
GAAP Net Cash Provided by Operating Activities was $2.8 million.
Adjusted Free Cash Flow was $4.8 million, above guidance. This is the fifth consecutive quarter of positive Adjusted Free Cash Flow. For the full year 2017, Adjusted Free Cash Flow was up $59 million compared to 2016.
2017 Highlights
Grew total revenue backlog to $536.1 million as of the end of 2017, up 25% from $429.3 million the year prior.
Completed multi-year business transformation.
Launched strategic alliance with Microsoft to develop and market cloud-based solutions and services for the media and entertainment industry.
Generated positive free cash flow.
Avid Progressing on Strategic Growth Objectives
Enterprise: During the fourth quarter, Avid signed several large multi-year commercial agreements. As of December 31, 2017, total licenses for the MediaCentral platform were approximately 53,700, up 26% year-over-year.
Individual: Digital sales, primarily targeted at individual creative professionals, were up 24% year-over-year. Cloud-enabled software subscriptions are now over 93,500, up 54% year-over-year.
“Our strategy is yielding improved financial results as customers are embracing our products and solutions,” said Jeff Rosica, Chief Executive Officer and President of Avid. “Looking ahead, I’m excited about the opportunity before us and our plan to continue to improve business performance, while further leveraging the unique position we’ve established, including our ability to lead customers and the industry into the cloud.”
“We are pleased with our financial performance this year having met key objectives for 2017, including meeting or exceeding guidance on all metrics each quarter and delivering a substantial improvement in free cash flow generation,” said Brian E. Agle, Senior Vice President and Chief Financial Officer of Avid. “In the second half of 2017, our results showed improvement as we delivered two consecutive quarters of revenue and adjusted EBITDA growth, excluding the impact of pre-2011 amortization and elimination of implied PCS revenue. We look forward to building on this momentum in 2018, as we remain focused on growing revenue, managing expenses and further increasing free cash flow.”
First Quarter and Full Year 2018 Guidance Avid’s first quarter and full year 2018 financial guidance is provided in the table below. This guidance reflects the expected estimated impact of the adoption of the new revenue recognition standard ASC 606 as of January 1, 2018. In 2018, the Company will be refining its guidance practices to focus only on Revenue, Adjusted EBITDA and Free Cash Flow. Annual Free Cash Flow guidance will replace the Adjusted Free Cash Flow guidance previously provided quarterly.
Guidance under ASC 606
(in $ millions)
2018
Q1 2018
Revenue
$404 - $434
$95 - $105
Adjusted EBITDA
$39 - $51
$3 - $9
Free Cash Flow (Annual)
$2 - $14
The adoption of ASC 606 as of January 1, 2018 is estimated to unfavorably impact revenue and Adjusted EBITDA by $11 million and $2 million in 2018 and Q1 2018, respectively. A reconciliation of guidance under the ASC 606 and ASC 605 standards is provided for comparison purposes in the supplemental tables included in this press release.
All guidance presented by the Company is inherently uncertain and subject to numerous risks and uncertainties. Avid’s actual future results of operations and cash flows could differ materially from those shown in the table above. For a discussion of some of the key assumptions underlying the guidance, as well as the key risks and uncertainties associated with these forward-looking statements, please see “Forward Looking Statements” below as well as the Avid Technology Q4 2017 Business Update presentation posted on Avid’s Investor Relations website.
Non-GAAP Financial Measures Avid includes non-GAAP financial measures in this press release, including Adjusted EBITDA, Adjusted Free Cash Flow, Free Cash Flow, non-GAAP Operating Income (loss), non-GAAP Operating Expenses, non-GAAP Gross Margin, Adjusted EBITDA margin and Adjusted Free Cash Flow conversion of Adjusted EBITDA. The Company also includes the operational metrics of bookings, revenue backlog and recurring revenue bookings in this release. Avid believes the non-GAAP financial measures and operational metrics provided in this release provide helpful information to investors with respect to evaluating the Company’s performance. Unless noted, all financial information is reported based on actual exchange rates. Definitions of the non-GAAP financial measures are included in our Form 8-K filed today. Reconciliations of the non-GAAP financial measures in this release to the Company's comparable GAAP financial measures for the periods presented are set forth below and are also included in the supplemental financial and operational data sheet available on our investor relations webpage at ir.avid.com, which also includes definitions of the operational metrics.
The earnings release also includes forward-looking non-GAAP financial measures, including Adjusted EBITDA, and Free Cash Flow. Reconciliations of these forward-looking non-GAAP financial measures are not included in the earnings release due to the high variability and difficulty in making accurate forecasts and projections of some of the excluded information, together with some of the excluded information not being ascertainable or accessible at this time. As a result, the Company is unable to quantify certain amounts that would be required to be included in the most directly comparable GAAP financial measure without unreasonable efforts.
Conference Call Avid will host a conference call to discuss its financial results for the fourth quarter and full year 2017 on Thursday, March 15, 2018 at 5:00 p.m. ET. The call will be open to the public and can be accessed by dialing 323-994-2083 and referencing confirmation code 7939066. You may also listen to the call on the Avid Investor Relations website. To listen via the website, go to the events tab at ir.avid.com for complete details prior to the start of the conference call. A replay of the call will also be available on the Avid Investor Relations website shortly after the completion of the call.
Forward-Looking Statements
Certain information provided in this press release, including the tables attached hereto, include forward-looking statements that involve risks and uncertainties, including projections and statements about our anticipated plans, objectives, expectations and intentions. Among other things, this press release includes estimated results of operations for the year ending December 31, 2018 and first quarter ending March 31, 2018, which estimates are based on a variety of assumptions about key factors and metrics that will determine our future results of operations, including, for example, anticipated market uptake of new products, realization of identified efficiency programs and market-based cost inflation. Other forward-looking statements include, without limitation, statements based upon or otherwise incorporating judgments or estimates relating to future performance such as future operating results and expenses; earnings; backlog; revenue backlog conversion rate; product mix and free cash flow; our future strategy and business plans; our product plans, including products under development, such as cloud and subscription based offerings; our liquidity and ability to raise capital and our liquidity. The projected future results of operations, and the other forward-looking statements in this release, are based on current expectations as of the date of this release and subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including but not limited to the effect on our sales, operations and financial performance resulting from: our liquidity; our ability to execute our strategic plan, and meet customer needs; our ability to retain and hire key personnel; our ability to produce innovative products in response to changing market demand, particularly in the media industry; our ability to successfully accomplish our product development plans; competitive factors; history of losses; fluctuations in our revenue based on, among other things, our performance and risks in particular geographies or markets; our higher indebtedness and ability to service it and meet the obligations thereunder; restrictions in our credit facilities; our move to a subscription model and related effect on our revenues and ability to predict future revenues; elongated sales cycles; fluctuations in foreign currency exchange rates; seasonal factors; adverse changes in economic conditions; variances in our revenue backlog and the realization thereof; and the possibility of legal proceedings adverse to our company. Moreover, the business may be adversely affected by future legislative, regulatory or changes, including tax law changes, as well as other economic, business and/or competitive factors. The risks included above are not exhaustive. Other factors that could adversely affect our business and prospects are set forth in our public filings with the SEC. Forward-looking statements contained herein are made only as to the date of this press release and we undertake no obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required by law.
About Avid Through Avid Everywhere™, Avid delivers the most open and efficient media platform, connecting content creation with collaboration, asset protection, distribution, and consumption. Avid’s preeminent customer community uses Avid’s comprehensive tools and workflow solutions to create, distribute and monetize the most watched, loved and listened to media in the world—from prestigious and award-winning feature films to popular television shows, news programs and televised sporting events, and celebrated music recordings and live concerts. With the most flexible deployment and pricing options, Avid’s industry-leading solutions include Media Composer®, Pro Tools®, Avid NEXIS®, MediaCentral®, iNEWS®, AirSpeed®, Sibelius®, Avid VENUE™, Avid FastServe™, Maestro™, and PlayMaker™. For more information about Avid solutions and services, visit www.avid.com, connect with Avid on Facebook, Instagram, Twitter, YouTube, LinkedIn, or subscribe to Avid Blogs.
Net (loss) income per common share - basic and diluted
$
(0.02
)
$
0.13
$
(0.33
)
$
1.20
Weighted-average common shares outstanding - basic
41,216
40,637
41,020
40,021
Weighted-average common shares outstanding - diluted
41,216
40,746
41,020
40,176
AVID TECHNOLOGY, INC.
Reconciliations of GAAP financial measures to Non-GAAP financial measures
(unaudited - in thousands)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
Non-GAAP revenue
2017
2016
2017
2016
GAAP revenue
$
107,258
$
115,295
$
419,003
$
511,930
Amortization of acquired deferred revenue
-
-
-
594
Non-GAAP revenue
107,258
115,295
419,003
512,524
Pre-2011 Revenue
78
2,268
985
24,772
Elim PCS
-
8,100
1,700
52,900
Non-GAAP Revenue w/o Pre-2011 and Elim
107,180
104,927
416,318
434,852
Non-GAAP gross profit
GAAP gross profit
58,446
69,469
242,116
332,723
Amortization of acquired deferred revenue
-
-
-
594
Amortization of intangible assets
1,950
1,950
7,800
7,800
Stock-based compensation
(305
)
(48
)
242
440
Non-GAAP gross profit
60,091
71,371
250,158
341,557
Pre-2011 Revenue
78
2,268
985
24,772
Elim PCS
-
8,100
1,700
52,900
Non-GAAP gross profit w/o Pre-2011 and Elim
60,013
61,003
247,473
263,885
Non-GAAP operating expenses
GAAP operating expenses
53,665
58,518
236,870
268,708
Less Amortization of intangible assets
(362
)
(363
)
(1,450
)
(2,498
)
Less Stock-based compensation
(2,741
)
(1,847
)
(8,069
)
(7,475
)
Less Restructuring costs, net
(595
)
(4,959
)
(7,059
)
(12,837
)
Less Restatement costs
(558
)
(109
)
(1,284
)
(295
)
Less Acquisition, integration and other costs
(266
)
(129
)
(163
)
(587
)
Less Efficiency program costs
(931
)
(967
)
(3,985
)
(4,305
)
Non-GAAP operating expenses
48,212
50,144
214,860
240,711
Non-GAAP operating income
GAAP operating income
4,781
10,951
5,246
64,015
Amortization of acquired deferred revenue
-
-
-
594
Amortization of intangible assets
2,312
2,313
9,250
10,298
Stock-based compensation
2,436
1,799
8,311
7,915
Restructuring costs, net
595
4,959
7,059
12,837
Restatement costs
558
109
1,284
295
Acquisition, integration and other costs
266
129
163
587
Efficiency program costs
931
967
3,985
4,305
Non-GAAP operating income
11,879
21,227
35,298
100,846
Adjusted EBITDA
Non-GAAP operating income (from above)
11,879
21,227
35,298
100,846
Depreciation
3,093
3,997
13,087
15,181
Adjusted EBITDA
14,972
25,224
48,385
116,027
Adjusted EBITDA margin
14
%
22
%
12
%
23
%
Pre-2011 Revenue
78
2,268
985
24,772
Elim PCS
-
8,100
1,700
52,900
Adjusted EBITDA w/o Pre-2011 and Elim
14,894
14,856
45,700
38,355
Adjusted EBITDA w/o Pre-2011 and Elim margin
14
%
14
%
11
%
9
%
Adjusted free cash flow
GAAP net cash provided by (used in) operating activities
2,833
(270
)
8,936
(49,195
)
Capital expenditures
(1,752
)
(1,322
)
(7,877
)
(11,003
)
Free Cash Flow
1,081
(1,592
)
1,059
(60,198
)
Non-Operational / One-time Items
Restructuring payments
2,599
1,959
12,139
10,940
Restatement payments
455
153
834
153
Acquisition, integration and other payments
120
24
313
1,841
Efficiency program payments
500
1,412
3,863
6,942
Sub-Total Non-Operational / One-Time Items
3,674
3,548
17,149
19,876
Adjusted free cash flow
$
4,755
$
1,956
$
18,208
$
(40,322
)
Adjusted free cash flow conversion of adjusted EBITDA
32
%
8
%
38
%
-35
%
These non-GAAP measures reflect how Avid manages its businesses internally. Avid’s non-GAAP measures may vary from how other companies present non-GAAP measures. Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles. This non-GAAP information supplements, and is not intended to represent a measure of performance in accordance with, disclosures required by generally accepted accounting principles, or GAAP. Non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP.
AVID TECHNOLOGY, INC.
Condensed Consolidated Balance Sheets
(unaudited - in thousands)
December 31,
December 31,
2017
2016
ASSETS
Current assets:
Cash and cash equivalents
$
57,223
$
44,948
Accounts receivable, net of allowances of $11,142 and $8,618
at December 31, 2017 and December 31, 2016, respectively
40,134
43,520
Inventories
38,421
50,701
Prepaid expenses
8,208
6,031
Other current assets
10,341
5,805
Total current assets
154,327
151,005
Property and equipment, net
21,903
30,146
Intangible assets, net
13,682
22,932
Goodwill
32,643
32,643
Long-term deferred tax assets, net
1,318
1,245
Other long-term assets
10,811
11,610
Total assets
$
234,684
$
249,581
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable
$
30,160
$
26,435
Accrued compensation and benefits
25,466
25,387
Accrued expenses and other current liabilities
31,549
34,088
Income taxes payable
1,815
1,012
Short-term debt
5,906
5,000
Deferred revenues
121,184
146,014
Total current liabilities
216,080
237,936
Long-term debt
204,498
188,795
Long-term deferred tax liabilities, net
-
913
Long-term deferred revenues
73,429
79,670
Other long-term liabilities
9,247
12,178
Total liabilities
503,254
519,492
Stockholders' deficit:
Preferred stock, $0.01 par value, 1,000 shares authorized; no shares issued or outstanding
-
-
Common stock, $0.01 par value, 100,000 shares authorized; 42,339 shares issued, and 41,356 shares and 40,727 shares outstanding at December 31, 2017 and 2016, respectively
423
423
Additional paid-in capital
1,035,808
1,043,063
Accumulated deficit
(1,284,703
)
(1,271,148
)
Treasury stock at cost, net of reissuances, 983 shares and 1,612 shares at December 31, 2017 and 2016, respectively
(17,672
)
(32,353
)
Accumulated other comprehensive loss
(2,426
)
(9,896
)
Total stockholders' deficit
(268,570
)
(269,911
)
Total liabilities and stockholders' deficit
$
234,684
$
249,581
AVID TECHNOLOGY, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited - in thousands)
Twelve Months Ended
December 31,
2017
2016
Cash flows from operating activities:
Net (loss) income
$
(13,555
)
$
48,219
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Accrued expenses, compensation and benefits and other liabilities
(8,189
)
(6,280
)
Income taxes payable
800
(9
)
Deferred revenues
(31,152
)
(122,617
)
Net cash provided by (used in) operating activities
8,936
(49,195
)
Cash flows from investing activities:
Purchases of property and equipment
(7,877
)
(11,003
)
Increase in other long-term assets
(36
)
(30
)
Decrease (Increase) in restricted cash
1,790
(4,544
)
Net cash used in investing activities
(6,123
)
(15,577
)
Cash flows from financing activities:
Proceeds from long-term debt
16,694
100,000
Repayment of debt
(6,735
)
(3,750
)
Proceeds from the issuance of common stock under employee stock plans
445
6,184
Common stock repurchases for tax withholdings for net settlement of equity awards
(1,329
)
(941
)
Proceeds from revolving credit facilities
-
25,000
Payments on revolving credit facilities
-
(30,000
)
Payments for credit facility issuance costs
(700
)
(5,041
)
Net cash provided by financing activities
8,375
91,452
Effect of exchange rate changes on cash and cash equivalents
1,087
366
Net increase in cash and cash equivalents
12,275
27,046
Cash and cash equivalents at beginning of the period
44,948
17,902
Cash and cash equivalents at end of the period
$
57,223
$
44,948
AVID TECHNOLOGY, INC.
Supplemental Revenue Information
(unaudited - in thousands)
December 31,
September 30,
December 31,
Revenue Backlog*
2017
2017
2016
Pre-2011
$
112
$
190
$
1,095
Post-2010
$
194,501
$
194,376
$
224,589
Deferred Revenue
$
194,613
$
194,566
$
225,684
Other Backlog
$
341,475
$
293,387
$
203,625
Total Revenue Backlog
$
536,088
$
487,953
$
429,309
The expected timing of recognition of revenue backlog as of December 31, 2017 is as follows:
2018
2019
2020
Thereafter
Total
Orders executed prior to January 1, 2011
$
112
$
-
$
-
$
-
$
112
Orders executed or materially modified on or
$
95,028
$
36,713
$
25,310
$
37,450
$
194,501
after January 1, 2011
Other Backlog
$
147,550
$
67,301
$
40,427
$
86,197
$
341,475
Total Revenue Backlog
$
242,690
$
104,014
$
65,737
$
123,647
$
536,088
*A definition of Revenue Backlog is included in the supplemental financial and operational data sheet available on our investor relations webpage at ir.avid.com.
Note: current estimates could change based on a number of factors, including (i) the timing of delivery of products and services, (ii) customer cancellations or change order, (iii) changes in the estimated period of time Implied Maintenance Release PCS is provided to customers, including as a result of changes in business practices.
**In connection with the adoption of ASU No. 2014-09, Revenue from Contracts with Customers, on January 1, 2018, which will require more of our product sales to be recognized as revenue upon delivery rather than over an extended period of time, we expect approximately $105 million of the deferred revenue component of revenue backlog recorded as of December 31, 2017 will be eliminated.