Avid Reports Second Quarter 2014 Financial Results

BURLINGTON, Mass., Oct. 20, 2014 (GLOBE NEWSWIRE) -- Avid® (OTC: AVID) announced today that it has filed its Form 10-Q for the fiscal quarter ended June 30, 2014. In connection with this filing, the Company has raised prior 2014 Adjusted EBITDA guidance to reflect improved conversion of bookings to revenue, accelerated growth in higher margin products and continued cost improvements. In addition, the Company has updated guidance for bookings and free cash flow. The Company is also now current with its ongoing reporting obligations with the Securities and Exchange Commission ("SEC") and has applied for re-listing of its common stock on the NASDAQ Stock Exchange.

Second Quarter Highlights

  • Revenue of $124.6 million and non-GAAP net income of $5.7 million
  • As previously reported, bookings increased 6% year-on-year to $127.7 million
  • Adjusted EBITDA of $10.7 million
  • Free Cash Flow of $2.7 million
  • Non-GAAP operating expense of $67.7 million down year-on-year and sequentially
  • Strong community engagement with growth of the Avid Customer Association to over 1,300 memberships
  • Platform unit sales over past twelve-months up over 2X the same period last year

"During the second quarter, Avid again saw incremental proof points that our strategy is working, including strong market reception for our technology platform and a continued shift to more profitable products in higher growth areas," said Louis Hernandez, Jr, President and CEO of Avid. "This sales shift to higher margin products, such as the Avid Media Central Platform, and de-emphasis on lower growth offerings, combined with continued reduction of operating costs, has contributed to our increased profitability expectations. We look forward to building on our current momentum and continuing to apply our strategic vision toward growth and value creation for the company."

The Company updated guidance for fiscal year 2014 and currently expects to report at year-end:

  • Adjusted EBITDA of $64 million to $72 million
  • Annual bookings growth of 0%-3%
  • Free cash flow of approximately $15 million to $20 million

"We are pleased with our results for the second quarter, which demonstrated continued growth, cost reduction and profitability progress on our three-phase transformation plan. We continue to believe our 2014 Adjusted EBITDA establishes a base on which we can continue to improve. Our updated bookings and free cash flow guidance primarily reflects the inherent variability associated with larger transactions," said John Frederick, Executive Vice President, Chief Financial and Administrative Officer of Avid. "We are also excited to be current with our SEC reporting requirements and have applied for relisting with NASDAQ. We believe we could resume trading on NASDAQ by the end of the year."

The Company's listing on the NASDAQ Stock Exchange will be subject to review by NASDAQ and is dependent upon the Company meeting all relevant quantitative and qualitative listing criteria of NASDAQ. In the interim, Avid stock will continue to trade on OTC Markets – OTC Pink Tier under the trading symbol AVID. For quotes or additional information on OTC Markets and the OTC Pink Tier, please visit http://www.otcmarkets.com.

Avid includes non-GAAP financial measures in this press release, including adjusted EBITDA and free cash flow. The reconciliations to the Company's comparable GAAP financial measures for the periods presented are included in the tables in the appendix to this press release. The Company also includes the operational metric of bookings in this release.

Conference Call

A conference call to discuss Avid's financial results for the second quarter of 2014 will be held on Tuesday, October 21, 2014 at 4:30 p.m. ET. The call will be open to the public and can be accessed by dialing 719.457.2664 and referencing confirmation code 7779065. 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.

Non-GAAP Measures and Bookings

Avid has in this press release presented a number of non-GAAP financial measures as set forth and reconciled in the tables in the appendix of this press release.

Avid defines adjusted EBITDA as non-GAAP operating profit or loss excluding depreciation and all amortization expense. Avid non-GAAP operating results and non-GAAP earnings per share exclude restructuring costs, stock based compensation, amortization and impairment of intangibles as well as other unusual items such as costs related to the restatement; M&A related activity; or impact of significant legal settlements. Avid defines free cash flow as GAAP operating cash flow less capital expenditures and excludes payments or receipts related to M&A, significant legal settlements, restructuring, restatement or other non-operational or non-recurring events. These non-GAAP measures also reflect how Avid manages its businesses internally and are consistent with the financial metrics that are included in management incentive plans.

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.

The reconciliation of non-GAAP to GAAP financial measures is in the tables included in this press release.

Avid references bookings in this press release. Bookings are an operational metric which is defined as the amount of revenue we expect to earn from an agreement between Avid and a customer for goods and services over the course of the agreement. To count as a booking, we expect there to be persuasive evidence of an agreement between us and our customer and that the collectability of the amounts payable under the arrangement are reasonably assured. Due to the timing of revenue recognition, all of the revenue related to the booking may not be recorded in the period that it was transacted and would therefore be reported as part of revenue backlog and/or deferred revenue, thereby providing visibility into future revenue. However, because our bookings are based on orders that, under certain circumstances can be cancelled or adjusted, bookings may not convert into revenue earned.

Forward-Looking Statements

The information provided in this press release includes forward-looking statements that involve risks and uncertainties, including statements about our anticipated plans, objectives, expectations and intentions. Such statements include, without limitation, statements regarding our recently filed financial statements or other information included herein based upon or otherwise incorporating judgments or estimates, including statements herein relating to future performance such as our future adjusted EBITDA, earnings, bookings, free cash flow, payments for restatement-related expenses; our future strategy and business plans; our objective to obtain relisting on the NASDAQ Stock Market and to have our shares of common stock trade on that market; and our anticipated timing for filing our future quarterly reports. These forward-looking statements 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. Unknown risks and uncertainties include, but are not limited to the effect on our sales, operations and financial performance resulting from the identified material weaknesses in our internal control of financial reporting; the delisting of our stock from NASDAQ; the previously disclosed ongoing SEC and Department of Justice inquiries; pending litigation, including the previously disclosed class action and possibility of further legal proceedings adverse to our Company resulting from the restatement or related matters; the costs associated with the restatement; our ability to have our shares relisted on the NASDAQ stock market; our liquidity; our ability to execute our strategic plan and meet customer needs; 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 in particular geographies or markets, fluctuations in foreign currency exchange rates and seasonal factors; adverse changes in economic conditions; and variances in our backlog and the realization thereof. Moreover, the business may be adversely affected by future legislative, regulatory or tax 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 described in our filings with the SEC. We expressly disclaim any obligation or undertaking to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

About Avid

Through Avid Everywhere™, Avid delivers the industry's most open, innovative and comprehensive media platform connecting content creation with collaboration, asset protection, distribution and consumption for the most listened to, most watched and most loved media in the world—from the most prestigious and award-winning feature films, music recordings, and television shows, to live concerts and news broadcasts. Industry leading solutions include Pro Tools®, Media Composer®, ISIS®, Interplay®, and Sibelius®. 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.

© 2014 Avid Technology, Inc. All rights reserved. Avid, the Avid logo, Media Composer, Pro Tools, Interplay, ISIS, 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. All other trademarks are the property of their respective owners.

Condensed Consolidated Statements of Operations
(unaudited - in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2014 2013 2014 2013
Net revenues:
Products $ 87,315 $ 99,858 $ 181,885 $ 198,576
Services 37,329 41,487 77,741 78,840
Total net revenues 124,644 141,345 259,626 277,416
Cost of revenues:
Products 35,097 38,902 70,091 75,917
Services 15,323 15,392 30,994 30,668
Amortization of intangible assets -- 501 50 1,152
Total cost of revenues 50,420 54,795 101,135 107,737
Gross profit 74,224 86,550 158,491 169,679
Operating expenses:
Research and development 22,070 23,847 45,024 47,454
Marketing and selling 34,297 33,903 67,112 67,812
General and administrative 19,984 16,131 38,315 31,728
Amortization of intangible assets 398 658 878 1,321
Restructuring (recoveries) costs, net (165) 1,918 (165) 2,191
Total operating expenses 76,584 76,457 151,164 150,506
Operating (loss) income (2,360) 10,093 7,327 19,173
Interest and other expense, net (357) (247) (708) (505)
(Loss) income before income taxes (2,717) 9,846 6,619 18,668
Provision for income taxes, net 622 669 1,062 1,226
Net (loss) income (3,339) 9,177 5,557 17,442
Net (loss) income per common share - basic $ (0.09) $ 0.24 $ 0.14 $ 0.45
Net (loss) income per common share - diluted $ (0.09) $ 0.23 $ 0.14 $ 0.45
Weighted-average common shares outstanding - basic 39,119 39,040 39,109 39,009
Weighted-average common shares outstanding - diluted 39,119 39,069 39,138 39,061
Reconciliations of GAAP financial measures to Non-GAAP financial measures
(unaudited - in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2014 2013 2014 2013
Net Revenues $ 124,644 $ 141,345 $ 259,626 $ 277,416
Cost of revenues 50,420 54,795 101,135 107,737
Gross Profit 74,224 86,550 158,491 169,679
Operating Expenses 76,584 76,457 151,164 150,506
Operating (loss) income (2,360) 10,093 7,327 19,173
Interest and other expense, net (357) (247) (708) (505)
Provision for income taxes, net 622 669 1,062 1,226
Net (loss) income $ (3,339) $ 9,177 $ 5,557 $ 17,442
Weighted-average common shares outstanding - diluted 39,119 39,069 39,138 39,061
Net (loss) income per share - diluted $ (0.09) $ 0.23 $ 0.14 $ 0.45
Adjustments to GAAP Results
Cost of Revenues
Amortization of intangible assets -- 501 50 1,152
Stock-based compensation 163 212 316 439
Operating Expenses
Amortization of intangible assets 398 658 878 1,321
Restructuring (recoveries) costs, net (165) 1,918 (165) 2,191
Restatement costs 6,690 2,929 10,843 3,695
Gain on sale of assets -- -- -- (125)
Stock-based compensation
R&D 113 173 240 318
Sales & Marketing 642 473 934 1,053
G&A 1,218 1,250 1,909 2,375
Tax adjustment 4 (215) (12) (430)
Net revenues 124,644 141,345 259,626 277,416
Cost of revenues 50,257 54,082 100,769 106,146
Gross Profit 74,387 87,263 158,857 171,270
Operating Expenses 67,688 69,056 136,525 139,678
Operating Income 6,699 18,207 22,332 31,592
Interest and other expense, net (357) (247) (708) (505)
Provision for income taxes, net 618 884 1,074 1,656
Net income 5,724 17,076 20,550 29,431
Net income per share - diluted $ 0.15 $ 0.44 $ 0.53 $ 0.75
Adjusted EBITDA
Non-GAAP Operating Income (from above) 6,699 18,207 22,332 31,592
Depreciation 3,990 4,429 8,325 9,149
Amortization of capitalized software development costs 49 77 99 179
Adjusted EBITDA 10,738 22,713 30,756 40,920
Free Cash Flow
GAAP net cash used in operating activities (2,090) (4,146) (26,082) (5,556)
Capital Expenditures (2,876) (3,164) (6,391) (5,290)
Restructuring Payments 1,885 3,122 4,811 7,415
Restatement Payments 5,737 1,514 16,088 1,514
Free Cash Flow $ 2,656 $ (2,674) $ (11,574) $ (1,917)
Condensed Consolidated Balance Sheets
(unaudited - in thousands)
June 30, December 31,
2014 2013
Current assets:
Cash and cash equivalents $ 23,049 $ 48,203
Accounts receivable, net of allowances of $11,330 and $13,963 at June 30, 2014 and December 31, 2013, respectively 49,263 56,770
Inventories 54,698 60,122
Deferred tax assets, net 532 522
Prepaid expenses 8,296 7,778
Other current assets 14,796 17,493
Total current assets 150,634 190,888
Property and equipment, net 33,270 35,186
Intangible assets, net 3,232 4,260
Long-term deferred tax assets, net 2,431 2,415
Other long-term assets 2,360 2,393
Total assets $ 191,927 $ 235,142
Current liabilities:
Accounts payable $ 28,335 $ 33,990
Accrued compensation and benefits 26,416 30,342
Accrued expenses and other current liabilities 30,883 41,273
Income taxes payable 6,228 6,875
Short-term debt 5,000 --
Deferred tax liabilities, net -- 14
Deferred revenues 204,291 211,403
Total current liabilities 301,153 323,897
Long-term deferred tax liabilities, net 562 565
Long-term deferred revenues 225,660 255,429
Other long-term liabilities 13,937 14,586
Total liabilities 541,312 594,477
Stockholders' deficit:
Common stock 423 423
Additional paid-in capital 1,045,777 1,043,384
Accumulated deficit (1,330,969) (1,336,526)
Treasury stock at cost (71,679) (72,543)
Accumulated other comprehensive income 7,063 5,927
Total stockholders' deficit (349,385) (359,335)
Total liabilities and stockholders' deficit $ 191,927 $ 235,142
Condensed Consolidated Statements of Cash Flows
(unaudited - in thousands)
Six Months Ended
June 30,
2014 2013
Cash flows from operating activities:
Net income $ 5,557 $ 17,442
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 9,352 11,800
(Recovery) expense from doubtful accounts (158) 30
Gain on sale of assets -- (125)
Stock-based compensation expense 3,398 4,185
Non-cash interest expense 147 147
Foreign currency transaction losses (317) (84)
(Benefit from) provision for deferred taxes (16) 9
Changes in operating assets and liabilities:
Accounts receivable 7,668 12,277
Inventories 5,424 5,896
Prepaid expenses and other current assets 833 1,225
Accounts payable (5,666) (6,661)
Accrued expenses, compensation and benefits, and other liabilities (14,842) (6,516)
Income taxes payable (583) (680)
Deferred revenues (36,879) (44,501)
Net cash used in operating activities (26,082) (5,556)
Cash flows from investing activities:
Purchases of property and equipment (6,391) (5,290)
Proceeds from divestiture of consumer business 1,500 --
Proceeds from sale of assets -- 125
Decrease (increase) in other long-term assets 11 (18)
Net cash used in investing activities (4,880) (5,183)
Cash flows from financing activities:
Proceeds from the issuance of common stock under employee stock plans 1 177
Common stock repurchases for tax withholdings for net settlement of equity awards (141) (232)
Proceeds from revolving credit facilities 11,500 --
Payments on revolving credit facilities (6,500) --
Net cash provided by (used in) financing activities 4,860 (55)
Effect of exchange rate changes on cash and cash equivalents 948 (3,492)
Net decrease in cash and cash equivalents (25,154) (14,286)
Cash and cash equivalents at beginning of period 48,203 70,390
Cash and cash equivalents at end of period $ 23,049 $ 56,104

CONTACT: Media Contact Lisa Kilborn Avid 978.640.3230 lisa.kilborn@avid.com Investor Contact Tom Fitzsimmons Avid 978.640.3346 tom.fitzsimmons@avid.com

Source:Avid Technology, Inc.