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Avid Announces Financial Results for Second Quarter 2015

BURLINGTON, Mass., Aug. 10, 2015 (GLOBE NEWSWIRE) -- Avid® (Nasdaq:AVID) announced today that it has released second quarter results and updated its 2015 full year guidance.

Q2 2015 Highlights

  • Raised Full Year 2015 Earnings Guidance on substantially increased visibility
    • Adjusted EBITDA range raised to $74 to $80 million, up from $72 to $78 million as previously guided
    • Constant dollar bookings range raised to 2% to 6% over 2014, although continued currency pressure could impact actual results by approximately 4 percentage points
    • Adjusted free cash flow range adjusted to $12 to $20 million
    • Post-2010 revenue backlog of $489 million reflects 17% year over year increase.
    • Recurring revenue shift accelerating as second quarter bookings for recurring revenue increased 58% over the prior year, representing 26% of Q2 2015 bookings
    • Strong market momentum for new products announced in April 2015 with $17 million in Q2 bookings expected to be converted to revenue and cash flow in 2nd half of 2015
    • Cost initiatives on track with opening of new global service centers
    • Completed the Orad transaction on June 23rd, and integration is on track
  • Recognized major milestones in both Platform and Subscription adoption
    • Topped 10,000 paid subscribers at end of the quarter, with over 12,000 active paid subscribers as of today, almost 130% growth since December 2014
    • More than 130,000 new users have pre-registered for Pro Tools First in the seven months since its launch
    • Passed the 25,000 milestone for Media Central platform licenses, ending the quarter at about 26,000

Q2 2015 Financial Update

  • Constant dollar bookings for marketed products of $122 million was flat year-over-year. Bookings of $118 million for quarter, up 5% sequentially and down 8% year over year
    • The strong U.S. dollar continues to put pressure on reported bookings and revenue results.
  • Adjusted EBITDA of $1.4 million as compared to $10.7 million in second quarter of 2014

"We had another quarter of meaningful operational progress and important accomplishments which has culminated in improved visibility as we enter the second half of 2015. The ongoing transformation to a recurring revenue model is accelerating, we launched new industry leading products that exceeded expectations, closed the Orad acquisition, restructured our balance sheet and have aggressively taken action on our cost saving programs," said Louis Hernandez, Jr., Chairman, President, and CEO of Avid. "During Q2, we hit major milestones in subscription and platform adoption, which are encouraging proof points that the Avid Everywhere strategy continues to resonate with our customers and that our business mix is continuing to improve."

"With improved visibility into the second half of the year and the addition of Orad into the Avid family, we're pleased to be able to provide this update on full year guidance," said John Frederick, Chief Financial and Administrative Officer of Avid. "On a trailing 12-month basis, our cost structure has been reduced by two percent and we are still in the early days of our labor arbitrage initiative. We believe the growth in revenue backlog, improving gross margins as a percent of revenue, the growth opportunity presented with the addition of Orad and the ability to accelerate our cost savings positions the company well for a strong second half of 2015."

Avid includes non-GAAP financial measures in this press release, including adjusted EBITDA, free cash flow, non-GAAP operating income (loss), non-GAAP operating income per share, and non-GAAP operating expenses. The reconciliations to the Company's comparable GAAP financial measures for the periods presented are included in the tables in the appendix of this press release. The Company also includes the operational metrics of bookings and revenue backlog in this release. Unless noted, all financial information is reported based on actual exchange rates.

Conference Call

A conference call to discuss Avid's financial results for the second quarter of 2015 will be held on Monday, August 10, 2015 at 5:00 p.m. ET. The call will be open to the public and can be accessed by dialing 719-457-2697 and referencing confirmation code 9388800. 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 and Revenue Backlog

Avid defines adjusted EBITDA as non-GAAP operating income (loss) excluding depreciation and all amortization expense. Avid non-GAAP operating income (loss), non-GAAP net income per share and non-GAAP operating expenses 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, and impact of significant legal settlements. Avid defines free cash flow as GAAP operating cash flow less capital expenditures and excludes from free cash flow 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.

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.

Bookings is an operational metric that 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.

Revenue backlog is an operational metric that is defined as firm orders received including (i) orders where the customer has paid in advance of our performance obligations being fulfilled, and (ii) orders for future product deliveries or services that have not yet been invoiced by us. We generally ship our products shortly after the receipt of an order. Orders that may exist at the end of a quarter and have not been shipped are not recognized as revenue and are included in revenue backlog. Certain orders included in revenue backlog may be reduced, canceled or deferred by our customers. The expected timing of the recognition or amortization of revenue backlog into revenue is based on current estimates and could change based on a number of factors, including (i) the timing of delivery of products and services, (ii) customer cancellations or change orders, (iii) changes in the estimated period of time Implied Maintenance Release PCS is provided to customers or (iv) changes in accounting standards or policies. Implied Maintenance Release PCS, as we define it, is the implicit obligation to make software updates available to customers over a period of time that represents implied post-contract customer support, or PCS, and is deemed to be a deliverable in each arrangement and accounted for as a separate element.

As there is no industry standard definition of bookings, revenue backlog, our reported bookings and revenue backlog may not be comparable with other companies. Additional information on our revenue backlog can be found in the section called "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-K for fiscal year ended December 31, 2014 filed with the SEC.

Forward-Looking Statements

The 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. Such statements include, without limitation, statements regarding our financial statements or other information included herein based upon or otherwise incorporating judgments or estimates relating to future performance such as future operating expenses; earnings; bookings; backlog; revenue backlog conversion rate; product mix and free cash flow; our cost savings initiatives; 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; the anticipated benefits of the Orad acquisition, including estimated synergies, and the effects of the transaction, including effects on future financial and operating results; and our liquidity. 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, 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; the previously disclosed SEC and Department of Justice inquiries; and the possibility of further 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 described in the filings made by our company 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. Media organizations and creative professionals use Avid solutions to create the most listened to, most watched and most loved media in the world—from the most prestigious and award-winning feature films, to the most popular television shows, news programs and televised sporting events, as well as a majority of today's most celebrated music recordings and live concerts. Industry leading solutions include Pro Tools®, Media Composer®, ISIS®, Interplay®, ProSet and RealSet, Maestro, PlayMaker, 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.

© 2015 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.

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,
2015 2014 2015 2014
Net revenues:
Products $ 76,150 $ 87,315 $ 156,179 $ 181,885
Services 33,617 37,329 73,174 77,741
Total net revenues 109,767 124,644 229,353 259,626
Cost of revenues:
Products 28,363 35,097 60,160 70,091
Services 14,943 15,323 30,638 30,994
Amortization of intangible assets 163 -- 163 50
Total cost of revenues 43,469 50,420 90,961 101,135
Gross profit 66,298 74,224 138,392 158,491
Operating expenses:
Research and development 23,310 22,070 46,483 45,024
Marketing and selling 32,811 34,297 60,856 67,112
General and administrative 17,425 19,984 36,812 38,315
Amortization of intangible assets 408 398 782 878
Restructuring costs (recoveries), net 539 (165) 539 (165)
Total operating expenses 74,493 76,584 145,472 151,164
Operating (loss) income (8,195) (2,360) (7,080) 7,327
Interest and other expense, net (1,439) (357) (2,162) (708)
(Loss) income before income taxes (9,634) (2,717) (9,242) 6,619
(Benefit from) provision for income taxes, net (5,550) 622 (4,989) 1,062
Net (loss) income (4,084) (3,339) (4,253) 5,557
Net (loss) income per common share - basic and diluted $ (0.10) $ (0.09) $ (0.11) $ 0.14
Weighted-average common shares outstanding - basic 39,635 39,119 39,512 39,109
Weighted-average common shares outstanding - diluted 39,635 39,119 39,512 39,138
AVID TECHNOLOGY, INC.
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,
2015 2014 2015 2014
GAAP
Net Revenues $ 109,767 $ 124,644 $ 229,353 $ 259,626
Cost of revenues 43,469 50,420 90,961 101,135
Gross profit 66,298 74,224 138,392 158,491
Operating expenses 74,493 76,584 145,472 151,164
Operating (loss) income (8,195) (2,360) (7,080) 7,327
Interest and other expense, net (1,439) (357) (2,162) (708)
(Benefit from) provision for income taxes, net (5,550) 622 (4,989) 1,062
Net (loss) income $ (4,084) $ (3,339) $ (4,253) $ 5,557
Weighted-average common shares outstanding - basic 39,635 39,119 39,512 39,109
Weighted-average common shares outstanding - diluted 39,635 39,119 39,512 39,138
Net (loss) income per share - basic and diluted $ (0.10) $ (0.09) $ (0.11) $ 0.14
Adjustments to GAAP Results
Cost of Revenues
Amortization of intangible assets 163 -- 163 50
Stock-based compensation 215 163 469 316
Operating Expenses
Amortization of intangible assets 408 398 782 878
Restructuring costs (recoveries), net 539 (165) 539 (165)
Restatement (recoveries) costs (1,106) 6,690 701 10,843
Acquisition and other costs 3,333 -- 5,675 --
Stock-based compensation
R&D 46 113 152 240
Sales & Marketing 683 642 1,373 934
G&A 1,938 1,218 3,349 1,909
Other
Tax adjustment -- 4 -- (12)
Non-GAAP
Net revenues 109,767 124,644 229,353 259,626
Cost of revenues 43,091 50,257 90,329 100,769
Gross Profit 66,676 74,387 139,024 158,857
Operating Expenses 68,652 67,688 132,901 136,525
Operating (loss) income (1,976) 6,699 6,123 22,332
Interest and other expense, net (1,439) (357) (2,162) (708)
(Benefit from) provision for income taxes, net (5,550) 618 (4,989) 1,074
Net income 2,135 5,724 8,950 20,550
Net income per share - diluted $ 0.05 $ 0.15 $ 0.22 $ 0.53
Adjusted EBITDA
Non-GAAP Operating (loss) income (from above) (1,976) 6,699 6,123 22,332
Depreciation 3,411 3,990 7,088 8,325
Amortization of capitalized software development costs -- 49 -- 99
Adjusted EBITDA 1,435 10,738 13,211 30,756
Adjusted Free Cash Flow
GAAP net cash used in operating activities (30,844) (2,090) (26,214) (26,082)
Capital Expenditures (3,802) (2,876) (6,742) (6,391)
Restructuring payments 308 1,885 736 4,811
Restatement payments 1,507 5,737 3,624 16,088
Acquisition and other payments 1,590 -- 1,590 --
Adjusted Free Cash Flow $ (31,241) $ 2,656 $ (27,006) $ (11,574)
AVID TECHNOLOGY, INC.
Condensed Consolidated Balance Sheets
(unaudited - in thousands)
June 30, December 31,
2015 2014
ASSETS:
Current assets:
Cash and cash equivalents $ 34,647 $ 25,056
Accounts receivable, net of allowances of $9,290 and $10,692 at June 30, 2015 and December 31, 2014, respectively 54,929 54,655
Inventories 43,872 48,001
Deferred tax assets, net 399 322
Prepaid expenses 9,467 6,892
Other current assets 14,542 17,932
Total current assets 157,856 152,858
Property and equipment, net 33,328 32,136
Intangible assets, net 38,701 2,445
Goodwill 33,905 --
Long-term deferred tax assets, net 4,441 1,886
Other long-term assets 7,998 2,274
Total assets $ 276,229 $ 191,599
LIABILITIES AND STOCKHOLDERS' DEFICIT:
Current liabilities:
Accounts payable $ 34,684 $ 32,951
Accrued compensation and benefits 24,666 32,636
Accrued expenses and other current liabilities 38,047 32,353
Income taxes payable 2,756 5,480
Deferred tax liabilities, net 402 --
Deferred revenues 204,495 206,608
Total current liabilities 305,050 310,028
Long-term debt 93,497 --
Long-term deferred tax liabilities, net 10,078 136
Long-term deferred revenues 188,304 208,232
Other long-term liabilities 17,396 14,273
Total liabilities 614,325 532,669
Stockholders' deficit:
Common stock 423 423
Additional paid-in capital 1,057,027 1,049,969
Accumulated deficit (1,326,051) (1,321,798)
Treasury stock at cost (64,214) (68,051)
Accumulated other comprehensive loss (5,281) (1,613)
Total stockholders' deficit (338,096) (341,070)
Total liabilities and stockholders' deficit $ 276,229 $ 191,599
AVID TECHNOLOGY, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited - in thousands)
Six Months Ended
June 30,
2015 2014
Cash flows from operating activities:
Net (loss) income $ (4,253) $ 5,557
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization 8,014 9,352
Recovery from doubtful accounts (205) (158)
Stock-based compensation expense 5,344 3,398
Non-cash interest expense 207 147
Unrealized foreign currency transaction gains (4,043) (317)
Deferred tax benefit (6,514) (16)
Changes in operating assets and liabilities:
Accounts receivable 8,935 7,668
Inventories 8,940 5,424
Prepaid expenses and other current assets 784 833
Accounts payable 347 (5,666)
Accrued expenses, compensation and benefits and other liabilities (17,362) (14,842)
Income taxes payable 770 (583)
Deferred revenues (27,178) (36,879)
Net cash used in operating activities (26,214) (26,082)
Cash flows from investing activities:
Purchases of property and equipment (6,742) (6,391)
Payments for business and technology acquisitions, net of cash acquired (65,967) --
Proceeds from divestiture of consumer business -- 1,500
(Increase) decrease in other long-term assets (850) 11
Increase in restricted cash (2,330) --
Net cash used in investing activities (75,889) (4,880)
Cash flows from financing activities:
Proceeds from long-term debt, net of issuance costs 121,150 --
Cash paid for capped call transaction (10,125) --
Proceeds from the issuance of common stock under employee stock plans 2,804 1
Common stock repurchases for tax withholdings for net settlement of equity awards (1,299) (141)
Proceeds from revolving credit facilities 29,500 11,500
Payments on revolving credit facilities (29,500) (6,500)
Payments of credit facilities issuance costs (505) --
Net cash provided by financing activities 112,025 4,860
Effect of exchange rate changes on cash and cash equivalents (331) 948
Net increase (decrease) in cash and cash equivalents 9,591 (25,154)
Cash and cash equivalents at beginning of period 25,056 48,203
Cash and cash equivalents at end of period $ 34,647 $ 23,049
AVID TECHNOLOGY, INC.
Supplemental Revenue Information
(unaudited - in thousands)
$K June 30, March 31, June 30,
Revenue Backlog* 2015 2015 2014
Pre-2011 $ 51,520 $ 66,928 $ 126,171
Post-2010 $ 341,279 $ 345,748 $ 303,780
Deferred Revenue $ 392,799 $ 412,676 $ 429,951
Other Backlog $ 147,453 $ 115,965 $ 113,175
Total Revenue Backlog $ 540,252 $ 528,641 $ 543,126
Post 2010 $ 488,732 $ 461,713 $ 416,955
The expected timing of recognition of revenue backlog as of June 30, 2015 is as follows:
Q3-Q4 2015 2016 2017 Thereafter Total
Orders executed prior to January 1, 2011 $ 25,652 $ 24,772 $ 952 $ 144 $ 51,520
Orders executed or materially modified on or after January 1, 2011 $ 82,396 $ 122,846 $ 67,779 $ 68,258 $ 341,279
Other Backlog $ 70,018 $ 38,578 $ 23,237 $ 15,620 $ 147,453
Total Revenue Backlog $ 178,066 $ 186,196 $ 91,968 $ 84,022 $ 540,252
*A definition of Revenue Backlog is included in the body of our press release.
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.
AVID TECHNOLOGY, INC.
2015 Outlook (a)
(unaudited - in millions)
Bookings
CFX AFX Revenue
Low High Low High Low High
1st Half of 2015 $ 240 $ 240 $ 230 $ 230 $ 229 $ 229
Estimated 2nd Half (including Orad product lines), using 1st Half run rates 261 263 250 252 252 252
Estimated Impact of New Product and Growth Initiatives:
- New Products Booked in 1st Half and Expected to be Shipped in 2nd Half -- -- -- -- 17 17
- Estimated New Products Booked in 2nd Half 5 7 5 7 3 4
- Estimated Growth Initiatives 10 15 10 14 7 11
Estimated Impact of Cost Initiatives:
- Facilities and Wage Rationalization and other -- -- -- -- -- --
Estimated Seasonality and Other:
- Estimated 2nd Half Seasonality, including resolution of sales elongation cycle 14 25 14 25 14 19
- Estimated Accounting Impact of Improved Business Practices -Q2 Carryover -- -- -- -- 11 11
- Estimated Accounting Impact of Improved Business Practices -2H Impact -- -- -- -- 5 7
Outlook 2015 (a) $ 530 $ 550 $ 509 $ 528 $ 538 $ 550
(a) As of August 10, 2015
Note: The 2015 Outlook is based on estimates as of the date of this press release and Avid expressly disclaims any obligation or undertaking to update such estimates; actual results may differ materially from those estimates as a result of a number of risks and uncertainties. Please see the forward looking disclaimer included in the press release. Each range of values provided represents the expected low and high estimates for such financial or operating factor.
AVID TECHNOLOGY, INC.
2015 Outlook (a)
(unaudited - in millions)
Adjusted
Adjusted EBITDA Free Cash Flow
Low High Low High
1st Half of 2015 $ 13 $ 13 $ (27) $ (27)
Estimated 2nd Half (including Orad product lines), using 1st Half run rates 18 18 (23) (23)
Estimated Impact of New Product and Growth Initiatives:
- New Products Booked in 1st Half and Expected to be Shipped in 2nd Half 11 11 11 11
- Estimated New Products Booked in 2nd Half 2 3 2 2
- Estimated Growth Initiatives 5 6 3 5
Estimated Impact of Cost Initiatives:
- Facilities and Wage Rationalization and other 4 5 4 5
Estimated Seasonality and Other:
- Estimated 2nd Half Seasonality, including resolution of sales elongation cycle 5 6 42 47
- Estimated Accounting Impact of Improved Business Practices -Q2 Carryover 11 11 -- --
- Estimated Accounting Impact of Improved Business Practices -2H Impact 5 7 -- --
Outlook 2015 (a) $ 74 $ 80 $ 12 $ 20
(a) As of August 10, 2015
Note: The 2015 Outlook is based on estimates as of the date of this press release and Avid expressly disclaims any obligation or undertaking to update such estimates; actual results may differ materially from those estimates as a result of a number of risks and uncertainties. Please see the forward looking disclaimer included in the press release. Each range of values provided represents the expected low and high estimates for such financial or operating factor.

CONTACT: Media Contact Sara Griggs Avid 310.821.0801 sara.griggs@avid.com Investor Contact Jonathan Huang Avid 978.640.5126 jonathan.huang@avid.com

Source:Avid Technology, Inc.