Avid Announces Third Quarter 2009 Results


Tewksbury, Mass, 2009-10-22 Avid® (NASDAQ: AVID) today reported revenues of $153.7 million for the three-month period ended September 30, 2009, compared to $217.1 million for the same period in 2008. The GAAP net loss for the quarter was $16.2 million, or $.43 per share, compared to a GAAP net loss of $66.4 million, or $1.80 per share, in the third quarter of 2008. The third quarter 2008 results included a non-cash impairment charge of $51.3 million or $1.39 per share.

The GAAP net loss for the third quarter of 2009 included amortization of intangibles, stock-based compensation, restructuring charges, loss on asset sales and related tax adjustments, collectively totaling $17.0 million. Excluding these items, the non-GAAP net income was $787 thousand for the third quarter, or $.02 per share.

“We continue to execute on a number of strategic initiatives to improve the overall health and efficiency of our operations,” said Gary Greenfield, Avid’s chairman and CEO. “The third quarter showed sequential improvement in revenue and expanded gross margins, resulting in another quarter of improving results.”

Revenues for the nine-month period ended September 30, 2009 were $455.9 million, compared to revenues of $638.2 million for the same period in 2008. GAAP net loss for the first nine months of 2009 was $49.4 million, or $1.33 per share, compared to GAAP net loss of $97.9 million, or $2.59 per share, for the same period in 2008. GAAP net loss for the nine-month period ended September 30, 2009 included $39.1 million of amortization, stock-based compensation, restructuring charges, loss on asset sales and related tax adjustments. Excluding these items, the non-GAAP net loss per share was $.28 for the nine-month period ended September 30, 2009. GAAP net loss for the nine-month period ended September 30, 2008 included $82.0 million of amortization, stock-based compensation, restructuring charges, impairment charges and related tax adjustments. Excluding these items, the non-GAAP net loss per share was $.42 for the first nine months of 2008.

The company’s cash balance on September 30, 2009 was $103.0 million, or approximately $2.76 per share. The company paid out approximately $4.9 million in cash in the third quarter related to restructuring activities.

Avid also announced that its Audit Committee is overseeing an investigation concerning the manner in which revenue was recognized on certain shipments of Audio products near the end of previous quarters from certain warehouses outside the United States. Based on the current progress of the investigation, Avid believes that there have been errors that affected the timing but not the amount of revenue recognized, and that correction of the errors likely will not have a material impact on its financial statements for the current or any prior period. This investigation was only recently commenced. Avid's expectations concerning the nature and materiality of these or any other errors are subject to change based on the final outcome of the investigation.

Use of Non-GAAP Financial Measures

This press release contains “non-GAAP financial measures” under the rules of the U.S. Securities and Exchange Commission. 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. The reconciliation for net income (loss) and earnings (loss) per share for the three- and nine-month periods ended September 30, 2009 and 2008 are in the tables attached to this press release.

The company uses non-GAAP financial measures internally to manage its business, for example, in establishing its annual operating budget, in assessing segment operating performance and for measuring performance under employee incentive compensation plans. Non-GAAP financial measures are used by management in its operating and financial decision-making because management believes these measures reflect the company’s ongoing business in a manner that allows meaningful period-to-period comparisons. Accordingly, the company believes it is useful for investors and others to review both GAAP and non-GAAP measures in order to (a) understand and evaluate the company’s current operating performance and future prospects in the same manner as management does and (b) compare in a consistent manner the company’s current financial results with past financial results. The primary limitations associated with the company’s use of non-GAAP financial measures are that these measures may not be directly comparable to the amounts reported by other companies and they do not include all items of income and expense that affect the company’s operations. The company’s management compensates for these limitations by considering the company’s financial results as determined in accordance with GAAP and by providing a detailed reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures in this press release.

Conference Call

A conference call to discuss Avid’s third quarter 2009 financial results will be held today, October 22, 2009 at 4:30 p.m. ET. The call will be open to the public and can be accessed by dialing 719.457.2617 and referencing confirmation code 4569475. The call and subsequent replay will also be available on Avid’s website. To listen via this alternative, go to the Investors tab at http://www.avid.com/ for complete details prior to the start of the conference call.

Use of Forward-Looking Statements

The above release is subject to the completion and results of the audit committee’s investigation described above and the completion and filing of our Quarterly Report on Form 10-Q. This release includes forward-looking statements, as defined by the Private Securities Litigation Reform Act of 1995, about the anticipated impact of the audit committee’s investigation described above, and these statements are subject to the outcome of such investigation. This release also makes forward-looking statements about Avid’s performance. There are a number of factors that could cause actual events or results to differ materially from those indicated by such forward-looking statements, such as Avid’s ability to execute on its corporate strategy and meet customer needs, general economic conditions, competitive factors, pricing pressures, delays in product shipments and other important events and factors disclosed previously and from time to time in Avid’s filings with the U.S. Securities and Exchange Commission. In addition, the forward-looking statements contained herein represent Avid’s estimates only as of today and should not be relied upon as representing the company’s estimates as of any subsequent date. While Avid may elect to update these forward-looking statements at some point in the future, Avid specifically disclaims any obligation to do so, even if the estimates change.

About Avid

Avid creates the digital audio and video technology used to make the most listened to, most watched and most loved media in the world – from the most prestigious and award-winning feature films, music recordings, television shows, live concert tours and news broadcasts, to music and movies made at home.  Some of Avid’s most influential and pioneering solutions include Media Composer®, Pro Tools®, Avid Unity™, Interplay®, Oxygen 8, Sibelius® and Pinnacle Studio™. For more information about Avid solutions and services, visit http://www.avid.com/, del.icio.us, Flickr, Twitter and YouTube; connect with Avid on Facebook; or subscribe to Avid Industry Buzz.

© 2009 Avid Technology, Inc. All rights reserved. Product features, specifications, systems requirements and availability are subject to change without notice.  Avid, Pinnacle Studio, Avid Unity, Interplay, Media Composer, Pro Tools, Symphony, Nitris, 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 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
 
Nine Months Ended
     
September 30,
 
September 30,
     
2009
 
2008
 
2009
 
2008
Net revenues:                
  Products  
$ 125,146
 
$ 183,686
 
$ 370,699
 
$ 540,977
  Services  
28,597
 
33,380
 
85,216
 
97,218
  Total net revenues  
153,743
 
217,066
 
455,915
 
638,195
                   
Cost of revenues:                
  Products  
57,625
 
94,303
 
177,302
 
272,004
  Services  
13,586
 
18,744
 
43,515
 
55,760
  Amortization of intangible assets  
519
 
1,249
 
1,465
 
6,773
  Restructuring costs  
-
 
-
 
799
 
-
  Total cost of revenues  
71,730
 
114,296
 
223,081
 
334,537
                   
Gross profit  
82,013
 
102,770
 
232,834
 
303,658
                   
Operating expenses:                
  Research and development  
29,262
 
37,825
 
90,974
 
115,307
  Marketing and selling  
44,705
 
53,638
 
127,480
 
159,224
  General and administrative  
12,093
 
19,734
 
39,765
 
61,169
  Amortization of intangible assets  
2,782
 
3,307
 
7,779
 
10,017
  Impairment of goodwill and intangible asset  
-
 
51,257
 
-
 
51,257
  Restructuring costs, net  
7,891
 
2,107
 
17,132
 
4,107
  Loss on sales of assets  
3,398
 
-
 
3,398
 
-
  Total operating expenses  
100,131
 
167,868
 
286,528
 
401,081
                   
Operating loss  
(18,118)
 
(65,098)
 
(53,694)
 
(97,423)
                   
Interest and other income (expense), net  
(240)
 
507
 
(29)
 
2,605
Loss before income taxes  
(18,358)
 
(64,591)
 
(53,723)
 
(94,818)
                   
(Benefit from) provision for income taxes, net  
(2,152)
 
1,800
 
(4,291)
 
3,106
                   
Net loss  
$ (16,206)
 
$ (66,391)
 
$ (49,432)
 
$ (97,924)
                   
Net loss per common share - basic and diluted  
$ (0.43)
 
$ (1.80)
 
$ (1.33)
 
$ (2.59)
                   
Weighted-average common shares outstanding - basic and diluted  
37,341
 
36,960
 
37,251
 
37,739

 

AVID TECHNOLOGY, INC.
(unaudited - in thousands, except per share data)

Change in Financial Presentation

Beginning January 1, 2009, we combined our professional video and consumer video businesses into a single reporting segment. We will now consequently report on two business segments: Audio and Video. Please note that the segment contribution margin calculation has also changed from last year. Segment contribution margin is now calculated as segment gross margin less the research and development and product management expenses directly attributable to the segment. Comparative results for the 2008 periods have been updated to reflect our new business structure.

Summary of the Company's revenues and contribution margin by reportable segment and a reconciliation of segment contribution margin to consolidated operating loss:

Summary of the Company's revenues and contribution margin by reportable segment and a reconciliation of segment contribution margin to consolidated operating loss:
     
Three Months Ended
 
Nine Months Ended
     
September 30,
 
September 30,
     
2009
 
2008
 
2009
 
2008
  Revenues:                
  Video (a)  
$ 93,246
 
$ 144,835
 
$ 269,447
 
$ 417,410
  Audio  
60,497
 
72,231
 
186,468
 
220,785
  Total revenues  
$ 153,743
 
$ 217,066
 
$ 455,915
 
$ 638,195
                   
  Contribution Margin:                
  Video  
$ 31,647
 
$ 40,791
 
$ 78,160
 
$ 112,877
  Audio  
21,529
 
23,493
 
66,090
 
76,278
  Segment contribution margin  
53,176
 
64,284
 
144,250
 
189,155
                   
  Less unallocated costs and expenses:                
  Research and development expenses  
(1,633)
 
(1,890)
 
(5,224)
 
(5,391)
  Marketing and selling expenses  
(41,018)
 
(48,841)
 
(116,589)
 
(146,019)
  General and administrative expenses  
(11,187)
 
(16,374)
 
(35,650)
 
(51,924)
  Amortization of acquisition-related intangible assets  
(3,301)
 
(4,556)
 
(9,244)
 
(16,790)
  Impairment of goodwill and intangible asset  
-
 
(51,257)
 
-
 
(51,257)
  Stock-based compensation  
(2,866)
 
(4,357)
 
(9,908)
 
(11,090)
  Restructuring costs, net  
(7,891)
 
(2,107)
 
(17,931)
 
(4,107)
  Loss on sales of assets  
(3,398)
 
-
 
(3,398)
 
-
  Consolidated operating loss  
$ (18,118)
 
$ (65,098)
 
$ (53,694)
 
$ (97,423)
                   
  (a) Includes revenues from non-core product lines of:  
$ 117
 
$ 15,121
 
$ 1,874
 
$ 50,214
                   
                   
             
Reconciliation of GAAP net loss to Non-GAAP net income (loss):
     
Three Months Ended
 
Nine Months Ended
     
September 30,
 
September 30,
     
2009
 
2008
 
2009
 
2008
  GAAP net loss  
$ (16,206)
 
$ (66,391)
 
$ (49,432)
 
$ (97,924)
                   
  Adjustments to reconcile to Non-GAAP net income (loss):                
  Amortization of intangible assets  
3,301
 
4,556
 
9,244
 
16,790
  Impairment of goodwill and intangible asset  
-
 
51,257
 
-
 
51,257
  Stock-based compensation  
2,866
 
4,357
 
9,908
 
11,090
  Restructuring costs, net  
7,891
 
2,107
 
17,931
 
4,107
  Loss on sales of assets  
3,398
 
-
 
3,398
 
-
  Related tax adjustments  
(463)
 
(240)
 
(1,357)
 
(1,288)
  Non-GAAP net income (loss):  
$ 787
 
$ (4,354)
 
$ (10,308)
 
$ (15,968)
                   
  Weighted-average common shares outstanding - diluted  
37,376
 
36,960
 
37,251
 
37,739
                   
  Non-GAAP net income (loss) per common share - diluted  
$ 0.02
 
$ (0.12)
 
$ (0.28)
 
$ (0.42)
                   
                   
     
Three Months Ended
 
Nine Months Ended
Stock-based compensation included in:  
September 30,
 
September 30,
     
2009
 
2008
 
2009
 
2008
  Cost of products revenues  
$ 163
 
$ 177
 
$ 666
 
$ 480
  Cost of services revenues  
247
 
144
 
868
 
408
  Research and development expenses  
655
 
763
 
1,737
 
2,215
  Marketing and selling expenses  
895
 
1,470
 
2,522
 
3,108
  General and administrative expenses  
906
 
1,803
 
4,115
 
4,879
     
$ 2,866
 
$ 4,357
 
$ 9,908
 
$ 11,090

 

AVID TECHNOLOGY, INC.
Condensed Consolidated Balance Sheets
(unaudited - in thousands)

     
September 30,
 
December 31,
     
2009
 
2008
ASSETS:        
Current assets:        
  Cash, cash equivalents and marketable securities  
$ 102,981
 
$ 147,694
  Accounts receivable, net of allowances of $14,458 and $23,182
at September 30, 2009 and December 31, 2008, respectively
 
89,503
 
103,527
  Inventories  
91,164
 
95,755
  Prepaid and other current assets  
33,378
 
43,969
  Total current assets  
317,026
 
390,945
           
Property and equipment, net  
33,556
 
38,321
Intangible assets, net  
32,451
 
38,143
Goodwill  
227,118
 
225,375
Other assets  
11,571
 
10,801
           
  Total assets  
$ 621,722
 
$ 703,585
           
LIABILITIES AND STOCKHOLDERS' EQUITY:        
Current liabilities:        
  Accounts payable  
$ 22,744
 
$ 29,419
  Accrued expenses and other current liabilities  
71,137
 
101,107
  Deferred revenues  
56,748
 
68,581
  Total current liabilities  
150,629
 
199,107
           
Long-term liabilities  
13,320
 
11,823
  Total liabilities  
163,949
 
210,930
           
Stockholders' equity:        
  Common stock  
423
 
423
  Additional paid-in capital  
989,018
 
980,563
  Accumulated deficit  
(424,335)
 
(365,431)
  Treasury stock at cost, net of reissuances  
(114,342)
 
(124,852)
  Accumulated other comprehensive income  
7,009
 
1,952
  Total stockholders' equity  
457,773
 
492,655
           
  Total liabilities and stockholders' equity  
$ 621,722
 
$ 703,585