Avid Announces Fourth Quarter 2009 Results


Tewksbury, Mass, 2010-01-28

TEWKSBURY, Mass., January 28, 2010 — Avid® (NASDAQ: AVID) today reported revenues of $174.7 million for the three-month period ended December 31, 2009, compared to $206.7 million for the same period in 2008. The GAAP net loss for the quarter was $17.9 million, or $0.48 per share, compared to a GAAP net loss of $100.3 million, or $2.71 per share, in the fourth quarter of 2008.

The GAAP net loss for the fourth quarter of 2009 included amortization of intangibles, stock-based compensation, restructuring charges, acquisition related costs, net gains from divested product lines and related tax adjustments, collectively totaling $16.5 million. Excluding these items, the non-GAAP net loss was $1.4 million for the fourth quarter, or $0.04 per share.

The GAAP operating loss for the fourth quarter was $15.1 million, including amortization of intangibles, stock-based compensation, restructuring charges, acquisition related costs and net gains from divested product lines collectively totaling $17.1 million. Excluding these items, the non-GAAP operating profit was $2.0 million for the fourth quarter.

“Avid has made good progress this quarter. Our revenues were up sequentially and we believe our markets are stabilizing with some signs of recovery,” said Gary Greenfield, chairman and CEO at Avid. “We reported a non-GAAP operating profit for the quarter and with the majority of our cost structure transformation complete we feel we are well positioned for margin expansion.”

Revenues for the year ended December 31, 2009 were $629.0 million, compared to revenues of $844.9 million for 2008. GAAP net loss for 2009 was $68.4 million, or $1.83 per share, compared to GAAP net loss of $198.2 million, or $5.28 per share for 2008. GAAP net loss for 2009 included $55.7 million of amortization, stock-based compensation, restructuring charges, acquisition related costs, net gains from divested product lines and related tax adjustments. Excluding these items, the non-GAAP net loss was $12.7 million or $0.34 per share for 2009. GAAP net loss for 2008 included $172.9 million of amortization, stock-based compensation, restructuring charges, net gains from divested product lines, impairment charges and related tax adjustments. Excluding these items, the non-GAAP net loss was $25.2 million or $0.67 per share for 2008.

The company’s cash balance on December 31, 2009 was $109 million, or approximately $2.91 per share.

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 operating income (loss), net income (loss) and earnings (loss) per share for the three- and twelve-month periods ended December 31, 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 fourth quarter 2009 financial results will be held today, January 28, 2010 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 filing of our Annual Report on Form 10-K. This release includes forward-looking statements, as defined by the Private Securities Litigation Reform Act of 1995. 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.

© 2010 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, 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
 
Twelve Months Ended
     
December 31,
 
December 31,
     
2009
 
2008
 
2009
 
2008
Net revenues:                
  Products  
$ 140,140
 
$ 173,255
 
$ 509,215
 
$ 714,232
  Services  
34,539
 
33,451
 
119,755
 
130,669
       Total net revenues  
174,679
 
206,706
 
628,970
 
844,901
                    
Cost of revenues:                
  Products  
66,588
 
97,182
 
243,362
 
369,186
  Services  
16,239
 
18,128
 
59,754
 
73,888
  Amortization of intangible assets  
568
 
753
 
2,033
 
7,526
  Restructuring costs  
-
 
1,876
 
799
 
1,876
  Total cost of revenues  
83,395
 
117,939
 
305,948
 
452,476
                   
Gross profit  
91,284
 
88,767
 
323,022
 
392,425
                   
Operating expenses:                
  Research and development  
30,015
 
33,291
 
120,989
 
148,598
  Marketing and selling  
50,279
 
49,511
 
177,759
 
208,735
  General and administrative  
17,164
 
17,422
 
56,929
 
78,591
  Amortization of intangible assets  
2,732
 
2,837
 
10,511
 
12,854
  Impairment of goodwill and intangible assets  
-
 
78,715
 
-
 
129,972
  Restructuring costs, net  
9,741
 
21,305
 
26,873
 
25,412
  Gain on sales of assets  
(3,553)
 
(13,287)
 
(155)
 
(13,287)
  Total operating expenses  
106,378
 
189,794
 
392,906
 
590,875
                   
Operating loss  
(15,094)
 
(101,027)
 
(69,884)
 
(198,450)
                   
Interest and other income (expense), net  
(94)
 
331
 
(123)
 
2,936
Loss before income taxes  
(15,188)
 
(100,696)
 
(70,007)
 
(195,514)
                   
Provision for (benefit from) income taxes, net  
2,733
 
(443)
 
(1,652)
 
2,663
                   
Net loss  
$ (17,921)
 
$ (100,253)
 
$ (68,355)
 
$ (198,177)
                   
Net loss per common share - basic and diluted  
$ (0.48)
 
$ (2.71)
 
$ (1.83)
 
$ (5.28)
                   
Weighted-average common shares outstanding - basic and diluted  
37,415
 
37,012
 
37,293
 
37,556

 

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:

   
Three Months Ended
 
Twelve Months Ended
   
December 31,
 
December 31,
   
2009
 
2008
 
2009
 
2008
Revenues:                
     Video (a)  
$ 106,192
 
$ 134,296
 
$ 375,010
 
$ 551,706
     Audio  
68,487
 
72,410
 
253,960
 
293,195
Total revenues  
$ 174,679
 
$ 206,706
 
$ 628,970
 
$ 844,901
                 
Contribution Margin:                
     Video  
$ 35,815
 
$ 31,762
 
$ 113,524
 
$ 144,639
     Audio  
26,090
 
25,211
 
91,534
 
101,489
Segment contribution margin  
61,905
 
56,973
 
205,058
 
246,128
                 
     Less unallocated costs and expenses:                
        Research and development expenses  
(1,694)
 
(1,779)
 
(6,918)
 
(7,170)
        Marketing and selling expenses  
(42,224)
 
(45,929)
 
(158,812)
 
(191,948)
        General and administrative expenses  
(15,948)
 
(14,982)
 
(51,598)
 
(66,906)
        Amortization of acquisition-related intangible assets  
(3,300)
 
(3,590)
 
(12,544)
 
(20,380)
        Impairment of goodwill and intangible assets  
-
 
(78,715)
 
-
 
(129,972)
        Stock-based compensation  
(3,486)
 
(3,111)
 
(13,394)
 
(14,201)
        Restructuring costs, net  
(9,741)
 
(23,181)
 
(27,672)
 
(27,288)
        Other costs  
(4,159)
 
-
 
(4,159)
 
-
        Gain on sales of assets  
3,553
 
13,287
 
155
 
13,287
Consolidated operating loss  
$ (15,094)
 
$ (101,027)
 
$ (69,884)
 
$ (198,450)
                 
(a) Includes revenues from non-core product lines of:  
$ 19
 
$ 11,294
 
$ 1,893
 
$ 61,508

 

Reconciliation of GAAP operating loss to Non-GAAP operating income (loss):

   
Three Months Ended
 
Twelve Months Ended
   
December 31,
 
December 31,
   
2009
 
2008
 
2009
 
2008
GAAP operating loss  
$ (15,094)
 
$ (101,027)
 
$ (69,884)
 
$ (198,450)
                 
Adjustments to reconcile to Non-GAAP operating income (loss):              
     Amortization of intangible assets  
3,300
 
3,590
 
12,544
 
20,380
     Impairment of goodwill and intangible assets  
-
 
78,715
 
-
 
129,972
     Stock-based compensation  
3,486
 
3,111
 
13,394
 
14,201
     Restructuring costs, net  
9,741
 
23,181
 
27,672
 
27,288
     Other costs  
4,159
 
-
 
4,159
 
-
     Gain on sales of assets  
(3,553)
 
(13,287)
 
(155)
 
(13,287)
Non-GAAP operating income (loss):  
$ 2,039
 
$ (5,717)
 
$ (12,270)
 
$ (19,896)

 

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

Reconciliation of GAAP net loss to Non-GAAP net loss:

   
Three Months Ended
 
Twelve Months Ended
   
December 31,
 
December 31,
   
2009
 
2008
 
2009
 
2008
GAAP net loss  
$ (17,921)
 
$ (100,253)
 
$ (68,355)
 
$ (198,177)
                 
Adjustments to reconcile to Non-GAAP net loss:                
     Amortization of intangible assets  
3,300
 
3,590
 
12,544
 
20,380
     Impairment of goodwill and intangible assets  
-
 
78,715
 
-
 
129,972
     Stock-based compensation  
3,486
 
3,111
 
13,394
 
14,201
     Restructuring costs, net  
9,741
 
23,181
 
27,672
 
27,288
     Other costs  
4,159
 
-
 
4,159
 
-
     Gain on sales of assets  
(3,553)
 
(13,287)
 
(155)
 
(13,287)
     Related tax adjustments  
(585)
 
(4,331)
 
(1,942)
 
(5,619)
Non-GAAP net loss:  
$ (1,373)
 
$ (9,274)
 
$ (12,683)
 
$ (25,242)
                 
Weighted-average common shares outstanding - diluted  
37,415
 
37,012
 
37,293
 
37,556
                 
Non-GAAP net loss per common share - diluted  
$ (0.04)
 
$ (0.25)
 
$ (0.34)
 
$ (0.67)

 

Stock-based compensation included in:

   
Three Months Ended
 
Twelve Months Ended
   
December 31,
 
December 31,
   
2009
 
2008
 
2009
 
2008
Cost of products revenues  
$ 193
 
$ 136
 
$ 859
 
$ 616
Cost of services revenues  
286
 
131
 
1,154
 
539
Research and development expenses  
717
 
605
 
2,454
 
2,820
Marketing and selling expenses  
1,074
 
897
 
3,596
 
4,005
General and administrative expenses  
1,216
 
1,342
 
5,331
 
6,221
   
$ 3,486
 
$ 3,111
 
$ 13,394
 
$ 14,201

 

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

   
December 31,
 
December 31,
   
2009
 
2008
ASSETS:        
Current assets:        
   Cash, cash equivalents and marketable securities  
$ 108,877
 
$ 147,694
   Accounts receivable, net of allowances of $16,347 and $23,182        
     at December 31, 2009 and 2008, respectively  
79,741
 
103,527
   Inventories  
77,243
 
95,755
   Prepaid and other current assets  
29,913
 
43,969
     Total current assets  
295,774
 
390,945
         
Property and equipment, net  
37,217
 
38,321
Intangible assets, net  
29,235
 
38,143
Goodwill  
227,195
 
225,375
Other assets  
20,455
 
10,801
         
     Total assets  
$ 609,876
 
$ 703,585
         
LIABILITIES AND STOCKHOLDERS' EQUITY:        
Current liabilities:        
   Accounts payable  
$ 30,230
 
$ 29,419
   Accrued expenses and other current liabilities  
82,938
 
101,107
   Deferred revenues  
39,107
 
68,581
     Total current liabilities  
152,275
 
199,107
         
Long-term liabilities  
14,483
 
11,823
     Total liabilities  
166,758
 
210,930
         
Stockholders' equity:        
   Common stock  
423
 
423
   Additional paid-in capital  
992,489
 
980,563
   Accumulated deficit  
(444,661)
 
(365,431)
   Treasury stock at cost, net of reissuances  
(112,389)
 
(124,852)
   Accumulated other comprehensive income  
7,256
 
1,952
     Total stockholders' equity  
443,118
 
492,655
         
     Total liabilities and stockholders' equity  
$ 609,876
 
$ 703,585