Q2 2009 Earnings


Tewksbury, Mass, 2009-07-23 Avid® (NASDAQ: AVID) today reported revenues of $150.5 million for the three-month period ended June 30, 2009, compared to $222.9 million for the same period in 2008. The GAAP net loss for the quarter was $15.9 million, or $.43 per share, compared to a GAAP net loss of $10.4 million, or $.28 per share, in the second quarter of 2008.

The GAAP net loss for the second quarter of 2009 included amortization of intangibles, stock-based compensation, restructuring charges and related tax adjustments, collectively totaling $10.4 million. Excluding these items, the non-GAAP net loss was $5.5 million for the second quarter, or $.15 per share.

“We made a number of strategic and operational improvements in the first half of 2009, which have resulted in gross margin improvement and reduced operating costs on a sequential and annual basis,” said Gary Greenfield, Avid’s chairman and CEO. “While ongoing macroeconomic issues continue to affect our revenue results, we remain confident that our continued efforts to improve our operations have positioned us to take advantage of growth opportunities when the economy improves.”

Revenues for the six-month period ended June 30, 2009 were $302.2 million, compared to revenues of $421.1 million for the same period in 2008. GAAP net loss for the first six months of 2009 was $33.2 million, or $.89 per share, compared to GAAP net loss of $31.5 million, or $.83 per share, for the same period in 2008. GAAP net loss for the six-month period ended June 30, 2009 included $22.1 million of amortization, stock-based compensation, restructuring charges and related tax adjustments. Excluding these items, the non-GAAP net loss per share was $.30 for the first half of 2009. GAAP net loss for the six-month period ended June 30, 2008 included $19.9 million of amortization, stock-based compensation, restructuring charges and related tax adjustments. Excluding these items, the non-GAAP net loss per share was $.30 for the first half of 2008.

The company’s cash balance on June 30, 2009 was $118.6 million, or approximately $3.18 per share. The company paid out approximately $6.8 million in cash in the second quarter related to restructuring activities.

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 six-month periods ended June 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 second quarter 2009 financial results will be held today, July 23, 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 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 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
 
Six Months Ended
     
June 30,
 
June 30,
     
2009
 
2008
 
2009
 
2008
Net revenues:                
  Products  
$ 121,912
 
$ 189,115
 
$ 245,553
 
$ 357,291
  Services  
28,631
 
33,748
 
56,619
 
63,838
  Total net revenues  
150,543
 
222,863
 
302,172
 
421,129
                   
Cost of revenues:                
  Products  
58,429
 
92,628
 
119,677
 
177,701
  Services  
14,090
 
19,629
 
29,929
 
37,016
  Amortization of intangible assets  
426
 
2,270
 
946
 
5,524
  Restructuring costs  
-
 
-
 
799
 
-
  Total cost of revenues  
72,945
 
114,527
 
151,351
 
220,241
                   
Gross profit  
77,598
 
108,336
 
150,821
 
200,888
                   
Operating expenses:                
  Research and development  
30,661
 
38,972
 
61,712
 
77,482
  Marketing and selling  
41,994
 
55,259
 
82,775
 
105,586
  General and administrative  
12,559
 
19,492
 
27,672
 
41,435
  Amortization of intangible assets  
2,622
 
3,323
 
4,997
 
6,710
  Restructuring costs, net  
5,019
 
937
 
9,241
 
2,000
  Total operating expenses  
92,855
 
117,983
 
186,397
 
233,213
                   
Operating loss  
(15,257)
 
(9,647)
 
(35,576)
 
(32,325)
                   
Interest and other income (expense), net  
58
 
617
 
211
 
2,098
Loss before income taxes  
(15,199)
 
(9,030)
 
(35,365)
 
(30,227)
                   
Provision for (benefit from) income taxes, net  
750
 
1,355
 
(2,139)
 
1,306
                   
Net loss  
$ (15,949)
 
$ (10,385)
 
$ (33,226)
 
$ (31,533)
                   
Net loss per common share - basic and diluted  
$ (0.43)
 
$ (0.28)
 
$ (0.89)
 
$ (0.83)
                   
Weighted-average common shares outstanding - basic and diluted  
37,282
 
36,904
 
37,206
 
38,133

 

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
 
Six Months Ended
     
June 30,
 
June 30,
     
2009
 
2008
 
2009
 
2008
  Revenues:                
  Video (a)  
$ 88,699
 
$ 147,548
 
$ 176,201
 
$ 272,575
  Audio  
61,844
 
75,315
 
125,971
 
148,554
  Total revenues  
$ 150,543
 
$ 222,863
 
$ 302,172
 
$ 421,129
                   
  Contribution Margin:                
  Video  
$ 25,233
 
$ 43,616
 
$ 46,513
 
$ 72,086
  Audio  
21,831
 
26,460
 
44,561
 
52,785
  Segment contribution margin  
47,064
 
70,076
 
91,074
 
124,871
                   
  Less unallocated costs and expenses:                
  Research and development expenses  
(1,837)
 
(1,731)
 
(3,591)
 
(3,501)
  Marketing and selling expenses  
(38,056)
 
(50,710)
 
(75,571)
 
(97,178)
  General and administrative expenses  
(11,467)
 
(16,164)
 
(24,463)
 
(35,550)
  Amortization of acquisition-related intangible assets  
(3,048)
 
(5,593)
 
(5,943)
 
(12,234)
  Stock-based compensation  
(2,894)
 
(4,588)
 
(7,042)
 
(6,733)
  Restructuring costs, net  
(5,019)
 
(937)
 
(10,040)
 
(2,000)
  Consolidated operating loss  
$ (15,257)
 
$ (9,647)
 
$ (35,576)
 
$ (32,325)
                   
  (a) Includes revenues from non-core product lines of:  
$ 808
 
$ 16,641
 
$ 1,757
 
$ 35,093
                   
                   
           
  Reconciliation of GAAP net loss to Non-GAAP net income (loss):  
Three Months Ended
 
Six Months Ended
   
June 30,
 
June 30,
     
2009
 
2008
 
2009
 
2008
  GAAP net loss  
$ (15,949)
 
$ (10,385)
 
$ (33,226)
 
$ (31,533)
                   
  Adjustments to reconcile to Non-GAAP net (loss) income:                
  Amortization of intangible assets  
3,048
 
5,593
 
5,943
 
12,234
  Stock-based compensation  
2,894
 
4,588
 
7,042
 
6,733
  Restructuring costs, net  
5,019
 
937
 
10,040
 
2,000
  Related tax adjustments  
(540)
 
(614)
 
(894)
 
(1,048)
  Non-GAAP net (loss) income:  
$ (5,528)
 
$ 119
 
$ (11,095)
 
$ (11,614)
                   
  Weighted-average common shares outstanding - diluted  
37,282
 
37,056
 
37,206
 
38,133
                   
  Non-GAAP net (loss) income per common share - diluted  
$ (0.15)
 
$ 0.00
 
$ (0.30)
 
$ (0.30)
                   
                   
           
Stock-based compensation included in:  
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
     
2009
 
2008
 
2009
 
2008
  Cost of products revenues  
$ 153
 
$ 171
 
$ 503
 
$ 303
  Cost of services revenues  
231
 
166
 
621
 
264
  Research and development expenses  
612
 
1,089
 
1,082
 
1,452
  Marketing and selling expenses  
806
 
1,109
 
1,627
 
1,638
  General and administrative expenses  
1,092
 
2,053
 
3,209
 
3,076
     
$ 2,894
 
$ 4,588
 
$ 7,042
 
$ 6,733

 

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

   
June 30,
 
December 31,
   
2009
 
2008
ASSETS:        
Current assets:        
   Cash, cash equivalents and marketable securities  
$ 118,588
 
$ 147,694
Accounts receivable, net of allowances of $16,631 and $23,182 at June 30, 2009 and December 31, 2008, respectively  
85,192
 
103,527
   Inventories  
93,399
 
95,755
   Prepaid and other current assets  
36,532
 
43,969
      Total current assets  
333,711
 
390,945
         
Property and equipment, net  
35,643
 
38,321
Intangible assets, net  
32,200
 
38,143
Goodwill  
225,375
 
225,375
Other assets  
11,221
 
10,801
         
      Total assets  
$ 638,150
 
$ 703,585
         
LIABILITIES AND STOCKHOLDERS' EQUITY:        
Current liabilities:        
   Accounts payable  
$ 27,785
 
$ 29,419
   Accrued expenses and other current liabilities  
69,097
 
101,107
   Deferred revenues  
61,566
 
68,581
      Total current liabilities  
158,448
 
199,107
         
Long-term liabilities  
12,705
 
11,823
      Total liabilities  
171,153
 
210,930
         
Stockholders' equity:        
   Common stock  
423
 
423
   Additional paid-in capital  
986,197
 
980,563
   Accumulated deficit  
(406,679)
 
(365,431)
   Treasury stock at cost, net of reissuances  
(116,224)
 
(124,852)
   Accumulated other comprehensive income  
3,280
 
1,952
      Total stockholders' equity  
466,997
 
492,655
         
      Total liabilities and stockholders' equity  
$ 638,150
 
$ 703,585