Avid Announces Third Quarter 2009 Results


Tewksbury, Mass, 2009-10-22 TEWKSBURY, Mass., October 22, 2009 — 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