Avid Reports First Quarter 2008 Results


Tewksbury, Mass, 2008-04-24 TEWKSBURY, MA, Apr 24, 2008 (MARKET WIRE via COMTEX News Network) -- Avid Technology, Inc. (NASDAQ: AVID) today reported revenue of $198.3 million for the three-month period ended March 31, 2008, compared to $218.9 million for the same period in 2007. GAAP net loss for the quarter was $21.1 million, or $.54 per share, compared to GAAP net income of $20,000, or $.00 per diluted share, in the first quarter of 2007.

GAAP net income in the first quarter of 2008 includes $9.4 million of amortization, stock-based compensation, restructuring costs and related tax adjustments. Excluding these items, non-GAAP loss per share was $.30. For the first quarter of 2007, GAAP net income included $10.6 million of charges, including amortization, stock-based compensation, restructuring and related tax adjustments. Excluding these items, non-GAAP earnings per diluted share were $.25 in the first quarter of 2007.

At March 31, 2008, the company's cash balance totaled $150.4 million, down $74.0 million since the end of 2007. During the first quarter of 2008, the company used $93.2 million in cash to re-purchase 4.3 million shares of common stock under the previously-announced share buyback program.

Our first quarter results were in line with our expectations and we expect to see improvement in our bottom line as the year progresses, said Gary Greenfield, Avid's chairman and chief executive officer. We are continuing to make progress on a number of initiatives designed to provide the basis for improved profitability and growth. In addition, the development of Avid's long-term strategy is proceeding well and we expect to discuss the plan during our second quarter results conference call.

Recent Highlights

Recent highlights include:

-- The appointment of Kirk Arnold as executive vice president and general manager of the professional video business unit. Ms. Arnold, most recently chief executive officer at consulting firm Keane, Inc., has more than 25 years of experience in the technology industry, including leadership roles at Computer Sciences Corporation and IBM.



-- Exceptionally strong recognition of Avid customers at the 80th annual Academy Awards® ceremony, where all of the winning and nominated films in the categories of Best Motion Picture, Directing, Film Editing, Sound Editing, Sound Mixing, Visual Effects, Documentary Feature and Original Score employed workflows that included multiple systems from the various Avid® brands.

-- Pinnacle Studio® Ultimate version 11 winning PC Magazine's prestigious Editors' Choice Award for consumer video editing software, bringing the number of consumer and retail awards received by the Pinnacle Studio product line to 36 since its May 2007 release.

-- Further strengthening of the Avid management team, with the addition of Beth Martinko, formerly of WaveLight, Inc., as vice president of customer success and Ed Raine, formerly of EMC Corporation, as vice president of human resources.

-- The launch of Avid's New Thinking campaign in the professional video business unit, which includes expanded on-line customer support capabilities, a streamlined and value-priced editing line, special academic pricing for students and a new community website.

-- Recognition of the Digidesign® ICON integrated audio console by the Cinema Audio Society as the winner of the Technical Achievement Award in the post production category.

-- The appointment of Louis Hernandez, Jr., chairman and chief executive officer of Open Solutions Inc., to Avid's board of directors.

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 and diluted earnings per share for the three-month periods ended March 31, 2008 and 2007 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 first quarter 2008 financial results will be held today, April 24, 2008, at 5:00 p.m. EDT. The call will be open to the public and can be accessed by dialing(719) 457-2617 and referencing confirmation code 3538405. The call and subsequent replay will also be available on Avid's website. To listen via this alternative, go to the Investor Relations page under the About Us menu at 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 meet customer needs, market acceptance of Avid's existing and new products, Avid's ability to recognize revenue in a timely manner, 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 estimate only as of today and should not be relied upon as representing the company's estimate 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 Technology, Inc.

Avid is a worldwide leader in tools for film, video, audio, 3D animation, gaming and broadcast professionals -- as well as for home audio and video enthusiasts. Avid professional and consumer brands include Avid, Digidesign, M-Audio®, Pinnacle Systems®, Sibelius®, Softimage® and Sundance Digital®. The vast majority of primetime television shows, feature films, commercials and chart-topping music hits are made using one or more Avid products. Whether used by seasoned professionals or beginning students, Avid's products and services enable customers to work more efficiently, productively and creatively. Avid received an Oscar® statuette representing the 1998 Scientific and Technical Award for the concept, design, and engineering of the Avid Film Composer® system for motion picture editing. For more information about the company's Oscar, Grammy® and Emmy® award-winning products and services, visit www.avid.com.

Copyright 2008 Avid Technology, Inc. All rights reserved. Avid, Digidesign, Film Composer, M-Audio, Pinnacle Studio, Pinnacle Systems, Sibelius, Softimage, and Sundance Digital are trademarks or registered trademarks of Avid Technology, Inc. or its subsidiaries in the United States and/or other countries. Emmy is a registered trademark of ATAS/NATAS. Academy Awards and Oscar are trademarks and service marks of the Academy of Motion Picture Arts and Sciences. Grammy is a trademark of the National Academy of Recording Arts and Sciences, Inc. All other trademarks are the property of their respective owners.

AVID TECHNOLOGY, INCCondensed Consolidated Statements of Operations(unaudited - in thousands, except per share data)                                                       Three Months Ended                                                           March 31,                                                      --------------------                                                        2008       2007                                                      ---------  ---------Net revenues: Products                                             $ 168,176  $ 192,443 Services                                                30,090     26,455                                                      ---------  ---------      Total net revenues                                198,266    218,898                                                      ---------  ---------Cost of revenues: Products                                                85,073     92,712 Services                                                17,387     15,979 Amortization of intangible assets                        3,254      4,472                                                      ---------  ---------      Total cost of revenues                            105,714    113,163                                                      ---------  ---------Gross profit                                             92,552    105,735                                                      ---------  ---------Operating expenses: Research and development                                38,510     37,742 Marketing and selling                                   50,327     51,694 General and administrative                              21,943     17,852 Amortization of intangible assets                        3,387      3,432 Restructuring costs, net                                 1,063        258                                                      ---------  ---------      Total operating expenses                          115,230    110,978                                                      ---------  ---------Operating loss                                          (22,678)    (5,243)Interest and other income (expense), net                  1,481      1,895                                                      ---------  ---------Loss before income taxes                                (21,197)    (3,348)Benefit from income taxes, net                              (49)    (3,368)                                                      ---------  ---------Net income (loss)                                     $ (21,148) $      20                                                      =========  =========Net income (loss) per common share - basic            $   (0.54) $    0.00Net income (loss) per common share - diluted          $   (0.54) $    0.00Weighted-average common shares outstanding - basic       39,362     41,154Weighted-average common shares outstanding - diluted     39,362     41,763AVID TECHNOLOGY, INC(unaudited - in thousands, except per share data)Change in Financial PresentationHistorically, the Company has allocated to each of its three business unitsa percentage of certain corporate operating expenses, such as finance,human resources, legal and some information technology.  Beginning thisquarter, the Company is reporting a contribution margin for each businessunit that excludes these corporate infrastructure costs and operatingexpenses to provide a clearer view on the operating performance of eachbusiness unit.  The Company is also presenting its 2007 comparative resultsusing this new methodology.Summary of the Company's revenues and contribution margin by reportablesegment and a reconciliation of segment contribution margin to consolidatedoperating loss:                                                       Three Months Ended                                                           March 31,                                                      --------------------                                                        2008       2007                                                      ---------  --------- Revenues:    Professional Video                                $  94,250  $ 112,671    Audio                                                73,239     78,923    Consumer Video                                       30,777     27,304                                                      ---------  --------- Total revenues                                       $ 198,266  $ 218,898                                                      =========  ========= Contribution Margin:    Professional Video                                $  (1,320) $  11,384    Audio                                                10,870     13,070    Consumer Video                                          509        766                                                      ---------  --------- Segment contribution margin                             10,059     25,220                                                      ---------  ---------   Less unallocated costs and expenses:       Common costs and operating expenses              (22,888)   (18,749)       Amortization of acquisition-related intangible        assets                                           (6,641)    (7,904)       Stock-based compensation                          (2,145)    (3,552)       Restructuring costs, net                          (1,063)      (258)                                                      ---------  --------- Consolidated operating loss                          $ (22,678) $  (5,243)                                                      =========  =========Reconciliation of GAAP net income (loss) to Non-GAAP net income (loss):                                                       Three Months Ended                                                           March 31,                                                      --------------------                                                         2008       2007                                                      ---------  --------- GAAP net income (loss)                               $ (21,148) $      20 Adjustments to reconcile to Non-GAAP net income:    Amortization of intangible assets                     6,641      7,904    Stock-based compensation                              2,145      3,552    Restructuring costs, net                              1,063        258    Related tax adjustments                                (434)    (1,115)                                                      ---------  --------- Non-GAAP net income (loss)                           $ (11,733) $  10,619                                                      =========  ========= Weighted-average common shares outstanding - diluted    39,362     41,763 Non-GAAP net income (loss) per common share -  diluted                                             $   (0.30) $    0.25Stock-based compensation is composed of the following:Stock-based compensation included in:                                                       Three Months Ended                                                           March 31,                                                      --------------------                                                         2008       2007                                                      ---------  --------- Cost of products revenues                            $     132  $     141 Cost of services revenues                                   98        197 Research and development expenses                          363      1,043 Marketing and selling expenses                             529        935 General and administrative expenses                      1,023      1,236                                                      ---------  ---------                                                      $   2,145  $   3,552                                                      =========  =========AVID TECHNOLOGY, INCCondensed Consolidated Balance Sheets(unaudited - in thousands)                                                 March 31,   December 31,                                                    2008         2007                                                -----------  -------------ASSETS:Current assets:   Cash, cash equivalents and marketable    securities                                  $   150,422  $     224,460   Accounts receivable, net of allowances of    $20,606 and $20,784 at March 31, 2008    and December 31, 2007, respectively             119,844        138,692   Inventories                                      123,204        117,324   Prepaid and other current assets                  36,064         36,788                                                -----------  -------------       Total current assets                         429,534        517,264   Property and equipment, net                       45,168         46,160   Intangible assets, net                            64,786         71,427   Goodwill                                         360,486        360,584   Other assets                                      10,697         10,518                                                -----------  -------------       Total assets                             $   910,671  $   1,005,953                                                ===========  =============LIABILITIES AND STOCKHOLDERS' EQUITY:Current liabilities:   Accounts payable                             $    41,761  $      34,992   Accrued expenses and other current    liabilities                                      90,365         93,912   Deferred revenues                                 91,092         79,771                                                -----------  -------------       Total current liabilities                    223,218        208,675   Long-term liabilities                             17,235         17,495                                                -----------  -------------       Total liabilities                            240,453        226,170                                                -----------  -------------Stockholders' equity:   Common stock                                         423            423   Additional paid-in capital                       968,996        968,339   Accumulated deficit                             (184,833)      (155,722)   Treasury stock at cost, net of reissuances      (130,117)       (45,823)   Accumulated other comprehensive income            15,749         12,566                                                -----------  -------------   Total stockholders' equity                       670,218        779,783                                                -----------  -------------       Total liabilities and stockholders'        equity                                  $   910,671  $   1,005,953