Avid Announces Results for Third Quarter 2011


BURLINGTON, MA, 2011-10-27

Avid® (NASDAQ: AVID) today reported revenues of $165.0 million for the three-month period ended September 30, 2011, compared to $165.1 million for the same period in 2010. The GAAP net loss for the third quarter was $8.0 million, or $0.21 per share, compared to a GAAP net loss of $10.0 million, or $0.26 per share, in the third quarter of 2010. The revenue reported for the second quarter of 2011 was $161.3 million and the GAAP net loss was $11.9 million.

The GAAP net loss for the third quarter of 2011 and 2010 included amortization of intangible assets, stock-based compensation, gain on asset sales, legal settlements and acquisition-related costs, restructuring charges, and related tax adjustments collectively totaling $8.4 million and $11.6 million, respectively. Excluding these items, the non-GAAP net income for the third quarter of 2011 was $385 thousand, or $0.01 per share, compared to non-GAAP net income of $1.6 million, or $0.04 per share, for the third quarter of 2010.

"The third quarter results showed sequential improvement in revenue and profit,” said Gary Greenfield, chairman and CEO of Avid.  “We continue our sharp focus on providing our customers with the products and solutions that help them succeed.  In addition, we have taken actions which should accelerate improvement in our financial performance.”

Revenues for the nine-month period ended September 30, 2011 were $492.6 million, compared to revenues of $483.2 million for the same period in 2010. The GAAP net loss for the first nine months of 2011 was $25.0 million, or $0.65 per share, compared to a GAAP net loss of $36.4 million, or $0.96 per share, for the same period in 2010. The GAAP net loss for the nine-month period ended September 30, 2011 included $20.6 million of amortization of intangible assets, stock-based compensation, restructuring charges,  loss on asset sales, legal settlements and acquisition-related costs and related tax adjustments. Excluding these items, the non-GAAP net loss was $4.4 million, or $0.11 per share, for the first nine months of 2011.  The GAAP net loss for the nine-month period ended September 30, 2010 included $31.4 million of amortization of intangible assets, gain on asset sales, stock-based compensation, restructuring charges, legal settlements and acquisition-related costs and related tax adjustments. Excluding these items, the non-GAAP net loss was $5.0 million, or $0.13 per share, for the first nine months of 2010.

A reconciliation of GAAP to non-GAAP results is included in the tables attached to this release.

Conference Call
A conference call to discuss Avid’s third quarter 2011 financial results will be held today, October 27, 2011 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 www.avid.com for complete details prior to the start of the conference call.

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. Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles. 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.  Non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP.  The reconciliation of the GAAP to non-GAAP financial measures that we provide is in the tables attached to this press release. 

Management considers both GAAP and non-GAAP financial results in managing our business.  Non-GAAP financial measures are used internally, for example, in establishing annual operating budgets, in assessing operating performance and for measuring performance under incentive compensation plans. Non-GAAP financial measures are also used in operating and financial decision-making because we believe these measures reflect our ongoing business and allow meaningful period-to-period comparisons. We believe it is useful for investors and others to also review both GAAP and non-GAAP measures in order to understand and evaluate our current operating performance and future prospects in the same manner as management and to compare in a consistent manner the company’s current financial results with past financial performance. The primary limitations associated with our use of non-GAAP financial measures are that they may not include all items of income and expense that affect our operations and that the non-GAAP financial measures we use may not be directly comparable to those reported by other companies. For example, the terms used in this press release, such as non-GAAP net loss and non-GAAP net income, do not have standardized meanings.  Other companies may use the same or similarly named measures, but exclude different items, which may not provide investors with a comparable view of our performance in relation to other companies.   We seek to compensate for this limitation by providing a detailed reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures in the tables attached to this press release.

Use of Forward-Looking Statements
The contents of this release are 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. Statements in this press release that relate to future results or events are forward-looking statements and are based on Avid’s current estimates and assumptions.  Forward-looking statements may be identified by the use of forward-looking words, such as “anticipate,” “believe,” “should,” “estimate,” “expect,” “intend,” “confidence,” “may,” “plan,” “feel,” “could,” “will,” and “would,” or similar expressions. Actual results and events in future periods may differ materially from those expressed or implied by these forward-looking statements because of a number of risks, uncertainties and other factors, including: Avid’s ability to execute on its corporate strategy and meet customer needs, including the ability to produce innovative products in response to changing market demand; competitive factors; fluctuations in Avid’s revenues, based on, among other things, Avid’s performance in particular geographies; general economic conditions and conditions within the rapidly evolving media industry specifically; and other risk factors and uncertainties 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, Interplay®, ISIS®, VENUE, Sibelius®, System 5, and Avid® Studio. For more information about Avid solutions and services, visit www.avid.com, Flickr, Twitter and YouTube; connect with Avid on Facebook; or subscribe to Avid Industry Buzz.

© 2011 Avid Technology, Inc. All rights reserved. Product features, specifications, system requirements and availability are subject to change without notice.  All prices are MSRP for the U.S. and Canada only and are subject to change without notice.  Contact your local Avid office or reseller for prices outside the U.S. and Canada.  Avid, the Avid logo, Fast Track, M-Audio, Media Composer, Pro Tools, Interplay, ISIS, Sibelius, and Avid Studio 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 the 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,
 
2011
 
2010
 
2011
 
2010
Net revenues:
  Products
$131,875
 
$134,231
 
$398,400
 
$397,044
  Services
      33,090
 
      30,828
 
       94,232
 
      86,131
     Total net revenues
     164,965
 
     165,059
 
     492,632
 
     483,175
 
Cost of revenues:
  Products
      60,048
 
      64,421
 
     187,663
 
     193,527
  Services
      16,497
 
      14,194
 
       46,196
 
      41,373
  Amortization of intangible assets
           685
 
           745
 
         2,036
 
        2,657
     Total cost of revenues
      77,230
 
      79,360
 
     235,895
 
   237,557
Gross profit
      87,735
 
      85,699
 
     256,737
 
    245,618
 
Operating expenses:
  Research and development
      28,960
 
      28,929
 
       89,386
 
      89,348
  Marketing and selling
45,411   43,199   136,273   129,419
  General and administrative
13,240   19,698   43,458   48,179
  Amortization of intangible assets
2,159   2,283   6,465   7,557
  Restructuring and other costs, net
2,707   185   328   5,532
 (Gain) Loss on sales of assets
-   (1,527)   597   (1,527)
     Total operating expenses
92,477   92,767   276,507   278,508
 
Operating loss
     (4,742)
 
     (7,068)
 
      (19,770)
 
     (32,890)
 
Interest and other income (expense), net
          (503)
 
          (30)
 
        (1,571)
 
          (132)
Loss before income taxes
     (5,245)
 
     (7,098)
 
      (21,341)
 
     (33,022)
 
Provision for income taxes, net
          2,774
 
           2,897
 
           3,657
 
           3,361
 
Net loss
($8,019)
 
($9,995)
 
($24,998)
 
($36,383)
 
Net loss per common share - basic and diluted
($0.21)
 
($0.26)
 
($0.65)
 
($0.96)
 
Weighted-average common shares outstanding - basic and diluted
38,511
 
38,045
 
38,386
 
37,826
  
AVID TECHNOLOGY, INC.
(unaudited - in thousands, except per share data)
 
Reconciliations of GAAP financial measures to Non-GAAP financial measures:
 
Three Months Ended September 30, 2011
                       
 
Gross
 
Operating
 
Operating
 
Tax
 
Net
 
Profit
 
Expenses
 
(Loss) Income
 
Provision
 
(Loss) Income
GAAP
$87,735
 
$92,477
 
($4,742)
 
$2,774
 
($8,019)
 
  Amortization of intangible assets
           685
 
       (2,159)
 
        2,844
     
          2,844
  Restructuring costs, net
   
          (2,707)
 
          2,707
     
            2,707
  Legal Settlement and Acquisition-related costs (a)
   
          (163)
 
           163
     
             163
  Tax adjustment
           
                  815
 
            (815)
  Stock-based compensation
  included in:
                 
    Cost of products revenues
           168
     
           168
     
             168
    Cost of services revenues
           63
     
           63
     
             63
    Research and development
    expenses
   
          (435)
 
           435
     
             435
    Marketing and selling expenses
   
       (1,051)
 
        1,051
     
          1,051
    General and administrative
    expenses
   
       (1,788)
 
        1,788
     
          1,788
                   
Non-GAAP
$88,651
 
$84,174
 
$4,477
 
$3,589
 
$385
 
Weighted-average shares outstanding - diluted
38,530
 
Non-GAAP net income per share - diluted
$0.01
 
Three Months Ended September 30, 2010
 
 
Gross
 
Operating
 
Operating
 
Tax
 
Net
 
Profit
   Expenses  
(Loss) Income
 
  Provision
 
(Loss) Income
GAAP
$85,699
 
$92,767
 
($7,068)
 
$2,897
 
($9,995)
 
  Amortization of intangible assets
           745
 
       (2,283)
 
        3,028
     
          3,028
  Restructuring and other costs, net
   
       (185)
 
        185
     
          185
 Legal settlement and acquisition-related costs (a)
   
            (5,656)
 
             5,656
     
              5.656
  Gain on sales of assets
    527   (527)  
                  
 
            (527)
Tax adjustment             399   (399)
  Stock-based compensation
  included in:
                 
    Cost of products revenues
           176
     
           176
     
             176
    Cost of services revenues
           287
     
           287
     
             287
    Research and development
    expenses
   
          (506)
 
           506
     
             506
    Marketing and selling expenses
   
       (1,078)
 
        1,078
     
          1,078
    General and administrative
    expenses
   
       (1,581)
 
        1,581
     
          1,581
                   
Non-GAAP
$86,907
 
$82,005
 
$4,902
 
$3,296
 
$1,576
 
Weighted-average shares outstanding - diluted
             
38,065
 
Non-GAAP net income per share - diluted
               
$0.04
 
(a) Represents costs included in general and administrative expenses
 
 
AVID TECHNOLOGY, INC.
(unaudited - in thousands, except per share data)
 
Reconciliations of GAAP financial measures to Non-GAAP financial measures:
 
Nine Months Ended September 30, 2011
                       
 
Gross
 
Operating
 
Operating
 
Tax
 
Net
 
Profit
 
Expenses
 
Loss
 
Provision
 
Loss
GAAP
$256,737
 
$276,507
 
($19,770)
 
$3,657
 
($24,998)
 
  Amortization of intangible assets
        2,036
 
       (6,465)
 
        8,501
     
          8,501
  Restructuring costs, net
   
        (328)
 
       328
     
         328
  Legal settlements and acquisition-related costs (a)
   
          (555)
 
           555
     
             555
  Loss on sale of assets
   
          (597)
 
           597
     
             597
  Tax adjustment
           
            1,115
 
            (1,115)
  Stock-based compensation
  included in:
                 
    Cost of products revenues
           417
     
      417    
     
             417
    Cost of services revenues
           608
     
       608 
     
             608
    Research and development
    expenses
   
          (1,334)
 
           1,334
     
             1,334
    Marketing and selling expenses
   
       (3,625)
 
        3,625
     
          3,625
    General and administrative expenses
   
       (5,783)
 
        5,783
     
          5,783
                   
Non-GAAP
$259,798
 
$257,820
 
$1,978
 
$4,772
 
($4,365)
 
Weighted-average shares outstanding - diluted
38,386
 
Non-GAAP net loss per share - diluted
($0.11)
 
Nine Months Ended September 30, 2010
 
 
Gross
 
Operating
 
Operating
 
Tax
 
Net
 
Profit
 
Expenses
 
Loss
 
Provision
 
Loss
GAAP
$245,618
 
$278,508
 
($32,890)
 
$3,361
 
($36,383)
 
  Amortization of intangible assets
        2,657
 
       (7,557)
 
        10,214
     
          10,214
  Restructuring and other costs, net (b)
   
       (5,532)
 
        5,532
     
          5,532
  Legal settlement and acquisition-related costs (a)
   
          (6,425)
 
           6,425
     
             6,425
 Gain on sales of assets
     527    (527)  
            
 
            (527)
 Tax adjustment             854   (854)
  Stock-based compensation
  included in:
                 
    Cost of products revenues
           562
     
           562
     
             562
    Cost of services revenues
           822
     
           822
     
             822
    Research and development
    expenses
   
       (1,704)
 
        1,704
     
          1,704
    Marketing and selling expenses
   
       (3,153)
 
        3,153
     
          3,153
    General and administrative
    expenses
   
       (4,373)
 
        4,373
     
          4,373
                   
Non-GAAP
$249,659
 
$250,291
 
($632)
 
$4,215
 
($4,979)
 
Weighted-average shares outstanding - diluted
37,826
 
Non-GAAP net loss per share - diluted
($0.13)
 
(a)Represents costs included in general and administrative expenses
(b) Includes costs of $3.7 million related to exiting our former Tewksbury, Massachusetts headquarters lease
 
 
Revenue Summary:
   
Three Months Ended
   
Nine Months Ended
   
 
September 30,
 
September 30,
   
 
2011
 
2010
 
2011
 
2010
   
Video revenues
$98,443
 
$100,186
 
$289,325
 
$278,060
   
Audio revenues
66,522
 
64,873
 
203,307
 
205,115
   
    Total net revenues
$164,965
 
$165,059
 
$492,632
 
$483,175
   
  
AVID TECHNOLOGY, INC.
Condensed Consolidated Balance Sheets
(unaudited - in thousands)
         
   
September 30,
 
December 31,
   
2011
 
2010
ASSETS:
Current assets:
   Cash and cash equivalents
 
 $33,652
 
 $42,782
   Accounts receivable, net of allowances of $13,277 and $17,149
   at September 30, 2011 and December 31, 2010, respectively
 
           92,904
 
         101,171
   Inventories
 
         126,029
 
         108,357
   Deferred tax assets, net
 
             1,081
 
             1,068
   Prepaid expenses
 
             6,598
 
             7,688
   Other current assets
 
           15,065
 
           16,130
       Total current assets
 
275,329
 
277,196
 
Property and equipment, net
 
           57,063
 
           62,519
Intangible assets, net
 
           21,327
 
           29,750
Goodwill
 
         246,658
 
         246,997
Other assets
 
           10,788
 
           10,109
       Total assets
 
 $611,165
 
 $626,571
 
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
   Borrowings under revolving credit facilities
 
 $13,000
 
 $0
   Accounts payable
 
           35,090
 
           47,340
   Accrued compensation and benefits
 
           28,551
 
           41,101
   Accrued expenses and other current liabilities
 
           32,200
 
           40,986
   Income taxes payable
 
             4,570
 
             4,640
   Deferred revenues
 
           52,752
 
           40,585
       Total current liabilities
 
166,163
 
174,652
 
Long-term liabilities
 
           30,060
 
           25,309
       Total liabilities
 
196,223
 
199,961
 
Stockholders' equity:
   Common stock
 
                423
 
                423
   Additional paid-in capital
 
       1,051,770
 
       1,005,198
   Accumulated deficit
 
        (524,717)
 
        (495,254)
   Treasury stock at cost, net of reissuances
 
          (83,612)
 
          (91,025)
   Accumulated other comprehensive income
 
           7,078
 
             7,268
       Total stockholders' equity
 
414,942
 
426,610
       Total liabilities and stockholders' equity
 
 $611,165
 
 $626,571
  
AVID TECHNOLOGY, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited - in thousands)
                         
   
Three Months Ended
   
Nine Months Ended
 
September 30,
 
September 30,
 
2011
 
2010
 
2011
 
2010
Cash flows from operating activities:
  Net loss
($8,019)
 
($9,995)
 
($24,998)
 
($36,383)
  Adjustments to reconcile net loss to net cash
  used in operating activities:
             
    Depreciation and amortization
        7,817
 
        8,529
 
       23,538
 
      25,026
    Provision for doubtful accounts
           75
 
           295
 
           534
 
            285
    Non-cash provision for restructuring
               133
 
           42
 
           258
 
           291
    (Gain) loss on sales of assets
           -
 
               (1,527)
 
           597
 
             (1,527)
    Gain on disposal of fixed assets
             (4)
 
            (24)
 
              (10)
 
            (70)
    Compensation expense from stock grants
    and options
        3,505
 
        3,628
 
         11,767
 
        10,614
Non-cash interest expense 74   -   228   -
    Unrealized foreign currency transaction
    (gains) losses
        (2,502)
 
       5,501
 
         3,988
 
       253
    Changes in deferred tax assets and liabilities,
    excluding initial effects of acquisitions
             -
 
          (1,143)
 
              (4)
 
          (1,393)
    Changes in operating assets and liabilities,
    excluding initial effects of acquisitions:
       
 
   
        Accounts receivable
       5,346
 
     10,319
 
         7,574
 
     (7,202)
        Inventories
       3,767
 
       (17,088)
 
      (17,671)
 
        (15,344)
        Prepaid expenses and other
        current assets
      489
 
        1,763
 
        778
 
        7,032
        Accounts payable
       (9,637)
 
     (7,088)
 
        (12,262)
 
      13,832
        Accrued expenses, compensation and
        benefits, and other liabilities
       (7,883)
 
       (6,539)
 
      (24,129)
 
     (25,021)
        Income taxes payable
       1,822
 
       3,257
 
        (209)
 
          2,290
        Deferred revenues
           4,649
 
           (1,583)
 
       16,464
 
        6,763
        Net cash used in operating activities
       (368)
 
       (11,653)
 
(13,557)
 
       (20,554)
 
Cash flows from investing activities:
             
  Purchases of property and equipment
       (2,784)
 
     (3,417)
 
        (8,862)
 
     (25,926)
  Decrease (increase) in other long-term assets
             102
 
          (149)
 
         (969)
 
             (82)
  Payments for business acquisitions,
  net of cash acquired
               -
 
   -
 
                -
 
     (27,008)
  Purchases of marketable securities
               -
 
         -
 
                -
 
       (2,250)
  Proceeds from sales of marketable securities
               -
 
        -
 
                -
 
      19,605
  Proceeds from sales of assets -   1,000   -   1,000
  Net cash used in investing activities
       (2,682)
 
     (2,566)
 
        (9,831)
 
     (34,661)
 
Cash flows from financing activities:
             
  Proceeds from (payments related to) the issuance
  of common stock under employee stock plans, net
        404
 
           261
 
         1,753
 
          (61)
  Proceeds from revolving credit facilities
      -
 
               -
 
       21,000
 
               -
  Payments on revolving credit facilities
               -
 
               -
 
        (8,000)
 
               -
  Net cash provided by (used in) financing activities
      404
 
           261
 
       14,753
 
          (61)
 
Effect of exchange rate changes on cash and cash equivalents
           (1,259)
 
       1,526
 
           (495)
 
       (1,880)
Net decrease in cash and cash equivalents
(3,905)
 
     (12,432)
 
(9,130)
 
     (57,156)
Cash and cash equivalents at beginning of period
      37,557
 
      46,793
 
       42,782
 
      91,517
Cash and cash equivalents at end of period
 
$33,652
 
$34,361
 
$33,652
 
$34,361