Avid Announces Results for Second Quarter


BURLINGTON, MA., 2011-07-21

Avid® (NASDAQ: AVID) today reported revenues of $161.3 million for the three-month period ended June 30, 2011, compared to $162.2 million for the same period in 2010. The GAAP net loss for the second quarter was $11.9 million, or $0.31 per share, compared to a GAAP net loss of $12.9 million, or $0.34 per share, in the second quarter of 2010.

The GAAP net loss for the second quarter of 2011 and 2010 included amortization of intangible assets, stock-based compensation, loss on asset sales, a legal settlement, acquisition-related costs, restructuring recoveries and charges and related tax adjustments collectively totaling $8.0 million and $10.9 million, respectively. Excluding these items, the non-GAAP net loss for the second quarter of 2011 was $3.9 million, or $0.10 per share, compared to a non-GAAP net loss of $2.0 million, or $0.05 per share, for the second quarter of 2010.

"While Q2 was difficult, I believe our business is sound,” said Gary Greenfield, chairman and CEO at Avid.  “Our customer focus is unwavering and I believe we’ll succeed by continuing to listen to them and responding with innovative, open tools to help video and audio professionals and enthusiasts around the world create great content they can distribute anywhere, anytime.”

Revenues for the six-month period ended June 30, 2011 were $327.7 million, compared to revenues of $318.1 million for the same period in 2010. The GAAP net loss for the first six months of 2011 was $17.0 million, or $0.44 per share, compared to a GAAP net loss of $26.4 million, or $0.70 per share, for the same period in 2010. The GAAP net loss for the six-month period ended June 30, 2011 included $12.2 million of amortization of intangible assets, stock-based compensation, net restructuring recoveries, loss on asset sales, a legal settlement, acquisition-related costs and related tax adjustments. Excluding these items, the non-GAAP net loss was $4.8 million, or $0.12 per share, for the first half of 2011. The GAAP net loss for the six-month period ended June 30, 2010 included $19.8 million of amortization of tangible assets, stock-based compensation, restructuring charges, acquisition-related costs and related tax adjustments. Excluding these items, the non-GAAP net loss was $6.6 million, or $0.17 per share, for the first half 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 second quarter 2011 financial results will be held today, July 21, 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, 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,” “could,” “estimate,” “expect,” “intend,” “confidence,” “may,” “plan,” “feel,” “should,” “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; general economic conditions and conditions within the rapidly evolving media industry specifically; competitive factors; fluctuations in Avid’s revenues, based on, among other things, Avid’s performance in particular geographies; 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, Oxygen 8, Sibelius®, System 5, and Pinnacle Studio™. For more information about Avid solutions and services, visit www.avid.com, del.icio.us, Flickr, Twitter and YouTube; connect with Avid on Facebook; or subscribe to Avid Industry Buzz.

© 2011 Avid Technology, Inc. All rights reserved. Avid, the Avid Logo, Interplay, ISIS, Media Composer, Pinnacle Studio, 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
 
Six Months Ended
 
June 30,
 
June 30,
 
2011
 
2010
 
2011
 
2010
Net revenues:
  Products
$129,190
 
$134,134
 
$266,525
 
$262,813
  Services
      32,154
 
      28,026
 
       61,142
 
      55,303
     Total net revenues
     161,344
 
     162,160
 
     327,667
 
     318,116
 
Cost of revenues:
  Products
      62,964
 
      65,837
 
     127,615
 
     129,106
  Services
      15,312
 
      13,139
 
       29,699
 
      27,179
  Amortization of intangible assets
           685
 
           946
 
         1,351
 
        1,912
     Total cost of revenues
      78,961
 
      79,922
 
     158,665
 
     158,197
Gross profit
      82,383
 
      82,238
 
     169,002
 
     159,919
 
Operating expenses:
  Research and development
      30,453
 
      30,268
 
       60,426
 
      60,419
  Marketing and selling
      46,052
 
      44,474
 
       90,862
 
      86,220
  General and administrative
      14,920
 
      13,879
 
       30,218
 
      28,481
  Amortization of intangible assets
        2,161
 
        2,417
 
         4,306
 
        5,274
  Restructuring and other (recoveries) costs, net
          (163)
 
        4,007
 
        (2,379)
 
        5,347
  Loss on sales of assets
           597
 
               -
 
           597
 
               -
     Total operating expenses
      94,020
 
      95,045
 
     184,030
 
     185,741
 
Operating loss
     (11,637)
 
     (12,807)
 
      (15,028)
 
     (25,822)
 
Interest and other income (expense), net
          (768)
 
          (102)
 
        (1,068)
 
          (102)
Loss before income taxes
     (12,405)
 
     (12,909)
 
      (16,096)
 
     (25,924)
 
(Benefit from) provision for income taxes, net
          (543)
 
             (3)
 
           883
 
           464
 
Net loss
($11,862)
 
($12,906)
 
($16,979)
 
($26,388)
 
Net loss per common share - basic and diluted
($0.31)
 
($0.34)
 
($0.44)
 
($0.70)
 
Weighted-average common shares outstanding - basic and diluted
38,413
 
37,909
 
38,323
 
37,714
  
AVID TECHNOLOGY, INC.
(unaudited - in thousands, except per share data)
 
Reconciliations of GAAP financial measures to Non-GAAP financial measures:
 
Three Months Ended June 30, 2011
                       
 
Gross
 
Operating
 
Operating
 
Tax
 
Net
 
Profit
 
Expenses
 
Loss
 
Benefit
 
Loss
GAAP
$82,383
 
$94,020
 
($11,637)
 
($543)
 
($11,862)
 
  Amortization of intangible assets
           685
 
       (2,161)
 
        2,846
     
          2,846
  Restructuring recoveries, net
   
           163
 
          (163)
     
            (163)
  Acquisition-related costs (a)
   
          (200)
 
           200
     
             200
  Legal settlement (a)
   
          (192)
 
           192
     
             192
  Loss on sales of assets
   
          (597)
 
           597
     
             597
  Tax adjustment
           
                  245
 
            (245)
  Stock-based compensation
  included in:
                 
    Cost of products revenues
           110
     
           110
     
             110
    Cost of services revenues
           277
     
           277
     
             277
    Research and development
    expenses
   
          (427)
 
           427
     
             427
    Marketing and selling expenses
   
       (1,356)
 
        1,356
     
          1,356
    General and administrative
    expenses
   
       (2,355)
 
        2,355
     
          2,355
                   
Non-GAAP
$83,455
 
$86,895
 
($3,440)
 
($298)
 
($3,910)
 
Weighted-average shares outstanding - diluted
38,413
 
Non-GAAP net income per share - diluted
($0.10)
 
Three Months Ended June 30, 2010
 
 
Gross
 
Operating
 
Operating
 
Tax
 
Net
 
Profit
   Expenses  
Loss
 
  (Benefit) Provision
 
Loss
GAAP
$82,238
 
$95,045
 
($12,807)
 
($3)
 
($12,906)
 
  Amortization of intangible assets
           946
 
       (2,417)
 
        3,363
     
          3,363
  Restructuring and other costs, net
   
       (4,007)
 
        4,007
     
          4,007
  Acquisition-related costs (a)
   
            (83)
 
             83
     
              83
  Tax adjustment
           
                  171
 
            (171)
  Stock-based compensation
  included in:
                 
    Cost of products revenues
           197
     
           197
     
             197
    Cost of services revenues
           282
     
           282
     
             282
    Research and development
    expenses
   
          (547)
 
           547
     
             547
    Marketing and selling expenses
   
       (1,107)
 
        1,107
     
          1,107
    General and administrative
    expenses
   
       (1,531)
 
        1,531
     
          1,531
                   
Non-GAAP
$83,663
 
$85,353
 
($1,690)
 
$168
 
($1,960)
 
Weighted-average shares outstanding - diluted
             
37,909
 
Non-GAAP net loss per share - diluted
               
($0.05)
 
(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:
 
Six Months Ended June 30, 2011
                       
 
Gross
 
Operating
 
Operating
 
Tax
 
Net
 
Profit
 
Expenses
 
Loss
 
Provision
 
Loss
GAAP
$169,002
 
$184,030
 
($15,028)
 
$883
 
($16,979)
 
  Amortization of intangible assets
        1,351
 
       (4,306)
 
        5,657
     
          5,657
  Restructuring recoveries, net
   
        2,379
 
       (2,379)
     
         (2,379)
  Acquisition-related costs (a)
   
          (200)
 
           200
     
             200
  Legal settlement (a)
   
          (192)
 
           192
     
             192
  Loss on sales of assets
   
          (597)
 
           597
     
             597
  Tax adjustment
           
            300
 
            (300)
  Stock-based compensation
  included in:
                 
    Cost of products revenues
           249
     
           249
     
             249
    Cost of services revenues
           545
     
           545
     
             545
    Research and development
    expenses
   
          (899)
 
           899
     
             899
    Marketing and selling expenses
   
       (2,574)
 
        2,574
     
          2,574
    General and administrative expenses
   
       (3,995)
 
        3,995
     
          3,995
                   
Non-GAAP
$171,147
 
$173,646
 
($2,499)
 
$1,183
 
($4,750)
 
Weighted-average shares outstanding - diluted
38,323
 
Non-GAAP net income per share - diluted
($0.12)
 
Six Months Ended June 30, 2010
 
 
Gross
 
Operating
 
Operating
 
Tax
 
Net
 
Profit
 
Expenses
 
Loss
 
Provision
 
Loss
GAAP
$159,919
 
$185,741
 
($25,822)
 
$464
 
($26,388)
 
  Amortization of intangible assets
        1,912
 
       (5,274)
 
        7,186
     
          7,186
  Restructuring and other costs, net (b)
   
       (5,347)
 
        5,347
     
          5,347
  Acquisition-related costs (a)
   
          (769)
 
           769
     
             769
  Tax adjustment
           
            455
 
            (455)
  Stock-based compensation
  included in:
                 
    Cost of products revenues
           386
     
           386
     
             386
    Cost of services revenues
           535
     
           535
     
             535
    Research and development
    expenses
   
       (1,198)
 
        1,198
     
          1,198
    Marketing and selling expenses
   
       (2,075)
 
        2,075
     
          2,075
    General and administrative
    expenses
   
       (2,792)
 
        2,792
     
          2,792
                   
Non-GAAP
$162,752
 
$168,286
 
($5,534)
 
$919
 
($6,555)
 
Weighted-average shares outstanding - diluted
37,714
 
Non-GAAP net loss per share - diluted
($0.17)
 
(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
   
Six Months Ended
   
 
June 30,
 
June 30,
   
 
2011
 
2010
 
2011
 
2010
   
Video revenues
$96,262
 
$93,521
 
$190,882
 
$177,874
   
Audio revenues
65,082
 
68,639
 
136,785
 
140,242
   
    Total net revenues
$161,344
 
$162,160
 
$327,667
 
$318,116
   
  
AVID TECHNOLOGY, INC.
Condensed Consolidated Balance Sheets
(unaudited - in thousands)
         
   
June 30,
 
December 31,
   
2011
 
2010
ASSETS:
Current assets:
   Cash and cash equivalents
 
 $37,557
 
 $42,782
   Accounts receivable, net of allowances of $15,400 and $17,149
   at June 30, 2011 and December 31, 2010, respectively
 
           98,386
 
         101,171
   Inventories
 
         129,795
 
         108,357
   Deferred tax assets, net
 
             1,144
 
             1,068
   Prepaid expenses
 
             7,628
 
             7,688
   Other current assets
 
           15,622
 
           16,130
       Total current assets
 
290,132
 
277,196
 
Property and equipment, net
 
           59,254
 
           62,519
Intangible assets, net
 
           24,625
 
           29,750
Goodwill
 
         247,520
 
         246,997
Other assets
 
           11,065
 
           10,109
       Total assets
 
 $632,596
 
 $626,571
 
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
   Borrowings under revolving credit facilities
 
 $13,000
 
 $          -
   Accounts payable
 
           44,777
 
           47,340
   Accrued compensation and benefits
 
           31,834
 
           41,101
   Accrued expenses and other current liabilities
 
           35,560
 
           40,986
   Income taxes payable
 
             2,801
 
             4,640
   Deferred revenues
 
           49,341
 
           40,585
       Total current liabilities
 
177,313
 
174,652
 
Long-term liabilities
 
           28,036
 
           25,309
       Total liabilities
 
205,349
 
199,961
 
Stockholders' equity:
   Common stock
 
                423
 
                423
   Additional paid-in capital
 
       1,012,348
 
       1,005,198
   Accumulated deficit
 
        (515,963)
 
        (495,254)
   Treasury stock at cost, net of reissuances
 
          (84,834)
 
          (91,025)
   Accumulated other comprehensive income
 
           15,273
 
             7,268
       Total stockholders' equity
 
427,247
 
426,610
       Total liabilities and stockholders' equity
 
 $632,596
 
 $626,571
  
AVID TECHNOLOGY, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited - in thousands)
                         
   
Three Months Ended
   
Six Months Ended
 
June 30,
 
June 30,
 
2011
 
2010
 
2011
 
2010
Cash flows from operating activities:
  Net loss
($11,862)
 
($12,906)
 
($16,979)
 
($26,388)
  Adjustments to reconcile net loss to net cash
  used in operating activities:
             
    Depreciation and amortization
        7,903
 
        8,194
 
       15,875
 
      16,497
    Provision for (recoveries of) doubtful accounts
           315
 
           160
 
           459
 
            (10)
    Non-cash provision for restructuring
               -
 
           249
 
           125
 
           249
    Loss on sales of assets
           597
 
               -
 
           597
 
               -
    Gain on disposal of fixed assets
             (1)
 
            (33)
 
              (6)
 
            (46)
    Compensation expense from stock grants
    and options
        4,525
 
        3,664
 
         8,262
 
        6,986
    Unrealized foreign currency transaction
    losses (gains)
        2,705
 
       (2,684)
 
         6,490
 
       (5,248)
    Changes in deferred tax assets and liabilities,
    excluding initial effects of acquisitions
             (4)
 
          (250)
 
              (4)
 
          (250)
    Changes in operating assets and liabilities,
    excluding initial effects of acquisitions:
       
 
   
        Accounts receivable
       (2,864)
 
     (15,028)
 
         2,228
 
     (17,521)
        Inventories
       (4,695)
 
       (3,959)
 
      (21,438)
 
        1,744
        Prepaid expenses and other
        current assets
      1,738
 
        5,358
 
        (208)
 
        5,269
        Accounts payable
       (2,732)
 
      18,117
 
        (2,625)
 
      20,920
        Accrued expenses, compensation and
        benefits, and other liabilities
       (2,107)
 
       (2,880)
 
      (16,246)
 
     (18,482)
        Income taxes payable
       (1,427)
 
       (1,172)
 
        (2,031)
 
          (967)
        Deferred revenues
           672
 
           786
 
       11,815
 
        8,346
        Net cash used in operating activities
       (7,237)
 
       (2,384)
 
(13,686)
 
       (8,901)
 
Cash flows from investing activities:
             
  Purchases of property and equipment
       (2,534)
 
     (12,500)
 
        (6,078)
 
     (22,509)
  (Increase) decrease in other long-term assets
             (350)
 
          (214)
 
         (574)
 
             67
  Payments for business acquisitions,
  net of cash acquired
               -
 
     (10,921)
 
                -
 
     (27,008)
  Purchases of marketable securities
               -
 
          (500)
 
                -
 
       (2,250)
  Proceeds from sales of marketable securities
               -
 
        1,000
 
                -
 
      19,605
  Net cash used in investing activities
       (2,884)
 
     (23,135)
 
        (6,652)
 
     (32,095)
 
Cash flows from financing activities:
             
  Proceeds from (payments related to) the issuance
  of common stock under employee stock plans, net
        1,222
 
           405
 
         1,349
 
          (322)
  Proceeds from revolving credit facilities
      13,000
 
               -
 
       21,000
 
               -
  Payments on revolving credit facilities
               -
 
               -
 
        (8,000)
 
               -
  Net cash provided by (used in) financing activities
      14,222
 
           405
 
       14,349
 
          (322)
 
Effect of exchange rate changes on cash and cash equivalents
           236
 
       (1,828)
 
           764
 
       (3,406)
Net increase (decrease) in cash and cash equivalents
4,337
 
     (26,942)
 
(5,225)
 
     (44,724)
Cash and cash equivalents at beginning of period
      33,220
 
      73,735
 
       42,782
 
      91,517
Cash and cash equivalents at end of period
 
$37,557
 
$46,793
 
$37,557
 
$46,793