Avid Announces Financial Results for Third Quarter 2015

Transformation on Track and Expected to be Completed by Q2 2017; Continued Shift to Recurring Revenue Drives Year on Year Bookings Growth

BURLINGTON, Mass., Nov. 05, 2015 (GLOBE NEWSWIRE) -- Avid® (Nasdaq:AVID) announced today that it has released third quarter results and updated its 2015 full year guidance.

Q3 2015 Highlights

Bookings as reported increased 2.6% year on year to $115.1 million. Bookings on a constant dollar basis grew 9% year on year to $121 million.
Revenue as reported declined by 4% year on year to $137 million but increased 25% sequentially. Revenue on a constant dollar basis was lower by 0.2% year on year. Pre-2011 revenue and non-marketed product bookings headwinds continue to diminish.
Recurring revenue bookings increased 42% year-on-year, representing 28% of total quarter’s bookings.
Adjusted EBITDA of $25.0 million versus $27.3 million in Q314. Sequentially, Adjusted EBITDA grew by $23.5 million.
Current paid subscribers exceeded 20,000 users.
Cumulative Media Central platform licenses reached more than 28,000, over a 50% increase from Q3 2014
Updated Full Year 2015 Earnings Guidance
- Adjusted EBITDA range of $55 to $60 million, as reported
- Bookings range of $490 to $503 million, as reported
- Adjusted free cash flow range adjusted to use of $26 to $35 million, as reported

“Avid continues to solidify its market leadership position by helping customers increase media workflow efficiencies in an industry that’s seeing tremendous monetization pressures” said Louis Hernandez, Jr, Chairman, President, and CEO of Avid. “At the same time, Avid’s own transformation is progressing well and we continue to drive towards a business with more recurring revenue streams and efficient operating model by 2017, when we expect our transformation to be largely complete, as evidenced by the fact that the headwinds from pre-2011 deferred revenue and non-marketed product bookings should have burned off and we should have completed our cost optimization projects”.

“During Q3, we made good progress on our transformation, which was reflected in our year-on-year constant dollar bookings growth in Q3.” said John Frederick, Chief Financial and Administrative Officer of Avid. “We’re continuing to work on our cost structure, build long term backlog and shift to higher margin products. As our bookings growth converts to revenue and cash, we’re looking forward to expanding margins and improved cash generation.”

Avid includes non-GAAP financial measures, including adjusted EBITDA, adjusted free cash flow, non-GAAP operating income (loss), non-GAAP operating income per share, non-GAAP gross margin, and non-GAAP operating expenses, as well as operational metrics of bookings, marketed bookings, recurring revenue bookings and revenue backlog in this release. Definitions of the non-GAAP financial measures and the reconciliations to the Company's comparable GAAP financial measures for the periods presented are included in our Form 8-K filed today and in the supplemental financial and operational data sheet available on our investor relations webpage at ir.avid.com, which also includes definitions of the operational metrics. Unless noted, all financial information is as reported based on actual exchange rates.

Conference Call
A conference call to discuss Avid's financial results for the third quarter of 2015 will be held on Thursday, November 5, 2015 at 5:00 p.m. ET. The call will be open to the public and can be accessed by dialing 719-457-2697 and referencing confirmation code 9388800. You may also listen to the call on the Avid Investor Relations website. To listen via the website, go to the events tab at ir.avid.com for complete details prior to the start of the conference call. A replay of the call will also be available on the Avid Investor Relations website shortly after the completion of the call. Earnings documents, including slides to accompany Avid’s management presentation and a supplemental financial and operational data sheet are posted to Avid’s investor relations website in advance of the conference call for reference.

Forward-Looking Statements

The information provided in this press release including the tables attached hereto include forward-looking statements that involve risks and uncertainties, including projections and statements about our anticipated plans, objectives, expectations and intentions. Such statements include, without limitation, statements regarding our financial statements or other information included herein based upon or otherwise incorporating judgments or estimates relating to future performance such as future operating expenses; earnings; bookings; backlog; revenue backlog conversion rate; product mix and free cash flow; our cost savings initiatives; our future strategy and business plans; our product plans, including products under development, such as cloud and subscription based offerings; our liquidity and ability to raise capital; the anticipated benefits of the Orad acquisition, including estimated synergies, and the effects of the transaction, including effects on future financial and operating results; and our liquidity. These forward-looking statements are based on current expectations as of the date of this release and subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including but not limited to the effect on our sales, operations and financial performance resulting from: our liquidity; our ability to execute our strategic plan, including cost savings initiatives, and meet customer needs; our ability to retain and hire key personnel; our ability to produce innovative products in response to changing market demand, particularly in the media industry; our ability to successfully accomplish our product development plans; competitive factors; history of losses; fluctuations in our revenue, based on, among other things, our performance and risks in particular geographies or markets; our higher indebtedness and ability to service it and meet the obligations thereunder; restrictions in our credit facilities; our move to a subscription model and related effect on our revenues and ability to predict future revenues; elongated sales cycles; fluctuations in foreign currency exchange rates; seasonal factors; adverse changes in economic conditions; variances in our revenue backlog and the realization thereof; the identified material weaknesses in our internal control over financial reporting; and the possibility of legal proceedings adverse to our company. Moreover, the business may be adversely affected by future legislative, regulatory or changes, including tax law changes, as well as other economic, business and/or competitive factors. The risks included above are not exhaustive. Other factors that could adversely affect our business and prospects are described in the filings made by our company with the SEC. We expressly disclaim any obligation or undertaking to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

About Avid

Through Avid Everywhere™, Avid delivers the industry's most open, innovative and comprehensive media platform connecting content creation with collaboration, asset protection, distribution and consumption. Media organizations and creative professionals use Avid solutions to create the most listened to, most watched and most loved media in the world—from the most prestigious and award-winning feature films, to the most popular television shows, news programs and televised sporting events, as well as a majority of today’s most celebrated music recordings and live concerts. Industry leading solutions include Pro Tools®, Media Composer®, ISIS®, Interplay®, ProSet and RealSet, Maestro, PlayMaker, and Sibelius®. For more information about Avid solutions and services, visit www.avid.com, connect with Avid on Facebook, Instagram, Twitter, YouTube, LinkedIn, or subscribe to Avid Blogs.

© 2015 Avid Technology, Inc. All rights reserved. Avid, the Avid logo, Media Composer, Pro Tools, Interplay, 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 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,
			2015			2014			2015			2014

Net revenues:
	Products	$	88,945		$	105,330		$	245,124		$	287,215
	Services		48,491			37,099			121,665			114,840
	Total net revenues		137,436			142,429			366,789			402,055

Cost of revenues:
	Products		32,256			37,807			92,416			107,898
	Services		15,416			14,981			46,054			45,975
	Amortization of intangible assets		1,950			-			2,113			50
	Total cost of revenues		49,622			52,788			140,583			153,923

Gross profit			87,814			89,641			226,206			248,132

Operating expenses:
	Research and development		25,225			22,154			71,708			67,178
	Marketing and selling		31,564			31,410			92,420			98,522
	General and administrative		15,834			20,644			52,646			58,959
	Amortization of intangible assets		786			373			1,568			1,251
	Restructuring costs (recoveries), net		-			-			539			(165	)
	Total operating expenses		73,409			74,581			218,881			225,745

Operating income			14,405			15,060			7,325			22,387

Interest and other expense, net			(2,519	)		(455	)		(4,681	)		(1,163	)
Income before income taxes			11,886			14,605			2,644			21,224

Provision for (benefit from) income taxes, net			768			365			(4,221	)		1,427
Net income			11,118			14,240			6,865			19,797

Net income per common share - basic and diluted		$	0.28		$	0.36		$	0.17		$	0.51

Weighted-average common shares outstanding - basic			39,231			39,133			39,417			39,117
Weighted-average common shares outstanding - diluted			39,750			39,201			40,727			39,164


AVID TECHNOLOGY, INC.
Reconciliations of GAAP financial measures to Non-GAAP financial measures
(unaudited - in thousands, except per share data)


		Three Months Ended						Nine Months Ended
		September 30,						September 30,
			2015			2014			2015			2014

	GAAP
	Net revenues	$	137,436		$	142,429		$	366,789		$	402,055
	Cost of revenues		49,622			52,788			140,583			153,923
	Gross profit		87,814			89,641			226,206			248,132
	Operating expenses		73,409			74,581			218,881			225,745
	Operating income		14,405			15,060			7,325			22,387
	Interest and other expense, net		(2,519	)		(455	)		(4,681	)		(1,163	)
	Provision for (benefit from) income taxes, net		768			365			(4,221	)		1,427
	Net income	$	11,118		$	14,240		$	6,865		$	19,797
	Weighted-average common shares outstanding - basic		39,231			39,133			39,417			39,117
	Weighted-average common shares outstanding - diluted		39,750			39,201			40,727			39,164
	Net income per share - basic and diluted	$	0.28		$	0.36		$	0.17		$	0.51

	Adjustments to GAAP Results
	Cost of revenues
	Amortization of intangible assets		1,950			-			2,113			50
	Stock-based compensation		183			78			652			394
	Operating expenses
	Amortization of intangible assets		786			373			1,568			1,251
	Restructuring costs (recoveries), net		-			-			539			(165	)
	Restatement costs		287			8,564			988			19,408
	Acquisition and other costs		1,965			-			7,640			-
	Stock-based compensation
	R&D		73			96			225			336
	Sales & Marketing		529			252			1,902			1,186
	G&A		1,604			(1,107	)		4,953			802
	Other
	Tax adjustment		-			4			-			(7	)

	Non-GAAP
	Net revenues		137,436			142,429			366,789			402,055
	Cost of revenues		47,489			52,710			137,818			153,479
	Gross profit		89,947			89,719			228,971			248,576
	Operating expenses		68,165			66,403			201,066			202,927
	Operating income		21,782			23,316			27,905			45,649
	Interest and other expense, net		(2,519	)		(455	)		(4,681	)		(1,163	)
	Provision for (benefit from) income taxes, net		768			361			(4,221	)		1,434
	Net income		18,495			22,500			27,445			43,052
	Net income per share - diluted	$	0.47		$	0.57		$	0.67		$	1.10

	Adjusted EBITDA
	Non-GAAP operating income (from above)		21,782			23,316			27,905			45,649
	Depreciation		3,168			3,968			10,257			12,294
	Amortization of capitalized software development costs		-			28			-			127
	Adjusted EBITDA		24,950			27,312			38,162			58,070

	Adjusted Free Cash Flow
	GAAP net cash used in operating activities		(9,873	)		5,252			(36,087	)		(20,830	)
	Capital expenditures		(4,368	)		(5,269	)		(11,110	)		(11,680	)
	Restructuring payments		316			1,274			1,052			6,085
	Restatement payments		-			6,814			3,624			22,902
	Acquisition and other payments		3,368			-			4,958			-
	Adjusted Free Cash Flow	$	(10,557	)	$	8,071		$	(37,563	)	$	(3,523	)
	These non-GAAP measures reflect how Avid manages its businesses internally. Avid’s non-GAAP measures may vary from how other companies present non-GAAP measures. 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.


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

	September 30,			December 31,
		2015			2014
ASSETS:
Current assets:
Cash and cash equivalents	$	21,980		$	25,056
Accounts receivable, net of allowances of $9,257 and $10,692 at September 30, 2015 and December 31, 2014, respectively		56,995			54,655
Inventories		48,784			48,001
Deferred tax assets, net		310			322
Prepaid expenses		8,448			6,892
Other current assets		12,954			17,932
Total current assets		149,471			152,858

Property and equipment, net		34,777			32,136
Intangible assets, net		35,966			2,445
Goodwill		33,905			-
Long-term deferred tax assets, net		2,044			1,886
Other long-term assets		8,013			2,274
Total assets	$	264,176		$	191,599

LIABILITIES AND STOCKHOLDERS' DEFICIT:
Current liabilities:
Accounts payable	$	39,232		$	32,951
Accrued compensation and benefits		23,362			32,636
Accrued expenses and other current liabilities		32,228			32,353
Income taxes payable		3,176			5,480
Short-term debt		10,000			-
Deferred tax liabilities, net		316			-
Deferred revenues		199,572			206,608
Total current liabilities		307,886			310,028

Long-term debt		94,605			-
Long-term deferred tax liabilities, net		7,687			136
Long-term deferred revenues		164,935			208,232
Other long-term liabilities		16,674			14,273
Total liabilities		591,787			532,669

Stockholders' deficit:
Common stock		423			423
Additional paid-in capital		1,058,330			1,049,969
Accumulated deficit		(1,314,933	)		(1,321,798	)
Treasury stock at cost		(64,415	)		(68,051	)
Accumulated other comprehensive loss		(7,016	)		(1,613	)
Total stockholders' deficit		(327,611	)		(341,070	)
Total liabilities and stockholders' deficit	$	264,176		$	191,599

AVID TECHNOLOGY, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited - in thousands)

				Nine Months Ended
				September 30,
					2015			2014

Cash flows from operating activities:
	Net income			$	6,865		$	19,797
	Adjustments to reconcile net income to net cash used in operating activities:
		Depreciation and amortization			13,936			13,721
		Recovery from doubtful accounts			(175	)		(177	)
		Stock-based compensation expense			7,731			2,718
		Non-cash interest expense			1,544			220
		Unrealized foreign currency transaction gains			(5,098	)		(494	)
		Deferred tax benefit			(6,504	)		(6	)
		Changes in operating assets and liabilities, net of effects from acquisition:
			Accounts receivable		6,844			931
			Inventories		4,028			6,145
			Prepaid expenses and other current assets		1,772			646
			Accounts payable		4,932			585
			Accrued expenses, compensation and benefits and other liabilities		(17,764	)		(14,842	)
			Income taxes payable		1,268			(603	)
			Deferred revenues		(55,466	)		(49,471	)
Net cash used in operating activities					(36,087	)		(20,830	)

Cash flows from investing activities:
	Purchases of property and equipment				(11,110	)		(11,660	)
	Payments for business and technology acquisitions, net of cash acquired				(65,967	)		-
	Proceeds from divestiture of consumer business				-			1,500
	(Increase) decrease in other long-term assets				(575	)		51
	Increase in restricted cash				(1,047	)		-
Net cash used in investing activities					(78,699	)		(10,109	)

Cash flows from financing activities:
	Proceeds from long-term debt, net of issuance costs				120,401			-
	Payments for repurchase of common stock				(7,999	)		-
	Cash paid for capped call transaction				(10,125	)		-
	Proceeds from the issuance of common stock under employee stock plans				3,113			1
	Common stock repurchases for tax withholdings for net settlement of equity awards				(1,442	)		(318	)
	Proceeds from revolving credit facilities				49,500			20,500
	Payments on revolving credit facilities				(39,500	)		(12,500	)
	Payments of credit facilities issuance costs				(1,193	)		-
Net cash provided by financing activities					112,755			7,683

Effect of exchange rate changes on cash and cash equivalents					(1,045	)		(2,471	)
Net decrease in cash and cash equivalents					(3,076	)		(25,727	)
Cash and cash equivalents at beginning of period					25,056			48,203
Cash and cash equivalents at end of period				$	21,980		$	22,476


AVID TECHNOLOGY, INC.
Supplemental Revenue Information
(unaudited - in thousands)

		September 30,		June 30,		September 30,
	Revenue Backlog*		2015		2015		2014

	Pre-2011	$	37,885	$	51,520	$	104,629
	Post-2010	$	326,622	$	341,279	$	312,708
	Deferred Revenue	$	364,507	$	392,799	$	417,337
	Other Backlog	$	148,776	$	147,453	$	92,000
	Total Revenue Backlog	$	513,283	$	540,252	$	509,337

	Post 2010	$	475,398	$	488,732	$	404,708

	The expected timing of recognition of revenue backlog as of September 30, 2015 is as follows:


		Q4 2015			2016		2017	Thereafter		Total
	Orders executed prior to January 1, 2011	$	12,017	$	24,772	$	952	$	144	$	37,885
	Orders executed or materially modified on or after January 1, 2011	$	48,769	$	131,225	$	68,686	$	77,942	$	326,622
	Other Backlog	$	51,449	$	48,191	$	30,338	$	18,797	$	148,776
	Total Revenue Backlog	$	112,235	$	204,189	$	99,975	$	96,883	$	513,283

	*A definition of Revenue Backlog is included in the supplemental financial and operational data sheet available on our investor relations webpage at ir.avid.com.
	Note: current estimates could change based on a number of factors, including (i) the timing of delivery of products and services, (ii) customer cancellations or change order, (iii) changes in the estimated period of time Implied Maintenance Release PCS is provided to customers, including as a result of changes in business practices


AVID TECHNOLOGY, INC.
2015 Outlook (a)
(unaudited - in millions)

	Bookings
	As Reported						Adjusted EBITDA						Adjusted Free Cash Flow
	Low			High			Low			High			Low			High

1st Half of 2015	$	230		$	230		$	13		$	13		$	(27	)	$	(27	)

- Estimated 2nd Half (including Orad product lines), using 1st Half run rates		250			252			18			18			(23	)		(23	)
- Estimated New Products and Growth Initiatives		15			21			18			20			16			18
- Estimated Impact of Cost Initiatives		-			-			4			5			4			5
- Estimated 2nd Half Seasonality and other		14			25			21			24			42			47

Outlook 2015, August Guidance		509			528			74			80			12			20

-Underperformance in Tier 3 Audio		(17	)		(14	)		(11	)		(10	)		(20	)		(17	)
-Mix Shift to Multi-Year Support Contracts		-			-			(4	)		(4	)		(15	)		(14	)
-Estimated 2nd Half Seasonality and other		-			-			-			-			(12	)		(12	)
- Currency and Other, Net		(2	)		(11	)		(4	)		(6	)		-			(3	)

Outlook 2015 (a)		490			503			55			60			(35	)		(26	)

(a) As of November 5, 2015
Note: The 2015 Outlook is based on estimates as of the date of this press release and Avid expressly disclaims any obligation or undertaking to update such estimates; actual results may differ materially from those estimates as a result of a number of risks and uncertainties. Please see the forward looking disclaimer included in the press release. Each range of values provided represents the expected low and high estimates for such financial or operating factor.

CONTACT: Media Contact	
Sara Griggs		
Avid			
310.821.0801		
[email protected]

Investor Contact
Jonathan Huang
Avid
978.640.5126
[email protected]