68% Year-Over-Year Subscription Revenue Growth Driven by Continued Increase in Paid Subscriptions with Net Increase of 24,000 Subscriptions in the Quarter
Operating Income Increased 214% Year-Over-Year from Improved Gross Margin and Significantly Reduced Operating ExpensesBURLINGTON, Mass., Aug. 03, 2020 (GLOBE NEWSWIRE) — Avid® (NASDAQ: AVID), a leading technology provider that powers the media and entertainment industry, today announced its second quarter 2020 financial results.During the second quarter, the Recurring Revenue components of the company’s business were resilient despite the COVID-19 global pandemic. The Company reported record subscription revenue of $16.4 million, up 68% year-over-year and maintenance revenue was stable, resulting in 8.5% year-over-year growth in Annual Contract Value. Also, in the quarter, Avid significantly improved its profitability as a result of higher gross margin coupled with a more efficient cost structure. The year-over-year improvement in gross margin of 760 basis points was a result of a greater portion of revenue coming from higher-margin software in the quarter and benefits from expense reductions in non-material cost of sales. Profitability was also enhanced by the $11 million year-over-year reduction in operating expenses in the quarter, which the Company will continue to closely manage towards the target of at least a $30 million reduction for fiscal 2020.For the second quarter, total revenue declined year-over-year, as the non-Recurring Revenue portions of the Company’s business related to product and professional services continued to be negatively impacted by weaker demand as a result of the COVID-19 global pandemic, which has caused the postponement or cancellation of many live music and major sporting events, and the temporary suspension of many film and television productions. During the quarter, the Company repaid the remaining $28.9 million of outstanding convertible notes at their maturity using available cash. As of June 30, 2020, the Company had $55.7 million in cash and cash equivalents. The Company’s leverage ratio under the financing agreement dropped to 4.3x as of June 30, 2020, as a result of the year-over-year increase in Adjusted EBITDA in the quarter, and the Company remains well below the covenant levels in the financing agreement as amended in May 2020.Second Quarter 2020 Financial and Business HighlightsSubscription revenue was $16.4 million, up 68.3% year-over-year.Paid Cloud-enabled software subscriptions increased by approximately 24,000 during the quarter, to approximately 242,000 at June 30, 2020, an increase of 63.9% year-over-year in total paid subscriptions.Subscription and Maintenance revenue was $47.0 million, up 13.5% year-over-year.Total revenue was $79.3 million, down (19.7%) year-over-year.Gross margin was 65.0%, up 760 basis points year-over-year. Non-GAAP Gross Margin was 65.4%, up 600 basis points year-over-year.Operating expenses were $43.5 million, a decrease of (19.6%) year-over-year. Non-GAAP Operating Expenses were $40.5 million, a decrease of (21.7%) year-over-year.Operating income was $8.1 million, an increase of 214.0% year-over-year. Non-GAAP Operating Income was $11.3 million, an increase of 65.2% year-over-year.Adjusted EBITDA was $13.5 million, an increase of 43.3% year-over-year. Adjusted EBITDA Margin was 17.0%, up 750 basis points year-over-year. Net income per common share was $0.04, up from a loss per common share of ($0.25) in the second quarter of 2019. Non-GAAP Net Income per Share was $0.12, up from Non-GAAP Net Income per Share of $0.02 in the second quarter of 2019.
Net cash (used in) operating activities was ($3.5) million in the quarter, a decrease of ($0.8) million compared to Net cash (used in) operating activities of ($2.7) million in the second quarter of 2019.Free Cash Flow was ($5.2) million, a decrease of ($0.7) million compared to ($4.5) million in the second quarter of 2019.LTM Recurring Revenue was 69.8% of the Company’s revenue for the 12 months ended June 30, 2020, up from 58.1% for the 12 months ended June 30, 2019.Annual Contract Value was $265.3 million as of June 30, 2020, up 8.5% from $244.6 million as of June 30, 2019.Jeff Rosica, Avid’s CEO and President stated, “While the COVID-19 pandemic continued to negatively impact the Company’s business during the second quarter, we are pleased with the strength of our creative subscription business, which continued its strong growth in the quarter, and with the resilience of our recurring revenue business. COVID-19 continues to temporarily reduce customer demand for parts of our non-recurring product business, but we expect demand to gradually improve as we get further into the second half of 2020.” Mr. Rosica continued, “The COVID-19 pandemic has also created opportunities to grow strategic portions of the business. We are adjusting our strategy and our investments to respond to the changes in the market which are informed by ongoing discussions with customers across the media industry, placing greater focus on the products and solutions that we believe will drive profitable growth as we emerge in the post-COVID environment. We are committed to making the changes we need to make to ensure that Avid exits this pandemic as a stronger and more profitable company.”Ken Gayron, Executive Vice President and Chief Financial Officer of Avid, said, “We made substantial progress in driving our higher margin revenue streams and improving our cost structure in the second quarter, resulting in strong growth in profitability.” Mr. Gayron continued, “We also made significant progress in improving our working capital position in the quarter, including by reducing accounts payable by more than $17 million during the quarter, that we believe should provide a strong foundation for improved Free Cash Flow in the second half of 2020. Finally, we expect to see continued improvement in our balance sheet and leverage position that we believe should enable the Company to improve its cost of capital and profitability over time.”Conference Call to Discuss Second Quarter 2020 Results on August 3, 2020Avid will host a conference call to discuss its financial results for the second quarter of 2020 on Monday, August 3, 2020 at 5:30 p.m. ET. Participants may join the webcast in listen-only mode and access the presentation slides using the link on the Avid Investor Relations website, which can be found on the events tab at ir.avid.com. Participants who would like to ask a question, can access the call by dialing +1 323-289-6576 and referencing confirmation code 7030762. Please connect at least 15 minutes in advance to ensure a timely connection to the call. A replay of the call will also be available for a limited time on the Avid Investor Relations website shortly after the completion of the call.Non-GAAP Financial Measures and Operational MetricsAvid includes non-GAAP financial measures in this press release, including Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Non-GAAP Gross Margin, Non-GAAP Operating Expenses, Non-GAAP Operating Income, and Non-GAAP Net Income (Loss) per Share. The Company also includes the operational metrics of Cloud-enabled software subscriptions, Recurring Revenue, LTM Recurring Revenue % and Annual Contract Value in this release. Avid believes the non-GAAP financial measures and operational metrics provided in this release provide helpful information to investors with respect to evaluating the Company’s performance. Unless noted, all financial and operating information is reported based on actual exchange rates. Definitions of the non-GAAP financial measures and operational metrics are included in our Form 8-K filed today. Reconciliations of the non-GAAP financial measures presented in this press release to the Company’s comparable GAAP financial measures for the periods presented are set forth below and are also included in the supplemental financial and operational data sheet available on our investor relations webpage at ir.avid.com, which also includes definitions of all operational metrics. Unless noted, all financial and operating information is reported based on actual exchange rates.Forward-Looking StatementsCertain information provided in this press release includes forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. Examples of forward-looking statements include statements regarding our future financial performance or position, results of operations, business strategy, plans and objectives of management for future operations, and other statements that are not historical fact. You can identify forward-looking statements by their use of forward-looking words such as “may”, “will”, “anticipate”, “expect”, “believe”, “estimate”, “intend”, “plan”, “should”, “seek”, or other comparable terms.Readers of this press release should understand that these forward-looking statements are not guarantees of performance or results. Forward-looking statements provide our current expectations and beliefs concerning future events and are subject to risks, uncertainties, and factors relating to our business and operations, all of which are difficult to predict and could cause our actual results to differ materially from the expectations expressed in or implied by such forward-looking statements.These risks, uncertainties, and factors include, but are not limited to: risks related to the impact of the coronavirus (COVID-19) outbreak on our business, suppliers, consumers, customers and employees; our liquidity; our ability to execute our strategic plan including our cost saving strategies, and to 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; fluctuations in subscription and maintenance renewal rates; 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; risks related to the availability and prices of raw materials, including any negative effects caused by inflation, weather conditions, or health pandemics; disruptions or inefficiencies in our supply chain and/or operations, including from the COVID-19 outbreak; the costs, disruption, and diversion of management’s attention due to the COVID-19 outbreak; the possibility of legal proceedings adverse to our Company; and other risks described in our reports filed from time to time with the U.S. Securities and Exchange Commission. Moreover, the business may be adversely affected by future legislative, regulatory or other changes, including tax law changes, as well as other economic, business and/or competitive factors. The risks included above are not exhaustive. We caution readers not to place undue reliance on any forward-looking statements includes in this press release which speak only as to the date of this press release. We undertake no responsibility to update or revise any forward-looking statements, except as required by law.About AvidAvid delivers the most open and efficient media platform, connecting content creation with collaboration, asset protection, distribution, and consumption. Avid’s preeminent customer community uses Avid’s comprehensive tools and workflow solutions to create, distribute and monetize the most watched, loved and listened to media in the world—from prestigious and award-winning feature films to popular television shows, news programs and televised sporting events, and celebrated music recordings and live concerts. With the most flexible deployment and pricing options, Avid’s industry-leading solutions include Media Composer®, Pro Tools®, Avid NEXIS®, MediaCentral®, iNEWS®, AirSpeed®, Sibelius®, Avid VENUE™, Avid FastServe®™, Maestro™, and PlayMaker™. 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.© 2020 Avid Technology, Inc. All rights reserved. Avid, the Avid logo, Avid NEXIS, Avid FastServe, AirSpeed, iNews, Maestro, MediaCentral, Media Composer, NewsCutter, PlayMaker, Pro Tools, Avid VENUE, and Sibelius are trademarks or registered trademarks of Avid Technology, Inc. or its subsidiaries in the United States and/or other countries. All other trademarks are the property of their respective owners. Product features, specifications, system requirements and availability are subject to change without notice.
AVID TECHNOLOGY, INC.
Consolidated Statements of Operations
(unaudited – in thousands except per share data)
AVID TECHNOLOGY, INC.
Reconciliations of GAAP financial measures to Non-GAAP financial measures
(unaudited – in thousands)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.
Consolidated Balance Sheets
(unaudited – in thousands, except per share data)
AVID TECHNOLOGY, INC.
Consolidated Statements of Cash Flows
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AVID TECHNOLOGY, INC.
Supplemental Revenue Information
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