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Avid Technology Announces Third Quarter 2021 Results

·20-min read

12.4% Year-Over-Year Revenue Growth

56.4% Year-Over-Year Subscription Revenue Growth

$16.5 million in Net Cash Provided by Operating Activities Leading to Free Cash Flow of $14.0 million

Raises Subscription & Maintenance Revenue Guidance and Raises High-End of Revenue Guidance for Full-Year 2021

BURLINGTON, Mass., Nov. 09, 2021 (GLOBE NEWSWIRE) -- Avid® (NASDAQ: AVID), a leading technology provider that powers the media and entertainment industry, today announced its financial results for the third quarter ended September 30, 2021, raised full-year 2021 guidance for Subscription & Maintenance Revenue, raised the high-end and tightened the range for total revenue and tightened the range towards the high-end of guidance on all other full-year 2021 metrics.

Total revenue increased 12.4% year-over-year in the third quarter to $101.6 million, as the Recurring Revenue components of the Company’s business continued on a strong trajectory. Subscription revenue was $28.0 million, an increase of 56.4% year-over-year, reflecting continued growth in paid subscriptions for creative tools, including an acceleration in Pro Tools net adds in the third quarter, and strong enterprise subscription sales in the quarter.

The continued revenue growth resulted in GAAP net income per share of $0.32 and Non-GAAP Net Income per Share of $0.27, which was at the higher end of the guidance range provided for the third quarter. This strong profitability resulted in net cash provided by operating activities of $16.5 million, and Free Cash Flow of $14.0 million for the quarter.

Third Quarter 2021 Financial and Business Highlights

  • Subscription revenue was $28.0 million, an increase of 56.4% year-over-year.

  • Paid Cloud-enabled software subscriptions increased by 35.0% year-over-year to approximately 389,000 at September 30, 2021 and increased by approximately 19,300 from June 30, 2021.

  • Subscription & Maintenance revenue was $58.7 million, an increase of 20.5% year-over-year.

  • Total revenue was $101.6 million, an increase of 12.4% year-over-year.

  • LTM Recurring Revenue % was 77.1% of the Company’s revenue for the 12 months ended September 30, 2021, up from 71.2% for the 12 months ended September 30, 2020.

  • Annual Contract Value was $328.0 million as of September 30, 2021, a year-over-year increase of 20.6%, from $271.9 million as of September 30, 2020.

  • Gross margin was 64.8%, an increase of 40 basis points year-over-year. Non-GAAP Gross Margin was 65.3%, an increase of 40 basis points year-over-year.

  • Operating expenses were $56.4 million, an increase of 24.8% year-over-year. Non-GAAP Operating Expenses were $51.3 million, an increase of 24.1% year-over-year. The prior year included significant temporary cost savings initiatives that were put in place due to the COVID-19 pandemic, including a $6.0 million benefit from temporary employee furloughs in the third quarter of 2020, which affect comparisons to the prior year period for operating expenses, net income, Adjusted EBITDA, net cash provided by operating activities and Free Cash Flow.

  • Net income was $14.8 million, an increase of 85.0% year-over-year. Net income in the third quarter of 2021 included a one-time $7.9 million benefit from the forgiveness of the PPP loan and accrued interest. Non-GAAP Net Income was $12.4 million, an increase of 1.9% year-over-year. Both net income and Non-GAAP Net Income in the third quarter of 2020 benefitted from the significant temporary cost savings discussed above.

  • Net income per common share was $0.32 up from net income per common share of $0.18 in the third quarter of 2020. Net income per common share in the third quarter of 2021 included a one-time benefit of $0.17 per common share from the forgiveness of the PPP loan and accrued interest. Non-GAAP Net Income per Share was $0.27, unchanged from the third quarter of 2020. Both net income per common share and Non-GAAP Net Income per Share in the third quarter of 2020 benefitted from the significant temporary cost savings discussed above.

  • Adjusted EBITDA was $17.0 million, a decrease of 11.9% year-over-year. Adjusted EBITDA Margin was 16.8%, a year-over-year decrease of 460 basis points. Adjusted EBITDA in the third quarter of 2020 benefitted from the significant temporary cost savings discussed above.

  • Net cash provided by operating activities was $16.5 million in the quarter, a decrease of $1.5 million compared to net cash provided by operating activities of $18.0 million in the prior year period. Free Cash Flow was $14.0 million in the quarter, a decrease of $1.5 million from $15.5 million in the prior year period. Both net cash provided by operating activities and Free Cash Flow in the third quarter of 2020 benefitted from the significant temporary cost savings discussed above.

  • Share repurchases under the $115 million share repurchase authorization announced on September 9, 2021 totaled approximately 412,000 shares for $11.2 million during the third quarter.

Jeff Rosica, Avid’s Chief Executive Officer and President, stated, “We are pleased that we were able to significantly grow our revenue in the third quarter due to the strong performance of our subscription business and the strengthening recovery of our end markets, which allowed us to continue to deliver strong profitability and Free Cash Flow. As we enter the fourth quarter, which historically has been our strongest quarter, we believe we are well positioned to finish 2021 on a high note, and our momentum gives us confidence as we look out to 2022.”

Ken Gayron, Chief Financial Officer and Executive Vice President of Avid, added, “We continued to grow our LTM Recurring Revenue %, which reached 77% of our total revenue as of the third quarter, and we delivered 56.4% year over year growth in subscription revenues. We also generated robust Free Cash Flow during the third quarter as a result of solid profitability and working capital management. Based on the strength in our business, we are raising guidance for Subscription & Maintenance Revenue for full-year 2021, we are raising the high-end and tightening the range of our total revenue guidance and we are tightening the range towards the high-end of guidance on all other full-year 2021 metrics.” Mr. Gayron continued, “Additionally, given the high degree of confidence we have in our plan, we announced a $115 million share repurchase authorization in September. Under this plan, we repurchased $11.2 million of our shares during the third quarter, and we have repurchased a total of $20 million of our shares as of November 8. Share repurchases are an important element of our capital deployment strategy which we expect will enhance overall shareholder returns.”

Full Year 2021 Guidance

Avid has revised its full-year 2021 guidance as shown in the table below.

($ in millions, except per share amounts)

Prior Guidance
Full-Year 2021

New Guidance
Full-Year 2021

Revenue

$382 - $402

$398 – $404

Subscription & Maintenance Revenue

$217 - $225

$225 – $230

Non-GAAP Net Income per Share

$1.05 - $1.27

$1.18 – $1.26

Adjusted EBITDA

$69 - $79

$73 – $78

Free Cash Flow

$49 - $57

$52 – $57

All guidance presented by the Company is inherently uncertain and subject to numerous risks and uncertainties. Avid’s actual future results of operations could differ materially from those shown in the table above. For a discussion of some of the key assumptions underlying the guidance, as well as the key risks and uncertainties associated with these forward-looking statements, please see “Forward-Looking Statements” below as well as the Avid Technology Q3 2021 Earnings Call presentation posted on Avid’s Investor Relations website at ir.Avid.com.

Conference Call to Discuss Third Quarter 2021 Results on November 9, 2021

Avid will host a conference call to discuss its financial results for the third quarter on Tuesday, November 9, 2021, at 5:30 p.m. Eastern Time. 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 +1 929-477-0577 and referencing confirmation code 9008735. Please connect at least 5 minutes in advance to ensure a timely connection to the call. A replay of the webcast 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 Metrics

Avid 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 Net Income, and Non-GAAP Net Income 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 the 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 included in the supplemental financial and operational data sheet available on our Investor Relations website at ir.Avid.com, which also includes definitions of all operational metrics.

This press release also includes expectations for future Adjusted EBITDA, Non-GAAP Net Income per Share and Free Cash Flow, which are forward-looking non-GAAP financial measures. Reconciliations of these forward-looking non-GAAP measures are not included in this press release or elsewhere, due to the high variability and difficulty in making accurate forecasts and projections of some of the information excluded from the estimation of the non-GAAP results, together with some of the excluded information not being ascertainable or accessible at this time. As a result, we are unable to quantify certain amounts that would be required to be included in the most directly comparable GAAP financial measure without unreasonable efforts.

Forward-Looking Statements

Certain 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. 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 and its variants 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 included 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 Avid

Avid 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™, FastServe®™ and Maestro™. 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.

© 2021 Avid Technology, Inc. All rights reserved. Avid, the Avid logo, Avid NEXIS, FastServe, AirSpeed, iNews, Maestro, MediaCentral, Media Composer, 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.

Contacts

Investor contact:

PR contact:

Whit Rappole

Jim Sheehan

Avid

Avid

ir@Avid.com

jim.sheehan@Avid.com


AVID TECHNOLOGY, INC.

Condensed Consolidated Statements of Operations

(unaudited - in thousands, except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Net revenues:

Products

$

36,850

$

35,775

$

107,295

$

98,121

Services

64,790

54,656

183,585

158,044

Total net revenues

101,640

90,431

290,880

256,165

Cost of revenues:

Products

20,468

20,957

60,044

58,873

Services

15,269

11,217

43,379

34,322

Total cost of revenues

35,737

32,174

103,423

93,195

Gross profit

65,903

58,257

187,457

162,970

Operating expenses:

Research and development

17,129

13,623

48,639

42,116

Marketing and selling

24,413

19,998

66,511

64,977

General and administrative

14,901

10,796

42,214

34,144

Restructuring costs, net

(88

)

723

1,001

1,008

Total operating expenses

56,355

45,140

158,365

142,245

Operating income

9,548

13,117

29,092

20,725

Interest expense, net

(1,646

)

(4,566

)

(5,547

)

(15,437

)

Other income, net

7,864

143

4,459

233

Income before income taxes

15,766

8,694

28,004

5,521

Provision for income taxes

991

707

1,832

1,546

Net income

$

14,775

$

7,987

$

26,172

$

3,975

Net income per common share - basic

$

0.32

$

0.18

$

0.58

$

0.09

Net income per common share - diluted

$

0.32

$

0.18

$

0.56

$

0.09

Weighted-average common shares outstanding - basic

45,564

44,019

45,115

43,665

Weighted-average common shares outstanding - diluted

46,428

44,758

46,449

44,498


AVID TECHNOLOGY, INC.

Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures

(unaudited - in thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

GAAP Revenue

GAAP Revenue

$

101,640

$

90,431

$

290,880

$

256,165

Non-GAAP Gross Profit

GAAP Gross Profit

65,903

58,257

187,457

162,970

Stock-based compensation

444

433

1,362

908

Non-GAAP Gross Profit

$

66,347

$

58,690

$

188,819

$

163,878

GAAP Gross Margin

64.8

%

64.4

%

64.4

%

63.6

%

Non-GAAP Gross Margin

65.3

%

64.9

%

64.9

%

64.0

%

Non-GAAP Operating Expenses

GAAP Operating Expenses

56,355

45,140

158,365

142,245

Less Amortization of intangible assets

(105

)

(105

)

(315

)

(306

)

Less Stock-based compensation

(3,337

)

(2,865

)

(9,473

)

(7,224

)

Less Restructuring costs, net

88

(723

)

(1,001

)

(1,008

)

Less Acquisition, integration and other costs

(876

)

-

(2,083

)

183

Less Efficiency program costs

-

(79

)

(48

)

(445

)

Less Digital Transformation costs

(808

)

(808

)

-

Less COVID-19 related expenses

(3

)

(22

)

(251

)

Non-GAAP Operating Expenses

$

51,317

$

41,365

$

144,615

$

133,194

Non-GAAP Operating Income and Adjusted EBITDA

GAAP net income

14,775

7,987

26,172

3,975

Interest and other expense

(6,218

)

4,423

1,088

15,204

Provision for income taxes

991

707

1,832

1,546

GAAP Operating Income

9,548

13,117

29,092

20,725

Amortization of intangible assets

105

105

315

306

Stock-based compensation

3,781

3,297

10,835

8,132

Restructuring costs, net

(88

)

723

1,001

1,008

Acquisition, integration and other costs

876

-

2,083

(183

)

Efficiency program costs

-

79

48

445

Digital Transformation costs

808

808

-

COVID-19 related expenses

-

3

22

251

Non-GAAP Operating Income

$

15,030

$

17,324

$

44,204

$

30,684

Depreciation

2,002

2,004

6,323

6,317

Adjusted EBITDA

$

17,032

$

19,328

$

50,527

$

37,001

GAAP net income margin

14.5

%

8.8

%

9.0

%

1.6

%

Adjusted EBITDA Margin

16.8

%

21.4

%

17.4

%

14.4

%

Non-GAAP Net Income

GAAP net income

14,775

7,987

26,172

3,975

Amortization of intangible assets

105

105

315

306

Stock-based compensation

3,781

3,297

10,835

8,132

Restructuring costs, net

(88

)

723

1,001

1,008

Acquisition, integration and other costs

876

-

2,083

(183

)

Efficiency program costs

-

79

48

445

Digital Transformation costs

808

808

-

Gain on forgiveness of PPP Loan

(7,800

)

(7,800

)

-

COVID-19 related expenses

-

3

22

251

Loss on Extinguishment of debt

-

-

3,748

-

Tax impact of non-GAAP adjustments

(25

)

5

(184

)

(35

)

Non-GAAP Net Income

$

12,432

$

12,199

$

37,048

$

13,899

Weighted-average share count (Basic)

45,564

44,019

45,115

43,665

Weighted-average share count (Diluted)

46,428

44,758

46,449

44,498

Non-GAAP Earnings per Share (Basic)

$

0.27

$

0.28

$

0.82

$

0.32

Non-GAAP Earnings per Share (Diluted)

$

0.27

$

0.27

$

0.80

$

0.31

Free Cash Flow

Net cash provided by operating activities

16,521

17,955

35,418

8,843

Capital expenditures

(2,475

)

(2,407

)

(4,750

)

(5,619

)

Free Cash Flow

$

14,046

$

15,548

$

30,668

$

3,224

Free Cash Flow conversion from Adjusted EBITDA

82.5

%

80.4

%

60.7

%

8.7

%


AVID TECHNOLOGY, INC.

Condensed Consolidated Balance Sheets

(unaudited - in thousands)

September 30,

December 31,

2021

2020

Assets

Current Assets

Cash and Cash Equivalents

$

50,485

$

79,899

Restricted Cash

1,422

1,422

Accounts receivable, net of allowances of $1,422 and $1,478

at September 30, 2021 and December 31, 2020, respectively

58,125

78,614

Inventories

22,215

26,568

Prepaid Expenses

6,766

6,044

Contract Assets

22,612

18,579

Other Current Assets

2,335

2,366

Total Current Assets

163,960

213,492

Property and Equipment, Net

15,211

16,814

Goodwill

32,643

32,643

Right of Use Assets

25,202

29,430

Deferred Tax Assets, Net

5,413

6,801

Other Long-Term Assets

6,462

5,958

Total Assets

$

248,891

$

305,138

Liabilities and Stockholders' Deficit

Current Liabilities

Accounts Payable

$

22,413

$

21,823

Accrued Compensation and Benefits

26,320

29,105

Accrued Expenses and Other Current Liabilities

34,511

42,264

Income Taxes Payable

1,447

1,664

Short-Term Debt

9,159

4,941

Deferred Revenues

76,658

87,974

Total Current Liabilities

170,508

187,771

Long-Term Debt

162,990

202,759

Long-Term Deferred Revenues

10,109

11,284

Long-Term Lease Liabilities

24,466

28,462

Other Long-Term Liabilities

7,249

7,786

Total Liabilities

375,322

438,062

Stockholders' Deficit

Common Stock

454

442

Treasury Stock

(11,169

)

-

APIC

1,030,116

1,036,658

Accumulated Deficit

(1,142,175

)

(1,168,347

)

Accumulated Other Comprehensive Loss

(3,657

)

(1,677

)

Total Stockholders' Deficit

(126,431

)

(132,924

)

Total Liabilities and Stockholders' Deficit

$

248,891

$

305,138


AVID TECHNOLOGY, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited - in thousands)

Nine Months Ended September 30,

2021

2020

Cash flows from operating activities:

Net income

$

26,172

$

3,975

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

6,323

6,317

Provision for doubtful accounts

401

1,349

Stock-based compensation expense

10,216

8,132

Non-cash provision for restructuring

841

653

Non-cash interest expense

386

3,408

Loss on extinguishment of debt

2,579

-

Gain on extinguishment of PPP loan

(7,800

)

-

Unrealized foreign currency transaction (gains) loss

(1,400

)

219

Benefit from (provision for) deferred taxes

1,388

997

Changes in operating assets and liabilities:

Accounts receivable

20,089

12,741

Inventories

4,353

788

Prepaid expenses and other assets

(1,343

)

1,390

Accounts payable

590

(26,440

)

Accrued expenses, compensation and benefits and other liabilities

(10,635

)

7,752

Income taxes payable

(217

)

81

Deferred revenue and contract assets

(16,525

)

(12,519

)

Net cash provided by operating activities

35,418

8,843

Cash flows from investing activities:

Purchases of property and equipment

(4,750

)

(5,619

)

Net cash used in investing activities

(4,750

)

(5,619

)

Cash flows from financing activities:

Proceeds from revolving line of credit

-

22,000

Repayment from revolving line of credit

-

(22,000

)

Proceeds from long-term debt

180,000

7,800

Repayment of debt

(208,142

)

(1,474

)

Payments for repurchase of common stock

(10,526

)

-

Payments for repurchase of outstanding Notes

-

(28,867

)

Proceeds from the issuance of common stock under employee stock plans

363

252

Common stock repurchases for tax withholdings for net settlement of equity awards

(17,108

)

(2,610

)

Prepayment penalty on extinguishment of debt

(1,169

)

-

Partial unwind capped call cash receipt

-

875

Payments for credit facility issuance costs

(2,574

)

(289

)

Net cash used in by financing activities

(59,156

)

(24,313

)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

(927

)

1,394

Net decrease in cash, cash equivalents, and restricted cash

(29,415

)

(19,695

)

Cash, cash equivalents and restricted cash at beginning of the period

83,638

$

72,575

Cash, cash equivalents and restricted cash at end of the period

$

54,223

$

52,880

Supplemental information:

Cash and cash equivalents

$

50,485

49,142

Restricted cash

1,422

1,664

Restricted cash included in other long-term assets

2,316

2,074

Total cash, cash equivalents and restricted cash shown in the statement of cash flows

$

54,223

$

52,880


AVID TECHNOLOGY, INC.

Supplemental Revenue Information

(unaudited - in millions)

Sep 30,

Jun 30,

Sep 30,

2021

2021

2020

Revenue Backlog*

Deferred Revenue

$ 86.8

$ 91.6

$ 81.2

Other Backlog

315.0

309.4

321.7

Total Revenue Backlog

$ 401.8

$ 401.0

$ 402.9

The expected timing of recognition of revenue backlog as of September 30, 2021 is as follows:

2021

2022

2023

Thereafter

Total

Deferred Revenue

$ 32.2

$ 46.4

$ 4.1

$ 4.1

$ 86.8

Other Backlog

35.7

120.5

75.7

83.1

$ 315.0

Total Revenue Backlog

$ 67.9

$ 166.9

$ 79.8

$ 87.2

$ 401.8

*A definition of Revenue Backlog is included in our Form 10-K and the supplemental financial and operational data sheet available on our investor relations webpage at ir.avid.com.


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