GlobeNewswire Inc | Oct 28, 2020 04:05PM EDT

October 28, 2020

14.1% Sequential Revenue Growth as End MarketsBegin to Recover from COVID-19 Downturn

73.9% Year-Over-Year Subscription Revenue Growth Driven by Net Increase of Approximately 27,000 Paid Subscriptions in the Quarter

Operating Income Increased 56.1% Year-Over-Year Driven byImproved Gross Margin and Significantly Reduced Operating Expenses

$18.0 million in Net Cash Provided by Operating Activities Leading to Free Cash Flow of $15.5 million in the Quarter

BURLINGTON, Mass., Oct. 28, 2020 (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, 2020.

Total revenue increased 14.1% sequentially in the third quarter, while declining slightly year-over-year, as many of Avids end markets showed initial signs of recovery from the COVID-19 pandemic. During the third quarter, the Recurring Revenue components of the Companys business remained strong. The Company reported record subscription revenue of $17.9 million, up 73.9% year-over-year, resulting in 6.5% year-over-year growth in Annual Contract Value. Also, in the third quarter, Avid significantly improved its profitability as a result of a 250 basis point year-over-year improvement in gross margin coupled with a ($4.3) million reduction in operating expenses that yielded a 56.1% year-over-year improvement in operating income and an Adjusted EBITDA Margin of 21.4%. The strong operating results for the third quarter resulted in Free Cash Flow of $15.5 million.

The non-Recurring Revenue portions of the Companys business related to product and professional services showed strong signs of sequential recovery during the third quarter, although they continued to be negatively impacted year-over-year by weaker demand as a result of the COVID-19 pandemic. Product revenue from perpetual software licenses and integrated solutions increased 29.5% sequentially to $35.8 million in the third quarter.

During the third quarter, the Company repaid the $22.0 million balance on its revolving credit facility using available cash. As of September 30, 2020, the Company had $49.1 million in cash and cash equivalents. The Companys leverage ratio under its financing agreement decreased to 3.4x as of September 30, 2020 as a result of the repayment of borrowings under the revolving credit facility using the Companys strong Free Cash Flow generation in the quarter, and the year-over-year increase in Adjusted EBITDA in the quarter.

ThirdQuarter 2020 Financial and Business Highlights

-- Subscription revenue was $17.9 million, up 73.9% year-over-year. -- Paid Cloud-enabled software subscriptions increased by approximately 27,000 during the quarter, to approximately 269,000 at September 30, 2020, an increase of 58.1% year-over-year in total paid subscriptions. -- Subscription and Maintenance revenue was $48.7 million, up 11.6% year-over-year. -- Total revenue was $90.4 million, up 14.1% sequentially, and down (3.2%) year-over-year. -- Gross margin was 64.4%, up 250 basis points year-over-year. Non-GAAP Gross Margin was 64.9%, up 280 basis points year-over-year. -- Operating expenses were $45.1 million, a decrease of (8.7%) year-over-year. Non-GAAP Operating Expenses were $41.4 million, a decrease of (12.6%) year-over-year. -- Operating income was $13.1 million, an increase of 56.1% year-over-year. Non-GAAP Operating Income was $17.3 million, an increase of 61.3% year-over-year. -- Adjusted EBITDA was $19.3 million, an increase of 51.2% year-over-year. Adjusted EBITDA Margin was 21.4%, up 770 basis points year-over-year. -- Net income per common share was $0.18, up from $0.07 in the third quarter of 2019. Non-GAAP Net Income per Share was $0.27, up from $0.10 in the third quarter of 2019. -- Net cash provided by operating activities was $18.0 million in the quarter, an increase of $20.5 million compared to Net cash (used in) operating activities of ($2.6) million in the third quarter of 2019. -- Free Cash Flow was $15.5 million in the quarter, an increase of $20.2 million compared to Free Cash Flow of negative ($4.6) million in the third quarter of 2019. -- LTM Recurring Revenue % was 71.2% of the Companys revenue for the 12 months ended September 30, 2020, up from 59.4% for the 12 months ended September 30, 2019. -- Annual Contract Value was $271.9 million as of September 30, 2020, up 6.5% from $255.3 million as of September 30, 2019.

Jeff Rosica, Avids CEO and President, stated, We are pleased with the beginning of the demand turnaround we saw in our non-recurring business during the third quarter, and with the strength of the recurring revenue elements of our business driven by the continued growth of our creative software subscription business and the introduction of enterprise subscription. COVID-19 continued to have some temporary impact on customer demand for parts of our non-recurring product business, but we expect demand to continue the gradual recovery that started in Q3. Mr. Rosica added, We have adjusted our strategy and investments to quickly respond to the changes in the market were seeing, focusing even more sharply on the parts of the business that we believe will drive more profitable growth. We also remain focused on ensuring we have the right cost structure moving forward so that Avid enters 2021 as a stronger and more profitable company.

Ken Gayron, Executive Vice President and Chief Financial Officer of Avid, said, We continued to make substantial progress in driving our higher margin revenue streams and improving our cost structure in the third quarter, yielding strong growth in profitability. Mr. Gayron continued, The improvement in profitability resulted in third quarter Free Cash Flow of $15.5 million, enabling us to fully repay the balance on our revolving credit facility and reduce our accounts payable, further strengthening our balance sheet. As we head into our seasonally highest Free Cash Flow generating quarter and with the improvements we achieved in our profitability during the third quarter, we believe Avid will generate strong Free Cash Flow as we conclude fiscal year 2020, which should enable us to improve our cost of capital and reduce our interest costs.

Conference Call to Discuss ThirdQuarter 2020 Results on October 28, 2020

Avid will host a conference call to discuss its financial results for the third quarter of 2020 on Wednesday, October 28, 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 4778505. 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 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 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 Companys 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 also 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.

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 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 Avid

Avid delivers the most open and efficient media platform, connecting content creation with collaboration, asset protection, distribution, and consumption. Avids preeminent customer community uses Avids comprehensive tools and workflow solutions to create, distribute and monetize the most watched, loved and listened to media in the worldfrom 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, Avids 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.

Contacts Investor contact: PR contact:Whit Rappole Jim SheehanAvid Avidir@avid.com jim.sheehan@avid.com (978) 771-4715

AVID TECHNOLOGY, INC.CondensedConsolidated Statements ofOperations(unaudited - inthousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Net revenues: Products $ 35,775 $ 42,911 $ 98,121 $ 147,633 Services 54,656 50,550 158,044 147,848 Total net 90,431 93,461 256,165 295,481 revenues Cost of revenues: Products 20,957 23,877 58,873 79,535 Services 11,217 11,726 34,322 36,408 Amortization of intangible - - - 3,738 assets Total cost of 32,174 35,603 93,195 119,681 revenues Gross profit 58,257 57,858 162,970 175,800 Operating expenses: Research and 13,623 14,860 42,116 46,325 development Marketing and 19,998 22,334 64,977 73,341 selling General and 10,796 12,034 34,144 38,543 administrative Amortization of intangible - - - 695 assets Restructuring 723 229 1,008 518 costs, net Total operating 45,140 49,457 142,245 159,422 expenses Operating income 13,117 8,401 20,725 16,378 Interest andother expense, (4,423 ) (5,519 ) (15,204 ) (23,994 ) netIncome (loss)before income 8,694 2,882 5,521 (7,616 ) taxes Provision for(benefit from) 707 (283 ) 1,546 155 income taxesNet income (loss) $ 7,987 $ 3,165 $ 3,975 $ (7,771 ) Net income (loss)per common share $ 0.18 $ 0.07 $ 0.09 $ (0.18 ) - basic anddiluted Weighted-averagecommon shares 44,019 42,913 43,665 42,510 outstanding -basicWeighted-averagecommon shares 44,758 43,674 44,498 42,510 outstanding -diluted

AVID TECHNOLOGY, INC. Reconciliations of GAAP FinancialMeasures to Non-GAAP Financial Measures(unaudited - inthousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, GAAP revenue 2020 2019 2020 2019 GAAP revenue $ 90,431 $ 93,461 $ 256,165 $ 295,481 Non-GAAP Gross Profit GAAP gross profit 58,257 57,858 162,970 175,800 Amortization of - - - 3,738 intangible assetsStock-based 433 185 908 420 compensationNon-GAAP Gross Profit $ 58,690 $ 58,043 $ 163,878 $ 179,958 Non-GAAP Gross Margin 64.9 % 62.1 % 64.0 % 60.9 % Non-GAAP Operating ExpensesGAAP operating $ 45,140 $ 49,457 $ 142,245 $ 159,422 expensesLess Amortization of (105 ) - (306 ) (695 ) intangible assetsLess Stock-based (2,865 ) (1,860 ) (7,224 ) (5,368 ) compensationLess Restructuring (723 ) (229 ) (1,008 ) (518 ) costs, netLess Restatement - - - 2 costsLess Acquisition,integration and other - (32 ) 183 (458 ) costsLess Efficiency (79 ) (33 ) (445 ) (191 ) program costsLess COVID-19 related (3 ) - (251 ) - expensesNon-GAAP Operating $ 41,365 $ 47,303 $ 133,194 $ 152,194 Expenses Non-GAAP Operating IncomeGAAP operating income 13,117 8,401 20,725 16,378 Amortization of 105 - 306 4,433 intangible assetsStock-based 3,297 2,045 8,132 5,788 compensationRestructuring costs, 723 229 1,008 518 netRestatement costs - - - (2 ) Acquisition,integration and other - 32 (183 ) 458 costsEfficiency program 79 33 445 191 costsCOVID-19 related 3 - 251 - expensesNon-GAAP Operating $ 17,324 $ 10,740 $ 30,684 $ 27,764 Income Adjusted EBITDA Non-GAAP Operating 17,324 10,740 30,684 27,764 Income (from above)Depreciation 2,004 2,045 6,317 7,037 Adjusted EBITDA $ 19,328 $ 12,785 $ 37,001 $ 34,801 Adjusted EBITDA 21.4 % 13.7 % 14.4 % 11.8 % Margin Non-GAAP Net Income Non-GAAP Operating 17,324 10,740 30,684 27,764 Income (from above)Less Non-GAAPInterest and other (4,423 ) (5,519 ) (15,204 ) (16,623 ) expenseLess Non-GAAP Income (702 ) (663 ) (1,581 ) (1,119 ) TaxNon-GAAP Net Income $ 12,199 $ 4,558 $ 13,899 $ 10,022 Weighted-averagecommon shares 44,019 42,913 43,665 42,510 outstanding - basicWeighted-averagecommon shares 44,758 43,674 44,498 42,510 outstanding - dilutedNon-GAAP Earnings Per $ 0.28 $ 0.11 $ 0.32 $ 0.24 Share - basicNon-GAAP Earnings Per $ 0.27 $ 0.10 $ 0.31 $ 0.24 Share - diluted Free Cash Flow GAAP net cash (usedin) provided by 17,955 (2,551 ) 8,843 1,112 operating activitiesCapital expenditures (2,407 ) (2,052 ) (5,619 ) (5,629 ) Free Cash Flow $ 15,548 $ (4,603 ) $ 3,224 $ (4,517 ) Free Cash Flowconversion of 80.4 % (36.0 %) 8.7 % (13.0 %) Adjusted EBITDA These non-GAAP measures reflect how Avid manages its businesses internally.Avid?snon-GAAP measures may vary from how other companies present non-GAAPmeasures. Non-GAAP financial measures are not based on a comprehensive set ofaccounting rules or principles. This non-GAAPinformation supplements, and isnot intended to represent a measure of performance in accordance with,disclosures required by generally accepted accounting principles, orGAAP.Non-GAAP financial measures should be considered inaddition to, not asa substitute for or superior to, financial measures determined in accordancewith GAAP.

AVID TECHNOLOGY, INC. Condensed Consolidated Balance Sheets(unaudited - in thousands) September 30, December 31, 2020 2019 ASSETS Current assets: Cash and cash equivalents $ 49,142 $ 69,085 Restricted cash 1,664 1,663 Accounts receivable, net of allowances of $1,522 and $958 at September 30, 2020 and 59,683 73,773 December 31, 2019, respectivelyInventories 28,378 29,166 Prepaid expenses 10,526 9,425 Contract assets 15,276 19,494 Other current assets 2,608 6,125 Total current assets 167,277 208,731 Property and equipment, net 18,884 19,580 Goodwill 32,643 32,643 Right of use assets 30,408 29,747 Long-term deferred tax assets, net 6,539 7,479 Other long-term assets 5,651 6,113 Total assets $ 261,402 $ 304,293 LIABILITIES AND STOCKHOLDERS' DEFICITCurrent liabilities: Accounts payable $ 13,450 $ 39,888 Accrued compensation and benefits 30,452 19,524 Accrued expenses and other current 34,758 36,759 liabilitiesIncome taxes payable 1,946 1,945 Short-term debt 4,135 30,554 Deferred revenues 70,858 83,589 Total current liabilities 155,599 212,259 Long-term debt 204,074 199,034 Long-term deferred revenues 10,306 14,312 Long-term lease liabilities 29,473 28,127 Other long-term liabilities 6,162 5,646 Total liabilities 405,614 459,378 Stockholders' deficit: Common stock 439 430 Additional paid-in capital 1,033,599 1,027,824 Accumulated deficit (1,175,434 ) (1,179,409 ) Accumulated other comprehensive loss (2,816 ) (3,930 ) Total stockholders' deficit (144,212 ) (155,085 ) Total liabilities and stockholders' $ 261,402 $ 304,293 deficit

AVID TECHNOLOGY, INC. Condensed Consolidated Statements of Cash Flows(unaudited - in thousands) Nine Months Ended September 30, 2020 2019 Cash flows from operating activities: Net income (loss) $ 3,975 $ (7,771 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 6,317 11,469 Provision for (recovery from) 1,349 (156 ) doubtful accounts Stock-based compensation expense 8,132 5,788 Non-cash provision for 653 - restructuring Non-cash interest expense 3,408 7,054 Loss on extinguishment of debt - 2,878 Unrealized foreign currency 219 237 transaction losses Benefit from (provision for) 997 (886 ) deferred taxes Changes in operating assets and liabilities: Accounts receivable 12,741 14,192 Inventories 788 788 Prepaid expenses and other 1,390 (3,526 ) assets Accounts payable (26,440 ) (3,661 ) Accrued expenses, compensation and benefits 7,752 (13,035 ) and other liabilities Income taxes payable 81 372 Deferred revenue and (12,519 ) (12,631 ) contract assetsNet cash provided by operating activities 8,843 1,112 Cash flows from investing activities: Purchases of property and equipment (5,619 ) (5,629 ) Net cash used in investing activities (5,619 ) (5,629 ) Cash flows from financing activities: Proceeds from revolving line of credit 22,000 - Repayment on revolving line of credit (22,000 ) - Proceeds from long-term debt 7,800 79,286 Repayment of debt (1,474 ) (1,113 ) Payments for repurchase of outstanding (28,867 ) (76,269 ) Notes Proceeds from the issuance of common stock 252 309 under employee stock plans Common stock repurchases for tax withholdings for net settlement of equity (2,610 ) (3,444 ) awards Unwind capped call cash receipt 875 27 Payments for credit facility issuance (289 ) (5,979 ) costsNet cash used in financing activities (24,313 ) (7,183 ) Effect of exchange rate changes on cash, cash 1,394 (615 ) equivalents, and restricted cashNet decrease in cash, cash equivalents, and (19,695 ) (12,315 ) restricted cashCash, cash equivalents and restricted cash at 72,575 68,094 beginning of the periodCash, cash equivalents and restricted cash at $ 52,880 $ 55,779 end of the periodSupplemental information: Cash and cash equivalents $ 49,142 $ 52,289 Restricted cash 1,664 1,664 Restricted cash included in other long-term 2,074 1,826 assetsTotal cash, cash equivalents and restricted $ 52,880 $ 55,779 cash shown in the statement of cash flows

AVID TECHNOLOGY, INC. Supplemental Revenue Information(unaudited - in millions) Sep Jun Sep 30, 30, 30, 2020 2020 2019 Revenue Backlog* Deferred Revenue $ $ $ 81.2 85.7 85.0Other Backlog 321.7 337.9 358.6 Total Revenue Backlog $ $ $ 402.9 423.6 443.6 The expected timing of recognition of revenue backlog as of September 30, 2020 is as follows: 2020 2021 2022 Thereafter Total Deferred Revenue $ $ $ 4.8 $ 3.2 $ 31.9 41.3 81.2Other Backlog 39.6 123.1 79.9 79.1 $ 321.7Total Revenue Backlog $ $ $ $ 82.3 $ 71.5 164.4 84.7 402.9 *A definition of Revenue Backlog is included in our Form 10-K and thesupplemental financial and operational data sheet available on our investor relations webpage at ir.avid.com.