Avid® (NASDAQ: AVID), a leading technology provider that powers the
media and entertainment industry, today announced preliminary
results for the third quarter ended September 30, 2019, based upon
preliminary unaudited financial information.
Revenue for the third quarter is expected to be between $92.5
million and $94.5 million, below the Company’s previous guidance of
$101.0 million to $109.0 million, provided on August 5, 2019.
On a GAAP basis, operating income for the third quarter is
expected to be between $8.0 million and $9.0 million. On a
non-GAAP basis, Adjusted EBITDA for the third quarter is expected
to be between $12.0 million and $13.0 million, below the Company’s
previous guidance of $13.5 million to $18.5 million. The
difference between the expected GAAP and non-GAAP results is
primarily stock-based compensation expense and depreciation
expense.
The revenue shortfall during the third quarter was due primarily
to:
- Greater than expected challenges implementing the new supply
chain model, including ramping up the new production lines, which
resulted in approximately $8.1 million of hardware orders that were
unfilled at the end of the third quarter that the Company expects
to ship during the fourth quarter. The Company remains
confident that the transition to the new outsourced manufacturing
partner will deliver the cost structure improvements and reductions
in inventory that the Company has previously disclosed.
- The balance of the revenue shortfall was due to product sales
to enterprise clients that fell short of expectations, and that
mainly impacted revenue in the storage and media management product
categories.
These negative factors were partially offset by expected strong
results in the Company’s subscription software revenue and an
expected sequential increase in maintenance revenue.
“Although we are disappointed with our performance during the
third quarter, we remain enthusiastic about the long-term
trajectory of the Company and the opportunity for improving growth
and profitability,” said Jeff Rosica, CEO and President. Mr.
Rosica continued, “We expect to report strong growth in our
subscription software business and sequentially higher maintenance
revenue for the third quarter.”
During the third quarter of 2019, the Company achieved the
following:
- Software subscriptions were approximately 170,000 as of
September 30, 2019, up 46% over September 30, 2018. The
increase in subscriptions of 23,000 during the quarter represents
the largest ever quarterly increase.
- Software subscription revenue for the third quarter is expected
to be between $10.0 million and $10.5 million. From a cash
perspective, software subscription billings increased approximately
49% year-over-year in the third quarter, slightly ahead of the
increase in the number of subscriptions, due in part to pricing
increases during the third quarter.
- Maintenance revenue for the third quarter is expected to be
between $32.8 million and $33.8 million, sequentially up from the
second quarter of 2019. During 2019, the Company has been
experiencing a headwind from ending the sale of support contracts
for certain legacy storage products at the end of 2018, which
reduced maintenance revenues year-over-year by approximately ($2.2)
million in the third quarter, and which is expected to fully
dissipate on a sequential basis by the second quarter of 2020.
- Annual Contract Value was approximately $258 million as of
September 30, 2019, up approximately 4% year-over year, and LTM
Recurring Revenue was approximately 59% for the twelve months ended
September 30, 2019.
- Net cash provided by (used in) operating activities for the
third quarter is expected to be between ($3.0) million and ($2.0)
million. Free Cash Flow for the third quarter is expected to
be between ($5.1) million and ($4.1) million, an improvement of
between $1.3 million and $2.3 million over the third quarter of
2018.
- Cash balance at September 30, 2019 was $52.3 million.
Total debt at September 30, 2019 was $229.3 million.
These preliminary, unaudited results are based on management’s
preliminary review of operations for the quarter ended September
30, 2019, and remain subject to completion of the Company’s
customary quarterly closing and review procedures.
Explanations regarding our use of non-GAAP financial measures
and operational metrics and related definitions are provided in the
section below entitled "Non-GAAP Financial Measures and Operational
Metrics".
Mr. Rosica continued, “While challenging in the short term, we
believe the transition to the new manufacturing partner will create
longer term cost efficiencies and will provide a working capital
benefit from lower inventory levels as we move to more of a lean
supply chain. We expect both maintenance and subscription
revenues to grow sequentially in the third quarter. All these
factors combined with the expected third quarter results contribute
to our revised full year 2019 guidance.”
Revised Full Year 2019 Guidance
Avid is updating its guidance for revenue, Adjusted EBITDA and
Non-GAAP Net Income per Share, and reaffirming its guidance for
Free Cash Flow for full-year 2019. While the Company believes
the factors that negatively impacted revenue in the third quarter
are largely temporary, it does not expect to recover all of the
revenue shortfall during the fourth quarter, and so is updating its
full-year 2019 guidance.
($ millions, except per share amounts) |
PriorFull-Year 2019 |
RevisedFull-Year 2019 |
Revenue |
$420 - $430 |
$405 - $415 |
Adjusted EBITDA |
$60 - $65 |
$55 - $60 |
Free Cash Flow |
$12 - $17 |
$12 - $17 |
Non-GAAP Net Income per Share |
$0.60 - $0.72 |
$0.50 - $0.60 |
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.
Third Quarter 2019 Earnings Release and Conference Call
scheduled for November 7, 2019
Avid also announced that Mr. Rosica and Ken Gayron, Executive
Vice President and Chief Financial Officer, will host a conference
call on Thursday, November 7, 2019 at 5:00 p.m. ET to discuss the
company's financial results for the third quarter of 2019, which
Avid expects to publish after the market close that day.
Conference call information:
- Date & time: Thursday, November 7, 2019, 5:00pm
EST
- Dial-in number: +1 334-777-6978
- Confirmation code: 7163009
- Webcast link (listen only) and presentation slides:
http://ir.avid.com
- Replay number: +1 719-457-0820, passcode:
7163009
A replay of the conference call and webcast will be available
for a limited time by dialing the replay number above or by
visiting Avid’s investor relations website at ir.avid.com.
Non-GAAP Financial Measures and Operational
Metrics
Avid includes non-GAAP financial measures in this press release,
including Adjusted EBITDA and Free Cash Flow. The Company
defines Adjusted EBITDA as GAAP operating income excluding
amortization of intangible assets, stock-based compensation,
restructuring costs, net, restatement costs, acquisition
integration and other costs, and depreciation expense. The
Company defines Free Cash Flow as net cash (used in) provided by
operating activities less capital expenditures. The Company
also includes the operational metrics of Cloud-enabled software
subscriptions, 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 August 5, 2019.
The earnings release also includes forward-looking non-GAAP
financial measures, including Adjusted EBITDA , Free Cash Flow and
Non-GAAP Net Income per Share. Reconciliations of these
forward-looking non-GAAP financial measures are not included in
this release due to the high variability and difficulty in making
accurate forecasts and projections of some of the excluded
information, together with some of the excluded information not
being ascertainable or accessible at this time. As a result, the
Company is 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, 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. Among other things, this press release includes
estimated results of operations for the year ending December 31,
2019, which estimates are based on a variety of assumptions about
key factors and metrics that will determine our future results of
operations, including, for example, anticipated market uptake of
new products and market-based cost inflation. Other forward-looking
statements include, without limitation, statements based upon or
otherwise incorporating judgments or estimates relating to future
performance such as future operating results and expenses;
earnings; backlog; revenue backlog conversion rate; product mix and
free cash flow; Recurring Revenue and Annual Contract Value; our
future strategy and business plans; our product plans, including
products under development, such as cloud and subscription based
offerings; our ability to raise capital and our liquidity. The
projected future results of operations, and the other
forward-looking statements in this release, 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 our cost saving
strategies, 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; 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; and the possibility of legal
proceedings adverse to our company. 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. Other factors that could adversely affect our
business and prospects are set forth in our public filings with the
SEC. Forward-looking statements contained herein are made only as
to the date of this press release and we undertake no obligation to
update or revise any forward-looking statements whether as a result
of new information, future events or otherwise, 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™, 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.
© 2019 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:
Whit Rappole
Avid
ir@avid.com
(978) 275-2032
PR contact:
Jim Sheehan
Avid
jim.sheehan@avid.com
(978) 640-3152
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