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Avid Technology Announces Second Quarter 2021 Results

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·19 min read
In this article:
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19.7% Year-Over-Year Revenue Growth, driven by Continued Subscription Growth and Recovery in Integrated Solutions

$6.6 million in Net Cash Provided by Operating Activities and Free Cash Flow of $5.6 million in the Quarter

Net Income per Share of $0.15 and Non-GAAP Net Income per Share of $0.25, a 108% Improvement Year-Over-Year

Full Year 2021 Guidance: Raises Free Cash Flow Guidance and Reaffirms All Other Guidance

BURLINGTON, Mass., Aug. 03, 2021 (GLOBE NEWSWIRE) -- Avid® (NASDAQ: AVID), a leading technology provider that powers the media and entertainment industry, today announced its financial results for the second quarter ended June 30, 2021, provided guidance for the third quarter of 2021, raised full-year guidance for Free Cash Flow, and reaffirmed all other full-year 2021 guidance.

Total revenue increased 19.7% year-over-year in the second quarter, driven by (i) continued growth in Subscription revenue, which was $21.5 million, an increase of 30.9% year-over-year and (ii) a recovery in Integrated Solutions revenue, which was $31.3 million, an increase of 50.5% year-over-year.

During the second quarter, net income was $7.0 million, an increase of 279.7% year-over-year, and Adjusted EBITDA was $15.8 million, an increase of 17.1% year-over-year. The improvement in profitability also resulted in significant year-over-year improvement in net cash provided by operating activities to $6.6 million, and Free Cash Flow to $5.6 million.

Second Quarter 2021 Financial and Business Highlights

  • Subscription revenue was $21.5 million, an increase of 30.9% year-over-year.

  • Paid Cloud-enabled software subscriptions, including MediaCentral subscriptions, increased by 43.2%, year-over-year to approximately 346,000 at June 30, 2021, and increased by approximately 19,000 from March 31, 2021.

  • Subscription and Maintenance revenue was $52.0 million, an increase of 10.5% year-over-year.

  • Total revenue was $94.9 million, an increase of 19.7% year-over-year.

  • LTM Recurring Revenue % was 76.1% of the Company’s revenue for the 12 months ended June 31, 2021, up from 69.8% for the 12 months ended June 30, 2020.

  • Annual Contract Value was $293.1 million as of June 30, 2021, an increase of 10.5% from $265.3 million as of June 30, 2020.

  • Gross margin was 63.4%, a decrease of 160 basis points year-over-year. Non-GAAP Gross Margin was 63.9%, a decrease of 150 basis points year-over-year. One-time items of $1.2M negatively impacted GAAP and Non-GAAP Gross Margin by 120 basis points in the second quarter of 2021.

  • Operating expenses were $51.1 million, an increase of 17.6% year-over-year, as the second quarter of 2020 included significant temporary cost savings initiatives put in place due to the COVID-19 pandemic. Non-GAAP Operating Expenses were $47.0 million, an increase of 16.0% year-over-year.

  • Net income was $7.0 million, an increase of 279.7% year-over-year. Net income was 7.4% of revenue, an increase of 510 basis points year-over year. Non-GAAP Net Income was $11.6 million, an increase of 128.5% year-over-year. Non-GAAP Net Income was 12.2% of revenue, an increase of 580 basis points year-over-year.

  • Net income per common share was $0.15, up from net income per common share of $0.04 in the second quarter of 2020. Non-GAAP Net Income per Share was $0.25, up from Non-GAAP Net Income per Share of $0.12 in the second quarter of 2020.

  • Adjusted EBITDA was $15.8 million, an increase of 17.1% year-over-year. Adjusted EBITDA Margin was 16.7%, a year-over-year decrease of 30 basis points, as the second quarter of 2020 included significant temporary cost savings initiatives put in place due to the COVID-19 pandemic.

  • Net cash provided by operating activities was $6.6 million in the quarter, an increase of $10.1 million compared to Net cash used in operating activities of ($3.5) million in the prior year period.

  • Free Cash Flow was $5.6 million in the quarter, an increase of $10.8 million from ($5.2) million in the prior year period.

Jeff Rosica, Avid’s Chief Executive Officer and President, stated, “We are pleased by the continued strong performance from our Subscriptions business and by the recovery of our Integrated Solutions business, including storage and live sound, during the second quarter.” Mr. Rosica continued, “We experienced gradual improvement in end market demand during the second quarter, and expect that the momentum from this recovery trend will continue into the second half of 2021 as we introduce several new product innovations across our portfolio.”

Ken Gayron, Chief Financial Officer and Executive Vice President of Avid, added, “We continued to grow our recurring revenue streams and deliver year-over-year growth in profitability and Free Cash Flow during the second quarter.” Mr. Gayron continued, “Having delivered this strong first half performance and favorable trajectory we are raising our 2021 Free Cash Flow Guidance and reaffirming all other items of our 2021 annual guidance.”

Third Quarter and Full Year 2021 Guidance

For the third quarter of 2021, Avid is providing guidance for Revenue, Subscription & Maintenance Revenue, Non-GAAP Net Income per Share and Adjusted EBITDA. Avid has also increased its full-year 2021 guidance for Free Cash Flow and reaffirmed its full-year 2021 guidance for Revenue, Subscription & Maintenance Revenue, Non-GAAP Net Income per Share and Adjusted EBITDA that was issued on May 5, 2021.

($ in millions, except per share amounts)

Third Quarter 2021

Revenue

$94 – $100

Subscription & Maintenance Revenue

$51 – $55

Non-GAAP Net Income per Share

$0.20 – $0.28

Adjusted EBITDA

$14 – $18

Full-Year 2021

Revenue

$382 – $402

Subscription & Maintenance Revenue

$217 – $225

Non-GAAP Net Income per Share

$1.05 – $1.27

Adjusted EBITDA

$69 – $79

Free Cash Flow

$49 – $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 Q2 2021 Earnings Call presentation posted on Avid’s Investor Relations website at ir.Avid.com.

Conference Call to Discuss Second Quarter 2021 Results on August 3, 2021

Avid will host a conference call to discuss its financial results for the first quarter on Tuesday, August 3, 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 +1 929-477-0593 and referencing confirmation code 3169916. Please connect at least 15 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 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. 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

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

Net revenues:

Products

$

37,178

$

27,635

$

70,445

$

62,346

Services

57,698

51,646

118,795

103,388

Total net revenues

94,876

79,281

189,240

165,734

Cost of revenues:

Products

20,083

16,954

39,576

37,916

Services

14,655

10,765

28,110

23,105

Total cost of revenues

34,738

27,719

67,686

61,021

Gross profit

60,138

51,562

121,554

104,713

Operating expenses:

Research and development

16,093

13,068

31,510

28,493

Marketing and selling

21,354

19,690

42,098

44,979

General and administrative

13,678

10,604

27,313

23,348

Restructuring costs, net

15

140

1,089

285

Total operating expenses

51,140

43,502

102,010

97,105

Operating income

8,998

8,060

19,544

7,608

Interest and other expense, net

(1,633

)

(5,498

)

(7,306

)

(10,781

)

Income (loss) before income taxes

7,365

2,562

12,238

(3,173

)

Provision for income taxes

359

717

841

839

Net income (loss)

$

7,006

$

1,845

$

11,397

$

(4,012

)

Net income (loss) per common share - basic

$

0.15

$

0.04

$

0.25

$

(0.09

)

Net income (loss) per common share - diluted

$

0.15

$

0.04

$

0.25

$

(0.09

)

Weighted-average common shares outstanding - basic

45,211

43,719

44,887

43,486

Weighted-average common shares outstanding - diluted

46,550

44,180

46,420

43,486


AVID TECHNOLOGY, INC.

Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures

(unaudited - in thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

GAAP Revenue

GAAP Revenue

$

94,876

$

79,281

$

189,240

$

165,734

Non-GAAP Gross Profit

GAAP Gross Profit

60,138

51,562

121,554

104,713

Stock-based compensation

478

275

918

475

Non-GAAP Gross Profit

$

60,616

$

51,837

$

122,472

$

105,188

GAAP Gross Margin

63.4

%

65.0

%

64.2

%

63.2

%

Non-GAAP Gross Margin

63.9

%

65.4

%

64.7

%

63.5

%

Non-GAAP Operating Expenses

GAAP Operating Expenses

51,140

43,502

102,010

97,105

Less Amortization of intangible assets

(105

)

(105

)

(210

)

(201

)

Less Stock-based compensation

(3,159

)

(2,450

)

(6,136

)

(4,359

)

Less Restructuring costs, net

(15

)

(140

)

(1,089

)

(285

)

Less Acquisition, integration and other costs

(838

)

-

(1,207

)

183

Less Efficiency program costs

-

(235

)

(48

)

(366

)

Less COVID-19 related expenses

(20

)

(62

)

(22

)

(248

)

Non-GAAP Operating Expenses

$

47,003

$

40,510

$

93,298

$

91,829

Non-GAAP Operating Income and Adjusted EBITDA

GAAP net income (loss)

7,006

1,845

11,397

(4,012

)

Interest and other expense

1,633

5,498

7,306

10,781

Provision for income taxes

359

717

841

839

GAAP Operating Income

8,998

8,060

19,544

7,608

Amortization of intangible assets

105

105

210

201

Stock-based compensation

3,637

2,726

7,054

4,835

Restructuring costs, net

15

140

1,089

285

Acquisition, integration and other costs

838

-

1,207

(183

)

Efficiency program costs

-

235

48

366

COVID-19 related expenses

20

62

22

248

Non-GAAP Operating Income

$

13,613

$

11,328

$

29,174

$

13,360

Depreciation

2,202

2,172

4,321

4,314

Adjusted EBITDA

$

15,815

$

13,500

$

33,495

$

17,674

GAAP net income margin

7.4

%

2.3

%

6.0

%

-2.4

%

Adjusted EBITDA Margin

16.7

%

17.0

%

17.7

%

10.7

%

Non-GAAP Net Income

GAAP net income (loss)

7,006

1,845

11,397

(4,012

)

Amortization of intangible assets

105

105

210

201

Stock-based compensation

3,637

2,726

7,054

4,835

Restructuring costs, net

15

140

1,089

285

Acquisition, integration and other costs

838

-

1,207

(183

)

Efficiency program costs

-

235

48

366

COVID-19 related expenses

20

62

22

248

Loss on Extinguishment of debt

-

-

3,748

7

Tax impact of non-GAAP adjustments

(10

)

(31

)

(159

)

(41

)

Non-GAAP Net Income

$

11,611

$

5,082

$

24,616

$

1,706

Weighted-average share count (Basic)

45,211

43,719

44,887

43,486

Weighted-average share count (Diluted)

46,550

44,180

46,420

43,486

Non-GAAP Earnings per Share (Basic)

$

0.26

$

0.12

$

0.55

$

0.04

Non-GAAP Earnings per Share (Diluted)

$

0.25

$

0.12

$

0.53

$

0.04

Free Cash Flow

Net cash provided by operating activities

6,585

(3,507

)

18,898

(9,112

)

Capital expenditures

(1,021

)

(1,733

)

(2,275

)

(3,212

)

Free Cash Flow

$

5,564

$

(5,240

)

$

16,623

$

(12,324

)

Free Cash Flow conversion from Adjusted EBITDA

35.2

%

-38.8

%

49.6

%

-69.7

%



AVID TECHNOLOGY, INC.

Condensed Consolidated Balance Sheets

(unaudited - in thousands)

June 30,

December 31,

2021

2020

Assets

Current Assets

Cash and Cash Equivalents

$

53,337

$

79,899

Restricted Cash

1,422

1,422

Accounts receivable, net of allowances of $1,369 and $1,478

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

58,746

78,614

Inventories

24,242

26,568

Prepaid Expenses

8,774

6,044

Contract Assets

21,828

18,579

Other Current Assets

2,265

2,366

Total Current Assets

170,614

213,492

Property and Equipment, Net

14,762

16,814

Goodwill

32,643

32,643

Right of Use Assets

26,561

29,430

Deferred Tax Assets, Net

6,254

6,801

Other Long-Term Assets

5,871

5,958

Total Assets

$

256,705

$

305,138

Liabilities and Stockholders' Deficit

Current Liabilities

Accounts Payable

$

21,775

$

21,823

Accrued Compensation and Benefits

23,103

29,105

Accrued Expenses and Other Current Liabilities

32,904

42,264

Income Taxes Payable

1,648

1,664

Short-Term Debt

16,961

4,941

Deferred Revenues

80,745

87,974

Total Current Liabilities

177,136

187,771

Long-Term Debt

165,178

202,759

Long-Term Deferred Revenues

10,838

11,284

Long-Term Lease Liabilities

25,819

28,462

Other Long-Term Liabilities

7,476

7,786

Total Liabilities

386,447

438,062

Stockholders' Deficit

Common Stock

452

442

APIC

1,029,675

1,036,658

Accumulated Deficit

(1,156,950

)

(1,168,347

)

Accumulated Other Comprehensive Loss

(2,919

)

(1,677

)

Total Stockholders' Deficit

(129,742

)

(132,924

)

Total Liabilities and Stockholders' Deficit

$

256,705

$

305,138



AVID TECHNOLOGY, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited - in thousands)

Six Months Ended

June 30,

2021

2020

Cash flows from operating activities:

Net income (loss)

$

11,397

$

(4,012

)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization

4,321

4,330

Provision for doubtful accounts

270

1,205

Stock-based compensation expense

6,702

4,835

Non-cash provision for restructuring

927

-

Non-cash interest expense

257

3,433

Loss on extinguishment of debt

2,579

-

Unrealized foreign currency transaction gains

(1,468

)

(112

)

Benefit from deferred taxes

547

383

Changes in operating assets and liabilities:

Accounts receivable

19,599

18,783

Inventories

2,326

(484

)

Prepaid expenses and other assets

(2,629

)

(547

)

Accounts payable

(48

)

(22,003

)

Accrued expenses, compensation and benefits and other liabilities

(14,942

)

(4,057

)

Income taxes payable

(16

)

66

Deferred revenue and contract assets

(10,924

)

(10,932

)

Net cash provided by (used in) operating activities

18,898

(9,112

)

Cash flows from investing activities:

Purchases of property and equipment

(2,275

)

(3,212

)

Net cash used in investing activities

(2,275

)

(3,212

)

Cash flows from financing activities:

Proceeds from revolving line of credit

-

22,000

Proceeds from long-term debt

180,000

7,800

Repayment of debt

(205,824

)

(695

)

Payments for repurchase of outstanding Notes

-

(28,867

)

Proceeds from the issuance of common stock under employee stock plans

363

-

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

(14,038

)

(2,357

)

Payment for loss 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) provided by financing activities

(43,242

)

(1,533

)

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

56

682

Net (decrease) increase in cash, cash equivalents, and restricted cash

(26,563

)

(13,175

)

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

$

57,075

$

59,400

Supplemental information:

Cash and cash equivalents

$

53,337

$

55,662

Restricted cash

1,422

1,663

Restricted cash included in other long-term assets

2,316

2,075

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

$

57,075

$

59,400



AVID TECHNOLOGY, INC.

Supplemental Revenue Information

(unaudited - in millions)

Jun 30,

Mar 31,

Jun 30,

2021

2021

2020

Revenue Backlog*

Deferred Revenue

$ 91.6

$ 97.5

$ 85.7

Other Backlog

309.4

319.3

337.9

Total Revenue Backlog

$ 401.0

$ 416.8

$ 423.6

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

2021

2022

2023

Thereafter

Total

Deferred Revenue

$ 57.9

$ 27.0

$ 3.4

$ 3.3

$ 91.6

Other Backlog

61.3

100.0

76.3

71.8

$ 309.4

Total Revenue Backlog

$ 119.2

$ 127.0

$ 79.7

$ 75.1

$ 401.0

*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.