Avid Technology Announces Q1 2022 Results

Avid Technology, Inc.

Subscription Revenue of $33.0M, an Increase of 32.5% Year-Over-Year, Driven by Net Increase of 21,200 Paid Subscriptions in the Quarter

Total Revenue of $100.6M, an Increase of 6.7% Year-Over-Year

Gross Margin of 66.3%, an Increase of 120 Basis Points Year-Over-Year

Net Income per Common Share of $0.23 and Non-GAAP Earnings per Share of $0.33, an Increase of 17.9% Year-Over-Year

BURLINGTON, Mass., May 04, 2022 (GLOBE NEWSWIRE) -- Avid® (NASDAQ: AVID), a leading technology provider that powers the media and entertainment industry, today announced its financial results for the first quarter of 2022, which ended on March 31, 2022.

Total revenue increased 6.7% year-over-year in the first quarter, led by enterprise and creative subscription growth as well as favorable demand across product offerings, continuing the sustained growth trend with the fifth consecutive quarter of year-over-year revenue growth. During the first quarter, the recurring revenue components of the Company’s business remained strong with subscription revenue of $33.0 million, up 32.5% year-over-year, and subscription & maintenance revenue of $61.3 million, up 12.0% year-over-year.

The revenue growth, combined with improved gross margin, resulted in a 17.9% year-over-year improvement in Non-GAAP Earnings per Share to $0.33.

First Quarter 2022 Financial and Business Highlights

• Subscription revenue was $33.0 million, an increase of 32.5% year-over-year.

• Paid Cloud-enabled software subscriptions increased by 24.1% year-over-year to approximately 431,800 as of March 31, 2022, and increased by approximately 21,200 during the first quarter.

• Subscription and Maintenance revenue was $61.3 million, up 12.0% year-over-year.

• Total revenue was $100.6 million, an increase of 6.7% year-over-year.

• Gross margin was 66.3%, an increase of 120 basis points year-over-year. Non-GAAP Gross Margin was 66.8%, an increase of 120 basis points year-over-year.

• Operating expenses were $53.5 million, an increase of 5.1% year-over-year. Non-GAAP Operating Expenses were $49.7 million, an increase of 7.4% year-over-year.

• Net income was $10.6 million, an increase of 141.1% year-over-year. Non-GAAP Net Income was $14.8 million, an increase of 13.6% year-over-year.

• Adjusted EBITDA was $19.3 million, an increase of 9.0% year-over-year. Adjusted EBITDA Margin was 19.2%, an increase of 50 basis points year-over-year.

• Net income per common share was $0.23, an increase of 130.0% year-over-year. Non-GAAP Earnings per Share was $0.33, an increase of 17.9% year-over-year.

• Net cash provided by operating activities was $7.9 million in the quarter, a decrease of ($4.4) million compared to the prior year period due to working capital changes.

• Free Cash Flow was $4.7 million in the quarter, a decrease of ($6.4) million compared to the prior year period due to working capital changes.

• LTM Recurring Revenue % was 79.1% of the Company’s revenue for the 12 months ended March 31, 2022, up from 75.3% for the 12 months ended March 31, 2021.

• Annual Contract Value was $339.0 million as of March 31, 2022, up 12.3% from $302.0 million as of March 31, 2021

• Repurchased 354,472 shares for $10.8 million during the first quarter, under the $115 million share repurchase authorization announced on September 9, 2021.

Jeff Rosica, Avid’s CEO and President, stated, “We continued to have success growing our subscription business as more enterprise customers adopt subscription licensing coupled with continued strength in subscriptions for creative individuals. While we continue to see strong customer demand and business activity for our solutions, we have seen a tightening of supply for several components for our audio integrated solutions at the end of the first quarter that impacted our ability to meet customer orders, resulting in first quarter revenue at the lower end of our guidance.” Mr. Rosica added, “The global supply chain continues to present challenges, which could cause some uneven quarterly performance in the near-term. We currently believe these challenges to be temporary, and remain confident in our growing subscription and healthy maintenance business and in our ability to meet our 2022 targets. We’ve recently introduced several exciting new product enhancements for Pro Tools, Media Composer and MediaCentral, and in April, we added new pricing tiers for Pro Tools entry-level and high-end users, as we continue to execute on our subscription growth strategy.”

Ken Gayron, Executive Vice President and Chief Financial Officer of Avid, said, “We continued to make substantial progress in driving our higher gross margin subscription revenue during the first quarter. While we had strong customer demand for audio integrated solutions, we ended the quarter with about $10 million more integrated solutions backlog than typical because of tightening supply chain constraints late in the quarter. Notwithstanding these short-term challenges, we continue to feel confident in our business trajectory and our strategy for profitable growth. Consequently, we are not changing our full-year 2022 guidance.” Mr. Gayron continued, “Additionally, given our high confidence in our strategy and long-term model, and with the goal of enhancing shareholder returns, we continued to repurchase shares in the first quarter under the Company’s share repurchase program.”

Second Quarter and Full Year 2022 Guidance

For the second quarter of 2022, Avid is providing guidance for Revenue, Subscription & Maintenance Revenue, Non-GAAP Earnings per Share and Adjusted EBITDA. For the full year 2022, Avid is affirming its guidance for Revenue, Subscription & Maintenance Revenue, Non-GAAP Earnings per Share, Adjusted EBITDA and Free Cash Flow, that was issued on March 1, 2022.

($ in millions, except per share amounts)	Q2 2022 Guidance
Revenue	$92.0 - $104.0
Subscription & Maintenance Revenue	$60.0 - $64.0
Non-GAAP Earnings per Share	$0.19 - $0.32
Adjusted EBITDA	$13.5 - $19.5
Q2 Non-GAAP Earnings per Share assumes 45.5 million shares outstanding.
	Full Year 2022 Guidance
Revenue	$430 - $450
Subscription & Maintenance Revenue	$266 - $274
Non-GAAP Earnings per Share	$1.40 - $1.51
Adjusted EBITDA	$84 - $94
Free Cash Flow	$60 - $67
2022 Non-GAAP Earnings per Share assumes 46.2 million shares outstanding.

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 Q1 2022 Business Update presentation posted on Avid’s Investor Relations website at ir.avid.com.

Conference Call to Discuss First Quarter 2022 Results on May 4, 2022

Avid will host a conference call to discuss its financial results for the first quarter 2022 on Wednesday, May 4, 2022 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 & Presentations tab at ir.avid.com. 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 and can be accessed on the Events & Presentations tab of the Avid Investor Relations website shortly after the completion of the call.

2022 Investor Day and Conference Participation

Avid will host an Investor Day on Tuesday, May 24, 2022, where our executive team will provide a detailed update of its business and strategy. The online event is open to all investors. Please visit the Events and Presentations page on ir.avid.com for event details and registration. The Investor Day presentation will also be available for a limited time on the Avid Investor Relations website shortly after the completion of the event.

In addition, members of our executive team will be participating in upcoming investor conferences. CEO Jeff Rosica will participate in a fireside chat at the 50^th Annual J.P. Morgan Global Technology, Media and Communications Conference on Wednesday, May 25, 2022, at 2:30 pm ET. CFO Ken Gayron will participate in a fireside chat at the B. Riley 22^nd Annual Institutional Investor Conference on Thursday, May 26, 2022, at 4:00 pm ET. Investors are invited to view the live webcasts of these sessions. Viewing details will be available at the events and presentations page of our investor relations website at ir.avid.com/events-and-presentations.

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 Earnings 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 Earnings 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 ongoing coronavirus (COVID-19) pandemic and subsequent variants on our business, suppliers, consumers, customers and employees; economic, social, and political instability, security concerns, and the risk of war, armed conflict and/or cyber conflict, particularly originating in, and complicated by, areas of heightened geopolitical tension and open conflict such as Ukraine, where we have outsourced research and development activities, Russia, and bordering territories; 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, armed conflict and related sanctions, weather conditions, or health pandemics; disruptions, inefficiencies, and/or complications in our operations and/or dynamic and unpredictable global supply chain , including interruptions, delays, complications, and other impacts related to armed conflict and/or cyber conflict and related international sanctions and reprisals and the ongoing COVID-19 pandemic and subsequent variants; the costs, disruption, and diversion of management's attention due to the ongoing COVID-19 pandemic and subsequent variants, armed conflict and/or cyber conflict and related international sanctions and reprisals; 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.

Avid Powers Greater Creators

People who create media for a living become greater creators with Avid’s award-winning technology solutions to make, manage and monetize today’s most celebrated video and audio content—from iconic movies and bingeworthy TV series, to network news and sports, to recorded music and the live stage. What began more than 30 years ago with our invention of nonlinear digital video editing has led to individual artists, creative teams and organizations everywhere subscribing to our powerful tools and collaborating securely in the cloud. We continue to re-imagine the many ways editors, musicians, producers, journalists and other content creators will bring their stories to life. Discover the possibilities at avid.com and join the conversation on social media with the multitude of brilliant creative people who choose Avid for a lifetime of success.

© 2022 Avid Technology, Inc., Avid and its logo are property of Avid. All rights reserved. Other trademarks are property of their respective owners.

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 March 31,
			2022				2021
Net revenues:
Subscription		$	32,954			$	24,868
Maintenance			28,327				29,852
Integrated solutions and other			39,368				39,644
Total net revenues			100,649				94,364
Cost of revenues:
Subscription			5,602				2,615
Maintenance			5,277				5,574
Integrated solutions and other			23,006				24,759
Total cost of revenues			33,885				32,948
Gross profit			66,764				61,416
Operating expenses:
Research and development			16,736				15,417
Marketing and selling			21,927				20,744
General and administrative			14,811				13,635
Restructuring costs, net			15				1,074
Total operating expenses			53,489				50,870
Operating income			13,275				10,546
Interest expense, net			(1,476	)			(2,118	)
Other expense, net			(87	)			(3,555	)
Income before income taxes			11,712				4,873
Provision for income taxes			1,126				482
Net income		$	10,586			$	4,391
Net income per common share - basic		$	0.24			$	0.10
Net income per common share - diluted		$	0.23			$	0.10
Weighted-average common shares outstanding - basic			44,817				44,559
Weighted-average common shares outstanding - diluted			45,408				46,204

AVID TECHNOLOGY, INC.
Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures
(unaudited - in thousands)
		Three Months Ended March 31,
			2022				2021
GAAP Revenue
GAAP Revenue		$	100,649			$	94,364
Non-GAAP Gross Profit
GAAP Gross Profit			66,764				61,416
Stock-based compensation			426				440
Non-GAAP Gross Profit		$	67,190			$	61,856
GAAP Gross Margin			66.3	%			65.1	%
Non-GAAP Gross Margin			66.8	%			65.6	%
Non-GAAP Operating Expenses
GAAP Operating Expenses			53,489				50,870
Less Amortization of intangible assets			(58	)			(105	)
Less Stock-based compensation			(2,996	)			(2,977	)
Less Restructuring costs, net			(15	)			(1,074	)
Less Acquisition, integration and other costs			(459	)			(369	)
Less Efficiency program costs			-				(48	)
Less Digital Transformation Initiave			(243	)			-
Less COVID-19 related expenses			-				(2	)
Non-GAAP Operating Expenses		$	49,718			$	46,295
Non-GAAP Operating Income and Adjusted EBITDA
GAAP net income			10,586				4,391
Interest and other expense			1,563				5,673
Provision for income taxes			1,126				482
GAAP Operating Income			13,275				10,546
Amortization of intangible assets			58				105
Stock-based compensation			3,422				3,417
Restructuring costs, net			15				1,074
Acquisition, integration and other costs			459				369
Efficiency program costs			-				48
Digital Transformation Initiave			243				-
COVID-19 related expenses			-				2
Non-GAAP Operating Income		$	17,472			$	15,561
Depreciation			1,803				2,119
Adjusted EBITDA		$	19,275			$	17,680
GAAP net income margin			10.5	%			4.7	%
Adjusted EBITDA Margin			19.2	%			18.7	%
Non-GAAP Net Income
GAAP net income			10,586				4,391
Amortization of intangible assets			58				105
Stock-based compensation			3,422				3,417
Restructuring costs, net			15				1,074
Acquisition, integration and other costs			459				369
Efficiency program costs			-				48
Digital Transformation Initiave			243				-
COVID-19 related expenses			-				2
Loss on Extinguishment of debt			-				3,748
Tax impact of non-GAAP adjustments			(3	)			(149	)
Non-GAAP Net Income		$	14,780			$	13,005
Weighted-average share count (Basic)			44,817				44,559
Weighted-average share count (Diluted)			45,408				46,204
Non-GAAP Earnings per Share (Basic)		$	0.33			$	0.29
Non-GAAP Earnings per Share (Diluted)		$	0.33			$	0.28
Free Cash Flow
Net cash provided by operating activities			7,916				12,313
Capital expenditures			(3,244	)			(1,254	)
Free Cash Flow		$	4,672			$	11,059
Free Cash Flow conversion from Adjusted EBITDA			24.2	%			62.6	%

AVID TECHNOLOGY, INC.
Condensed Consolidated Balance Sheets
(unaudited - in thousands)
		March 31, 2022				December 31, 2021
Assets
Current Assets
Cash and Cash Equivalents		$	41,245			$	56,818
Restricted Cash			2,013				2,416
Accounts receivable, net of allowances of $1,298 and $1,456 at March 31, 2021 and December 31, 2021, respectively			57,410				77,046
Inventories			17,817				19,922
Prepaid Expenses			7,137				5,464
Contract Assets			25,542				18,903
Other Current Assets			1,896				1,953
Total Current Assets			153,060				182,522
Property and Equipment, Net			17,742				16,028
Goodwill			32,643				32,643
Right of Use Assets			23,242				24,143
Deferred Tax Assets, Net			4,155				5,210
Other Long-Term Assets			14,265				13,454
Total Assets		$	245,107			$	274,000
Liabilities and Stockholders' Deficit
Current Liabilities
Accounts Payable		$	21,380			$	26,854
Accrued Compensation and Benefits			26,821				35,458
Accrued Expenses and Other Current Liabilities			36,457				37,552
Income Taxes Payable			145				868
Short-Term Debt			8,709				9,158
Deferred Revenues			80,744				87,475
Total Current Liabilities			174,256				197,365
Long-Term Debt			160,889				160,806
Long-Term Deferred Revenues			11,578				10,607
Long-Term Lease Liabilities			22,673				23,379
Other Long-Term Liabilities			5,730				5,917
Total Liabilities			375,126				398,074
Stockholders' Deficit
Common Stock			459				455
Treasury Stock			(35,906	)			(25,090	)
APIC			1,026,115				1,031,633
Accumulated Deficit			(1,116,373	)			(1,126,959	)
Accumulated Other Comprehensive Loss			(4,314	)			(4,113	)
Total Stockholders' Deficit			(130,019	)			(124,074	)
Total Liabilities and Stockholders' Deficit		$	245,107			$	274,000

AVID TECHNOLOGY, INC.
Supplemental Revenue Information
(unaudited - in millions)
	March 31,		Dec 31,		March 31,
	2022		2021		2021
Revenue Backlog*
Deferred Revenue	$ 92.3		$ 98.1		$ 97.5
Other Backlog	283.0		314.7		319.3
Total Revenue Backlog	$ 375.3		$ 412.8		$ 416.8
The expected timing of recognition of revenue backlog as of March 31, 2022 is as follows:
	2022		2023		2024		Thereafter		Total
Deferred Revenue	$ 74.0		$ 11.9		$ 4.0		$ 2.4		$ 92.3
Other Backlog	99.2		75.8		54.5		53.5		$ 283.0
Total Revenue Backlog	$ 173.2		$ 87.7		$ 58.5		$ 55.9		$ 375.3
*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.

AVID TECHNOLOGY, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited - in thousands)
	Three Months Ended March 31,
		2022				2021
Cash flows from operating activities:
Net income	$	10,586			$	4,391
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		1,803				2,119
(Recovery) Provision for doubtful accounts		(135	)			83
Stock-based compensation expense		3,422				3,122
Non-cash provision for restructuring		15				912
Non-cash interest expense		126				129
Loss on extinguishment of debt		-				2,579
Loss on Disposal of Fixed Assets		548				-
Unrealized foreign currency transaction (gains) loss		(128	)			(1,432	)
Benefit from deferred taxes		1,055				501
Changes in operating assets and liabilities:
Accounts receivable		19,770				19,702
Inventories		2,105				(1,048	)
Prepaid expenses and other assets		(2,067	)			(866	)
Accounts payable		(5,473	)			(2,604	)
Accrued expenses, compensation and benefits and other liabilities		(9,993	)			(9,887	)
Income taxes payable		(723	)			(259	)
Deferred revenue and contract assets		(12,995	)			(5,129	)
Net cash provided by operating activities		7,916				12,313
Cash flows from investing activities:
Purchases of property and equipment		(3,244	)			(1,254	)
Net cash used in investing activities		(3,244	)			(1,254	)
Cash flows from financing activities:
Proceeds from long-term debt		-				180,000
Repayment of debt		-				(201,208	)
Repayment of debt principal		(53	)			(2,346	)
Payments for repurchase of common stock		(10,562	)			-
Common stock repurchases for tax withholdings for net settlement of equity awards		(8,936	)			(7,706	)
Payment for loss on extinguishment of debt		-				(1,169	)
Payments for credit facility issuance costs		(440	)			(2,574	)
Net cash used in financing activities		(19,991	)			(35,003	)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		(254	)			(332	)
Net decrease in cash, cash equivalents, and restricted cash		(15,573	)			(24,276	)
Cash, cash equivalents and restricted cash at beginning of the period		60,556				83,638
Cash, cash equivalents and restricted cash at end of the period	$	44,983			$	59,362
Supplemental information:
Cash and cash equivalents	$	41,245			$	55,624
Restricted cash		2,013				1,422
Restricted cash included in other long-term assets		1,725				2,316
Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$	44,983			$	59,362