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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Avid Technology, Inc.    AVID

AVID TECHNOLOGY, INC.

(AVID)
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Avid Technology : Q3 2020 Earnings Presentation

10/28/2020 | 05:30pm EST

Avid Technology (Nasdaq:AVID)

October 28, 2020

We're on a mission to empower media creators

with innovative technology solutions to entertain,

inform, educate and enlighten the world.

NON-GAAP MEASURES & OPERATIONAL METRICS

The following non-GAAP measures

  • operational metrics will be used in the presentation:

Non-GAAP Measures

  • Adjusted EBITDA
  • Adjusted EBITDA Margin
  • Free Cash Flow
  • Non-GAAPGross Profit
  • Non-GAAPGross Margin
  • Non-GAAPOperating Expenses
  • Non-GAAPOperating Income
  • Non-GAAPNet Income (Loss) Per Share

Operational Metrics

  • Cloud Enabled Software Subscriptions
  • Recurring Revenue
  • LTM Recurring Revenue %
  • Annual Contract Value ("ACV")

The non-GAAP measures used in this presentation are reconciled to their comparable GAAP measures in our press release announcing

Q3 2020 results published today and filed as an exhibit to our 8-K filed with the SEC today, and the operational metrics used in this presentation are defined in the supplemental financial information datasheet available on ir.avid.com. Avid believes the non-GAAP measures and the operational metrics provided in this presentation provide helpful information to investors with respect to evaluating the Company's performance. However, these non-GAAP measures and operational metrics may vary from how other companies present such measures. Non-GAAP measures should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP.

The presentation also includes expectations for Adjusted EBITDA, Adjusted EBITDA Margin and Free Cash Flow, which are forward- looking non-GAAP financial measures. Reconciliations of these forward-lookingnon-GAAP measures are not included in this presentation, 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, 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.

Avid ©2020

2

SAFE HARBOR STATEMENT

Certain information provided in this presentation 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 presentation 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.

Avid ©2020

3

Jeff Rosica

Chief Executive Officer & President

STRATEGIC PRIORITIES

Grow Recurring Revenue from Subscriptions, Maintenance and Long-Term Agreements

Deliver more consistent growth, and enhanced profitability and Free Cash Flow

Improve business operations and expense control, while making focused R&D investments

Create innovative software and solutions to power content creators and media enterprises

Enable enterprise cloud/SaaS solutions for secure, powerful media creation workflows

AvidAvid ©2020©2020

55

Q3 2020 EXECUTIVE SUMMARY

1

2

3

Growth in non-recurring

Continued strong growth

Significantly improved

integrated solutions and

in subscriptions and

profitability and Free Cash

perpetual license product

improvement in Annual

Flow from higher

revenue as end markets

Contract Value

gross margin & lower

started to strengthen

operating expenses

Delivered sequential growth, strong profitability and significantly improved

Free Cash Flow as markets started to recover from COVID-19 impacts

Avid ©2020

6

Q3 2020 PERFORMANCE HIGHLIGHTS

SUBSCRIPTION

SUBSCRIPTION

eCOMMERCE

ADJUSTED

FREE CASH

REVENUE

+ MAINTENANCE

REVENUE

EBITDA

FLOW

REVENUE

+73.9%

+11.6%

+41.2%

+51.2%

$15.5M

YoY

YoY

YoY

YoY

Q3

Accelerating growth in high-quality revenue streams and strategic elements of the business contributed to improved profitability and Free Cash Flow

Avid ©2020

7

INNOVATION TO DRIVE GROWTH

  • New innovations for broadcasters and media enterprises with major Q3 product releases
    • MediaCentral | Collaborate application
    • Avid Connector for Adobe® Premiere® Pro
    • Enterprise Subscriptions for MediaCentral
  • Continued innovation around creative tools for remote workflows and cloud collaboration
    • MediaCentral | Reporter mobile app
    • Avid Edit on Demand cloud/SaaS editing
  • More future innovation in the works with some major releases expected to be unveiled in Q4

MediaCentral l Collaborate

Avid & Adobe Premiere Pro

Integration

I Reporter

AvidAvid ©2020©2020

88

Ken Gayron

Executive Vice President & Chief Financial Officer

Q3 2020 FINANCIAL RESULTS

Growth in subscription & maintenance revenue and focus on controlling expenses yielded improved profitability

($M, except per share)

YoY change

Q3'19

Q2'20

Q3'20

Fav/(Unfav)

Revenue

$93.5

$79.3

$90.4

(3.2%)

Subscription & Maintenance Revenue

43.7

47.0

48.7

11.6%

Non-GAAP Gross Profit

58.0

51.8

58.7

1.1%

Non-GAAP Gross Margin

62.1%

65.4%

64.9%

280 bps

Non-GAAP Operating Expenses

$47.3

$40.5

$41.4

12.6%

Adjusted EBITDA

12.8

13.5

19.3

51.2%

Adjusted EBITDA Margin %

13.7%

17.0%

21.4%

770 bps

Non-GAAP Net Income

4.6

5.1

12.2

167.6%

Non-GAAP Net Income per Share

$0.10

$0.12

$0.27

$0.17

Free Cash Flow

($4.6)

($5.2)

$15.5

$20.2

Change in Working Capital1

($10.0)

($12.0)

$3.0

$13.0

(1) (Increase) in working capital during a quarter is the change in operating assets and liabilities, as shown on the consolidated statement of cash flows.

Avid ©2020 10

LTM RECURRING REVENUE % AND ACV METRICS

LTM Recurring Revenue % increased 1,200 bps YoY to 71% and Annual Contract Value increased $17 million, or +6.5%, YoY

LTM Recurring Revenue %

Annual Contract Value

($M)

Note: Long-Term Agreement contribution to ACV excludes maintenance and subscription

Avid ©2020

11

PAID SUBSCRIPTIONS REACH NEW HIGHS

Software Subscriptions at End of Quarter

Continued robust growth of cloud-enabled software subscriptions, up 58% YoY, with net increase of approx. 27,000 paid subscriptions in the third quarter

New product innovations, improved pricing strategy, and enhanced digital marketing efforts have contributed to accelerating growth since Q3 2019

Avid ©2020 12

REVENUE & NON-GAAP GROSS MARGIN BY TYPE

Continued strong growth in subscriptions and sequential recovery in non-recurring perpetual, integrated solutions and professional services

Q3 2020

Q3 2020

($M)

Q3 2019

Q2 2020

Q3 2020

Q/Q %

Y/Y %

Revenue

Subscriptions

$10.3

$16.4

$17.9

9.0%

73.9%

Maintenance

33.4

30.6

30.8

0.8%

(7.6%)

Subscriptions and Maintenance

$43.7

$47.0

$48.7

3.7%

11.6%

Perpetual Licenses

8.7

6.8

9.0

31.5%

3.5%

SW Licenses and Maintenance

$52.3

$53.8

$57.7

7.2%

10.3%

HW & Integrated Software

34.2

20.8

26.8

28.8%

(21.7%)

Professional Services & Training

6.9

4.6

5.9

27.4%

(14.1%)

Total Revenue

$93.5

$79.3

$90.4

14.1%

(3.2%)

Software Revenue (Subscriptions + Perpetual Licenses)

$19.0

$23.2

$26.9

15.6%

41.7%

Non-GAAP Gross Margin

SW Licenses and Maintenance

86.7%

85.6%

85.2%

(40 bps)

(150 bps)

HW & Integrated Software

34.2%

25.8%

30.3%

450 bps

(390 bps)

Professional Services & Training

14.5%

8.9%

23.7%

1480 bps

920 bps

64.9%

Total Non-GAAP Gross Margin %

62.1%

65.4%

(50 bps)

280 bps

Avid ©2020 13

STRONG FREE CASH FLOW

Free Cash Flow YoY Comparison

($M)

Strong Free Cash Flow in Q3 from recovering revenue, operating expense reductions and working capital management, ahead of expected seasonally-strong Q4

Improved working capital position at the end of Q3, with sequentially higher accounts receivable and significantly reduced accounts payable (YoY and sequential)

Avid ©2020 14

BALANCE SHEET AS OF SEPTEMBER 30, 2020

Healthy cash balance, higher accounts receivable balance and improved accounts payable provides strong foundation for robust Free Cash Flow

($M)

9/30/19

6/30/20

9/30/20

Cash and Cash Equivalents

$52.3

$55.7

$49.1

Accounts Receivable

53.7

52.9

59.7

Contract Assets

$14.4

$18.2

$15.3

Net Inventory

32.2

29.7

28.4

Accounts Payable

35.6

17.9

13.5

Deferred Revenue

85.0

85.7

81.2

Long-Term Debt

199.6

227.4

204.1

Avid ©2020 15

CAPITALIZATION AND CREDIT METRICS

Repaid revolving credit facility, reduced leverage and improved Adjusted EBITDA position the Company for potential reduction in interest expense in 2021

Maturity/

($M)

6/30/2020

9/30/2020

Rate

Improving Leverage

Cash & Cash Equivalents

$55.7

$49.1

Revolving Credit Facility

22.0

- (1)

May 2023 /

($22.5M undrawn at 9/30)

LIBOR +675

Term Loan (including

199.7

199.2

May 2023 /

current portion)

LIBOR +675

Convertible Notes

- (2)

-

Total Debt

230.7

208.2

LTM Adjusted EBITDA

51.7

58.2

Total Debt /

4.5x

3.6x

LTM Adjusted EBITDA

Net Debt /

3.4x

2.7x

LTM Adjusted EBITDA

Covenant Secured Debt /

4.3x

3.4x

Adjusted EBITDA

  1. Revolver balance of $22.0M repaid in September 2020, using available cash
  2. Remaining $28.9M of Convertible Notes repaid at maturity on June 15, 2020, using available cash

Avid ©2020 16

OUTLOOK AND CURRENT EXPECTATIONS

We are providing limited outlook on our Q4 and FY 2020 expectations

  • Expect external markets to continue their gradual improvement in Q4 and into 2021
  • Anticipate typical seasonality to benefit Q4 revenue
  • Expect continued growth in subscription revenue and sequential improvement in non-recurring business in Q4
  • Temporary furloughs ended as planned at the end of Q3 and cost savings on target for Q4 and 2021
  • Q4 Adjusted EBITDA margin expected to be higher YoY
  • Seasonally strong Free Cash Flow expected in Q4
  • Approximately 60% of the cost reductions in FY 2020 to continue into FY 2021

Avid ©2020

17

Disclaimer

Avid Technology Inc. published this content on 28 October 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 October 2020 22:29:04 UTC


© Publicnow 2020
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Financials (USD)
Sales 2020 361 M - -
Net income 2020 15,4 M - -
Net Debt 2020 139 M - -
P/E ratio 2020 49,7x
Yield 2020 -
Capitalization 791 M 791 M -
EV / Sales 2020 2,58x
EV / Sales 2021 2,25x
Nbr of Employees 1 429
Free-Float 93,4%
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Income Statement Evolution
Consensus
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Mean consensus OUTPERFORM
Number of Analysts 5
Average target price 19,88 $
Last Close Price 17,90 $
Spread / Highest target 28,5%
Spread / Average Target 11,0%
Spread / Lowest Target -7,82%
EPS Revisions
Managers and Directors
NameTitle
Jeff Rosica President, Chief Executive Officer & Director
Peter Miles Westley Chairman
Kenneth Gayron Chief Financial Officer & Executive Vice President
Kevin W. Riley Chief Technology Officer & Senior Vice President
Nancy Hawthorne Independent Director
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