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.
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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.
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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
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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
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Q3 2020 PERFORMANCE HIGHLIGHTS
SUBSCRIPTION | SUBSCRIPTION | eCOMMERCE | ADJUSTED | FREE CASH |
REVENUE | + MAINTENANCE | REVENUE | EBITDA | FLOW |
REVENUE |
+73.9% | +11.6% | +41.2% | +51.2% | $15.5M |
YoY | YoY | YoY | YoY | Q3 |
Accelerating growth in high-quality revenue streams and strategic elements of the business contributed to improved profitability and Free Cash Flow
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INNOVATION TO DRIVE GROWTH
- New innovations for broadcasters and media enterprises with major Q3 product releases
- MediaCentral | Collaborate application
- Avid Connector for Adobe® Premiere® Pro
- Enterprise Subscriptions for MediaCentral
- Continued innovation around creative tools for remote workflows and cloud collaboration
- MediaCentral | Reporter mobile app
- Avid Edit on Demand cloud/SaaS editing
- More future innovation in the works with some major releases expected to be unveiled in Q4
MediaCentral l Collaborate
Avid & Adobe Premiere Pro
Integration
I Reporter
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Ken Gayron
Executive Vice President & Chief Financial Officer
Q3 2020 FINANCIAL RESULTS
Growth in subscription & maintenance revenue and focus on controlling expenses yielded improved profitability
($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.
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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
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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
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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 | $26.9 | 15.6% | 41.7% |
Non-GAAP Gross Margin | |||||
SW Licenses and Maintenance | 86.7% | 85.6% | 85.2% | (40 bps) | (150 bps) |
HW & Integrated Software | 34.2% | 25.8% | 30.3% | 450 bps | (390 bps) |
Professional Services & Training | 14.5% | 8.9% | 23.7% | 1480 bps | 920 bps |
64.9% | |||||
Total Non-GAAP Gross Margin % | 62.1% | 65.4% | (50 bps) | 280 bps | |
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STRONG FREE CASH FLOW
Free Cash Flow YoY Comparison
($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)
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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 | $15.3 |
Net Inventory | 32.2 | 29.7 | 28.4 |
Accounts Payable | 35.6 | 17.9 | 13.5 |
Deferred Revenue | 85.0 | 85.7 | 81.2 |
Long-Term Debt | 199.6 | 227.4 | 204.1 |
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CAPITALIZATION AND CREDIT METRICS
Repaid revolving credit facility, reduced leverage and improved Adjusted EBITDA position the Company for potential reduction in interest expense in 2021
Maturity/ | ||||
($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 | ||||
- Revolver balance of $22.0M repaid in September 2020, using available cash
- Remaining $28.9M of Convertible Notes repaid at maturity on June 15, 2020, using available cash
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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
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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