Avid Announces Results for Third Quarter 2011

BURLINGTON, Mass.--()--Avid® (NASDAQ: AVID) today reported revenues of $165.0 million for the three-month period ended September 30, 2011, compared to $165.1 million for the same period in 2010. The GAAP net loss for the third quarter was $8.0 million, or $0.21 per share, compared to a GAAP net loss of $10.0 million, or $0.26 per share, in the third quarter of 2010. The revenue reported for the second quarter of 2011 was $161.3 million and the GAAP net loss was $11.9 million.

The GAAP net loss for the third quarter of 2011 and 2010 included amortization of intangible assets, stock-based compensation, gain on asset sales, legal settlements and acquisition-related costs, restructuring charges, and related tax adjustments collectively totaling $8.4 million and $11.6 million, respectively. Excluding these items, the non-GAAP net income for the third quarter of 2011 was $385 thousand, or $0.01 per share, compared to non-GAAP net income of $1.6 million, or $0.04 per share, for the third quarter of 2010.

"The third quarter results showed sequential improvement in revenue and profit,” said Gary Greenfield, chairman and CEO of Avid. “We continue our sharp focus on providing our customers with the products and solutions that help them succeed. In addition, we have taken actions which should accelerate improvement in our financial performance.”

Revenues for the nine-month period ended September 30, 2011 were $492.6 million, compared to revenues of $483.2 million for the same period in 2010. The GAAP net loss for the first nine months of 2011 was $25.0 million, or $0.65 per share, compared to a GAAP net loss of $36.4 million, or $0.96 per share, for the same period in 2010. The GAAP net loss for the nine-month period ended September 30, 2011 included $20.6 million of amortization of intangible assets, stock-based compensation, restructuring charges, loss on asset sales, legal settlements and acquisition-related costs and related tax adjustments. Excluding these items, the non-GAAP net loss was $4.4 million, or $0.11 per share, for the first nine months of 2011. The GAAP net loss for the nine-month period ended September 30, 2010 included $31.4 million of amortization of intangible assets, gain on asset sales, stock-based compensation, restructuring charges, legal settlements and acquisition-related costs and related tax adjustments. Excluding these items, the non-GAAP net loss was $5.0 million, or $0.13 per share, for the first nine months of 2010.

A reconciliation of GAAP to non-GAAP results is included in the tables attached to this release.

Conference Call

A conference call to discuss Avid’s third quarter 2011 financial results will be held today, October 27, 2011 at 4:30 p.m. ET. The call will be open to the public and can be accessed by dialing 719.457.2617 and referencing confirmation code 4569475. The call and subsequent replay will also be available on Avid’s website. To listen via this alternative, go to the Investors tab at www.avid.com for complete details prior to the start of the conference call.

Use of Non-GAAP Financial Measures

This press release contains “non-GAAP financial measures” under the rules of the U.S. Securities and Exchange Commission. Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles. This non-GAAP information supplements, and is not intended to represent a measure of performance in accordance with, disclosures required by generally accepted accounting principles, or GAAP. Non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP. The reconciliation of the GAAP to non-GAAP financial measures that we provide is in the tables attached to this press release.

Management considers both GAAP and non-GAAP financial results in managing our business. Non-GAAP financial measures are used internally, for example, in establishing annual operating budgets, in assessing operating performance and for measuring performance under incentive compensation plans. Non-GAAP financial measures are also used in operating and financial decision-making because we believe these measures reflect our ongoing business and allow meaningful period-to-period comparisons. We believe it is useful for investors and others to also review both GAAP and non-GAAP measures in order to understand and evaluate our current operating performance and future prospects in the same manner as management and to compare in a consistent manner the company’s current financial results with past financial performance. The primary limitations associated with our use of non-GAAP financial measures are that they may not include all items of income and expense that affect our operations and that the non-GAAP financial measures we use may not be directly comparable to those reported by other companies. For example, the terms used in this press release, such as non-GAAP net loss and non-GAAP net income, do not have standardized meanings. Other companies may use the same or similarly named measures, but exclude different items, which may not provide investors with a comparable view of our performance in relation to other companies. We seek to compensate for this limitation by providing a detailed reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures in the tables attached to this press release.

Use of Forward-Looking Statements

The contents of this release are subject to the completion and filing of our Quarterly Report on Form 10-Q. This release includes forward-looking statements, as defined by the Private Securities Litigation Reform Act of 1995. Statements in this press release that relate to future results or events are forward-looking statements and are based on Avid’s current estimates and assumptions. Forward-looking statements may be identified by the use of forward-looking words, such as “anticipate,” “believe,” “should,” “estimate,” “expect,” “intend,” “confidence,” “may,” “plan,” “feel,” “could,” “will,” and “would,” or similar expressions. Actual results and events in future periods may differ materially from those expressed or implied by these forward-looking statements because of a number of risks, uncertainties and other factors, including: Avid’s ability to execute on its corporate strategy and meet customer needs, including the ability to produce innovative products in response to changing market demand; competitive factors; fluctuations in Avid’s revenues, based on, among other things, Avid’s performance in particular geographies; general economic conditions and conditions within the rapidly evolving media industry specifically; and other risk factors and uncertainties disclosed previously and from time to time in Avid’s filings with the U.S. Securities and Exchange Commission. In addition, the forward-looking statements contained herein represent Avid’s estimates only as of today and should not be relied upon as representing the company’s estimates as of any subsequent date. While Avid may elect to update these forward-looking statements at some point in the future, Avid specifically disclaims any obligation to do so, even if the estimates change.

About Avid

Avid creates the digital audio and video technology used to make the most listened to, most watched and most loved media in the world – from the most prestigious and award-winning feature films, music recordings, television shows, live concert tours and news broadcasts, to music and movies made at home. Some of Avid’s most influential and pioneering solutions include Media Composer®, Pro Tools, Interplay®, ISIS®, VENUE, Sibelius®, System 5, and Avid® Studio. For more information about Avid solutions and services, visit www.avid.com, Flickr, Twitter and YouTube; connect with Avid on Facebook; or subscribe to Avid Industry Buzz.

© 2011 Avid Technology, Inc. All rights reserved. Product features, specifications, system requirements and availability are subject to change without notice. All prices are MSRP for the U.S. and Canada only and are subject to change without notice. Contact your local Avid office or reseller for prices outside the U.S. and Canada. Avid, the Avid logo, Fast Track, M-Audio, Media Composer, Pro Tools, Interplay, ISIS, Sibelius, and Avid Studio are trademarks or registered trademarks of Avid Technology, Inc. or its subsidiaries in the United States and/or other countries. The Interplay name is used with the permission of the Interplay Entertainment Corp. which bears no responsibility for Avid products. All other trademarks are the property of their respective owners.

AVID TECHNOLOGY, INC.
Condensed Consolidated Statements of Operations
(unaudited - in thousands, except per share data)
       
Three Months Ended Nine Months Ended
September 30, September 30,
  2011     2010     2011     2010  
Net revenues:
Products $ 131,875 $ 134,231 $ 398,400 $ 397,044
Services   33,090     30,828     94,232     86,131  
Total net revenues   164,965     165,059     492,632     483,175  
 
Cost of revenues:
Products 60,048 64,421 187,663 193,527
Services 16,497 14,194 46,196 41,373
Amortization of intangible assets   685     745     2,036     2,657  
Total cost of revenues 77,230 79,360 235,895 237,557
       
Gross profit   87,735     85,699     256,737     245,618  
 
Operating expenses:
Research and development 28,960 28,929 89,386 89,348
Marketing and selling 45,411 43,199 136,273 129,419
General and administrative 13,240 19,698 43,458 48,179
Amortization of intangible assets 2,159 2,283 6,465 7,557
Restructuring and other costs, net 2,707 185 328 5,532
(Gain) loss on sales of assets   -     (1,527 )   597     (1,527 )
Total operating expenses   92,477     92,767     276,507     278,508  
 
Operating loss (4,742 ) (7,068 ) (19,770 ) (32,890 )
 
Interest and other income (expense), net   (503 )   (30 )   (1,571 )   (132 )
Loss before income taxes (5,245 ) (7,098 ) (21,341 ) (33,022 )
 
Provision for income taxes, net   2,774     2,897     3,657     3,361  
 
Net loss   ($8,019 )   ($9,995 )   ($24,998 )   ($36,383 )
 
Net loss per common share - basic and diluted   ($0.21 )   ($0.26 )   ($0.65 )   ($0.96 )
 
Weighted-average common shares outstanding - basic and diluted 38,511 38,045 38,386 37,826
AVID TECHNOLOGY, INC.
(unaudited - in thousands, except per share data)
           
Reconciliations of GAAP financial measures to Non-GAAP financial measures:
 

Three Months Ended September 30, 2011

 
Gross Operating Operating Tax Net
Profit Expenses (Loss) Income Provision (Loss) Income
GAAP $ 87,735 $ 92,477 ($4,742 ) $ 2,774 ($8,019 )
 
Amortization of intangible assets 685 (2,159 ) 2,844 2,844
Restructuring costs, net (2,707 ) 2,707 2,707
Legal settlement and acquisition-related costs (a) (163 ) 163 163
Tax adjustment 815 (815 )
Stock-based compensation included in:
Cost of products revenues 168 168 168
Cost of services revenues 63 63 63
Research and development expenses (435 ) 435 435
Marketing and selling expenses (1,051 ) 1,051 1,051
General and administrative expenses     (1,788 )   1,788       1,788  
Non-GAAP $ 88,651 $ 84,174 $ 4,477 $ 3,589 $ 385
 
Weighted-average shares outstanding - diluted 38,530
 
Non-GAAP net income per share - diluted $ 0.01
 

Three Months Ended September 30, 2010

 
Gross Operating Operating Tax Net
Profit Expenses (Loss) Income Provision (Loss) Income
GAAP $ 85,699 $ 92,767 ($7,068 ) $ 2,897 ($9,995 )
 
Amortization of intangible assets 745 (2,283 ) 3,028 3,028
Restructuring and other costs, net (185 ) 185 185
Legal settlement and acquisition-related costs (a) (5,656 ) 5,656 5,656
Gain on sales of assets 527 (527 ) (527 )
Tax adjustment 399 (399 )
Stock-based compensation included in:
Cost of products revenues 176 176 176
Cost of services revenues 287 287 287
Research and development expenses (506 ) 506 506
Marketing and selling expenses (1,078 ) 1,078 1,078
General and administrative expenses     (1,581 )   1,581       1,581  
Non-GAAP $ 86,907 $ 82,005 $ 4,902 $ 3,296 $ 1,576
 
Weighted-average shares outstanding - diluted 38,065
 

Non-GAAP net income per share - diluted

$ 0.04
 
(a) Represents costs included in general and administrative expenses
AVID TECHNOLOGY, INC.
(unaudited - in thousands, except per share data)
           
Reconciliations of GAAP financial measures to Non-GAAP financial measures:
 

Nine Months Ended September 30, 2011

 
Gross Operating Operating Tax Net
Profit Expenses (Loss) Income Provision Loss
GAAP $ 256,737 $ 276,507 ($19,770 ) $ 3,657 ($24,998 )
 
Amortization of intangible assets 2,036 (6,465 ) 8,501 8,501
Restructuring costs, net (328 ) 328 328
Legal settlements and acquisition-related costs (a) (555 ) 555 555
Loss on sales of assets (597 ) 597 597
Tax adjustment 1,115 (1,115 )
Stock-based compensation included in:
Cost of products revenues 417 417 417
Cost of services revenues 608 608 608
Research and development expenses (1,334 ) 1,334 1,334
Marketing and selling expenses (3,625 ) 3,625 3,625
General and administrative expenses     (5,783 )   5,783     5,783  
Non-GAAP $ 259,798 $ 257,820 $ 1,978 $ 4,772 ($4,365 )
 
Weighted-average shares outstanding - diluted 38,386
 

Non-GAAP net loss per share - diluted

($0.11 )
 

Nine Months Ended September 30, 2010

 
Gross Operating Operating Tax Net
Profit Expenses Loss Provision Loss
GAAP $ 245,618 $ 278,508 ($32,890 ) $ 3,361 ($36,383 )
 
Amortization of intangible assets 2,657 (7,557 ) 10,214 10,214
Restructuring and other costs, net (b) (5,532 ) 5,532 5,532
Legal settlement and acquisition-related costs (a) (6,425 ) 6,425 6,425
Gain on sales of assets 527 (527 ) (527 )
Tax adjustment 854 (854 )
Stock-based compensation included in:
Cost of products revenues 562 562 562
Cost of services revenues 822 822 822
Research and development expenses (1,704 ) 1,704 1,704
Marketing and selling expenses (3,153 ) 3,153 3,153
General and administrative expenses     (4,373 )   4,373     4,373  
Non-GAAP $ 249,659 $ 250,291 ($632 ) $ 4,215 ($4,979 )
 
Weighted-average shares outstanding - diluted 37,826
 
Non-GAAP net loss per share - diluted ($0.13 )
 
(a) Represents costs included in general and administrative expenses
(b) Includes costs of $3.7 million related to exiting our former Tewksbury, Massachusetts headquarters lease
 
Revenue Summary:
Three Months Ended Nine Months Ended
September 30, September 30,
2011   2010     2011   2010
Video revenues $ 98,443 $ 100,186 $ 289,325 $ 278,060
Audio revenues   66,522   64,873     203,307     205,115
Total net revenues $ 164,965 $ 165,059   $ 492,632   $ 483,175
AVID TECHNOLOGY, INC.
Condensed Consolidated Balance Sheets
(unaudited - in thousands)
   
September 30, December 31,
  2011     2010  
ASSETS:
Current assets:
Cash and cash equivalents $ 33,652 $ 42,782
Accounts receivable, net of allowances of $13,277 and $17,149
at September 30, 2011 and December 31, 2010, respectively 92,904 101,171
Inventories 126,029 108,357
Deferred tax assets, net 1,081 1,068
Prepaid expenses 6,598 7,688
Other current assets   15,065     16,130  
Total current assets 275,329 277,196
 
Property and equipment, net 57,063 62,519
Intangible assets, net 21,327 29,750
Goodwill 246,658 246,997
Other assets   10,788     10,109  
 
Total assets $ 611,165   $ 626,571  
 
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Borrowings under revolving credit facilities $ 13,000 $ 0
Accounts payable 35,090 47,340
Accrued compensation and benefits 28,551 41,101
Accrued expenses and other current liabilities 32,200 40,986
Income taxes payable 4,570 4,640
Deferred revenues   52,752     40,585  
Total current liabilities 166,163 174,652
 
Long-term liabilities   30,060     25,309  
Total liabilities   196,223     199,961  
 
Stockholders' equity:
Common stock 423 423
Additional paid-in capital 1,015,770 1,005,198
Accumulated deficit (524,717 ) (495,254 )
Treasury stock at cost, net of reissuances (83,612 ) (91,025 )
Accumulated other comprehensive income   7,078     7,268  
Total stockholders' equity   414,942     426,610  
 
Total liabilities and stockholders' equity $ 611,165   $ 626,571  
AVID TECHNOLOGY, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited - in thousands)
         
Three Months Ended Nine Months Ended
September 30,   September 30,
  2011     2010     2011     2010  
Cash flows from operating activities:
Net loss ($8,019 ) ($9,995 ) ($24,998 ) ($36,383 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 7,817 8,529 23,538 25,026
Provision for doubtful accounts 75 295 534 285
Non-cash provision for restructuring 133 42 258 291
(Gain) loss on sales of assets - (1,527 ) 597 (1,527 )
Gain on disposal of fixed assets (4 ) (24 ) (10 ) (70 )
Compensation expense from stock grants and options 3,505 3,628 11,767 10,614
Non-cash interest expense 74 - 228 -
Unrealized foreign currency transaction (gains) losses (2,502 ) 5,501 3,988 253
Changes in deferred tax assets and liabilities, excluding initial effects of acquisitions - (1,143 ) (4 ) (1,393 )
Changes in operating assets and liabilities, excluding initial effects of acquisitions:
Accounts receivable 5,346 10,319 7,574 (7,202 )
Inventories 3,767 (17,088 ) (17,671 ) (15,344 )
Prepaid expenses and other current assets 489 1,763 778 7,032
Accounts payable (9,637 ) (7,088 ) (12,262 ) 13,832
Accrued expenses, compensation and benefits, and other liabilities (7,883 ) (6,539 ) (24,129 ) (25,021 )
Income taxes payable 1,822 3,257 (209 ) 2,290
Deferred revenues   4,649     (1,583 )   16,464     6,763  
Net cash used in operating activities   (368 )   (11,653 )   (13,557 )   (20,554 )
 
Cash flows from investing activities:
Purchases of property and equipment (2,784 ) (3,417 ) (8,862 ) (25,926 )
Decrease (increase) in other long-term assets 102 (149 ) (969 ) (82 )
Payments for business acquisitions, net of cash acquired - - - (27,008 )
Purchases of marketable securities - - - (2,250 )
Proceeds from sales of marketable securities - - - 19,605
Proceeds from sales of assets   -     1,000     -     1,000  
Net cash used in investing activities   (2,682 )   (2,566 )   (9,831 )   (34,661 )
 
Cash flows from financing activities:
Proceeds from (payments related to) the issuance of common stock under employee stock plans, net 404 261 1,753 (61 )
Proceeds from revolving credit facilities - - 21,000 -
Payments on revolving credit facilities   -     -     (8,000 )   -  
Net cash provided by (used in) financing activities   404     261     14,753     (61 )
 
Effect of exchange rate changes on cash and cash equivalents   (1,259 )   1,526     (495 )   (1,880 )
Net decrease in cash and cash equivalents (3,905 ) (12,432 ) (9,130 ) (57,156 )
Cash and cash equivalents at beginning of period   37,557     46,793     42,782     91,517  
Cash and cash equivalents at end of period $ 33,652   $ 34,361   $ 33,652   $ 34,361  

Contacts

Avid
PR Contact:
Amy Paladino, 781-772-1005
amy.paladino@avid.com
or
IR Contact:
Tom Fitzsimmons, 978-640-3346
tom.fitzsimmons@avid.com

Contacts

Avid
PR Contact:
Amy Paladino, 781-772-1005
amy.paladino@avid.com
or
IR Contact:
Tom Fitzsimmons, 978-640-3346
tom.fitzsimmons@avid.com