Avid® (Nasdaq: AVID) today issued a business update in response to
the coronavirus (COVID-19) pandemic. The Company is still
completing its review of its first quarter results, which it will
report on May 7, 2020. Based on a preliminary review of
results for the quarter, the Company expects that its subscription
business will experience a record growth quarter in terms of net
new cloud-enabled software subscriptions. However, the
intensifying COVID-19 crisis during the second half of March
negatively impacted product shipments during the first quarter.
For the first quarter of 2020, the Company now expects its
subscription and maintenance revenue will be between $44.5 million
and $46.0 million, slightly above the prior guidance issued on
March 7, 2020; its total revenue will be approximately 13% - 15%
below the mid-point of the prior guidance; its Adjusted EBITDA will
be adversely impacted by the reduced revenue and is expected to be
positive, but significantly below the prior guidance, and Free Cash
Flow is expected to be approximately negative $7 million due to
slower collections and reduced billings in the second half of
March. Given the uncertainty about how the COVID-19 situation
will continue to unfold and its duration, the Company is also
withdrawing its full-year 2020 guidance. The Company will
share additional information with the release of its full first
quarter 2020 results on May 7, 2020.
The COVID-19 situation rapidly evolved and intensified following
the Company’s Q4 2019 earnings report on March 7, 2020.
During the first quarter, the recurring portions of the Company’s
business performed ahead of expectations with record subscription
license counts, while maintenance and the contribution from
long-term agreements with customers remained relatively stable.
Avid’s customers include many leading television broadcast
networks and station groups across the globe, and Avid solutions
are relied upon by these customers to deliver news and other
essential programming. However, the non-recurring portions of
the Company’s business depend significantly on sales activity
during the last few weeks of the quarter. The postponement or
cancellation of many music festivals and major sporting events, and
the suspension of many film and television productions,
particularly during the second half of March, negatively impacted
the Company’s product sales. In addition, the travel
restrictions put in place in many areas across the globe during
March negatively impacted professional services revenue in the
first quarter as the Company’s ability to deliver certain
professional services and to complete certain milestones at the end
of the quarter was affected. In the first quarter, the
Company did not experience any material production issues related
to its supply chain. However, the Company was recently
notified by its contract manufacturing partners of an order by the
Mexican government related to COVID-19 that restricts the
partners’ ability to produce new products for the Company through
the end of April. These partners manufacture the Company’s
storage and audio/video console products. The Company
believes it has positioned sufficient finished goods inventory as
well as service spares to support the expected demand through the
end of the second quarter, assuming no significant extension of the
order by the Mexican government.
The Company is undertaking what it believes to be appropriate
measures to safeguard its employees and workplaces, as well as to
ensure its business continuity and customer support. In these
trying times, Avid is committed to supporting its customers and
keeping their operations running, enabling its employees to work
and collaborate remotely, and working to maintain the highest
levels of service as well as to be proactive in its efforts to
mitigate and minimize any potential disruptions for its
customers.
In spite of the unanticipated challenges caused by the pandemic,
Avid’s management believes the Company’s long-term strategy has
improved its ability to respond to the COVID 19 situation.
Importantly, the Company’s shift towards Recurring
Revenue-based business, its robust product innovation strategy to
help customers move to secure cloud based offerings that can be
accessed remotely, and its continued focus on improving its cost
structure have all been instrumental in mitigating the impact of
the COVID-19 situation on the Company.
Other preliminary first quarter results include:
- Record growth in cloud-enabled software subscriptions of
approximately 30,000 in the first quarter, raising the total number
to approximately 218,000 at March 31, 2020.
- During the first quarter, Avid signed a new, significant
multi-million dollar cloud services agreement with a major media
company to enable the customer to globally deploy cloud-based
business continuity solutions to ensure productions can continue
with remote workers, including those working-from-home, which will
be delivered beginning in the second quarter of 2020.
- Avid continues to aggressively reduce its operating expenses
and capital expenditures to offset the decline in revenues for
products and professional services. Additionally, the Company
expects to realize an unplanned savings of approximately $3 million
in the first half of 2020, resulting from its cancellation of major
trade show appearances.
- Avid had cash and cash equivalents of approximately $81 million
at March 31, 2020. During the first quarter, the Company drew
$22 million on its existing revolving credit facility out of an
abundance of caution given the volatility in the markets.
Avid believes it continues to operate with sufficient
near-term liquidity and maintains ample cushion on its financial
covenants.
“As the impacts of COVID-19 evolved rapidly and became highly
visible across the global economy, generally, and the media
business, specifically, during March, we saw an impact on our
business during the second half of March, which typically
contributes meaningfully to our quarterly results,” said Jeff
Rosica, Chief Executive Officer and President of Avid. “Our
strong quarterly growth in subscriptions is accelerating our
transition towards more Recurring Revenue, which was 62% of our
revenue during 2019, and is helping to provide some stability
during the COVID-19 event.”
Mr. Rosica continued, “Avid serves the highly resilient and
innovative media industry and we have been working in very close
consultation with many of our customers to support their respective
business continuity efforts. Avid has provided over 88,000
free 90-day additional licenses for our creative software tools to
help many of our enterprise customers keep their operations
producing content while their employees are temporarily working
from home. In addition, we have enabled unique remote
workflows utilizing advanced cloud-based solutions to help many of
these same customers protect and expand their media workflows
during the COVID-19 crisis. We’re very encouraged by the
speed at which the industry has responded to the situation and is
embracing the cloud-based solutions that Avid provides.”
Ken Gayron, Executive Vice President and Chief Financial Officer
of Avid, said, “Given the headwinds that we have been experiencing
in our non-recurring revenue since the middle of March, we are
taking what we think are appropriate measures to aggressively
reduce our cost structure to manage profitability and cash flow
through this situation. With approximately $81 million in
cash at March 31, we believe we have sufficient near-term liquidity
to manage through the COVID-19 impact.”
Conference Call to Discuss First Quarter 2020 Results on
May 7, 2020
Avid will host a conference call to discuss its financial
results for the first quarter of 2020 on Thursday, May 7, 2020 at
5:00 p.m. ET. The call will be open to the public and can be
accessed by dialing +1 323-994-2131 and referencing confirmation
code 107655. You may also access the presentation slides and
listen to the call on the Avid Investor Relations website. To
listen via the website, go to the events tab at ir.avid.com for
complete details prior to the start of the conference call. A
replay of the call 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 and Free Cash Flow. The Company
defines Adjusted EBITDA as GAAP operating income excluding
restructuring costs, stock-based compensation, amortization of
intangible assets as well as other unusual items such as costs
related to the restatement, M&A related activity, and
efficiency programs, and depreciation expense. The Company
defines Free Cash Flow as GAAP operating cash flow less capital
expenditures. The Company also includes the operational
metrics of Cloud based software subscriptions and Recurring Revenue
in this release. Recurring Revenue is defined as the sum,
without duplication, of subscription revenue, maintenance revenue,
and revenue under our long-term contractual agreements.
Cloud-enabled software subscriptions as of a given date represent
the number of paid subscription licenses under an active contract
as of that date, excluding any licenses that may be receiving
service under an active contract but that are not paid for at that
time by the customer, whether due to a promotion, cancellation or
otherwise. 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.
Forward-Looking Statements
Certain information provided in this press release includes
forward-looking statements within the meaning of the federal
securities laws. 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: 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
impact of the recent coronavirus (COVID-19) outbreak on our
business, suppliers, consumers, customers and employees; 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 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.
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™, Avid FastServe®™, Maestro™, and PlayMaker™. 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.
© 2020 Avid Technology, Inc. All rights reserved. Avid, the Avid
logo, Avid NEXIS, Avid FastServe, AirSpeed, iNews, Maestro,
MediaCentral, Media Composer, NewsCutter, PlayMaker, 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 |
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Investor contact: |
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PR contact: |
Whit Rappole |
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Jim Sheehan |
Avid |
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Avid |
ir@avid.com |
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jim.sheehan@avid.com |
(978) 275-2032 |
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(978) 640-3152 |
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