NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. FINANCIAL INFORMATION
The accompanying condensed consolidated financial statements include the accounts of Avid Technology, Inc. and its wholly owned subsidiaries (collectively, “we” or “our”). These financial statements are unaudited. However, in the opinion of management, the condensed consolidated financial statements reflect all normal and recurring adjustments necessary for their fair statement. Interim results are not necessarily indicative of results expected for any other interim period or a full year. We prepared the accompanying unaudited condensed consolidated financial statements in accordance with the instructions for Form 10-Q and, therefore, include all information and footnotes necessary for a complete presentation of operations, comprehensive income, financial position, changes in stockholders’ deficit, and cash flows in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying condensed consolidated balance sheet as of December 31, 2021 was derived from our audited consolidated financial statements and does not include all disclosures required by U.S. GAAP for annual financial statements. We filed audited consolidated financial statements as of and for the year ended December 31, 2021 in our Annual Report on Form 10-K for the year ended December 31, 2021, which included information and footnotes necessary for such presentation. The financial statements contained in this Form 10-Q should be read in conjunction with the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2021.
The consolidated results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022. The Company’s results of operations are affected by economic conditions, including macroeconomic conditions and levels of business and consumer confidence.
The novel coronavirus (COVID-19) pandemic, together with the measures implemented or recommended by governmental authorities and private organizations in response to the pandemic, has had a material adverse impact to the Company's business, operating results and financial condition primarily due to reduced demand for our products and services which has led to lower net revenues.
Through the first quarter of 2022, our results have continued in the same direction as our 2021 results, reflecting a gradual recovery in spending levels with the continuing positive signs of recovery from the impacts of the COVID-19 pandemic driven by vaccination and government stimulus programs, particularly in the United States. At the same time, certain countries continue to face challenges with renewed lockdowns and travel restrictions in response to new variants and there remains uncertainty relating to the ongoing spread and severity of those variants. Although we are encouraged by the trends we saw during 2021 and during the first quarter of 2022, to the extent that the pandemic continues to have negative impacts on economies, our results could be affected and uneven. Consequently, we will continue to evaluate our financial position in light of future developments, particularly those relating to COVID-19.
Our operations, and the operations of our customers, are vulnerable to interruptions, delays, complications, and other impacts from natural disasters and catastrophic events, including pandemics such as the COVID-19 pandemic, as well as political unrest including armed conflicts such as the Russian invasion of Ukraine. Ongoing effects of the COVID-19 pandemic and its subsequent variants continue to complicate supply chain logistics and cause delays, and the Russian invasion of Ukraine may exacerbate supply chain issues further.
Our preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from our estimates.
Reclassifications
As our business continues to shift towards a subscription-based model, we have reformatted our income statement presentation to conform with this shift. We have reclassified certain prior period amounts related to revenue and cost of goods sold within our consolidated statements of operations and accompanying notes to conform to our current period presentation. These reclassifications did not affect total revenue or total cost of goods sold.
Significant Accounting Policies
There have been no material changes to our significant accounting policies as compared to the significant accounting policies described in our Annual Report.
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 is intended to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This guidance is effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. We adopted ASU 2020-04 as of January 1, 2022. The Company has determined the impact of this adoption was not material to our consolidated financial statements and related disclosures.
2. NET INCOME PER SHARE
Net income per common share is presented for both basic income per share (“Basic EPS”) and diluted income per share (“Diluted EPS”). Basic EPS is based on the weighted-average number of common shares outstanding during the period. Diluted EPS is based on the weighted-average number of common shares and common share equivalents outstanding during the period.
The potential common shares that were considered anti-dilutive securities were excluded from the diluted earnings per share calculations for the relevant periods either because the sum of the exercise price per share and the unrecognized compensation cost per share was greater than the average market price of our common stock for the relevant periods, or because they were considered contingently issuable. The contingently issuable potential common shares result from certain stock options and restricted stock units granted to our employees that vest based on performance conditions, market conditions, or a combination of performance and market conditions.
The following table sets forth (in thousands) potential common shares that were considered anti-dilutive securities at March 31, 2022 and 2021:
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| March 31, 2022 | | March 31, 2021 |
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Non-vested restricted stock units | 783 | | | 1,040 | |
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The following table sets forth (in thousands) the basic and diluted weighted common shares outstanding for the three months ended March 31, 2022 and 2021:
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| Three months ended | | |
| March 31, 2022 | March 31, 2021 | | | |
Weighted common shares outstanding - basic | 44,817 | | 44,559 | | | | |
Net effect of common stock equivalents | 591 | | 1,645 | | | | |
Weighted common shares outstanding - diluted | 45,408 | | 46,204 | | | | |
3. FAIR VALUE MEASUREMENTS
Assets Measured at Fair Value on a Recurring Basis
We measure deferred compensation investments on a recurring basis. As of March 31, 2022 and December 31, 2021, our deferred compensation investments were classified as either Level 1 or Level 2 in the fair value hierarchy. Assets valued using quoted market prices in active markets and classified as Level 1 are money market and mutual funds. Assets valued based on other observable inputs and classified as Level 2 are insurance contracts.
The following tables summarize our deferred compensation investments measured at fair value on a recurring basis (in thousands):
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| | | Fair Value Measurements at Reporting Date Using |
| March 31, 2022 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Financial assets: | | | | | | | |
Deferred compensation assets | $ | 396 | | | $ | 93 | | | $ | 303 | | | $ | — | |
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| | | Fair Value Measurements at Reporting Date Using |
| December 31, 2021 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Financial assets: | | | | | | | |
Deferred compensation assets | $ | 408 | | | $ | 99 | | | $ | 309 | | | $ | — | |
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Financial Instruments Not Recorded at Fair Value
The carrying amounts of our other financial assets and liabilities including cash, accounts receivable, accounts payable, and accrued liabilities approximate their respective fair values because of the relatively short period of time between their origination and their expected realization or settlement.
4. INVENTORIES
Inventories consisted of the following (in thousands):
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| March 31, 2022 | | December 31, 2021 |
Raw materials | $ | 7,229 | | | $ | 8,519 | |
Work in process | 304 | | | 304 | |
Finished goods | 10,284 | | | 11,099 | |
Total | $ | 17,817 | | | $ | 19,922 | |
As of March 31, 2022 and December 31, 2021, finished goods inventory included $1.3 million and $1.9 million, respectively, associated with products shipped to customers and deferred labor costs for arrangements where revenue recognition had not yet commenced.
5. LEASES
We have entered into a number of facility leases to support our research and development activities, sales operations, and other corporate and administrative functions in North America, Europe, and Asia, which qualify as operating leases under U.S. GAAP. We also have a limited number of equipment leases that qualify as either operating or finance leases. We determine if contracts with vendors represent a lease or have a lease component under U.S. GAAP at contract inception. Our leases have remaining terms ranging from less than one year to six years. Some of our leases include options to extend or terminate the lease prior to the end of the agreed upon lease term. For purposes of calculating lease liabilities, lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise such options.
Operating lease right of use assets and liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the lease commencement date. As our leases generally do not provide an implicit rate, we use an estimated incremental borrowing rate in determining the present value of future payments. The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease within a particular location and currency environment. As of March 31, 2022, the weighted average incremental borrowing rate was 5.9% and the weighted average remaining lease term was 5.7 years.
Finance lease right of use assets and liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the lease commencement date. Each lease agreement provides an implicit discount rate used to determine the present value of future payments. As of March 31, 2022, the weighted-average discount rate was 2.3% and the weighted average remaining lease term was 1.8 years.
Lease costs for minimum lease payments is recognized on a straight-line basis over the lease term. Our total operating lease costs were $1.5 million and $1.9 million for the three months ended March 31, 2022 and March 31, 2021, respectively. Related cash payments were $1.5 million and $2.1 million for the three months ended March 31, 2022 and March 31, 2021, respectively. Short term lease costs were $0.6 million and $0.3 million for the three months ended March 31, 2022 and March 31, 2021, respectively. Operating lease costs are included within research and development, marketing and selling, and general and administrative lines on the condensed consolidated statements of operations, and the related cash payments are included in the operating cash flows on the condensed consolidated statements of cash flows. Finance lease costs, variable lease costs, and sublease income are not material.
The table below reconciles the undiscounted future minimum lease payments for operating and finance leases under non-cancelable leases with terms of more than one year to the total lease liabilities recognized on the condensed consolidated balance sheets as of March 31, 2022 (in thousands):
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Year Ending December 31, | Operating Leases | Finance Leases |
2022 (excluding three months ended March 31, 2022) | $ | 4,776 | | $ | 188 | |
2023 | 5,937 | | 219 | |
2024 | 5,130 | | 72 | |
2025 | 5,151 | | — | |
2026 | 5,163 | | — | |
Thereafter | 6,495 | | — | |
Total future minimum lease payments | $ | 32,652 | | $ | 479 | |
Less effects of discounting | (5,159) | | (9) | |
Total lease liabilities | $ | 27,493 | | $ | 470 | |
Supplemental balance sheet information related to leases was as follows (in thousands):
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Operating Leases | March 31, 2022 |
Right of use assets | $ | 23,242 | |
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Accrued expenses and other current liabilities | (4,820) | |
Long-term lease liabilities | (22,673) | |
Total lease liabilities | $ | (27,493) | |
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Finance Leases | March 31, 2022 |
Other assets | $ | 438 | |
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Accrued expenses and other current liabilities | (245) | |
Other long-term liabilities | (225) | |
Total lease liabilities | $ | (470) | |
6. OTHER LONG-TERM LIABILITIES
Other long-term liabilities consisted of the following (in thousands):
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| March 31, 2022 | | December 31, 2021 |
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| | | |
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Deferred compensation | $ | 4,875 | | | $ | 4,981 | |
Finance lease liabilities | 225 | | | 289 | |
Other long-term liabilities | 630 | | | 647 | |
Total | $ | 5,730 | | | $ | 5,917 | |
7. COMMITMENTS AND CONTINGENCIES
Commitments
We entered into a long-term agreement to purchase a variety of information technology solutions from a third party in the second quarter of 2020, which included an unconditional commitment to purchase a minimum of $32.2 million of products and services over the initial five years of the agreement. We have purchased $13.5 million of products and services pursuant to this agreement as of March 31, 2022.
We have letters of credit that are used as security deposits in connection with our leased Burlington, Massachusetts office space. In the event of default on the underlying leases, the landlords would, at March 31, 2022, be eligible to draw against the letters of credit to a maximum of $0.7 million.
We also have letters of credit in connection with security deposits for other facility leases totaling $0.6 million in the aggregate, as well as letters of credit totaling $1.9 million that otherwise support our ongoing operations. These letters of credit have various terms and expire during 2022 and beyond, while some of the letters of credit may automatically renew based on the terms of the underlying agreements.
Substantially all of our letters of credit are collateralized by restricted cash included in the caption “Restricted cash” and “Other long-term assets” on our condensed consolidated balance sheets as of March 31, 2022.
Contingencies
Our industry is characterized by the existence of a large number of patents and frequent claims and litigation regarding patent and other intellectual property rights. In addition to the legal proceedings described below, we are involved in legal proceedings from time to time arising from the normal course of business activities, including claims of alleged infringement of intellectual property rights and contractual, commercial, employee relations, product or service performance, or other matters. We do not believe these matters will have a material adverse effect on our financial position or results of operations. However, the outcome of legal proceedings and claims brought against us is subject to significant uncertainty. Therefore, our financial position or results of operations may be negatively affected by the unfavorable resolution of one or more of these proceedings for the period in which a matter is resolved. Our results could be materially adversely affected if we are accused of, or found to be, infringing third parties’ intellectual property rights.
Following the termination of our former Chairman and Chief Executive Officer on February 25, 2018, we received a notice alleging that we breached the former employee’s employment agreement. On April 16, 2019, we received an additional notice again alleging we breached the former employee’s employment agreement. We have since been in communications with our former Chairman and Chief Executive Officer’s counsel. While we intend to defend any claim vigorously, when and if a claim is actually filed, we are currently unable to estimate an amount or range of any reasonably possible losses that could occur as a result of this matter.
On July 14, 2020, we sent a notice to a customer demanding sums that we believe are due to Avid pursuant to a contract. On October 7, 2020, the customer sent a notice to us denying any legal liability and demanding payment for breach of contract resulting from various alleged delays by us. While we intend to defend any claim vigorously when and if a claim is actually filed, we are currently unable to estimate an amount or range of any reasonably possible losses that could occur related to this matter.
We consider all claims on a quarterly basis and based on known facts assess whether potential losses are considered reasonably possible, probable, and estimable. Based upon this assessment, we then evaluate disclosure requirements and whether to accrue for such claims in our condensed consolidated financial statements. We record a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated and such amount is material. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case.
At March 31, 2022 and as of the date of filing of these condensed consolidated financial statements, we believe that, other than as set forth in this note, no provision for liability nor disclosure is required related to any claims because: (a) there is
no reasonable possibility that a loss exceeding amounts already recognized (if any) may be incurred with respect to such claim, (b) a reasonably possible loss or range of loss cannot be estimated, or (c) such estimate is immaterial.
Additionally, we provide indemnification to certain customers for losses incurred in connection with intellectual property infringement claims brought by third parties with respect to our products. These indemnification provisions generally offer perpetual coverage for infringement claims based upon the products covered by the agreement and the maximum potential amount of future payments we could be required to make under these indemnification provisions is theoretically unlimited. To date, we have not incurred material costs related to these indemnification provisions; accordingly, we believe the estimated fair value of these indemnification provisions is immaterial. Further, certain arrangements with customers include clauses whereby we may be subject to penalties for failure to meet certain performance obligations; however, we have not recorded any related material penalties to date.
We provide warranties on externally sourced and internally developed hardware. For internally developed hardware, and in cases where the warranty granted to customers for externally sourced hardware is greater than that provided by the manufacturer, we record an accrual for the related liability based on historical trends and actual material and labor costs. The following table sets forth the activity in the product warranty accrual account for the three months ended March 31, 2022 and 2021 (in thousands):
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| Three Months Ended March 31, |
| 2022 | | 2021 |
Accrual balance at beginning of period | $ | 1,219 | | | $ | 1,095 | |
Accruals for product warranties | 321 | | | 466 | |
Costs of warranty claims | (306) | | | (374) | |
Accrual balance at end of period | $ | 1,234 | | | $ | 1,187 | |
The warranty accrual is included in the caption “accrued expenses and other current liabilities” in our condensed consolidated balance sheet.
8. RESTRUCTURING COSTS AND ACCRUALS
In October 2020, we committed to a restructuring plan in order to undergo a strategic reorganization of our business. The strategic reorganization involved significant changes in business operations to better support our strategy and overall performance. The restructuring plan related to our strategic reorganization is expected to be substantially completed in 2022.
During the three months ended March 31, 2022, we recorded an immaterial amount of restructuring charges due to employee severance cost adjustments.
During the three months ended March 31, 2021, we recorded restructuring charges of $1.1 million for employee severance costs related to approximately 23 positions eliminated during the first quarter of 2021.
The following table sets forth the activity in the restructuring accruals for the three months ended March 31, 2022 (in thousands):
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| Employee | | | | | | | | |
Accrual balance as of December 31, 2021 | $ | 655 | | | | | | | | | |
Restructuring charges and revisions | 15 | | | | | | | | | |
Cash payments | (665) | | | | | | | | | |
Foreign exchange impact on ending balance | (5) | | | | | | | | | |
Accrual balance as of March 31, 2022 | $ | — | | | | | | | | | |
9. REVENUE
Disaggregated Revenue and Geography Information
Through the evaluation of the discrete financial information that is regularly reviewed by the chief operating decision makers (our chief executive officer and chief financial officer), we have determined that we have one reportable segment.
The following table is a summary of our revenues by type for the three months ended March 31, 2022 and 2021 (in thousands):
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| Three Months Ended March 31, | | |
| 2022 | | 2021 | | | | |
Subscriptions | 32,954 | | | 24,868 | | | | | |
Maintenance | 28,327 | | | 29,852 | | | | | |
Integrated solutions & other | 39,368 | | | 39,644 | | | | | |
Total net revenues | $ | 100,649 | | | $ | 94,364 | | | | | |
The following table sets forth our revenues by geographic region for the three months ended March 31, 2022 and 2021 (in thousands):
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| Three Months Ended March 31, | | |
| 2022 | | 2021 | | | | |
Revenues: | | | | | | | |
United States | $ | 44,389 | | | $ | 39,471 | | | | | |
Other Americas | 4,894 | | | 5,179 | | | | | |
Europe, Middle East and Africa | 38,845 | | | 36,523 | | | | | |
Asia-Pacific | 12,521 | | | 13,191 | | | | | |
Total net revenues | $ | 100,649 | | | $ | 94,364 | | | | | |
Contract Asset
Contract asset activity for the three months ended March 31, 2022 and 2021 was as follows (in thousands):
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| March 31, 2022 | | March 31, 2021 |
Contract asset at beginning of period | $ | 25,397 | | | $ | 18,579 | |
Revenue in excess of billings | 9,891 | | | 14,395 | |
Customer billings | (2,657) | | | (11,019) | |
Contract asset at end of period | $ | 32,631 | | | $ | 21,955 | |
Less: long-term portion (recorded in other long-term assets) | 7,089 | | | — | |
Contract asset, current portion | $ | 25,542 | | | $ | 21,955 | |
Deferred Revenue
Deferred revenue activity for the three months ended March 31, 2022 and 2021 was as follows (in thousands):
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| March 31, 2022 | | March 31, 2021 |
Deferred revenue at beginning of period | $ | 98,082 | | | $ | 99,259 | |
Billings deferred | 29,506 | | | 31,132 | |
Recognition of prior deferred revenue | (35,266) | | | (32,885) | |
Deferred revenue at end of period | $ | 92,322 | | | $ | 97,506 | |
A summary of the significant performance obligations included in deferred revenue is as follows (in thousands):
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| March 31, 2022 |
Product | $ | 6,210 | |
Subscription | 6,719 | |
Maintenance contracts | 71,294 | |
Implied PCS | 5,200 | |
Professional services, training and other | 2,899 | |
Deferred revenue at March 31, 2022 | $ | 92,322 | |
Remaining Performance Obligations
For transaction prices allocated to remaining performance obligations, we apply practical expedients and do not disclose quantitative or qualitative information for remaining performance obligations (i) that have original expected durations of one year or less and (ii) where we recognize revenue equal to what we have the right to invoice and that amount corresponds directly with the value to the customer of our performance to date.
Historically, for many of our products, we had an ongoing practice of making when-and-if-available software updates available to customers free of charge for a period of time after initial sales to customers. The expectation created by this practice of providing free Software Updates represents an implied obligation of a form of post-contract customer support (“Implied PCS”) which represents a performance obligation. While we have ceased providing Implied PCS on new product offerings, we continue to provide Implied PCS for older products that were predominately sold in prior years. Revenue attributable to Implied PCS performance obligations is recognized over time on a ratable basis over the period that Implied PCS is expected to be provided, which is typically six years. We have remaining performance obligations of $5.2 million attributable to Implied PCS recorded in deferred revenue as of March 31, 2022. We expect to recognize revenue for these remaining performance obligations of $1.6 million for the remainder of 2022 and $1.5 million, $1.1 million, $0.6 million and $0.3 million for the years ending December 31, 2023, 2024, 2025, and 2026, respectively, and $0.1 million thereafter.
As of March 31, 2022, we had approximately $35.6 million of transaction price allocated to remaining performance obligations for certain enterprise agreements that have not yet been fully invoiced. Approximately $25.5 million of these performance obligations were unbilled as of March 31, 2022. Remaining performance obligations represent obligations we must deliver for specific products and services in the future where there is not yet an enforceable right to invoice the customer. Our remaining performance obligations do not include contractually committed minimum purchases that are common in our strategic purchase agreements with resellers since our specific obligations to deliver products or services is not yet known, as customers may satisfy such commitments by purchasing an unknown combination of current or future product offerings. While the timing of fulfilling individual performance obligations under the contracts can vary dramatically based on customer requirements, we expect to recognize the $35.6 million in roughly equal installments through 2027.
Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations due to contract breach, contract amendments, and changes in the expected timing of delivery.
10. LONG-TERM DEBT AND CREDIT AGREEMENT
Long-term debt consisted of the following (in thousands):
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| March 31, 2022 | | December 31, 2021 |
Term Loan, net of unamortized issuance costs and debt discount of $2,373 and $2,059 at March 31, 2022 and December 31, 2021, respectively | $ | 168,627 | | | $ | 168,941 | |
Other long-term debt | 971 | | | 1,023 | |
Total debt | $ | 169,598 | | | $ | 169,964 | |
Less: current portion | 8,709 | | | 9,158 | |
Total long-term debt | $ | 160,889 | | | $ | 160,806 | |
The following table summarizes the contractual maturities of our borrowing obligations as of March 31, 2022 (in thousands):
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Fiscal Year | Term Loan | | Other Long-Term Debt | | Total |
2022 | $ | 6,413 | | | 118 | | | $ | 6,531 | |
2023 | 8,550 | | | 167 | | | 8,717 | |
2024 | 11,756 | | | 179 | | | 11,935 | |
2025 | 16,031 | | | 192 | | | 16,223 | |
2026 | 17,100 | | | 206 | | | 17,306 | |
Thereafter | 111,150 | | | 109 | | | 111,259 | |
Total before unamortized discount | 171,000 | | | 971 | | | 171,971 | |
Less: unamortized discount and issuance costs | (2,373) | | | — | | | (2,373) | |
Less: current portion of long-term debt | (8,550) | | | (159) | | | (8,709) | |
Total long-term debt | $ | 160,077 | | | $ | 812 | | | $ | 160,889 | |
Credit Agreement
On January 5, 2021, the Company entered into a Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A. as collateral and administrative agent, and a syndicate of banks, as lenders thereunder (the “Lenders”). Pursuant to the Credit Agreement, the Lenders agreed to provide the Company with (a) a term loan in the aggregate principal amount of $180.0 million (the “Term Loan”) and (b) a revolving credit facility (the “Credit Facility”) of up to a maximum of $70.0 million in borrowings outstanding at any time. The Credit Facility, which was undrawn at closing, can be used for working capital, other general corporate purposes and for other permitted uses. The proceeds from the Term Loan, plus available cash on hand, were used to repay outstanding borrowings of $201 million under the Company’s prior financing agreement with Cerberus Business Finance, LLC ( the “Financing Agreement”), which was then terminated. As a result of this termination, the Company incurred a loss on extinguishment of debt of $3.7 million as a result of writing off $2.6 million of remaining unamortized issuance costs as well as a $1.1 million prepayment penalty.
In association with the Credit Agreement, the Company incurred $2.5 million of issuance discounts and an immaterial amount of issuance costs. The Term Loan had an initial interest rate of LIBOR plus an applicable margin of 3.00%, with a 0.25% LIBOR floor. The applicable margin on the Term Loan and the Credit Facility ranged from 2.00% to 3.25%, depending on leverage.
On February 25, 2022, the Company executed an Amended and Restated Credit Agreement (the “A&R Credit Agreement) with JPMorgan Chase Bank, N.A. and the Lenders. The A&R Credit Agreement extended the term of the Term Loan by approximately one year to February 25, 2027, reduced the applicable interest rate margins by 0.25%, removed the LIBOR floor, moved the reference rate from LIBOR to the Secured Overnight Financing Rate (“SOFR”), reset the principal amortization schedule, and eliminated the fixed charge coverage ratio. The effective interest rate for the three months ended March 31, 2022 was 2.75%.
The Company granted a security interest on substantially all of its assets to secure the obligations under the Credit Facility and the Term Loan.
The A&R Credit Agreement also requires the Company to maintain a total net leverage ratio of no more than 4.00 to 1.00 initially, with step downs thereafter. Other terms of the A&R Credit Agreement remain substantially the same as the Credit Agreement. We were in compliance with the Credit Agreement covenants as of March 31, 2022.
In connection with the A&R Credit Agreement, the Company incurred an additional $0.4 million of issuance costs during the three months ended March 31, 2022. These additional costs and the remaining unamortized Term Loan discount and issuance costs will be amortized jointly over the amended remaining life of the A&R Credit Agreement. We recorded $1.2 million of interest expense on the Term Loan for the three months ended March 31, 2022. As of March 31, 2022, there were no amounts drawn under the Credit Facility.
11. STOCKHOLDERS’ EQUITY
Stock-Based Compensation
Information with respect to the Company’s non-vested restricted stock units for the three months ended March 31, 2022 was as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | Number of Restricted Stock Units | | Weighted- Average Grant-Date Fair Value | | Weighted- Average Remaining Contractual Term (years) | | Aggregate Intrinsic Value (in thousands) | | Shares Retained to Cover Statutory Minimum Withholding Taxes |
Non-vested at January 1, 2022 | | | 1,061,834 | | | $16.60 | | | | | | — | |
Granted | | | 164,405 | | | 31.22 | | | | | | — | |
Vested | | | (235,721) | | | 11.20 | | | | | | (136,435) | |
Forfeited | | | (19,976) | | | 17.62 | | | | | | — | |
Outstanding at March 31, 2022 | | | 970,542 | | | $20.37 | | 0.91 | | $33,833 | | |
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Information with respect to the Company’s non-vested performance-based restricted stock units for the three months ended March 31, 2022 was as follows:
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| | | | | |
| | | Number of Performance-based Restricted Stock Units | | Weighted- Average Grant-Date Fair Value | | Weighted- Average Remaining Contractual Term (years) | | Aggregate Intrinsic Value (in thousands) | | Shares Retained to Cover Statutory Minimum Withholding Taxes |
Non-vested at January 1, 2022 | | | 579,364 | | | $13.20 | | | | | | — | |
Granted | | | 296,405 | | | 22.69 | | | | | | — | |
Vested | | | (454,804) | | | 10.19 | | | | | | (254,596) | |
Forfeited | | | (3,448) | | | 26.38 | | | | | | — | |
Non-vested at March 31, 2022 | | | 417,517 | | | $23.11 | | 1.46 | | $14,555 | | |
The following table sets forth stock-based compensation expense by award type for the three months ended March 31, 2022 and 2021 (in thousands):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2022 | | 2021 | | | | |
Share-based compensation expense by type: | | | | | | | |
| | | | | | | |
Time-based Restricted Stock Units | $ | 2,428 | | | $ | 2,437 | | | | | |
Performance-based Restricted Stock Units | 948 | | | 656 | | | | | |
ESPP | 46 | | | 29 | | | | | |
Total share-based compensation expense | $ | 3,422 | | | $ | 3,122 | | | | | |
Stock-based compensation was included in the following captions in the Company’s condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021 (in thousands):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2022 | | 2021 | | | | |
Cost of revenues | $ | 426 | | | $ | 440 | | | | | |
Research and development expenses | 350 | | | 521 | | | | | |
Marketing and selling expenses | 598 | | | 602 | | | | | |
General and administrative expenses | 2,048 | | | 1,559 | | | | | |
Total share-based compensation expense | $ | 3,422 | | | $ | 3,122 | | | | | |
On September 9, 2021, our Board of Directors approved the repurchase of up to $115.0 million of our outstanding shares. This authorization does not have a prescribed expiration date. As of March 31, 2022, approximately $79.1 million of the $115.0 million share repurchase authorization remained available. The Company has no obligation to repurchase any amount of its common stock, and the program may be suspended or discontinued at any time. For the three months ended March 31, 2022, the Company repurchased 354,472 shares of its common stock for $10.8 million. These amounts may differ from the repurchases of common stock amounts in the condensed consolidated statements of cash flows due to unsettled share repurchases at the end of a period.