Avid Technology Announces Q3 2022 Results

Subscription Revenue of $41.8M, an Increase of 49.2% Year-Over-Year, Driven by All-Time Record 32,600 Net Increase in Paid Subscriptions in the Quarter

Net Income of $12.0M, Adjusted EBITDA of $21.0M, and Adjusted EBITDA Margin of 20.4%

Net Income per Common Share of $0.27; Non-GAAP Net Income per Common Share of $0.38 which Represents an Increase of 40.7% Year-Over-Year

BURLINGTON, Mass., Nov. 08, 2022 (GLOBE NEWSWIRE) -- Avid^® (NASDAQ: AVID), a leading technology provider that powers the media and entertainment industry, today announced its financial results for the third quarter of 2022, which ended on September 30, 2022.

The recurring components of the Company’s revenue remained strong during the third quarter, with subscription revenue increasing 49.2% year-over-year in the third quarter to $41.8 million and subscription & maintenance revenue growing 17.6% year-over-year to $69.1 million.   Total revenue increased 1.3% year-over-year to $103.0 million in the third quarter, led by the strong subscription growth but offset by continuing supply chain challenges that have impacted the Company’s ability to ship a significant amount of the orders received for integrated solutions during the first nine months of 2022.    At constant currency, total revenue increased 6.0% year-over-year and subscription & maintenance revenue increased 22.3% year-over-year in the third quarter.

The revenue growth, combined with improved gross margin, resulted in Adjusted EBITDA of $21.0 million, representing 20.4% of revenue, and Non-GAAP Earnings per Share of $0.38, an increase of 40.7% year-over-year.

Third Quarter 2022 Financial and Business Highlights

• Subscription revenue was $41.8 million, an increase of 49.2% year-over-year. At constant currency, subscription revenue increased 56.2% year-over-year.
• Paid Cloud-enabled software subscriptions increased by an all-time record of 32,600 during the quarter to approximately 482,900 as of September 30, 2022, an increase of 24.1% year-over-year.
• Subscription and maintenance revenue was $69.1 million, up 17.6% year-over-year. At constant currency, Subscription and maintenance revenue increased 22.3% year-over-year.
• Annual Recurring Revenue was $237.2 million, an increase of 10.0% year-over-year. At constant currency, Annual Recurring Revenue increased 13.2% year-over-year.
• Subscription ARR was $131.3 million, an increase of 33.2% year-over-year. At constant currency, Subscription ARR increased 36.9% year-over-year.
• Total revenue was $103.0 million, an increase of 1.3% year-over-year. At constant-currency, total revenue increased 6.0% year-over-year.
• Gross margin was 67.8%, an increase of 300 basis points year-over-year. Non-GAAP Gross Margin was 68.3%, an increase of 300 basis points year-over-year.
• Operating expenses were $55.7 million, a decrease of (1.2%) year-over-year. Non-GAAP Operating Expenses were $51.5 million, an increase 0.3% year-over-year.
• Net income was $12.0 million, a decrease of (18.6%) year-over-year, largely due to a one-time gain related to loan forgiveness in the prior year period. Net income was 11.7% of revenue. Non-GAAP Net Income was $16.8 million, an increase of 35.2% year-over-year. Non-GAAP Net Income was 16.3% of revenue.
• Adjusted EBITDA was $21.0 million, an increase of 23.5% year-over-year. Adjusted EBITDA Margin was 20.4%, an increase of 360 basis points year-over-year.
• Net income per common share was $0.27, a decrease of (15.6%) year-over-year, largely due to a one-time gain related to loan forgiveness in the prior year period. Non-GAAP Earnings per Share was $0.38, an increase of 40.7% year-over-year.
• Net cash provided by operating activities was $10.3 million in the quarter, a decrease of ($6.2) million compared to the third quarter of 2021.
• Free Cash Flow was $6.6 million in the quarter, an increase of $3.4 million compared to the second quarter of 2022. Free Cash Flow decreased ($7.4) million compared to the third quarter of 2021, due to impact of working capital changes and timing of product shipments in the quarter.
• LTM Recurring Revenue % was 83.3% of the Company’s revenue for the 12 months ended September 30, 2022, up from 77.1% for the 12 months ended September 30, 2021.
• The Company repurchased 757,720 shares for $18.6 million during the third quarter, under the $115 million share repurchase authorization announced on September 9, 2021.

Jeff Rosica, Avid’s Chief Executive Officer and President, stated, “We are pleased by the strong growth from our subscription software business, particularly enterprise subscription and reacceleration of our creative tools, most notably Pro Tools.” Mr. Rosica continued, “Demand for our integrated solutions products remains strong, and while we continue to see some lingering constraints in the supply chain, we were able to resume production of certain audio hardware products late in the third quarter and we believe the remaining constraints are temporary. For the fourth quarter and full year, we believe we are well positioned to deliver earnings growth despite revenue headwinds from the impacts of foreign exchange and slower-than expected recovery from the current global supply chain situation.”

Ken Gayron, Chief Financial Officer and Executive Vice President of Avid, added, “We are pleased with our strong Non-GAAP Earnings per Share growth of over forty percent that was driven by an acceleration of our subscription business including an all-time record in paid subscription net adds during the quarter.” Mr. Gayron continued, “However, due to foreign exchange headwinds and the continuing challenges with the supply chain for integrated solutions, we are modifying our 2022 guidance for revenue and Free Cash Flow but maintaining and tightening our 2022 guidance for Non-GAAP Earnings per Share and Adjusted EBITDA due to prudent management of the business. Solely as a result of the foreign exchange headwinds, we are modifying our 2022 guidance for subscription & maintenance revenue.”

Full-Year 2022 Guidance

For the full-year 2022, Avid is reaffirming and tightening its guidance for Non-GAAP Earnings per Share and Adjusted EBITDA. Solely as result of foreign exchange headwinds, Avid is modifying is full-year 2022 guidance for subscription & maintenance revenue. Finally, due to the challenges in the supply chain and foreign exchange headwinds, Avid is modifying its full-year 2022 guidance for revenue and Free Cash Flow.

All guidance presented by the Company is inherently uncertain and subject to numerous risks and uncertainties. Avid’s actual future results of operations could differ materially from those shown in the table above. For a discussion of some of the key assumptions underlying the guidance, as well as the key risks and uncertainties associated with these forward-looking statements, please see “Forward-Looking Statements” below as well as the Avid Technology Q3 2022 Earnings presentation posted on Avid’s Investor Relations website at ir.Avid.com.

Conference Call to Discuss Third Quarter 2022 Results on November 8, 2022

Avid will host a conference call to discuss its financial results for the third quarter 2022 on Tuesday, November 8, 2022, at 5:30 p.m. ET.   Participants may join the webcast in listen-only mode and access the presentation slides using the link on the Avid Investor Relations website, which can be found on the Events & Presentations tab at ir.Avid.com.   Please connect at least 5 minutes in advance to ensure a timely connection to the call.   A replay of the call will also be available for a limited time and can be accessed on the Events & Presentations tab of 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, Adjusted EBITDA Margin, Free Cash Flow, Non-GAAP Gross Margin, Non-GAAP Operating Expenses, Non-GAAP Net Income, and Non-GAAP Earnings per Share. The Company also includes the operational metrics of Cloud-enabled software subscriptions, Annual Recurring Revenue, Recurring Revenue, LTM Recurring Revenue % and Annual Contract Value in this release. 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. Avid presents constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results in currencies other than United States dollars are converted into United States dollars using the same historical budget exchange rate rather than the actual exchange rates in effect during the respective periods. Definitions of the non-GAAP financial measures and the operational metrics are included in our Form 8-K filed today. Reconciliations of the non-GAAP financial measures presented in this press release to the Company's comparable GAAP financial measures for the periods presented are set forth below and are included in the supplemental financial and operational data sheet available on our Investor Relations website at ir.Avid.com, which also includes definitions of all operational metrics.

This press release also includes expectations for future Adjusted EBITDA, Non-GAAP Earnings per Share and Free Cash Flow, which are forward-looking non-GAAP financial measures. Reconciliations of these forward-looking non-GAAP measures are not included in this press release or elsewhere, 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, we are unable to quantify certain amounts that would be required to be included in the most directly comparable GAAP financial measure without unreasonable efforts.

Forward-Looking Statements

Certain information provided in this press release 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 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: the effect of the continuing worldwide macroeconomic uncertainty and its impacts, including inflation, market volatility and fluctuations in foreign currency exchange and interest rates on our business and results of operations, including impacts related to acts of war, armed conflict, and cyber conflict, such as for example, the Russian invasion of Ukraine, and related international sanctions and reprisals; risks related to the impact of the ongoing coronavirus (COVID-19) pandemic and subsequent variants on our business, suppliers, consumers, customers and employees; economic, social, and political instability, security concerns, and the risk of war, armed conflict and/or cyber conflict, particularly originating in, and complicated by, areas of heightened geopolitical tension and open conflict such as Ukraine, where we have outsourced research and development activities, Russia, and bordering territories; 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; seasonal factors; other adverse changes in external 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, armed conflict and related sanctions, weather conditions, or health pandemics; disruptions, inefficiencies, and/or complications in our operations and/or dynamic and unpredictable global supply chain, including interruptions, delays, complications, and other impacts related to armed conflict and/or cyber conflict and related international sanctions and reprisals and the ongoing COVID-19 pandemic and subsequent variants; the costs, disruption, and diversion of management's attention due to the ongoing COVID-19 pandemic and subsequent variants, armed conflict and/or cyber conflict and related international sanctions and reprisals; 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.

Avid Powers Greater Creators

People who create media for a living become greater creators with Avid’s award-winning technology solutions to make, manage and monetize today’s most celebrated video and audio content—from iconic movies and bingeworthy TV series, to network news and sports, to recorded music and the live stage. What began more than 35 years ago with our invention of nonlinear digital video editing has led to individual artists, creative teams and organizations everywhere subscribing to our powerful tools and collaborating securely in the cloud. We continue to re-imagine the many ways editors, musicians, producers, journalists and other content creators will bring their stories to life. Discover the possibilities at avid.com and join the conversation on social media with the multitude of brilliant creative people who choose Avid for a lifetime of success.

© 2022 Avid Technology, Inc., Avid and its logo are property of Avid. All rights reserved. Other trademarks are property of their respective owners.

Contacts

AVID TECHNOLOGY, INC.
Consolidated Statements of Operations
(unaudited - in thousands except per share data)

AVID TECHNOLOGY, INC.
Reconciliations of GAAP financial measures to Non-GAAP financial measures
(unaudited - in thousands except per share data)

These non-GAAP measures reflect how Avid manages its businesses internally. Avid’s non-GAAP measures may vary from how other companies present non-GAAP measures. 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.

AVID TECHNOLOGY, INC.
Consolidated Balance Sheets
(unaudited - in thousands, except per share data)

AVID TECHNOLOGY, INC.
Consolidated Statements of Cash Flows
(unaudited - in thousands)

AVID TECHNOLOGY, INC.
Supplemental Revenue Information
(unaudited - in millions)