Avid Technology Announces Q4 and FY 2022 Results

Q4 revenue of $116.1M, which includes a ($3.3M) one-time non-cash adjustment, was in the middle of the implied Q4 guidance range; excluding the adjustment, Q4 revenue of $119.4M would have been at the high end of the implied Q4 guidance range

Subscription ARR of $141.3M, an increase of 37.1% year-over-year and 38.8% at constant currency, and total ARR of $244.9M, an increase of 10.2% year-over-year and 13.4% at constant currency

Exceeded 500,000 paid Cloud-Enabled Software Subscriptions as of December 31, 2022

Introduction of Annual Recurring Revenue (ARR) guidance for Q1 and FY 2023

BURLINGTON, Mass., March 01, 2023 (GLOBE NEWSWIRE) -- Avid^® (NASDAQ: AVID), a leading technology provider that powers the media and entertainment industry, today announced its financial results for the fourth quarter and full year ended December 31, 2022.

As reported, fourth quarter revenue was $116.1 million, a decrease of (2.5%) year-over-year, net income was $25.3 million, an increase of 66.0% year-over-year, Adjusted EBITDA was $24.8 million, a decrease of (0.6%) year-over-year, net income per common share was $0.57, an increase of $0.24 year-over-year, and Non-GAAP Earnings per Share was $0.45, a decrease of ($0.01) year-over year. Revenue was in the middle of our implied Q4 guidance range, Adjusted EBITDA was below our implied Q4 guidance range and Non-GAAP Earnings per Share was within our implied Q4 guidance range.

During the fourth quarter, we recorded a one-time, non-cash adjustment to revenue of ($3.3 million) related to a corrective change in methodology for calculating standalone selling price for subscription term-based licenses in the amount of $0.1 million for FY 2020, ($2.1 million) for FY 2021 and ($1.3 million) for the nine months ending September 30, 2022, as outlined in our 10-K filed today. The adjustment related to the period from FY 2020 to FY 2022 and represented 0.3% of the total revenue over the three years. The adjustment also negatively impacted net income and Adjusted EBITDA in the fourth quarter, but had no impact on net cash provided by operating activities, Free Cash Flow or ARR.

Excluding the adjustment, fourth quarter revenue would have been $119.4 million, an increase of 0.3% year-over-year (or 4.4% at constant currency), net income would have been $27.7 million, an increase of 82.0% year-over year (or 97.3% at constant currency), Adjusted EBITDA would have been $27.2 million, an increase of 9.2% year-over year (or 17.9% at constant currency), net income per common share would have been $0.63, an increase of $0.30 year-over year (or an increase of $0.34 at constant currency) and Non-GAAP Earnings per Share would have been $0.51, an increase of $0.05 year-over-year (or an increase of $0.10 at constant currency).   Excluding the adjustment, revenue and Non-GAAP Earnings per Share would have been in the high end of our implied Q4 guidance range and Adjusted EBITDA would have been within our implied Q4 guidance range.

The recurring components of the Company’s revenue remained strong during the fourth quarter as paid subscriptions reached 506,000 as of the end of 2022, an increase of 23.2% year-over-year. Subscription ARR was $141.3 million (as of December 31, 2022), an increase of 37.1% year-over-year, and total ARR was $244.9 million (as of December 31, 2022), an increase of 10.2% year-over-year. At constant currency, subscription ARR increased 38.8% year-over-year and total ARR increased 13.4% year-over-year.   In the fourth quarter, integrated solutions revenue was $40.8 million, an increase of 55% sequentially, as we continued to work to resolve supply chain challenges. As a result of continued strong integrated solutions orders during the fourth quarter, the backlog of unshipped orders was reduced during the quarter but remained above what we believe to be normal levels as of the end of 2022, at over $20 million.

Net cash provided by operating activities was $22.5 million in the fourth quarter and $48.0 million for FY 2022. Free Cash Flow was $18.3 million in the fourth quarter and $32.8 million for FY 2022. Free Cash Flow was lower year-over-year due to a greater use of cash in working capital, primarily from timing of cash billings related to multi-year enterprise subscriptions. In addition, higher capital expenditures, prepaid expenses due to our temporary Digital Transformation Initiative (DTI) investments and capitalized software development also negatively impacted Free Cash Flow. The Company expects that Free Cash Flow will be higher in 2023, as outlined in our guidance below.

Fourth Quarter 2022 Financial and Business Highlights

• Paid Cloud-enabled software subscriptions increased by approximately 23,100 during the quarter to approximately 506,000 as of December 31, 2022, an increase of 23.2% year-over-year.
• Subscription ARR was $141.3 million, an increase of 37.1% year-over-year. At constant currency, Subscription ARR increased 38.8% year-over-year.
• Total ARR was $244.9 million, an increase of 10.2% year-over-year. At constant currency, ARR increased 13.4% year-over-year.
• Subscription revenue was $42.5 million, an increase of 24.6% year-over-year. At constant currency, subscription revenue increased 29.6% year-over-year.   Excluding the one-time adjustment in the quarter, subscription revenue would have increased 34.3% year-over-year and 39.2% year-over-year at constant currency.
• Subscription and maintenance revenue was $68.9 million, an increase of 5.3% year-over-year. At constant currency, Subscription and maintenance revenue increased 9.3% year-over-year.   Excluding the one-time adjustment in the quarter, subscription and maintenance revenue would have increased 10.3% year-over-year and 14.3% year-over-year at constant currency.
• Total revenue was $116.1 million, a decrease of (2.5%) year-over-year.   At constant-currency, total revenue increased 1.7% year-over-year. Excluding the one-time adjustment in the quarter, total revenue would have increased 0.3% year-over-year and 4.4% year-over-year at constant currency.
• Gross margin was 64.2%, a decrease of (160 basis points) year-over-year and Non-GAAP Gross Margin was 64.6%, a decrease of (160 basis points) year-over-year.  
• Operating expenses were $58.0 million, a decrease of (5.2%) year-over-year.   Non-GAAP Operating Expenses were $52.5 million, a decrease of (5.9%) year-over-year.
• Net income was $25.3 million, an increase of 66.0% year-over-year, due in part to a one-time non-cash tax benefit of $11.3 million in Q4 2022.   Net income was 21.8% of revenue. Non-GAAP Net Income was $19.9 million, a decrease of (4.5%) year-over-year. Non-GAAP Net Income was 17.2% of revenue. Excluding the one-time adjustment in the quarter, net income would have increased 82.0% year-over-year and 97.3% year-over-year at constant currency, and Non-GAAP Net Income would have increased 7.1% year-over-year and 17.9% year-over-year at constant currency.
• Adjusted EBITDA was $24.8 million, a decrease of (0.6%) year-over-year. At constant-currency, Adjusted EBITDA increased 8.0% year-over-year. Adjusted EBITDA Margin was 21.4%, an increase of 40 basis points year-over-year.   Excluding the one-time adjustment in the quarter, Adjusted EBITDA increased 9.2% year-over-year and 17.9% year-over-year at constant currency.
• Net income per common share was $0.57, an increase of $0.24 year-over-year, due in part to the one-time non-cash tax benefit in Q4 2022 mentioned above. Non-GAAP Earnings per Share was $0.45, a decrease of ($0.01) year-over-year.   Excluding the one-time adjustment in the quarter, Net income per common share would have increased $0.30 year-over-year and $0.34 year-over-year at constant currency, and Non-GAAP Earnings per Share would have increased $0.05 year-over-year and $0.10 year-over-year at constant currency.
• Net cash provided by operating activities was $22.5 million in the quarter, a decrease of ($4.6) million compared to the prior year period.
• Free Cash Flow was $18.3 million in the quarter, a decrease of ($6.7) million compared to the fourth quarter of 2022, due to the items mentioned above.
• The Company repurchased 364,760 shares for $9.3 million during the fourth quarter, under the $115 million share repurchase authorization announced on September 9, 2021.
  

FY 2022 Financial and Business Highlights

• Paid Cloud-enabled software subscriptions increased during the year by approximately 95,400 to approximately 506,000 as of December 31, 2022, an increase of 23.2% year-over-year.
• Subscription revenue was $151.3 million, an increase of 39.5% year-over-year. At constant currency, subscription revenue increased 44.7% year-over-year.   Excluding the one-time adjustment in the fourth quarter, subscription revenue would have increased 42.6% year-over-year and 47.7% year-over-year at constant currency.
• Subscription and maintenance revenue was $261.2 million, up 13.1% year-over-year. At constant currency, Subscription and maintenance revenue increased 16.4% year-over-year.   Excluding the one-time adjustment in the fourth quarter, subscription and maintenance revenue would have increased 14.6% year-over-year and 17.8% year-over-year at constant currency.
• Total revenue was $417.4 million, an increase of 1.8% year-over-year. At constant-currency, total revenue increased 5.3% year-over-year.   Excluding the one-time adjustment in the fourth quarter, total revenue would have increased 2.6% year-over-year and 6.1% year-over-year at constant currency.
• Gross margin was 65.7%, an increase of 90 basis points year-over-year. Non-GAAP Gross Margin was 66.2%, an increase of 90 basis points year-over-year.  
• Operating expenses were $220.6 million, an increase of 0.5% year-over-year. Non-GAAP Operating Expenses were $203.3 million, an increase of 1.4% year-over-year.
• Net income was $55.2 million, an increase of 33.5% year-over-year, due in part to the one-time non-cash tax benefit in Q4 2022 mentioned above.   Net income was 13.2% of revenue. Non-GAAP Net Income was $63.3 million, an increase of 9.3% year-over-year. Non-GAAP Net Income was 15.2% of revenue.   Excluding the one-time adjustment in the quarter, net income would have increased 39.4% year-over year and 59.2% year-over-year at constant currency, and Non-GAAP Net Income would have increased 13.5% year-over-year and 26.4% year-over-year at constant currency.
• Adjusted EBITDA was $81.6 million, an increase of 8.1% year-over-year. At constant-currency, Adjusted EBITDA increased 17.9% year-over-year.   Adjusted EBITDA Margin was 19.5%, an increase of 110 basis points year-over-year. Excluding the one-time adjustment in the fourth quarter, Adjusted EBITDA would have increased 11.3% year-over-year and 21.3% year-over-year at constant currency.
• Net income per common share was $1.23, an increase of $0.34 year-over-year, due in part to the one-time non-cash tax benefit in Q4 2022 mentioned above. Non-GAAP Earnings per Share was $1.41, an increase of $0.16 year-over-year.   Excluding the one-time adjustment in the quarter, Net income per common share would have increased $0.40 year-over-year and $0.55 year-over-year at constant currency, and Non-GAAP Earnings per Share would have increased $0.22 year-over-year and $0.37 year-over-year at constant currency.
• Net cash provided by operating activities was $48.0 million in 2022, a decrease of (23.2%) year-over-year.
• Free Cash Flow was $32.8 million in 2022, a decrease of (41.1%) year-over-year, due to the items mentioned above.
• LTM Recurring Revenue % was 84.5% of the Company’s revenue for the year-ended 2022, up from 78.0% for the prior year period.
• The Company repurchased 2,036,524 shares for $52.8 million during 2022, under the $115 million share repurchase authorization announced on September 9, 2021.
  

Jeff Rosica, Avid’s Chief Executive Officer and President, stated, “We remain pleased with the overall business performance in the fourth quarter as we continue to see strong growth in our software subscription business for both creative and enterprise customers. Our customers continue to adopt our enterprise subscription offerings, which, combined with creative subscription growth, resulted in solid growth in ARR. In addition, we continued making progress in resolving supply chain challenges in our integrated solutions that we experienced throughout 2022.”   Mr. Rosica added, “While the one-time, non-cash adjustment to revenue we took in the fourth quarter impacted our results for the quarter, absent this adjustment, we would have been at the high-end of our implied Q4 guidance range for revenue and Non-GAAP Earnings per Share, and so, as we start 2023, we are confident in the underlying performance of the business as our product innovations continue to drive strong customer demand for our solutions.”

Ken Gayron, Executive Vice President and Chief Financial Officer of Avid, said, “We continued to make substantial progress in driving our higher gross margin subscription and maintenance revenue during the fourth quarter, which together accounted for 59% of our total revenue in the quarter. This growth, combined with lower operating expenses, enabled us to deliver solid profitability in 2022 and, we believe, positions us well as we enter 2023.” Mr. Gayron continued, “Given the importance of ARR as a measure of the growth of our subscription and maintenance business, we have added ARR to our forward guidance for Q1 and FY 2023. Additionally, given our high confidence in our strategy and long-term model, we continued to repurchase shares in the fourth quarter under the Company’s share repurchase program.”

First Quarter and Full Year 2023 Guidance

For the first quarter of 2023, Avid is providing guidance for ARR, Revenue, Subscription & Maintenance Revenue, Non-GAAP Earnings per Share, and Adjusted EBITDA. For the full year 2023, Avid is providing guidance for ARR, Revenue, Subscription & Maintenance Revenue, Non-GAAP Earnings per Share, Adjusted EBITDA, and Free Cash Flow, as adjusted.

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 Q4 and FY 2022 Earnings presentation posted on Avid’s Investor Relations website at ir.Avid.com.

Conference Call to Discuss Fourth Quarter and FY 2022 Results on March 1, 2023

Avid will host a conference call to discuss its financial results for the fourth quarter and FY 2022 on Wednesday, March 1, 2023, 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.

Corrective Change in Methodology for Calculating Standalone Selling Price

More information on the one-time, non-cash adjustment taken during the fourth quarter to correct an immaterial error in methodology for calculating standalone selling price for subscription term-based licenses in prior periods is detailed in Management's Discussion and Analysis and the Notes to Consolidated Financial Statements in our 10-K filed today.

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. Constant currency growth rates are calculated using the same historical budget exchange rates for both the historical and current 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; the impact of changes in accounting treatment interpretations over time; our higher indebtedness and ability to service it and meet the obligations thereunder; our ability to mitigate and remediate material weaknesses in our internal controls; 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.

© 2023 Avid Technology, Inc., Avid and its logo are property of Avid. All rights reserved. Other trademarks are property of their respective owners.

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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)

AVID TECHNOLOGY, INC.  
Impact of one-time, non-cash revenue adjustment in Q4 2022  
(unaudited - in millions)