Avid Announces Results for Third Quarter 2012

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Avid Announces Results for Third Quarter 2012

Divestment Largely Complete

BURLINGTON, Mass.--(BUSINESS WIRE)-- Avid® (NASDAQ: AVID) today reported GAAP revenues of $127.2 million for the three-month period ended September 30, 2012, compared to $164.7 million for the same period in 2011. The GAAP net loss for the third quarter was $17.4 million, or $0.45 per share, compared to a GAAP net loss of $7.6 million, or $0.20 per share, in the third quarter of 2011.


Revenue for the ongoing business for the third quarter of 2012 was $123.0 million compared to $142.8 million of ongoing revenue for the same period in 2011.

The GAAP net loss for the third quarter of 2012 and 2011 included amortization of intangible assets, stock-based compensation, restructuring costs and costs and allowances related to divestitures, gain on asset sales, acquisition and other costs and related tax adjustments collectively totaling $14.4 million and $8.4 million, respectively. Excluding these items, the non-GAAP net loss for the third quarter of 2012 was $3.0 million, or $0.08 per share, compared to non-GAAP net income of $0.8 million, or $0.02 per share, for the third quarter of 2011.

The GAAP operating loss for the third quarter of 2012 was $16.4 million and excluding the items identified above, except tax adjustments, the non-GAAP operating loss for the third quarter was $2.2 million.

The company's balance sheet remains strong with cash of $71 million, up $12 million sequentially.

"During the third quarter we completed the majority of the changes we announced earlier this summer," said Gary Greenfield, chairman and CEO of Avid. "Despite the transitional issues we experienced in the quarter, we remain focused on executing the business strategy we outlined in July as the path to returning the business to sustained profitability."

Revenues for the nine-month period ended September 30, 2012 were $436.7 million, compared to revenues of $492.2 million for the same period in 2011. The GAAP net loss for the first nine months of 2012 was $69.6 million, or $1.80 per share, compared to a GAAP net loss of $23.5 million, or $0.61 per share, for the same period in 2011. The GAAP net loss for the nine-month period ended September 30, 2012 included $55.1 million of amortization of intangible assets, stock-based compensation, restructuring costs and costs and allowances related to divestitures, acquisition and other costs, loss on asset sales and related tax adjustments. Excluding these items, the non-GAAP net loss was $14.6 million, or $0.38 per share, for the first nine months of 2012. The GAAP net loss for the nine-month period ended September 30, 2011 included $21.6 million of amortization of intangible assets, stock-based compensation, restructuring costs, legal settlement, acquisition-related costs, loss on asset sales and related tax adjustments. Excluding these items, the non-GAAP net loss for the nine-month period ended September 30, 2011 was $1.9 million or $0.05 per share.

A reconciliation of GAAP to non-GAAP results and a reconciliation of ongoing revenue are included in the tables attached to this release.

Conference Call

A conference call to discuss Avid's third quarter 2012 financial results will be held today, October 29, 2012 at 4:15 p.m. ET. The call will be open to the public and can be accessed by dialing 719.457.2617 and referencing confirmation code 4569475. The call and subsequent replay will also be available on Avid's website.

To join the webcast and view the slides as well as listen to the call please go to events tab at http://ir.avid.com/ to sign in prior to the start of the conference call.

Use of Non-GAAP Financial Measures

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

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

Use of Forward-Looking Statements

The financial results included in this release are preliminary and unaudited. The contents of this release are subject to the completion and filing of our Quarterly Report on Form 10-Q. This release may include forward-looking statements, as defined by the Private Securities Litigation Reform Act of 1995. Statements in this press release that relate to future results or events are forward-looking statements and are based on Avid's current estimates and assumptions. Forward-looking statements may be identified by the use of forward-looking words, such as "anticipate," "believe," "should," "estimate," "expect," "intend," "confidence," "may," "plan," "feel," "could," "will," and "would," or similar expressions. Actual results and events in future periods may differ materially from those expressed or implied by these forward-looking statements because of a number of risks, uncertainties and other factors, including: Avid's ability to execute its strategic plan and meet customer needs; Avid's ability to realize operational and financial benefits from the sale of its consumer audio and video product lines and the reduction in workforce announced last quarter; Avid's ability to sell its professional products through retail sales channels following the divestiture of consumer products sold through those sales channels; its ability to produce innovative products in response to changing market demand, particularly in the media industry; competitive factors; fluctuations in its revenue, based on, among other things, Avid's performance in particular geographies or markets, fluctuations in foreign currency exchange rates, and seasonal factors; adverse changes in economic conditions; Avid's liquidity; and other risk factors and uncertainties disclosed previously and from time to time in Avid's filings with the U.S. Securities and Exchange Commission. In addition, the forward-looking statements contained herein represent Avid's estimates only as of today and should not be relied upon as representing the company's estimates as of any subsequent date. While Avid may elect to update these forward-looking statements at some point in the future, Avid specifically disclaims any obligation to do so, even if the estimates change.

About Avid

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

© 2012 Avid Technology, Inc. All rights reserved. Avid, the Avid logo, Media Composer, Pro Tools, Interplay, ISIS, and Sibelius are trademarks or registered trademarks of Avid Technology, Inc. or its subsidiaries in the United States and/or other countries. The Interplay name is used with the permission of the Interplay Entertainment Corp. which bears no responsibility for Avid products. All other trademarks are the property of their respective owners.

 
AVID TECHNOLOGY, INC.
Condensed Consolidated Statements of Operations
(in thousands except per share data, unaudited)
     
Three Months EndedNine Months Ended
September 30,September 30,
20112011
2012(Revised)2012(Revised)
Net revenues:
Products$89,071$131,655$334,882$397,889
Services36,29733,043102,90594,343
Allowances related to divestitures 1,807  -  (1,041) - 
Total net revenues 127,175  164,698  436,746  492,232 
 
Cost of revenues:
Products43,78460,064171,633187,951
Services15,10715,58642,14944,346
Amortization of intangible assets6346841,9282,036
Restructuring costs 741  -  3,374  - 
Total cost of revenues60,26676,334219,084234,333
    
Gross profit 66,909  88,364  217,662  257,899 
 
Operating expenses:
Research and development23,09928,96077,47489,386
Marketing and selling36,67245,395126,055136,312
General and administrative10,49913,51839,30042,737
Amortization of intangible assets7822,1593,4996,465
Restructuring costs, net12,6742,70728,6831,392
(Gain) Loss on sales of assets (419) -  9,280  597 
Total operating expenses 83,307  92,739  284,291  276,889 
 
Operating loss(16,398)(4,375)(66,629)(18,990)
 
Interest and other income (expense), net (318) (503) (891) (1,448)
Loss before income taxes(16,716)(4,878)(67,520)(20,438)
 
Provision for income taxes, net 672  2,672  2,097  3,039 
 
Net loss$(17,388)$(7,550)$(69,617)$(23,477)
 
Net loss per common share - basic and diluted$(0.45)$(0.20)$(1.80)$(0.61)
 
Weighted-average common shares outstanding - basic and diluted38,85938,51138,76738,386
       
AVID TECHNOLOGY, INC.
(in thousands except per share data, unaudited)
 
Reconciliations of GAAP financial measures to Non-GAAP financial measures:
 

Three Months Ended September 30, 2012

 
GrossOperatingOperatingTaxNet
RevenuesCOGSProfitExpensesLossProvisionLoss
GAAP$127,175$60,266$66,909$83,307$(16,399)$671$(17,388)
Amortization of intangible assets(634)634(782)1,4161,416
Restructuring costs, and costs and allowances related to divestitures(1,807)(741)(1,066)(12,674)11,60811,608
Acquisition and other costs (benefits) (a)100(100)(100)
Gain on sales of assets419(419)(419)
Tax adjustment(166)166
Stock-based compensation included in:
Cost of products revenues(79)797979
Cost of services revenues(129)129129129
Research and development expenses(212)212212
Marketing and selling expenses(620)620620
General and administrative expenses    (659) 659   659 
Non-GAAP$125,368$58,683$66,685$68,879$(2,195)$505$(3,018)
Weighted-average shares outstanding - diluted38,859
Non-GAAP net loss per share - diluted$(0.08)
(a) Represents costs (benefits) included in general and administrative expenses
       

Three Months Ended September 30, 2011 (Revised)

 
GrossOperatingOperatingTaxNet
RevenuesCOGSProfitExpenses(Loss) IncomeProvision(Loss) Income
GAAP$164,698$76,334$88,364$92,739$(4,375)$2,672$(7,550)
Amortization of intangible assets(684)684(2,159)2,8432,843
Restructuring recoveries, net(2,707)2,7072,707
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