Avid Technology Q Business Update November 9, 2017

Transcription

1 Avid Technology Q Business Update November 9,

2 Introduction Dean Ridlon Investor Relations 2

3 Non-GAAP & Operational Measures The following Non-GAAP (Adjusted) Measures & Operational Measures will be used in the presentation: Non-GAAP Measures Adjusted EBITDA Adjusted Free Cash Flow Non-GAAP Revenue Non-GAAP Gross Margin Non-GAAP Operating Expenses Operational Measures Bookings, Recurring Revenue Bookings Revenue Backlog These non-gaap measures are defined in our Form 8-K filed today, and the non-gaap measures are reconciled with GAAP measures in our press release tables as well as in the supplemental financial information available on ir.avid.com, which also includes definitions of our operational measures. 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. The presentation also includes forward-looking non-gaap financial measures, including non-gaap Revenue, Adjusted EBITDA, non-gaap Operating Expenses and Adjusted Free Cash Flow. Reconciliations of these forward-looking non-gaap financial measures are not included in this presentation or our press release issued today, due to the high variability and difficulty in making accurate forecasts and projections of some of the excluded information, together with some of the excluded information not being ascertainable or accessible at this time. As a result, the Company is unable to quantify certain amounts that would be required to be included in the most directly comparable GAAP financial measure without unreasonable efforts. 3

4 Safe Harbor Statement Certain statements made within this presentation contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, including projections and statements about our anticipated plans, objectives, expectations and intentions. Among other things, this presentation includes estimated results of operations for 2017, which estimates are based on a variety of assumptions about key factors and metrics that will determine our future results of operations, including, for example, anticipated market update of new products, realization of identified efficiency programs and market based cost inflation. Other forwardlooking statements include, without limitation, statements based upon or otherwise incorporating judgments or estimates relating to future performance such as future operating results and expenses; earnings; bookings; backlog; product mix and free cash flow; our long-term and recent cost savings initiatives and the anticipated benefits therefrom; our future strategy and business plans; our product plans, including products under development, such as cloud and subscription based offerings. The projected future results of operations, and the other forward-looking statements in this presentation are based on current expectations as of the date of this presentation and subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. The guidance presented in this presentation is inherently uncertain and subject to numerous risks and uncertainties. Our actual future results of operations and cash flows could differ materially from those discussed in this presentation. For additional information, including a discussion of some of the key risks and uncertainties associated with these forward-looking statements, please see the Forward Looking Statements section of our press release issued today, as well as the Risk Factors and Forward-Looking Statements sections of the Company s 2016 Annual Report on Form 10-K filed with the SEC. Copies of these filings are available from the SEC, the Avid Technology web site or the Company s Investor Relations Department. Any forward-looking information relayed in this presentation speaks only as of today, and Avid undertakes no obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required by law. 4

5 Avid Technology 2017 Investor Day DECEMBER 5, 2017 Palace Hotel & NBC Studios at Rockefeller Center 10:00 am 3:30 pm RSVP to Dean Ridlon (978)

6 Business Update Louis Hernandez, Jr. Chairman and Chief Executive Officer 6

7 Q Highlights Growth in bookings and revenue exceeded guidance; met guidance for all other key metrics Bookings excluding Greater China grew 21% year-over-year and 5% sequentially Operational revenue grew 3% year-over-year and sequentially In-line with guidance for Bookings (Constant $), Non-GAAP Operating Expenses, Adjusted EBITDA and Adjusted Free Cash Flow Profitability and cash flow improving Operational adjusted EBITDA more than doubled year-over-year and grew 34% sequentially Adjusted free cash flow improved $3.2 million year-over-year and up $55.7 million year to date Fourth consecutive quarter of positive Adjusted Free Cash Flow Achievement of key strategic objectives driving financial performance MediaCentral platform strategy is expanding market opportunity and saw continued growth of large enterprise deals in the quarter; cross-selling opportunities significant Cloud-enabled functionality and First product offerings are driving adoption of individual cloud enabled subscriptions which increased 69% year-over-year Strategic alliance with Microsoft for the cloud off to strong start Visibility improving with higher year over year recurring and increasing backlog Bookings attributable to recurring revenue were 41% of bookings in Q Approximately 70-80% of a quarter s revenue is known entering a quarter Revenue backlog continues to grow year over year 7

8 Strategy Driving Growth and Improving Visibility 8 MediaCentral Platform Adoption 50,000+ users 27% growth year-over-year Vehicle for future cross-sales and maximizing lifetime value of customer Shift to Recurring Revenue Bookings* 41% of Q % in Q1 12 (quarter low pre-transformation) 50% of LTM 17% in 2012 (pre-transformation) * On constant $ basis. A GAAP to Non-GAAP reconciliation is available in the back of this presentation Subscribers and Digital Sales Surging Paying subscribers up 69% from Q3 16 Digital sales up 35% over Q3 16 Backlog Continues to Increase Year Over Year Total revenue backlog of $488 million which includes contractually committed revenue backlog of $293 million

9 Continued Momentum with Enterprises and Individuals Enterprises Individuals Freemium and limited trial versions of industry leading cloud-enabled products attracting new customers Pro Tools First Media Composer First More than 500,000 downloads of Pro Tools First and Media Composer First so far MediaCentral Platform with bundled applications improves efficiency, saving customers money Professional services and deployment bundles offer additional value Multi-year agreements improve visibility Positioned to expand relationships further Nearly 100,000 downloads of Media Composer First since made available at the end of June Powerful, low cost acquisition tool with high conversion rates Total cloud-enabled subscribers reached over 84,000 in Q3, up 69% year-over-year 9

10 Financial Results and Guidance Brian E. Agle Senior Vice President and Chief Financial Officer 10

11 Q Results Compared to Guidance Guidance ($M) Q3 17 Low High Bookings Constant $ $107.9 $95 $109 Bookings Revenue Revenue excl. Pre-2011 & Elim PCS Pre-2011 & Elim PCS 0.1 Non-GAAP Operating Expenses Adjusted EBITDA Adj EBITDA excl. Pre-2011 & Elim PCS 11.4 Favorable to Guidance Range Bookings Revenue Within Guidance Range Bookings (Constant $) Operating Expenses Adjusted EBITDA Adjusted Free Cash Flow Adjusted Free Cash Flow 0.5 ($7) $1 11 A GAAP to Non-GAAP reconciliation is available in the back of this presentation

12 Q Growth Across Most Categories Change % Fav/(UnFav) ($M) Q3 16 Q2 17 Q3 17 Seq YoY Bookings Constant $ $94.7 $104.3 $ % 14% Excl. Greater China % 19% Bookings % 15% Excl. Greater China % 21% Non-GAAP Revenue % (12%) Revenue excl. Pre-2011 & Elim PCS % 3% Pre-2011 & Elim PCS Non-GAAP Gross Margin % (20%) G.M. excl. Pre-2011 & Elim PCS % 4% % Revenue excl. Pre-2011 & Elim PCS 59.2% 60.5% 59.2% Non-GAAP Operating Expenses % 8% Bookings excluding Greater China up year-over-year and sequentially Revenue growing (excluding Pre-2011 & Elim PCS) while shifting to recurring revenue Minimal amount of Pre-2011 & Elim PCS revenue in Q3; reduced by over $17M year-over-year Efficiency program drives year-overyear reduction in Non-GAAP Operating Expenses Adjusted EBITDA % (50%) Adj. EBITDA excl. Pre-2011 & Elim PCS % 107% Adjusted Free Cash Flow improves $3.2M year-over-year Adjusted Free Cash Flow (2.6) (91%) - 12 A GAAP to Non-GAAP reconciliation is available in the back of this presentation

13 Bookings Greater China and Rest of World Q3 17 ($M) Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 YoY Greater China $3.9 $5.4 $4.3 $3.2 $ Rest of World % Total $92.5 $102.2 $89.5 $125.4 $172.3 $98.0 $ % 13

14 Efficiency Program Steadily Driving Down Expenses ($M) $300 $280 $260 $240 $220 $200 $180 Non-GAAP Operating Expenses (LTM) -17% YoY Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Avid Historical Orad Completed additional $30M efficiency program savings in 2017 $106M+ total savings over past two years Leverages the development platform Opportunities for talent alignment Facilities rationalization 14 A GAAP to Non-GAAP reconciliation is available in the back of this presentation

15 Key Balance Sheet Metrics ($M) Q3 16 Q2 17 Q3 17 Cash $47.7 $47.4 $44.1 Accounts Receivable DSO Net Inventory Turns Long Term Debt Deferred Revenue a Def. Rev excl. Pre-2011 & Elim PCS Contractually Committed Backlog b Cash Balance of $44M Total revenue backlog of $488M which includes contractually committed revenue backlog of $293M Contractually committed backlog up nearly $100M year-over-year Total Revenue Backlog a+b $437.2 $487.8 $488.0 Total Rev Backlog excl. Pre-2011 & Elim PCS

16 Revenue Visibility Deferred Revenue Contractually Committed Backlog 70-80% Entering a quarter, approximately 70-80% of revenue is known Current Quarter Bookings 16

17 Material Improvement in Adjusted Free Cash Flow ($M) Adjusted Free Cash Flow $6.8 $6.2 $3M year-over-year improvement $2.0 +$3.2 $ bonus payment has been paid in Q4 Continue to see benefit of efficiency programs and working capital optimization $(2.6) Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 17 A GAAP to Non-GAAP reconciliation is available in the back of this presentation

18 YTD Adjusted Free Cash Flow Dramatic Improvement ($M) YTD Adjusted Free Cash Flow $13.5 +$55.7 Year-over-year Adjusted Free Cash Flow on a YTD basis represents an improvement of $55.7M $(42.3) Q1-Q Q1-Q A GAAP to Non-GAAP reconciliation is available in the back of this presentation

19 Free Cash Flow Improvement (unaudited - in thousands) Three Months Ended September 30, Fav/Unfav Adjusted free cash flow GAAP net cash provide/ (used in) operations (3,909) 31 3,940 Capital expenditures (2,360) (3,017) (657) Free Cash Flow (6,269) (2,986) 3,283 Non-Operational / One-time Items Restructuring payments 1,496 2,546 1,050 Restatement payments Acquisition, integration and other payments (22) Efficiency program payments 1, (1,313) Sub-Total Non-Operational / One-Time Items 3,639 3,523 (116) Strong YoY improvement in free cash flow generation CapEx consistent with historical trends Positive Adjusted Free Cash Flow for four consecutive quarters Adjusted free cash flow $ (2,630) $ 537 $ 3,167 19

20 Business Updates Harmonic Settled our patent infringement litigation against Harmonic in October Avid to receive $6.0M $2.5M received in October 2017 $1.5M due in 2 nd quarter 2019 $2.0M due in 3 rd quarter 2020 Accounting impact expected in Q Jetsen (China) China government elections and market conditions making environment increasingly challenging and complicated Q3 shipment minimum was met. Minimum cash payment was paid but delayed to early Q4 due to Chinese holiday 2017 annual minimums not anticipated to be met Equity investment not expected in Q4 20

21 Expanded Loan Facility Incremental Cash and Liquidity Term Loan Increase Cash $15M Expanded Line of Credit $5M Total Incremental Liquidity $20M Closed on November 9, Terms of the extended facility are the same as the current agreement. Created a basket providing an option to purchase $15 million of Avid s convertible bonds. Amended covenant calculation for the new revenue accounting standard (ASC 606) effective for

22 Q Guidance Q Guidance ($M) Q4 16 Q3 17 Low High Bookings Constant $ $134.6 $107.9 $118 $132 Excl. Greater China Bookings Excl. Greater China Revenue Revenue (Excl. Pre-2011 & Elim PCS) Pre-2011 & Elim PCS Non-GAAP Operating Expenses Adjusted EBITDA EBITDA (Excl. Pre-2011 & Elim PCS) Pre-2011 & Elim PCS Adjusted Free Cash Flow $ ($4) $4 22 A GAAP to Non-GAAP reconciliation of historical performance is available in the back of this presentation

23 In Summary Financials are simplified Revenue is growing; Expenses are decreasing Consistent trend of positive adjusted free cash flow Positioned to increase profit and to generate additional cash 23

24 Closing Remarks Louis Hernandez, Jr. Chairman and Chief Executive Officer 24

25 Well Positioned for the Future Positioned well for: Accelerating revenue growth Scaling profitability Driving higher cash flow 25

26 Central Media Index Shared Components ConnectivityToolkit InfrastructureManagement 26

27 Strategy for Enterprise and Individual Customers Drives Growth, Visibility and Recurring Model Land Expand Maximize Enterprises Land new, and migrate existing customers to MediaCentral Platform Expand wallet share with complimentary Avid and Alliance products and services at initial deployment Maximize lifetime value through additional products, services, support and consulting Individuals Land new users with freemium and limited trial versions of anchor products Expand wallet share with complementary plug-ins, apps, content and hardware peripherals Maximize lifetime value through additional products and services 27

28 Transformation Growth Phase Avid Everywhere Strategy Drives Expanded Market Opportunity New High Growth Opportunities New product categories, cloud services, customer segments Platform allows efficient expansion into new high-growth categories and customer segments Cloud Cloud hosting, as-a-service, with Microsoft Incremental opportunity from cloud services enabled by platform strategy and strategic alliance with Microsoft Recurring Business Model Subscription, Enterprise, Maintenance Shift to recurring model adds new services opportunities and establishes model for growth Heritage Market Video, Audio Newsroom, Storage Large market, but low growth MediaCentral platform expands addressable opportunity from content creation through distribution 28

29 Q Highlights Growth in revenue and bookings exceeded guidance; met guidance for all other metrics Profitability and cash flow materially improving Achievement of key strategic objectives driving financial performance Visibility improving with higher recurring and increasing backlog 29

30 30

31 AVID TECHNOLOGY, INC. Reconciliations of GAAP financial measures to Non-GAAP financial measures (unaudited - in thousands) Three Months Ended Nine Months Ended September 30, September 30, Non-GAAP revenue GAAP revenue $ 105,265 $ 119,019 $ 311,745 $ 396,635 Amortization of acquired deferred revenue Non-GAAP revenue 105, , , ,229 Pre-2011 Revenue 142 5, ,504 Elim PCS - 12,000 1,700 44,800 Non-GAAP Revenue w/o Pre-2011 and Elim 105, , , ,925 Non-GAAP gross profit GAAP gross profit 60,358 75, , ,254 Amortization of acquired deferred revenue Amortization of intangible assets 1,950 1,950 5,850 5,850 Stock-based compensation Non-GAAP gross profit 62,371 77, , ,186 Pre-2011 Revenue 142 5, ,504 Elim PCS - 12,000 1,700 44,800 Non-GAAP gross profit w/o Pre-2011 and Elim 62,229 60, , ,882 Non-GAAP operating expenses GAAP operating expenses 56,650 66, , ,190 Less Amortization of intangible assets (362) (567) (1,088) (2,135) Less Stock-based compensation (2,418) (1,571) (5,327) (5,628) Less Restructuring costs, net 582 (5,314) (6,464) (7,878) Less Restatement costs (284) (38) (726) (186) Less Acquisition, integration and other costs (458) Less Efficiency program costs (483) (1,338) (3,054) (3,338) Non-GAAP operating expenses 53,929 58, , ,567 Non-GAAP operating income GAAP operating (loss) income 3,708 8, ,064 Amortization of acquired deferred revenue Amortization of intangible assets 2,312 2,517 6,938 7,985 Stock-based compensation 2,481 1,728 5,874 6,116 Restructuring costs, net (582) 5,314 6,464 7,878 Restatement costs Acquisition, integration and other costs (244) (336) (104) 458 Efficiency program costs 483 1,338 3,054 3,338 Non-GAAP operating income 8,442 19,103 23,417 79,619 31

32 AVID TECHNOLOGY, INC. Reconciliations of GAAP financial measures to Non-GAAP financial measures (unaudited - in thousands) Three Months Ended Nine Months Ended September 30, September 30, Adjusted EBITDA Non-GAAP operating income (from above) 8,442 19,103 23,417 79,619 Depreciation 3,088 3,762 9,994 11,184 Adjusted EBITDA 11,530 22,865 33,411 90,803 Adjusted EBITDA margin 11% 19% 11% 23% Pre-2011 Revenue 142 5, ,504 Elim PCS - 12,000 1,700 44,800 Adjusted EBITDA w/o Pre-2011 and Elim 11,388 5,497 30,804 23,499 Adjusted free cash flow GAAP net cash provided by (used in) operating activities 31 (3,909) 6,103 (48,925) Capital expenditures (3,017) (2,360) (6,125) (9,681) Free Cash Flow (2,986) (6,269) (22) (58,606) Non-Operational / One-time Items Restructuring payments 2,546 1,496 9,540 8,981 Restatement payments Acquisition, integration and other payments ,817 Efficiency program payments 634 1,947 3,363 5,530 Sub-Total Non-Operational / One-Time Items 3,523 3,639 13,475 16,328 Adjusted free cash flow $ 537 $ (2,630) $ 13,453 $ (42,278) Adjusted free cash flow conversion of adjusted EBITDA 5% -12% 40% -47% 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. 32