UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,September 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________

Commission File Number:  1-36254
__________________
Avid Technology, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware04-2977748
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
75 NetworkBlue Sky Drive
BurlingtonMassachusetts01803
   Address of Principal Executive Offices, Including Zip Code
(978) 640-6789640-3000
Registrant's Telephone Number, Including Area Code
__________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueAVIDNasdaq Global Select Market
Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  Yes x   No ¨
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes x   No ¨ 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 under the Exchange Act.
Large accelerated filerxAccelerated filero
Non-accelerated filer  oSmaller reporting companyo
Emerging growth companyo
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 under the Exchange Act).  
Yes ☐   No x
The number of shares outstanding of the registrant’s Common Stock, as of May 2,November 4, 2022, was 44,971,814.43,691,214.



AVID TECHNOLOGY, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31,September 30, 2022

TABLE OF CONTENTS
 Page
   
  
  
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  




CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Form 10-Q”) includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained in this Form 10-Q that relate to future results or events are forward-looking statements. Forward-looking statements may be identified by use of forward-looking words, such as “anticipate,” “believe,” “confidence,” “could,” “estimate,” “expect,” “feel,” “intend,” “may,” “plan,” “should,” “seek,” “will,” and “would,” or similar expressions.

Forward-looking statements may involve subjects relating to, among others, the following:

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;

the effects that the COVID-19 pandemic, including variants, and its related consequences may have on the national and global economy and on our business and operations, revenues, cash flows and profitability, and capital resources;

our ability to successfully implement our strategy, including our cost saving measures and other actions implemented in response to the COVID-19 pandemic;market volatility and other adverse economic and commercial conditions;

the anticipated trends and developments in our markets and the success of our products in these markets;

our ability to develop, market, and sell new products and services;

our business strategies and market positioning;

our ability to achieve our goal of expanding our market positions;

our ability to accelerate growth of our cloud-enabled platform;

anticipated trends relating to our sales, financial condition or results of operations, including our ongoing shift to a recurring revenue model and complex enterprise sales with long sales cycles;

the expected timing of recognition of revenue backlog as revenue, and the timing of recognition of revenues from subscription offerings;

our ability to successfully consummate acquisitions and investment transactions and to successfully integrate acquired businesses;

the anticipated performance of our products;

our ability to maintain adequate supplies of products and components, including through sole-source supply arrangements;

our plans regarding repatriation of foreign earnings;

the outcome, impact, costs, and expenses of pending litigation or any new litigation or government inquiries to which we may become subject;

the effect of the continuing worldwide macroeconomic uncertainty on our business and results of operations, including acts of war, armed conflict, and cyber conflict, such as the Russian invasion of Ukraine, and related international sanctions and reprisals;

our compliance with covenants contained in the agreements governing our indebtedness;

our ability to service our debt and meet the obligations thereunder;




the effect of seasonal changes in demand for our products and services;




fluctuations in foreign exchange and interest rates;

estimated asset and liability values;

our ability to protect and enforce our intellectual property rights; and

the expected availability of cash to fund our business and our ability to maintain adequate liquidity and capital resources, generally and in the wake of the COVID-19 pandemic and the continuing worldwide macroeconomic uncertainty described above.

Actual results and events in future periods may differ materially from those expressed or implied by forward-looking statements in this Form 10-Q. There are a number of factors that could cause actual events or results to differ materially from those indicated or implied by forward-looking statements, many of which are beyond our control, including the risk factors discussed herein and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021, in Part II, Item 1A of this Quarterly Report on Form 10-Q, and in other documents we file from time to time with the U.S. Securities and Exchange Commission (“SEC”). In addition, the forward-looking statements contained in this Form 10-Q represent our estimates only as of the date of this filing and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update these forward-looking statements in the future, we specifically disclaim any obligation to do so, whether to reflect actual results, changes in assumptions, changes in other factors affecting such forward-looking statements, or otherwise.

We own or have rights to trademarks and service marks that we use in connection with the operation of our business. “Avid” is a trademark of Avid Technology, Inc. Other trademarks, logos, and slogans registered or used by us and our subsidiaries in the United States and other countries include, but are not limited to, the following: Avid, Avid NEXIS, AirSpeed, FastServe, MediaCentral, Media Composer, Pro Tools, and Sibelius. Other trademarks appearing in this Form 10-Q are the property of their respective owners.





PART I - FINANCIAL INFORMATION

ITEM 1.    UNAUDITED FINANCIAL STATEMENTS

AVID TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data, unaudited)
Three Months EndedThree Months EndedNine Months Ended
March 31, September 30,September 30,
20222021 2022202120222021
Net revenues:Net revenues:  Net revenues:  
SubscriptionSubscription$32,954 24,868 Subscription$41,782 $28,008 $108,878 $74,384 
MaintenanceMaintenance28,327 29,852 Maintenance27,280 30,702 83,382 90,997 
Integrated solutions & otherIntegrated solutions & other39,368 39,644 Integrated solutions & other33,923 42,930 109,054 125,499 
Total net revenuesTotal net revenues100,649 94,364 Total net revenues102,985 101,640 301,314 290,880 
Cost of revenues:Cost of revenues:  Cost of revenues:  
SubscriptionSubscription5,602 2,615 Subscription6,163 4,020 18,057 10,210 
MaintenanceMaintenance5,277 5,574 Maintenance4,849 5,739 15,379 17,135 
Integrated solutions & otherIntegrated solutions & other23,006 24,759 Integrated solutions & other22,194 25,978 67,969 76,078 
Total cost of revenuesTotal cost of revenues33,885 32,948 Total cost of revenues33,206 35,737 101,405 103,423 
Gross profitGross profit66,764 61,416 Gross profit69,779 65,903 199,909 187,457 
Operating expenses:Operating expenses:  Operating expenses:  
Research and developmentResearch and development16,736 15,417 Research and development17,110 17,129 49,869 48,639 
Marketing and sellingMarketing and selling21,927 20,744 Marketing and selling24,362 24,413 69,962 66,511 
General and administrativeGeneral and administrative14,811 13,635 General and administrative14,066 14,901 42,241 42,214 
Restructuring costs, netRestructuring costs, net15 1,074 Restructuring costs, net158 (88)515 1,001 
Total operating expensesTotal operating expenses53,489 50,870 Total operating expenses55,696 56,355 162,587 158,365 
Operating incomeOperating income13,275 10,546 Operating income14,083 9,548 37,322 29,092 
Interest expense, netInterest expense, net(1,476)(2,118)Interest expense, net(2,741)(1,646)(6,161)(5,547)
Other expense, net(87)(3,555)
Other income, netOther income, net15 7,864 4,459 
Income before income taxesIncome before income taxes11,712 4,873 Income before income taxes11,357 15,766 31,168 28,004 
Provision for income taxes1,126 482 
(Benefit from) provision for income taxes(Benefit from) provision for income taxes(665)991 1,187 1,832 
Net incomeNet income$10,586 $4,391 Net income$12,022 $14,775 $29,981 $26,172 
Net income per common share – basicNet income per common share – basic$0.24$0.10Net income per common share – basic$0.27$0.32$0.67$0.58
Net income per common share – dilutedNet income per common share – diluted$0.23$0.10Net income per common share – diluted$0.27$0.32$0.66$0.56
Weighted-average common shares outstanding – basicWeighted-average common shares outstanding – basic44,817 44,559 Weighted-average common shares outstanding – basic44,476 45,564 44,676 45,115 
Weighted-average common shares outstanding – dilutedWeighted-average common shares outstanding – diluted45,408 46,204 Weighted-average common shares outstanding – diluted44,703 46,428 45,107 46,449 
The accompanying notes are an integral part of the condensed consolidated financial statements.
1


AVID TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, unaudited)
Three Months EndedThree Months EndedNine Months Ended
March 31, September 30,September 30,
20222021 2022202120222021
Net incomeNet income$10,586 $4,391 Net income$12,022 $14,775 $29,981 $26,172 
Other comprehensive (loss) income:
Other comprehensive loss:Other comprehensive loss:
Foreign currency translation adjustmentsForeign currency translation adjustments(201)(1,457)Foreign currency translation adjustments(1,416)(738)(3,352)(1,980)
Comprehensive incomeComprehensive income$10,385 $2,934 Comprehensive income$10,606 $14,037 $26,629 $24,192 
The accompanying notes are an integral part of the condensed consolidated financial statements.


2


AVID TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, unaudited)
March 31,
2022
December 31,
2021
September 30,
2022
December 31,
2021
ASSETSASSETS  ASSETS  
Current assets:Current assets:  Current assets:  
Cash and cash equivalentsCash and cash equivalents$41,245 $56,818 Cash and cash equivalents$31,344 $56,818 
Restricted cashRestricted cash2,013 2,416 Restricted cash2,413 2,416 
Accounts receivable, net of allowances of $1,298 and $1,456 at March 31, 2022 and December 31, 2021, respectively57,410 77,046 
Accounts receivable, net of allowances of $2,317 and $1,456 at September 30, 2022 and December 31, 2021, respectivelyAccounts receivable, net of allowances of $2,317 and $1,456 at September 30, 2022 and December 31, 2021, respectively55,257 77,046 
InventoriesInventories17,817 19,922 Inventories21,993 19,922 
Prepaid expensesPrepaid expenses7,137 5,464 Prepaid expenses8,766 5,464 
Contract assetsContract assets25,542 18,903 Contract assets17,728 18,903 
Other current assetsOther current assets1,896 1,953 Other current assets2,380 1,953 
Total current assetsTotal current assets153,060 182,522 Total current assets139,881 182,522 
Property and equipment, netProperty and equipment, net17,742 16,028 Property and equipment, net21,215 16,028 
GoodwillGoodwill32,643 32,643 Goodwill32,643 32,643 
Right of use assetsRight of use assets23,242 24,143 Right of use assets20,553 24,143 
Deferred tax assets, netDeferred tax assets, net4,155 5,210 Deferred tax assets, net3,972 5,210 
Other long-term assetsOther long-term assets14,265 13,454 Other long-term assets19,271 13,454 
Total assetsTotal assets$245,107 $274,000 Total assets$237,535 $274,000 
LIABILITIES AND STOCKHOLDERS’ DEFICITLIABILITIES AND STOCKHOLDERS’ DEFICIT  LIABILITIES AND STOCKHOLDERS’ DEFICIT  
Current liabilities:Current liabilities:  Current liabilities:  
Accounts payableAccounts payable$21,380 $26,854 Accounts payable$34,906 $26,854 
Accrued compensation and benefitsAccrued compensation and benefits26,821 35,458 Accrued compensation and benefits22,453 35,458 
Accrued expenses and other current liabilitiesAccrued expenses and other current liabilities36,457 37,552 Accrued expenses and other current liabilities35,560 37,552 
Income taxes payableIncome taxes payable145 868 Income taxes payable27 868 
Short-term debtShort-term debt8,709 9,158 Short-term debt8,694 9,158 
Deferred revenueDeferred revenue80,744 87,475 Deferred revenue60,630 87,475 
Total current liabilitiesTotal current liabilities174,256 197,365 Total current liabilities162,270 197,365 
Long-term debtLong-term debt160,889 160,806 Long-term debt175,683 160,806 
Long-term deferred revenueLong-term deferred revenue11,578 10,607 Long-term deferred revenue16,045 10,607 
Long-term lease liabilitiesLong-term lease liabilities22,673 23,379 Long-term lease liabilities19,978 23,379 
Other long-term liabilitiesOther long-term liabilities5,730 5,917 Other long-term liabilities4,960 5,917 
Total liabilitiesTotal liabilities375,126 398,074 Total liabilities378,936 398,074 
Commitments and contingencies (Note 7)Commitments and contingencies (Note 7)00Commitments and contingencies (Note 7)
Stockholders’ deficit:Stockholders’ deficit:Stockholders’ deficit:
Common stock, par value $0.01; authorized: 100,000 shares; issued: 46,219 shares at March 31, 2022 and 45,828 shares at December 31, 2021; outstanding: 44,991 shares at March 31, 2022 and 44,954 shares at December 31, 2021459 455 
Common stock, par value $0.01; authorized: 100,000 shares; issued: 46,472 shares at September 30, 2022 and 45,828 shares at December 31, 2021; outstanding: 43,926 shares at September 30, 2022 and 44,954 shares at December 31, 2021Common stock, par value $0.01; authorized: 100,000 shares; issued: 46,472 shares at September 30, 2022 and 45,828 shares at December 31, 2021; outstanding: 43,926 shares at September 30, 2022 and 44,954 shares at December 31, 2021461 455 
Treasury stockTreasury stock(35,906)(25,090)Treasury stock(68,651)(25,090)
Additional paid-in capitalAdditional paid-in capital1,026,115 1,031,633 Additional paid-in capital1,031,232 1,031,633 
Accumulated deficitAccumulated deficit(1,116,373)(1,126,959)Accumulated deficit(1,096,978)(1,126,959)
Accumulated other comprehensive lossAccumulated other comprehensive loss(4,314)(4,113)Accumulated other comprehensive loss(7,465)(4,113)
Total stockholders’ deficitTotal stockholders’ deficit(130,019)(124,074)Total stockholders’ deficit(141,401)(124,074)
Total liabilities and stockholders’ deficitTotal liabilities and stockholders’ deficit$245,107 $274,000 Total liabilities and stockholders’ deficit$237,535 $274,000 
The accompanying notes are an integral part of the condensed consolidated financial statements.
3


AVID TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(in thousands, unaudited)

Three Months Ended March 31, 2022
Nine Months Ended September 30, 2022Nine Months Ended September 30, 2022
Shares of
Common Stock
 Additional Accumulated
Other
Total Shares of
Common Stock
 Additional Accumulated
Other
Total
IssuedIn
Treasury
Common
Stock
Treasury
Stock
Paid-in
Capital
Accumulated
Deficit
Comprehensive
Loss
Stockholders’
Deficit
IssuedIn
Treasury
Common
Stock
Treasury
Stock
Paid-in
Capital
Accumulated
Deficit
Comprehensive
Loss
Stockholders’
Deficit
Balances at January 1, 2022Balances at January 1, 202245,828(874)455(25,090)1,031,633(1,126,959)(4,113)(124,074)Balances at January 1, 202245,828(874)$455 $(25,090)$1,031,633 $(1,126,959)$(4,113)$(124,074)
Stock issued pursuant to employee stock plans, net of shares withheld for employee tax obligationsStock issued pursuant to employee stock plans, net of shares withheld for employee tax obligations391(8,940)(8,936)Stock issued pursuant to employee stock plans, net of shares withheld for employee tax obligations391(8,940)(8,936)
Repurchase of common stockRepurchase of common stock(354)— (10,816)(10,816)Repurchase of common stock(354)— (10,816)(10,816)
Stock-based compensationStock-based compensation— 3,4223,422Stock-based compensation— 3,4223,422
Net incomeNet income— 10,58610,586Net income— 10,58610,586
Other comprehensive lossOther comprehensive loss— (201)Other comprehensive loss— (201)
Balances at March 31, 2022Balances at March 31, 202246,219(1,228)459(35,906)1,026,115(1,116,373)(4,314)(130,019)Balances at March 31, 202246,219(1,228)459(35,906)1,026,115(1,116,373)(4,314)(130,019)
Stock issued pursuant to employee stock plans, net of shares withheld for employee tax obligationsStock issued pursuant to employee stock plans, net of shares withheld for employee tax obligations1892(1,483)(1,481)
Repurchase of common stockRepurchase of common stock(560)(14,143)(14,143)
Stock-based compensationStock-based compensation3,6453,645
Net incomeNet income7,3737,373
Other comprehensive lossOther comprehensive loss(1,735)
Balances at June 30, 2022Balances at June 30, 202246,408(1,788)461 (50,049)1,028,277 (1,109,000)(6,049)(136,360)
Stock issued pursuant to employee stock plans, net of shares withheld for employee tax obligationsStock issued pursuant to employee stock plans, net of shares withheld for employee tax obligations64(992)(992)
Repurchase of common stockRepurchase of common stock(758)(18,602)(18,602)
Stock-based compensationStock-based compensation3,9473,947
Net incomeNet income12,02212,022
Other comprehensive lossOther comprehensive loss(1,416)
Balances at September 30, 2022Balances at September 30, 202246,472(2,546)461 (68,651)1,031,232 (1,096,978)(7,465)(141,401)

Three Months Ended March 31, 2021
 Shares of
Common Stock
 Additional Accumulated
Other
Total
 IssuedIn
Treasury
Common
Stock
Paid-in
Capital
Accumulated
Deficit
Comprehensive
Loss
Stockholders’
Deficit
Balances at January 1, 202144,4204421,036,658(1,168,347)(1,677)(132,924)
Stock issued pursuant to employee stock plans, net of shares withheld for employee tax obligations592(7,712)(7,706)
Stock-based compensation3,1223,122
Net income4,3914,391
Other comprehensive loss(1,457)(1,457)
Balances at March 31, 202145,012448 1,032,068 (1,163,956)(3,134)(134,574)
4


Nine Months Ended September 30, 2021
 Shares of
Common Stock
 Additional Accumulated
Other
Total
 IssuedIn
Treasury
Common
Stock
Treasury
Stock
Paid-in
Capital
Accumulated
Deficit
Comprehensive
Loss
Stockholders’
Deficit
Balances at January 1, 202144,4204421,036,658(1,168,347)(1,677)(132,924)
Stock issued pursuant to employee stock plans, net of shares withheld for employee tax obligations592(7,712)(7,706)
Stock-based compensation3,1223,122
Net income4,3914,391
Other comprehensive loss(1,457)(1,457)
Balances at March 31, 202145,012448 1,032,068 (1,163,956)(3,134)(134,574)
Stock issued pursuant to employee stock plans, net of shares withheld for employee tax obligations5134(5,973)(5,969)
Stock-based compensation3,5803,580
Net income7,0067,006
Other comprehensive income215215
Balances at June 30, 202145,5254521,029,675(1,156,950)(2,919)(129,742)
Stock issued pursuant to employee stock plans1682(3,073)(3,071)
Repurchase of common stock(412)(11,169)(11,169)
Stock-based compensation3,5143,514
Net income14,77514,775
Other comprehensive loss(738)(738)
Balances at September 30, 202145,693(412)454(11,169)1,030,116(1,142,175)(3,657)(126,431)



The accompanying notes are an integral part of the condensed consolidated financial statements.

45


AVID TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
Three Months EndedNine Months Ended
March 31, September 30,
20222021 20222021
Cash flows from operating activities:Cash flows from operating activities:  Cash flows from operating activities:  
Net incomeNet income$10,586 $4,391 Net income$29,981 $26,172 
Adjustments to reconcile net income to net cash provided by operating activities:Adjustments to reconcile net income to net cash provided by operating activities:  Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortizationDepreciation and amortization1,803 2,119 Depreciation and amortization6,023 6,323 
(Recovery) allowance for doubtful accounts(135)83 
Allowance for doubtful accountsAllowance for doubtful accounts893 401 
Stock-based compensation expenseStock-based compensation expense3,422 3,122 Stock-based compensation expense11,014 10,216 
Non-cash provision for restructuringNon-cash provision for restructuring15 912 Non-cash provision for restructuring495 841 
Non-cash interest expenseNon-cash interest expense126 129 Non-cash interest expense367 386 
Loss on extinguishment of debtLoss on extinguishment of debt— 2,579 Loss on extinguishment of debt— 2,579 
Gain on forgiveness of PPP loanGain on forgiveness of PPP loan— (7,800)
Loss on disposal of fixed assetsLoss on disposal of fixed assets548 — Loss on disposal of fixed assets548 — 
Unrealized foreign currency transaction gainsUnrealized foreign currency transaction gains(128)(1,432)Unrealized foreign currency transaction gains(2,769)(1,400)
Benefit from deferred taxesBenefit from deferred taxes1,055 501 Benefit from deferred taxes1,238 1,388 
Changes in operating assets and liabilities:Changes in operating assets and liabilities:  Changes in operating assets and liabilities:  
Accounts receivableAccounts receivable19,770 19,702 Accounts receivable20,896 20,089 
InventoriesInventories2,105 (1,048)Inventories(2,071)4,353 
Prepaid expenses and other assetsPrepaid expenses and other assets(2,067)(866)Prepaid expenses and other assets(5,624)(1,343)
Accounts payableAccounts payable(5,473)(2,604)Accounts payable8,050 590 
Accrued expenses, compensation and benefits and other liabilitiesAccrued expenses, compensation and benefits and other liabilities(9,993)(9,887)Accrued expenses, compensation and benefits and other liabilities(17,257)(10,635)
Income taxes payableIncome taxes payable(723)(259)Income taxes payable(841)(217)
Deferred revenue and contract assetsDeferred revenue and contract assets(12,995)(5,129)Deferred revenue and contract assets(25,380)(16,525)
Net cash provided by operating activitiesNet cash provided by operating activities7,916 12,313 Net cash provided by operating activities25,563 35,418 
Cash flows from investing activities:Cash flows from investing activities:  Cash flows from investing activities:  
Purchases of property and equipmentPurchases of property and equipment(3,244)(1,254)Purchases of property and equipment(11,067)(4,750)
Net cash used in investing activitiesNet cash used in investing activities(3,244)(1,254)Net cash used in investing activities(11,067)(4,750)
Cash flows from financing activities:Cash flows from financing activities:  Cash flows from financing activities:  
Proceeds from revolving credit facilityProceeds from revolving credit facility19,000 — 
Proceeds from long-term debtProceeds from long-term debt— 180,000 Proceeds from long-term debt— 180,000 
Repayment of debtRepayment of debt— (201,208)Repayment of debt(4,515)(208,142)
Repayment of debt principal(53)(2,346)
Payments for repurchase of common stockPayments for repurchase of common stock(10,562)— Payments for repurchase of common stock(40,929)(10,526)
Proceeds from the issuance of common stock under employee stock plansProceeds from the issuance of common stock under employee stock plans468 363 
Common stock repurchases for tax withholdings for net settlement of equity awardsCommon stock repurchases for tax withholdings for net settlement of equity awards(8,936)(7,706)Common stock repurchases for tax withholdings for net settlement of equity awards(11,878)(17,108)
Prepayment penalty on extinguishment of debtPrepayment penalty on extinguishment of debt— (1,169)Prepayment penalty on extinguishment of debt— (1,169)
Payments for credit facility issuance costsPayments for credit facility issuance costs(440)(2,574)Payments for credit facility issuance costs(440)(2,574)
Net cash used in financing activitiesNet cash used in financing activities(19,991)(35,003)Net cash used in financing activities(38,294)(59,156)
Effect of exchange rate changes on cash, cash equivalents and restricted cashEffect of exchange rate changes on cash, cash equivalents and restricted cash(254)(332)Effect of exchange rate changes on cash, cash equivalents and restricted cash(1,809)(927)
Net decrease in cash, cash equivalents and restricted cashNet decrease in cash, cash equivalents and restricted cash(15,573)(24,276)Net decrease in cash, cash equivalents and restricted cash(25,607)(29,415)
Cash, cash equivalents and restricted cash at beginning of periodCash, cash equivalents and restricted cash at beginning of period60,556 83,638 Cash, cash equivalents and restricted cash at beginning of period60,556 83,638 
Cash, cash equivalents and restricted cash at end of periodCash, cash equivalents and restricted cash at end of period$44,983 $59,362 Cash, cash equivalents and restricted cash at end of period$34,949 $54,223 
Supplemental information:Supplemental information:Supplemental information:
Cash and cash equivalentsCash and cash equivalents$41,245 $55,624 Cash and cash equivalents$31,344 $50,485 
Restricted cashRestricted cash2,013 1,422 Restricted cash2,413 1,422 
Restricted cash included in other long-term assetsRestricted cash included in other long-term assets1,725 2,316 Restricted cash included in other long-term assets1,192 2,316 
Total cash, cash equivalents and restricted cash shown in the statement of cash flowsTotal cash, cash equivalents and restricted cash shown in the statement of cash flows$44,983 $59,362 Total cash, cash equivalents and restricted cash shown in the statement of cash flows$34,949 $54,223 
Cash paid for income taxesCash paid for income taxes$851 $281 Cash paid for income taxes$1,551 $706 
Cash paid for interestCash paid for interest$1,176 $3,630 Cash paid for interest$3,095 $6,354 
The accompanying notes are an integral part of the condensed consolidated financial statements.
56


AVID TECHNOLOGY, INC.
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 and nine ended March 31,September 30, 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.

TheIn March 2020, the World Health Organization declared the outbreak of the novel coronavirus (COVID-19) pandemic, together with the measures implemented or recommended by governmental authorities and private organizations in response to the("COVID-19") a pandemic. The COVID-19 pandemic has had a material adverse impact to the Company's business, operating resultscreated, 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 countriesmay continue to face challenges with renewed lockdownscreate, significant uncertainty in macroeconomic conditions, including disrupted supply chains and travel restrictionssignificant volatility in responsefinancial markets. The countries in which the Company operates have generally continued easing initial measures to new variants and there remains uncertainty relatingcontrol the spread of COVID-19. However, the Company is not able to estimate 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 extentimpact that the pandemic continuesCOVID-19 may continue to have negative impacts on economies, our results could be affected and uneven. Consequently, we will continue to evaluate ourworldwide economic activity or the Company’s 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 theposition. The Russian invasion of Ukraine. Ongoing effectsUkraine and related acts of the COVID-19 pandemicaggression and its subsequent variants continue to complicate supply chain logisticsdestruction, including destruction of energy, commercial and cause delays,industrial infrastructure has caused further direct and the Russian invasion of Ukraineindirect economic disruption, which may exacerbate supply chain issues further.further and may lead to prolonged shortages and economic disruption including foreign currency fluctuation. The Company continues to assess the potential impacts of armed conflict and COVID-19 and the measures taken by governments, businesses and other organizations in response as information becomes available.

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.shift starting on our Annual Report for the year ended December 31, 2021. 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.
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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.
7



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,September 30, 2022 and 2021:
 March 31, 2022March 31, 2021
Non-vested restricted stock units783 1,040 
 September 30, 2022September 30, 2021
Non-vested restricted stock units820 930 

The following table sets forth (in thousands) the basic and diluted weighted common shares outstanding for the three and nine months ended March 31,September 30, 2022 and 2021:

Three months endedNine months ended
Three months endedSeptember 30September 30
March 31, 2022March 31, 20212022202120222021
Weighted common shares outstanding - basicWeighted common shares outstanding - basic44,817 44,559 Weighted common shares outstanding - basic44,476 45,564 44,676 45,115 
Net effect of common stock equivalentsNet effect of common stock equivalents591 1,645 Net effect of common stock equivalents227 864 431 1,334 
Weighted common shares outstanding - dilutedWeighted common shares outstanding - diluted45,408 46,204 Weighted common shares outstanding - diluted44,703 46,428 45,107 46,449 


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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,September 30, 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):
 Fair Value Measurements at Reporting Date Using  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)
September 30,
2022
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
Significant
Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs
(Level 3)
Financial assets:Financial assets:    Financial assets:    
Deferred compensation assetsDeferred compensation assets$396 $93 $303 $— Deferred compensation assets$375 $84 $291 $— 
  Fair Value Measurements at Reporting Date Using
 December 31, 2021Quoted 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 $— 

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):
March 31, 2022December 31, 2021 September 30, 2022December 31, 2021
Raw materialsRaw materials$7,229 $8,519 Raw materials$8,257 $8,519 
Work in processWork in process304 304 Work in process288 304 
Finished goodsFinished goods10,284 11,099 Finished goods13,448 11,099 
TotalTotal$17,817 $19,922 Total$21,993 $19,922 

As of March 31,September 30, 2022 and December 31, 2021, finished goods inventory included $1.3$1.8 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.


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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,September 30, 2022, the weighted average incremental borrowing rate was 5.9% and the weighted average remaining lease term was 5.75.3 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,September 30, 2022, the weighted-average discount rate was 2.3% and the weighted average remaining lease term was 1.81.4 years.

Lease costs for minimum lease payments is recognized on a straight-line basis over the lease term. Our total operating lease costs were $1.4 million and $1.7 million for the three months ended September 30, 2022 and September 30, 2021, respectively and $4.3 million and $5.4 million for the nine months ended September 30, 2022 and September 30, 2021, respectively. Related cash payments were $1.5 million and $1.9 million for the three months ended March 31,September 30, 2022 and March 31,September 30, 2021, respectively. Related cash payments were $1.5respectively, and $4.6 million and $2.1$5.8 million for the threenine months ended March 31,September 30, 2022 and March 31,September 30, 2021, respectively. Short term lease costs were $0.6 million and $0.3$0.4 million for the three months ended March 31,September 30, 2022 and March 31,September 30, 2021, respectively, and $1.9 million and $1.0 million for the nine months ended September 30, 2022 and September 30, 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.

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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,September 30, 2022 (in thousands):
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Year Ending December 31,Year Ending December 31,Operating LeasesFinance LeasesYear Ending December 31,Operating LeasesFinance Leases
2022 (excluding three months ended March 31, 2022)$4,776 $188 
2022 (excluding nine months ended September 30, 2022)2022 (excluding nine months ended September 30, 2022)$1,577 $56 
202320235,937 219 20235,742 219 
202420245,130 72 20245,004 72 
202520255,151 — 20255,034 — 
202620265,163 — 20265,060 — 
ThereafterThereafter6,495 — Thereafter6,446 — 
Total future minimum lease paymentsTotal future minimum lease payments$32,652 $479 Total future minimum lease payments$28,863 $347 
Less effects of discountingLess effects of discounting(5,159)(9)Less effects of discounting(4,307)(4)
Total lease liabilitiesTotal lease liabilities$27,493 $470 Total lease liabilities$24,556 $343 

Supplemental balance sheet information related to leases was as follows (in thousands):

Operating LeasesMarch 31,September 30, 2022
Right of use assets$23,24220,553 
Accrued expenses and other current liabilities(4,820)(4,578)
Long-term lease liabilities(22,673)(19,978)
     Total lease liabilities$(27,493)(24,556)


Finance LeasesMarch 31,September 30, 2022
Other assets$438316 
Accrued expenses and other current liabilities(245)(243)
Other long-term liabilities(225)(100)
     Total lease liabilities$(470)(343)

6.    OTHER LONG-TERM LIABILITIES

Other long-term liabilities consisted of the following (in thousands):
March 31, 2022December 31, 2021 September 30, 2022December 31, 2021
Deferred compensationDeferred compensation$4,875 $4,981 Deferred compensation$4,263 $4,981 
Finance lease liabilitiesFinance lease liabilities225 289 Finance lease liabilities100 289 
Other long-term liabilitiesOther long-term liabilities630 647 Other long-term liabilities597 647 
Total Total$5,730 $5,917  Total$4,960 $5,917 


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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$17.9 million of products and services pursuant to this agreement as of March 31,September 30, 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,September 30, 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,September 30, 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,September 30, 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
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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 threenine months ended March 31,September 30, 2022 and 2021 (in thousands):
Three Months Ended March 31,Nine Months Ended September 30,
2022202120222021
Accrual balance at beginning of periodAccrual balance at beginning of period$1,219 $1,095 Accrual balance at beginning of period$1,219 $1,095 
Accruals for product warrantiesAccruals for product warranties321 466 Accruals for product warranties541 988 
Costs of warranty claimsCosts of warranty claims(306)(374)Costs of warranty claims(784)(900)
Accrual balance at end of periodAccrual balance at end of period$1,234 $1,187 Accrual balance at end of period$976 $1,183 

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 threenine months ended March 31,September 30, 2022, we recorded an immaterial amount of restructuring charges due toof $0.5 million for employee severance cost adjustments.costs related to three positions eliminated throughout 2022.

During the threenine months ended March 31,September 30, 2021, we recorded restructuring charges of $1.1$1.0 million for employee severance costs related to approximately 2324 positions eliminated during the first quarter ofthroughout 2021.

The following table sets forth the activity in the restructuring accruals for the threenine months ended March 31,September 30, 2022 (in thousands):
 Employee
Accrual balance as of December 31, 2021$655 
Restructuring charges and revisions15515 
Cash payments(665)(917)
Foreign exchange impact on ending balance(5)(17)
Accrual balance as of March 31,September 30, 2022$236 



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The employee restructuring accrual at September 30, 2022 represents severance costs to former employees that will be paid out within 12 months, and is, therefore, included in the caption “accrued expenses and other current liabilities” in our condensed consolidated balance sheet as of September 30, 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 1one reportable segment.

The following table is a summary of our revenues by type for the three and nine months ended March 31,September 30, 2022 and 2021 (in thousands):
Three Months Ended March 31,Three Months Ended September 30,Nine Months Ended September 30,
20222021 2022202120222021
SubscriptionsSubscriptions32,954 24,868 Subscriptions$41,782 $28,008 $108,878 $74,384 
MaintenanceMaintenance28,327 29,852 Maintenance27,280 30,702 83,382 90,997 
Integrated solutions & otherIntegrated solutions & other39,368 39,644 Integrated solutions & other33,923 42,930 109,054 125,499 
Total net revenuesTotal net revenues$100,649 $94,364 Total net revenues$102,985 $101,640 $301,314 $290,880 

The following table sets forth our revenues by geographic region for the three and nine months ended March 31,September 30, 2022 and 2021 (in thousands):
Three Months Ended March 31,Three Months Ended September 30,Nine Months Ended September 30,
20222021 2022202120222021
Revenues:Revenues:  Revenues:  
United StatesUnited States$44,389 $39,471 United States$46,206 $45,026 $130,755 $126,084 
Other Americas4,894 5,179 
Europe, Middle East and AfricaEurope, Middle East and Africa38,845 36,523 Europe, Middle East and Africa36,865 38,782 112,026 109,400 
Asia-PacificAsia-Pacific12,521 13,191 Asia-Pacific13,747 12,610 39,066 40,366 
Other AmericasOther Americas6,167 5,222 19,467 15,030 
Total net revenuesTotal net revenues$100,649 $94,364 Total net revenues$102,985 $101,640 $301,314 $290,880 

Contract Asset

Contract asset activity for the threenine months ended March 31,September 30, 2022 and 2021 was as follows (in thousands):
March 31, 2022March 31, 2021September 30, 2022September 30, 2021
Contract asset at beginning of periodContract asset at beginning of period$25,397 $18,579 Contract asset at beginning of period$25,397 $18,579 
Revenue in excess of billingsRevenue in excess of billings9,891 14,395 Revenue in excess of billings51,400 43,757 
Customer billingsCustomer billings(2,657)(11,019)Customer billings(47,427)(39,724)
Contract asset at end of periodContract asset at end of period$32,631 $21,955 Contract asset at end of period$29,370 $22,612 
Less: long-term portion (recorded in other long-term assets)Less: long-term portion (recorded in other long-term assets)7,089 — Less: long-term portion (recorded in other long-term assets)11,642 — 
Contract asset, current portionContract asset, current portion$25,542 $21,955 Contract asset, current portion$17,728 $22,612 

The increase in the long-term portion of contract assets is primarily due to long-term subscription agreements with revenue recognition ahead of scheduled billings greater than 12 months.


Deferred Revenue
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Deferred revenue activity for the threenine months ended March 31,September 30, 2022 and 2021 was as follows (in thousands):
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March 31, 2022March 31, 2021September 30, 2022September 30, 2021
Deferred revenue at beginning of periodDeferred revenue at beginning of period$98,082 $99,259 Deferred revenue at beginning of period$98,082 $99,258 
Billings deferredBillings deferred29,506 31,132 Billings deferred57,094 56,846 
Recognition of prior deferred revenueRecognition of prior deferred revenue(35,266)(32,885)Recognition of prior deferred revenue(78,501)(69,337)
Deferred revenue at end of periodDeferred revenue at end of period$92,322 $97,506 Deferred revenue at end of period$76,675 $86,767 

A summary of the significant performance obligations included in deferred revenue is as follows (in thousands):
March 31,September 30, 2022
Product$6,2107,922 
Subscription6,7198,545 
Maintenance contracts71,29455,435 
Implied PCS5,2004,293 
Professional services, training and other2,899480 
Deferred revenue at March 31,September 30, 2022$92,32276,675 

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$4.3 million attributable to Implied PCS recorded in deferred revenue as of March 31,September 30, 2022. We expect to recognize revenue for these remaining performance obligations of $1.6$0.5 million for the remainder of 2022 and $1.5$1.6 million, $1.1 million, $0.6$0.7 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,September 30, 2022, we had approximately $35.6$22.5 million of transaction price allocated to remaining performance obligations for certain enterprise agreements that have not yet been fully invoiced. Approximately $25.5$18.9 million of these performance obligations were unbilled as of March 31,September 30, 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$22.5 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.

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10.    LONG-TERM DEBT AND CREDIT AGREEMENT

Long-term debt consisted of the following (in thousands):
March 31, 2022December 31, 2021September 30, 2022December 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 
Term Loan, net of unamortized issuance costs and debt discount of $2,131 and $2,059 at September 30, 2022 and December 31, 2021, respectivelyTerm Loan, net of unamortized issuance costs and debt discount of $2,131 and $2,059 at September 30, 2022 and December 31, 2021, respectively$164,594 $168,941 
Credit FacilityCredit Facility19,000 — 
Other long-term debtOther long-term debt971 1,023 Other long-term debt783 1,023 
Total debt Total debt$169,598 $169,964  Total debt$184,377 $169,964 
Less: current portionLess: current portion8,709 9,158 Less: current portion8,694 9,158 
Total long-term debtTotal long-term debt$160,889 $160,806 Total long-term debt$175,683 $160,806 


The following table summarizes the contractual maturities of our borrowing obligations as of March 31,September 30, 2022 (in thousands):
Fiscal YearFiscal YearTerm LoanOther Long-Term DebtTotalFiscal YearTerm LoanCredit FacilityOther Long-Term DebtTotal
2022$6,413 118 $6,531 
2022 (excluding nine months ended September 30, 2022)2022 (excluding nine months ended September 30, 2022)$2,138 $— $35 $2,173 
202320238,550 167 8,717 20238,550 — 147 8,697 
2024202411,756 179 11,935 202411,756 — 157 11,913 
2025202516,031 192 16,223 202516,031 — 169 16,200 
2026202617,100 206 17,306 202617,100 — 181 17,281 
ThereafterThereafter111,150 109 111,259 Thereafter111,150 19,000 94 130,244 
Total before unamortized discountTotal before unamortized discount171,000 971 171,971 Total before unamortized discount$166,725 $19,000 $783 $186,508 
Less: unamortized discount and issuance costsLess: unamortized discount and issuance costs(2,373)— (2,373)Less: unamortized discount and issuance costs(2,131)— — (2,131)
Less: current portion of long-term debtLess: current portion of long-term debt(8,550)(159)(8,709)Less: current portion of long-term debt(8,550)— (144)(8,694)
Total long-term debtTotal long-term debt$160,077 $812 $160,889 Total long-term debt$156,044 $19,000 $639 $175,683 


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 resultmade up 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.
1516



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 threenine months ended March 31,September 30, 2022 was 2.75%3.58%.

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 A&R Credit Agreement covenants as of March 31,September 30, 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$2.1 million and $4.6 million of interest expense on the Term Loan for the three and nine months ended March 31, 2022.September 30, 2022, respectively. As of March 31,September 30, 2022, there were no amounts drawnwas $19.0 million outstanding under the Credit Facility.


Subsequent Event

On October 6, 2022, the Company executed a Second Amended and Restated Credit Agreement (the “Second A&R Credit Agreement”) with JPMorgan Chase Bank, N.A. and the Lenders. Pursuant to the Second A&R Credit Agreement, the Lenders agreed to provide the Company with (a) an additional term loan in the aggregate principal amount of $20 million (of which approximately $19 million was used to pay off the Company’s existing Credit Facility draw), and (b) an additional $50 million of available borrowing capacity under the revolving credit facility, increasing the aggregate amount available to $120.0 million. The Second A&R Credit Agreement, which replaces the Company’s existing secured credit facility, includes substantially similar terms and does not result in any changes to financial covenants, pricing or the February 2027 maturity.

11. STOCKHOLDERS’ EQUITY

Stock-Based Compensation

Information with respect to the Company’s non-vested restricted stock units for the threenine months ended March 31,September 30, 2022 was as follows:
Number of Restricted Stock UnitsWeighted-
Average
Grant-Date
Fair Value
Weighted-
Average
Remaining
Contractual
Term (years)
Aggregate
Intrinsic
Value
(in thousands)
Shares Retained to Cover Statutory Minimum Withholding Taxes Number of Restricted Stock UnitsWeighted-
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, 2022Non-vested at January 1, 20221,061,834 $16.60  — Non-vested at January 1, 20221,061,834 $16.60  — 
GrantedGranted164,405 31.22  — Granted534,419 32.35  — 
VestedVested(235,721)11.20  (136,435)Vested(578,107)15.20  (209,848)
ForfeitedForfeited(19,976)17.62  — Forfeited(122,887)19.01  — 
Outstanding at March 31, 2022970,542 $20.370.91$33,833
Outstanding at September 30, 2022Outstanding at September 30, 2022895,259 $26.580.98$20,815

Information with respect to the Company’s non-vested performance-based restricted stock units for the threenine months ended March 31,September 30, 2022 was as follows:
 Number of Performance-based Restricted Stock UnitsWeighted-
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, 2022579,364 $13.20  — 
Granted296,405 22.69  — 
Vested(454,804)10.19  (254,596)
Forfeited(3,448)26.38  — 
Non-vested at March 31, 2022417,517 $23.111.46$14,555
1617


 Number of Performance-based Restricted Stock UnitsWeighted-
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, 2022579,364 $13.20  — 
Granted296,405 22.69  — 
Vested(454,804)10.19  (200,208)
Forfeited(64,964)24.72  — 
Non-vested at September 30, 2022356,001 $22.850.94$8,277


The following table sets forth stock-based compensation expense by award type for the three and nine months ended March 31,September 30, 2022 and 2021 (in thousands):
Three Months Ended March 31,Three Months Ended September 30,Nine Months Ended September 30,
20222021 2022202120222021
Share-based compensation expense by type:Share-based compensation expense by type:Share-based compensation expense by type:
Time-based Restricted Stock UnitsTime-based Restricted Stock Units$2,428 $2,437 Time-based Restricted Stock Units$2,892 $2,507 $8,272 $7,528 
Performance-based Restricted Stock UnitsPerformance-based Restricted Stock Units948 656 Performance-based Restricted Stock Units1,007 977 2,598 2,599 
ESPPESPP46 29 ESPP48 30 144 89 
Total share-based compensation expenseTotal share-based compensation expense$3,422 $3,122 Total share-based compensation expense$3,947 $3,514 $11,014 $10,216 

Stock-based compensation was included in the following captions in the Company’s condensed consolidated statements of operations for the three and nine months ended March 31,September 30, 2022 and 2021 (in thousands):

Three Months Ended March 31,Three Months Ended September 30,Nine Months Ended September 30,
20222021 2022202120222021
Cost of revenuesCost of revenues$426 $440 Cost of revenues$588 $443 $1,603 $1,361 
Research and development expensesResearch and development expenses350 521 Research and development expenses498 340 1,363 1,270 
Marketing and selling expensesMarketing and selling expenses598 602 Marketing and selling expenses743 639 2,141 1,858 
General and administrative expensesGeneral and administrative expenses2,048 1,559 General and administrative expenses2,118 2,092 5,907 5,727 
Total share-based compensation expenseTotal share-based compensation expense$3,422 $3,122 Total share-based compensation expense$3,947 $3,514 $11,014 $10,216 

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,September 30, 2022, approximately $79.1$46.3 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,September 30, 2022, the Company repurchased 354,472757,720 shares of its common stock for $10.8$18.6 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.



1718


ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

EXECUTIVE OVERVIEW

Business Overview

We develop, market, sell, and support software and integrated solutions for video and audio content creation, management and distribution. We are a leading technology provider that powers the media and entertainment industry. We do this by providing an open and efficient platform for digital media, along with a comprehensive set of tools and workflow solutions. Our solutions are used in production and post-production facilities; film studios; network, affiliate, independent and cable television stations; recording studios; live-sound performance venues; advertising agencies; government and educational institutions; corporate communications departments; and by independent video and audio creative professionals, as well as aspiring professionals. Projects produced using our tools, platform, and ecosystem include feature films, television programming, live events, news broadcasts, sports productions, commercials, music, video, and other digital media content. With over one million creative users and thousands of enterprise clients relying on our technology platforms and solutions around the world, Avid enables the industry to thrive in today’s connected media and entertainment world.

Our mission is to empower media creators with innovative technology and collaborative tools to entertain, inform, educate, and enlighten the world. Our clients rely on Avid’s products and solutions to create prestigious and award-winning feature films, music recordings, television shows, live concerts, sporting events, and news broadcasts. Avid has been honored for technological innovation with 18 Emmy Awards, one Grammy Award, two Oscars, and the first ever America Cinema Editors Technical Excellence Award.

Operations Overview

Our strategy for connecting creative professionals and media enterprises with audiences in a powerful, efficient, collaborative, and profitable way leverages our creative software tools, including Pro Tools for audio, and Media Composer for video, Sibelius for musical composition and our MediaCentral Platform - the open, extensible, and customizable foundation that streamlines and simplifies content workflows by integrating all Avid or third-party products and services that run on top of it. The platform provides secure and protected access, and enables fast and easy creation, delivery, and monetization of content.

We work to ensure that we are meeting customer needs, staying ahead of industry trends, and investing in the right areas through a close and interactive relationship with our customer base. The Avid Customer Association was established to be an innovative and influential media technology community. It represents thousands of organizations and over 30,000 professionals from all levels of the industry including inspirational and award-winning thought leaders, innovators, and storytellers. The Avid Customer Association fosters collaboration between Avid, its customers, and other industry colleagues to help shape our product offerings and provide a means to shape our industry together.

A key element of our strategy is our transition to a recurring revenue-based model through a combination of subscription offerings and long-term agreements. As of March 31,September 30, 2022, we had approximately 432,000483,000 paid subscriptions. The subscription count includes all paid and active seats under multi-seat licenses. These licensing options offer choices in pricing and deployment to suit our customers’ needs. Our subscription offerings to date have been sold to creative professionals and media enterprises. We expect to increase subscription sales to media enterprises going forward as we expand offerings and move through customer upgrade cycles, which we expect will further increase recurring revenue on a longer-term basis. Our long-term agreements are comprised of multi-year agreements with large media enterprise customers to provide specified products and services, including SaaS offerings, and channel partners and resellers to purchase minimum amounts of products and service over a specified period of time.

Avid continuedis committed to invest in our Digital Transformation Initiative through the first quarter of 2022,digital transformation initiative, which focuses on optimizing systems, processes, and back-office functions with the objective of improving our operations related to our digital and subscription business. The project started in the third quarter of 2021, and over the next four years, weis expected to continue through 2025. We plan to significantly invest in transforming our enterprise-wide infrastructure and technologies to benefit customers and drive enhanced performance across the company.company.

A summary of our revenue sources for the three and nine months ended March 31,September 30, 2022 and 2021 is as follows (in thousands):
1819


Three Months Ended March 31,Three Months Ended September 30,Nine Months Ended September 30,
202220212022202120222021
SubscriptionsSubscriptions$32,954 $24,868 Subscriptions$41,782 $28,008 $108,878 $74,384 
MaintenanceMaintenance28,327 29,852 Maintenance27,280 30,702 83,382 90,997 
Subscriptions and MaintenanceSubscriptions and Maintenance61,281 54,720 Subscriptions and Maintenance69,062 58,710 192,260 165,381 
Perpetual LicensesPerpetual Licenses5,197 7,058 Perpetual Licenses1,790 5,678 9,729 18,596 
Software Licenses and MaintenanceSoftware Licenses and Maintenance66,478 61,778 Software Licenses and Maintenance70,852 64,388 201,989 183,977 
Integrated solutionsIntegrated solutions28,212 26,209 Integrated solutions26,267 31,172 82,492 88,699 
Professional services & trainingProfessional services & training5,959 6,377 Professional services & training5,866 6,080 16,833 18,204 
Total revenueTotal revenue$100,649 $94,364 Total revenue$102,985 $101,640 $301,314 $290,880 

Recent Developments Affecting on Our Business

During the COVID-19 pandemic, our priority has been supporting our employees, customers, partners and communities, while positioning Avid for the future. The pandemic has driven organizations across the globe to digitize their operations and support remote workforces at a faster speed and greater scale than ever before. We have moved towards a hybrid work model in certain countries, giving our employees the flexibility to work offsite or at onsite Avid locations, and we have continued to implement and encourage the benefits of hybrid work as conditions improve in certain countries.

The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, and created significant global economic uncertainty which adversely impacted our businessvolatility and the businessdisruption of our customers and partners during 2020. However, our results through 2021 and the first quarter of 2022, reflected 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 countriesfinancial markets. We continue to face challenges and there remains uncertainty relatingmanage through significant supply constraints seen industry-wide due to the ongoing spread and severity of the virus and its variants. Although we are encouragedcomponent shortages caused, in part, by the trends we have seen, to the extent that the pandemic continues to have negative impacts on economies, our results could be affected and uneven. Ongoing effects of the COVID-19 pandemic, and its subsequent variants continue to complicate supply chain logistics and cause delays, andfor which the duration of such constraints is uncertain. The Russian invasion of Ukraine and related acts of aggression and destruction, including destruction of energy and commercial and industrial infrastructure has caused further direct and indirect economic disruption, which may exacerbate supply chain issues further. Consequently,further and may lead to prolonged disruption and shortages. These shortages have resulted in increased costs (i.e., component and other commodity costs, freight, expedite fees, etc.) which have had a negative impact on our product gross margin and have resulted in extended lead times for us and our customers.

The extent to which our operations may be impacted will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including the severity or resurgence of a COVID-19 outbreak, actions by government authorities to contain an outbreak or treat its impact, actions by government authorities to address inflationary and cost pressures, and the severity, length and potential expansion of the conflict in Ukraine. The impacts of these uncertain global economic and geopolitical conditions could result in further supply chain disruptions, including the shortages of critical components, and continued disruptions to, and volatility in, the financial markets. Recent events surrounding the global economy, geopolitics, and the COVID-19 pandemic continue to evolve. Although we believe that we will continue to evaluateultimately emerge from these events well positioned for long-term growth, uncertainties remain and, as such, we cannot reasonably estimate the duration or extent of these adverse factors on our business, results of operations, financial position in light of future developments, particularly those relating to COVID-19.or cash flows.

CRITICAL ACCOUNTING ESTIMATES

Our condensed consolidated financial statements have been prepared in accordance with U.S GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We base our estimates and judgments on historical experience and various other factors we believe to be reasonable under the circumstances, the results of which form the basis for judgments about the carrying values of assets and liabilities and the amounts of revenues and expenses. Actual results may differ from these estimates.

We believe that our critical accounting policies and estimates are those related to revenue recognition and allowances for sales returns and exchanges, stock-based compensation, and income tax assets and liabilities. We believe these policies and estimates are critical because they most significantly affect the portrayal of our financial condition and results of operations and involve our most complex and subjective estimates and judgments. A discussion of our critical accounting policies and estimates may be found in our Annual Report on Form 10-K for the year ended December 31, 2021 in Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Critical Accounting Policies and Estimates”.
20


There have been no significant changes to our critical accounting policies and estimates since our Annual Report on Form 10-K for the year ended December 31, 2021.
1921



RESULTS OF OPERATIONS

The following table sets forth certain items from our condensed consolidated statements of operations as a percentage of net revenues for the three and nine months ended March 31,September 30, 2022 and 2021:
Three Months Ended March 31, Three Months Ended September 30,Nine Months Ended September 30,
20222021 2022202120222021
Net revenues:Net revenues:  Net revenues:  
SubscriptionsSubscriptions32.7 %26.4 %Subscriptions40.6 %27.6 %36.1 %25.6 %
MaintenanceMaintenance28.1 %31.6 %Maintenance26.5 %30.2 %27.7 %31.3 %
Integrated solutions & otherIntegrated solutions & other39.2 %42.0 %Integrated solutions & other32.9 %42.2 %36.2 %43.1 %
Total net revenuesTotal net revenues100.0 %100.0 %Total net revenues100.0 %100.0 %100.0 %100.0 %
Cost of revenuesCost of revenues33.7 %34.9 %Cost of revenues32.2 %35.2 %33.7 %35.6 %
Gross marginGross margin66.3 %65.1 %Gross margin67.8 %64.8 %66.3 %64.4 %
Operating expenses:Operating expenses:  Operating expenses:  
Research and developmentResearch and development16.6 %16.3 %Research and development16.6 %16.8 %16.6 %16.7 %
Marketing and sellingMarketing and selling21.8 %22.0 %Marketing and selling23.7 %24.0 %23.2 %22.9 %
General and administrativeGeneral and administrative14.7 %14.5 %General and administrative13.7 %14.7 %14.0 %14.5 %
Restructuring costs, netRestructuring costs, net— %1.1 %Restructuring costs, net0.1 %(0.1)%0.2 %0.3 %
Total operating expensesTotal operating expenses53.1 %53.9 %Total operating expenses54.1 %55.4 %54.0 %54.4 %
Operating incomeOperating income13.2 %11.2 %Operating income13.7 %9.4 %12.4 %10.0 %
Interest expense, netInterest expense, net(1.5)%(2.2)%Interest expense, net(2.7)%(1.6)%(2.1)%(1.9)%
Other income, netOther income, net(0.1)%(3.8)%Other income, net— %7.7 %— %1.5 %
Income before income taxesIncome before income taxes11.6 %5.2 %Income before income taxes11.0 %15.5 %10.3 %9.6 %
Provision for income taxes1.1 %0.5 %
(Benefit from) provision for income taxes(Benefit from) provision for income taxes(0.7)%1.0 %0.3 %0.6 %
Net incomeNet income10.5 %4.7 %Net income11.7 %14.5 %10.0 %9.0 %

Net Revenues

Our net revenues are derived mainly from sales of subscription software solutions, maintenance contracts, and integrated solutions for digital media content production, management and distribution, and related professional services. We commonly sell large, complex solutions to our customers that, due to their strategic nature, have long lead times where the timing of order execution and fulfillment can be difficult to predict. In addition, the rapid evolution of the media industry is changing our customers’ needs, businesses, and revenue models, which is influencing their short-term and long-term purchasing decisions. As a result of these factors, the timing and amount of product revenue recognized related to orders for large, complex solutions, as well as the services associated with them, can fluctuate from quarter to quarter and cause significant volatility in our quarterly operating results. For a discussion of these factors, see the risk factors discussed in Part I, Item 1A under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021.

Net Revenues for the Three Months Ended March 31, 2022 and 2021
Net Revenues for the Three Months Ended September 30, 2022 and 2021Net Revenues for the Three Months Ended September 30, 2022 and 2021
(dollars in thousands)(dollars in thousands)(dollars in thousands)
2022Change20212022Change2021
Net Revenues$%Net Revenues Net Revenues$%Net Revenues
SubscriptionsSubscriptions$32,954 $8,086 32.5%$24,868 Subscriptions$41,782 $13,774 49.2%$28,008 
MaintenanceMaintenance28,327 (1,525)(5.1)%29,852 Maintenance27,280 (3,422)(11.1)%30,702 
Integrated solutions & otherIntegrated solutions & other39,368 (276)(0.7)%39,644 Integrated solutions & other33,923 (9,007)(21.0)%42,930 
Total net revenuesTotal net revenues$100,649 $6,285 6.7%$94,364 Total net revenues$102,985 $1,345 1.3%$101,640 

2022



Net Revenues for the Nine Months Ended September 30, 2021 and 2020
Net Revenues for the Nine Months Ended September 30, 2022 and 2021
(dollars in thousands)
2022Change2021
 Net Revenues$%Net Revenues
Subscriptions$108,878 $34,494 46.4%$74,384 
Maintenance83,382 $(7,615)(8.4)%90,997 
Integrated solutions & other$109,054 $(16,445)(13.1)%$125,499 
Total net revenues$301,314 $10,434 3.6%$290,880 

The following table sets forth the percentage of our net revenues attributable to geographic regions for the three and nine months ended March 31,September 30, 2022 and 2021:
Three Months Ended March 31,Three Months Ended September 30,Nine Months Ended September 30,
202220212022202120222021
United StatesUnited States44%42%United States45%44%43%43%
Other Americas5%5%
Europe, Middle East and AfricaEurope, Middle East and Africa39%39%Europe, Middle East and Africa36%38%37%38%
Asia-PacificAsia-Pacific12%14%Asia-Pacific13%13%13%14%
Other AmericasOther Americas6%5%7%5%

Subscription Revenues

Our subscription revenues are derived primarily from sales of our Media Composer, MediaCentral, Pro Tools, and Sibelius offerings. Subscription revenues increased $8.1$13.8 million, or 32.5%49.2%, for the three months ended March 31,September 30, 2022, and increased $34.5 million, or 46.4%, for the nine months ended September 30, 2022, compared to the same periodperiods in 2021. The increaseincreases for the three and nine months ended March 31,September 30, 2022 waswere primarily a result of new customers adopting our subscription solutions and customers transitioning from our perpetual product licenses to our subscription-based model.

Maintenance Revenues

Our maintenance revenues are derived from a variety of maintenance contracts for our software and integrated solutions. Maintenance contracts allow each customer to select the level of technical and operational support that they need to maintain their operational effectiveness. Maintenance contracts typically include the right to the latest software updates, call support, and, in some cases, hardware maintenance. Maintenance revenues decreased $1.5$3.4 million, or 5.1%11.1%, for the three months ended March 31,September 30, 2022, and decreased $7.6 million or 8.4% for the nine months ended September 30, 2022, compared to the same periodperiods in 2021. The decreasedecreases for the three and nine months ended March 31,September 30, 2022 waswere primarily due to customers transitioning from our perpetual based licenses to our subscription licenses. In addition, there was lower maintenance revenue related to new integrated solutions sales due to delayed integrated solutions shipments as a result of supply chain issues in the nine months ended September 30, 2022 compared to the same period in 2021.

Integrated Solutions and other Revenues

Our integrated solutions and other revenues are derived primarily from sales of our storage and workflow solutions, media management solutions, video creative tools, digital audio software and workstation solutions, and our control surfaces, consoles, and live-sound systems, as well as professional and learning services. Integrated solutions and other revenues decreased slightly,$9.0 million or 21.0% for the three months ended March 31,September 30, 2022, and decreased $16.4 million or 13.1% for the nine months ended September 30, 2022, compared to the same periodperiods in 2021 as the result of delayed shipments due to supply chain issues.issues as well as customers transitioning from our perpetual product licenses to our subscription-based model.


23


Cost of Revenues, Gross Profit and Gross Margin Percentage

Cost of revenues consists primarily of costs associated with:
procurement of components and finished goods;
assembly, testing and distribution of finished products;goods;
warehousing;
customer support related to maintenance;
royalties for third-party software and hardware included in our products; and
providing professional services and training.







21









training for customers.

Costs of Revenues and Gross Profit

Costs of Revenues and Gross Profit for the Three Months Ended March 31, 2022 and 2021
Costs of Revenues and Gross Profit for the Three Months Ended September 30, 2022 and 2021Costs of Revenues and Gross Profit for the Three Months Ended September 30, 2022 and 2021
(dollars in thousands)(dollars in thousands)(dollars in thousands)
2022Change20212022Change2021
Costs$%Costs Costs$%Costs
SubscriptionsSubscriptions$5,602 $2,987 114.2%$2,615 Subscriptions$6,163 $2,143 53.3%$4,020 
MaintenanceMaintenance5,277 (297)(5.3)%5,574 Maintenance4,849 (890)(15.5)%5,739 
Integrated solutions & otherIntegrated solutions & other23,006 (1,753)(7.1)%24,759 Integrated solutions & other22,194 (3,784)(14.6)%25,978 
Total cost of revenues Total cost of revenues$33,885 $937 2.8%$32,948  Total cost of revenues$33,206 $(2,531)(7.1)%$35,737 
Gross profitGross profit$66,764 $5,348 8.7%$61,416 Gross profit$69,779 $3,876 5.9%$65,903 


Costs of Revenues and Gross Profit for the Nine Months Ended September 30, 2021 and 2020
Costs of Revenues and Gross Profit for the Nine Months Ended September 30, 2022 and 2021
(dollars in thousands)
2022Change2021
 Costs$%Costs
Subscriptions$18,057 $7,847 76.9%$10,210 
Maintenance15,379 (1,756)(10.2)%17,135 
Integrated solutions & other67,969 (8,109)(10.7)%76,078 
    Total cost of revenues$101,405 $(2,018)(2.0)%$103,423 
Gross profit$199,909 $12,452 6.6%$187,457 

Gross Margin Percentage

Gross margin percentage, which is net revenues less costs of revenues divided by net revenues, fluctuates based on factors such as the mix of products sold, the cost and proportion of third-party hardware and software included in the systems sold, the offering of product upgrades, price discounts and other sales-promotion programs, the distribution channels through which products are sold, the timing of new product introductions, sales of aftermarket hardware products, and currency exchange-rate fluctuations. For a discussion of these factors, see the risk factors discussed in Part I, Item 1A under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021.

Our increase in gross margin percentage for the three and nine months ended March 31,September 30, 2022 increased to 66.3% from 65.1% compared to the same periodperiods in 2021. This increase2021, was primarily due to increased volume on our higher margin subscription revenue as well as an improvement in ourrevenue. This was partially offset by lower integrated solutions gross margin. This was offset by the decrease in our subscription marginsmargin due to increased customer care costs being allocated to subscription.supply chain issues.
Gross Margin % for the Three Months Ended March 31, 2022 and 2021
 2022 Gross
Margin %
Change2021 Gross
Margin %
Subscription83.0%(6.5)%89.5%
Maintenance81.4%0.1%81.3%
Integrated solutions & other41.6%4.1%37.5%
Total66.3%1.2%65.1%
24


Gross Margin % for the Three Months Ended September 30, 2022 and 2021
 2022 Gross
Margin %
Change2021 Gross
Margin %
Subscription85.2%(0.4)%85.6%
Maintenance82.2%0.9%81.3%
Integrated solutions & other34.6%(4.9)%39.5%
Total67.8%3.0%64.8%

Gross Margin % for the Nine Months Ended September 30, 2021 and 2020
Gross Margin % for the Nine Months Ended September 30, 2022 and 2021
 2022 Gross
Margin %
Change2021 Gross
Margin %
Subscription83.4%(2.9)%86.3%
Maintenance81.6%0.4%81.2%
Integrated solutions & other37.7%(1.7)%39.4%
Total66.3%1.9%64.4%




22



Operating Expenses and Operating Income

Operating Expenses and Operating Income for the Three Months Ended March 31, 2022 and 2021
Operating Expenses and Operating Income for the Three Months Ended September 30, 2022 and 2021Operating Expenses and Operating Income for the Three Months Ended September 30, 2022 and 2021
(dollars in thousands)(dollars in thousands)(dollars in thousands)
2022Change20212022Change2021
Expenses$%Expenses Expenses$%Expenses
Research and developmentResearch and development$16,736 $1,319 8.6%$15,417 Research and development$17,110 $(19)(0.1)%$17,129 
Marketing and sellingMarketing and selling21,927 1,183 5.7%20,744 Marketing and selling24,362 (51)(0.2)%24,413 
General and administrativeGeneral and administrative14,811 1,176 8.6%13,635 General and administrative14,066 (835)(5.6)%14,901 
Restructuring costs, netRestructuring costs, net15 (1,059)(98.6)%1,074 Restructuring costs, net158 246 (279.5)%(88)
Total operating expensesTotal operating expenses$53,489 $2,619 5.1%$50,870 Total operating expenses$55,696 $(659)(1.2)%$56,355 
Operating incomeOperating income$13,275 $2,729 25.9%$10,546 Operating income$14,083 $4,535 47.5%$9,548 

Operating Expenses and Operating Loss for the Nine Months Ended September 30, 2021 and 2020
Operating Expenses and Operating Income for the Nine Months Ended September 30, 2022 and 2021
(dollars in thousands)
2022Change2021
 Expenses$%Expenses
Research and development$49,869 $1,230 2.5%$48,639 
Marketing and selling69,962 3,451 5.2%66,511 
General and administrative42,241 27 0.1%42,214 
Restructuring costs, net515 (486)(48.6)%1,001 
Total operating expenses$162,587 $4,222 2.7%$158,365 
Operating income$37,322 $8,230 28.3%$29,092 
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Research and Development Expenses

Research and development (“R&D”) expenses include costs associated with the development of new products and the enhancement of existing products, and consist primarily of employee compensation and benefits, facilities costs, depreciation, costs for consulting and temporary employees, and prototype and other development expenses. R&D expenses increased $1.3 million, or 8.6%, forThe tables below provide further details regarding the three months ended March 31, 2022, compared to the same periodchanges in 2021. The increase in R&D expenses was primarily due to increased consulting and outsidecomponents of research and development services for the three months ended March 31, 2022, compared to the same period in 2021.expenses.
Change in R&D Expenses for the Three Months Ended March 31, 2022 and 2021

Change in Research and Development Expenses for the Three Months Ended September 30, 2022 and 2021
(dollars in thousands)
2022 Increase (Decrease) From 2021
$%
Consulting and outside services1,175 44.5 %
Personnel-related(987)(9.5)%
Other$(207)(5.0)%
Total research and development expenses decrease$(19)(0.1)%

Change in Research and Development Expenses for the Nine Months Ended September 30, 2022 and 2021
(dollars in thousands)
2022 Increase (Decrease) From 2021
$%
Consulting and outside services3,019 40.6 %
Personnel-related(1,408)(4.7)%
Other(381)(3.3)%
Total research and development expenses increase$1,230 2.5 %
Change in R&D Expenses for the Nine Months Ended September 30, 2021 and 2020
The increase in consulting and outside services for the three and nine months ended September 30, 2022, compared to the same periods in 2021 were primarily due to both an increase in fees as well as increased usage of consultants. The decrease in personnel-related expenses for the three and nine months ended September 30, 2022, compared to the same periods in 2021 were primarily due to increased capitalization of employees’ salaries for time spent on internal-use software development as well as a decrease in variable related compensation.


Marketing and Selling Expenses

Marketing and selling expenses consist primarily of employee compensation and benefits for selling, marketing and pre-sales customer support personnel, commissions, travel expenses, advertising and promotional expenses, web design costs, and facilities costs. The tables below provide further details regarding the changes in components of marketing and selling expenses.
Change in Marketing and Selling Expenses for the Three Months Ended March 31, 2022 and 2021
(dollars in thousands)
 2022 Increase (Decrease) From 2021
 $%
Personnel-related225 1.4 %
Advertising and promotions370 76.3 %
Consulting and outside services369 51.5 %
Foreign exchange (gains) and losses727 1,115.4 %
Other(508)(14.3)%
Total marketing and selling expenses decrease$1,183 5.7 %
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Change in Marketing and Selling Expenses for the Three Months Ended September 30, 2022 and 2021
(dollars in thousands)
 2022 (Decrease) Increase From 2021
 $%
Consulting and outside services(1,004)(59.7)%
Advertising and promotions568 59.8 %
Other385 1.8 %
Total marketing and selling expenses decrease$(51)(0.2)%

Change in Marketing and Selling Expenses for the Nine Months Ended September 30, 2021 and 2020
Change in Marketing and Selling Expenses for the Nine Months Ended September 30, 2022 and 2021
(dollars in thousands)
 2022 Increase From 2021
 $%
Personnel-related1,078 2.2 %
Foreign exchange (gains) and losses1,055 129.8 %
Advertising and promotions1,032 45.5 %
Other286 2.0 %
Total marketing and selling expenses increase$3,451 5.2 %

The decrease in consulting and outside services for the three months ended September 30, 2022 was primarily due to less professional services contractors due to the decrease in product related revenue in 2022. The increase in advertising and promotions for the three and nine months ended September 30, 2022 was primarily due to resuming in person trade shows and events, that were attended remotely in the prior year. The increase in personnel-related expenses for the threenine months ended March 31,September 30, 2022, compared to the same period in 2021, was primarily the result of resuming our attendance at trade shows that were paused in 2021 and increased advertising
23


efforts to promote increased sales. The increase in consulting and outside services for the three months ended March 31, 2022 was primarily due to an increased used of external contractors to provide marketing and promotional supporttravel as well as assist in our digital transformation initiative.annual salary increases. The change in foreign exchange translations for the threenine months ended March 31,September 30, 2022, compared to the same period in 2021, was due to foreign exchange gains and losses from foreign currency denominated transactions and the revaluation of foreign currency denominated assets and liabilities. These foreign exchange changes were primarily due to the euro-dollar and pound-dollar exchange rate volatility. The decreaseincrease in other expenses for the three and nine months ended March 31,September 30, 2022 was related to a reduction inincreased pricing on our bad debt allowance.third party software subscriptions as well as increased spend on our information technology infrastructure to support ongoing business operations.

General and Administrative Expenses

General and administrative (“G&A”) expenses consist primarily of employee compensation and benefits for administrative, executive, finance and legal personnel, audit, legal and strategic consulting fees, and insurance, information systems and facilities costs. Information systems and facilities costs reported within general and administrative expenses are net of allocations to other expenses categories. The tables below provide further details regarding the changes in components of G&A expenses.

Change in G&A Expenses for the Three Months Ended March 31, 2022 and 2021
Change in G&A Expenses for the Three Months Ended September 30, 2022 and 2021Change in G&A Expenses for the Three Months Ended September 30, 2022 and 2021
(dollars in thousands)(dollars in thousands)(dollars in thousands)
2022 Increase
From 2021
2022 Decrease
From 2021
$% $%
Personnel-relatedPersonnel-related595 8.8 %Personnel-related(451)(6.0)%
Facilities and information151 10.0 %
OtherOther430 8.0 %Other(384)(5.2)%
Total G&A expenses increase$1,176 8.6 %
Total G&A expenses decreaseTotal G&A expenses decrease$(835)(5.6)%

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Change in G&A Expenses for the Nine Months Ended September 30, 2022 and 2021
(dollars in thousands)
 2022 Increase (Decrease)
From 2021
 $%
Facilities and information504 10.9 %
Other(367)(2.3)%
Personnel-related(110)(0.5)%
Total G&A expenses increase$27 0.1 %

The decrease in personnel-related expenses for the three and nine months ended September 30, 2022, compared to the same periods in 2021, was primarily due to a decrease in variable related compensation, partially offset by annual salary increases. The decrease in other expenses for the three and nine months ended September 30, 2022, compared to the same periods in 2021, was primarily a result of business development activities that have slowed in 2022. The increase in facilities and information technology expenses for the nine months ended September 30, 2022, compared to the same period in 2021, was related to increased spend on our information technology infrastructure to support ongoing business operations.


The increase in personnel-related expenses(Benefit from) Provision for Income Taxes
(Benefit from) Provision for Income Taxes for the Three Months Ended September 30, 2022 and 2021
(dollars in thousands)
2022Change2021
 $%
(Benefit from) Provision for income taxes$(665)$(1,656)(167.1)%$991 

Provision for Income Taxes for the Nine Months Ended September 30, 2021 and 2020
(dollars in thousands)
2022Change2021
 $%
Provision for income taxes$1,187 $(645)(35.2)%$1,832 

We had a tax benefit of 5.9% and a provision of 3.8% as a percentage of income before tax for the three monthsmonth and nine month periods ended March 31,September 30, 2022, respectively. The decrease for the three month period ended September 30, 2022, compared to the same period in 2021 was primarily duedriven by the decrease in profit before tax and a discrete tax adjustment related to an increasea tax return to provision true-up in variable related compensation as a result of the Company’s continued strong performance.our UK entity. The increase in other expensesdecrease for the three monthsnine-month period ended March 31,September 30, 2022, compared to the same period in 2021, was driven primarily a result of business development activities as well as our digital transformation initiative.

Provision for Income Taxes
Provision for Income Taxes for the Three Months Ended March 31, 2022 and 2021
(dollars in thousands)
2022Change2021
 $%
Provision for income taxes$1,126 $644 133.6%$482 

Provision for Income Taxes for the Nine Months Ended September 30, 2021 and 2020
We hadby the discrete tax adjustment related to a tax return to provision of 9.6% and 9.9% as a percentage of income and loss before tax for the three months ended March 31, 2022 and 2021, respectively. The increasetrue-up in the taxour UK entity. No provision for the three months ended March 31, 2022, compared to the same period in 2021, is primarily due to the increase in worldwide pre-tax income. Noor benefit was provided for the tax loss generated in the United States due to a full valuation on the deferred tax asset.

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LIQUIDITY AND CAPITAL RESOURCES

Liquidity and Sources of Cash

Our principal sources of liquidity include cash and cash equivalents totaling $41.2$31.3 million as of March 31,September 30, 2022, as well as the availability of borrowings of up to $70.0 million under our revolving Credit Facility. As of September 30, 2022, there was $19.0 million outstanding under the Credit Facility. We have generally funded operations in recent years through the use of existing cash balances, supplemented from time to time with the proceeds of long-term debt and borrowings under our credit facilities.

We have continuedAvid is committed to our commitment to a digital transformation initiative, focused around modernizingwhich focuses on optimizing systems, processes, and back-office functions with the objective of improving our operations related to our digital and subscription business. The project started in the third quarter of 2021, has continued through the first half of 2022 and is expected to continue through 2025. We plan to significantly invest in transforming our enterprise-wide infrastructure and technologies to benefit our customers and drive enhanced performance across the company, which we started in the quarter ended September 30, 2021. Over the next four years we plan to invest significant funds and resources towards implementing these new technologies.company.

On January 5, 2021, we entered into the Credit Agreement with JPMorgan Chase Bank, N.A. and a syndicate of banks, as collateral and administrative agent, and the Lenders. Pursuant to the Credit Agreement, the Lenders agreed to provide us with the Term Loan and the Credit Facility. We borrowed the full amount of the Term Loan, or $180.0 million, on the closing date, but did not borrow any of the $70.0 million available under the Credit Facility on the closing date. The proceeds from the Term Loan, plus available cash on hand, were used to repay outstanding borrowings of $201.0 million under the Company’s prior credit facility with Cerberus Business Finance, LLC, which was then terminated. Prior to the maturity of the Credit Facility, any amounts borrowed under the Credit Facility may be repaid and, subject to the terms and conditions of the Credit Agreement, reborrowed in whole or in part without penalty.

On February 25, 2022, the Company executed 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 SOFR, reset the principal amortization schedule, and eliminated the fixed charge coverage ratio. The A&R Credit Agreement contains a financial covenant 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. The Term Loan, as amended, has an initial interest rate of SOFR plus a 0.10% credit spread adjustment plus an applicable margin of 2.25%, with a 0% floor. The applicable margin for SOFR loans under the A&R Credit Agreement ranges from 1.75% to 3.0%, depending on the Company’s total net leverage ratio. Both the Term Loan and the revolving Credit Facility mature on February 25, 2027.

On October 6, 2022, the Company executed a Second Amended and Restated Credit Agreement (the “Second A&R Credit Agreement”) with JPMorgan Chase Bank, N.A. and the Lenders. Pursuant to the Second A&R Credit Agreement, the Lenders agreed to provide the Company with (a) an additional term loan in the aggregate principal amount of $20 million (of which approximately $19 million was used to pay off the Company’s existing Credit Facility draw), and (b) an additional $50 million of available borrowing capacity under the revolving credit facility, increasing the aggregate amount available to $120.0 million. The Second A&R Credit Agreement, which replaces the Company’s existing secured credit facility, includes substantially similar terms and does not result in any changes to financial covenants, pricing or the February 2027 maturity.

Our ability to satisfy the maximum total net leverage ratio covenant in the future depends on our ability to increasemaintain profitability and cash flow in line with prior results. This includes our ability to maintain bookings and billings abovein line with levels experienced over the last 12 months. In recent quarters, we have experienced volatility in bookings and billings resulting from, among other things, (i) our transition towards subscription and recurring revenue streams and the resulting decline in traditional upfront productperpetual software sales, (ii) dramatic changes inthe rapid evolution of the media industry and the impact it has onresulting in changes to our customers,customers’ needs, (iii) the impact of new and anticipated product launches and features, and (iv) volatility in currency rates.

In the event revenues in future quarters are lower than we currently anticipate, we may be forced to take remedial actions which could include, among other things (and where allowed by the lenders), (i) further cost reductions, (ii) seeking replacement financing, (iii) raising funds through the issuance of additional equity or debt securities or the incurrence of additional borrowings, or (iv) disposing of certain assets or businesses. Such remedial actions, which may not be available on favorable terms or at all, could have a material adverse impact on our business. If we are not in compliance with the net leverage ratio covenant and are unable to obtain an amendment or waiver, such noncompliance may result in an event of default under the Second A&R Credit Agreement, which could permit acceleration of the outstanding indebtedness under the Second A&R Credit
29


Agreement and require us to repay such indebtedness before the scheduled due date. If an event of default were to occur, we might not have sufficient funds available to make the payments required. If we are unable to repay amounts owed, the lenders may be entitled to foreclose on and sell substantially all of our assets, which secure our borrowings under the Second A&R Credit Agreement.

Our cash requirements vary depending on factors such as the growth of the business, changes in working capital, and capital expenditures. We anticipate that we will have sufficient internal and external sources of liquidity to fund operations and anticipated working capital and other expected cash needs for at least the next 12 months as well as for the foreseeable future. We also believe that our financial resources will allow us to manage the anticipated impact of COVID-19 on our business operations and cash flows for the foreseeable future, which could include reductions in revenue and delays in payments from customers and partners. The challenges posed by COVID-19 on our business are constantly evolving. Consequently, we will continue to evaluate our financial position in light of future developments, particularly those relating to COVID-19.
25



Cash Flows

The following table summarizes our cash flows for the periods presented (in thousands):
Three Months Ended March 31, Nine Months Ended September 30,
20222021 20222021
Net cash provided by operating activitiesNet cash provided by operating activities$7,916 $12,313 Net cash provided by operating activities$25,563 $35,418 
Net cash used in investing activitiesNet cash used in investing activities(3,244)(1,254)Net cash used in investing activities(11,067)(4,750)
Net cash used in financing activitiesNet cash used in financing activities(19,991)(35,003)Net cash used in financing activities(38,294)(59,156)
Effect of foreign currency exchange rates on cash, cash equivalents and restricted cashEffect of foreign currency exchange rates on cash, cash equivalents and restricted cash(254)(332)Effect of foreign currency exchange rates on cash, cash equivalents and restricted cash(1,809)(927)
Net decrease in cash, cash equivalents and restricted cashNet decrease in cash, cash equivalents and restricted cash$(15,573)$(24,276)Net decrease in cash, cash equivalents and restricted cash$(25,607)$(29,415)

Cash Flows from Operating Activities

Cash provided by operating activities aggregated $7.9$25.6 million for the threenine months ended March 31,September 30, 2022. The decrease in cash provided by operations compared to the threenine months ended March 31,September 30, 2021 was primarily due to a change in working capital.

Cash Flows from Investing Activities

For the threenine months ended March 31,September 30, 2022, net cash flows used in investing activities reflected $3.2$11.1 million used for the purchase of property and equipment. Our purchases of property and equipment which largely consist of computer hardware and software to support R&D activities and information systems. In addition, we have increased resources to spend time on the development of internal-use software as we upgrade and improve our back-office applications, as well as development of our cloud related infrastructure.

Cash Flows from Financing Activities

For the threenine months ended March 31,September 30, 2022, net cash flows used in financing activities were primarily the result of our proceeds on the revolving credit facility, offset by our stock repurchase program and our common stock repurchases for tax withholdings for net settlement of equity awards.

RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements and Recent Accounting Pronouncements To Be Adopted

Our recently adopted and to be adopted accounting pronouncements are set forth in Note 1 “Financial Information” of our Notes to Unaudited Condensed Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.
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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Foreign Currency Exchange Risk

We have significant international operations and derive more than half of our revenues from customers outside the United States. This business is, for the most part, transacted through international subsidiaries and generally in the currency of the end-user customers. Therefore, we are exposed to the changes in foreign currency exchange rates that could adversely affect our revenues, net income, and cash flow.

We recorded a net foreign exchange loss of $0.71.9 million and an immaterial net foreign exchange gain$0.8 million for the threenine months ended March 31,September 30, 2022 and 2021, respectively. The foreign exchange gains and losses resulted from foreign currency denominated transactions and the revaluation of foreign currency denominated assets and liabilities.

A hypothetical change of 10% in appreciation or depreciation of foreign currency exchange rates from the quoted foreign currency exchange rates as of March 31,September 30, 2022 would not have a significant impact on our financial position, results of operations, or cash flows.operations. For this purpose, “significant” means an impact of more than a 20% change.

Interest Rate Risk

On February 25, 2022, the Company executed an Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A. and the Lenders. The Second A&R Credit Agreement had an initial interest rate of SOFR plus a 0.10% credit spread adjustment plus an applicable margin of 2.25%2.5%, with a 0% floor.The applicable margin for SOFR loans under the Second A&R Credit Agreement ranges from 1.75% to 3.0%, depending on the Company’s total net leverage ratio. A hypothetical 10% increase or decrease in interest rates paid on outstanding borrowings under the Second A&R Credit Agreement would not have a material impact on our financial position, results of operations, or cash flows.

ITEM 4.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation and supervision of our Chief Executive Officer and Chief Financial Officer, is responsible for our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified under SEC rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Our management, including the Chief Executive Officer and the Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures as of March 31,September 30, 2022. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our management concluded that, as of March 31,September 30, 2022, these disclosure controls and procedures were effective at a reasonable level of assurance.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarterly period ended March 31,September 30, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


Inherent Limitation on the Effectiveness of Internal Controls

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The effectiveness of any system of internal control over financial reporting is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, any system of internal control over financial reporting can only provide reasonable, not absolute, assurances. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business, but cannot assure that such improvements will be sufficient to provide us with effective internal control over financial reporting.


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PART II - OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

See Note 7 “Commitments and Contingencies” of our Notes to Unaudited Condensed Consolidated Financial Statements under Part 1, Item 1 of this Form 10-Q regarding our legal proceedings.


ITEM 1A.RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described in Part I, Item 1A under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 in addition to the other information included in this Form 10-Q before making an investment decision regarding our common stock. If any of these risks actually occurs, our business, financial condition, or operating results would likely suffer, possibly materially, the trading price of our common stock could decline, and you could lose part or all of your investment.
There has been no material change to the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2021.


ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Share repurchase activity during the three months ended March 31,September 30, 2022 was as follows:

PeriodTotal number of shares purchasedAverage price paid per shareTotal number of shares purchased as part of publicly announced programsMaximum approximate dollar value of shares that may yet be purchased under the programs
January 1, 2022 - January 31, 2022197,666$30.33 197,666$83,914,520 
February 1, 2022 - February 28, 2022131,217 $30.11 131,217$79,963,950 
March 1, 2022 - March 31, 202225,589 $33.99 25,589$79,094,302 
PeriodTotal number of shares purchasedAverage price paid per shareTotal number of shares purchased as part of publicly announced programsMaximum approximate dollar value of shares that may yet be purchased under the programs
July 1, 2022 - July 31, 2022$— $64,950,864 
August 1, 2022 - August 31, 2022240,333 $26.47 240,333$58,589,980 
September 1, 2022 - September 30, 2022517,387 $23.66 517,387$46,348,833 

See Note 11 of Notes to Unaudited Condensed Consolidated Financial Statements for further information regarding our share repurchase program.


ITEM 6.    EXHIBITS

The list of exhibits, which are filed or furnished with this Form 10-Q or are incorporated herein by reference, is set forth in the Exhibit Index immediately preceding the exhibits and is incorporated herein by reference.

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EXHIBIT INDEX
   Incorporated by Reference
Exhibit
No.
DescriptionFiled with
this Form
10-Q
Form or
Schedule
SEC Filing
Date
SEC File
Number
3.18-KMarch 31, 2017001-36254
3.210-KMarch 9, 2020001-36254
10.0110.110-K8-KMarch 1,October 13, 2022001-36254
31.1X    
31.2X    
32.1X    
101.INSeXtensible Business Reporting Language (XBRL) Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
*101.SCHXBRL Taxonomy Extension Schema DocumentX
*101.CALXBRL Taxonomy Calculation Linkbase DocumentX
*101.DEFXBRL Taxonomy Definition Linkbase DocumentX
*101.LABXBRL Taxonomy Label Linkbase DocumentX
*101.PREXBRL Taxonomy Presentation Linkbase DocumentX
__________________________
*    Pursuant to Rule 406T of Regulation S-T, XBRL (Extensible Business Reporting Language) information is deemed not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934 and otherwise is not subject to liability under these sections.


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SIGNATURE


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

AVID TECHNOLOGY, INC.
(Registrant)
Date:May 4,November 8, 2022By: /s/ Kenneth Gayron 
 Name:Kenneth Gayron  
 Title:Executive Vice President, and Chief Financial Officer and Corporate Treasurer 

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