AVID - Earnings call transcript Q1 2019

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Operator

Good day, and welcome to the Avid Technology Q1 earnings call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Whit Rappole. Please go ahead, sir.

Whit Rappole

operator. you, Thank and Avid everyone, for us joining Good First thank Quarter for Technology's XXXX today afternoon, you Earnings Call. Whit Relations. My Development is Rappole, President Vice name for and Investor Avid's Corporate our With afternoon and Gayron, Chief me our Officer Officer EVP. are Rosica, Ken and this Financial and Chief Jeff President; Executive provide for remarks, operating review of of financial strategic and our your provide business, their prepared a will detailed In and followed a time by results, questions. Jeff will overview then Ken our and afternoon on this have early release earnings our we to issued slide a refer that this we presentation We prepared will call. the The website press our call release on are and of be and will presentation for ir.avid.com, a website a this replay our at limited on available time. available currently

information operational measures appendix are with G, website all definitions most During by today's non-GAAP call, our financial management to contain will otherwise the noted, during measures reference figures and In GAAP this the and the Unless a both Regulation figures. also metrics. in call our the the on certain and used closely release management and to presentation. associated metrics earnings today non-GAAP operational non-GAAP noted of the investor reconciliation for accordance call financial

during made addition, certain forward-looking Litigation the statements within of presentation In statements the Act XXXX. today's contain of meaning Reform Securities Private

results pertain future slide these forward-looking the Our from include comments to and occurrences answers outcome. statements and to may this results call deck or may accompanying that materially are your well as Actual on statements. as differ questions that future forward-looking or

call and filed SEC. these ending Rosica. to for statements, our and and uncertainties Jeff discussion December release our year the a of XX-K over CEO with me With please including XX, issued of forward-looking press some key information, XXXX turn let the more risks today the President, that, with For see the our associated

Jeff Rosica

for And Whit. thanks, everyone, our joining today. on you, us Thank call

provide are which also discuss delivering and and positive major and CFO, and our and all Avid's our plenty efforts with improving gathering Connect our from performance momentum, then strategy initiatives, to creation April, business and plan. for progress excitement resulting insights our Avid's for your answering For Along the financial evidence with performance introductions are results of ongoing in continued results at Gayron, We're the and eager give we've according and value in achievements customer that investors. NAB into showed good our been we'll better we'll of time our business questions. product events Avid to QX, new Ken our

So let's started. get

on the and optimize had we're and all, aligning and free by So cash are strategy. operations I very to product and focus hard our visibility be results XXXX in Avid's to and proud with growth, adjusted us seeing, project The future the continued remain first strong Overall, growth that Avid. revenue with from ability especially value. confidence to to flow better the of going our innovation across exiting momentum our encouraged successful I the results. we'll continue and of that's towards do provide I'm work QX, continuing in XXXX QX to deliver revenue in we sustainable shareholder executing we as we recurring together, EBITDA through focus delivered everyone greater model I greater sustained generation. have results to and higher-margin am the business also drive we pleased help our more profitable team

of the notes. more this the important a Avid's terms an benefit our realized by in in upcoming discuss address funds order Ken amending credit convertible we of month, improving last our maturities moment. performance in also favorable facility secure detail at announced As more to will to

particularly executing in we enable the against the our beyond. with to and product including Connect deliver plan can announced very to have enterprise introductions we on spanning bolstered our market Association's about confidence continue back quickly. XXXX innovation financial forward-looking conversion continued completing and July bring optimistic and supply improved chain positive our happy While so had we're the tools, A the We're own our our at platform With response can new NAB products our by that Show we results. releasing is solutions, offerings integrated XXXX Conference of creative and customer the for Customer stay we Avid plan, focused growth new part April. the prospects, initial to at will in XXXX team key

enables I enterprise strategy, we sign agreements their a positions as way with secure the reimagine Avid to product customers think, they Our multiple enterprises with media continue our large years. over to that uniquely to And trusted products partner advantages work.

that and Cloud of U.S. infrastructure storage, CBS on Asset cloud-ready be as new and its a search, enterprise-wide Manhattan repurposing, editing As Composer facility. Europe NEXIS approach and the economy well their the to professional Media content MediaCentral in first upgrade give workflows. as groundbreaking announced April, CBS In signed sites has multiple of content QX, Avid-based in example, operations agreement in enterprise host services and levels UX scalability tools focus users a a and CBS preparing will HBO's new in as organization's training. hundreds the across with to platform, entirely end resources achieved example, HBO the retrieval News Avid the to solutions virtualized of editing we storage will another production future. latest we'll multiyear promotional for Avid Management and News upgrade in and | during production them a available Avid The NEXIS

growing our overall sales, the an the at the overall and was This been shows continued trend, quarter revenues including by last of the solid solutions let's our from Now QX product showing growth, another same continued and quarter. represents the driven versus making improvement very GAAP category contributions, make second strong which outcome which e-commerce E-commerce performance consecutive consecutive had are quarter. end for software integrated revenue of indeed year-over-year Likewise, up year. was the in of growth, in XX% X% quarter with the continued impact. was GAAP with XX% momentum revenue their major which margin improved quarter. which look fifth up subscriptions the activities strong that we've indicates strong Avid's growth and QX XXXX, plans paying surpassing XXX,XXX changes the Gross also subscribers to subscriptions year-over-year. place storage, performance putting at

the margins benefited improve in margins high-margin expect and initiatives, our a continue favorable efforts in product as it half chain first improve new While lines storage. to in to as to through second planned quarter, continued said, production we year transition by additionally expected our our bring we affected progressing today this from XXXX. the is to to mix is supply of targeted partner, all July the That into which and

we execution, of strong improving gross margin, combined and and underlie better-than-expected initial income key team's with profitability. increased revenue the the first the to EBITDA due some also improvement and of net our results Now the initiatives realized in The adjusted overall quarter. programs,

thanks able we cash strong of generation company the free and quarter. deliver the also to the Finally, improving flow performance improved were execution in overall, to financial

a we're in for want quarter, while continue that earlier, of the encouraged emphasize us. -- or I encourage we still lot to by first stated work our to I as ahead the has Now results delivered team

NAB in in will later the and new raise Upon This industry This renewed that help user. will made ready the in creation to experienced the innovations to Cloudspaces, subscription which accelerate the every on-premise reception of creative customers Avid all-new Show. with which expected flagship of editorial Media NEXIS significant commitment critical cloud announcement. overwhelming also allowing as availability and almost solves better XXXX within in unveiled of for with type is which Composer with X our our at NEXIS their new we've and or progress a quarter XXXX workflows in It of advantage positive storage response discipline industry for be unlike of of effortlessly the our complete quarter, includes The offerings Composer storage remains only to to performance been offering our quite surprise of is the the teams at start tools. Media to free for expect product local Avid's than most Avid time our unveilings every This the would today. map recent Avid. today. and Avid made well capabilities and with production about introducing the and new the take out by with market's road that video immediately and bar we the positions need increase Leveraging enthusiastic unique general new it storage product are has our here are this say, Microsoft available our the offering. adoption of top -- is across We we've Avid yet priority, April some X,XXX reprioritization -- try tool. along cloud the enables category. pleasantly, a their to any took the SaaS SaaS our Connect customer reimagining tools, all in more to environment up anything it power all growth Azure, our I quite as introduction,

cloud. to Avid UX and Microsoft, NEXIS adoption Additionally, Avid achieved companies media several on storage. working with | strategic has platform into MediaCentral and solutions, their the cloud the remote based collaboration bring in and This archiving including has crucial editing, included disaster initiatives also workflows early several large close by for studios recovery Cloud

do be able to mention we so While aren't near able customers we to the by right to hope name now, do these future. in

at to for from new industry, turned video featured pro witness that Avid product market in effort our half the while new the And of rarely my also will nor effective will anticipates we're NAB history on conference our and Avid summer NAMM response the XX-year and also and for a in announcements execution XXXX in our Nashville. an second results customers, our Management In customers a unveiled in group events Show. preparing music that team people beginning audio impact of April this customers. be of primarily this year. offerings deliveries such capitalize resoundingly new remarkable the positive our product Our a such Connect I fully

In seeing fact, at improvement pipeline we events. performance industry stemming the already our recent from are

our build on to on momentum. aggressively focus positive combined on improvements executing this expect plans, year our as Now the deliver further with our improvement performance continued strategy operational with recent we we

the portion during full everyone a chain this cautious year weaker for Looking our our quarter, that, outlook supply remind new significant I'd transitioning in is to forward seasonally our a though, optimistic Avid. a remain And to of for factory historically, taking said, we XXXX. partner QX. over are for like that given QX is we production quarter That outlook

by As operating efforts delivering improve second financial map contribute gross product before, mentioned our further and margins new starting lower continued revenue the the half. road QX costs, products, XXXX, which will combined in key to improved during performance with continued against our see to growth expect we with to

increasing performance successfully subscriptions more on software delivering and revenues financial our through we're QX in in recurring growth our how believe focus more we agreements. our on built Now shows model a from predictable long-term

more focus performance sustainable efforts, moving an to And we're more and also growth then SaaS continue margins our higher-margin through driving our and and solutions with integrated on efficient with will with adding sure, operations offerings approach. combined profitable well software how strong optimized go-to-market and innovation as to for near-term growth good underscores effective as and We prospects.

I'll call our QX. over financial with his to performance now ahead, on the Go provide remarks for that, Ken Ken. to So turn

Kenneth Gayron

Thank good afternoon, you, everyone. and Jeff,

are unless non-GAAP Jeff As to figures noted referring noted. above, I and

progress we XXXX first our the for quarter our of As of as high the Jeff met the first adjusted end outlined we we our quarter EBITDA fiscal pleased and our guidance the we momentum, for with financial ended have exceeded quarter. year Overall, XXXX. good are seen revenue momentum improve results strong guidance our in continue performance. to making and on that initiatives We earlier, are through with for

gross results. so that comparisons, of For our those in the quarter free EBITDA, at strategy the is financial which XXXX, sequential performance net had first seasonality fourth improved income adjusted to leading business. and growth year-over-year our look new flow, revenue, important favorable we assess results year-over-year to our it's In comparisons quarter to of in to cash demonstrates margin, Avid, impact

the value and remainder and adjusted We are our of EBITDA in backlog, of achieve in With flow also improving our year-over-year savings, well-defined in progress in favorable forward-looking revenue consisting $XX plan free cash contract revenue. metrics, to million metrics revenue, and we continued annual XXXX. seeing anticipate recurring cost improvement forward-looking

Let's now get into the details.

consecutive of quarter and Turning growth. end income year-over-year our at X% our statement, second of million high This of the the the $XXX.X was GAAP year-over-year. up guidance to revenue revenue for was GAAP quarter

and and Tools, continue We margins for quarter see e-commerce again our Sibelius. during and good for the the Pro from was at to benefited favorable Storage transaction quarter. growth additionally subscriptions in strong Media a Composer multimillion-dollar

XXXX in XX.X% XXX improvement due down the year-over-year. from The favorable million product initiatives XXX live improvement up operating fifth the for basis margin Additionally, from growth including storage that and quarter. improvement. XXX we margin in XX% began of category, management gross QX our hardware point in Adjusted the in gross of smart mainly part, year-over-year. basis was offset, $X.X control quarter $X.X to the smart by capital was the our quarter our of EBITDA EBITDA growth of related our quarter expenses expenses $XX.X quarter $X.X audio points mix our The increase the saw million, for services revenue, quarter margin XX.X% quarter XXXX. margin in better we to in Adjusted basis our basis consecutive adjusted the lines. a Operating in was realization guidance This EBITDA above adjusted initiatives. million up QX Gross quarter, for gross sound up was the million is by business resulted points year-over-year. and by operating primarily was to from favorable support adjusted high-margin by and compared XXXX. towards integrated cash improvement expenses software were savings EBITDA, points The driven in the XXXX flow of for improvement of the working margin exceeded XXX investment in was first business. driven in the and the margin $XX.X in first of million in savings to EBITDA our improving and Free of driven third

of recurring revenue. of annual our that's confidence to predictability revenue with moving and business. us recurring our contract more increased, Now has steadily value The the percentage providing in

XX For XX in from total XX% months was XXXX. months ending of March XXXX, the ending XX% recurring, the XX, March revenue up XX,

driven revenue subscriptions given increasing time the revenue We our are our and on agreements. continue of recurring recurring of up adding was expect focus software we quarter, XX% at to over long-term X $XXX high-margin the to the long-term next from focus years. to strategy our X ACV subscriptions We in reaffirm and on growth new goal seeing in first million agreements. end the X% reaching year-over-year

We in reduction decline perpetual more time quarter, fourth software expect and The end the to seasonal the the $X was decline transition maintenance ACV. sequentially revenue growth ACV peaks the ACV reduction over our sequential internal for seasonality. towards our ACV business. a subscription see $XX quarter annualized to continued a and given result in was of line maintenance to and with related our down to agreements of a our Subscription strategy long-term our holiday million forecast traditionally At ongoing due in in in in is subscription the signing in million promotions, first from is, subscription and creative products. part, as to this due in growing

We recent expect integrated a catalyst uptick our as flatten the in maintenance revenue maintenance business. in software the and to quarters hardware to of remaining provide should during XXXX

our maintenance the the perpetual software of subscriptions. first $XX.X revenues. and due includes partly offset sales licenses of year-over-year down license composition increase quarter our the to subscriptions was in moving which revenue million perpetual slightly both from revenue, decline by XXXX, licenses, $X.X high-margin Now and in by In maintenance, to million, the and

the our revenue during Software first quarter. maintenance and was of licenses XX%

produce XX%-plus. this to expect to this -- gross margins continue grow category modestly continue to and quarter software We of

XX% of improvement and Moving which These the and in software the the to high-margin to the XX% of generate transition on of contributed our gross our high-value, also first our our margins. is business attractive the balance in Hardware chain integrated and $X.X and quarter. in year-over-year we continued and services forward. portion business. million strategic software and software, software, hardware, down We new quarter. margin with was up in hardware from moving programs integrated in XXXX. are revenue next increase audio called revenue combine revenue products the professional included of services, XX% contribution storage vendor, XXXX as will and new revenue hardware presentation line. from strength margin solutions, and revenues integrated is The business gross total comes the see revenue the this year-over-year integrated and had we million video first professional in audio solutions, to believe XX-Q smallest quarter, selective Professional in in $XX.X which supply our our in we services introduction being where we by-type our This which are internally of quarter, starting driving more

was to turning $X.X flow. million quarter. period. in up made for from to first higher this growth payment the million and first free cash in improvement support offset flow to million bonus quarter, cash year-over-year. the We of $X.X free benefited flow in Now up the and EBITDA, in $XXX,XXX in accounts million Adjusting working $X.X from the payment, was Free cash the year-earlier $X.X capital by flow receivable. cash cash inventory a amounting a use Free adjusted

remaining of cash impact quarter. payment the in will the Although quarter, we bonus free million second the in which portion the XXXX, $X.X first paid XXXX a our paid April we for flow

the complete transition second chain flow of in and levels once in vendor. from capital, supply working lower improve the new to to cash of free XXXX we expect benefit We inventory, half particularly the

had from XX, up At to March of cash $X.X balance XX, March $XX.X sheet. moving XXXX. million, XXXX, we the Now million

including restricted $X of collateralize favor of cash million million one excludes cash, $X.X our a of credit balance cash issued in chain letter of supply used vendors. to of Our

back $X.X to July XX, unrestricted vendor receivable, $XX.X is a by quarter Cash notes. due of March transition balance time. first that XXXX as January completing we cash XX, XXXX expect convertible $X.X our the at from December new from to use cash million with be restricted expect slightly up We the the We chain million cash accounts supply down to as ended come in to XXXX. repurchase million to

back to the strong XX, was XX due half days XXXX DSO Our towards quarter. at of billings the March

XX, transition. totaled revenue. DSO long-term new move XX, [blend] from market XXXX, favorable in Inventory I'm backlog revenue of was as revenue at to Contract that from first XX, which XXXX. million back in at of March December and supply million confident XX, as chain XXXX was should the XXXX. increase of our in deferred $XXX.X are at slightly contractually $X million XX, XX, signing was We $XX.X in $XX.X the we of March million primarily leading introductions. result end up million $X.X down forward given our Deferred in in assets growth quarter, expect result business. end our growth a up XXXX. to million seeing up agreements. $X.X the million as point year. to product the was levels a as at we seasonally the noncash at XXXX complete the our from the XX, March XXXX revenue are to over half $XXX.X backlog, XX, up billings XXXX, second due Inventory decline million to due committed XXXX, and and first $X.X into XXXX Total includes to of quarter, QX up over March million the opportunity, continue And backlog, mid-XXs $XX.X Deferred March was revenue subscription March amortization we normalize new $XX.X during high a at the start of maintenance the QX of partly million December XXXX The expected from

objectives, the term end incentives program the we $XX.X the January compliant was repurchase balance increased commission of notes quarter first was We due $XXX.X debt sales million for first $X.X ratio the the our to we loan the long-term And added XXXX end the an loan that leverage milestones and several we with we completed to up the significant with by the were At the to required of of structure early refinancing, more long-term XXXX the capital of our that address ability the financing repurchase for convertible offset to covenant new have our due to from existing first the finally, amendment agreement to debt long-term May term entered convertible strengthen from $XXX XX, to notes. our covenants. Additionally, achieve XXXX to Long-term of provided had drive quarter, in million announced from company. million, a repurchase notes. down at the cushion business at convertible December agreements. to of into XXXX. new have April, quarter million our In

to keeps In million $XXX the covenant $XXX interest to payments notes, tender maintains loan, stable X offer offer providing flexibility same, million XX, X. term in on $XXX The provides loan funds and leverage business. we a also April the million amendment to the reduces amortization launched repurchase close the additional operate both rate for and X scheduled our principal May us new in on the addition the years significant to May XXXX, only mature the is financing. convertible of loan and term On the existing our providing notes entire term

convertible to repurchase cash can quarter. the we we approximately increase our and using that Assuming by rate, expense million current $X.X all expect the notes LIBOR interest per

we term new will the interest result had to review the related immaterial to cash to be there let's transaction, repurchase transaction. that $XX With cash guidance includes in Also, used XXXX an factored following loan these additional turn expense free our a interest the change in guidance. quarter, the flow this in notes. of costs convertible million long-term first as only funds our from will as of debt transactions the be As the

of with we we progress the with risks. said, As With pleased that good middle of transition, we a contains XXXX quarter making. transition that we finish are the chain and are are supply first momentum, in inherent the

our second quarter million, continued to guidance. of expect adjusted million revenue XXXX, midpoint. showing at expect So year-over-year In be EBITDA remain between In $XX.X quarter $XX we appropriately conservative GAAP revenue $X.X to be to the second growth we the second $XXX we quarter, between to million. million the in

are our annual XXXX provided Day full XXXX. our also in We reaffirming guidance year at we Analyst November

XXXX Our revenue $XXX million. $XXX to remains guidance million

guidance XXXX $XX Our EBITDA remains million million. $XX to adjusted

XXXX $XX Our free to Jeff the back cash million. call that, closing flow I'd guidance remains With for to $XX commentary. million to turn like

Jeff Rosica

Ken. Great. Thanks,

second growth excitement we're to flow. in QX, XXXX cash with opportunity, our growing in So as and approaching well free which the half revenue of our increased shows EBITDA we momentum demonstrated adjusted for the as our thanks

and product upgrades investing deliver we'll of you XXXX through that and thanking I'll close Avid's Our high-value gives to that that who into joined innovations cloud call confidence including your really can tools and we let momentum us major offering, focus our appreciate simply flagship we by time. on today creative everyone this major able know immediately, beyond. first the continue be storage do

that, I'll our that Whit Q&A. call back organize can the So to he so with turn

Whit Rappole

concludes ahead. Thank take your and now are remarks, to we please prepared Operator, Jeff our go That you, happy Ken. and questions.

Operator

Nehal from take we'll our Chokshi Group. Maxim question Instructions] with first [Operator And

Nehal Chokshi

year then is that's your imply you so, results. on [cushion,] maintaining flip that's cash at great. flow, side Maybe and ours, $X why If free full net are so guidance, least and of not back-half on income that to that not, your why? Congratulations If lower expectations? raise guidance? But overall great does then this GAAP relative million

Kenneth Gayron

Nehal. you Sure, for question. your Thank Yes.

pleased making. progress we're we're the that So with

a in the middle as and we're talked the time, seasonally about, is However, at this transition. quarter QX of we chain supply challenging

then we through our and we'll reaffirming we're move But full good year we about As business XXXX guidance. this annual the feel QX, guidance. point, reassess our at

Nehal Chokshi

XQ? don't -- us But XQ to mean, that, us remind that question do you I you see decline that why I that can for So as sequential a to happen? And Okay. XQ there you does remind typically happens. as far is why can -- QX

Kenneth Gayron

commercialized are -- just introduced, outline would trade QX, lot more to then called revenue the be in side, product in end trade I major we significant QX. we in a and terms which marketing those a X Yes. those associated say of products Connect, at that quarter. going we and have where show have on are new just the the are of introductions with Also, the the typically expenses shows, the of NAB

result, typically expenses So revenue, second and our QX, introductions as really a new a marketing and in QX there's performance in typically, decline half with QX. there's the in enhancing seasonality product higher

Nehal Chokshi

not why downtick revenue 'XX And side, at Okay. we did seasonal see that in XQ on least? the

Kenneth Gayron

to I it that flat relatively down on were because revenue If million and was So on million we $X EBITDA. about $X.X recall, of marketing expense.

Nehal Chokshi

expected performance reason basis? to margin mentioned year-over-year, points, basis of relative is midterm product about final did up a my mix that. to XXX And queue, big the for this that gross of Okay. the that storage strong storage, question, you and is in and Where on I'll in have you be back get XX% long-term you the where

Kenneth Gayron

Yes.

in to contributor storage that that probably quarter. came higher than second our revenue was our neighborhood stronger say was XX% storage good initial would our the in XX% to a I So forecast, at and of margins.

was overall points in call basis That's XXX to our in margin. the gross the our obviously, as out we margin, basis about about to of terms margin. which XXX wanted enhancement that is why -- hardware points to it quarter helped gross of So us an

Operator

with question Steven next our Frankel take now We'll from Dougherty.

Steven Frankel

start are to When you've we been a drive this which $XX OpEx Let's year-over-year, savings. the kind in but did OpEx, that, below and and going on to program with they're QX, to down to decline designed higher that and drive is than QX of million they were quarter? additional see

Kenneth Gayron

Yes.

line we're savings our initiatives $X.X are smart year-over-year, -- million. When look OpEx I so plan. on So forecast, with our like feel in down OpEx our was actually, we at we're

comments, QX bonus So to better will last helped 'XX, a than a 'XX annualized, year. the as prior did relayed that quarter. $X.X QX your benefit was say, true-up our about I so that of have OpEx onetime that I accrual is our comparison million in

clear to $X path the to achieve $XX OpEx, I I've will go, $XX seeing and savings. the and that. to other million XXXX we remaining in working to have savings to contemplate Also, would then and that quarter savings that trade you So But is XXXX, expect come have of expenses, it. also benefits at about OpEx. that in of to is $X.X really I terms a benefit, back did seeing savings smart comparison. where year-over-year, what $X.X about initiatives, those target a got on supply benefit million a the are of transitioning I'm July annualized. of additional And I receive, we is add have a and chain in will towards, supply Jeff that for of January, I of the first million give I that so are NAMM expect $XX impacted us I called as that was show when terms and million I'm million have million in the and the which so really chain on focus look seeing that the in

achieve our to So $XX savings commitment. be able million we'll annual

Steven Frankel

happening down understand being traditionally, quarterly what's ACV you from better what been booking quarter? they to quarters, disclosed And dynamic this in were it's Okay. the then to And are. the few What for last where bookings the have try of on side?

Kenneth Gayron

Yes.

a purchase forward-looking key no longer as look enterprise moving of there's timing in bookings, amount. people with a quarterly the don't good reseller -- because metric. we're a we we metric as we're bookings big X sign long-term reporting multiyear large When backlog by is bookings swing believe quarterly of we at strategic agreement not a So agreement. kind bookings can towards when lumpiness agreement or the

the to were and focus QX trying we're backlog revenue. overall grow. So But investors did bookings on backlog as recurring for our positive

Our ACV up is year-over-year. X%

revenue to So growth our our forward-looking in we annual metrics our year-on-year see and efficient guidance. funnel support metrics

Steven Frankel

nature, your the getting of lenient increase do are the Okay. have increasingly deals, And their this end -- receivables, the more business? than very more enterprise the because to that in are quarters is by Or terms with just typical quarter? skewed

Kenneth Gayron

We we as good But had and balance, I result, our the throughout it's a and really quarter. helps very the factor just receivables say cash did have growth, year. helped March, but good that billings the growth that of help good business. a growing will had We receivable a revenue receivables No. up. drive a that flow in will and

we receivables are up sign. and million, our $X So good a think that's

Steven Frankel

Okay. what was And and the this then just was year? when paid the versus last relative you're bonus doing payment, what size it year,

Kenneth Gayron

paid quarter the So bonus was first paid This payment, last in the be and year, $XXX,XXX $X.X $X.X was XXXX. paid quarter, it million million, bonus was will $X.X April second -- year's payment was paid that in the million. was

So second cash that will impact our quarter flow.

Steven Frankel

in traditional base got growth Okay. and And on faster you've this maintenance, decline $X the to carry moving customer saying subscription? time million maintenance. more in your Is the that you're just one don't delta? products traditional Or subscription just and those that's

Kenneth Gayron

Yes.

when maintenance -- forecast. right revenue with our first, So we was our plan on

subscription. to from the transition of expected perpetual decline a the We because

forecasted. was that So

that and businesses are XXXX. Steve, hardware products, that the software revenue the attachment flattening given comes maintenance those We of had start won't optimistic, on decline that the the of the QX rate remainder that and maintenance and will in the with for integrated out growth

see at what of maintenance. point So of that's we terms in this kind

Steven Frankel

which Again, maintenance? but products are differently? being now coming be it in maybe don't the that to traditional that that on traditional were maintenance customers purchasing Or is maintenance -- growth that is a there used out from and dense, the some now churned subscription have is decline I'm little customers

Kenneth Gayron

I would mix. say, it's a

all both I it's new and don't think Jeff? it's know, I customers, existing.

Jeff Rosica

it's Steve, so as doing later and years of support, products so they and a age churn products churn because XX ages, there's stop always think, always as bit X there's there's I using always obviously, stop product people or -- Yes, out.

lot movement a their bought software as and to from lot So perpetual from lot always to then going to license the perpetual from there's revenues, so all enterprises, that subscription, moving perpetual way there's professionals, And also everything of you creative subscription the numbers. -- perpetual licensing individual subscription within of people, line move the a just over be the now more who the some see their a to up noise of one. a to where of subscription, they're

Steven Frankel

that there to lot we in a you area question. Or And growth are there of the life in this the do still that live Okay. year coming Where to sound cycle? are products last Are new be is SXL going? then the later think orders shipped there? keep

Jeff Rosica

started live its just sound Actually, growth trajectory.

I -- well think line been this quarter. that we've mean, one And that received. product the every in line has still comes extension It's got but more -- predict quarter, product successful. did line been very, we delivery I can't I just we it's that the of into -- that have very extension

think I of end planning this the quarter. it's for

opportunity time, of business And beginning to most a available ago, became that live so and Remember, available mine we're announced the significant in the over year 'XX. for but the became half we just products the us for currently. products second sound

So we're line. with just product getting that started

Operator

Hamed our take Financial. next with Khorsand We'll BWS question from

Hamed Khorsand

questioning. Just a follow-up on Steve's

decline, this customers? they're seats of amount scenario? buying their the on off, license cash subscription, have of are if enterprise first same subscription So And these especially your basis, on a maintenance would revenue moving maintenance as are to kind your customers they enterprise they

Unidentified Company Representative

can I that. probably answer

to lot customers, moving lot all or it's They would used product. license. then updates types -- where individual subscribe customer all that to Media audio of as Pro continue were Tools hi. people would buy from people perpetual the customers It's a get on Remember, by finding customer the or the buy types [Ed], to People and side, a and Sibelius subscription. that they product a way, maintenance software a Composer, of have support. to creative especially to So I'm are

from name big So of have, can't and only the mean, of the I to individual can ones media to that allow way. a which move lot I us that a about would starting are went perpetual you though, to big educational for subscription. tell We enterprises that you we up sale, there's thousands enterprises. institution that we professional, of as And creative know, full name, know it's them, name some them. we everybody, I talked hundreds is

move, revenues subscription. software those as So maintenance over move from to they

Hamed Khorsand

are that resellers long-term you with your then long-term discounts, just talk these you Okay. how providing you doing And were about you? discounts to agreements talking Are into entered of these and agreements you much about? could

Jeff Rosica

try think, this about I have little I I but talked you again to Well, define -- think I'll more. clearly, it and a before,

business that historically, have the there's come a happening been always we quarter, can would you, and business obviously, lot time, discounts they a the a were, So [handing] big at in or load these of partner discounts were what because end for say, over it. get of were we for the of time, a for

behavior that to so stop. And really we wanted

what benefit to just -- model wants so benefit to a from say, to let's moved a business to did and give have continue to they long-term to than if And this we did a a if they want put they want what and to are previously. -- if have or opportunities, it they where commit, customer to they way, those agreements And that's is from channel us. partner commit they more what

careful more lot we pretty on than capability, something can I would in their in lot that and discount course, people what agreements. strategic the we're contractual through there's think strategies -- on more careful generally, capability I way, unless, a had and were door. pricing our comes long-term aren't by would this, agreements, be we're I our discount discount our if are hard-lined general, before of behaviors -- very say or the say But long-term they a

agreements margins can give You proof point to not you. our could watering is margins, just are know down the the I look these at best that long-term

Hamed Khorsand

Well, it's about long-term not but you're are about it the cash free you it's for business? possibility generating wasn't really flow on losing out margins, short-term --

Jeff Rosica

customer flow free they I bill the customer, like No, it whatever just from a would as trading normally is, as a it's their think we're trading all, commitment takedown a a for Cash like a and/or -- delivery, cash takes thing. they behaves don't partner these at no, bigger Remember, agreements, flow we're with economics regular normal. a partner. pay

As the that billing whatever is cadence. and billing a normal with the is enterprise customer under takes agreement a that arrangement of or that cash flow delivery customer,

Kenneth Gayron

number a Yes. of we we've revenue customer. we have, has the recurring more and getting We're a share products of provide better and customer, customer, the the do just that that that all wallet able margins. wide And platform led to been bigger of a to that enterprise can because media of

business. pleased of we're with the So progress this

Jeff Rosica

Yes.

We winner. will been strategy. It's going keep a the with

Operator

to next now Partners. from Investment question our We'll on Orin move AIGH Hirschman with

Orin Hirschman

results. the on Congratulations

moving -- product adopting going And Question in SaaS the to that When think big smaller one. products, two, medium-sized the customers, touched model, customers customers on new those a really a know when of hence capability? SaaS the the do of before of or revenue? a indicated them driving begin big terms difference the hybrid in does you've to start but question really happen do really having transition the that want you've customers hybrid not actually including et making want (inaudible), That's number of Some in cetera, you to the massive I terms number terms customers? those are ones yet. do primarily they SaaS happen they model,

Jeff Rosica

on good, good a both. question That's

the we're currently we product an That all, or redid XXXX, Avid product. like that be that's NAB at kind Connect, and will we available, product, quarter. the the on products reimagined that all-new the of Composer first new products all-new -- in So late unveiled Media targeting of

So a of growth in get most bit it. from that we'll benefit product's in revenue second the of that half of little But potential. QX the we'll see for

I'm have SaaS product -- in On the will -- that for to trial the try out, before they go start people second period been product get a paying for moment, second specific to the half for but to for to of because offering in your actually it. going offering also. your start available to part the made question It's already revenue they a do generate

going I start say because a be second this, to to revenue we've for So is grow gradual revenues it's take going modeled grow It's to it will the explosive. half. to in that the don't think I building. to time

which to subscription like bigger the build. half And to or revenues, answer second leads they your -- half SaaS Just second moves. my my of time is take of to that the your question,

industry hit the be massive doing explosive. you they could It too migrate gradually, see media we'll be large over, moving number a will, good moves they most flows customers small at take and it's projects in of prepared revenues continue moved be migrate already have that is started of are working approach actually because and QX. to J start we've if second the doing deploy, a we'll already those fast, impact too the went been it of those aggressive revenues not see mentioned of to in half As is We've these film and of those avoid to with thing and workflows strategic that studios kind see -- with honest, of the will as -- going I'll I scale to this, to kind Because time we'll hybrid, for Again, a remarks, over a cash to a the kind revenues, you cash flows. company. trend of some curve to to which, multicloud customers. continuing, see of This our businesses' largely of those their will they well, several on grow say of think, revenues cloud. XXXX. I into gradually, and But

do our from deploy some So gradually. lot early complementary we're we're on of are it's not the especially take I than and ways -- there for really adding also hybrid will business. offerings, you, today, stuff away different I go you looking in we in on, to We're the industry And go add to services, think even us, a services early I'll cloud the will remind that think SaaS Orin, can on-prem. -- though we the days, SaaS do focused

Orin Hirschman

features SaaS And overall, follow-up. much revenue the better, by not ultimately much net-positive? on the on that's come that on just a a out for can started actually those day customer you side, X, add maybe adding but increase Can so quick actually net-positive you to one

Jeff Rosica

is that, that Obviously, a done We've big lot can. be a difference The that a when all, sell there we cloud the the except that, just fact and lot for licenses a storage, that lot a of the to not of a licenses revenue modeling between really, of we're opportunity. software hardware we moment. selling in the of subscription sell cloud SaaS hardware. which There's of really anyway, hardware go for we subscription. talk about and Yes, to But won't first in that cloud, won't our solutions the a today, in today regard. I'll moving a

and So out that get they're really cloud in controlled services things environment. you a and of I/O,

And selling hold model. a the selling is to the so and The -- that the we're cloud licensing advantage building, take a the SaaS that entire as people, that part We're obviously don't revenues network, infrastructure, service, will when all a from subscription SaaS a we're selling remember storage, all offering today. air service. is infrastructure conditioning. those of we revenues an all-in

I And bigger so Avid think tool storage, so collaborative line also it has it, does on-prem cloud for I from only storage, have, materials, that for create to to it a revenue. top build a to is high-performance call we're Avid today. hardware I'll think, move bigger a storage that will be where opportunity, a there what,

that of us all IP than share a to cetera, to archive, big Our and work today. that with Microsoft of leverage to gives allows wallet customer et and us storage, can into cold even opportunity we bigger line, expand near a number levels a storage storage, of

that wallet the medium-term bigger we long-term or is do of a get. picture So think I most the customers picture for share can

Orin Hirschman

again question, go one then just last or then you. up if And with I offline queue I'd may, just quick and

customers if could of competitors one nonpaying mentioned of that of are of of of total if do convert the Avid in it competitors? kind before the you there's to and terms number of active maybe higher that side a the or I end the know mentioned versus anything actually number the customers SaaS can and and you've don't was] downloads on substantial. the and from You increased had more what Avid provide paying taste [pay both more of

Jeff Rosica

Yes.

will that first under Puls, are There's I a Pro grow. users Composer, much have, leadership million on team, X.X that in focused Tools, we Sibelius is will Melissa exactly. continue -- developing products marketing Media of X really to there's the the CMO, our So and we to a opportunity and is mine the between a marketing I practice a the standpoint, standard, that I the about know really that of I'll is, it which customer a say really nurture practice, with them opportunity almost the able to engine our demand-gen for have say, this, at aggressively conversion think to -- we get really be But make going I at we're top-industry there But journey and this don't great And would the through lot paid. best get bigger shows opportunity say going more that big is better. I from year we mean yet way dig. efforts customers because same don't passion those industry best today, paid next base, to and that after averages know be a after were even that year. and more they in are the today, going today. as our would we'll a already Melissa even there there's to of later that thing, conversions

Operator

from question We'll Capital. next [ph] Odeon Michael take our with Stager

Unidentified Analyst

for maybe are margins storage Most of one actually me. just it similar, like piece. shouldn't a would see of SaaS the a the been a little into convert if asked, more or sounds bit kind respect And clarification but And of percentage the It to of storage, SaaS that's with what downstream, they thinking storage higher? we model? were you them be business have

Kenneth Gayron

moves model, the by gross a margin. storage points percentage XX it of in terms XX Yes, magnitude we with to typically so SaaS will gross our margins improve, to as -- of

we'll believe than the to on today. SaaS bigger margins So we think will because integrated start higher only a wallet, we migrate the margins do get solution not share of storage are our

Unidentified Analyst

you a that, to to accounts something is and do potentially to then, this migration? could existing that accelerate target to follow-up kind conversions of actively more that partial And a

Jeff Rosica

what going do. we're to is This Yes.

I Avid's it Cloudspaces. was workspaces. the way what behind today, they and collaborative The is that, a what best tool, could strategy this in way So explain storage storage [Michael], works call we call Avid this, the --

allows and assign and cloud cetera, work, bandwidth who them. with customers, than storage a maintenance they capacity, not, storage customers software to download and additional storage X,XXX their is every customer have you do et the groups give update in part is to for already immediately cloud Azure not workspaces assign Cloudspaces them date, of Microsoft program. almost why you mentioned when you to and update the And so download, and that basically because run maintenance their that's give them you it's capability that workspaces which installations We're what more it's -- all that near to And to meant bought get the they a for Cloudspaces, NEXIS try the them as most archives. plan, we allowing basically to we've software line they have so that customer all in lights those expansion. a up the environment start NEXIS, their done I a And

the near as to Microsoft help want days. X then they get company have a And just beyond a what we for free started us show park really use literally lights have can software, -- of and for they XX And stuff archive first product given download step and cloud Azure the easily it the it they they when So available and with to the line partnership the to in the is first do. terabytes they team, people decide up people in our very today with how efficiently. of of storage actually

to for it which archive strategy hopefully, it, then an really, the it try give is try and So our additional us piece. start Cloudspaces, consuming and people will to get for stream the love revenue free, NEXIS

Operator

follow-up Maxim our take now with from Group. Chokshi We'll question Nehal

Nehal Chokshi

year-over-year. correct? $X was XX% is in press quarter, release, off a or So subscription said March the up that the Is for was of I reported it million revenue believe that that so XXXX

Kenneth Gayron

correct. that's Yes,

Nehal Chokshi

that behind it q-over-q be from imply $XX or the down million the from reason XQ. then that? And What's would would so Okay. the that

Kenneth Gayron

Yes.

the subscription, fourth there's holiday Friday. promotions Black quarter, in So

in impacted in by didn't the typically, and quarter line first big fourth revenue that. is those have promotions, the with quarter we a subscription the promotion So in

the So it -- the when a a reason or XXX, or have roughly of standard, decline. deal the you consumer for Also, deal, you an big enterprise XXX book large that's quarter. XX% even the under in ASC

revenue just in in being resulted that there period. fourth So the to quarter more in those were recognized transactions due the promotions that

Nehal Chokshi

But q-over-q. subscribers the clearly, Okay. up is number of

Kenneth Gayron

Yes.

sequential to So see we're growth. a It's continue the challenging just the sequential. and QX more rule Obviously, promotions in on little comfortable. the it that accounting will the comparison with made

Nehal Chokshi

that the your per that under reflection or that here. what maintenance that continue the given expect not of necessarily given the to which Is significant is been has hardware, by seats revenue of particular it past stabilized reflected increasing fair -- reflection to happened a what's And Would Understood. an there? it that's item? be XX X- pressure effectively a XX-year the on you've of then continued Okay. generating the as discussion hardware characterize would life cycle years, X seat line total number be declines But topic large the fair you and a that maintenance been backlog is this to over been decline not to would fair value of that reporting. revenue, that of has increasing maintenance say is scenario, to the that a assertion have historical

Jeff Rosica

because a revenue -- look because, not remember, don't I at in noncash. you you see really the we at think when decline, there's lot when that declines now Well, completely the look

Kenneth Gayron

noncash a piece. was There

Jeff Rosica

marketplace you're and always subscriptions. more billings licensing that is We will on that's there enterprise subscription, standpoint. things, we will -- look of of going put platform years going have move subscriptions what generally to partner our now base to that perpetual from again, as see leveled to from the line. the at going from MediaCentral that that's is a doing pressure we're have installed number X and move say that have put licensing the to ago more And doing, at on I'd that in the the always off that,

also renewals over on now pay side said, the which the -- On ago, -- same, Ken that the conversion dealing the have outline the which product seen, of though, Ken low maintenance hardware very price was sales today having, as line. were with to we the we're hardware to in sales and for from is you've we're going maintenance. that And putting item integrated a for year growth software doing side, alluding we've earlier, as back product as to and the equate on strong been

that have going most hit of at mix say transition, look aggressively. there. that pretty the a pretty our if are big be just decline us. Ken you situation at parameters I on going to and through there's in going for as way back that avoiding to said, managed So all kind a dynamics through companies J subscription that curve We to win getting the different this of this. smoothly, And year of looking a is maintenance so-called for they flattening

Nehal Chokshi

number Okay. and do distribution then quarter the question end the for is LTAs the Understood. partners? And customer my March of that and final end at where update you of between have an stand on

Kenneth Gayron

Yes.

value. of roughly $XXX have million in enterprise million terms of and about we That's probably in say about there's to in $XXX terms is in of say, And of number, it channel. in terms $XXX value, number million, XX the enterprise of agreements, terms -- the In kind we SPAs. of agreements, and I the of have the want of agreements roughly, is XX

Jeff Rosica

XX. about Actually

Kenneth Gayron

XX. XX,

Jeff Rosica

Yes.

Nehal Chokshi

XX.

the Okay. in a quarter like strong of LTA terms SPA the It signings then. than sounds had

Jeff Rosica

generally was it -- actually they No, good. pretty

a including CBS also strong enterprise had agreement, We News.

Operator

question-and-answer any session. Mr. like our the conclude for Rosica conference closing does turn I'd to remarks. additional to over That back or

Jeff Rosica

look then, a just reporting the forward that for call. us great our we tonight joining earnings Until on on we've evening. say I XXXX Thank I'll thanks again. everybody, our gone we're so know I just call QX long have you, today, when next -- to results. QX enough,

Operator

does conference. your Thank today's you. you Thank That participation. conclude all for

may You now disconnect.

Avid Technology (AVID) 6 May 192019 Q1 Earnings call transcript