AVID - Earnings call transcript Q2 2019

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Operator

Good day, ladies and gentlemen, and welcome to today’s Avid Technology Second Quarter 2019 Earnings Call. I'd like to remind everyone that this program is being recorded.

And at this time, I’ll turn the floor over to Whit Rappole, Vice President of Investor Relations.

Whit Rappole

Thank you, operator. Good afternoon, everyone, and thank you for joining us today for Avid Technology's second quarter 2019 earnings call. Rappole, Vice Whit and Corporate is Relations. Investor name Avid President, Technolog’s Development My

afternoon your Rosica, then financial Financial followed are Officer this of of Jeff me With Jeff our strategic a provide questions. and In prepared time overview Gayron, by a will EVP. review provide and business, our results, Ken our will and and Chief and operating Officer our their for remarks, Ken President; Executive Chief detailed

earlier this slide our release presentation limited a and on we will We to replay a earnings issued available call. website time. the afternoon have prepared and available a our release of presentation refer website on our ir.avid.com, are currently and we this for that at be The call on this press will

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

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

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

or from Actual these occurrences future forward-looking materially differ results may statements.

statements, today year as our December uncertainties risks some of press XX-K for the release including XXXX associated issued For of and a discussion our more with XX, with forward-looking these see key SEC. and please filed ended the the information,

over CEO call our With President, for Rosica, remarks. the to and his Jeff me turn that, let

Jeff Rosica

QX constraints joining slight everyone from which and headwinds due Whit, thanks to did some face QX QX to our into thanks results our chain earnings were account noted of transition. revenue our that lower at They end show Avid’s our we in us taken in call, for outlook the our guidance. cautious bring today. supply Well results did in

spite in the with challenges, are our many exiting That have own line in half we said, than is and second fully we pleased I been that half, internal first these of planning, better in entering the years. positioned Avid am

good also Today, and along operational strategic the discuss on Gayron, new Ken with CFO, success half average in with for the trajectory full-year. and momentum We'll and and and partners. product a introductions have second factors will indications business customers in plans, performance our of the the execution on initiatives, major our us progress consistent review

my impacted yet with encountered confident change longer-term is headwinds factors results, trajectory improving nor QX don't we what The that these observations. the our start view let's we slight full-year XXXX. So quarter of as the during revenue see we're company our the

both metrics, revenue free but In see fractionally. in and net QX, margin cash year-over-year, share. per adjusted up fact, significant income growth flow including only and are to year-over-year average financial key EBITDA, In continuing gross were we

kept Towards we video and face and hardware did audio the I for just end of mentioned, certain constraints due our to mix, because order QX, supply chain some product of as which products. orders transition, from timing fulfilling us

agreements and performance subscriptions give continued Our confidence long-term in strong QX new the trajectory. and during extended software us growth of addition in our

million savings basis and continued to our in We achieved Savings Smart the annualized $XX an from have as also of on benefits OpEx QX additional realize initiatives close.

as of COGS we chain forward savings realize the in are the benefits to $X transition. remaining in We achieving supply looking our XXXX million

in manage ramping up forecasted up We'll the our Asia Americas. create demand. bringing to lines prioritizing carefully and demand some new up. Avid on partner have will and we Inventory from partner to we as to chain at the supply has exit that audio presently are former hand supplier now completed are ramp the constraints we in our bridge the according process new in as are this could certain we products production seeing strong production

would we such don't that achieve can disruptions a encountered anticipate if reduction outlook be full-year short-term targeted are any cost basis. that change While savings starting inventory our have any extensive encountered typical on the issues are we and and in transition, undertaking when an to near-term our in

We've the their work of their bringing disaster recovery. own significant also including large progress, work support workflows and continued remote to in backup progress our make in in archiving, studios into cloud, crucial to initiatives, efficiency with media editing, companies and

for major these platform are discussed cloud. cloud-based solutions NEXIS which cloud customers the quarter, Microsoft the on and include MediaCentral Azure running our referenced As last storage,

as small While the to other year revenue half the we of bring to workflows projects the in to ramp second media these revenue looking from forward these QX, beyond of the these was in continue into cloud demanding and for we're more the clients. and up

and Additionally, with is major international agreements multi-year long-term partners. most the sporting organization of television, the Avid produces radio, customers recently the of secured renewal agreement events. these has our in and of watch Among with coverage the additional digital live early July

support provision which last XXXX services to between back Disagreement until our XXXX and international continues and started it in capability relationship the production a to winter their summer summer successful of and largest signed new with are events agreement also - QX products. purchase also Avid a audio in globally. the broadcast music strategic of and sports pro that retailers of Separately, one Avid U.S. Avid organizations,

of was our to our cash in a our software We and year-over-year and storage. including performance. Revenue flow. continued turning XX% changes meaningful and products year-over-year subscription live, benefited on growth making the hardware from are that QX. basically profitability which believe overall impact up demonstrate Now certain from It was and continues plans improvement business, flat strategic into quarter Avid in QX sound

constraints. Revenue e-commerce in grew activities chain impacted supply was E-commerce and discussed quarter. year-over-year nicely as in the and subscriptions make up contributions earlier, to However, continued by software from QX. slightly XX% also revenue major was

QX, subscriptions continued surpass Software is strong end XX% paid the which of up at and year-over-year. their trend subscription XXX,XXX

improved only margin Gross year-over-year. slightly

negatively QX margin was our during had During in the impacted we call high large which not as QX margin QX from as discussed an repeat expected. gross mix storage to adverse deal, was

certain lower hardware and video audio While margin in products stronger were quarter. the

the shipping overall We're margins happy normalization trajectory chain and mix of with in improvement to higher products, gross additional the realization second supply positive margins of from margin half new the savings of see and during our product expect transition. from

strong growth had of initiatives. down operating in Avid quarter. the net a delivered income QX XX% adjusted were expenses significantly per our We success the year-over-year positive improved EBITDA and realized profitability our with as due Smart in share Savings

cash improved delivered the to Finally, thanks the and cost quarter versus strong flow execution the overall, year. during generation structure prior improved we free

Although, bonus it’s XXXX remind Connect NAB payment our QX for the you events. normal well with as cash show expenses flow weak and as seasonally included and

a flow on of net we're good metrics free and with income revenue, key EBITDA, per Overall, consistent trajectory performance share. cash improvement adjusted the in financial

coupled we year of last improving significant that basis, sales enter an the more the exiting on achieve half our pipeline guidance stronger Additionally, as and efficient metrics. of all XX full-year half to showing first we're a months a with this seasonally these trajectory second on the we cost improvement structure. encouraged We're are in

later new HX to the benefit half and the growth we products that realize for begin optimistic remain we as expect we drive forward, of second in beyond. Looking to

also anticipate realizing second benefit the completing Smart the initiatives our fully We Savings in and half.

a is ramping driven the Also, entire subscription up agreement next our focus model to in Avid on and positioned OpEx profitable portion is realize predictable now the complete benefits revenue COGS growing by intensifying built and offerings The chain supply delivering essentially lien months. our consistently from long-term strategy. recurring and growing over a the we're well base financial on several

Importantly, solutions in music. Avid's pace product strong on introductions for and audio strategic and recent is video several innovation pro integrated software accelerating with a

Media dramatically Our to strengthens video our TV leadership XXXX editors category positions and capture and generation film creators. better us Composer emerging all and of the new

small cloud-enabled collaboration started connectivity and and news, needs organizations seeking Both MediaCentral XXXX their greater June. addresses that next-generation in for been multi-site post the medium products software sized these platform, Our late have media of of delivery operations. to sports

begin and products, reach our of higher-end bring SX, smaller half, Avid the which within creators. studios and the of the mixing In category-leading SX Avid audio new Avid second systems the power shipping independent

well media globally Our by pipeline all creators half very been second received momentum. on we're already experiencing latest improvement the new based introductions have and for the product

product In heavily shareholder continued Avid's innovation in operations driving optimizing focus and were sustainable profitable support started. deliver greater and growth, technology to and getting order just really value more our summary, that thus and on to

financial let that, the details QX. turn over ahead, Go provide So our to me to Ken. with Ken performance for on call

Kenneth Gayron

everyone. Jeff, Thank good afternoon, you, and

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

business. it’s at new to the those comparisons, our year-over-year impacts For of seasonality look sequential Avid, so our to comparisons to assess important performance

are earlier, on As performance. progress we Jeff financial making improve to outlined our our substantial initiatives

end While chain at supply brought lower we improvements to transition adjusted QX that EBITDA headwinds to our and certain free the see flow, we enter a faced cash in our first QX half continued during of in our and year-over-year related our results revenue results our guidance. half line guidance. With second XXXX that annual for said, strong our our to with we achieve foundation plans with XXXX were

details. now into the Let's get

year-over-year. was fractionally income $XX.X the revenue GAAP quarter to the of Turning statement, for $XXX,XXX million up

Media Composer, in our business and subscriptions in and strong had e-commerce We Tools, continue quarter to growth Sibelius software see MediaCentral Pro and our for good business. perpetual a

live growth Additionally, from with subscription. lower related perpetual maintenance but audio we the business shift we revenue our saw our sound model business in in our to quarter had lines, our continued in favorable product to

offset is XXX improvement gross quarter. Gross quarter XX integrated by from adverse license margin margin QX hardware to maintenance basis up was The and points product XXX in the software mix our during our increase and software XX.X% basis in point year-over-year. margin for basis decline the point due

half. favorable moving a normalized supply see We in mix chain transition our expect more to more second forward in gross products the from margins

improvement expenses the XXXX. from expenses in million The the Operating that for of began resulted Savings operating down in million the QX realization were $X.X $X.X quarter from of from initiatives we Smart primarily XXXX. $XX.X third quarter our million,

Through million have targets operating last we expenses set June annual savings year. have year-over-year the and realized XX, $XX we accomplished operating expected of savings largely

expenses lower operating XXXX. of continue these to expect throughout levels We

QX operating in XXXX, $X.X Net to the the X.X% points or EBITDA income due from from in lower $X.XX per quarter expenses. basis year-over-year, primarily for up to $X.XX $X.XX $X.X million margin year-over-year. of improvement primarily million of in was QX Adjusted Adjusted was operating XXX a share XX% expenses. EBITDA up loss XXXX, up increased of

XXXX, the Free cash of free impact cash QX was bonus cash to million QX of XXXX $X.X the QX second in million compared $X.X XXXX, in have quarter of second excluding would quarter up payments $X.X negative flow in million the year-over-year. been $X.X flow XXXX, in million $X.X XXXX, negative million and of in $X.X million

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

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

over our goal LTM of are We revenue to growth adding expect focus to three the in our and in agreements. recurring on increasing reaching time XX% seeing we revenue given reaffirm new long-term recurring subscriptions next the two years. continue We

driven million on $XXX lower agreements, the long-term margin maintenance from higher second revenue. the year-over-year and quarter, slightly by was at focus subscriptions our to end strategy software offset up ACV of

strategy agreements plus our to given expect long-term growing business, continued more the subscription in signing maintenance of ACV see We revenue. towards time and stabilization growth our over

was they systems. to lower of as impact for related upgrade transition our the as software to perpetual certain from as storage subscription well maintenance ongoing in customers maintenance products decline from their the The creative

catalyst We revenues of maintenance remaining stronger provide of integrated during business contracts expect should that stabilized to renewing. start started maintenance the is these and XXXX second maintenance as a XXXX our software as in quarters the hardware half

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

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

over The and subscriptions. licenses gross by maintenance points the growth the XXXX and second QX, basis margin driven for XX.X% was during quarter, software XXX up

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

X% called line. the second revenue also year-over-year we software to in revenue Moving million product. up Hardware Hardware our of and of revenue in had the and contributed the which strength $XX.X software, integrated XX% our live-sound integrated the of quarter. integrated solutions, total quarter, on next

quarter and integrated and margins. of in mix QX, the lower prior attractive the mix adverse combine product gross margins from the These sold basis generated was higher margin XX.X%, software, hardware period. from due high-value, XXX versus solutions QX, in high-margin solutions, point In which with hardware video hardware with QX, to XXXX XXXX, down audio

software the remainder that in products a Although see benefits result QX, mix; second, gross versus we third, margins gross in in supply introduction products that normalized new margins; in in audio a in have improvement transition freight the of hardware expected QX, XXXX margin were from area and overhead. in XXXX, and and integrated new expect to cost XXXX of video one, lower result of, this as more XXXX to in will reductions stronger chain vendor our

XX% quarter, our comes gross from Professional strategic of portion selective up balance on. which was XX% in as professional business million we in we are a the in down professional more are XXX QX, the $X and second that smallest points. of take services margin revenue basis business. With said, revenue services, services The our professional services year-over-year is in

June of $XX the June had At XX, we use from from XXXX million, notes. of our XX, cash $X.X repurchase convertible primarily to cash down XXXX, million

credit excludes cash vendor. that June million chain the of $X was used to former restricted issued our supply balance at cash a cash XX of including Our collateralize favor of in million $X.X letter

flow vendor back discussed be QX is the from as of in Avid. during XXXX. will exit above, this free in completed which July and quarter, seasonal the free This cash down expected balance this was cash cash in for point and received reflected as the XX, is sheet. the negative we we our unrestricted $X.X million balance cash March from Cash low As our we QX flow million $X.X

quarter We ended $XX.X business. in XX, $XX.X million the up growth of XXXX, with June accounts million second signifying the receivable, the from

in days quarter. XX to at XXXX timing the of is the later DSO XX, Our due June billings

XXXX. back DSO expect to our We to into mid-XXs we’ve as the normalize move further

the the $XX.X $X.X to half The remaining second as the XXXX. the at completing June elevated inventory the of chain and we million transition the supply end million as we inventory prior decline expected was XXXX XX, burn Inventory of off quarter, levels supplier. are from remains over second are up

was of subscription Contract assets from in the at up $XX.X a totaled at business. Deferred quarter, XXXX $XX.X second end amortization million million of XXXX, in at down million XX, million from as $X result to the XX, June June our the XXXX June $XX.X growth million non-cash of revenue due revenue. XX, $X.X

end long-term backlog committed up increase Contractually backlog QX, $X on of end billings was $XXX exceeded million year-over-year Contractually committed new our million as backlog QX $X was from at the of agreements. agreements. the down million from

contribute forward. the mentioned of contractually Jeff We will the that been agreements the backlog pipeline third quarter earlier, long-term strong have which ones new expect signed during including to already going increase committed

the down repurchase notes $XX.X term May, from additional At from the XXXX to end refinancing. convertible was long-term due June XX, XXXX of the $XXX.X the million, proceeds debt the million of second quarter, from load

were $XX June reduced notes as XX, convertible Additionally, million due the XXXX. as long-term XXXX liability as current a of reclassified by was debt further

reducing total to debt previously small tender These completed are notes we million result we XXXX our in interest loans principal mature second our increase $X due principal $XX while during As a repurchase disclosed through transactions the in rate. value XXXX. about a loan the May the quarter, that of term million in of additional refinancing of convertible offer term

At ratio the our covenants. with have leverage cushion and quarter, the required we compliant end of our significant were with covenant

in on notes additional sufficient mature, remaining cash revolver they free the XXXX convertible million cash of June, We $XX.X expect undrawn that's hand plus to we and capacity million expected. flow due retire XX have in when

comfortable maturity. we level with that are So of

chain second XXXX, As quarter we we the that transition we supply are with transition completing finish we the are and risks. inherent said of contains making. With that pleased progress are the

So in quarter we appropriately conservative third remain our guidance.

showing million $XXX to EBITDA quarter, In we XXXX, third third be of million. year-over-year $XX.X revenue to to the $XX.X expect between between quarter million at be we $XXX midpoint. to growth In million, adjusted the expect the GAAP

guidance. annual reaffirming also our We're XXXX

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

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

$XX remains Our million cash to XXXX flow million. free guidance $XX

guidance clear per of Also, we XXXX $X.XX showing strategy income are our net business assuming full-year shares $X.XX, signs share adding as is for profitability, improved non-GAAP outstanding. a XX of to million

like call to commentary. With the turn that, I'd for to back closing Jeff

Jeff Rosica

Actually, I think the we right. turned operator, it back to

Whit Rappole

Thank you. prepared our Actually, that concludes remarks.

We are ahead. now your take go happy questions. Operator, please to

Operator

first Samad Instructions] And Thank from you, Samana. we'll hear [Operator sir. Jefferies, from

Samad Samana

for Thanks questions. my afternoon. good Hi, taking

Jeff Rosica

Samad. Hi,

Samad Samana

Maybe I'll for caution just transition quarter some risks be the you that it start-off thanks did if But could around bit us and more if it's with on to think helpful can really I to color on maybe guys little there a and us click understand. chain supply understand for we double it. last all the

think risks product as are there's to maybe you partner? little new legacy highlight related partner, So no Could more that you risks what with about the well? the bit but of a you half the the as just risk as your portfolio ramp what about of more think as would have we might maybe with helpful us for the that and back year. parts associated be That

Jeff Rosica

Yes.

I'll one. I think take this

we QX new risk any risk we would and year, bring in timing made half. the when the totality. comments look could think Obviously, But made. the we be of there as back in overall that you second half lines. why our risks up think back I So half there's today the we I production foresee at – see characteristics don't don't between That's we QX some

another. to new really talking that said up that, things risks we encounter you handle about inventory The pretty call to but as some supplier supply can built one before, lines up, production we transition it's don't And as we've bring we're what only from did in really the I is we them issues, could to to the have have deal with. product are normal chain.

audio be strength to honest, audio we is performing than we importantly, But expected. more and forecasted products our better

will ultimately clip put audio good on on it inventories, a selling we So such are the pressure products. at because

July moving on we we'll affected in all it And but the good But products, and to are That's we the only still products. trajectory through be our between manage in issues audio, August. it's managed why over products second June, half. delivering any being audio not that confidence the were and it guidance. got we've are certain will audio see – full-year our That's basically lines don't and

Samad Samana

Okay, And to numbers related, or great. to question subscription a noted the customers about – that as maybe for then of more headwinds you taking maintenance, transition the think then Ken lower things were that maintenance. financial and I you a there couple is but some

the Could maybe you of the or we of that think magnitude understand contractually the in those as should And help subscription, start see the to too? we committed then we just metrics reporting? the is backlog transition Company see entity that about that us to where should number benefit in

Kenneth Gayron

Yes.

be had and we second is maintenance shift stronger down ISIS from sales. model QX in said from $X drivers on going to perpetual of versus the approximately That is to we've to XXXX. plus million maintenance better business still one that for of performer was we subscription half, to a XXXX QX us NEXIS. is reason revenue move So product The the that as the believe the leading

is the tailwind see in stronger certain performed for first last that And areas. a year well the be as business renewal starting solutions as also overall maintenance over up rate business. stronger free those for and has maintenance our to those will products come with comes we're renewal to year, that volumes, integrated us up, The

business, in I revenue two and the tailwinds say will better those second it have be year. will us, would maintenance the help of from our half So to

Samad Samana

about your And think about new Should then type squeeze I How another of or could product maybe months in product maybe Great. one. that a think that products six the of to the over product And and if duration? longer strength moving we cycle, storage could the the the should cycle from as we refresh percentage products? XX-month understand released? kind you us then is you of help in new uplift what

Jeff Rosica

Let we it. Well, on answer I'll How mean you you revenue launch say try the or mean you so to announcement, awarded. product cycle and our When that. cycle cycle, me first see question? the when clarify between do

Samad Samana

Yes.

impact business. release to we the to the from to So when start see the

Jeff Rosica

one on obviously system, to does product, the delivered because is, enterprise products, we've that kind get we've turn we have the actually depends which orders, that got to some on germination few revenue, a and then it software So, like where time. of it on before the take it months revenue, on to the got can when MediaCentral becomes

fast project. – a say as it on I'd some and three things happen take things as as as So two can or can big long year

Though project depends. it has So the yet. product going though been even a wasn't released on, work there of lot

So deliver starts results in I will the MediaCentral think gradually results. mean new It delivering it I will. second MediaCentral. half, the

On will right Media having start in that half. away Composer the the results new second example,

channeled. On hardware that's because heavily fairly converts quickly to it products, revenue the

as shipping, So and taking product channel start them other the delivering as and to delivering customers. we soon the start delivery started they

there So ramp within can it the is products. up quarter, about can the fast churn we new on how really production start the

Samad Samana

the I'll then And one hop and Great. last out.

seen. usual from macro just from as a customers? have from or change been as in level far of a that there's a least there's of curious in either we've software it's there's your going you've at high on clearly as as noise a terms little earnings at any from was what just if behavior business perspective, lot view today a or gotten if customers caution Just mixed any I'm macro bit increased feedback

Jeff Rosica

any I say wouldn't it's that different.

lumpy quickly. the before, as I those tools doing really a creation is pretty are and said people we’ve along, enterprise I think video well content the it's bit much we've The quite customers said really business like think – creative, we is all pretty quarter-to-quarter. adopting

about it’s So on I don't think trajectory there's the in that, same. any change

on plans, in and a and with with our public at who us dynamics our they actually talking strategic can social was We about having of product benefit very week the couple looking facility and media. last about because are on dozen this talk I market summit we’re customers from this

like see not promoting that So people it's we’re wouldn't it.

so wouldn't what from last pretty fresh, got about from significantly say our views talked a we've couple the views. of sample our anything our I we've is And quarters. and has good in of customers feedback Melissa pretty think I changed

Kenneth Gayron

Our lot software benefit in and action and the that's base healthy that business we're is prices growth to very we of Samad, see a user will to continues actually up second the XX% reasons also in demand obviously why an you be us over increase seeing the that can and one in of the half. took

Jeff Rosica

Good point. for Yes. Samad Thanks questions. your

Operator

Next Group, we from Chokshi. Nehal Maxim have

Nehal Chokshi

Yes. Thank you.

typically to. you're think and what September seasonality us quarter I So you just seasonality? that what that the remind seems of are Can drivers there's guiding

Jeff Rosica

on so At you've the half through all managing announced products good Well, both we’re Europe. but in got summer a are token, lot so benefits obviously our bad. our headwind, I of there’s a you've that products. tailwind in lot first of I got those of summer the and and QX in mean, side, mean, Europe, same products, not from them, it's

media have help and it clean of half then us us European in front of lot September. enterprise because we've of to a in which us and in unveiled month actually NAB bring our it. And Convention, Europe finally, we in first the it customers the put stuff in the Connect to the allows allows does a big lot of September, IBC

we both to pretty and but is much know never it's is our going QX the to So business Avid. seasonality be going big is goes it again, way, seasonality, always that very a It change. ways, quarter for of obviously there

Nehal Chokshi

Okay.

a I you you that over, given have September see supply ask June I produce And why and would the guidance quarter. now at quarter of softness in the to seasonal the above supply expected the that that that September June quarter seasonality level bit due chain transition would guidance. that in is saw little is chain that from quarters, I So think reason the typical transition the

what out that's really drive to I'm So trying here.

So there? potential that on any color concern

Jeff Rosica

No, transition is we've returned just I Asia that out is fact, the in the clarify. even mentioned One know actually I in what credits there other been want partner point And than complete. of of released. to letter our Ken that

$X.X on QX. put our QX that QX. in be back July, when it but our will sheet we million we'll in be already balance, balance back We received So it report in

ramp up lean of the move what done activities. the several and the chain month production supply to a is that's So

still we'll is bringing activity production. there doing, So new be up

As I mentioned before, are just the we're on - all said, quarter. QX. the continue supply and before them. were current to to But be on We're deliver right going our cautious guidance good we be our trajectory we're we we as going still as to chain feel about on to full-year

Nehal Chokshi

from March year-over-year flat where you saw already a acceleration I that a it. significant quarter And out that XX% then Got software prior Is behind narrative was it that once relatives Ken pointed understood. up quarter. we in very there good license the is growth acceleration? revenue

Kenneth Gayron

Yes.

had the announced which the all Just Pro June. nice subscription side, areas, across uplift the – new more side, nice subscription growth a NAB Composer, in at and Media the Composer and Media on was in Sibelius Tools,

about good the very growth look as we the excited we're in half. related at second So that had we that And to a perpetual also new MediaCentral, release. side with

really really versus behind the growth So the QX that's QX. those color are in better – the

Nehal Chokshi

to progress guys talked new significant though, terms a then you you current you that signed, quarter your very got long-term in color in maybe as and correct being us Can perhaps A) pipeline already your as, what's B) far contractually how some long-term agreements there like sounds pipeline wasn't agreements. of the committed in it. Is that about, give It for And have that Okay, nice relative big backlog? is

Jeff Rosica

better share bit off Well, I kind quarter, I the could a we don't with a year-on-year. mean pipeline pipeline my every the you is top if of than know the head, but track of I ratio

So the comfortably would better. I trend. better. pipeline what say a like from is We we're seeing

not agreements noticed, of commented I we like – did July. about that the renewals did one of all in We get of I

bookings. the on We're the focused deliveries As company. metrics we not the said before, on we're the around and focused and really other revenue really

for the signed We that We to think from of for do the June call, was it's obviously need time booking team. sales I the to on the push when in be behavior want the July. bookings at because standpoint at the an business I the it early signed before shared good mentioned look I've and we we quarter, agreement, we also the renew look the In case about of a in as call from in didn't agreement.

in bad get We're them want stuff for this the see. ourselves ACV But contract to boundaries it as We not company. be time. place and to are quarter. making That's revenue But to we're get negotiations. saw We on uptick we a And in the incentivizing making we're putting slight recurring critical sure a progress. a so early. not using they

with. you saw we half? hopefully If down, bit of quarter. dip remember a focusing second quarters, last a an the little in keep happy We'll little uptick We're bit, this an on uptick delivering

Kenneth Gayron

having But results we NAB at guidance, at product forward-looking April, our the so of That's the new Composer LTM XX nice benefit through trajectory low end I Media show were releases, first look the June. both feel metrics, about of would forward. the talked moving I really June about we business. to when in say the close in annual good our a

NAMM products conference. new introduced were have that at the just We Summer

increases. We have price

not optimistic contractual in granted, improving the revenue, but growing. I'm pipelines Jeff are it's which on have mentioned, pipeline We that very

we we second and the half So about guidance reaffirmed. annual good the that very feel

Nehal Chokshi

of is that existing couple pipeline a more just follow-on portion customers or questions pipeline? is customers Okay. the of here. that consists A is that largely new One significant

Jeff Rosica

a give which but additional channel it. deliver our a customers, the of our is a of we customers, been it's its standpoint. is existing the the all same about upgrades I new new a above. There's all does company. No, new customer's project Its us new have its business lot a customers, that we with new The customers, from of to pipeline of pipeline new also the customers mean, lot unveiling, lot and lot percentage we're both. the business customers running were there, recurring channel of its existing not products

Nehal Chokshi

then these of Ken you mentioned prices. referred to? a call And products on times Okay. What's raise to couple the

Kenneth Gayron

This products Sibelius. and the These are Media Tools, is creative – and Composer on Pro cloud our creative-software.

Nehal Chokshi

having This Adobe is to creative raised basically for cloud. in prices response

Jeff Rosica

us, really at, them, was not a months Well, business forward. couple responses wasn't before the but obviously wasn't Yes. looking to move model did similar we they response it something

We very are get make to perpetual. to and subscription it trying people off also attractive for on

we And shouldn't all adjustments made the say I on, lessons based made, on that business. But that they're increases. just price some general those we adjustments learned

them neutral, a We couple adjusted, software went went creative our we see, those tailwind tools So adjustments. are I'm basically for down. few or down a are but of revenues it price actually, there of will there some of because the in

Nehal Chokshi

Gotcha. Thank you.

Jeff Rosica

Yep.

Kenneth Gayron

you. Thank

Operator

Frankel. we from Next Steven have Dougherty,

Steven Frankel

I'm you. couple afternoon. Good to a connect trying Thank dots.

you that So mix this and say products that about or in talk and bought talked coming issue around. two you're has you've hoping at QX, margin and moment? a it was new helping decline the the does cycle seen turn the storage And down storage I year that quieted the for that last about bottoms look a you maintenance to gross revenues that were year into

Jeff Rosica

No. Steve…

Steven Frankel

of didn't why year? the what's see the we storage QX. a between end lot in of that's and the high And storage margin now outlook for And

Kenneth Gayron

So me that. let take

first So first dollars in in the large those called was margin likely storage that that high of in multi-million XXXX, out was there wouldn't quarter that we a quarter, deal specifically reoccur. occurred the

margin So our as a slightly result, higher was QX. in

It storage a reoccurring, just storage. that deal the issue. margin on still but with QX, In mix we're declined, not optimistic

sell less you in audio, more was and which quarters storage more higher margin Some The and we lower QX – has typically product live-sound margin. mix did like QX. higher margin

related the and to related summer. the And businesses concerts to as that's live-sound know, the you

on tends also, quarter So for business. other elements a to on are that. we optimistic But storage bigger QX in and we're the the the but storage, second of half on be business optimistic all

Steven Frankel

the second storage up Was quarter? year-on-year in

Kenneth Gayron

year-on-year QX was the first was was up for about, it Storage actually half, up double-digits. yes, down, – but year-on-year up we're slightly

Steven Frankel

side, perpetual long-term in from early maintenance the to in comment for a the to shifting Tier you X Tier about impacted where by understand is I a was give call flavor Avid us kind the on subscription? core subscription. being but customer shift the there then And X of could Right. that

Jeff Rosica

is this Jeff. Steve, Hey

small That's production pretty be Tier level, It subscription subscription. let size say is in medium post me growing or to the That doing X, a it's too. Tier So of lot the on Tier more X obviously growing production X also enterprises. could space that is companies in companies. well.

We the more are the the a which X in attractiveness launching announced, kind team be a team we've second half, help will make which subscriptions, Tier offering, new of markets. which be will in which will delivered

said in really X customers as and big has – that was aren't space will yet. ready have have launched but started in Tier taken gone continue take few that we the because office into We've back customers there only aggressively to a for systems subscription a And big but that area, before, subscription. few as there more, we we our that we've customers few to taken few in in haven't a it, really mainly probably of enterprises a

Steven Frankel

Ken, didn't number I the out on subscription see And data quarter? Okay. sheet given in the it software a past you've this and

Kenneth Gayron

In just I to terms the user base? sure. want make of

Steven Frankel

number. revenue No

Kenneth Gayron

Yes.

we So earnings software actually breakout the with the slides that it we and license have side in is subscription, on earnings maintenance. do

make – IR the there. should be the you, We'll it's On sheet, sure data on for it Steve. posted earnings

Steven Frankel

be Okay. there, I didn’t see see could didn't it. I it. It

Kenneth Gayron

will the XX-Q, that the Within out, think coming I in be as minutes well. XX

Steven Frankel

when year, the proposition the in it in to stalled the your then we ACV of the that get – start running is should terms console of ACV half again? back cycle out. And growing Okay. kind Is of of you see

Kenneth Gayron

reasons. is Hopefully, by a the ACV first growing second seasonally for we'll is all, heavily growth of think strong. ACV driven and subscription I couple of half see

season of that's grow that us with because important the of is music point a lot music course second the customer, The our a for holiday time that is to heavy holidays. for

working the thought of help. what sign will that's also agreements year in near long-term at and the our of end of We Tier the SPA also agreements we're We renewal X that course high-end as to – anticipation is.

Steven Frankel

the factor forecast full-year? risk Okay. biggest And then for cash free to the your flow what's

Kenneth Gayron

cash flow $XX million. free is free at a I feel $XX flow. forecast. XX The On million very $XX.X basis guidance June, through to good million months in last about the we're cash

to conversion, in we products able the our that Given the that half we're given positioned the with like have, improved prior cost given better the going reduce in the the than free to fact feel be year. structure be new I cash inventory. supply chain and second flow will

think for clear the achieving flow the beating So and visibility a free not of guidance. guidance improve if the cash to I there's full-year lot

Steven Frankel

you. Okay. Thank

Kenneth Gayron

you, Steve. Thank

Jeff Rosica

Thanks Steve.

Operator

Next Instructions] Financial, [Operator we Hamed BWS have from Khorsand.

Hamed Khorsand

Hi.

weak of So first usually hardware year The the year. of off, side on the get last seasonally been it's second has the been of the you in then half this ramped business. and this – few the half the years first

much is prior years. half first The stronger than

So is what going seasonality this or the And from year? you're kind a is kind steady in half continued change of there performance? a second with be this that the in hardware are you trend this to a of seeing expecting

Jeff Rosica

are about continue we Investor As I it the all and that of we’ll around the the think Day We the creative and selling by process. portfolio is solutions talked expanding we've solutions, talk integrated said had – in our to around been way. hi we've before, back about Hamed

original we facilities. was the and storage to which as because first has with also as products of benefit expand as unveiled expand in And year live-sound put in a And we this remember quite concerts live-sound the late and the performing festivals big in year, well. really half a been that expansion, out we fixed we did that we those portfolio the SXL continue lot more last

with then and have SX. more And we SX solutions those the half of with expansion the the second

look encouraged products are as even chain at we're and near-term more to we're supply half really the transition, second foresee and maybe the see going I those how going customers look So next economic headwinds we we the I relationship even of We're now from the at it, there in think those by before. if very than what from contribute. full-year year, getting we were

Hamed Khorsand

your you the from mix has to could How revenue maintenance some And enterprise have then it subscription? maintenance of subscription? customers you like just go when switched into customer over much talk declined? about What's

Kenneth Gayron

Yes.

Jeff year. as today. we're kind big again, we're we to we're on we subscription. opportunities talk we'll say in would So move about working think that the people side, I said, – out, half earlier to on on second things the that through Those of – pointed some working the to be the able enterprise are as of about we're that have That days that

on subscription. about the from of talked moving are the actual we terms other we the on In the business to of creative maintenance side that the decline, perpetual was, things two still sides

been well headwind, in that's that's that so to on NEXIS from on move resulted also a So ISIS as, we the headwind year-on-year a as a maintenance. storage, decline, as

That said, Hamed on when we look maintenance. forward,

strong – had pointed sales. we've we revenue, as product you out, very to Our and started have product

Our drive result, been us fairly free, first year the more product a provide sales a as for tailwind year have over maintenance up we forward. those last come look sales as because be maintenance to that renewal, as for maintenance the will product strong we and revenue

reasons at carefully And sales forward. of a we tick on, starting the strong but up and us with moving will talked rates to looking decline tiers. did the we product we're we're that that also renewal for the about So the that, across help some here see

Hamed Khorsand

in you seeing decline customers in So seeing professionals? you're a because enterprise that are more individual from coming now subscription

Jeff Rosica

Our the subscription professionals. is mainly today creative

working opportunities. are or enterprises have in big to moving of We the subscription, we innings early some

part streams move So that will become more the as forward. company's revenue of we

Kenneth Gayron

I Maybe Hamed. add. There may confusion can be

software license, program. had an program So, come maintenance when didn't just maintenance media enterprises. Individual stream doesn't they perpetual a had or just we support from because maintenance and a annual come have creatives

of It part maintenance significant or product or just know sizable maintenance off big we're is comes not on but somebody subscription maintenance about over of subscription, – major, of And perpetual, don't not enterprises move any when of the media not big So the Avid. our moves We're if enterprises, right. of from they that really to losing of it's I enterprises. revenue their even kind off is any and perpetual the headwind all about goes subscription. on – off just to moving

Hamed Khorsand

that's plan short-term? you the to how remaining is payoff convertible question And do last Okay. now debt

Kenneth Gayron

Well, was cash back of a that the sheet. balance million had restricted. $X.X just $XX We we in got million

we've available to freely of cash. million So got $XX close

have have $XX million undrawn of revolver. $XX half flow second million – to year, we in plus expect We strong the cash of the

So sheet. the cash use comfortable and in I reducing going balance have that that feel multiple pay liability. very it I'm doing I sources to just to off.

Hamed Khorsand

Okay. Thank you.

Jeff Rosica

Thanks.

Operator

turn And at back things don't this from additional Rosica further we closing I'd for Jeff time, looks questions like have remarks. the or to any any like it to audience.

Jeff Rosica

thanks everybody operator, you, Thank for All attending right. and the questions.

confidence. So Smart of positive trajectory progress the XXXX the half a made Savings entering some as Avid improvements by encouraged in second and half on with we've operational heard, and initiatives has it performance our We're you've is the first exited to-date.

we excited about We're contribution new as to important and the make results laid second anticipate releases recent to an our which out performance the deliver in our worked half will also product deliveries, our guidance. we full-year in

report we our enjoy results. to next us a call for of joining summer. we XXXX evening and rest the the look Thanks, everyone. day of rest Until the again your in to QX everyone forward then, fall and Thanks have or today when great our

Operator

that joining and for Thanks our call gentlemen, today. ladies for again, concludes us. Once

You disconnect. may now

Avid Technology (AVID) 5 Aug 192019 Q2 Earnings call transcript