AVID - Earnings call transcript Q3 2019

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Operator

Good day, and welcome to the Avid Technology, Third Quarter Earnings Call. Today's call is being recorded.

At this time, I would like to turn the call over to Whit Rappole. Please go ahead, sir.

Whit Rappole

Thank you, Brads. thank quarter joining XXXX and Avid today everyone, third Technology's earnings afternoon you us for for Good call. My Vice name Relations. President Avid's for Corporate is Development and Whit Rappole, Investor Officer Jeff Financial Chief and EVP. our are Gayron, Officer afternoon this and Ken me Chief With Executive and President, our Rosica,

earnings In remarks, by We financial our and on provide results, followed Jeff earlier an business, questions. of our release of their then detailed Ken and call. this that our prepared review for afternoon, prepared time issued your slide and a to will we will we overview provide this a operating refer will have presentation

our The ir.avid.com, press replay will of currently available and on limited are call and for time. on website our a a presentation website, this at available release be

call, metrics. certain metrics non-GAAP During will reference financial today's and management operational

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

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

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

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

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

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

Jeff Rosica

today. us and joining Whit, thanks everyone for Thanks

challenges our well the subscription related we earnings execution Avid's announcement business as As and maintenance as third strength in I clear chain supply week, revenue during transition. saw the significant highlighted last to of our preliminary quarter, recurring

stronger are for headwinds the results, the While we our encountered profitability. quarter, improving than anticipated QX opportunity that we and in and growth we final within the enthusiastic in disappointed long-term trajectory which show remain

is QX our strategic guidance, in executive as along performance several discuss Ken factors last well Gayron, our plans performance QX revised we confidence with that and impacted execute outlook the Today, and in our two week. the our full-year in reflected or underscore in XXXX our for CFO, our execution. as Avid's strong indications we'll under-performing team's business primary

on with progress initiatives customers momentum partners. our operational We'll major and also and review

to on get welcome pleased note Board and we shareholders, under Partner way, at a While I'd like that our new as Capital. Impactive to Asmar, Avid's is Christian Director a largest Managing Directors. was last one of of Avid new Christian week

ability positive diversifying our and a to step forward This goal the is on and of the representation -- our in to continue Board expertise guide of of to help strong further shareholder Company having Directors. Board our the

expected product observations. Now, supply than smaller to transition to under-performing sales primary our leading with my were and our QX I'll begin our chain clients. Two enterprise weaker factors

the we QX during been orders expected than million were of resulted greater of in midst of $X.X supply discussing quarter. hardware are transition. third at XXXX, The major As unfilled we had a throughout challenges end the in approximately chain the that

remain we the previously inventory during the to and cost that the expected quarter, a the confident and transition new this making will While in progress our was we structure reductions outsourced had in deliver manufacturing partner that I'll detail we're discuss in disclosed. improvements progress slower more than moment.

media revenue short enterprise our of that demand due management smaller customers impacted that to product fell due product was clients the to shortfall categories. from and revenue enterprise and storage to mainly QX the of expectations, balance our The sales softer in

software the year-over-year factors of up year-over-year. our significant XXX,XXX subscribers in results These our billings grew QX, also several include, positive business and during reached subscription above XX% business. was strategic date, delivered areas XX% which headwinds While subscriptions were in we unique to

down the a participation up from over was past in of of price more this reemergence sequentially in product these and discuss the stronger trend renewal also earlier Maintenance I'll both year revenue rates headwinds points a detail improving while generally moment. underlying resulting from the year-over-year year, experienced of the increases, and sales half.

we've achieved savings smart quarter, As our discussed from initiatives. OpExsavings $XX last million

expect $X to our remaining supply transition. fully million from We realize chain the

are However, due still to the factors performance, come. benefits to these QX impacting

Avid's and to Disney news of they and made many Studios the utilizing distribute Avid's cloud cloud produce create, when Microsoft their During in collaboration QX, strategic to cloud began solutions. partner Walt publicly discuss content

establishes to Avid IBC one with point the and during show, the cloud pleased the ago signals strategy We described M&E very the Annual both these the event early of was largest companies in their readiness our Press trade companies secured proof entire host industry of at having they workflows the of initiatives. couple world's where a our most the demanding believe to months of media cloud.

this with for other that In cloud large companies embrace we preparing are fact are own as operations. media technologies content engaged their stated to year, earlier

XX has agreements. As long-term active September of XX, Avid

with more strategic trajectory of feel or confident deliver we agreements. headwinds partners, revenue. During extended purchasing to we the new the we the profitable renewed of Irrespective channel QX, recurring and in QX, business active several added in other two also agreements long-term

Revenue and quarter, we that QX business changes year-over-year our our impact cash maintenance growth continued subscriptions and business it down benefited demonstrate although continues and plans performance, Avid Turning strategic are over from to flow. the our in meaningful business. to software in improved stabilization making third a was our believe creative in on profitability

and mix negatively quarter. temporary favorable maintenance than and expected improved However, the the as XX.X% margin customers revenue to gross our software from quarter. from impacted the sales impact chain during product Gross discussed earlier, was and product constraints lower to supply our in higher products enterprise by margin in

our lower down XX% to as initiative. margin due smart lower savings quarter, due was revenue the EBITDA gross Adjusted but in operating the primarily to year-over-year by as benefited improved expenses well EBITDA

while Finally, better million lower negative primarily in operating free flow quarter expenses. was to the $X.X year-over-year due cash

Ken on quarter will provide in his discussion. the additional detail

of receive in on QX the the benefits the Given making to plan the transition financial transition on you results, want effects details progress magnitude our happened supply -- QX, the how we expect provide to our chain operating of chain. from deliver in what and supply you of of we remind and complex the QX, to further of that with ultimately we're to

products of consoles exclusively audio to our new effective shipping that I SX was new including QX note the first want the partner. from manufacturing quarter the

During the difficulties the quarter. that several were there quarter, greater expected than impacted

process we volume, timing to new qualifying and documentation First, production to producing impacting underestimated enable partner. that the at of the qualify test ensure required partner and product's was sufficient the the start was new in able manufacturing time resources and to

the ramp expected our to impacted the Second, desired the or partner, to was qualification of affecting ability end the move our at than given lower quarter. of ability volume slower to of products new meet volumes

during audio at new exasperated Third, the new the the the introduction quarter third partner. the challenges console SX of

had we ship first several revenue did did planned. we SX the many QX, as we not during for ship as While consoles

transferring higher a manufacturing our during experienced that for of had demand we of certain exceeding were the product those planned production partner products to but range Finally for for quarter, products. mix the we new unexpected capacity course, we

as online all partner the we're million were and bring hardware that new at $X.X of to of the we of contributed the of these quarter, factors shipped Xth. While the million of to November continuing orders have $X.X backlog approximately QX end unfilled the third

that all product position new smaller and optimistic scheduled of be plan the qualified quarter. major are with qualifications, through are the We to in remaining completed now our we needed QX. a meet manufacturing We've fourth the products for are the to partner

production lines QX in from expected learned support forward. order and in the adapted QX and demand rapidly to have We've going the

Finally, the expected our target holiday channel strong to in the audio on we've higher console new already globally SX meet demand, and production from demand QX seen in partners season. pre-order order our time for for volume is

while anticipate 'XX. been after the benefits the by transition the term, full over chain in short complete to we quarters manufacturing coming see the transition Company improved painful has realizing end of Now we're starting the financial performance fully we supply our for the and

We and working be inventory as benefits significant, resulting capital, to perspective as these both reduced manufacturing a expect well from flow. lean a from cost

solid Now delivered turning to subscription a consistent strong performer, results in Avid's software business QX.

new largest subscriptions increase Sibelius. X, We subscriptions. XX,XXX stated were -- and QX and including saw instituted creative software on to in net Media our up increases despite price As XXX,XXX for a over products creative Pro year-over-year Avid's with over subscriptions series Composer Tools, previously, of July increases, Pro ever subscriptions Tools, QX those XX% obviously

Media as significant This monetize a of products. contribution, enterprises and place demonstrates as software which Media in our particularly customers our to the was reimagined June which of subscription all completely saw the Composer across We that has by over products value time. our release the individuals XXXX, by ability creative well subscriptions made our alike. Composer driven received been value growth well strong

Pro Tools also showed XXX,XXX subscriptions surpassed the quarter. in a strong growth and

up start growth result billings price XX% increases reflects QX. of in continues also implemented at in year-over-year to were QX. This overall by the The Our track we subscription subscriptions. billings the billings

billings should long ahead this growth, with over significantly While the is growth. of revenue revenue our term subscription track

maintenance our which which to hardware We Avid's software you and revenue sales. line product revenue largest more into and is to insight generates also provide related revenue both our want with

have dissipate. QX, installed of the And recent was of revenue was software product the revenue maintenance the and it that in stronger starting quarters, it factors and of the begin impacted reemerge. While large hardware are products as down our health XXXX year-over-year up during sequentially benefits to to base several generally in of negatively

products of about primary our total on impact XXXX The on at certain Maintenance storage, in QX. hardware was to such legacy maintenance the negative due products audio sales of end graphics contracts revenue consoles maintenance maintenance and XX% from systems revenue ending XXXX. represented in overall storage as of

are increases underlying and QX. sales revenue in from creative of maintenance we recently. products improving renewal -- Media maintenance tools product issue, revenue rates Maintenance and generally from tools that's and Central, about total price trends positive our in seeing software XX% stronger from our represented this from creative Aside selective

Tools. products a Composer Pro maintenance Media stream We from customers software healthy have all for and revenue MediaCentral, of our including our

quarter, a tool transition there ongoing from subscription model. creative portion the was customers to negative of a a impact the In of

to performance, beyond supply the isolated that sales we've chain and to primary I Looking factors say our QX enterprise clients. would

we temporary expected As and financial we've supply are -- are were our benefits. the -- than optimistic greater chain they goals changes meet the we have that so achieve expected, and that made we QX challenges will discussed the great while production

and expect sales QX. we On improve have to as opportunities to future the our strong weaker for in performance well of as the business in to confident during quarter, remain our positioning third us enterprise potential we expectations. ability a of pipeline Overall, the meet ahead customers

that have We generated market rapid supplier, achieve of products making QX milestone progress and products including fully audio our that expect in a delivered new we number are from new our in significant excitement. will

pleased in Tools, particular by that trend and its We're total continues Pro growth year-over-year increase and and significant in upward our to business Creative subscription Composer software driven subscriptions, with Media billings Tools. our contribution revenue

growth. and Throughout in announcing to product audio our delivering our contribute tools this portfolios year, new video that solutions been consistent we've innovations and and across

on recurring Looking more executive growing profitable team remains trajectory at Avid's consistently all toward confident and built delivering these in management our financial predictable and revenue. more indications model combined,

So, thank it me to you, over let Ken. and turn

Ken Gayron

and Thank afternoon Jeff everyone. you, good

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

quarter As smaller that million customers. in portion orders to of hardware variance the not to related related our with softness enterprise $X.X in the ship did earlier, third remaining to was revenue shortfall Jeff the the our of outlined in sales quarter

to subscriptions despite XXX Beyond quarter, lower resulted in headwind the margin in in due subscriptions maintenance supply improving maintenance points improvement the margins a remain continued our year-over-year, our margin. gross from software software giving an The up results, model third our in mix the quarter shift third in revenue we to chain. basis and and our hardware significant XX.X% our margin gross in improved quarter higher optimistic to recovery

as We benefits expected see in we achieved the plan savings of most also plans in the for our from continue expense operating have QX. our savings expenses $XX operating already to million smart

contract in improvement EBITDA adjusted with the forward-looking and progress recurring year-over-year cash revenue. our in consisting value fourth quarter anticipate we metrics, continued forward, in annual our of and flow free Looking revenue,

the unshipped Let's revenue quarter and beginning expected $XX.X has quarter The now backlog $X.X by get during the with million to news November XX. the of at November our in remainder of today ship of into the of was the details. million Xth, preliminary line shipped is GAAP that positive is the results. as

our much qualified third better major in has quarter. production lines production rate all and new manufacturing the of beginning has Also, partner of at a

revenue quarter, During products, lower and we storage expected third than the which also contributed management media to in experienced revenue. lower our our

half Our Enterprise in quarter. softer in the business of it including storage the was year, first did well the but third

We to predictable and into entering partners streams on the both revenue of more agreements channel for continue focus enterprise in long-term lock customers more this with to business. portion

of for During XXX,XXX the Media had of over growth now new quarter, a in subscriptions & subscriptions. continued creative with progress year-over-year subscription Tools software and Pro XX% saw business. exceeding margin to Composer. strong subscriptions subscription our count high we in for number our our We both exceptional of solutions record We total make number total a software

our addition, quarter. In about during the average an products of on subscription of increased by many third we XX% prices

have following the in growth customers embedded rate demonstrating subscriptions increases, value power. these our to pricing in seen we our no price Avid's of reduction Importantly,

We're well due also decreasing of that to as pricing pleased service discussed renewal improved in maintenance the storage as with third and maintenance the from legacy rates the on issue revenue the and headwinds quarter, during recovery Jeff contracts. the

pricing of quarter, to revenue was stabilize expect increased renewal up rates installed and We favorable year-over-year. The an points gross improvement a to and increasing license maintenance professional basis gross maintenance to maintenance coupled from due products XXX dissipate benefited mix. point coupled software improving that XX.X% continue more increase base was and revenue services a subscription improvement these as the an in for margin, margin Gross XXX basis reemerges. headwinds in and with margin with

for professional resulting in gross million, gross decline more services expenses lower software, $XX.X were a the resulted an the The accrual volumes. QX margin operating the bonus and Operating production from quarter The well than from in quarter. improvement improvement savings in reversal improvement million margin of $X in maintenance smart offset from as $X.X realization as XXXX. our the expenses primarily of million hardware

impact million margin quarter Year-to-date operating was in from in and of savings expenses our smart line in and operating the EBITDA for adjusted with year-over-year have year. operating The through EBITDA expenses in $XX.X was our preliminary quarter by lower as for $X.X Adjusted results. gross offset September, our on we improvements targets largely the part revenues expenses. year-over-year the million realized are down

has EBITDA adjusted favorable Non-GAAP XXXX. of up year-over-year is revenue due $X.XX margin the September offset quarter, for during over in in XXXX third by XX% through down expenses. same improving $X.XX gross million year-to-date per period of the in showing $XX.X lower net the to Our XXXX share the made and progress improvement impact was the operating income profitability the team

of the quarter negative $X.X negative Free in an of XXXX, cash the was of to XXXX, third improvement million flow $X.X in million compared $X.X quarter third million.

subscriptions XX% basis year-over-year. revenue been was year-over-year growth quarter from XXXX. has software taken at in the higher subscription software a moving starting certain revenues. Now by against million, revenue XXXX, $XX.X Revenue to In end of third on the of the subscriptions composition impacted our reserves of up

increase price revenue growth more in subscription due increases closely track part the increased subscriptions quarter growth are From in third cash time, paid perspective, the number contracts. the should to the the the billings forward. in selecting in Over and a who in year-over-year above of for a moving quarter XX% subscriptions upfront annual subscriptions, third growth in customers

when annual monthly which customers quality the higher to paid compared for The revenue Avid paid believe quarter we stream upfront subscriptions. increases to were influence part pricing third in to contracts, designed in select are

$X.X revenue flat continues and to down due was our revenues for year-over-year products. million to with a subscription perpetual license perpetual challenges the sequentially, rather customers into to creative than subscriptions enterprise selecting sales smaller software portion customers While licenses grow, of

growth revenue With revenue in software stream the that Avid's maintenance and said, expect forward. with piece software relatively centered subscription high-margin a licenses moving of perpetual business stable overall on we our be associated to

Maintenance third quarter, million down up year-over-year, the but sequentially. revenue $XX.X was X.X% during X.X%

support storage continue of maintenance see we and through as the legacy of a non-cash comes the discussed we revenue line, solutions, took the the as as trends of maintenance our that price to of declining slowly reemergence end installed that underlying base to for revenue. July starting products well selective build and impacts While of earlier, software are effect increased to see increases hardware in

X% software quarter. non-cash and year-over-year maintenance in The was maintenance revenue storage discussed above, third Excluding third XXX million, to revenue revenue in grew sequentially. the product total the third up and licenses revenue revenue maintenance quarter $XX.X hardware up in down the legacy quarter. the basis mix revenue of stream in represents due of lower year-over-year the points X.X% X.X% quarter, This year-over-year during the XX% revenue

software of seen perpetual hardware of licenses was and we If during period we to business. a many software flat strength believe year-over-year, see to which Avid's maintenance companies we exclude total software growing products, the on share from the during subscription believe Typically, demonstrates and and maintenance software transition subscription, in users the we decline to-date new stability our that taking their category, transition expanding demonstrates our business market. are in revenue a

in licenses points Gross the during software margin or third maintenance software The which price the during $X.X was XXX can XX%. increases. basis down $XX.X from million XX.X% quarter the quarter, QX due in revenue from up and challenges integrated was year-on-year to part QX, XXXX, Company's revenue be in and million hardware seen

the challenges sales to and the clients. earlier enterprise This discussed ramping in software up revenue smaller line impacted partner directly by was by manufacturing new

hardware continued improvement and expect We our in in strong quarter software sequential hardware and in see improvement strong seasonally integrated and margin revenue maintenance. expect to hardware fourth

the lower to impact basis production during the integrated to transition the higher products new software quarter, third cost points from volumes was the down Gross margin partner. of XXX and XX.X% in manufacturing and hardware their due

balance margins of services our from in Hardware business services as quarter in business, more production the $X.X professional the The revenue. moving portion are revenue which we third million in and fourth year-over-year to as PS increases. recover our comes revenue XX% expected smallest the are selective down was volume of forward. being strategic quarter, is Professional

the was the strong breakeven on improvement period. professional year-over-year however, quarter, in margin XX.X% in from services, Gross a

our recurring to moving percentage over contract Now value. The of has and steadily the revenue revenue increased annual periods. recurring

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

a revenue in increasing recurring are to seeing growth as adding of given percent agreements. expect continue We focus time, and long-term the sales on new over we our subscriptions

Annual contract from from the benefiting value and margin third software on at revenue. up was the stabilizing of our focus year-over-year and quarter, $XXX strategy long-term to maintenance million X% agreements end higher subscriptions

the QX, million moving XX, accounts of million cash had million ended a balance $XX.X sheet. to XXXX, from At of Now XXXX. the balance September up $XX.X million, receivable, from $XX.X XXXX. third with XX, quarter the September at we end We up healthy of $X.X

lien million down are levels prior we new at with of take XXXX few quarter, of year. third million volume end to Inventory new June the the Inventory expected reaches $X.X manufacturing the the our quarters next over and production was as XX, flat chain. and advantage down partner $XX.X supply the over move

deferred part and deferred was million and million and XX, revenue, deferred $X.X to $X.X in in million September $XX revenue offset deferred of revenue. million of non-cash in professional million a $X.X an by increase XX, decrease services at XXXX, $X.X in Due revenue $X.X down million from $XXX,XXX IPCS Deferred subscription products September revenue, in maintenance XXXX. revenue deferred

XXXX. and down backlog Total XXXX, at and of $XXX.X agreements. revenue primarily June The deferred long-term revenue committed due from deferred lower revenue backlog $X.X million to million decline the was XX, contractually was September timing includes XX, certain which

revenue. we confident will new QX the signing see occurred that in our seasonally and backlog long-term quarter should have that agreements XXXX increase fourth a maintenance We increase given billings revenue for expectations deferred stronger during

notes We due debt down million, cash to of in XX, remaining $XXX.X million current at the borrowings to At retire plan from to reclassification convertible XXXX remaining $XX from June notes XXXX, maturity the quarter, credit third or prior the the on liabilities. facility. was September long-term or XX, senior $XX to end hand under convertible the of million

We have quarter at cash covenants. compliant of generation with $XX.X will our meet to expected we liquidity balance the cushion and as with that our of confident as existing ratio free sufficient were end million revolver leverage flow our our this are undrawn with third have cash the well significant We plus obligation.

months. Now looking at the business over the XX last

non-GAAP profitability free improvement main a cash flow all Our and from ago. year showing metrics are

revenue LTM the XX, flat LTM through trailing the is of faced quarter. challenges period, during Our the reflecting third to XXXX $XXX prior September million

lower XX% However, $XX year. expenses of in our XX, from XXXX operating trailing September XX, LTM gross is reflecting LTM during ended period the the September through margin EBITDA up million XXXX, the improvements past and

$XX.X XX LTM free plus June up improved XX, costs, September reduced million September $XX.X of XXXX adjusted flow through ended is months XX, the capital. cash restructuring through Our improvements and million in our -- cash EBITDA working from reflecting XXXX

well positioned new totaling guidance. in QX. the with progress now Let's turn given with ship up we making hardware million initial our in believe are have orders the are We we coupled will a production fourth that strong manufacturing $X quarter to partner, ramping to

with our we we our guidance preliminary provided annual this week. At reaffirming last time, that results XXXX are

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

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

flow share assuming XXXX income to million Non-GAAP XX.X guidance free $X.XX our $XX per guidance outstanding. $XX share million net million. to per And cash $X.XX Our share XXXX per shares finally, remains is

York. Lastly, Tuesday, Day you in our New that at November XXXX is I to for XX NASDAQ invite the wanted to attend Investor scheduled headquarters

will Jeff, from other products leaders dive Avid our go-to-market myself strategy, business initiatives. doing and be a into and deep our

demonstration. product a We will also have

and model. and transparency how our our providing is long-term information of expectations business level for We we'll our in investment you compelling a into a you operating this all show believe Finally provide Avid better market. XXXX high be guidance will today's

I'd release. information the in to to seeing of press hopefully RSVP Investor is look two the all to our Whit Rappole included Whit. VP weeks. With to If you next We whose turn please you'd that contact like of like forward attend, call to the over in Relations,

Whit Rappole

thank concludes That All again. Jeff, remarks. you, right, our prepared

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

Operator

Thank Instructions]. comes first Chokshi with Maxim And you. [Operator our Nehal from question Group.

Nehal Chokshi

you. Thank Yeah.

want that confidence smaller make sure the So softness competition I XQ'XX I enterprise related? But part gives was the what into to just the enterprise that softness of you to is the the miss. drill want not

Jeff Rosica

Hi, Nehal, in this that. is Well, tracked because is Jeff, the a in answer our systems. of confidence enterprise business I'll by -- in our CRM majority our us the really is

So we know what we've won or lost over and/or what's period. the deferred or what's changed

So see prior that change we can the track in pretty than and different trends no in closely we quarter, quarter. any

an that So nothing there's gave that. indication of

what year. to prior just the prior improvement they versus did year. would the enterprise our a but bit from say, for for softness the had our in expectations improve quarter, one is I second just We second yes, it from note half saw always we growth half an were to of it's remember and the planned a or did in important thing that that in improve

Nehal Chokshi

track been able down then? the you softness that what have was So to driver of

Jeff Rosica

we partners, our a relative offset of strength comes media that larger quarter. quarter. A there Well, we was yeah, think now medium we in little what what channel I in and -- in our enterprise the softness experienced I greater a enterprises -- customers is this in but a we bit lot saw that sized through just the we the small to what that that we -- softness that, of had saw saw

about and to in I quarter, a we at the for point it's smaller a think softness businesses wouldn't I there this on this more say point trend So would -- one bit the quarter. specific -- was medium-sized that would but that to, talk

Nehal Chokshi

do SME why there think softness the you And on was sector?

Jeff Rosica

a there is the think going bit in market bit, of a I Well, I bifurcation little a think on.

I call the think middle of X, from Tier X the kind we segment middle or some sector. it business -- of Tier the

smaller medium up businesses starting is of X. of bifurcate to Some that Tier those just to into some businesses,

but X and in seeing bit And up the Tier of business are those X more are space, see so, show we're down more start becoming to Tier it some enterprises, larger customer of to media and that a able capable. go really we types where little into

we've us one so wouldn't seen was want speculate I But this, business for year-on-year. it's the only general, would again, in that trend. beyond quarter say up I to

wasn't as in way our And best again, plans. we Just much as leaveit. that's expected had to the probably

Nehal Chokshi

to full understanding Okay. down cash the why but guidance? for not year, to guidance And I want EBITDA goes flow get as free an

Jeff Rosica

say, the we would where appropriate very to we our this it's about with cash time and position quarter first, free flow had We a the respect range, in I good QX. Yes, strong guidance feel year last a expect the guidance. fourth LTM $XX we in similar at flow year, feel we free started at million, cash

the did comments challenges respect say would I supply in $XX that if like revenue in EBITDA million take the So we with and $XX because we of we would free we feel hit And the the cash believe, the the transition. of to the earlier flow, the of say, million cash chain. free given we'll we conservative in to guidance guidance -- forward. said, guidance into we not at original moving probably higher had well, little that on we down are That as terms year good when have visibility in set will the flow more range. end. come supply a chain I the

of, we're that million that's forward to be to point, come upto $XX that believe able kind million. moving So we'll on original on $XX the guidance now we

Nehal Chokshi

that did especially adds and users, it's you very value last still that you're my a you price. saw which noted despite and was incredibly the in on the question increase. subscriptions, yet the is note Understood net strong that such it. the and that's you That's to impressive test the a subscription Got impressive providing. increase XX% surprising But strength price average

such user So as strong here? far any adds why further color you're seeing as

Jeff Rosica

the again. Well, value I'd I this market performance products I obviously doing, in we're say, is, we've Yeah, that into adding what is and features sees and would mean, been I Jeff one and say as us. the like has helped that, is Nehal, functionality before that yes, said

that last Composer which think remember June. if and the the you delivery like Media I announcement of a new product, that started days little XXXX few

very the But into by also very, QX. machine our that -- that was increase And I revenue So performed And standpoint. well go-to-market benefit a machine and received rate obviously of to well from product quarter. during most is help of would say the billings eventually the rolled very the the price market.

pleased. driving business to were this going we're hard. the in we continue this and to aggressively going in And of We're -- continue hard area and push to lean to

Nehal Chokshi

sort competitive of a adds? environment enabled increased in that change rate there has Is user some the of this

Jeff Rosica

say is say now to been performing would engines it that belief product in and that in channel my teams web very would was well been in fact improvements our summer. the we've have sales response store marketing over our really largely that that the and I I and the right making

Nehal Chokshi

Thank much. you great. very Okay,

Jeff Rosica

spend And indicated direct were we more for a Nehal, putting on digital. we marketing effort the little

I think those on that you're are return that some of the spend. from things seeing that

Ken Gayron

a good it's point. Yeah,

Nehal Chokshi

That's Right. great. All you. right. Thank

Operator

Thank you.

& Steve question comes from with Frankel Our Company. Dougherty next

Steven Frankel

regional station are and expectations tier performed Good for go weakness afternoon. in QX like broadcast how back to storage and that's how that ask bit traditional groups, a what little to your QX. one and I'd big the enterprise maybe

Jeff Rosica

growth the We smaller think Steve. kind call what Tier and large big of large Nehal larger wasn't said, performed relative of we year-over-year. We but and lot the to the but see enterprises Jeff. Tier happy X one saw did It in QX smaller saying, of which was seeing station what your the lot broadcasters The I saying the is in with well. question a and quite planned it large is. Like the the growth under decent big you I are we I This broadcasters, we had broadcasters, in we exactly call X, what for, a that are growth some know Hi, trend groups, the is -- we're what really are networks, was more media studios media growth and the are in from before side. pressure enterprises. we

did it like well. So made with to happy I'd progress We but do more, say we're the -- quarter. the just in we

Steven Frankel

does thought be you Or you what that slower make not to the hitting relative do targets? it this was think the looks growth what pause, storage this your is economic question at is to like you an business going beginning? And why cycle

Jeff Rosica

in in storage in categories, storage -- servers, those goes the that and I editors. make into in the lot of wasn't mist Steve, the that but expectations, Well, and first which show will it to it at storage have dollars would point cycle. that call were a want the reality, categories, mean, storage there management -- it a of just in we look buy, be It thing they a we make of that making is the prepared impact may media in media remarks, media clear, if more our is when of to we segment it one in clarified want point. I impact the media, from up goes that of enterprise all, but bulk sure that category, more graphics, the platform but we those -- was I

efficiencies As obviously we far well from looking is navigate enterprise. drive really that for because We're and to very forces navigate macroeconomic our driving media I in efficiencies know what story, enterprises trend. what because But in doing of, we're their positioned out the have we're business, helping we as to platform clearly there. the those there we're to there company. of mean, I those which forces they're think are

is work The cloud think Microsoft Walt announcement transition we're a to Microsoft. very to there with Disney strategy some great and proving going on cloud. is people after obviously I is a But and be Studio I the that. Disney doing on-prem think was and at successful we've our testament going important. the been and between we there what mean,

trajectory think I than I think expected, got that market if to a it's do on, that. originally of So it's we're macro doing differences -- that's well we're really transition, in we I I may what and trends And quarter-to-quarter positioned see there. even we again, like the we like than we're But going on. lot a

Steven Frankel

that the quarter? renewal are in long-term Okay. up volume fourth of what's And the agreements for

Jeff Rosica

-- I contracts in we're extending even point Steve. resigning, new in data the lot -- QX. in of But of heaviest majority putting the Both and in the or probably don't long-term half them those are There just the it's the agreements, it's agreements, like quarter heavy both process are front have it's QX there, of agreements are that of it's in not not place. me, of maintenance but and businesses a a agreements.

Steven Frankel

or Okay. be upon you same renewal, And gross long-term the to agreements, lower? higher then margin do profile you agreements expect as of the you would resign these those --

Jeff Rosica

[Indiscernible]

Ken Gayron

in get think wallet would Yeah, gross helps overheads. that agreements signed as the margin We not agreements profile and as we've better in I agreements. look And model, same, standpoint. our we're that when expand and and our margins have a positioning would We margins we improved. the we think at better mix protect improve software general, long-term agreements cover also share the the in you -- that say, provides the and if more we ourselves from be

all have We low-margin partners just don't product. buying to want

So we downside protect -- we protect ourselves there. the on

Steven Frankel

have the is accounts? to on churn it And too month-to-month might price your impressive. Is soon on to increase do Okay. what any data pretty that

Ken Gayron

In metrics quarter, when of dramatic by user a actually general, on base the when over don't don't look talk we're that and but churn we're any XX,XXX XXX,XXX look publicly up at this changes heading at adds we churn, in expect -- number. the where we I went we

a the Avid. people much Additionally, the annual of increases given churn to better and annual that's moving for paid we're more price strategy

recurring pay strength gross with the So be quality moving forward margins annual, over annual to for really benefiting revenue company. in move said, going we we And time, that's get as our we the this a as think higher we business. people,

Jeff Rosica

month, we to the move said monthly Steve, not is at our to price least the to to say, month annual month increase on And would pay goal also an I if did annual you more, to try month, monthly, annually. two in the over in them

Steven Frankel

late accrual large of was then reversal? was Okay, bonus items, I a call. great. couple missed How And to the the I

Jeff Rosica

$X million.

Steven Frankel

free that moving should non-traditional impact from would there QX is And last quarter apples-to-apples in or be one anything with the another year? to Okay. it cash payments flow guidance that like any

Jeff Rosica

the mean to cash guidance have September, million in visibility plan cash I good to million is -- was LTM guidance. our $XX through $XX our we million flow we in $XX.X free that and No,

So there's nothing unusual at all.

Steven Frankel

Okay, great. Thank you.

Jeff Rosica

Steve. Thanks

Operator

you. Thank

Nehal Chokshi from comes Group. Maxim question with next Our

Nehal Chokshi

Hey, Nehal.

Operator

open. your And line is Chokshi, Mr.

Jeff Rosica

on have Operator, a he that already may because questions. for been mistake, was

Operator

And turn this to Right. questions. now at like back closing time management we to have conference the any I for no remarks. further would

Jeff Rosica

for thank -- chain. underscore factors as working as term challenging QX to questions. closing the a operator efficiencies the negatively cost supply from the In and thanks benefit the while and our have well I lean expect including been participants we the transition our So are establishing investors that complex want to chain supply all call, results you, and your commitment to our capture for longer Avid, our to impacted capital

with long and software combined the significantly improvement, strong for in and improved profitability Avid's subscription expected growth about fuels growth. our This term trajectory enthusiasm potential

beyond. In QX on in XXXX and new that focused closing new and accelerating to bringing sharply products growth strong, innovation Avid product to contribute is the market year revenue-generating will

Eastern of everyone. on our your us Until hope Investor XXfrom today. for live Thanks rest XX:XX or We place So you'll X:XX thanks of through Eastern register for joining again PM enjoy take XXXX website to I stream November Time. then, Avid's which day the Day, will AM evening. Time everyone on you encourage the

Operator

and Ladies Thank and today's this participation. you concludes gentlemen call. for your attendance

disconnect. may You now

Avid Technology (AVID) 10 Nov 192019 Q3 Earnings call transcript