AVID - Earnings call transcript Q4 2019

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Operator

Good day, and welcome to the Avid Technology Fourth Quarter and Full-Year 2019 Earnings Call.

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

Whit Rappole

Thank you. Good afternoon, everyone, and thank you for joining us today for Avid Technology's fourth quarter and full-year 2019 earnings call. Rappole, President Whit and Corporate is Relations. Investor name Avid's for Vice Development My afternoon Rosica, Financial are Officer this me With Jeff and Gayron, EVP. and our Ken our and Chief Officer President; Executive Chief

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

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

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

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

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

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

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

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

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

Jeff Rosica

trajectory Avid's everyone the Whit, improved Ken well review us we'll XXXX, in our CFO, our leadership results. for with throughout Gayron with Along as in product laid Avid's business. are business including QX Thanks discuss plans leading key to our improvements deliveries the out strategic in as team achievements and the of remarks, and full-year by XXXX the prepared first from thanks today we and year, customers, significant how resulting innovation our market new our joining executing

accomplishments We confidence us and in beyond. we XXXX give commitment how our plans these further to will discuss will our that progress also make and

with begin maintenance, overall. drove and I'll and achieved important XXXX, going very profitability several agreements. streams key strategically are takeaways business positive areas revenue in and momentum my growth long-term for continued XXXX QX to higher including high-quality the subscriptions, including In recurring that forward, in Avid

year our our continued with opportunities driven by last our new through deliveries and all subscription on and was to offerings expansion pipeline progress of focus product customers. enhancing innovative by Our position of our already our new realizing strong customers

expect has which HX our creative subscription we saw that and been The are we software. in by continue momentum XXXX the driven in investments core refreshing we in to making

increase of supported Sibelius Our Pro users high subscriptions at year. XX,XXX at the users year-end, second Creative which and in about improving user be of QX paid Composer, XX,XXX rates were approximately new an in continued Media Tools, to trajectory our Tools, growth well half for XXX,XXX and in the by

view of subscriptions also During which trajectory products, growth promising part strategy of customers longer-term these as subscription the subscriptions QX, for licensing for expansion adopted several enterprise development we overall. our a

continued and show to QX. strength business maintenance The also underlying during performed well

growth reported on ending the end service sale of legacy contracts revenues, we quarter the for of non-cash certain systems actually of the year-over-year Excluding at XXXX maintenance. in X.X% related maintenance the and headwind of storage

media servers, storage, addition, across In category revenue solid graphics. Avid's made contributions integrated including solutions and categories

share capturing including creation in new in recording, and significant integrated XXXX, growing and we innovations portfolio solutions on enhancements focus delivering made in sound. for market released to our music mixing, professional strides Through audio, opportunities live the and

to that and business you further getting audio are will to I growth this our in remind started and just that product improve am profitability of I our drive pleased portfolio our to growth we business. segment returned has in strategy say refreshing this

also had benefits the which supply from the supply chain for the year. started our the company supported the of transition factories chain, news difficulties have is major see transition We out our This obviously production new production to coming into for bringing new earlier and with products of the needs including the QX, good we fully last stabilized, in full quarter.

savings both first As of our XXXX, the during improvements. and supply achieve OpEx from chain levels significant COGS such, half of to we expect

to benefit capital in to expect course the over we from inventory working of reductions related Additionally, levels levels, primarily XXXX.

QX, Our media as providing in last enterprises but sequential growth companies solid improvement. year sequentially, to enterprise small-to-medium year-over-year. larger quarter were same sales as size well well Sales performed flat improved significant versus to

continued up year-over-year some softness video solid production were quite of experienced our year-over-year. sales solutions sequential growth, in service were quarterly we and sales and but While software, flat graphics and delivered of enterprise basically storage platform our

while customer we forward, continue believe customers, encounter enterprise segment. an may Going to with occasional we situation we lumpiness that improving see in this

our year-over-year, was products have by dramatically benefiting smart our our savings new substantially profitability margin as well primarily and the structure from mix as metrics. cost driven improvements improved initiative, Gross an up improving from which

both saw year. strengthening the we across and APAC From strong in with EMEA delivering results a regions regional further both perspective,

Additionally, region was throughout Americas in while did growth of QX. most return challenged the to XXXX,

full in we pleased am we made the with progress focused for we but business, the on remain the areas continue year I of ways can the key Overall, improvement.

to and forward. achieving toward going continuing the position are cost We to structure right margin well us work

again business results. impressive delivered subscription software Avid’s

are cornerstone our part this performance our we by portfolio. of the of heartened of business a consistently strategy, As strong

up across strong had growth products. in XX% paid year-over-year as mentioned software representing subscriptions were creative subscriptions Avid new and of Creative XXX,XXX earlier, at our users all in year-end, QX, about

in continued introduction strong performance mid-year growth the received of and of XXXX subscription helped additional top Media products of Our the Composer well suite. other was drive on the

quarter the price QX consecutive increases growth, an QX second that accelerated subscriber about growth at with pleased following occurred XX,XXX We this of of the that subscriptions was we overall in XXXX. implemented and growth the to end of accelerated are particularly report

subscription with continues growth by were billings the to growth in year-over-year QX reflects XX% enterprises leading subscription up and adoption closely three customers subscriptions. business for Subscription the in enterprise XX% track subscriptions quarter. by overall QX. adopting up of revenue Our their was year-over-year in in edge the licensing tracking This subscription

as by expect healthy enterprise trend subscription to subscriptions, that encouraged continued expand as growth the from creative We we our performance continue resulting XXXX the strong continue efforts and our see in we segment. for greatly to strategy subscription this as offerings, be from the our and to professional continue individual well sales

Moving on performance. to QX the highlights of Avid's

strategic and continued made in improving contribution demonstrate our changes We have that performance to key metrics. toward our a meaningful plans

our growth Total from software strength and revenue quarter in our subscriptions year-over-year X.X% the business ongoing in integrated business fourth creative maintenance relative and benefiting was continued solutions audio up business. our in

maintenance revenue as and in headwinds subscription growth exceed XX.X% up fast subscription any our far combined the year-over-year outlined revenue was maintenance in The revenues. previously

XX% revenue of grew XXXX to at from LTM year-end. XX% the at end recurring

Investor good recurring revenue Day. target making toward greater of outlined recent XX% or So our as at longer-term we're achieving our progress

services. XXX ahead improvements. Non-GAAP points increase significant gross saw supply fully quarter, representing programs I improvement benefits pleased we progress margin improvement complete of in saw the an a the as we to chain improved am basis in fourth margin and our of in margin gross transition that XX.X% our of professional hardware realizing

Among customers. enterprise the factors performance contributing strong was our Avid's QX to traction with

roughly MediaCentral which the key wins National included of Enterprise chose end XXX the Composer Media new YLE, support across Finnish Some their group. Cloud to Broadcaster users and the the UX edition

to As newsroom in of School system. Al-Arabi which and And they well, key the competitor's a students. its Tools Media subscription Avid and to television Cloud Media NEXIS bring Composer, at LA network UX, Avid other signed a multi-year selected Pro products agreement replacement MediaCentral Film Composer

we last growth full-year business, recurring on challenges difficulties revenues, performance, our typical that transition in executed especially seasonality organization industry comprehensive including supply the our our through highlights the Our of can resilience to chain the year. resulting in growing arise XXXX responding and that from in

were revenue and currency. including hardware impact in the relatively services in as certain saw faced was and XXXX we subscriptions Total strength by foreign headwinds audio year-over-year professional maintenance, areas moderated the we of solutions flat in the

currency XX.X% on to the well down mix XXXX, shift, initial basis on products total impacts was in X.X% improved supply positive margin as new X%. XXX improvements points favorable year. our of in as full-year up but constant our revenue basis, basis, for from a Revenue a margin chain XXXX software the introduced Gross benefits on higher year-over-year and grew

expenses benefiting $XX XXXX year, from was our nearly EBITDA smart up operating due the million well improved over as Adjusted savings initiative. XX% primarily gross margin to as for lower

from cash deliver free we to $XX.X year-over-year improve XXX% flow believe adjusted EBITDA. continued cash that We work improved free flow as increased XXXX. conversion to to the continue to Free by during million conversion we flow cash will

net was GAAP first for and our reflecting GAAP with profitability both a free of the flow of we since per increase net improvements first $X.XX Non-GAAP over income of full-year an per operating income And XXXX XXXX, the cash on and share during in profitability share year, basis, year performance XXXX. since our our $X.XX GAAP had $X.XX, positive XXXX.

full-year will detail the supports sustainable performance business in on and additional in prepared his more more the profitable quarter XXXX the our recurring the performance deliver to Overall, remarks. of trajectory our Ken and revenue confidence growth. provide

I plans, responded XXXX has our the our entered to of positively. on am strategic that with the execution quite market significant our products execution has and resulting our from of focus which long-term new pleased operational Avid momentum improving delivery

order to Avid's has comment to I'd many to in impacted a concern to community, including our can especially world. is first like we the around well-being ensure our employees. what of take outbreak so the COVID-XX do moment here which and on safety the

potentially also in Avid's While we precautionary our proper and near-term. proactive a proceed executing events taking the with continue usual for hosting are major participating other measures including industry in and on we to strategy adjusting business, and plan conferences as

any products said, about in the guidance. the non-recurring rapidly negative our that currently which business coronavirus optimistic we we to could we solutions. impacts for Overall, are have we today, into demand impacts and nature, the situation short-term result side business the to long-term demand while remain evolving of QX not do factored in product That our our for feel see material

our in foresee completed supply our any don't to related States. in China our significant previous now as Mexico supply point, chain At and the United move to chain plans from we new issues the partners manufacturing this Thailand and we've partners

continue XXXX, in disruptions Again, streams, business, currently will which to XXXX while to for and long-term streams believe overall, we our growth customers drive our we believe will our which about remain enterprise which expect with parts to continue create our be for revenue optimistic of and subscription potential COVID-XX on evolving show efficiencies business, especially remain partners, margins including high-quality of in there revenue to will strong we We relatively continued maintenance situation growth our high-quality in the operations. is improved focused and very stable we agreements light continue will in these business, driving a we recurring expand. believe

a perspective, further work to are cost continuing From on and efficiencies. we cost operational

now and the supply on free more Avid's free in good in in and chain cash flows conversion from financial flow improvement reap poised greater to the therefore with significant we of adjusted progress Additionally, anticipate in EBITDA XXXX. are XXXX. operational benefits that strategy Thus transition cash QX, and we

dramatically to our them to range best return our enhancements unveiled brand the and do up category-leading and released our community their stepped Avid of innovation to growth. audio a and help XXXX, new During We for work business major solutions. professional audio products

versions software of control lower we SX ramped cost number of audio a we audio of new creative several audio NAMM shipments tools control this our the new service and QX, our new our and Show, of solutions entering enhanced market XXXX, In at service. quarter. integrated launched are Then SX the beginning which at debuted up of

we Encouraged an help customers all growth. engine increasingly are innovation Avid's build of our to pace to continue by strong this accelerating and to fuel benefit types progress, of product

prospects their offerings. and long-term media the SaaS Additionally, customers production enterprise increasingly operations type we are cloud about into the moving from enthusiastic

shows, We early pilot growth deployments a of adopters large position media believe cloud-based TV continue business several near-term and created and success to and on initial Avid to based expect our among those other workflows market-leading organizations. critical at modest commercial for applications. looking has their become films archiving feature We

both and this confident our these for of built and present year and our make All model beyond position on factors management Board team in predictable on recurring based streams. financial and growing consistently expectations revenue Avid's profitable

share to the and behind full-year details over hand Ken XXXX CFO, our I'll Avid's for So that, with to call our Gayron outlook QX performance XXXX. and

you, Ken. to over So

Kenneth Gayron

Jeff, Thank everyone. afternoon, good and you,

are and noted. XXXX. business I above, Overall, the noted as unless pleased model non-GAAP to figures Jeff progress exit we Avid's with referring in are we As

drive tools, our selective our be in portfolio revenue and gross will cost focus driving recurring focus profitability Our and of our XXXX margin improving promotion to subscription software structure. aggressive while through higher continue in price products to of increases efficiencies across continued creative quality on

We our key in improvement cash continued in financial conversion subsequent years. expect including these efforts in result XXXX free to stronger and metrics, flow

that, let's into and was from fourth quarter maintenance $XXX.X audio graphics. in fourth the With during strength well quarter, of in stabilizing the improvements revenue X.X% subscriptions as up now storage in details year-over-year hardware results. get our and million GAAP financial primarily as

in million, decline rate subscription revenue. $XX.X year-over-year was Combined the growth maintenance up in far XX.X% subscription maintenance XX% the revenue as exceeded and revenue

decline the end and Sequentially, systems maintenance million legacy XXXX, at revenue was the up maintenance quarter. flat have sun in the maintenance the been at from fourth storage revenue $XX.X of would Excluding setting X.X%. stabilized for

During the earlier contract new in the we whom the manufacturer supply XXXX Mexico based from faced fourth challenges we the the the on recovered to fourth quarter was brought in third meet able chain during board demand the fully as in quarter. quarter

service XXXX. production levels service the audio we introduced and working move supply We cost the capital improvements additional the launched from control as in look audio quarter, third of the achieving the the benefits quarter. end into chain we of of SX production new to new and at forward transition the forward During SX control ramp

points and a integrated gross margin higher a plus maintenance mix from Gross XX.X% benefited of for in margin. basis more XXX improvement basis chain gross a in margin services fourth a point point revenue margin solutions due revenue, up was XXX and increase was the to transition quarter, improvement year-over-year. supply XXX mix basis The subscription that favorable overall professional

bonus increased $XX.X were commissions subscription $X.X sales expenses million for over expenses fees by and quarter quarter-over-quarter. strong transaction of driven volumes to increase to in the Operating in to approximately increase million increase expanding business, our the $X sales Europe fourth in e-commerce R&D XXXX related higher fourth investment higher XXXX. in roadmap, approximately webstore operating $X.X quarter our of quarter a million, and performance in quarter markets of million in our accrual product due APAC a $XXX,XXX The support increased was

during As the believe bonus of in anomalies bonus will temporary quarter reoccur in quarter a commissions bonus XXXX while our fourth fourth sales to are XXXX. quarter had year-over-year accrual improved the due of not expense credit, the quarter. We had expenses performance quarter fourth first and higher of Avid's the the and XXXX

the the income XX%, was to quarter, last quarter EBITDA reflecting for quarter, fourth slightly $XX.X year. in cash Adjusted in flow $X.XX at year-over-year. was the flat million of of down strong margin Non-GAAP flat a which year-over-year. net million $XX share was Free was per roughly

timing the these by billings that year-end. was during receivable quarter flow level have cash the been million billings, impacted free at of quarter. would quarter in cash accounts the of elevated timing in an $X flow the resulted fourth higher the to in million we $X not If of for believe Free

professional integrated and and million declines year-over-year Now X.X% the from the as the turning versus FX was relative services pound of U.S. $XXX.X maintenance due growth as the GAAP in in during to as solutions year. results. XXXX XXXX, fiscal by offset subscriptions dollar strength headwinds in down euro to revenue well were and

you our Also revenue from maintenance in sun been revenue have exclude in legacy XXXX On our up would related up overall non-cash impact storage business, the of a X% revenue constant setting year-over-year. to when X.X%. revenue was currency basis,

service in subscription was and the year-over-year Combined X% above. in issue of the and storage legacy decline as mainly revenue maintenance the the up benefits revenue due $XXX.X maintenance growth from discussed X.X% million, XX% impact exceeded to the of subscription revenue

setting subscription mentioned XXXX sun revenue revenue was of previously, X.X%. non-cash storage and maintenance in the legacy and Excluding up our

XXX due from gross for a primarily point integrated increase software improvement in point points XX.X% solutions gross point margin. the XXX and maintenance basis The increase XXX which year-over-year. a XXX and the chain supply to basis was margin was in margin, basis benefited basis transition Gross improvement margin, professional up year, gross in services

year, year operating million, EBITDA the expenses. the The million for for $XXX.X improvement margin was program. were and of was to Adjusted in up expenses Operating higher smart the than XX%. million gross $X.X savings expenses XXXX. lower in Adjusted EBITDA operating $XX benefited from primarily improvement due benefits the

year-over-year gross up XXXX, income. was in benefited non-GAAP operating benefited as the year, net million the in the $XX.X operating cash $X.XX, XXX% similar income. net net per XXX% flow the in our income. expenses Non-GAAP income cash to increase or improvement non-GAAP Free for share flow and Free was $X.XX margin up improvements from in

moving the growth XXXX, Now XX% result our revenues certain taken year-over-year revenue. the $XX.X reserves to subscription higher Earlier of fourth a quarter, impacted composition year-over-year. revenue was revenue negatively from on as up of was million, basis at against XXXX. subscription starting In in a end the subscriptions of

quarter the license subscription closely the more and growth comparisons subscription year-over-year growth. matched the fourth normalized revenue In

Moving license growth. growth track expect revenue closely forward, to we subscription subscription

more count subscriptions both during XX,XXX now for creative our We added our quarter subscriptions solutions XXX,XXX. the and Pro Composer exceeds grew and software total XX% year-over-year. over fourth Media than subscription by Tools

upfront believe for customers have quality select to compared Additionally, the had influencing subscriptions. monthly stream increases to annual higher implemented we intended third paid revenue price the contracts, when we paid are Avid effect in of quarter the which

of share at month-to-month the XX% the above total subscriptions decrease to paid of the the the We have quarter. end subscriptions to and XX% seen fourth of share annual of below upfront increase revenues

fourth quarter increased perspective the subscriptions, billings increases customers growth contracts. above annual paid subscriptions the upfront cash the quarter, third the XX% due are to who selecting part in and From increase the price in year-over-year rate in for in in a

While was subscriptions weakness license subscription down MediaCentral software products. into revenue licenses our continues creative to our revenue of perpetual customers a selecting perpetual sales due perpetual rather to in $X.X million grow, year-over-year than portion for

new fourth perpetual fourth the by impacted had been XXXX revenue. XXXX feature favorably the MediaCentral of in MediaCentral of benefiting a release third quarter quarter XXXX quarter In revenue

that business time to benefit MediaCentral product enhancements XXXX our Additional planned mid should for which in period. are MediaCentral

during the down Maintenance million sequentially revenue $XX.X quarter, year-over-year. was fourth X.X% and flat

of increasing installed see as underlying took product of products effect We base. to the well selective that and base reemergence trend are of July starting hardware the software to as price in in build maintenance the revenue increases

the revenue we should support through of that legacy maintenance non-cash also impacts some the continue and the for slowly solutions the continue line. But declining end to see of then storage comes

the maintenance revenue Excluding and quarter. above, revenue maintenance year-over-year legacy X.X% the fourth in storage revenue discussed non-cash the grew

in XX.X% integrated Gross software and quarter, and fourth and and was up margin the in strongly points XX licenses $XX.X revenue software million up up sequentially. year-over-year. on quarter, the X.X% The $XX.X quarter maintenance recovered million hardware company's the year-over-year basis was in

line hardware the services graphics benefited well and strength including products audio partner audio in our new the improved recovery chain revenue of performance sequential This and control the in products. as supply storage a SX new the as and SX

professional integrated better in balance of services hardware absorbed from volumes as the quarter. production from business. software our was in XX.X% higher the fourth quarter, manufacturing up overhead products revenue the our XXX and comes The basis margin Gross points the

on year-over-year. business the was XXX the Gross professional strategic as being services points revenue fourth we margin the million in $X.X quarter, X% was selective more in in down professional services quarter, XX.X% Professional forward. services basis and moving up are year-over-year

as was change revenue Now from at full-year reserve million, $XX.X a up subscriptions by above. XXXX software basis. XXXX XX% the result year-over-year discussed impacted revenue on was XXXX the looking In

XX,XXX and the of to we per half quarter solutions During the per year for added the year. XX,XXX XX,XXX our from year, first the in XX,XXX we accelerate of subscriptions half to the saw rate creative the the XX,XXX software year second quarter in during to

factors and We including subscriptions the promotions. expect number releases, of see on seasonal variation timing quarterly of the buying new patterns multiple to based in new

down legacy $X.X smaller decreasing revenue million issues a in We $X.X was million. year-over-year. see in XXXX. The the both $XXX.X impact X.X% having Maintenance from impact revenue was much and million XXXX, storage non-cash was impact

compared factors, to two flat these XXXX was XXXX. maintenance Excluding revenue in

Total maintenance maintenance XXXX declined. growth subscription in the and the X.X% increased by as revenue subscription exceeded

$X.X continues down perpetual revenue subscriptions to was year-over-year perpetual portion to for customers subscription due grow, of selecting rather licenses creative our revenue license a While products. than million software

was million as points year-over-year maintenance from $X.X and year-over-year up integrated license XX.X% The audio or both in XXXX software the and well million software storage XXXX. was benefiting over from hardware revenue in XXX X.X% margin improvements company's $XXX.X graphics. products up as XXXX, during Gross strength in hardware basis and

XXXX, quarter the being integrated visible up points Gross margin and the margin to chain started a in from basis in third XX.X% benefits as quarter. XXX from after hardware products transition the was software over supply the in fourth be gross the XXXX on drag

XXXX, XXXX revenue business selective XXXX up as scoping strategic year points basis and generated from professional services due dollars approximately business. than on XX.X% gross year-over-year was improved was prior professional selection. year-over-year. project We services more to Gross in margin the our being down services million XX% $XX.X and or $X.X margin professional services business XXX more we our in Professional are in in million XX%

and to recurring Now that revenue continues to our The revenue of recurring ACV. is steadily increase. moving percentage

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

increased our the Recurring under revenue revenue stream. maintenance exceeding long-term and percentage to revenue in subscription increased agreements, due revenue decline

we will We quarters. seeing adding X% to the time, and we way next we achieving in revenue expect our the well growth percentage increasing given be in on to recurring long-term focus over our are recurring revenue subscriptions new agreements and believe of continue several

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

and to the end cash free by in At the at period from quarter. ended the balance $X QX, up due sheet. refinancing increased fourth cash year $XX.X million of $XX.X XXXX accounts up million a of at million from part had due to $XX.X December of balance billings We up XXXX the to $XX the XX, million, we XXXX. end moving million repurchases of XXXX the costs. the and Cash ended flow Now during million debt with from the $XX.X during timing year, of offset receivable, balance

was XX, the Inventory of $X.X fourth million XX benefits down and XXXX. the million December from levels were million supply at the quarter, Inventory over $XX.X from transition. end down $X September down due to initial chain

levels chain. to volume over inventory lean reaches supply expect move partner to our of we down new as take quarters continue and the the next new We few manufacturing production advantage

million, of December of assets million $X.X at $X $XX.X XX, subscription December XX, in during $XX.X $X.X and annual and deferred in subscriptions. by paid primarily in an services to and Deferred IPCS from XXXX Contract increases XXXX million revenue million revenue increase from decreases due revenue monthly to product deferred increased XXXX $X.X in $XXX,XXX non-cash $X down was million offset deferred deferred maintenance in revenue part revenue. in professional million million

end convertible June $XXX reclassification long-term the down remaining of from from million amortization of December was XXXX XXXX due term liability. down due XX, debt notes At XX and current September the $XX.X to in $XXX,XXX million our loan from XXXX our of million, $XX the to

cash comments, and continue from again, quarter compliant of the hand. expect to fourth have end leverage at significant to on convertible moving we which with plan We, remaining XX, retire to the were notes or the We cushion ratio XXXX forward. our with prior June our at

is we improvement from net material significant to our adjusted areas saw these XX today, X.Xx our the metrics. improvement in few During improvement Avid in last seen debt quarters, a a ratio and ago. EBITDA credit X.Xx, months has

in time available positioned Avid's its to debt options and lower us to improvement credit Avid carefully to is believe we favorable and cost more profitability track today. Given we the continue over of metrics, multiple well

free and such flow. funding the interest in should Any of in cash improvement favorable our cash expense in reduction result annual cost reduction in

will objective in to balance interest and strengthen down Our to sheet paying continue XXXX be cash our by reducing expense. debt

to turn Let's guidance. now

are any are we That strength potential in track our We impact underlying as we the the in our said, situation of to confident business XXXX. COVID-XX enter business. evolving carefully in continuing

of Asia any supply transition lessened chain felt date. to during has our out otherwise of we XXXX Southeast impact may Our have

to timing nature. as However, risk evolves be the situation QX downside, of extent differences our realized quarter which, any to COVID-XX. to risk the be the Accordingly, potential as in ranges the widened guidance opposed likely have to the of we for would results permanent there given could our

Recall first not is dollar storage benefited quarter multi-million XXXX a from we large the to also that that in of likely order this going reoccur quarter.

Given this, $XX guiding of million XXXX revenue quarter million. for the of we first $XXX are to

million Our guidance $XX is in $XX QX XXXX materials the million. subscription plus revenue written to

press release this as a scrivener's error However, million our there for and our official QX XXXX revenue category. guidance for subscription maintenance is in $XX to $XX.X for million was

adjusted million. XXXX to EBITDA million guidance QX Our $XX $XX is

our we our annual reaffirming time, also at in guidance this At Investor that XXXX Day are we November. provided

million remains and Our XXXX to to XXXX $XXX subscription remains income per our cash our XXXX $XX million, revenue $XX $XX guidance guidance $XXX to flow to million, adjusted million guidance $XXX XXXX $XX share. our million to our guidance guidance $XXX free is remains XXXX million, $X.XX remains plus maintenance non-GAAP EBITDA $X.XX net million per million share

With call the to back Whit. that, I'll turn

Whit Rappole

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

Operator

Instructions] from first [Operator comes Samana Samad Jefferies. our question with And

Samad Samana

questions. taking kick will Maybe Good my off. and for Hi. thanks I evening,

Jeff Rosica

Samad. Hi,

Samad Samana

Avid just in I now customers was maybe with And for the few off approaching think XXXX months Microsoft. of news and other if you're curious last the I'll seeing the big kick Hi. on tailwinds – Disney the I'm agreement similar from just type like maybe from and generally then questions. have there. of and what enterprise of kind deals looks a what acquisition seeing then I And customer as behavior that, of a follow-up the of – And just couple momentum side? you're dovetailing kind with

Jeff Rosica

Yes, absolutely.

So, Jeff. is this

we in think my on I work we mean, on to able go their But the and Disney. we continue along mention we're we're their companies to with work with pretty similar far in with are at the Disney working comments I do not I media companies them to with So, are front. mentioned activities continuing what things in those obviously well. other as moment, that doing

the we we're like seeing. So, progress

going I it's think quite well.

in near-term, building. do as mild, in rather as couple see activity, as – mentioned you forward but we say years. building the we is next far look we contribution perspective over the I'd As quickly be it of revenue will that if the the

now with strategy. think think, situation a the coronavirus well, cloud right I I that's the happening current into play does situation

lot of business only we've companies talked collaboration tools workers I capabilities they of Avid That's even A remote takes the remote know and about a and strength before that the about continuity of how are cloud further. Avid. worried have enabled.

And work bring people business really is how that going I continuity extremely that well think, for strategy. to important, think I does, and have plays you're more is it workers the life so into our remotely important,

don't and Avid regard. want benefit does the So can a as in what this of to from do I what industry much but cloud remind frankly I crisis, quite think it

been that's a benefit. So,

were growth of mentioned, a I The saw We improvement see larger quite the ones – larger did the performed think flat sequential in medium general solid XXXX, in enterprises definitely QX though as QX. though small they a and I we well year-on-year. year-on-year. in

great So I of we've customers. think execution wise lot a those seen from momentum

market. I there'll some think said, I lumpiness in be As this

from timing. time-to-time, about that more to happen but it's expect We

our business. good So side about overall that we're of feeling

Samad Samana

and I market script in current in that obviously, the the uncertainty. comments factoring the heard And guidance around Great. were

Jeff Rosica

Yes.

Samad Samana

company narrowed have heard that behavioral you changing And widened COVID-XX, has about kind help changes could what's guess in But it you XQ think for just us guess, modestly the say I telling range. the fair that that of one, ex think any assume travel with we any guidance I can you I meeting to whether Ken, they vein, change. been so guidance, understand; or about is that that probably up then XXXX? if would bumped out made it's we about or range can't you it salespeople as customer maybe going think if you the

Jeff Rosica

guidance answer Ken So, the part, let me part. answer I'll and first let the

said, contractors, – of being customers our we're care own and I staff a we're something. carrier sure We also one of isn't our sure it's the I mistakenly and our too. to as want the our priority making employees but on that the number So, change, is behavioral staff, make think safety our yes, of taking

we're being So careful.

moved have or business business – travel. critical I'd We important business say to

the what's to necessary remote and with our execute customers' and we're So and for team connect being doing more internal we've meetings, We're projects. lot of to especially exclusively. even conferencing using more necessary know execute to business, doing is on we are customers on what's do but virtual technology the the video selling, I to moved careful. to almost a sales

I So, works. and tools of company real lot been in don't selling, our there already remote the our a any disruption. think use We has in way

We've not had massive near-term. just little that's that a change. a into people So, lean bit the in more

I don't guidance. to the speak know Ken if to you want

Kenneth Gayron

Yes.

good feel meeting in business, So guidance first our piece Avid's as we overall streams, we November as revenue full-year disclosed on are and business. Samad, improving our subscription expansion direction the of analyst recurring of about the our rapid the our reaffirming guidance

given the China minimal of in short-term. from chain going supply move supply have assessment is that our to Our the Mexico, risk to chain current we're

the certain reflects a a guidance orders, with some to which could as $X a timing of quarter we the this by be impact that result, would COVID-XX, first And on receipt respect widened we've temporary issue. provided Our range million. potential have uncertainty of but

of did business direction the feel with overall So reaffirmed respect that's full-year to good something QX, guidance. we the and that but we about

Samad Samana

Okay. you retiring converts. Maybe But along. on the and mentioned of pass maybe XXXX it I'll the one more for me rest just

cash wants in make, maybe philosophy we the the intermediate capital So company how management know the flow think about term? should are to nicely, I free given flow that there generation but I investments the pullback for just improving the some around free ramping the nicely. maybe the is guess stock, cash

Kenneth Gayron

Yes.

capacity liquidity of So to plus call $XX maturity of $XX revolver the meet generate from free we have additional over this, convert hand, $XX it on of million comfortably million. significant flow million cash to cash

of in resources. payment, So have terms that we sufficient

execute we to to will expense through company delever improvements EBITDA. during markets opportunity different sheet interest an want evaluating of our flow options capital and XXXX. and to the over the reduce terms cash to time the Obviously, our in we be upon In improve of balance continue see and company that free

Samad Samana

Great. That's back the helpful. queue. I'll in get

Operator

with question Nehal Group. next comes Chokshi Maxim our from And

Nehal Chokshi

great a And Thanks. and great Yes. here. quarter stats

you modest you're guidance decline. subscription typically for to here. growth I flattish On the think But [indiscernible] the a slight maintenance, and guys see guiding toward

So I here? driver think of that's is above the high end of the the historical this norm. What

Kenneth Gayron

Yes.

XX.X% were would subscription up the So and QX QX. in say on results our I maintenance,

only continuing $XX is tighter the which right in here not range we we're is maintenance that see the that we non-cash but is $XX.X for see subscription do that As in and an direction, off. moving believe storage we provided, from today, in QX to piece million right impact that the having the we that as running guidance we legacy less us product at sit our of million revenue,

overall leads significant high stable, QX. us the in So and we which maintenance for to guidance relatively then growth single-digit see subscription,

Nehal Chokshi

maintain of subscription the that correct? Sounds in is like adds you're expecting to rate the XX%-ish range,

Kenneth Gayron

subscription, Yes. we the and recent I continue the last QX. two say about in that to good would performance in for feel quarters

Nehal Chokshi

on And subscription ongoing mention that's expect on XX% [indiscernible] did growth billings that, you going here. have you you and growth, Okay. growth strong did so XX%

here bracketing? just and about frame us also can what on help bracketing what XX%, think going So XX%, for frame you talking we we sustain billings that or subscription do Can growth? bracket time Are XX% means about? are to XX%, talking that you give some and the are time you XX%, we

Kenneth Gayron

continuing point our seeing the our see feeling of last The in plus quarter strong, the driven by was high-single and subscription obviously, growth subscription for maintenance in that this year. quarter. trend good maintenance. growth kind in the of XXXX. We guided in we're and in subscription elements at digits We subscription stabilizing about XX% I'm the very given the that that business the maintenance

and move right high point the we'll year. and revenues point. moving in revisit this this feel at I that that very But through the quality good the to reaffirming we're maintenance we as look number about subscription At direction for Avid

Nehal Chokshi

the And ACV to X% And as the and well as LTAs. year-to-date well. as growth from growth think due the the of average quarter in subscription finally the in accelerated X% that's around acceleration I Okay. year-over-year then XX% prior

a you the and was at numbers? was remind more little us color year-ago on it So quarter a the quarter Where where give the the it can and ago end LTAs? of

Kenneth Gayron

say, So – just what I that's subscription the continues now subscription on we be by revenue revenue normalized point, would expect. that's was first on impacted the also – on reserve, and that to your

catalyst be for a subscription higher year. should to that the So

see the main from, increase you we would did of I terms a XX% the XX% were at year-over-year. subscription in it then And In when ACV, say, year. of neighborhood for the components the driver the and of look was the up LTAs

Nehal Chokshi

Thank very you Great. much.

Kenneth Gayron

maintenance. That offset decline in the

Nehal Chokshi

Yes.

Operator

Steven Instructions] comes [Operator question from next Dougherty. Our with Frankel

Steven Frankel

afternoon. I about that the the supply around numbers? what many components supply of understand your chain, in hit out those China your your China, Good but what's from and moved given your QX come to comments need of critical component? of visibility you've you production terms of How

Jeff Rosica

we shape that. that first those. need good are some overall Steve. at we're have commit that hand. commits from China. Right feel now We've Thanks, components the subassemblies need. I'll This that the come we obviously on in got are we it. we that about looking half good on There Look, the is We're answer they and/or Jeff. and

in we're either – shape. they're again They either So committed or good are on hand.

in out very looked relatively little at we worked plans, situations in source. on backup build – of little – And where we come Even cases we comes had that we China, actually have China.

So small that I maybe at we mean, I feeling but with, have think we're good to okay. things overall this point. there deal we're

Steven Frankel

to in kind of the a number. of on year-over-year and relative back terms us you activity want But basis, or QX address Okay. And in look dollar to LTAs, LTA you what full-year like however in QX subject, did was going either to gave number expectations? the of kind the the how the that value, it, in your

Jeff Rosica

QX mean in In we're this improvement not comments. a them that several publishing mentioned, million area, numbers. – the I as was Well, my were I there couple in a of say dollar exact we LTAs. mentioned had I'll from

comments So two those was I there contributors in made.

license enterprise with We a helping growing grow solid or see enterprise agreements just of really long-term trend. that agreements trend the area

signed I agreements are also there mention School, that multi-year yet. to around we we As mentioned, signed that weren't LA able YLE where Film both regard others

the QX lot good with think and can I a So made it. people will up new in because we're progress strong sign be year. of happy for coming for a quarter quarter the agreements we LTA

at the again always regard, tentative people the sign and in because of good up year-end that to QX be So QX rather just us or start can at year. for were

Steven Frankel

we about decline committed think how year-over-year in And contractually should Okay. the backlog?

Jeff Rosica

you I'll let to do address that? want – Ken,

Kenneth Gayron

Yes.

that subscription That growing that of model backlog the through move of we business, in Avid of a progression rate resulting which the the that really terms mature. on headwind our and – There in ACV. in higher is and multi-year we is our elements So is are our growth backlog. have business said as we some agreements margin

Additionally, we growth. LTAs XX% about where the over talked

ACV. our that's So helping

Annual $XXX contract Contract growing recurring have that the we and when on million the focused then year-on-year we're started That's So under Value. the is year, number that I revenue.

comfortable are – with internal positive. along of our terms pipelines the get that's I our all what with So in forward-looking metrics that

our on mature in those focused just forward metrics contracts we're why that's go as look through, we that's as renew. issue that multi-year they timing when The So business. those

Steven Frankel

– not then a or front the impact? QX and know QX. does but What think hard us payments of to past year year? giving of of in how year moved out know QX years we What the we're and free or the number you cash you're QX during flow And them think between I should in half, how in I Okay, I split totally flow and see? last thinking going either that are you you've bonus of cash this

Kenneth Gayron

a free for quarter toward by be flow I a And we end payment positive be then XXXX. of the say our will year. lot flow impacted a of cash cash QX bonus will free the generate QX would Yes. and seasonally

continue. that cycle So likely will

our since Day. basis improvement will year on see XXX elements team, LIBOR, a and the which has those we Company's in cash interest was – decline this expense, cash points as interest already We metrics Analyst flow But our our that capital drag based a free that help year, declined and the see credit expense. which the improving working for on improving the

cash higher in drive two much XXXX. profitability plus So conversion elements, those improvement flow free in will the

Steven Frankel

Okay, great. NAB And participate noticed of process whether more to as then couple not, companies little maybe dropped more I your thought today? a or you in just a around out

Jeff Rosica

Yes.

think this in Customer Jeff. Avid Directors is make a customers Hi, Association in Steve. So decision NAB right our look, the the that and Board of we're now we employees, active with is partners. and of Well discussions interest to best

We what at – NAB make our Connect. about participation participation be an announcement regarding we'll later and doing to our week expect this

have I I say lean But to going to little with tuned. generally more think stay to probably a decisions. we're So would be safe our

Steven Frankel

you Yes. much. right, Makes so thank All to sense me.

Jeff Rosica

Yes.

Kenneth Gayron

Steve. Thanks,

Operator

next And Josh comes Riley. our question B. from with Nichols

Joshua Nichols

you to Media And great cadence expect see Composer split Yes. strong revenue growth subscriber Thanks Pro between to the question. through like it and my for subscription and a taking looks continue kind for of the fairly XXXX? Tools. even like that Do growth

Kenneth Gayron

terms on SKU That up the growing Well, of rate the Tools. the I the would was Company in fastest say Pro done match the with now Media we new seeing release that until in subscription. second the was half said, Media this Tools of of QX, second had year Composer the the as growth year half are Pro Composer

both continue have the our are recognition that – brand those market. opportunity continue the near-term. a great in in should of to have We to growth to in which rates expect accelerate significant we obviously And SKUs,

supporting So on marketing an some the acceleration of that an marketing driving functionality that we'll team continue to and job growth. is be doing incredible digital are adding efforts focused

Jeff Rosica

I will QX. Media in Composer and as helped was can I think it we see say, QX be will if

you the has Media that launched a of competitors if new more about, more lot specific we to don't product we does and we our benefit which subscription As edition, the on our lot that. Composer or talked Tools offering also side a features Pro – remember, we're Media very have. Enterprise a enterprises called enterprise expanding of Composer than And

So in part business. growth that subscription the our that of help does

year the throughout that will valleys think I peaks generate think be There'll we'll and that. the overall growth. I with see help enterprises. But

Joshua Nichols

the on also the really about And else you Is to could on these offerings it's half. call, talk there press Composer planned outside anything about that of you second with some invest continuing in Great. you that the expected whether software in the side? hardware have kind Media or talked then release in of for of new R&D offering the and release,

Jeff Rosica

that the it to we're of what whether in the software would suites, suite, continue subscription keep will platform we the and maybe haven't suite driving in areas video the with R&D say overall. audio public with. around I looking a little kind say be that I'll to more Investor we're software innovate not and clarity, we the our or creative suite, that for to to going clearly to we're about R&D creative gone in growth we pre-announce But areas in make investments things those repeat I'll talked Day, at investing

growth audio solution the as you – we're the with with of growth really lot drive and along the lot on to there, of in fast In growth Pro of Tools integrated work business been bringing our that doing have our see the a to of we audio business making a of know, business. a a huge side back opportunity in work lot audio part

see on products front. You'll continue coming new audio to the

of that R&D around a see lot will you hardware. front, instead necessarily cloud is media – front video the On lot a of of

of a of cloud. also We around see on have interesting a that and us lot storage. innovate lot storage side we innovation around will to innovation around But doing collaborative continue you'll

Joshua Nichols

for that. a XQ question and just on you for side I little And me. that I items, through Could the one-time color right? to it get on sure the provide know couple how And was bit going want more OpEx a year? make like XQ last you the then for think additional I Thanks flow to that's of mentioned. detail there

Kenneth Gayron

Yes.

continue and will in bonus provider the to and The transition the were the XXXX. seeing differences. just with then we So up to and were webstore into transaction QX $XXX,XXX, that R&D we quarter commissions will and that the that XXXX did investments roadmap, start in savings respect fees product fourth a new timing

come $X expect in QX from by down million million $X We to to QX OpEx to dollars. the OpEx absolute

Joshua Nichols

Great. Thanks.

Kenneth Gayron

Yes.

Operator

Gentlemen, there questions in the at are further time. queue this no

Jeff Rosica

your to good appreciate forward Avid We speaking we to and the look you. again in you Thank interest evening. Have a future. in

Kenneth Gayron

evening Good everyone.

Operator

today's concludes call. Thank This you participation. for your

now You disconnect. may

Avid Technology (AVID) 9 Mar 202019 Q4 Earnings call transcript