AVID - Earnings call transcript Q2 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen, and welcome to the Avid Technology Second Quarter 2020 Earnings Call. Today's call is being recorded. At this time, I’d like to turn the call over to Whit Rappole, Vice President of Investor Relations. Please go ahead.

Whit Rappole

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

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

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

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

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

Jeff Rosica

Thank released and and for we've global more pandemic. us facing thanks of making as the speak to result that second the joining today. we review pleased earlier about Whit, to the difficult Avid’s climate results a COVID-XX business resilience been you you, We're company's progress quarter XXXX the with

calls, we transition in discussed increase As in business we recurring our been revenues. Avid, emphasis as software a prior on we've and in our subscription

our our customers we Gayron, with a reputation same better will our and future. At mitigated the for of the the continuing on effectively of on manage positioned or and of management efforts and review produce respond through COVID-XX, aggressive customers This by challenges customers of deliver COVID-XX to that adjusted and can we at transition content commitment to to created the quarter, in we the consumers profitable most quarter our demonstrated reoriented we've the demand. strategy The situation years. rapidly and high-quality help the continue to appropriately Avid, three saw benefits comprehensive time, further company's we've and with they with position effectively far types. cemented out pandemic and play so planning to second begin we teams adapt profitability Across to impact change thus really the the the delivered effects the business with Ken our help environment, becoming our pandemic we're along results Today, our CFO, how QX actions. Avid’s and global all

our and to and streams long-term way effectiveness In and of recurring advantages continued customers. efficiency strategy increase work grow and serve our in we strength the addition, we'll discuss the revenue our

with Now, let's QX. from the takeaways start important

the working adapt COVID-XX caused During customers by conditions to the the Avid work second industry continued media quarter, our situation. to rapidly and new with to

came portions related The given non-recurring to on of for strength value product year-over-year revenue of agreements first like the in from expected The grow, Avid’s are of recurring business and many quarter. increasing the end annual that quarter to and around the continues we're in lead professional and contract total is continued second business. parts the globe. the our the side headwinds performance persistence so in an sequential However, through decline and challenge our business greatest positive more year-over-year at This Avid’s quarter even our second subscription facing maintenance over slightly the also to sales the revenue services from revenue quarter. for the up and climate long-term X% of our impressive QX. others the business impact started revenue The

fact, five with quarter to agreements being up for expect partner a we revisit that recovered. once strategic renewed renewal In market purchasing end four and the one renewal the were has that that we of during lifestyle

focused We and able both industries. were disruption implemented In also spite the extensive one and results. deliver savings quarter to purchasing margins the of sales revenue cost strategic during of systems efforts non-material integration continues. early of property execution the largest quickly improved subscription thus the expenses during to cost company quarter, as global quarter, the the the and profitability added in in and and second global improved significantly other And disciplined to serves on across we remain and a the quarter yielded agreement and that entertainment in in our the we strong partners growth revenue new media lower with the

will of Our pandemic forward, this revenue through savings we year. also spite rapid only the weather half second financial benefit our response helped company in associated COVID better persevere not continue mitigation performance, to We're contributed the going confident anticipated and through to the as but the to us that developing programs of headwinds. cost the QX, to measures pandemic the

of business, revenue cloud second contribution services the tools. I quarter mentioned, again, software COVID-XX over our see started revenue including for by as impact revenue to XX% business during then recurring creative continue we number portions the of to signed overall demonstrate to cloud growth the we that major the We our increased see in from enterprise agreement again As with at subscription and revenue be our the a of the company And which grew as to as rapid the subscription XX%, in In subscription QX, quarter. has subscriptions margin combined paid from non-material improve from shift continue maintenance up first climbed more over performance we points year-over-year, and with strength software XX.X% we the quarter. we coming our to benefited the reduced continued stable expenses to a year-over-year. XXX saw in COGS media our continued and revenue during year-over-year, the mix of Maintenance was in basis strong gross at revenue combined plus growth, sales end relatively quarter.

to million. growth business year-over-year quarter, representing continued e-commerce rate increasing run Our nearly $XX the million to during show of annual strong XX% over $XX an

few our maintenance our license a creative grown Over and tools. agreements years, into the market strategic e-commerce has software profitable and large valuable for route business last subscriptions, perpetual for to

workflows solutions, we see On continue support to the year-over-year the quarter, to for we in EBITDA. in pandemic improved second a remote in increase as And our the resulted the and cloud productions. workers and customers in and Demand remote During significant our studios, broadcasters growth at distributed finally, such gross efforts controlling cost XX% margin the subscriptions, interest Edit adjusted Avid during made from on new

music, continue events our the weaken business, ongoing film quarter, sporting live demand and challenges as During production. of and COVID-related we during encounter portions as the we in disruption major in TV anticipated, non-recurring saw second and to the

subsequently by as Avid’s of demand. channel partners with and as to have Overall, pace many has stocking careful exercise to impacted return by continue the been normal also And are We their factors eventually abate they its that to these production. expect we tight believe temporary our management creativity of the subsides, temporary allowing to remained continued inventory of pandemic the business levels. reduced their orders, industry to

purchases Additionally, enterprise customers and of delayed post projects caused some ongoing of some have television restricted climate by larger to studios their of such due as and pause to broadcasters, pandemic. business some houses temporarily the facilities Avid’s the film access and their

these market customers the XXXX as adapts several very in leads. anticipate the searching and working to closing these second pandemic continue closely We and of on the with as half of for opportunities

XXXX, second productions resumed, but television to progresses. As so continue And we recovery improve our and do market gradual, continue solutions COVID-XX. we a But for the quarter live half we rest potentially as that COVID forward by to as the their grab the and supports of the when as work impacted will to slowly return, to expect environment be amid uneven companies to expect entertainment look the and third live capabilities environment.

as the expected our the paid them recurring our combined subscription this we portions hold that licenses strong will And maintenance We subscriptions to with continue of during our of subscription more business of more offerings expect to offerings, XX and continue up the customers we're adopt customers day conversion to later from and for that the of revenue March and growth, enterprise from including add going April. temporary free subscription to many provided year. launch our

continue and workflows editing to cloud. other we media the addition, to remote opportunity to our In work-from-home, grow cloud enable see offerings through

our conditions, Given optimize remain grow strategic cash focused on has also our on of business. the COGS growing opportunities we profitability cloud pandemic and operating The we'll our high streams revenue the will quality free created And controlling from and remain external market vigilant SaaS. flow. to and COVID-XX these subscription expenses and non-material to portions

profitable in business. stronger our changes ensure as with exits making the market, our of also products a environment. our strategy focus committed were and believe kind to the if the to We're discussions that adjusting they the ongoing realigning on from across more company informed a respond we solutions expect as a in growth the the greater which deliver they're to we’re the media results drive pandemic that customers change we will and investments its post-COVID are process company non-recurring We Avid software profitable in the revenue shareholders, of structure with emerged by industry, especially to and to and to cost necessary

Now hand you, more Gayron, want call with results. that, offer behind to QX Ken XXXX Over to over our the details who’ll I Ken.

Ken Gayron

good you, Thank and afternoon, Jeff everyone.

non-GAAP Jeff be are to quarter. challenges referring above second pleased results the with XXXX, Overall, given As noted our will for business noted. our in quarter business and facing we unless the financial figures the and I macro of

be market non-recurring business revenue negatively to revenues and Our have of remained related portion impacted the weak recurring the continues COVID-XX. by demand to including healthy, external subscription sources, while maintenance

the balance free quarter as in profitability. able albeit we're all on focus these flow the cash in to business our was healthy limit EBITDA, adjusted of deliver a negative the improving efforts, to and second result sheet. managing quarter incrementally on while to the And revenue effectively Our lower

of the combined the million, actions benefit the recovers. quarter XX.X% working second travel impact our to details reductions, of for temporary our of improvement reductions subscription the $XX.X in and strong the revenue bonus XX% a environment was gross million year-over-year decrease perpetual was EBITDA expenses the by EBITDA the decrease year-over-year more the goods and $X.X a cost was impacted and to to income. X.X% non-GAAP prior wage that reductions, Non-GAAP optimistic we spend compared quarter beginning impact year-over-year, as as operating The down year-over-year, was XX.X% – significant COVID-XX spending. a million. as was of first income With improvement was quarter, in were up quarter to taken as cautiously year-over-year, year-over-year. million in use into a accrual $X.X constant of net higher Gross margin second resulting to are $X of from gradually at for efforts, $X.X in million the XX.X% well due of XXXX the quarter, Working now to we've revenue year-over-year, lower subscription down down that, quarter year from revenue year-over-year, the including cash second in quarter, from $X about in and the furloughs of profitability second first marketing lower a The second in negatively At year-over-year on million maintenance quarter, let's $XX.X higher up GAAP U.S. billings, $XXX,XXX achieve market non-recurring million, was and revenue, from non-material position in increase for expenses reflecting working quarter, Adjusted operating million revenue increase second $XX of as per well Operating sold. during unfavorable $X.XX partially us share XX.X% to was cost results. prior our quarter from flow implemented the basis period. capital and million million compared a XXX reflecting $XX strong XX% offset We the $X negative revenue were as Free euro hardware April, $XX.X get capital million change financial was $XX.X cash in at benefits the stronger an up from savings crisis. due revenue change the points should of up of of the margin was of Adjusted up while X.X%. year-over-year. $XX.X mix a year capital. was by million due XXXX. as large down currency, from quarter, sales the margin and from period. $X.X dollar or decrease licenses our an the revenue XX% million million $X.XX cost Recurring the maintenance the favorable external was the savings relatively initiatives margin due

During million in foundation improvement for quarter, payable margins. that accounts by structure to of and free XXXX. a the reduced The cost provides payable facilitate company year-over-year, flow benefited second vendor half higher profitability accounts in the its pricing the plus cash reduction improvement for strong $XX in an

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

to the second term perpetual and the We few product Annual end elevated the of And in the of while half at million revenue from and and XXXX, the product recurring June months to non-recurring and expect portion business, the in on focused revenue XX XX, of continue and months the starts up year-over-year, in professional was due COVID. of first was revenue due services percentage as XX, increase XX% quarter, from in benefiting non-recurring from subscription to lower total year-over-year. it rebound revenue increase increased building subscription LTM ending ending. uneven during product next recurring up XX% we long higher revenue short volatility $XXX believe are revenue the agreements agreements greater from professional depressed and from services to For XXXX. our as percentage long-term revenue revenue. current the we revenue may recurring to contribution levels value quarters term. contract be XXXX, as revenue therefore the is well in long-term the June given recurring, hardware it XX quarter, X% the sequentially non-recurring

The new During was the the renew sound dollar multimillion four not one agreement second we long-term and we agreements purchase channel quarter, renewed strategic market. with five agreement added serves partner or one in the the who did quarter. live

to market expect the this partner live as with agreement revisit recovers. this sound We

of Subscriptions lower an early we In into quarter of users to X% for our subscriptions quarter, and continued was number look quarter, net resilience creative count the up and the XXX,XXX second new to we the XX,XXX software our in pandemic growth in at particularly at year-over-year. than growth of and quarter details reached year-over-year second the increase was streams, XX% ways we up year-over-year. first MediaComposer solutions of our total remotely ProTools continue by preparing end, slightly March. The work subscriptions As onset during encouraged XX% the to due strong the the of revenue new subscription base. the of subscription added net roughly be our in

of only are total second now to to and stream as We continue subscriptions. our subscriptions a customers compared in in in optimize continue up the growth XX% in from July growing accounts grow Lower for continue upfront year-over-year drove months we annual paid represent revenue XXXX, annual The we Additionally, of will when an the more growth XX% paid down towards year-over-year. higher see subscription revenue during subscription in growth upfront to subscriptions of impact enterprise XXX% from pricing up year-over-year of XX% contracts, quarter quality contracts down the in subscriptions, XX% paid Avid, X% quarter, subscription, of were a revenue now with the in subscriptions second adopt models. a year grew cloud continued and monthly subscriptions business of due increases. paid total subscriptions that of for of and subscriptions pricing implement second increased which perspective, million, and months shift a changes, From the early Annual revenue above increase up believe our is subscriptions quality and rate billings a the upfront XX% that share believe paid subscriptions to increase a quarter, for year-over-year we ago. reaching the paid ago. cash $XX.X X% and the year result in annual price to annual share

when the year-over-year subscriptions Finally, subscriptions creative total tool maintenance far grown about the and paid XXXX number in contracts. the users, exceeds we growth the XX% look agreements, has June active XX, active at total both at to decline maintenance as in XXX,XXX,

Now was down moving second the quarter X.X% during composition $XX.X the million our year-over-year. Maintenance revenues. revenue to of

to continue solutions revenue We end impact non-cash through the and of the see flows the legacy declining maintenance line. of for storage slowly that support

sales Excluding to have maintenance maintenance revenue these and first lower in due year-over-year, first product from year quarters. primarily factors second revenue to down been the X.X% reduce would

was and was perpetual Company’s points revenue than customers software the basis selecting to due software revenue software in Gross up our to due The was year-over-year, weakness the as broadcast servers revenue to decline $XX.X on a customer from a live year-over-year in less music substantial storage as licenses revenue down studio license in grow, million and sales products. COVID-XX continues XX XX.X% creative to resulting of of in customers, decisions. due continued well concert year-over-year of XX.X% on subscriptions perpetual The operations margin portion line and in COVID-XX maintenance for COVID-XX sound While MediaCentral licenses sales was quarter integrated second subscription and by into caused of rather perpetual our through the hardware impact solutions by significantly and video audio down COVID. impact quarter, purchasing sales impacted XX.X% tours, decline festivals in activity the on

pushed reopen, year-over-year, did As creation our future the second contribution of The strong integrated XX% And hardware shift quarter, quarter. in lower solutions volumes services as services professional from see Gross personnel down margin utilization. $X.X companies limited higher million revenue the was believe from through in projects and services basis solutions. certain will be comes at onsite points Gross of were locations. ability balance the professional down margin, quarters, X.X% there year-over-year. hardware audio in margin production the we expect business. absorb integrated we services of the with products. resurgence revenue in products integrated content to margin requiring basis as professional mix be lower in software out X,XXX to the improvement through second Professional manufacturing year-over-year products, hardware of points A was as quarter, the versus overhead a in XXX the storage lower quarter, the our in XX.X% down within customer much greater economies was not in

$XXX.X Cash to million convertible As use from of XX, of had in a quarter, $XX.X XX, at notes the cash $XX.X $X.X million, the due flow million proceeds of million March cash we free debt XXXX. total million At down $XX from balance we June million, $XX loan. repay of balances negative XX, offset the to in decreased March cash down from of had XX. and June PPP by

our as LTM in flexibility. leverage EBITDA provide our from XX. EBITDA March adjusted times falling to at a During additional of XX, June our quarter, for amended X.X in ratio to we XX, times experienced credit to with On debt the improvement X.X adjusted May facility the our we net with reduction covenant

falls of by the LIBOR part to second did plus the rate removed basis the covenants, we As interest XX increase also amendment, million, when liquidity points $XX tier of our XXX. amendment below

to However, as path moving evaluate we’ll continue capital of improve our to our cost we continue profitability, to forward. improve

maximum at credit agreement leverage plus in March reported six June levels under June have the from times, XX. our we our of XX. of covenant covenant As down against we leverage With amended at times our X.X X.X ratio, leverage improvement the XX, substantial times cushion

The impact Finally, turn uncertain. continuing demand and pandemic and COVID-XX our potential on still our let’s our to market its products outlook. for business is

for of Given outlet are and a only the official third remainder and the quarter uncertainty, of providing not year guidance. level limited the we providing the

that continue. third current for to the Our during expectation quarter weakness second the we the is for quarter saw

However, even yet we a the on market. see expect recovery to gradual of

non-recurring recurring remain continue well, to of expect We business in our the will that term. portions challenged revenue perform that the near but will

remain subscription We continue expect stable. and maintenance that will will the growth and

grow So combined will revenue quarter. year-over-year third to maintenance continue subscription the plus in

will increases efforts quarter. year-over-year continue We expect savings the in adjusted in year-over-year reduce to and yielding that the cost EBITDA starting implemented operating in sequential April third expenses,

we continue to As could situation our the look evaluate we scenarios in various to out business. COVID-XX remainder play the XXXX, of for how

resumes. to when content remain to and as Although, to more the products the the surface our half for We subscription strive content creators demand ease offerings second We new within remain pent-up relatively deliver to their do expect of expect market yet will audiences. believe we into XXXX. should begin studios healthy and for continue for currently demand individually, restrictions overall production uneven weak certain recovery gradual a demand

implemented will We more deliver measures than year-over-year the during we year expect reductions operating fiscal saving for million expense that QX $XX cost XXXX.

year-over-year both should EBITDA together, and higher for year margins we the measures the cash as free approximately exit adjusted taken in cost that we expect XX% Taken Also, savings XXXX, positive should XXXX. of during be XXXX. will full be we permanent become XXXX expect flow

is call pandemic back positioned profitable Whit. With and a that, I stronger more exit company. Avid to as to the like As so we to cost our structure realign that the turn

Whit Rappole

your we Thank Ken. happy our to prepared That you, go Christy, concludes And now take you, Thank remarks. Jeff. are question. ahead.

Operator

go will from to Riley. Josh you. First, [Operator Instructions] we Nichols Thank B.

line is open. Your

Josh Nichols

couple to management challenging you’re how any and actually question, has as is, and well One Thanks both taking could far be the Yes. hardware ask provide in more as maintaining hardware on and the there traditional you’re what months? color potentially quarter, rebound did that if could I team also little last helpful. storage, very you seeing and And the send, divide outlook magnitude my seeing kind you for the thing, great to of want provide bit what of improving. a for profitability navigated a see between

Ken Gayron

Yes.

general, to thank benefit market you I terms say, gradually rebound over your I we hardware Josh, we has recover. see, And towards we their maintenance improve and continue the perform say, terms would content that, hardware strength subscription expect the that and software to impacted be I we if would of QX expect and due should and So year. to back the continue for the quarter. be broadcasters question. better to then be I been say, say storage in well. hardware, able to QX QX likely, the would continue expect in more in then we then will to to on-prem an audio improvement the perform to a to would to being and the and situation. fill then the to But continue And pipelines, expect the studios well see to of look that to as of half

Josh Nichols

seen this in the gears switching term based. Avid revenue additional is and really recurring the that some detail. you’ve a about longer think I story bit, then for the company’s little And Thanks subscription growth providing

growth half. in you expect back of durable to think second Do the the relatively to kind back stable You the maintain expected subscription you’ve maintenance seen remain year? the that revenue the and to said of half that in the is revenue quarter you

Ken Gayron

Yes.

feel good a about quarter QX that, say we subscription would QX. well very good the be as as I business. So will We feel

we digits. healthy. like, the remain think But, and we benefit And that quarter. bit at low growth first XX% we will a subscription home guidance. working XX% to to plus growth these double little in did subscription I in people will accelerating be our initial continue rates feel general from QX, from in continue of expect to that maintenance, QX be in And which ahead that its rate to

revenue than we So this quality in expected. growing more highest the environment see initially streams we

outlook see and So continue piece to positive that we the of business.

Josh Nichols

that, company in I a for for And then on released there’s new heard call the recently enterprise Ken. offering. Jeff, that has question earlier, quickly able Thanks more me, is to a pipe. a last the over will the the the months so? expectation be more for customers of get larger next these onto subscription What’s how some company the basis XX couple or

Jeff Rosica

I it’s – going to I look, think good a question. Well, think be

going plan it’s been to think to gradual new I but hopefully, we – quarter will So it’s some see, to every degree, signup is our be have quarter. customer every

releases So we of work our be A with platform we’ll it expect lot actually the instant that including product timeframe. are project products the September in forward we’ll the doing from wider of But wider actually and project, them move the to formally third aware all customers there now. in MediaCentral of the form goes across our quarter. lot And of channel then it releases subscription. a partners

where we’ll the in continue few quarter. will that is anticipation trend we’ll the join probably expectation think I or see see a So our

Josh Nichols

Great. the in I’ll back queue. hop Thanks guys.

Operator

take Chokshi from next we’ll Nehal Northland from And our question Capital Markets.

is line Your open.

Nehal Chokshi

amazing video? on would associate what subscription And what there. and Pre-COVID, want the the with percent quarter that audio non-recurring the on you. non-recurring of I portion Thank percent to congrats business focus of though. would

Jeff Rosica

I’ll write-down. let Ken

Ken Gayron

Yes.

you say, at audio the the I when XX% move a in business revenue and the half still is in contributor would video into the as main was early rebalance of say, on into the audio, expect XXXX. line, the storage. growing on look terms of business. some year hardware. we on it that I the we So would in roughly pre-COVID and we It of seeing the of COVID environment are But that was the for the because back weakness basis,

Nehal Chokshi

and characterize what products, the then on levels, – demand when you during how you minus the pre-COVID we’re the levels Avid relative filming based now, also and what saw the to quarter, video would any content is production if then lag And the and Okay. seeing generated lag? for there what’s June are between is has what you

Jeff Rosica

Jeff. is This Yes.

me can that. that see I’ll say actual the And market storm obviously the that So there’s of that with we quickly kind let actually quarter, to no answer data Well, the was that try by are. where all levels comes no I’ll out eye it June it pandemics. of – the this say there’s quarter,

the be to expected is quarter it of production from obviously all So standpoint. worst

as Americas, in but graduate we we in the New bit some LA parts startup we are in are should in even of the to little we say, return better are in it I the are it’s seeing starting up. seeing outside in they’ve quicker. where warm especially may a In lighter far but As It’s are production. work. world, and where of U.S., or U.S., bit little the seeing a get QX, moment, seeing to back like parts they feel other to to ability other people York, going Canada, got production But and a we’re

the quarter than – QX, quarter. saw give sequentially better I I recover So was gradually be what within late very obviously that to this in in percentage. to QX. it looking say wouldn’t would late we a is Even starting

show doing different were to they They basis, yet. do. they’re and want think the pre-COVID. planning give global they’re progress get in making I to it’s are starting we the to or now either produce in to to sometimes estimate work get in decent would that say they way So I have back productions – a are sequential. production back an on But than have wouldn’t I production, that just a

live as someone like produce quick. really as content they usually oriented is, As equipment far a to a stage. soon pretty depends, can they’ve are and be They’ll Others, actually Their after show. photography post-production. right needs when time, that are months shows like serious do be the lag becoming is pre-production need coming in few and the more as Avid need soon, film time the to some us more away shooting the it between that

Nehal Chokshi

and are would market be video of now. just you end does. share what’s it experiencing rate clearly know growth market that the the but market to guys above market going of share my Yes, helpful. right I thighs, and last the just in very duration you to share now That’s has right is market audio? broad-stroke side. you gaining engage on guys And broad-stroke type tough this do help lower it’s the subscription Okay. are share is think on Avid of What question

Jeff Rosica

Yes.

I on There’s a the who move. space. So lot think, video of a well, I have think of sharing you that companies to side, lot room have

more individual high is know. end while you the at share a the lower end, market, So very Avid as has creatives. significant have At the probably you of where

sub in probably XX% shares that market. – to the in XX% XX% Our

as for us tools again, see in there’s lot lower But growth. grow where to at a the So lot are that competing. room the seeing a you of other of that space the we’re end numbers

say. let’s of that creation the music audio say, music again there. side, On we’re at players XX%, market, probably larger the end, of to I’m the the posts and creation, a or up going audio there’s markets. we share market lower remainder I And say, make XX% have around, several would

even lots again, still So interesting. of there there’s

Nehal Chokshi

great. Thank very you Okay, much.

Operator

Vander to Maxim Aarde from we’ll Next Instructions] Group. go Jack [Operator

is open. line Your

Jack Vander Aarde

for for Thanks guys. a taking Thanks questions. my I question start with Hi. I’ll guess Jeff.

any would and to than large specific there customers the two likely a or verticals to based faster there to customer say make from you in ago? customers are that verticals larger in some slower the based then enterprise conversations your a flip are or types or specific rebound a are customers say are So of currently two would purchase your have on that with or And on less multiyear contract. month not – quarters? the any certain or on potential you expected rebounding even on better one end next Are that side,

Jeff Rosica

good Yes, that’s a question.

are the on little that where think I markets, of to They’re going advertising. their longer. So a come markets advertising be a bit lot from probably revenues

white who probably based just return I think require actually a say Those their going a services probably services. ecosystem that of supplying doing, think longer collective, who subscription-based black the it move start content people in will content streaming quicker, or answer. are lot content anything in be come creation going But back or creating of is people subscription to for a turn going investing new already are the potentially they’re constant those the caliber, that faster of be larger slower just that’s models otherwise to to let’s because a things anybody stream or There in are and content a content I’d a that’s business will for and business are service off. than I say But larger as if to in people to space. investments. not percentage them in advertising, a making

markets a quickly. And more moving so those I are think little

public the We or the of some the Those are to markets domain more around starting end areas. seeing see already. type government are once two world,

that have you How it about? at So depends. nuances much of when a much There’s is with are into advertising you’re if of based a recovery production it There’s full be post-production your subscription is, I you’re that. Hollywood, And business of that based. think how what you lot their talking with is of swing. to go lot metrics and really look country a working is on obviously, back course, provider going gets

Jack Vander Aarde

Great.

very And guess then question that’s a Now Ken. for I helpful.

or zero, million you prepared in savings, a XXXX $XX that in Did or that’s that I to hear the expenses savings I of cost profitability plan your or XX% or $XX as six Ken from correct? remarks $XX of for XXXX? benefit correctly, good permanent be reduced of into So that XXXX. so so will so. chunk Is million guess about, is this operating So target cost which head million

Ken Gayron

correct. that’s Yes,

was areas about we’re a certain want in savings the to We from We million making XXXX. feel those of savings. to realize believe benefiting the We permanent will that that’s programs. roughly we’re movement OpEx and majority the of cost good $XX try XX% those. So be in

we of structure continued in drive saying our shareholders. feel XX% improvement to cost our So we comfortable in what for profitability XXXX, as want

Jack Vander Aarde

I of savings helpful. to opportunity. Thank then, some That’s did savings guys plan And you it, case I for part you. the was costs think missed – in Sure.

guideline as any you sold well? would the $XX or that savings And experience be so about heading million or sold into then percent XXXX. of have XXXX was do savings cost permanent in what framework it or goods think you line? Did I from for similar the any of goods target for guys cost as of

Ken Gayron

the would year. our Yes, say, I was million goal for $XX

track. on We’re

this And We’re us would I actually be basis a good points can from year-over-year that, in our for I you see XXXX. in COGS. so ahead gross results. estimate on QX period. on slightly that’s in gross margin, probably probably in our that based margin XX%, XXX XX% the point general, say going in the would we’re to XX% area the say at to was

number. the getting benefits of are negotiations vendor that drive We to continued will continue that

that for estimate have So XXXX. an you that’s for would

Jack Vander Aarde

Okay. XX-Q That’s points the product gross one just the at And more helpful. for margin about three that for noticed looking sales for I the so – I’m and me. or the XXX contracted through basis then months.

this how other pricing scale? the such or as like wondering due that. from Just product lower factors is or maybe like of how much costs pressure COVID-XX just related temporary less due absorption essentially actually much or business anything to is to headwinds the fixed to normal discounting revenue Or

Ken Gayron

Yes.

margin, business, So we gross margin overheads. product when the which look and at obviously then includes at both product look we our

held a And was our Our is margin storage. to pretty was audio, which by that margin more well. product shift in impacted margin mix year-on-year up lower

down hardware side. margin, overhead feel absorbed, about. So not we’re good when obviously, product the we the The really in revenues are

that as the – market that should a gradually see business overheads rebounds hardware is the – margin has in are absorbed. we those large I as fairly will So increase recovers?

health and market. we But expect the pointed recovery, in general, gradual be of are that we’re As I out, it a Jeff could uneven. seeing

we to as improve overhead. So, the the as side because revenue gross should well, able that improves, in absorb fact, see on hardware product margin we’ll be

Jack Vander Aarde

EBITDA adjusted follow-up it think that formally about the XXXX? Is of then higher too. a year-over-year. gross And which as explicitly, year, not that that Do target you for for product you said, expect you supposed versus embed in EBITDA that sort or into your to – adjusted margin but kind just XXXX actually up margin expansion digging is Okay. comment be I to of and

Ken Gayron

Yes.

EBITDA this benefits. we improve year year margin to and So was can quarter. expect we Obviously, margin the it – X% EBITDA see adjusted was XX% this you a ago.

that improvements well that’s on higher structure, to COGS, the see that’s margin in in favorable the cost gross can we’re higher making driving the you quality revenue. as the the improvement addition profitability, So as the driving

to goal. improvement half expect to the get our So, when we the hardware help we in look – think margin about some in year that margin, the back of

fourth So we to to there the that those recovery get really that in is – quarter is some expect levels.

Jack Vander Aarde

guys. you Thank Fantastic. for questions my Okay. taking

Jeff Rosica

Thanks.

Operator

from we’ll Samad And Jefferies. Samana to go next

Your line open. is

Samad Samana

for my I’ll has changed. maybe Thanks taking Maybe start Hi. on pipeline evening. Good questions. the how

the effect change But now announcement, that look the that Now wins months of – having know partnership content that from I’m drawing into removed time, lot a some received the and providers deal curious I of visibility a intended Disney/Microsoft that’s several larger world. I pipeline. of lot know in we’re the of at if

Jeff Rosica

Samad. is Hi, Yes. only answer This you. for Jeff,

while trends. the had think I impact yes, at the obviously intended beginning, – we So upset COVID of the kind very

as there signed around agreement to Where to QX. as heavy now. that work half. started company yet, two, in that another mentioned, see those that we’re that the named with lot but company are others we we they’re those that convert of companies, continuing those maybe we stabilized we’ve amount QX to revenue second – in And it’s size contribute of media think as and hopefully was – the signed an I And in are significant around a world pretty customers haven’t major not the in large area. starting in to

to doing need bit is because the prove all can the you in and different going do doing cloud. well. go POC is very work do they what you you process to out a But things little of through Something that a that cloud in

And busy They’re of some are quite overtaxed. almost is is the we improving. from team Our so that’s converting working, that process funnel.

I with it. so pleased we’re think far So

Samad Samana

of entertainment, back much Is media. addressed just that with of apologize already the how as other and pivots it’s even at some about maybe coming forms and and you’ve areas think that And – if Great. back a solve this. I of though being use I but think – or Avid should for “bubbles”. to at live or all? not instance either in versus these in-person, we NBA But if maybe spend driving you that’s opportunity that existing that how product allows from that purchased least short-term at maybe kind some guess, providers incremental about I new maybe coming

Jeff Rosica

depends. really above. it think I all It’s Well, the

have they back, say advertising getting by back, recent would customers revenue spend need even they you’re until in if good, recently, proved the short-term. sports Some not off they’re there the advertising or to general, new isn’t in stands, invest. things back, I because getting so revenue. don’t it’s generating Others still put fans maybe the to in upgraded need have a lot getting

when getting times eyeballs, want at they day those back those of to or evening the TV You’re eyeballs.

eventually economics it’s So going those I to default the in media think helps of the advertising help revenue, broadcasters companies. or by which

return a good is and thing. better the faster us. for return, that’s more the it The the the So

As the far map. over all as who needs again, it’s equipment,

Some people needed immediately.

waiting put little additional get help to or are Some something plays whether people us out. to upgraded bit already have Others season given longer get contracts to something the a in. see

rights the that, their better. is But the environment. sports people where the or to plan gets what back So particular their again, is on own more are of answer into for who some broadcasters the general really production, that the and depends it the

Samad Samana

safely, more I as Right. as for rooting else’s along is with everybody soon possible.

adjacent six safe. terms is And hopeful. Avid type next bottom maybe maybe balance or opportunity to the pieces How for think how of cost think that is in the done to any a sheet whereas be – company’s of in where environment balance your cutting obviously maybe But smaller tactical we’re keep we the for then, line months? good and shape. this competitors sheet some the should might M&A in about in the XX benefit we lot there opportunity measures struggling, has company should So about of

Jeff Rosica

to would I specific nothing There’s specific about want wouldn’t it. I Well, share. be

company on what present the now, to we’re in the market attention. is right see paying those stay us. I I we’re pay you’re and cash think flow the attention profile going don’t and immediately, But do present any I’ll keep right technology opportunities to think themselves. our I to but opportunities obviously in going they’re eye are happening all what’s profitability interesting a Look, execution likely say may to profile. got near-term, Avid, and we’ve eventually to generally ensure like is this, But like be going to it those themselves. market focused on think

keeping We’re our eyes open.

Samad Samana

seen cohorts, more Got for one’s impresses. the be think area think you. retention about But as you. probably Ken, that any an I subscriptions, amongst this I And in you to continues cloud have And terms that patterns getting versus of months the along. maybe changes the as the different have or stabilization signed gone think of cohorts more signups. March the of any about end as you And the customers or you at is there

Jeff Rosica

We’re Also there’s paid annual actually annual the rate. retention stream significant overall that And monthly. of strategically we’re more revenue the of in quality business seeing in an terms environment. pushing side this monthly subscription during improvement the in a of versus paid rates the on improvement retention

strategies pay two annual. customers, to push annual continue those So to people keen nurture to

and will felt subscription, to kind very We’re rate an business see we Because that. starting to it improvement of important the that retention piece of and that’s a well. continue do in

Samad Samana

always, floor taking the I’ll I you my next as the feed and appreciate Great questions to person.

Operator

like back And questions we the it further to time, At no Rosica queue. to Jeff have turn in I’d this remarks. closing for

Jeff Rosica

thanks you, operator thank and Well, everyone again.

about saying, the by close we opportunities for just let me Avid. So enthusiastic remain

and as to We’re cost to efforts post-COVID in top opportunities we’re strategically in operate business committed our savings positioning given the expected supporting of growth COVID-XX looking we environment. the on the remaining capitalize And Avid pandemic the the current environment. the forward vigilant responsibility, we’re customers to our through

So thank you again us We hope joining to today. speaking others safe I remain and everyone you to for And forward look our with investors, and analysts healthy. will soon.

Operator

our conclude call your for does for And that participation. you Thank today.

disconnect. now may You

Avid Technology (AVID) 3 Aug 202020 Q2 Earnings call transcript