AVID - Earnings call transcript Q3 2020

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Avid Technology’s Third Quarter 2020 Earnings Call. Today's call is being recorded.

Let me turn the call over to Whit Rappole, Vice President of Investor Relations. Please go ahead, sir.

Whit Rappole

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

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

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

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

on Rosica, his and President, release of statements, turn XX-Q these report filed the me and and discussion most issued With please CEO Form recent quarterly information, remarks. risks SEC. with see including for For some to with of reports our Jeff let press and a forward-looking XX-K call the on that, our the Form annual today over our associated more uncertainties key

Jeff Rosica

Thank today. quarter to to for released QX everyone us you, thanks certainly joining Avid's with We're review our Whit, we third that pleased and results results.

of enterprise quarter. recurring that subscription business our by of Specifically, demand the on and continue customer started with temporary quarter. our COVID-XX strength creative we start continue business, growth to now some continued driven that software of elements of the our initial But some parts rollout both our non-recurring we're the of And the the turnaround to offerings. our have encountered encouraged revenue the we also in business in did by the subscription product recovery during of the third on business. expect in non-recurring impact demand

more We changes drive have in quickly growth. our will sharply we're business on seeing, the to that even the we the and to believe strategy respond focusing more market of investments the parts adjusted profitable

delivering have product resilience ensuring CFO, We will as also how XXXX more cost work right the position enters our the customers to Gayron, Avid for remain to with structure of global innovations profitable the the effects remain QX results, pandemic on a and hard and Today, our our review Avid's focused better we and to along Avid at moving sure ongoing company. future. forward we we Ken make stronger

serve in to grow discuss streams, our the addition, our to effectiveness In we long-term our strategy increase we efficiency customers. way will continue and and recurring and revenue work

distractions achieved we situation, for the I'm of moment laid against results, these execution the take pleased and Investor out from COVID-XX that XXXX. to spite priorities. we our we at want reflect on I third have outlined a that priorities we these and to obvious strategic we have in results say stayed significant focused priorities the the progress to November Day, quarter toward made our Before into dive XXXX on we

in models. recurring Our most and business continued agreements. by efforts on of make is from year, this and Despite conditions subscription progress marketing our market first area we've maintenance for to to revenue the priority grow this challenging long-term focusing subscriptions, sales

our a the revenue of approximately on dollar number has QX, by in year-over-year software particular, the paid the The success of recurring driven LTM of of global year, beginning the basis, cloud-enabled subscriptions. since XX%, of subscriptions, increased growing As or XX,XXX pandemic. total is our despite the impact

second enhanced is profitability cash priority growth, deliver more and consistent to Our free flow.

XXXX of in during have growth elements the COVID-XX we overall having on software subscription the business, sales. deliver solid an is While obvious continued impact to our non-recurring and

non-material flow. which our contributed on strong expenses profitability, controlling focused operating COGS, also to and altogether improving have have and cash We free

cash many quarter, years. free position the our sheet in this year-to-date that proud of end time we're the while are flow for And in fourth historically as strengthening first balance positive flow strong accomplished QX the cash generation. going We especially for as strongest we've free a quarter into I'm of our

to and investments R&D growth. expense making while operations business improve the to is priority control third support Our needed

We to profitable the parts have on investments quickly the we growth. in of will to believe more market, strategy changes the our that sharply even respond adjusted and business the focusing drive more

secure, to solutions solutions released have and profitability. ensuring also even and company, structure for innovative product QX throughout the will roadmaps we listening is on enterprises that We've will about for flexible right needs also We've priorities. and the to cost We media address help and on ensure some growth to of one we numerous to will say our solution delivering as product product that talk can new I to media final of XXXX. offerings. we focus and And our cloud customers our into But priority more creation enable areas shortly. XXXX and create innovating, the another continued drive continue year, have deliver changing innovations adjusted focused that those to this important we R&D remain new and move spending plans improved workflows. our powerful and SaaS for have sufficed

and past companies, added globe. the SaaS media cloud-based solutions During have early of adopters the large our facilities production post broadcasters at and year, several we studios, offerings expanded across

results. of Now, let third into our me jump the quarter discussion

our category creative we storage This sequential had perpetual strong by the Likewise, MediaCentral improved non-recurring another of sound from for strong which also recovery including release Audio XXXX. quarter, in integrated solutions, even saw quarter, platform. NEXIS our live quarter our reflects aided on though is revenue the NEXIS systems, ongoing performance and the pandemic impact industry. an Pro recovery licenses the newest our demand During strong of software average Solutions tools the the turned during having portion non-recurring video into our revenues

available as Avid us our We're creative with working In ongoing for based for upward our to creative software advantage always tools business, enterprise growth subscription for enterprise subscriptions pleased also to well During subscriptions customers QX as to tools creative growth we in post on quarter, the MediaCentral, of all agreements production that of organizations in teams. their of customers as starting in ensure well tools. and recurring are large signed Sales annual our And resources higher saw types our the the saw flexible with tools value. revenue side success other education. trajectory. sales their we new several individual to of initial with for continued of broadcast, we as very subscription contract are and their way quarter, production in this take

of as during days quickly operating to subscription performance this the benefits our and ago, This embarked our growth that we as would well strategic and quarter, lower from fiscal revenue with higher gross significantly for to an cost expenses. contributed on our we streams our additional early COVID-XX discipline in growth this As two discipline the cash we’re see years materially the customers, solid we that this of savings enterprise business. April, contributed profitability measures offerings and this clear engine very overall high impact of became business, additional significantly our we saw third ongoing as of the improved and our quality planned the operating Combined accelerating year. for subscription software in of flow. free all operational the as it established plans elements in expansion likely Also, margin,

and our success and review indicators number highlighting the key average strategy. of of Let's metrics a ongoing overall performance

Avid earlier, sales of benefited together in integrated perpetual third the recovery non-recurring solutions licenses, Subscription the XX% improved up and and recurring quarter. revenues in strength which mentioned was from revenue continued I As nearly in results contributed delivered to substantially year-over-year.

revenue to new MediaCentral Growth as platform mentioned For of to strong initial paid subscriptions, growth, also subscription earlier. in and QX creative reflects our enhancements. deliver in aided tools for our I of enterprise customers, the enterprise number continued subscription product a sales by releases introduction and major

combined the and quarter sequential strong Our we in a XX.X% maintenance saw a growth, growth third plus slightly revenue year-over-year. basis of subscription increased on with maintenance revenue revenue along the subscription

the increasing to market, QX, tools. we Adjusted business, continued of e-commerce a business with efforts route year-over-year web Our year-over-year. creative This continues perform are our returned GAAP level marketing year's demand are was last and to while digital as through focused XX% to third higher in down expenses significantly of well for which e-commerce store growth of up as year-over-year commercial almost strong engine the generate year-over-year. margin significantly additional revenue to software supporting EBITDA part is gross XX% to channel. our And this over viable growth the is operating profitable deliver increasingly our quarter,

several to and market and flow contributed in strong discipline, first the have during free strongest notable Our cash flow evolving the rigor engineering and quarter. solutions million QX, focused free which very expect the $XX.X we for quarter, bringing our developing beyond. been flow the needs, what to customers’ product months latter into heading faced our will profitability of part cash our free Throughout address gives us of releases overall XXXX on the innovative positions teams growth QX in product challenges seasonally cash the to continued operational well contribute which typically XXXX, is of us positive in cost and we nine

enterprises. enables teams new MediaCentral market production platform including including NEXIS Collaborate our develop on wherever remote the Premiere by the several interoperability the First, teams, Adobe innovations This solutions the improves Avid to up they're the surprised opportunities new working. We better Connector Adobe Pro, opening across and collaboration streamlines environments for efforts platform, introduced joint media to Avid announcing and also storage. application which that our enhance with disparate for and included we and MediaCentral MediaCentral MediaCentral Adobe and production journalists market between new for workflows market

to subscription MediaCentral, We also update the our customers. address end-to-end of which enterprise delivered expands our important subscription an licensing, to requirements offerings

back it we for journalists remote enabling on workflows. to MediaCentral. addition, to support the innovate continued right creative have to remote introduced and mobile tools capture their to and improve We and content app, Reporter cloud-based new mobile devices, around In send our MediaCentral edit

updates pure We also its Demand, SaaS important for has Edit in been an XXXX. planned cloud-based solution access that available customers. been solution editing, key a which On dozens for released for the currently is several to Avid in to release, made of enterprise general through program Avid’s early prior our is QX paces We've early putting which

In many our addition releases, of improvements major software in to support continued our subscription delivered in including more upgrades, these business. tools we've creative

along we I amount several we planned customers to innovation musicians the team and In closing, job we innovation QX, While of we on be have to a end in of trailblazing navigating that today, focus of major excited are the coming markets still very off believe our adjustments, continue challenges to opportunities audio front the soon, structural about. great fourth address us. performance the say has excited current of market given we’re done bringing producers their the well-positioned available that quite strong help that I'm have the with the really happy I many facing opportunities quarter, and environment with releases which recovery, our we'll a improvements advantage for market. we're operational truly in cost including as delivered will this announce we're about and believe take of to innovations

you, QX Ken XXXX some the Now, our Over hand details to offer call Ken. over performance. will more to I'll who behind

Ken Gayron

Thank you, afternoon, Jeff, good and everyone.

quarter. are unless above, Overall, figures referring with non-GAAP noted very are I noted. our to business third we financial and pleased and results the Jeff As otherwise for

revenue free flow third our recurring subscription including remained healthy, maintenance quarter generated XXXX. and and improved significantly and Our have revenues, profitability cash strongest sources, since we

business to the and solutions recover non-recurring the related portions integrated the of to perpetual Additionally, started in licenses quarter.

$X and forecasts and accrual a reductions metrics sold. bonus details that, which expenses for quarter, a one-time savings year-over-year million we basis to benefit to year-over-year, EBITDA in $X.X of to contractors revenue quarter the quarter third the and was favorable accrual finish QX a $X.X professional goods for $XXX,XXX although a profitability, third levels in and let's of million million million, impact was year, to we seeing revenue exit offset path our points. on With the third due reflecting integrated financial were improvement of operating while of At X.X% was XXXX. revenue from maintenance third this flow $XX.X consulting, far up turn an quarter, the dollar increase maintenance improvement licenses increase income. as results. decrease prior sequentially, continued $XX.X net operating strong the as savings Avid's was period. QX $X up and revenue The our this $X EBITDA. XX.X% was solutions, stronger XXX As revenue XXXX now in that the up $X.X year-over-year clearer for fiscal impact free benefits seeing margin in year-over-year, of million third our quarter pandemic higher cost sequentially. $XX.X internal business. the margin the by of outpaced was for in travel negatively the improvement corporate due higher significant flow cost up the of from a the due to EBITDA basis XX.X% portion for non-material was and temporary up efforts, revenue our services from subscription per should expenses COVID-XX year-over-year third the mix combined in The margin in XXXX improvement $X.XX to more GAAP million XXXX. income margin for to related are was of as was was partly XX.X% share revenue million, the impacted are we cost $X.XX including quarter, cash the XX.X% XX% a currency, of perpetual Non-GAAP in the the sustained of catch-up X% certain year bonus. million as as Gross the the quarter for to the year-over-year operating the higher in our in XX.X% down cash subscription quarter, $XX.X the or euro at result from $X.X year compared the gross from points a strong well non-recurring XX.X% Adjusted million, down $XX.X up to was adjusted Adjusted on from decrease Non-GAAP Free increase year-over-year, as by year-over-year XX due from was Recurring down but revenue furloughs, expenses quarter, million year-over-year. year-over-year, during up operating initiatives in U.S. was $XX.X million constant revenue the lower and of strong non-GAAP quarter, third relatively and of decline. million million second X.X% quarter, and

chose to moves an of capital free source but working million as Our been for $X.X vendors. flow of to our cycle as annual pricing paid improvement of repay Working our the we and $X have cash better more a a are higher capital seeing subscriptions. to accounts was could clearly in business upfront quarter payable with Avid's cash million quarter, software drive we key

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

ending recurring ending increased XXXX. revenue the revenue months in from XX and months XX% subscription due long-term highest service plus XXXX. The XX, agreements, revenue from non-recurring September recurring, revenue and of total September XX, XXXX, revenue lower XX the percentage to was For in of XX% up professional product

to of revenue. recurring our While volatility business, revenue our been revenue of services quarters perpetual and the non-recurring we of strategy few the is professional caused the focused integrated has the solutions, in due recurring in percentage on impact last building licenses which our has elevated COVID-XX, portion believe

as As increased revenue next the maintenance continue benefiting up end Annual uneven such, non-recurring was could contract from year-over-year, the in $XXX.X the value million during by subscription decreases part revenue, offset quarter, of to quarters, be streams long-term the few at in those and recurring agreements revenue percentage recover. X.X% year-over-year.

we quarter, four three agreement. third and long-term of the renewed one agreements During long-term new added

As was market. the agreement case channel was did serves live the partner with last we quarter, the who sound not one renew a

live two when revisit market these to with the recovers. expect We partners the agreements sound

pricing roughly As the we high subscriptions. to of reached In continue new base, which third And Also, and generation year-over-year resulting $X XXX,XXX count quarter in up reached since Composer signed in subscriptions look the was Tools by new resilience in Sibelius and into with new Subscriptions during our for encouraged our enterprise be in multi-year Overall, our of strong added in XX% has approximately quarter, the revenue of year-over-year. the quarter Media creative innovations, up XXXX five a of tools million subscriptions revenue the improvements detail efforts. total demand growth with third quarter. all at end, and growth XX.X% net of solutions. up we software increase subscription we paid XX,XXX digital the subscription in the streams, year-over-year. strategy, XX.X% accelerated XX.X% our product year-over-year, quarter, increased we creative an a combination growth Pro subscription of agreements

see that adopt Annual when we our optimize revenue monthly grew and up subscriptions annual to continue shift believe we grow quarter, XXX% annual in are subscriptions. from a Avid We paid to paid streams towards Additionally, as year-over-year upfront paid of the XX% a which higher up our enterprise continue to contracts, and more continue the compared subscriptions, paid quality to upfront we pricing now for believe total subscriptions models. will of share customers of represent XX.X% subscriptions ago. year third

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

was cloud up the the third composition year-over-year. subscription tools, year-over-year, $XX.X of as our $XX.X revenue from or growth creative million continued X.X% in of million to during moving in for new during The sequentially. revenue continued Now our the growth as and reaching well but enterprise revenue X.X% revenues. quarter, XX% subscriptions subscription paid increase quarter, down third Maintenance an drove

impacts see last from to storage revenue solutions from small decreasing of from continue and We end support non-cash the legacy year.

tools Excluding been these the was integrated points sequentially hardware otherwise, for would lower margin factors, to licenses third XX.X% the products COVID-XX integrated downturn. recover the as demand license last quarter. in and maintenance year-over-year, QX ‘XX. impact primarily solutions result up software year-over-year, was started company's product three down the the demand perpetual one-time revenue the maintenance to recover up X.X% XX.X% have Perpetual in from stable. to due the our licenses from or first the sales Gross $XX.X revenue remains year MediaCentral But quarter, in creative in margin year-over-year, a quarter, credit down in gross on maintenance The million software pandemic. started quarters basis COVID-XX as due X.X% third reduce XXX to our revenue for of and of revenue enterprise a was as

solutions from as COVID-XX, in XX.X% points our volumes overhead absorb was revenue margin not the as third quarter. from down in the continuing down manufacturing was lower the impact Gross solutions as quarter, did XXX to integrated basis the much XX.X% due production year-over-year, integrated However, year-over-year.

sequentially shift higher XXX third However, of mix balance to storage the The basis margin the on the quarter. and towards improved second quarter higher our compared gross the margin points in volumes pandemic. revenue professional comes revenue business. was in year-over-year $X.X back due services quarter, our the projects third million the COVID from were down out certain pushed XX% Professional services as to

the delivery revenue ability services and remotely professional margin year-over-year services due the professional XX.X% other in basis in service on ability saving measures. XXX quarter, work to improved during points quarter. cost sequentially to at up Gross to was the was However, XX.X% strong up complete

flow. cash free to turn let's Now,

flow see generating the flow sustainable our conversion November. free significant we can to to is projected as Day Avid levels You a cash during on path EBITDA stronger free cash that improvement in and of last of Investor adjusted

The investment higher third As the stronger quality and Avid reported With profitability, in in a strategy quarter quarter the of during flow negative from in year-to-date transition driving million $X.X from our third capital. seeing cash cash $X business, our free in working million, Free recurring higher million strongest generated up months, million the XXXX. negative year-over-year. $X.X was XXXX. million flow cash flow, result since its in this generated months positive first revenue, in the are $X.X XX $XX.X $XX.X of of of company XXXX. quarter in we And up last free XXXX, the or margins third cash flow in lower XX% nine up million free company

As drive and seasonally margin its further the Avid accounts reduced working a well-positioned business cash with higher an receivable significantly capital sequentially position, predictable accounts of our to flow, higher strongest more amount both and free payable improved and in recurring is improvement to streams just year-over-year. and company enters revenue shifting quarter,

balance its quarter. sequentially end augment in chain end help and seeing the the up sequentially low are million million $X.X third the $XX year-over-year. manufacturing supply with million of September. in down and and let's quarter. as vendors quarter, That from on also after balance was on of the quarter collections Inventory cash $XX.X repaying million fully in in completed strength down $XX receivable up benefits the the XXXX. billings at year-over-year payable transition million the fourth the the outstanding The million third ended to Accounts at Now, cash revolving $XX.X million move $X was company should $X.X facility Accounts our reduced in million remained the $XX.X we the sheet. at third was credit the

profitability. improvement will we allow balance improved from are our payable continued accounts vendors in lower the for that seeing With pricing

The company's a to in cash ended healthy million. move third year-over-year debt metrics. and the of the a quarter quarter metrics the the free in the a With let's resulted XXXX $XXX.X X.X well-positioned flow, clear and The free third cash capitalization is times. at potential net balance with for improving EBITDA costs in reduction times the a to and net our company of leverage flow in credit and path during reduction Avid's improve at adjusted strong cash end Now, total X.X September in leverage company and credit borrowing XXXX. improvement to

outlook. let's to Finally, turn our

their expect XXXX. the improvement to revenue a benefit to external this sequential We the And quarter. markets gradual continue in the improvement in fourth into fourth quarter and result in should

In continual the from addition anticipate to fourth revenue. our Avid benefit typical COVID seasonality the improvement expected gradual quarter downturn, we in to

in track We enterprise from deliver quarter quarter the for quarter. end expect subscription the perpetual and third revenue as we during the cost at from well the cloud, be fourth we the in growth and as additional quarter. during to But subscription September. We continue furloughs paid in license expectation set growth temporary the and ended our subscriptions of continued the the on improvement creative revenue second implemented targets in tools non-recurring both the we fourth solutions integrated second to in saving

cash continue structure, XXXX, position positions in pandemic in be as that, in higher The the savings fourth operating of approximately end like at of to for in Avid adjusted EBITDA sustained well-positioned higher combined flow. we seasonally fourth expenses the working as back to the lower and we XXXX call With in company quarter Whit. cash seasonally quarter. capital to exits with fourth exit strong free on stronger QX expected higher improvement Also, so Avid revenue flow XX% expect gross is that in to margin the year-on-year quarter, the EBITDA XXXX. quarter, higher we the profitability the the generate margin into that and third margin realign XXXX fiscal We to free year turn and the expect cost our improved cost adjusted as I'd than

Whit Rappole

remarks. This Ken. and Jeff you, prepared our Thank concludes

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

Operator

go Thank first from Colliers. take We'll Frankel ahead. Steve Instructions]. you. [Operator Please our with question

Steve Frankel

a bit Just give these users little length is? on what the the details like enterprise the maybe in number ask some agreements. and covered of you us of subscription agreements Could term these to size about

Jeff Rosica

Steve. This Jeff. Hi, is

it gives us sense. I general think a

as can of length, users dozens the we're a larger And years. be be of agreements just company, the have far depends accounts. users. deal a we Typically, as can on that one anywhere to because run company the So that they're three higher may institution, users, of two in or to say accounts the from they media for from, anywhere year hundreds users ones number let's five years doing. smaller broadcast the large from It a account large on production of everything educational with larger smaller post to more companies of size maybe dozens

Steve Frankel

similar the been last improvement kind nicely sequential the were from you've growing that of over in so. or probably X, year base majority the Tier subscriptions of vast So cloud so

Jeff Rosica

the from so subscription the compared growth But just the individual enterprise. was of professionals But mentioned, Yes, the start yes, yes. September, the started it small businesses who the are by But has business. limited the subscribing and is growth of still most to rest as its of is we fairly enterprises to creative impact our tools. helped creative some in in

Ken Gayron

the XX% in of XX%, XX%, the to Yes, count subscription of to that X% our up for $X revenues accounted color there, million. were Steve, was up license growth, enterprise roughly terms adding

in be a we So, the of see we're and ahead. second but stage early that's phases, to going lot opportunity again, of growth, our

Steve Frankel

that we think how for about, before have it's next into that ‘XX, And think take to maybe late do going Okay. something the long to you to to rebound? or year live Is sound recover? business starts

Jeff Rosica

evolves how We a pandemic that’s lot half how It see things a together. events, it mount people, not not would and a opportunity things to in a of you up how regional I say or the depend But can but just open really regional on because estimate, or a it's depends little hundreds how from, of people will really come may the to on bit of basis, of Steve. a thousands improvement. XXXX. global XX lot probably second on evolve, of need some good XX

like we're the earliest, probably expecting more and So, right think XXXX. late I now ‘XX

Steve Frankel

the and giving And see QX? year? of in budget the core your level then business, Is flush your this expect in do QX you a gains sequential to in that this confidence normal

Jeff Rosica

Yes. typical of will typical typical be And a the end means of a at things of the naturally happen the there's there or It at year. timing end that also the year. flush just investment

this on prior I think we'll be years. that for we will a obviously, do different base, But year see see It a benefit QX. than that happen. as in

know, strong you for but QX quarter in on a seasonally flow business, our cash also free of both level performance. As us, is

Steve Frankel

any you've a your customers? with And storage on that update couple in large of trials done cloud

Jeff Rosica

are broadcasters, television fact, that’s going in the I’ll anytime But are fact, doing allow important soon. the post in the well, in in we're allow tests We've them films studios, also with -- tests, content produced we being companies, in companies. in than production. companies have been -- sound for there these general, larger working And, we say, don't well, us Yes, even in tool. more already. feature And pretty some large name media large to production and are are and cloud production got

well, progressing happy far it's So so and progress. we're the with

Operator

next question our B. Nichols with Riley. take We'll from Josh

Josh Nichols

others, showing from you're the going popping has such about talk thing taking just seeing back down or one a you Great, in and is, weaknesses various it’s flow -- hit evolved cash And for as places this rebound up wanted quarter seeing in in just coming strong if that to XQ. question. lows you for could was ask because front? I some I to good way geographies, on that to what the thanks free COVID my on see you're strengths and

Jeff Rosica

Yes.

say up I general, think I over look in what strong when would is at quite actually It Europe actually QX. slightly back performed QX, year-over-year. that we was

really Europe. performance saw So we in solid

Hollywood, based year-over-year the from we I that's Asia is Americas in and areas on driver. think regional and were have perspective, the also slightly down a those that a big obviously, business more

U.S. And so large broadcasters is in the

a world. see -- other markets but the bit lot saw depends everywhere, in we in better the than of situation we really Europe different better it think we saw did I a Europe in we of So than on parts did we but results recovery did see

Ken Gayron

I should actually, and Middle Europe say whole EME. East the across

Josh Nichols

sales if increasing about the between economic is role in a think more based on going direct time like and e-commerce. or very continue an the distribution, current I little backdrop? we big evolves should bit, role company sales then as separated we how And about think play mix assume e-commerce a the to to

Jeff Rosica

seeing north was I e-commerce or Yes, reported, strong trajectory it's e-commerce. year-on-year. strong led we growth us for I that. really of several this that growth as growth, in a quarters. think we're minus bit in hasn't XX% beyond some again, up But mean, little double-digit That quarter, had a plus very

QX, sequential at we Tier of you was improvement recovery a did large If quarter-over-quarter. north look nice the business, see XX% it X or media in the enterprise

So that nice was to see.

the part of improvement We double-digit in sequentially increase also business. the saw channel --

digital portion more and SaaS business still The more through significant enterprise think. more subscription channel them I as we through But store business. That's call So it's will our engagement to selling. direct of a a sales accounts, go the business business. teams, are of I’d digital direct and web large progressing, the evolve

Josh Nichols

business then, hardware your contribution could little think elaborate nice was comments pretty I on favorable outlook right? I from you XQ, wondering integrated maybe if the a bit you a that because storage earlier you on business. like rebound side for in saw what a looks margin piece, the that's pretty And mentioned the

Ken Gayron

think recover lot us. was give in recovery expect we and to be and to for of There relatively up our a a don't of is say, lot up that continue that I QX, there's I we strong storage going contributor pretty pent So continue on expect quarter for typically but demand quarter QX also catch for strong the demand but we also a business. is guidance, still business strong and to fulfilled a being we storage us, would specific -- saw,

Jeff Rosica

would say we similar you to I'd Yes, continue. is generally trend -- expect I what tell a

Josh Nichols

then and the me, queue. I'll for question the and back baton last then hop And pass in

to like you're relative bit guess, on subscriber If looking XQ, the that expecting similar, growth Are business. seeing look comment what's I'm that that relatively growth at I the you front? could I if quarter-over-quarter or or -- of subscription pace pretty -- piece last phenomenal at rates, you a from year little increases,

Jeff Rosica

over quarters. you probably I similar look, of couple think, well pace a if you've seen the last

very for that, the typically because I quarter assuming the holiday we're music moment, typically think at strong going Fourth continue into of quarter. it's customers, a the shopping, is a that pace our to is especially fourth quarter strong quarter.

So, with our market the our of we're level had the we've adoption to offering response for tools. subscription creative the and encouraged obviously

everything way through -- Monday to expect we look be typically holidays, to strong Cyber that period the for from we us. a all As the

Operator

Nehal from next Capital ahead. Markets. We'll Please with take Northland our Chokshi go question

Nehal Chokshi

normal a seasonality XX%. at quarters revenue. soft expect If standard look about for the deviation I the of at guidance average the six of and past Q-over-Q December Regarding saying [X%]

is you define So too normal us seasonality. better? that help bit just really I'm a what Can not little sure

Ken Gayron

say business we Yes. improvements earlier in mentioned But the music see in Tools. we in that also, solutions. fourth improvements Pro due especially our to in certain do subscription Jeff No. would see with I holiday quarter, integrated normally, buying

So in quarter. fourth the in there is an uplift general,

back. over historically to revenue of of $XX QX. increases I historically kind you that's quarter has $XX million think, look generally And when the million fourth

are So goal that's the guidance, of company I we're model. think some with providing good I although estimate your a historically. -- to those think had think you kind that of traction help the And I posts that's not

Nehal Chokshi

correct? you what's was that the that And enterprise And said came a from there between think I XX% subscribers points And subscription Great. up increasing spread did subscription. you then, year-over-year. beginning Okay. year-over-year spread? about basis B, X,XXX for remainder Ken, the that A, revenue of mention the is XX% and

Ken Gayron

Yes. No, absolutely you're so correct.

the seeing you recognition upfronts, paid the there's upfront for they’re typically also than traction better better of and agreements but both users, being are get of, higher revenue enterprises signing annual we benefit one, start creative as revenues, continued revenue number the migrating, So upfront license because in count on agreements. those

excluding we that the about XX% enterprises, been talked up up was enterprise have the So roughly, licenses XX%. with would we

Nehal Chokshi

I've Okay. the you It had up show that, I looks contributor get breakout that between Pro address And just subscription your subscribers space. metric year-over-year. total then out, of that to well, that subscribers XX% like the Media before, question Can think, plus major harvesting Tools, a paying is users nice was bearish deck, perpetual increase. take simply I'd are on wouldn't slide that Pro give and final a guess subscribers. in Great. maintenance potentially is argument being you about Composer. heard like That's to stopped did that this the up you on Tools provided And a Q-over-Q on the still pushback my that I there? you Sibelius maintenance your that the perpetual,

Ken Gayron

I subscription and the maintenance we year-over-year being think XX% highlights are active that the at looking growing the contracts up pie.

of that’s think I piece one data.

I think maintenance double-digits grow XX.X%. at also plus continues subscription to

stream the So piece we It’s one are pie. just moving not to expanding other. of revenue the

we're margin free the expanding consolidated the can we're you in we're gross EBITDA generating. in And margin. and total So cash gross pie increasing nice company and and the flow the see attractive that

Operator

Samad next our question Samana go Please with take We'll ahead. Jefferies. from

Samad Samana

well. questions. right doing everybody maybe diving And the is just into First, I hope

If think of durable we've step understand maybe your end a perspective? ask subscriptions. or on view total market? kind that So is the I what back, the seen the either what really take side. could cloud growth subscription How maybe kind you us strong to opportunity mean I maybe of as market want in TAM about should a follow-up maybe help logical we you from we

Jeff Rosica

a space -- we Pro you've Yes. give won’t I we're very though total the music, you still XX%, it's want There's only one-third of in Sibelius, you maybe don't got still market we're a at market bigger share, numbers, mean precise the This other probably small two-thirds In where -- Sibelius, I XX% we're large even I'll look necessarily that and have Even of Tools if this, to is Jeff. market. market. it’s to of want give editorial, than in uses just you video difference. portion. well, less relatively I In but probably say tools. TAM, music our

math. opportunity There's also video you do -- that in the the the for side, say like pie on still a creation content side is the large you're music this. pretty that on it's can I growth, seeing there's editorial growing. growing would itself or whether to company So expand the is

we have for lot grow to -- there's continue us, here. a runway so to opportunity of And left our

Samad Samana

over side the enterprise it this, base? about is the growth. around more XX there, we subscriptions next it enterprise appreciate about X, think I more let's do the strategy to attaching existing Or contribution call When maybe the months, the you on of as customer a color it, acquisition subscriptions? have view least, its at to then new opportunity these And to

Jeff Rosica

out that So fusion a little And around platform. packages you of workflow designed subscription call bit these it's preset packages, around on the first to the share are is which I with both. a it's largely are get but of MediaCentral the will a to tell rollout customers we to the what a other greater get competitor customer, account either or new take platform. application the also words, of in specific to, current workflow of or

having in on. we're existing success And so to over customers getting some while we are new customers these great converting also offerings,

be to designed a customer is acquisition it so And tool. new

we or subscription, they does of Avid enter up found open with customers the felt in even subscription One maybe that thought couldn't improperly for things solution. really opportunities maybe an

subscription a we think really an when quickly you point, I entry that pretty a solutions. offer point people easier lower it entry into allows learned offering, our

the around able then subscription to make So be driver enterprise these a it. customers important again, to did that's opportunities. it we why we very see new deploy And packages do new very and to it right also solution acquire -- as easy of

Samad Samana

maintenance? will on And the rates? coming later. maybe the the looking contracts of that and maybe, of there should for the getting renewals questions to Are kind general dollar-based the couple Or are back discounting? as back on maintenance then think think guys you're for that license come enterprise should broadly you up more maybe, we at, agreement, and on retention Are stepping about a getting for you. Ken, price? renewal I you you how requests heard But mention one renewing you how we about -- renewal, pushback again,

Ken Gayron

increasing say, although were the hardware the have environment recovers. to the last sound, the and we quarter dollars and market compensate maintenance in so more just COVID. because And did both that of of with been obviously, quarters would pricing keep have rates impact -- live with to X Yes. but bit hold. been we general, But of relatively terms selectively on that weakness ones last the revisit stable, as for the renewal a No, that, the that of rates, side see I little expect for the to in renewal impacted were we quarter this

strong our continue went in and of to stable in sure to actively we terms I discounting sequentially up going of actively that negotiate So been to the on -- maintenance we terms hold kind make of out to big able to working saw to our maintenance actually maintenance have to, on revenue slightly. look dollars work But continue revenue. say, at would contracts we not revenue. We've

Samad Samana

either call then individual the think Got I'll economics? retention the floor. the I But one differentials cohorts just you've well if terms cloud versus that more to. Any sold it, of cede trends noticeable between creatives quarters early about you. the in last of, cohorts one, or subscriptions recent then unit and the And in

Ken Gayron

the seen we've annual. both retention a on paid the annual and actually slight improvement paid actually rates, we've monthly retention -- on the annual So, rate on

those We and right to level of nurturing continue the service focus on providing customers. customer

revenue terms the did accelerated successful price that been still those we've of We In price economics, last July have driving and increases. increases. economic at since

with to continue value time customers. life those we drive more So

from our joy people brands. They're and well-regarded We expect the of get using number lot in market, products time because are them. of: over to one, that continue leading a

that So have momentum there's in marketplace. of good we a lot the

Operator

Please ahead. We'll Jack Aarde go next our from take question Maxim Group. with Vander

Jack Vander Aarde

quarter. Exceptional a strong Yes, results.

analysts questions. the driving been you Ken Jeff all well. start other well, question have as think taking my home as that a I appreciate or for I'll so point with

under of added LTA. you were X you LTAs renewal, you those also terms mentioned X LTAs, for enterprise of customer a up In but new that renewed

LTA? it particular of the you agreement? additional color in or/and included if in are are this types of duration wondering kind any terms share of typical this Just duration -- you able what customer, the new product X-year the of to X solutions LTA maybe on Is to

Jeff Rosica

difficult come is that's I mentioned X say, come go on back partners We don't sound, a out. this market LTAs. related will sound to been we want board can't new agreements. start in may plus be But it's also renewing specific their we've see let's year live the Ken end remarks. live that the on if it together. out. yes, to in the more believe too because as And -- once his not again, we The back they area disclose been We've really the bringing found don't one to one something of -- been and customers disclose -- it's first all,

LTA keeping probably about still general strong our you moment agreement. this it's give products very and have we from include so the does been I performance one. It of And talking X-year is -- that it's a that probably the several a The business. the the on can you're portfolio, area most in

Jack Vander Aarde

this customer I to you a and of And subscriptions it's X this I the just how contract? want Or are new are is are anything, maybe provide. I color necessarily And not with any to those they going categories, MediaCentral maybe that interested already Are and X and for Connector you for? in enterprise be Avid QX of they the that made relates chance that MediaCentral. there with paying releases involved in if appreciate say you publicly the or if that -- Of are helpful. that's information but I can able No, for, you Okay. then just they any products understand provide, to helpful. that's available to things guess continue though.

Jeff Rosica

we agreements modules And who are they Look, roadmaps. but any anybody it's the this, within multi-year customers, not they before look agreement we to there a to say does but the customer -- they that who we're would at is like add want where and heading generally not. I they that. were ability I or want when to our sign It's details generally. any But we a they make of understand the -- do what agreement, have of all a what we're allowed in well, to them, our they’re investing I in MediaCentral don't sign involved, again, applications directly that to have heading. They not are has know commitments anybody larger they -- lot -- or who not of again where

innovation they’ve -- pretty got general. all they've plans so sign a And those, in what our good people are idea when

Jack Vander Aarde

which I spot about question Maybe happens calls percentage for the paid are mix basis, each to gears double in you added each quarters, subscriber you And a Sure, or what terms you adds A maybe you've total strongest a previous provide previous the subscriptions color this switch you regions? regional for X how recent region, believe provide are adds you continues then those in on appreciate of subscription XX.X% business increasing those total like the from and added of is, lot paid color question upfront coming referenced so X of upfront, talk about sure. terms segments. in But I subscription Wondering and major kind of subscribers there. accelerate. call the subscriptions Absolutely. Ken. in annually quickly. where geographical last mix. if could strength, bright upfront this I'll any is new in on the and during talked a a annual almost of that new are annual Subscription adds Obviously, quarter of like mix year. quarters, even guys. can momentum my

Ken Gayron

that would The growth partners. through really also global. is its say terms mainly It is rate. business sold e-commerce in continues sold impressive but Yes. engine, No, through of to our sold we're I globally. subscription be It

look And this something breaking we But that subscription geography. time. we're terms potentially at point, this not that geographies, out out just point In to we'll at related of metrics that's providing don't do. over other breaking at

Jack Vander Aarde

momentum the is exceptional -- mean, the enough. and accelerating. Fair subscription regardless And Okay. business, I

a certainly guess, I'll squeeze related quarter And Congrats just bright outlook. then spot. more on So question lastly, to in a that's that. fourth I

guys free still cash flow. for really. a record You comments trying again about for mean there'd And that in talked free you figure fourth the strong I seasonally out cash EBITA what be XQ. flow given then the cash implies a Free comments I'm expect QX, you've your high is flow to quarter. quarter. provided exceptional that

But sure is guess, you EBITDA believe said. be necessarily you’ve year-over-year, So is on supposed not a I to basis. I'm up one, correct? that said Q-over-Q I

Ken Gayron

quarter fourth our is expect revenue. I sequential mean, I to would obviously we say that improvement outlook in our have

good position of component, our then of stronger sequential payable. and very in terms the help EBITDA low EBITDA margin. you favorable of which and EBITDA cash with performance is our in about is And think in expect high free capital year-over-year improvement, We when improvement dollar one but now terms will working very right flow, collections receivables

quarter free the in cash progress time. our and So should flow we LTM generate flow very over think in we strong over cash will free --

So improving free we free guidance cash EBITDA and of conversion to flow improving have a clear flow. cash to

Jack Vander Aarde

be it's very back fourth as but here getting wondering a makes to it's And in margin lot hardware products, software the then relates there. of That recover, revenue levels, not sensitive it to And Yes. to assume reasonable gross look just appreciate would I normalized -- to growth there. the as color the EBITDA just at and of it sequentially the mean, you and starting it's in to the obviously. revenue because I mix, if quarter, sense. quite terms

sequential a with So on an though, you for trend I I that that, I that margin, Is mix where -- so. increasing that of lower mean is revenue? assuming guess, margins, the fourth a quarter, believe hardware see gross do continues basis

Ken Gayron

solutions continue in I better so we of perform pointed do Jeff sequentially the Yes, out, would quarter. our expect, to fourth integrated as kind to

As or gross margin lines have than, margin some software. let's our those will about say, we -- subscription those think lower revenue of gross

profit dollars, the So impact more add gross have will gross which EBITDA. will we'll margin, to overall that but

the on sequentially the So of in because side fourth gross could solutions negative increase the in slightly from revenue the quarter. margin impacted be integrated

part -- The yes. other is it of

-- the theme expect. are that's would those think I main So you

Operator

conference ladies today's session. to like or remarks. the and And any I Rosica this question-and-answer for back would additional to Jeff turn closing gentlemen, will conclude

Jeff Rosica

others and Well, us thanks our operator, thank joining today. analysts you, investors, our and again to for

strategy shown year deliver a forward and opportunity quarter and recovery position As operational in to our earlier, very we're a performance, quarter and our year will resilience and the result third on capitalize fiscal of the fourth market we Avid's I progress next said commitment with business safe our we've our discipline. healthy to our Look pleased our reporting everyone and strong uniquely and with when remain until we to you full hope again. have speak results as

have So a evening. good

Operator

conference. Ladies We and your gentlemen, this participation. today's concludes appreciate

may You now disconnect.

Avid Technology (AVID) 28 Oct 202020 Q3 Earnings call transcript