avid-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number: 1-36254

__________________

Avid Technology, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

04-2977748

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

75 Blue Sky Drive

Burlington

Massachusetts

01803

Address of Principal Executive Offices, Including Zip Code

(978) 640-6789

Registrant's Telephone Number, Including Area Code

__________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

AVID

Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 under the Exchange Act.


Large accelerated filer	x	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	o
		Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 under the Exchange Act).

Yes ☐ No x

The number of shares outstanding of the registrant’s Common Stock, as of May 2, 2023, was 43,907,924.

AVID TECHNOLOGY, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

TABLE OF CONTENTS


		Page
PART I.	FINANCIAL INFORMATION

ITEM 1.	UNAUDITED FINANCIAL STATEMENTS
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022	1
	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2023 and 2022	2
	Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022	3
	Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the three months ended March 31, 2023 and 2022	4
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	17
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	27
ITEM 4.	CONTROLS AND PROCEDURES	27

PART II.	OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	29
ITEM 1A.	RISK FACTORS	29
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	29
ITEM 6.	EXHIBITS	29

INDEX TO EXHIBITS		30

SIGNATURE		31

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Form 10-Q”) includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained in this Form 10-Q that relate to future results or events are forward-looking statements. Forward-looking statements may be identified by use of forward-looking words, such as “anticipate,” “believe,” “confidence,” “could,” “estimate,” “expect,” “feel,” “intend,” “may,” “plan,” “should,” “seek,” “will,” and “would,” or similar expressions.

Forward-looking statements may involve subjects relating to, among others, the following:

•the effect of the continuing worldwide macroeconomic uncertainty and its impacts, including inflation, market volatility and fluctuations in foreign currency exchange and interest rates on our business and results of operations, including impacts related to acts of war, armed conflict, and cyber conflict, such as, for example the Russian invasion of Ukraine, and related international sanctions and reprisals;

•our ability to successfully implement our strategy, including our cost saving measures and other actions implemented in response to market volatility and other adverse economic and commercial conditions;

•the anticipated trends and developments in our markets and the success of our products in these markets;

•our ability to maintain adequate supplies of products and components, including through sole-source supply arrangements;

•our ability to develop, market, and sell new products and services;

•our business strategies and market positioning;

•our ability to expand our market positions;

•our ability to grow of our cloud-enabled platform;

•anticipated trends relating to our sales, financial condition or results of operations, including our ongoing shift to a recurring revenue model and complex enterprise sales with long sales cycles;

•the expected timing of recognition of revenue backlog as revenue, and the timing of recognition of revenues from subscription offerings;

•our ability to mitigate and remediate effectively the material weakness in our internal control over financial reporting, and the expected timing thereof

•our ability to successfully consummate acquisitions and investment transactions and to successfully integrate acquired businesses;

•the anticipated performance of our products;

•our plans regarding repatriation of foreign earnings;

•the outcome, impact, costs, and expenses of pending litigation or any new litigation or government inquiries to which we may become subject;

•our compliance with covenants contained in the agreements governing our indebtedness;

•our ability to service our debt and meet the obligations thereunder;

•the effect of seasonal changes in demand for our products and services;

•estimated asset and liability values;

•our ability to protect and enforce our intellectual property rights; and

•the expected availability of cash to fund our business and our ability to maintain adequate liquidity and capital resources, generally and in the wake of continuing worldwide macroeconomic uncertainty described above.

Actual results and events in future periods may differ materially from those expressed or implied by forward-looking statements in this Form 10-Q. There are a number of factors that could cause actual events or results to differ materially from those indicated or implied by forward-looking statements, many of which are beyond our control, including the risk factors discussed herein and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022, in Part II, Item 1A of this Quarterly Report on Form 10-Q, and in other documents we file from time to time with the U.S. Securities and Exchange Commission (“SEC”). In addition, the forward-looking statements contained in this Form 10-Q represent our estimates only as of the date of this filing and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update these forward-looking statements in the future, we specifically disclaim any obligation to do so, whether to reflect actual results, changes in assumptions, changes in other factors affecting such forward-looking statements, or otherwise.

We own or have rights to trademarks and service marks that we use in connection with the operation of our business. “Avid” is a trademark of Avid Technology, Inc. Other trademarks, logos, and slogans registered or used by us and our subsidiaries in the United States and other countries include, but are not limited to, the following: Avid, Avid NEXIS, AirSpeed, FastServe, MediaCentral, Media Composer, Pro Tools, and Sibelius. Other trademarks appearing in this Form 10-Q are the property of their respective owners.

PART I - FINANCIAL INFORMATION

ITEM 1. UNAUDITED FINANCIAL STATEMENTS

AVID TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except per share data, unaudited)


	Three Months Ended
	March 31,
	2023		2022
Net revenues:
Subscription	$	39,385	32,954
Maintenance	22,650		28,327
Integrated solutions & other	35,776		39,368
Total net revenues	97,811		100,649

Cost of revenues:
Subscription	4,264		5,602
Maintenance	4,747		5,277
Integrated solutions & other	26,607		23,006
Total cost of revenues	35,618		33,885
Gross profit	62,193		66,764

Operating expenses:
Research and development	19,426		16,736
Marketing and selling	22,657		21,927
General and administrative	16,614		14,811
Restructuring costs, net	—		15
Total operating expenses	58,697		53,489

Operating income	3,496		13,275

Interest expense, net	(3,715)		(1,476)
Other income (expense), net	147		(87)
(Loss) income before income taxes	(72)		11,712
Provision for income taxes	309		1,126
Net (loss) income	$	(381)	$	10,586

Net (loss) income per common share – basic	$(0.01)		$0.24
Net (loss) income per common share – diluted	$(0.01)		$0.23

Weighted-average common shares outstanding – basic	43,813		44,817
Weighted-average common shares outstanding – diluted	43,813		45,408

The accompanying notes are an integral part of the condensed consolidated financial statements.

AVID TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands, unaudited)


	Three Months Ended
	March 31,
	2023		2022
Net (loss) income	$	(381)	$	10,586

Other comprehensive income (loss):
Foreign currency translation adjustments	594		(201)

Comprehensive income	$	213	$	10,385

The accompanying notes are an integral part of the condensed consolidated financial statements.

AVID TECHNOLOGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, unaudited)


	March 31, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	20,855	$	35,247
Restricted cash	2,463		2,413
Accounts receivable, net of allowances of $559 and $601 at March 31, 2023 and December 31, 2022, respectively	62,855		76,849
Inventories	26,371		20,981
Prepaid expenses	9,247		8,360
Contract assets	31,966		32,295
Other current assets	2,538		2,826
Total current assets	156,295		178,971
Property and equipment, net	25,586		23,684
Goodwill	32,643		32,643
Right of use assets	21,905		21,395
Deferred tax assets, net	16,118		15,859
Other long-term assets	21,364		14,901
Total assets	$	273,911	$	287,453

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	50,081	$	45,904
Accrued compensation and benefits	21,526		22,602
Accrued expenses and other current liabilities	32,696		36,031
Income taxes payable	217		62
Short-term debt	9,716		9,710
Deferred revenue	62,717		76,308
Total current liabilities	176,953		190,617
Long-term debt	170,690		172,958
Long-term deferred revenue	19,734		17,842
Long-term lease liabilities	21,025		20,470
Other long-term liabilities	4,245		4,348
Total liabilities	392,647		406,235

Commitments and contingencies (Note 7)

Stockholders’ deficit:
Common stock, par value $0.01; authorized: 100,000 shares; issued: 46,763 shares at March 31, 2023 and 46,551 shares at December 31, 2022; outstanding: 43,837 shares at March 31, 2023 and 43,771 shares at December 31, 2022	464		462
Treasury stock	(78,353)		(77,933)
Additional paid-in capital	1,036,538		1,036,287
Accumulated deficit	(1,072,099)		(1,071,718)
Accumulated other comprehensive loss	(5,286)		(5,880)
Total stockholders’ deficit	(118,736)		(118,782)
Total liabilities and stockholders’ deficit	$	273,911	$	287,453

The accompanying notes are an integral part of the condensed consolidated financial statements.

AVID TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(in thousands, unaudited)


Three Months Ended March 31, 2023
	Shares of Common Stock						Additional				Accumulated Other		Total
	Issued	In Treasury	Common Stock		Treasury Stock		Paid-in Capital		Accumulated Deficit		Comprehensive Loss		Stockholders’ Deficit
Balances at January 1, 2023	46,551	(2,911)	$	462	$	(77,933)	$	1,036,287	$	(1,071,718)	$	(5,880)	$	(118,782)

Stock issued pursuant to employee stock plans, net of shares withheld for employee tax obligations	212	—	2		—		(4,842)		—		—		(4,840)

Repurchase of common stock	—	(15)	—		(420)		—		—		—		(420)

Stock-based compensation	—	—	—		—		5,093		—		—		5,093

Net loss	—	—	—		—		—		(381)		—		(381)

Other comprehensive income	—	—	—		—		—		—		594		594

Balances at March 31, 2023	46,763	(2,926)	$	464	$	(78,353)	$	1,036,538	$	(1,072,099)	$	(5,286)	$	(118,736)


Three Months Ended March 31, 2022
	Shares of Common Stock						Additional				Accumulated Other		Total
	Issued	In Treasury	Common Stock		Treasury Stock		Paid-in Capital		Accumulated Deficit		Comprehensive Loss		Stockholders’ Deficit
Balances at January 1, 2022	45,828	(874)	$	455	$	(25,090)	$	1,031,633	$	(1,126,959)	$	(4,113)	$	(124,074)

Stock issued pursuant to employee stock plans, net of shares withheld for employee tax obligations	391	—	4		—		(8,940)		—		—		(8,936)

Repurchase of common stock	—	(354)	—		(10,816)		—		—		—		(10,816)

Stock-based compensation	—	—	—		—		3,422		—		—		3,422

Net income	—	—	—		—		—		10,586		—		10,586

Other comprehensive loss	—	—	—		—		—		—		(201)		(201)

Balances at March 31, 2022	46,219	(1,228)	$	459	$	(35,906)	$	1,026,115	$	(1,116,373)	$	(4,314)	$	(130,019)

The accompanying notes are an integral part of the condensed consolidated financial statements.

AVID TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)


	Three Months Ended
	March 31,
	2023		2022
Cash flows from operating activities:
Net (loss) income	$	(381)	$	10,586
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,297		1,803
Recovery for doubtful accounts	(42)		(135)
Stock-based compensation expense	5,093		3,422
Non-cash provision for restructuring	—		15
Non-cash interest expense	149		126


Loss on disposal of fixed assets	—		548
Unrealized foreign currency transaction losses (gains)	675		(128)
(Provision for) Benefit from deferred taxes	(259)		1,055
Changes in operating assets and liabilities:
Accounts receivable	14,036		19,770
Inventories	(5,390)		2,105
Prepaid expenses and other assets	(3,688)		(2,067)
Accounts payable	4,177		(5,473)
Accrued expenses, compensation and benefits and other liabilities	(4,570)		(9,993)
Income taxes payable	155		(723)
Deferred revenue and contract assets	(14,808)		(12,995)
Net cash (used in) provided by operating activities	(2,556)		7,916

Cash flows from investing activities:
Purchases of property and equipment	(3,931)		(3,244)
Net cash used in investing activities	(3,931)		(3,244)

Cash flows from financing activities:




Repayment of debt principal	(2,410)		(53)
Payments for repurchase of common stock	(572)		(10,562)


Common stock repurchases for tax withholdings for net settlement of equity awards	(4,840)		(8,936)


Payments for credit facility issuance costs	—		(440)
Net cash used in financing activities	(7,822)		(19,991)

Effect of exchange rate changes on cash, cash equivalents and restricted cash	(83)		(254)
Net decrease in cash, cash equivalents and restricted cash	(14,392)		(15,573)
Cash, cash equivalents and restricted cash at beginning of period	38,852		60,556
Cash, cash equivalents and restricted cash at end of period	$	24,460	$	44,983
Supplemental information:
Cash and cash equivalents	$	20,855	$	41,245
Restricted cash	2,463		2,013
Restricted cash included in other long-term assets	1,142		1,725
Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$	24,460	$	44,983

Cash paid for income taxes	$	175	$	851
Cash paid for interest	$	2,679	$	1,176

The accompanying notes are an integral part of the condensed consolidated financial statements.

AVID TECHNOLOGY, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. FINANCIAL INFORMATION

The accompanying condensed consolidated financial statements include the accounts of Avid Technology, Inc. and its wholly owned subsidiaries (collectively, “we” or “our”). These financial statements are unaudited. However, in the opinion of management, the condensed consolidated financial statements reflect all normal and recurring adjustments necessary for their fair statement. Interim results are not necessarily indicative of results expected for any other interim period or a full year. We prepared the accompanying unaudited condensed consolidated financial statements in accordance with the instructions for Form 10-Q and, therefore, include all information and footnotes necessary for a complete presentation of operations, comprehensive income, financial position, changes in stockholders’ deficit, and cash flows in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying condensed consolidated balance sheet as of December 31, 2022 was derived from our audited consolidated financial statements and does not include all disclosures required by U.S. GAAP for annual financial statements. We filed audited consolidated financial statements as of and for the year ended December 31, 2022 in our Annual Report on Form 10-K for the year ended December 31, 2022, which included information and footnotes necessary for such presentation. The financial statements contained in this Form 10-Q should be read in conjunction with the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022.

The consolidated results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2023. The Company’s results of operations are affected by economic conditions, including macroeconomic conditions and levels of business and consumer confidence.

Our preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from our estimates.

Significant Accounting Policies

There have been no material changes to our significant accounting policies as compared to the significant accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2022.

2. NET (LOSS) INCOME PER SHARE

Net income per common share is presented for both basic income per share (“Basic EPS”) and diluted income per share (“Diluted EPS”). Basic EPS is based on the weighted-average number of common shares outstanding during the period. Diluted EPS is based on the weighted-average number of common shares and common share equivalents outstanding during the period.

The potential common shares that were considered anti-dilutive securities were excluded from the diluted earnings per share calculations for the relevant periods either because the sum of the exercise price per share and the unrecognized compensation cost per share was greater than the average market price of our common stock for the relevant periods, or because they were considered contingently issuable. The contingently issuable potential common shares result from certain restricted stock units granted to our employees that vest based on performance conditions, market conditions, or a combination of performance and market conditions.

The following table sets forth (in thousands) potential common shares that were considered anti-dilutive securities at March 31, 2023 and 2022:


	March 31, 2023	March 31, 2022

Non-vested restricted stock units	484	783

The following table sets forth (in thousands) the basic and diluted weighted common shares outstanding for the three months ended March 31, 2023 and 2022:

Three months ended

March 31, 2023

March 31, 2022

Weighted common shares outstanding - basic

43,813

44,817

SEC Form 10-Q filed by Avid Technology Inc.