Avid Technology Inc. Q1 2010 Earnings Call Transcript

Avid Technology Inc. Q1 2010 Earnings Call Transcript
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Avid Technology Inc.

(AVID)

Q1 2010 Earnings Call Transcript

April 22, 2010 4:30 pm ET

Executives

Tom Fitzsimmons – Director, IR

Gary Greenfield – CEO & President

Ken Sexton – EVP, CFO and Chief Administrative Officer

Analysts

Mary [ph] – JP Morgan

Steven Frankel – Brigantine Advisors

Andrew Abrams – Avian Securities

Presentation

Operator

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Good day, everyone. Welcome to the Avid Technology first quarter 2010 earnings results conference call. Today's program is being recorded. At this time, I'd like to turn things over to the Director of Investor Relations, Mr. Tom Fitzsimmons. Please go ahead, sir.

Tom Fitzsimmons

Good afternoon. I’m Tom Fitzsimmons, Director of Investor Relations for Avid. I'd like to welcome you to today's call. With me today are Gary Greenfield, Avid's Chairman and CEO; and Ken Sexton, Executive Vice President, Chief Financial Officer and Administrative Officer.

Before we begin, please note that this call will include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including statements about our performance. There are a number of factors that could cause actual events or results to differ materially from those indicated by these statements, such as competitive changes, our ability to execute our strategic plan, or adverse changes in general economic conditions, other important events and factors appearing on our filings with the US Securities and Exchange Commission.

In addition, our forward-looking statements represent our estimates only as of today, April 22, 2010, and should not be relied upon as representing our views on subsequent date. We undertake no obligation to review or update these forward-looking statements.

During this call, we will be referring to non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with Generally Accepted Accounting Principles. The most directly comparable financial measures calculated in accordance with GAAP and a reconciliation of GAAP to non-GAAP measures are contained in our press release announcing this quarter's results and are available in the Investor Relations section of our website at www.avid.com.

For the purpose of understanding our future business models, we will also provide some forward-looking analysis on this call on a non-GAAP basis. Some of our GAAP financial measures are not accessible on a forward-looking basis, and the differences between our future GAAP and non-GAAP financial measures could be substantial.

And now, I'd like to turn the call over to Gary.

Gary Greenfield

Thank you, Tom. And welcome, everyone, to our conference call for the first quarter of 2010. Our revenue for the first quarter was $156 million, which represents a 3% increase compared to the first quarter of 2009. This is the first year-on-year increase in revenue since the fourth quarter of 2007. Having just returned from the National Association of Broadcasters Show in Las Vegas, we can sense momentum building across many of our markets, and we continue to demonstrate how we can help our customers succeed in the world of digital media content creation.

I will discuss more about NAB and our recent announcements in a moment, but first I will turn the call over to Ken who will provide more details on our first quarter financial results. Ken?

Ken Sexton

Thank you, Gary. And good afternoon, everyone. Revenues for the first quarter were $156 million, up 3% year-on-year, but down sequentially from our seasonally high fourth quarter. We experienced year-on-year growth in most of our product groups. Changes in currency exchange rates also benefited revenue growth year-on-year. We see signs of recovery in our broadcast and creative enthusiast markets with sales to both of these markets up year-on-year.

As part of the company’s transformation, our organizational structure has evolved significantly over the last 18 months. The organization is unified as a single operating unit, centered on delivering Avid strategy. This has allowed us to better focus on customers while streamlining our operations. While we will continue to report revenue for audio and video, the remainder of our discussion regarding our financial performance will focus on the entire company.

For the first quarter, our video revenues were $84.4 million, down about 4% compared to the first quarter of 2009. While overall video revenue was down, we did see strong year-on-year sales for our ISIS shared storage systems and Interplay production and media asset management products. This growth was offset somewhat by year-on-year declines in some of our broadcast automation and on-air graphics products.

In audio, revenues were $71.6 million for the first quarter, which is an increase on a year-on-year and sequential basis. The first quarter year-on-year increase was about 12% for audio products and services. While we had a year-on-year improvement in almost all of our audio product groups, our professional audio products and our live systems venue product line were especially strong.

Now I will discuss our operating results on both GAAP and non-GAAP basis. On a GAAP basis, we reported gross margins as a percentage of revenue of 49.8%, up 1.5 percentage points year-on-year, but down sequentially. Our GAAP operating expense was $90.7 million for the first quarter, down almost $16 million sequentially and down $2.8 million year-on-year. The GAAP operating loss for the quarter was $13 million, an improvement year-on-year and sequentially.

Our GAAP net loss for the first quarter was $13.5 million or $0.36 per share. I will now speak to our results on a non-GAAP basis. Our earnings press release provides a reconciliation and a comparison of our GAAP and non-GAAP results. The items excluded from our non-GAAP results for the first quarter totaled $8.9 million and include amortization of intangibles of $3.8 million, stock-based compensation of $3.3 million, restructuring cost of $1.3 million, acquisition-related costs of $686,000, and a related favorable tax adjustment of $284,000. Excluding these items, our non-GAAP net loss was $4.6 million for the first quarter or $0.12 per share.

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