Avid Technology Announces 4Q and FY 2022 Results

Avid, a technology provider that powers the media and entertainment industry, today announced its financial results for the fourth quarter and full year ended Dec. 31, 2022.

• Fourth quarter revenue was $116.1 million, a decrease of 2.5% year-over-year.
• Net income was $25.3 million, up 66%.
• Adjusted EBITDA was $24.8 million, a decrease of 0.6%.
• Net income per common share was $0.57, an increase of $0.24.
• Non-GAAP Earnings per Share was $0.45, a decrease of $0.01.

Revenue was in the middle of the company’s implied 4Q guidance range, Adjusted EBITDA was below the implied 4Q guidance range and non-GAAP earnings per share was within the implied 4Q guidance range.

The company said: “During the fourth quarter, we recorded a one-time, non-cash adjustment to revenue of ($3.3 million) related to a corrective change in methodology for calculating standalone selling price for subscription term-based licenses in the amount of $0.1 million for FY 2020, ($2.1 million) for FY 2021 and ($1.3 million) for the nine months ending Sept. 30, 2022…. The adjustment related to the period from FY 2020 to FY 2022 and represented 0.3% of the total revenue over the three years. The adjustment also negatively impacted net income and adjusted EBITDA in the fourth quarter, but had no impact on net cash provided by operating activities, free cash flow or ARR.

“Excluding the adjustment, fourth quarter revenue would have been $119.4 million, an increase of 0.3% year-over-year (or 4.4% at constant currency), net income would have been $27.7 million, an increase of 82.0% year-over year (or 97.3% at constant currency), Adjusted EBITDA would have been $27.2 million, an increase of 9.2% year-over year (or 17.9% at constant currency), net income per common share would have been $0.63, an increase of $0.30 year-over year (or an increase of $0.34 at constant currency) and Non-GAAP Earnings per Share would have been $0.51, an increase of $0.05 year-over-year (or an increase of $0.10 at constant currency). Excluding the adjustment, revenue and Non-GAAP Earnings per Share would have been in the high end of our implied Q4 guidance range and Adjusted EBITDA would have been within our implied Q4 guidance range.

“The recurring components of the company’s revenue remained strong during the fourth quarter as paid subscriptions reached 506,000 as of the end of 2022, an increase of 23.2% year-over-year. Subscription ARR was $141.3 million (as of December 31, 2022), an increase of 37.1% year-over-year, and total ARR was $244.9 million (as of December 31, 2022), an increase of 10.2% year-over-year. At constant currency, subscription ARR increased 38.8% year-over-year and total ARR increased 13.4% year-over-year. In the fourth quarter, integrated solutions revenue was $40.8 million, an increase of 55% sequentially, as we continued to work to resolve supply chain challenges. As a result of continued strong integrated solutions orders during the fourth quarter, the backlog of unshipped orders was reduced during the quarter but remained above what we believe to be normal levels as of the end of 2022, at over $20 million.

“Net cash provided by operating activities was $22.5 million in the fourth quarter and $48.0 million for FY 2022. Free Cash Flow was $18.3 million in the fourth quarter and $32.8 million for FY 2022. Free Cash Flow was lower year-over-year due to a greater use of cash in working capital, primarily from timing of cash billings related to multi-year enterprise subscriptions. In addition, higher capital expenditures, prepaid expenses due to our temporary Digital Transformation Initiative (DTI) investments and capitalized software development also negatively impacted Free Cash Flow. The Company expects that Free Cash Flow will be higher in 2023.

Fourth Quarter 2022 Highlights

• Paid cloud-enabled software subscriptions increased by approximately 23,100 during the quarter to approximately 506,000 as of December 31, 2022, an increase of 23.2% year-over-year.
• Subscription ARR was $141.3 million, an increase of 37.1% year-over-year. At constant currency, Subscription ARR increased 38.8% year-over-year.
• Total ARR was $244.9 million, an increase of 10.2% year-over-year. At constant currency, ARR increased 13.4% year-over-year.
• Subscription revenue was $42.5 million, an increase of 24.6% year-over-year. At constant currency, subscription revenue increased 29.6% year-over-year. Excluding the one-time adjustment in the quarter, subscription revenue would have increased 34.3% year-over-year and 39.2% year-over-year at constant currency.
• Subscription and maintenance revenue was $68.9 million, an increase of 5.3% year-over-year. At constant currency, Subscription and maintenance revenue increased 9.3% year-over-year. Excluding the one-time adjustment in the quarter, subscription and maintenance revenue would have increased 10.3% year-over-year and 14.3% year-over-year at constant currency.
• Total revenue was $116.1 million, a decrease of (2.5%) year-over-year. At constant-currency, total revenue increased 1.7% year-over-year. Excluding the one-time adjustment in the quarter, total revenue would have increased 0.3% year-over-year and 4.4% year-over-year at constant currency.
• Gross margin was 64.2%, a decrease of (160 basis points) year-over-year and Non-GAAP Gross Margin was 64.6%, a decrease of (160 basis points) year-over-year.
• Operating expenses were $58.0 million, a decrease of (5.2%) year-over-year. Non-GAAP Operating Expenses were $52.5 million, a decrease of (5.9%) year-over-year.
• Net income was $25.3 million, an increase of 66.0% year-over-year, due in part to a one-time non-cash tax benefit of $11.3 million in Q4 2022. Net income was 21.8% of revenue.
• Non-GAAP Net Income was $19.9 million, a decrease of (4.5%) year-over-year. Non-GAAP Net Income was 17.2% of revenue. Excluding the one-time adjustment in the quarter, net income would have increased 82.0% year-over-year and 97.3% year-over-year at constant currency, and Non-GAAP Net Income would have increased 7.1% year-over-year and 17.9% year-over-year at constant currency.

For the full year, results included:

• Subscription revenue was $108.4 million, an increase of 48.9% year-over-year.
• Subscription and Maintenance revenue was $230.9 million, an increase of 17.2% year-over-year.
• Total revenue was $409.9 million, an increase of 13.7% year-over-year.
• LTM Recurring Revenue represented 78.0% of the Company’s revenue for the year ended December 31, 2021, an increase of 380 basis points year-over-year.
• Gross margin was 64.8%, an increase of 150 basis points year-over-year. Non-GAAP Gross Margin was 65.3%, an increase of 160 basis points year-over-year.
• Operating expenses were $219.5 million, an increase of 11.6% year-over-year. Non-GAAP Operating Expenses were $200.4 million, an increase of 11.6% year-over-year.
• Net income was $41.4 million, an increase of 274.1% year-over-year. Non-GAAP Net Income was $57.9 million, an increase of 98.8% year-over-year.
• Adjusted EBITDA was $75.5 million, an increase of 28.7% year-over-year. Adjusted EBITDA Margin was 18.4%, an increase of 210 basis points year-over-year.

Read the company’s full report here.