Avid, a technology provider that powers the media and entertainment industry, today announced its fourth quarter and full-year 2018 financial results, provided guidance for the first quarter of 2019 and reaffirmed full-year 2019 guidance.
Fourth Quarter 2018 Financial and Business Highlights:
Revenue was $112.7 million, an increase of five per cent year-over-year and eight per cent sequentially. Revenue excluding non-cash revenue was $112.4 million, an increase of seven per cent year-over-year and 10 per cent sequentially.
Gross Margin was 59.0 per cent, up 450 basis points year-over-year. Non-GAAP Gross Margin was 60.8 per cent, up 480 basis points year-over-year.
Operating Expenses were $54.4 million, an increase of one per cent year-over-year and two per cent sequentially, largely driven by a $5.2M legal settlement recognized as a credit in Q4 2017 offset by savings from operational efficiency initiatives. Excluding the non-recurring settlement, operating expenses declined by $4.4 million year-over year.
Operating Income was $12.1 million, an improvement of $7.3 million year-over-year and $5.0 million sequentially.
Adjusted EBITDA was $21.3 million, an increase of 42 per cent year-over-year and 46 per cent sequentially.
Adjusted EBITDA Margin was 18.9 per cent, up 490 basis points year-over-year and sequentially.
GAAP net income per common share was $0.14, up from net loss per common share of ($0.02) in Q4 2017.
Net cash provided by operating activities was $20.1 million.
Free Cash Flow was $17.7 million.
Software revenue from subscriptions increased 77 per cent year-over-year, surpassing $10 million in the quarter.
Revenue through the Company’s e-commerce activities was up 50 per cent year-over-year.
2018 Financial and Business Highlights:
Revenue was $413.3 million, a decrease of one per cent year-over-year. Revenue, excluding non-cash revenue, was $407.1 million, an increase of five per cent year-over-year.
Gross Margin was 57.9 per cent, up 10 basis points year-over-year. Non-GAAP Gross Margin was 59.8 per cent, up 10 basis points year-over-year.
Operating Expenses were $225.5 million, a decrease of five per cent year-over-year largely driven by savings from operational efficiency initiatives.
Operating Income was $13.7 million, an increase of 161 per cent, or $8.4 million, year-over-year.
Adjusted EBITDA was $47.5 million, a decrease of two per cent year-over-year. Adjusted EBITDA Margin was 11.5 per cent, flat with 2017.
GAAP net loss per common share of ($0.26), up from GAAP net loss per common share of ($0.33) in 2017.
Net cash provided by operating activities was $15.8 million.
Free Cash Flow was $5.9 million, an increase of $4.8 million from the prior year.
Software revenue from subscriptions increased 78 per cent year-over-year, with approximately 125,000 cloud-enabled software subscriptions at the end of 2018.
Revenue through the Company’s e-commerce activities was up 52 per cent year-over-year, surpassing $50 million for the year.
Recurring Revenue was 56 per cent of the Company’s revenue in 2018 up from 49 per cent in 2017.
Annual Contract Value (ACV) was $248 million at the end of 2018 up from $216 million at the end of 2017, reflecting continuing growth in Avid’s high-margin subscription revenue plus maintenance revenues and revenues under long-term agreements.
“Our return to revenue growth and the improvement in our key financial metrics, including Free Cash Flow and Adjusted EBITDA, demonstrate an improving business profile for our Company,” said Jeff Rosica, CEO and president of Avid.
“Additionally, the management team is focused on continuing to build upon a scalable recurring revenue model as evidenced by our double-digit growth in subscriptions and e-commerce revenue. We intend to continue to drive R&D investments in key product areas in 2019 which are expected to set the foundation for future growth for the Company.”
“We ended 2018 with strong momentum evidenced by our improving revenue streams, gross margin and cash flow. With our strong revenue backlog and the savings from our internal efficiency programmes we have visibility to continued improvements in Free Cash Flow and Adjusted EBITDA during 2019,” commented Ken Gayron, executive VP and chief financial officer of Avid.
Explanations regarding our use of non-GAAP financial measures and operational metrics and related definitions, and reconciliations of our GAAP and non-GAAP measures, are provided in the sections below entitled "Non-GAAP Financial Measures and Operational Metrics" and "Reconciliations of GAAP financial measures to Non-GAAP financial measures".
First Quarter and Full Year 2019 Guidance:
For the first quarter of 2019, Avid is providing Revenue and Adjusted EBITDA guidance. Avid is also reaffirming its guidance for Revenue, Adjusted EBITDA and Free Cash Flow for full-year 2019.
(in $ millions)
Revenue $96 - $104
Adjusted EBITDA $7 - $12
Full Year 2019:
Revenue $420 - $430
Adjusted EBITDA $60 - $65
Free Cash Flow $12 - $17
All guidance presented by the Company is inherently uncertain and subject to numerous risks and uncertainties. Avid’s actual future results of operations could differ materially from those shown in the table above. For a discussion of some of the key assumptions underlying the guidance, as well as the key risks and uncertainties associated with these forward-looking statements, please see “Forward-Looking Statements” below as well as the Avid Technology Q4 and Full-Year 2018 Business Update presentation posted on Avid’s Investor Relations website.