SOURCE: AVID TECHNOLOGY, INC.

October 23, 2008 16:00 ET

Avid Announces Third Quarter 2008 Results and Continued Business Transformation

TEWKSBURY, MA--(Marketwire - October 23, 2008) - Avid Technology, Inc. (NASDAQ: AVID) today reported revenue of $217.1 million for the three-month period ended September 30, 2008, compared to $226.8 million for the same period in 2007. GAAP net loss for the quarter was $66.4 million, or $1.80 per share, compared to GAAP net loss of $5.9 million, or $.14 per share, in the third quarter of 2007.

GAAP net loss in the third quarter of 2008 included goodwill and intangible asset impairment charges associated with the 2005 Pinnacle acquisition, amortization, stock-based compensation, restructuring charges and related tax adjustments totaling $62.0 million. Excluding these items, non-GAAP loss per share was $.12. For the third quarter of 2007, GAAP net loss included $21.0 million of amortization, stock-based compensation, restructuring charges, other costs and related tax adjustments. Excluding these items, non-GAAP earnings per diluted share were $.37 in the third quarter of 2007.

As part of the company's business transformation efforts, Avid also announced today plans to divest the Softimage® 3D animation product line. In addition, the company announced a reduction in workforce to better align its cost structure around the core businesses.

"We've made solid progress in transforming Avid, by organizing around our customers, delivering solutions that will help our customers succeed, and taking necessary steps to align our cost structure to support our core product lines," said Gary Greenfield, Avid's chairman and CEO. "We are pleased with our progress and plan to leverage Avid's collective audio and video strengths, from the consumer to the enterprise, in ways that will deliver sustainable value to customers and prospects."

Revenue for the nine-month period ended September 30, 2008 was $638.2 million, compared to revenue of $671.1 million for the same period in 2007. GAAP net loss for the first nine months of 2008 was $97.9 million, or $2.59 per share, compared to GAAP net loss of $11.8 million, or $.29 per share, for the same period in 2007. GAAP net loss for the nine-month period ended September 30, 2008 included $82.0 million of impairment charges, amortization, stock-based compensation, restructuring charges and related tax adjustments. Excluding these items, the non-GAAP loss per share was $.42 per share for the first nine months of 2008. GAAP net loss for the nine-month period ended September 30, 2007 included $45.8 million of amortization, stock-based compensation, restructuring charges, other costs and related tax adjustments. Excluding these items, non-GAAP earnings per diluted share were $.82 for the first nine months of 2007.

At September 30, 2008, the company's cash balance was $122.4 million, down $102.0 million since the end of 2007. During the first quarter of 2008, the company used $93.2 million in cash to repurchase 4.3 million shares of common stock under the previously-announced share buyback program.

Recent Highlights

--  The release of Avid® DS 10 - a solution designed to save customers
    time and money by offering professional editing, compositing, keying, image
    retouching, and paint and graphics capabilities in a single application.
    
--  The introduction of Avid automation to the European marketplace for
    the first time - integrating the broadcast master control solutions Avid
    acquired from Sundance Digital.
    
--  BusinessWeek named Avid's Digidesign® 003® Factory, a portable
    digital audio production console for aspiring musicians and producers, as a
    recipient of this year's prestigious IDEA Award for Best Global Design. The
    003 Factory was awarded a bronze medal in the highly competitive
    Entertainment category. M-Audio also received the prestigious Best Buy
    BRAVO! Award in the Musical Instruments category.
    
--  All of the Emmy® Award winners across 31 Outstanding Picture
    Editing, Outstanding Sound Editing/Mixing, and Outstanding Program
    categories at the 60th Annual Emmy Awards used at least one system from
    Avid to create this year's top television programming. A majority of these
    programs employed workflows consisting of multiple systems from the various
    Avid brands. In total, more than 140 nominees in 38 categories used Avid
    brand systems.
    

Use of Non-GAAP Financial Measures

This press release contains "non-GAAP financial measures" under the rules of the U.S. Securities and Exchange Commission. This non-GAAP information supplements, and is not intended to represent a measure of performance in accordance with, disclosures required by generally accepted accounting principles, or GAAP. The reconciliation for net income and diluted earnings per share for the three- and nine-month periods ended September 30, 2008 and 2007 are in the tables attached to this press release.

The company uses non-GAAP financial measures internally to manage its business, for example, in establishing its annual operating budget, in assessing segment operating performance and for measuring performance under employee incentive compensation plans. Non-GAAP financial measures are used by management in its operating and financial decision-making because management believes these measures reflect the company's ongoing business in a manner that allows meaningful period-to-period comparisons. Accordingly, the company believes it is useful for investors and others to review both GAAP and non-GAAP measures in order to (a) understand and evaluate the company's current operating performance and future prospects in the same manner as management does and (b) compare in a consistent manner the company's current financial results with past financial results. The primary limitations associated with the company's use of non-GAAP financial measures are that these measures may not be directly comparable to the amounts reported by other companies and they do not include all items of income and expense that affect the company's operations. The company's management compensates for these limitations by considering the company's financial results as determined in accordance with GAAP and by providing a detailed reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures in this press release.

Conference Call

A conference call to discuss Avid's third quarter 2008 financial results will be held today, October 23, 2008, at 4:30 p.m. EDT. The call will be open to the public and can be accessed by dialing (719) 457-2617 and referencing confirmation code 3538405. The call and subsequent replay will also be available on Avid's website. To listen via this alternative, go to the Investor Relations page under the About Us menu at www.avid.com for complete details prior to the start of the conference call.

Use of Forward-Looking Statements

The above release is subject to the completion and filing of our Quarterly Report on Form 10-Q. This release includes forward-looking statements, as defined by the Private Securities Litigation Reform Act of 1995, about Avid's performance. There are a number of factors that could cause actual events or results to differ materially from those indicated by such forward-looking statements, such as Avid's ability to execute on its transformation strategy and meet customer needs, market acceptance of Avid's existing and new products, competitive factors, pricing pressures, delays in product shipments and other important events and factors disclosed previously and from time to time in Avid's filings with the U.S. Securities and Exchange Commission. In addition, the forward-looking statements contained herein represent Avid's estimate only as of today and should not be relied upon as representing the company's estimate as of any subsequent date. While Avid may elect to update these forward-looking statements at some point in the future, Avid specifically disclaims any obligation to do so, even if the estimates change.

About Avid Technology, Inc.

Avid is a worldwide leader in tools for film, video, audio, 3D animation, gaming and broadcast professionals -- as well as for home audio and video enthusiasts. Avid professional and consumer brands include Avid, Digidesign, M-Audio®, Pinnacle Systems®, Sibelius®, Softimage and Sundance Digital®. The vast majority of primetime television shows, feature films, commercials and chart-topping music hits are made using one or more Avid products. Whether used by seasoned professionals or beginning students, Avid's products and services enable customers to work more efficiently, productively and creatively. Avid received an Oscar® statuette representing the 1998 Scientific and Technical Award for the concept, design, and engineering of the Avid Film Composer® system for motion picture editing. For more information about the company's Oscar, Grammy® and Emmy award-winning products and services, visit www.avid.com.

© 2008 Avid Technology, Inc. All rights reserved. Avid, Digidesign, Film Composer, M-Audio, Pinnacle Systems, Sibelius, Softimage, Sundance Digital and 003 are trademarks or registered trademarks of Avid Technology, Inc. or its subsidiaries in the United States and/or other countries. Emmy is a registered trademark of ATAS/NATAS. Academy Awards and Oscar are trademarks and service marks of the Academy of Motion Picture Arts and Sciences. Grammy is a trademark of the National Academy of Recording Arts and Sciences, Inc. All other trademarks are the property of their respective owners.

AVID TECHNOLOGY, INC.
Condensed Consolidated Statements of Operations
(unaudited - in thousands, except per share data)


                                 Three Months Ended     Nine Months Ended
                                    September 30,         September 30,
                                --------------------  --------------------
                                  2008       2007       2008       2007
                                ---------  ---------  ---------  ---------
Net revenues:
  Products                      $ 183,686  $ 198,817  $ 540,977  $ 583,630
  Services                         33,380     28,009     97,218     87,420
                                ---------  ---------  ---------  ---------
      Total net revenues          217,066    226,826    638,195    671,050
                                ---------  ---------  ---------  ---------

Cost of revenues:
  Products                         94,303     93,397    272,004    279,100
  Services                         18,744     16,054     55,760     49,487
  Amortization of intangible
   assets                           1,249      4,096      6,773     13,329
  Restructuring costs                   -      2,797          -      2,797
                                ---------  ---------  ---------  ---------
      Total cost of revenues      114,296    116,344    334,537    344,713

                                ---------  ---------  ---------  ---------
Gross profit                      102,770    110,482    303,658    326,337
                                ---------  ---------  ---------  ---------

Operating expenses:
  Research and development         37,825     36,471    115,307    112,657
  Marketing and selling            53,638     48,832    159,224    157,031
  General and administrative       19,734     20,514     61,169     56,064
  Amortization of intangible
   assets                           3,307      3,432     10,017     10,295
  Impairment of goodwill and
   intangible asset                51,257          -     51,257          -
  Restructuring costs, net          2,107      6,297      4,107      8,072
                                ---------  ---------  ---------  ---------
      Total operating expenses    167,868    115,546    401,081    344,119
                                ---------  ---------  ---------  ---------

Operating loss                    (65,098)    (5,064)   (97,423)   (17,782)

Interest and other income
 (expense), net                       507      1,980      2,605      5,898
                                ---------  ---------  ---------  ---------
Loss before income taxes          (64,591)    (3,084)   (94,818)   (11,884)

Provision for (benefit from)
 income taxes, net                  1,800      2,769      3,106        (52)
                                ---------  ---------  ---------  ---------

Net loss                        $ (66,391) $  (5,853) $ (97,924) $ (11,832)
                                =========  =========  =========  =========

Net loss per common share -
 basic and diluted              $   (1.80) $   (0.14) $   (2.59) $   (0.29)

Weighted-average common shares
 outstanding - basic
 and diluted                       36,960     40,798     37,739     40,963



AVID TECHNOLOGY, INC.
(unaudited - in thousands, except per share data)

Summary of the Company's revenues and contribution margin by reportable
segment and a reconciliation of segment contribution margin to
consolidated operating loss:



                                 Three Months Ended     Nine Months Ended
                                   September 30,          September 30,
                                --------------------  --------------------
                                  2008       2007       2008       2007
                                ---------  ---------  ---------  ---------
Revenues:
   Professional Video           $ 117,202  $ 118,855  $ 327,190  $ 351,844
   Audio                           72,231     77,320    220,785    233,006
   Consumer Video                  27,633     30,651     90,220     86,200
                                ---------  ---------  ---------  ---------
Total revenues                  $ 217,066  $ 226,826  $ 638,195  $ 671,050
                                =========  =========  =========  =========

Contribution Margin:
   Professional Video           $  14,852  $  20,747  $  24,095  $  44,484
   Audio                            8,119     14,327     29,615     39,589
   Consumer Video                  (4,761)     1,218     (4,231)     3,753
                                ---------  ---------  ---------  ---------
Segment contribution margin        18,210     36,292     49,479     87,826
                                ---------  ---------  ---------  ---------

   Less: Unallocated costs
    and expenses:
      Common costs and
       operating expenses         (21,031)   (20,396)   (63,658)   (57,649)
      Amortization of
       acquisition-related
       intangible assets           (4,556)    (7,528)   (16,790)   (23,624)
      Impairment of goodwill
       and intangible asset       (51,257)         -    (51,257)         -
      Stock-based compensation     (4,357)    (3,988)   (11,090)   (12,091)
      Restructuring costs, net     (2,107)    (9,094)    (4,107)   (10,869)
      Other costs                       -       (350)         -     (1,375)
                                ---------  ---------  ---------  ---------
Consolidated operating loss     $ (65,098) $  (5,064) $ (97,423) $ (17,782)
                                =========  =========  =========  =========



Reconciliation of GAAP net loss
 to Non-GAAP net income (loss):
                                 Three Months Ended     Nine Months Ended
                                   September 30,          September 30,
                                --------------------  --------------------
                                   2008       2007       2008       2007
                                ---------  ---------  ---------  ---------
GAAP net loss                   $ (66,391) $  (5,853) $ (97,924) $ (11,832)

Adjustments to reconcile to
 Non-GAAP net income:
   Amortization of intangible
    assets                          4,556      7,528     16,790     23,624
   Impairment of goodwill and
    intangible asset               51,257          -     51,257          -
   Stock-based compensation         4,357      3,988     11,090     12,091
   Restructuring costs, net         2,107      9,094      4,107     10,869
   Other costs                          -        350          -      1,375
   Related tax adjustments           (240)        74     (1,288)    (2,140)
                                ---------  ---------  ---------  ---------
Non-GAAP net income (loss)      $  (4,354) $  15,181  $ (15,968) $  33,987
                                =========  =========  =========  =========

Weighted-average common shares
 outstanding - diluted             36,960     41,234     37,739     41,521

Non-GAAP net income (loss) per
 common share - diluted         $   (0.12) $    0.37  $   (0.42) $    0.82


Stock-based compensation included
 in:                             Three Months Ended    Nine Months Ended
                                   September 30,         September 30,
                                --------------------  --------------------
                                   2008      2007        2008       2007
                                ---------  ---------  ---------  ---------
 Cost of products revenues      $     177  $     182  $     480  $     505
 Cost of services revenues            144        248        408        696
 Research and development
  expenses                            763      1,018      2,215      3,415
 Marketing and selling expenses     1,470      1,092      3,108      3,228
 General and administrative
  expenses                          1,803      1,448      4,879      4,247
                                ---------  ---------  ---------  ---------
                                $   4,357  $   3,988  $  11,090  $  12,091
                                =========  =========  =========  =========




AVID TECHNOLOGY, INC.
Condensed Consolidated Balance Sheets
(unaudited - in thousands)

                                                 September 30, December 31,
                                                      2008         2007
                                                  -----------  -----------
ASSETS:
Current assets:
   Cash, cash equivalents and marketable
    securities                                    $   122,434  $   224,460
   Accounts receivable, net of allowances of
    $20,390 and $20,784 at September 30, 2008
    and December 31, 2007, respectively               112,144      138,692
   Inventories                                        122,867      117,324
   Prepaid and other current assets                    35,683       36,788
                                                  -----------  -----------
       Total current assets                           393,128      517,264

Property and equipment, net                            41,734       46,160
Intangible assets, net                                 49,980       71,427
Goodwill                                              313,924      360,584
Other assets                                           10,801       10,518
                                                  -----------  -----------
       Total assets                               $   809,567  $ 1,005,953
                                                  ===========  ===========

LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
   Accounts payable                               $    29,471  $    34,992
   Accrued expenses and other current liabilities      89,003       93,912
   Deferred revenues                                   79,963       79,771
                                                  -----------  -----------
       Total current liabilities                      198,437      208,675

Long-term liabilities                                  16,197       17,495
                                                  -----------  -----------
       Total liabilities                              214,634      226,170
                                                  -----------  -----------

Stockholders' equity:
   Common stock                                           423          423
   Additional paid-in capital                         977,735      968,339
   Accumulated deficit                               (264,024)    (155,722)
   Treasury stock at cost, net of reissuances        (126,327)     (45,823)
   Accumulated other comprehensive income               7,126       12,566
                                                  -----------  -----------
       Total stockholders' equity                     594,933      779,783
                                                  -----------  -----------
       Total liabilities and stockholders' equity $   809,567  $ 1,005,953
                                                  ===========  ===========

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