2018 Needham Growth Conference - January 18, 2018 - AVID

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2018 Needham Growth Conference - January 18, 2018 - AVID
2018 Needham
Growth Conference

January 18, 2018
2018 Needham Growth Conference - January 18, 2018 - AVID
Non-GAAP & Operational Measures
The following Non-GAAP (Adjusted) Measures & Operational Measures will be used in the presentation:

               Non-GAAP Measures
               ▪  Adjusted EBITDA
               ▪  Adjusted Free Cash Flow
               ▪  Non-GAAP Revenue
               ▪  Non-GAAP Gross Margin
               ▪  Non-GAAP Operating Expenses

               Operational Measures
               ▪  Bookings, Recurring Revenue Bookings
               ▪  Revenue Backlog
These non-GAAP measures are defined in our Form 8-K filed today, and the non-GAAP measures are reconciled with GAAP measures in our press release tables as
well as in the supplemental financial information available on ir.avid.com, which also includes definitions of our operational measures. Avid believes the non-GAAP
financial measures and operational metrics provided in this release provide helpful information to investors with respect to evaluating the Company’s performance.

The presentation also includes forward-looking non-GAAP financial measures, including non-GAAP Revenue, Adjusted EBITDA, non-GAAP Operating Expenses and
Adjusted Free Cash Flow. Reconciliations of these forward-looking non-GAAP financial measures are not included in this presentation or our press release issued today,
due to the high variability and difficulty in making accurate forecasts and projections of some of the excluded information, together with some of the excluded information
not being ascertainable or accessible at this time. As a result, the Company is unable to quantify certain amounts that would be required to be included in the most
directly comparable GAAP financial measure without unreasonable efforts.

                                                                                                                                                                  Avid ©2017   2
2018 Needham Growth Conference - January 18, 2018 - AVID
Safe Harbor Statement
Certain statements made within this presentation contain forward-looking statements, within the meaning of the Private Securities Litigation
Reform Act of 1995 that involve risks and uncertainties, including projections and statements about our anticipated plans, objectives,
expectations and intentions. Among other things, this presentation includes estimated results of operations for 2017, which estimates are
based on a variety of assumptions about key factors and metrics that will determine our future results of operations, including, for example,
anticipated market update of new products, realization of identified efficiency programs and market based cost inflation. Other forward-
looking statements include, without limitation, statements based upon or otherwise incorporating judgments or estimates relating to future
performance such as future operating results and expenses; earnings; bookings; backlog; product mix and free cash flow; our long-term and
recent cost savings initiatives and the anticipated benefits therefrom; our future strategy and business plans; our product plans, including
products under development, such as cloud and subscription based offerings. The projected future results of operations, and the other
forward-looking statements in this presentation are based on current expectations as of the date of this presentation and subject to known
and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements.
The guidance presented in this presentation is inherently uncertain and subject to numerous risks and uncertainties. Our actual future
results of operations and cash flows could differ materially from those discussed in this presentation.

For additional information, including a discussion of some of the key risks and uncertainties associated with these forward-looking
statements, please see the “Forward Looking Statements” section of our press release issued today, as well as the Risk Factors and
Forward-Looking Statements sections of the Company’s 2016 Annual Report on Form 10-K filed with the SEC. Copies of these filings are
available from the SEC, the Avid Technology web site or the Company’s Investor Relations Department.

Any forward-looking information relayed in this presentation speaks only as of today, and Avid undertakes no obligation to update or revise
any forward-looking statements whether as a result of new information, future events or otherwise, except as required by law.

                                                                                                                                    Avid ©2017   3
2018 Needham Growth Conference - January 18, 2018 - AVID
Avid At-a-Glance
Avid Technology, Inc. is the premier provider of technology solutions to
media companies to create, manage, distribute and monetize media content

Total revenues
More than $420M in the last twelve months            Category creator with
Trusted partner                                       30-year heritage of
For customers in 140 countries                          innovation and
                                                      industry leadership
Employees
Approximately 1,800 FTEs in offices globally
                                               Comprehensive media technology
Trades on NASDAQ under the ticker               suite and leading global brands,
AVID
                                                   including Pro Tools, Media
Headquartered in                               Composer, and Avid MediaCentral,
Burlington, MA                                    our enterprise-wide platform

                                                                                   Avid ©2017   4
2018 Needham Growth Conference - January 18, 2018 - AVID
Company Highlights
 Well positioned in a large, growing market undergoing significant transition

 The only enterprise platform specifically for Media, uniquely positioned for the cloud

 Realigned cost structure to drive growth and profitability

 Shift to more recurring revenue and growing backlog is improving visibility

 Transformation completed; company positioned for profitable growth

                                                                                  Avid ©2017   5
2018 Needham Growth Conference - January 18, 2018 - AVID
Large and growing market opportunity
                                                     Selected Segments Multi-Year CAGRs

                                         VR / AR                                                                92%
                        IaaS - Compute / Storage                                            43%
                                         Security                        27%
Selected Sub-Segments

                                                                                                                                                       High Growth
                        Phonetic Search and QC                         25%
                                                                                                                         MEDIA TECHNOLOGY               Segments
                                            DRM                        24%
                                      OVP / OTT                  15%                                                      SPEND: $60B (2017)             $12B
                           Digital Video Analytics             12%
                                   Watermarking                11%
                                                                                                                                                         Currently
                              Managed Services              10%
                                                                                                                                                        Addressable
                                            MAM             9%                                                                      Remaining Media
                          Metadata Management               9%                                                                      Technology Spend        $8B
                                 Plugin Software          8%                                                                             $40B
                                             NLE       6%
                                 Shared Storage        6%
                                      Newsroom       3%

Opportunity to both gain share in segments Avid currently operates and expand into higher growth areas

                                                                             Sources: PwC, IABM, Devoncoft, NAMM, Infocomm, Avid.
                                                                                                                                                                Avid ©2017   6
2018 Needham Growth Conference - January 18, 2018 - AVID
Large and growing market opportunity
                                                         ENTERPRISE OPPORTUNITY
                     $5B   Develop the platform and enable upsell/cross-sell opportunities
                           Expand relationships
                           Convert enterprises to multi-year enterprise-wide agreements
                           Move to cloud, new cloud services (i.e. cognitive, storage, …)
       Continuum

                   TOTAL
                   $8B
                                                            INDIVIDUAL OPPORTUNITY
                           Digital (cloud-enabled subscriptions, digital GTM, First offerings)
                           Upsell/cross-sell new applications and services
                           Attract new creative customers
                     $3B   Cloud-enabled innovations and new offerings

                                                                                            Avid ©2017   7
2018 Needham Growth Conference - January 18, 2018 - AVID
2017                           7         Education
                                                                                   8    Professional
                                                                                        Services
          6 Consumer
             Packaged Goods
                                                                                                 9     Hospitality
                                                                                                       & Tourism
   5   Telecommunications                                           Media &
                                                           1
                                                                    Entertainment

                                                                                                        10 Manufacturing
         4   Financial                                                         2       IT Tech
             Services

                                        3         Retail

                   Source: Global Center for Digital Business Transformation                                         Avid ©2017   8
2018 Needham Growth Conference - January 18, 2018 - AVID
Media challenges
Fundamental      from
             needs    digital
                    across thedisruption
                                industry

    Create
                        Distribute to            Maximize &                   Ensure
 High-quality,
                       More>10x
                            Devices &           Protect Value             Operational &
  Engaging
                         Channels                 of Assets              Capital Efficiency
   2x–4x
   Content
                                                      +50%                    +3–4%
  Increasing Rate of   Exponential Growth of     Continued Increase in     Media Tech Budgets
  Content Creation     Distribution Platforms   Content Consumption        Have Not Kept Pace

                                                                                        Avid ©2017   9
2018 Needham Growth Conference - January 18, 2018 - AVID
Industry’s business challenges and needs were the
catalyst for the Avid MediaCentral™ Platform

                                                    Avid ©2017   10
Platform strategy uniquely positions Avid while
unlocking growth and driving greater efficiencies
     Leverage comprehensive        …along with category
       global distribution…          leading brands         Market
                                                           Expansion

                                                           Increase
                                                          Wallet-share

     Integrate on a common         And now move it all
       technology platform           into the Cloud          Maximize
              MediaCentral
                                                          Lifetime Value

      •   Shared Media Services
      •   Connectivity Toolkit
      •   Common User Experience
                                                          Lower Costs

                                                                    Avid ©2017   11
Breakthrough alliance with Microsoft
to lead the media industry into the cloud
                                            Avid ©2017   12
Platform is uniquely enabling connections and
collaboration across the global media ecosystem

                                                  Avid ©2017   13
Stronger financials today and tomorrow

Revenue visibility and predictability greatly improving

Cost structure realigned to focus on growth areas

Profitability and Adjusted Free Cash Flow improving

                                                          Avid ©2017   14
Strategy is opening up an expanded market opportunity
            New High
       Growth Opportunities             Platform allows efficient expansion into
        New product categories, cloud   new high-growth categories and customer
        services, customer segments
                                        segments

                   Cloud                Incremental opportunity from cloud services
         Cloud hosting, as-a-service,
               with Microsoft           enabled by platform strategy and strategic
                                        alliance with Microsoft
             Recurring
           Business Model
          Subscription, Enterprise,     Shift to recurring model adds new services
               Maintenance              opportunities and establishes model for growth

                Heritage
                 Market                 Large market, but low growth – MediaCentral
                Video, Audio
                                        platform expands addressable opportunity from
                Newsroom,               content creation through distribution
                  Storage

                                                                               Avid ©2017   15
Land, expand and maximize lifetime value
                                                 ADOPTION: Increase number of enterprises
                                                 and creative clients on the platform

                                                 REFINEMENT: Improve platform
                                                 performance and customer experience

                                                 CLOUDIFICATION: Enable full cloud
                                                 deployment of the platform, including SaaS

                                           Expand Services Offering
     Expand Product Offering               • Cloud Media & Cognitive Services
     • New (Adjacent) Growth Categories    • Microsoft Azure Cloud & Marketplace
     • Content & Infrastructure Security   • Consulting, Enhanced Professional
     • Content Monetization                  Services and Expanded Training Offering
                                           • Advanced Client Care
                                                                                       Avid ©2017   16
Revenue opportunity builds as customers adopt the platform

  Customer A          Land with platform and anchor products

               2016            2017             2018           2019   2020   2021

                                                                                Avid ©2017   17
Revenue opportunity builds as customers adopt the platform

                                   Expand with cross sell of apps and integrated solutions

  Customer A          Land with platform and anchor products

               2016            2017             2018              2019              2020     2021

                                                                                                Avid ©2017   18
Revenue opportunity builds as customers adopt the platform

                                                                                              Group B             Group D
                                                                                Group A
                                                                                                        Group C

                                                     Expand footprint across the enterprise

                                   Expand with cross sell of apps and integrated solutions

  Customer A          Land with platform and anchor products

               2016            2017             2018              2019              2020                 2021

                                                                                                                  Avid ©2017   19
Revenue opportunity builds as customers adopt the platform

                                                     Expand footprint across the enterprise

                                                                                               Maximize
                                   Expand with cross sell of apps and integrated solutions
                                                                                              Lifetime Value

  Customer A          Land with platform and anchor products

               2016            2017             2018              2019              2020              2021

                                                                                                               Avid ©2017   20
Revenue opportunity
  builds as customers                                                                                                    Expand

  adopt the platform                                  Customer D                                   Land
                                                                                                              Expand

                                                                                                               Expand

▪ Good traction with early adopters, 50,000 users                                                    Expand

  across 600 MediaCentral installations               Customer C                         Land

▪ We’ve only converted 1/3 of the current Avid base
▪ Once we land with the platform, value to                                                         Expand

  customer is compelling, switching costs are high                                       Expand

▪ Positions us more strategically with customer for   Customer B              Land
  enterprise-level commercial engagements
▪ Drives further shift to recurring and growing                                          Expand
  backlog
                                                                              Expand

                                                      Customer A     Land

                                                                   2016     2017       2018       2019        2020         2021

                                                                                                                        Avid ©2017   21
Transformation has improved financials
                                                                                                                  Implied Guid
                                                                                                                      Mid Pt
AFX $M                                                 2013           2014           2015            2016               2017

Operational Revenue (a)                                439             439            425            435                 417
                                                                                                                                    ▪     Overall results have built a stronger foundation for the
  Pre-2011 Revenue (b)                                 124              92             59             25                   1              company’s future and growth
  Elim PCS (c)                                           0               0             23             53                   2
  Amort of acquired deferred revenue                     0               0             (1)            (1)                  0
GAAP Revenue                                           563             530            506            512                 420        ▪     The composition of the revenue has changed and the
Cost of Goods Sold                                     222             204            193            171                  43              visibility has increased
Gross Margin                                           342             327            313            341                 255
Operational Gross Margin                               217             235            233            264                 252        ▪     A leaner and more directed cost structure to address
  % Operational Revenue                                 50%             54%            55%            61%                 60%             the industry opportunity has driven higher earnings
Operating Expense                                      280             270            272            241                 217
                                                                                                                                    ▪     Turned the corner to profitability with over $90M
Adjusted EBITDA                                          80             72             55            116                  50
Operational Adj EBITDA                                  (44)           (19)           (25)            39                  48              improvement in operational adjusted EBITDA
  % Operational Revenue                                -10%            -4%            -6%             9%                 11%

COGS + OPEX                                            502             474            465            412                 259        ▪     Unbilled backlog approaching $300 million
Backlog (Unbilled)                                       92            125            204            204                 293 (d)

Recurring Revenue as % Total (e)                        21%            22%            27%            37%

                     (a) As a result of (i) the impact of accounting changes effective January 1, 2011, and (ii) changes in the company’s revenue recognition models due to the elimination of Implied PCS in more
                     recent periods, the calculation of Operational Revenue for 2013 and 2014 is not consistent with other periods presented and is therefore less meaningful for comparison purposes.
                     (b) Represents revenue from all customer transactions originating prior to 2011. Effective January 1, 2011, due to changes in accounting standards, many of the Company’s products began to
                     qualify for upfront revenue recognition. Prior to these changes, the same products required ratable recognition over periods of up to eight years. As a result, some of the revenue attributable to
                     transactions originating prior to 2011 would not have been recognized in subsequent periods had the adoption of the new accounting standard been applied on a retroactive basis.
                     (c) Represents the impact of accelerated recognition of revenue due to the cessation of implied post-contract customer support (“Implied PCS”) for certain product lines.
                     (d) As of quarter ending 9/30/2017
                     (e ) Excludes Enterprise Agreements & Volume Purchase Agreements
                                                                                                                                                                                                                 Avid ©2017   22
Greater China New Partnerships
 • Signed five-year agreements with two new partners effective January 1, 2018.
     • Digital Media Technology Co. Ltd.
     • New Digital Technology Holdings Ltd.

 • Partners have exclusive distribution rights to cover all of the Greater China market.
    • Each partner will focus on and distribute products to specific end markets where
       they have expertise.

 • Commercial agreement with Beijing Jetsen Technology Co. Ltd. was terminated as of
   the end of December 2017.
     • Securities purchase agreement expired without Jetsen acquiring any shares.

 • New agreements include performance guarantees with a minimum of between
   6-10% growth per annum.

                                                                                   Avid ©2017   23
Strategy driving growth and improving visibility
                                                      Subscribers and Digital
  MediaCentral Platform Adoption
                                                      Sales Surging
      50,000+ users                                     Paying subscribers up   69%
                                                        from Q3’16
      27% growth year-over-year                         Digital sales up   35%
      Vehicle for future cross-sales and
      maximizing lifetime value of customer             over Q3’16

  Shift to Recurring                                  Backlog Continues to
  Revenue Bookings*                                   Increase Year-Over-Year
      41% of Q3’17                                      Total revenue backlog of $488
      13% in Q1’12 (quarter low pre-transformation)     million which includes contractually
      50% of LTM                                        committed revenue backlog of $293
      17% in 2012 (pre-transformation)                  million
   * On constant $ basis.

                                                                                         Avid ©2017   24
Q3 2017 – Growth Across Most Categories
                                                                       Change %
                                                                      Fav/(UnFav)
($M)                                    Q3 ‘16    Q2 ‘17    Q3 ‘17    Seq    YoY
                                                                                        ▪ Bookings excluding Greater China up
Bookings – Constant $                    $94.7    $104.3    $107.9      3%     14%        year-over-year and sequentially
Excl. Greater China                       90.4     104.3     107.9      3%     19%
                                                                                        ▪ Revenue growing (excluding Pre-2011
Bookings                                  89.5      98.0     102.8      5%     15%
Excl. Greater China                       85.2      98.0     102.8      5%     21%
                                                                                          & Elim PCS) while shifting to recurring
                                                                                          revenue
Non-GAAP Revenue                         119.0     102.4     105.3      3%    (12%)
 Revenue excl. Pre-2011 & Elim PCS       101.7     102.0     105.1      3%      3%      ▪ Minimal amount of Pre-2011 & Elim
 Pre-2011 & Elim PCS                      17.4       0.4       0.1                        PCS revenue in Q3; reduced by over
                                                                                          $17M year-over-year
Non-GAAP Gross Margin                     77.5      62.1      62.4      0%    (20%)
 G.M. excl. Pre-2011 & Elim PCS            60.1      61.8      62.3     1%      4%
                                                                                        ▪ Efficiency program drives year-over-
 % Revenue excl. Pre-2011 & Elim PCS     59.2%     60.5%     59.2%
                                                                                          year reduction in Non-GAAP
Non-GAAP Operating Expenses               58.4      56.6      53.9      5%      8%        Operating Expenses

Adjusted EBITDA                           22.9       8.9      11.5     30%    (50%)     ▪ Adjusted Free Cash Flow improves
Adj. EBITDA excl. Pre-2011 & Elim PCS       5.5       8.5      11.4    34%    107%        $3.2M year-over-year
Adjusted Free Cash Flow                   (2.6)      6.2       0.5    (91%)         -

                                                                                                                        Avid ©2017   25
Contractually Committed Backlog – Significant Increase
      $350

      $300                             ▪ Total revenue backlog of $488
                            $293         million which includes
      $250                               contractually committed backlog
                                         of $293 million
      $200
                                       ▪ Contractually committed
 $M

                                         backlog is bookings
      $150                               representing future:
                                          ▪ Billings
      $100                                ▪ Revenue
                $92                       ▪ EBITDA
       $50                                ▪ Cash

        $0
             12/31/2013   9/30/2017

                                                                   Avid ©2017   26
Revenue visibility continues to increase

           Deferred
           Revenue                  ▪ Entering a quarter,
                          70-80%      approximately 70-80% of
                                      revenue is known
         Contractually
          Committed                 ▪ Recurring revenue as a
           Backlog                    percentage of total is increasing
                                      year-over-year

        Current Quarter
          Bookings

                                                                Avid ©2017   27
Expense reductions complete; continued refinements ahead
($M)           Non-GAAP Operating Expenses (LTM)
$300

$280                                                            ▪ Completed $106M+ savings
                                                                   ▪ 2016 - $76 million
$260                                                               ▪ 2017 - $30 million
                                           -17% YoY
$240
                                                                ▪ How?
                                                                  ▪ Leveraged development
                                                                    platform
$220
                                                                  ▪ Aligned talent
                                                                  ▪ Rationalized facilities
$200

$180
       Q1'16    Q2'16   Q3'16   Q4'16   Q1'17   Q2'17   Q3'17

                                                                                      Avid ©2017   28
Adjusted Free Cash Flow is much improved year-over-year
          ($M)          YTD Adjusted Free Cash Flow

                                               $13.5

                                    +$55.7

                   $(42.3)

                 Q1-Q3 2016                  Q1-Q3 2017

                                                          Avid ©2017   29
Non-Recurring Cash Expenses Diminishing in 2017
($M)
 $5.5
           $5.0     $5.0
 $5.0

 $4.5                                                ▪ In 2017, expect
                                                       approximately $16
 $4.0                                                  million of non-recurring
                                $3.5                   cash expenses
 $3.5
                                                     ▪ In 2018, trend of
 $3.0
                                                       declining non-recurring
                                            ~ $2.5     expected to continue
 $2.5

 $2.0

 $1.5
        Q1 2017   Q2 2017   Q3 2017    Q4 2017-F

                                                                         Avid ©2017   30
Cash & Liquidity Strengthening; Covenant Compliance Solid
▪ Cash & Liquidity
    ▪ September 30, 2017 cash balance - $44.1 million (plus $5 million LOC)
    ▪ November 6, 2017 closed on expanded loan facility which provided:
                     • Term Loan Increase – Cash        $15M
                     • Expanded Line of Credit           $5M
                          Incremental Liquidity         $20M

▪ Covenant Compliance Considerations
    ▪ Foreign currency (FX) adjustment
    ▪ 2017 bonus expense (reversal mechanism)
    ▪ ASC 606 add-back* (2018 forward)
   * Included in the November 6, 2017 debt amendment.

                                                                              Avid ©2017   31
Avid is well positioned today, and for the future…

 Our Position                          Financial Opportunity

 ▪ Large and growing market            ▪ Accelerating revenue growth
 ▪ Right products, at the right time   ▪ Scaling profitability
 ▪ Consistent management execution     ▪ Driving higher cash flow

                                                                       Avid ©2017   32
Avid ©2017   33
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