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Article Excerpt
PARTICIPANTS
. Tom Fitzsimmons, Avid Technology, Inc., Director, IR . Gary Greenfield, Avid Technology, Inc., Chairman, CEO . Ken Sexton, Avid Technology, Inc., EVP, CFO, Chief Administrative Officer . Paul Coster, JP Morgan, Analyst . Mike Olson, Piper Jaffray, Analyst . Ben Hunt, Iridian Asset Management, Analyst
OVERVIEW
AVID reported 4Q08 revenue of $206.7m and preliminary net loss of $31.9m or $0.86 per share. 4Q08 non-GAAP net loss was $9.3m or $0.25 per share.
FINANCIAL DATA
A. Key Data From Call 1. 4Q08 revenue = $206.7m. 2. 4Q08 preliminary net loss = $31.9m. 3. 4Q08 non-GAAP net loss = $9.3m. 4. 4Q08 preliminary net loss per share = $0.86. 5. 4Q08 non-GAAP net loss per share = $0.25. 6. 4Q08 GAAP GM = 42.9%. 7. 4Q08 OpEx = $97.4m. 8. 4Q08 DSO = 45. 9. 4Q08-end inventory = down $27m vs. 3Q08. 10. 4Q08-end cash =$148m.
PRESENTATION SUMMARY
S1. Opening Comments (G.G.) 1. Overview: 1. Closed 2008 with busy and productive 4Q08. 2. Economic climate, product line divestments, and restructuring had an impact on 4Q08. 3. 4Q08 results were mixed. 4. Continues to see number of positive strides being made.
S2. 4Q08 Financial Review (K.S.) 1. Highlights: 1. Revenue, $206.7m. 1. Down sequentially and YonY. 2. Major factors impacting revenue: 1. Economy. 2. Unfavorable currency exchange rates. 3. Non-core product lines sale. 2. Preliminary net loss, $31.9m or $0.86 per share. 1. Performed impairment analysis in Consumer Video segment resulting in $9.6m impairment charge. 2. As Co. finalizes analysis for all business segments, might have additional impairment charges. 1. Analysis will be complete prior to filing 2008 annual report on Form 10-K. 3. Non-GAAP results will not be impacted by any additional non- cash impairment charges. 3. Non-GAAP results exclude certain items. 1. These items totaled $22.6m and include: 1. Impairment charges, $9.6m. 2. Amortization of intangibles, $3.6m. 3. Stock-based compensation, $3.1m. 4. Restructuring costs, $23.9m. 5. Net gain from product line divestments, $13.3m. 6. Related favorable taxes adjustments, $4.3m. 2. Excluding aforementioned items, non-GAAP net loss, $9.3m or $0.25 per share. 2. GM: 1. GAAP GM, 42.9%. 1. Includes $2.9m of restructuring, amortization of intangibles, and stock-based compensation. 1. Without these charges, GM would have been 44.3%. 2. Non-GAAP GM, down YonY and sequentially. 3. GM was adversely impacted by about 3 points or $7m related to performance of Consumer Video product segment. 1. Strengthening of US dollar impacted short-term margins, as most cost of goods are valued in dollars. 3. Operating Results: 1. OpEx, excluding impairment charges, amortization, stock-based compensation, net gains from (indiscernible) divestments and restructuring, $97.4m. 1. Down about $10m sequentially and $12m YonY, which is early evidence of cost savings from restructuring efforts. 2. OpEx includes $1.7m of transformation-related cost. 3. Transformation related cost includes: 1. Third-party consulting. 2. Severance and recruiting costs related to 2008 restructuring activity that are not included in restructuring charge. 4. Full-year 2008 transformations related cost, approx. $8.8m or $0.24 per share. 1. These types of cost should not be material in 2009. 2. Preliminary GAAP operating loss, $32.7m. 3. Non-GAAP operating loss was $5.7m, including transformational related costs and excluding: 1. Impairment. 2. Net gain on product line divestments. 3. Amortization. 4. Stock-based compensation. 5. Restructuring. 4. After tax and interest, non-GAAP net loss was $9.3m. 4. Product Sales: 1. Finalized sale of Softimage, 3D and PCTV product lines. 2. Softimage transaction closed on 11/17/08. 1. Received $26.5m of $33.5m purchase price with remaining balance to be held at escrow with scheduled distribution dates in 2009 and 2010. 3. Completed PCTV sale for $4.8m on 12/24/08. 1. Received $2.3m at closing. 2. Remainder is schedule to be collected over next 12-months. 3. Will be reimbursed for cost of existing PCT inventory, sold by buyer over next 18 months. 1. PCT inventory on balance sheet as of 12/31/08, $7.5m. 4. Sale of the two non-core product lines will allow to better focus on core business moving forward. 5. Segment Performance: 1. While Co. now has single integrated customer facing organization, this will be final time it will report businesses in three segments: 1. Professional Video. 2. Consumer Video. 3. Audio. 2. Following items are excluded from business unit...
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