Media technology company Avid (NASDAQ: AVID) has announced its financial results for the third quarter of 2022, which ended on September 30, 2022.
According to Avid, the recurring components of the Company’s revenue remained strong during the third quarter, with subscription revenue increasing 49.2% year-over-year in the third quarter to USD$41.8 million and subscription & maintenance revenue growing 17.6% year-over-year to $69.1 million. Total revenue increased 1.3% year-over-year to $103.0 million in the third quarter, led by the strong subscription growth but offset by continuing supply chain challenges that have impacted the Company’s ability to ship a significant amount of the orders received for integrated solutions during the first nine months of 2022. At constant currency, total revenue increased 6.0% year-over-year and subscription & maintenance revenue increased 22.3% year-over-year in the third quarter.
The revenue growth, combined with improved gross margin, resulted in Adjusted EBITDA of $21.0 million, representing 20.4% of revenue, and Non-GAAP Earnings per Share of $0.38, an increase of 40.7% year-over-year.
Third Quarter 2022 Financial and Business Highlights
- Subscription revenue was $41.8 million, an increase of 49.2% year-over-year. At constant currency, subscription revenue increased 56.2% year-over-year.
- Paid Cloud-enabled software subscriptions increased by an all-time record of 32,600 during the quarter to approximately 482,900 as of September 30, 2022, an increase of 24.1% year-over-year.
- Subscription and maintenance revenue was $69.1 million, up 17.6% year-over-year. At constant currency, Subscription and maintenance revenue increased 22.3% year-over-year.
- Annual Recurring Revenue was $237.2 million, an increase of 10.0% year-over-year. At constant currency, Annual Recurring Revenue increased 13.2% year-over-year.
- Subscription ARR was $131.3 million, an increase of 33.2% year-over-year. At constant currency, Subscription ARR increased 36.9% year-over-year.
- Total revenue was $103.0 million, an increase of 1.3% year-over-year. At constant-currency, total revenue increased 6.0% year-over-year.
- Gross margin was 67.8%, an increase of 300 basis points year-over-year. Non-GAAP Gross Margin was 68.3%, an increase of 300 basis points year-over-year.
- Operating expenses were $55.7 million, a decrease of (1.2%) year-over-year. Non-GAAP Operating Expenses were $51.5 million, an increase 0.3% year-over-year.
- Net income was $12.0 million, a decrease of (18.6%) year-over-year, largely due to a one-time gain related to loan forgiveness in the prior year period. Net income was 11.7% of revenue. Non-GAAP Net Income was $16.8 million, an increase of 35.2% year-over-year. Non-GAAP Net Income was 16.3% of revenue.
- Adjusted EBITDA was $21.0 million, an increase of 23.5% year-over-year. Adjusted EBITDA Margin was 20.4%, an increase of 360 basis points year-over-year.
- Net income per common share was $0.27, a decrease of (15.6%) year-over-year, largely due to a one-time gain related to loan forgiveness in the prior year period. Non-GAAP Earnings per Share was $0.38, an increase of 40.7% year-over-year.
- Net cash provided by operating activities was $10.3 million in the quarter, a decrease of ($6.2) million compared to the third quarter of 2021.
- Free Cash Flow was $6.6 million in the quarter, an increase of $3.4 million compared to the second quarter of 2022. Free Cash Flow decreased ($7.4) million compared to the third quarter of 2021, due to impact of working capital changes and timing of product shipments in the quarter.
- LTM Recurring Revenue % was 83.3% of the Company’s revenue for the 12 months ended September 30, 2022, up from 77.1% for the 12 months ended September 30, 2021.
- The Company repurchased 757,720 shares for $18.6 million during the third quarter, under the $115 million share repurchase authorisation announced on September 9, 2021.
Jeff Rosica, Avid’s Chief Executive Officer and President, stated, “We are pleased by the strong growth from our subscription software business, particularly enterprise subscription and reacceleration of our creative tools, most notably Pro Tools.
“Demand for our integrated solutions products remains strong, and while we continue to see some lingering constraints in the supply chain, we were able to resume production of certain audio hardware products late in the third quarter and we believe the remaining constraints are temporary. For the fourth quarter and full year, we believe we are well positioned to deliver earnings growth despite revenue headwinds from the impacts of foreign exchange and slower-than expected recovery from the current global supply chain situation.”
Ken Gayron, Chief Financial Officer and Executive Vice President of Avid, added, “We are pleased with our strong Non-GAAP Earnings per Share growth of over forty percent that was driven by an acceleration of our subscription business including an all-time record in paid subscription net adds during the quarter.” Mr. Gayron continued, “However, due to foreign exchange headwinds and the continuing challenges with the supply chain for integrated solutions, we are modifying our 2022 guidance for revenue and Free Cash Flow but maintaining and tightening our 2022 guidance for Non-GAAP Earnings per Share and Adjusted EBITDA due to prudent management of the business. Solely as a result of the foreign exchange headwinds, we are modifying our 2022 guidance for subscription & maintenance revenue.”
Full-Year 2022 Guidance
For the full-year 2022, Avid is reaffirming and tightening its guidance for Non-GAAP Earnings per Share and Adjusted EBITDA. Solely as result of foreign exchange headwinds, Avid is modifying is full-year 2022 guidance for subscription & maintenance revenue. Finally, due to the challenges in the supply chain and foreign exchange headwinds, Avid is modifying its full-year 2022 guidance for revenue and Free Cash Flow.
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 Q3 2022 Earnings presentation posted on Avid’s Investor Relations website at ir.Avid.com.