Avid has announced its financial results for the third quarter ended 30 September 2021, raised full-year 2021 guidance for Subscription & Maintenance Revenue, raised the high-end and tightened the range for total revenue and tightened the range towards the high-end of guidance on all other full-year 2021 metrics.
Total revenue increased 12.4% year-over-year in the third quarter to $101.6 million, as the Recurring Revenue components of the Company’s business continued on a strong trajectory. Subscription revenue was $28.0 million, an increase of 56.4% year-over-year, reflecting continued growth in paid subscriptions for creative tools, including an acceleration in Pro Tools net adds in the third quarter, and strong enterprise subscription sales in the quarter.
The continued revenue growth resulted in GAAP net income per share of $0.32 and Non-GAAP Net Income per Share of $0.27, which was at the higher end of the guidance range provided for the third quarter. This strong profitability resulted in net cash provided by operating activities of $16.5 million, and Free Cash Flow of $14.0 million for the quarter.
Third Quarter 2021 Financial and Business Highlights
Subscription revenue was $28.0 million, an increase of 56.4% year-over-year.
- Paid Cloud-enabled software subscriptions increased by 35.0% year-over-year to approximately 389,000 at September 30, 2021 and increased by approximately 19,300 from June 30, 2021.
- Subscription & Maintenance revenue was $58.7 million, an increase of 20.5% year-over-year. Total revenue was $101.6 million, an increase of 12.4% year-over-year.
- LTM Recurring Revenue % was 77.1% of the Company’s revenue for the 12 months ended September 30, 2021, up from 71.2% for the 12 months ended September 30, 2020.
- Annual Contract Value was $328.0 million as of September 30, 2021, a year-over-year increase of 20.6%, from $271.9 million as of September 30, 2020.
- Gross margin was 64.8%, an increase of 40 basis points year-over-year. Non-GAAP
- Gross Margin was 65.3%, an increase of 40 basis points year-over-year.
- Operating expenses were $56.4 million, an increase of 24.8% year-over-year. Non-GAAP Operating Expenses were $51.3 million, an increase of 24.1% year-over-year. The prior year included significant temporary cost savings initiatives that were put in place due to the COVID-19 pandemic, including a $6.0 million benefit from temporary employee furloughs in the third quarter of 2020, which affect comparisons to the prior year period for operating expenses, net income, Adjusted EBITDA, net cash provided by operating activities and Free Cash Flow.
- Net income was $14.8 million, an increase of 85.0% year-over-year. Net income in the third quarter of 2021 included a one-time $7.9 million benefit from the forgiveness of the PPP loan and accrued interest. Non-GAAP Net Income was $12.4 million, an increase of 1.9% year-over-year. Both net income and Non-GAAP Net Income in the third quarter of 2020 benefitted from the significant temporary cost savings discussed above.
- Net income per common share was $0.32 up from net income per common share of $0.18 in the third quarter of 2020. Net income per common share in the third quarter of 2021 included a one-time benefit of $0.17 per common share from the forgiveness of the PPP loan and accrued interest. Non-GAAP Net Income per Share was $0.27, unchanged from the third quarter of 2020. Both net income per common share and Non-GAAP Net Income per Share in the third quarter of 2020 benefitted from the significant temporary cost savings discussed above.
- Adjusted EBITDA was $17.0 million, a decrease of 11.9% year-over-year. Adjusted EBITDA Margin was 16.8%, a year-over-year decrease of 460 basis points. Adjusted EBITDA in the third quarter of 2020 benefitted from the significant temporary cost savings discussed above.
- Net cash provided by operating activities was $16.5 million in the quarter, a decrease of $1.5 million compared to net cash provided by operating activities of $18.0 million in the prior year period. Free Cash Flow was $14.0 million in the quarter, a decrease of $1.5 million from $15.5 million in the prior year period. Both net cash provided by operating activities and Free Cash Flow in the third quarter of 2020 benefitted from the significant temporary cost savings discussed above.
- Share repurchases under the $115 million share repurchase authorization announced on September 9, 2021 totaled approximately 412,000 shares for $11.2 million during the third quarter.
Jeff Rosica, Avid’s Chief Executive Officer and President, stated, “We are pleased that we were able to significantly grow our revenue in the third quarter due to the strong performance of our subscription business and the strengthening recovery of our end markets, which allowed us to continue to deliver strong profitability and Free Cash Flow. As we enter the fourth quarter, which historically has been our strongest quarter, we believe we are well positioned to finish 2021 on a high note, and our momentum gives us confidence as we look out to 2022.”
Ken Gayron, Chief Financial Officer and Executive Vice President of Avid, added, “We continued to grow our LTM Recurring Revenue %, which reached 77% of our total revenue as of the third quarter, and we delivered 56.4% year over year growth in subscription revenues. We also generated robust Free Cash Flow during the third quarter as a result of solid profitability and working capital management.
Based on the strength in our business, we are raising guidance for Subscription & Maintenance Revenue for full-year 2021, we are raising the high-end and tightening the range of our total revenue guidance and we are tightening the range towards the high-end of guidance on all other full-year 2021 metrics.”
Gayron continued: “Additionally, given the high degree of confidence we have in our plan, we announced a $115 million share repurchase authorization in September. Under this plan, we repurchased $11.2 million of our shares during the third quarter, and we have repurchased a total of $20 million of our shares as of November 8. Share repurchases are an important element of our capital deployment strategy which we expect will enhance overall shareholder returns.”
