Avid Technology Inc. Reports Operating Results (10-Q)

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Nov 04, 2010
Avid Technology Inc. (AVID, Financial) filed Quarterly Report for the period ended 2010-09-30.

Avid Technology Inc. has a market cap of $489.9 million; its shares were traded at around $12.91 with and P/S ratio of 0.8. AVID is in the portfolios of Richard Blum of Blum Capital Partners, Private Capital of Private Capital Management, Chuck Royce of Royce& Associates, Columbia Wanger of Columbia Wanger Asset Management, Richard Snow of Snow Capital Management, L.P., PRIMECAP Management, Jean-Marie Eveillard of First Eagle Investment Management, LLC.

Highlight of Business Operations:

Our revenues for the three-month period ended September 30, 2010 were $165.1 million, an increase of 8.5% compared to the same period last year, with revenues from video products and services increasing by 8.2%, and revenues from audio products and services increasing by 9.0%. For the three-month period, product revenues increased by 8.7% and services revenues increased by 7.8%. Our revenues for the nine-month period ended September 30, 2010 were $483.2 million, an increase of 6.4% compared to the same period last year, with revenues from video products and services increasing by 3.4%, and revenues from audio products and services increasing by 10.6%. For the nine month period, product revenues increased by 7.6% and services revenues increased by 1.1%. Currency exchange rates had a negative impact on our revenues for both the three- and nine-month periods, compared to the same periods in 2009. The changes in revenues are discussed in further detail in the section titled “Results of Operations” below.

Our total gross margin percentage for the three-month period ended September 30, 2010 decreased to 51.9% from 53.2% for the comparable 2009 period. Our total gross margin percentage for the nine-month period ended September 30, 2010 decreased slightly to 50.8% from 51.0% for the comparable 2009 period. The decreases for both periods were driven by decreases in products gross margin percentage. Increased freight costs resulting from increased shipment volumes, including the increased use of more expensive air freight to support new product introductions and meet increased demand for certain products, were a significant factor in the percentage decreases for both periods. For the three-month period, changes in currency exchange rates also had a negative impact on our gross margin percentage compared to the 2009 period. Our services gross margin percentages improved for both periods, which was largely the result of improved utilization of services resources.

Net revenues derived through indirect channels were 62% and 65% of our net revenues for the three- and nine-month periods ended September 30, 2010, respectively, compared to 67% and 66% for the same periods in 2009.

Sales to customers outside the United States accounted for 56% and 57% of our net revenues for the three- and nine-month periods ended September 30, 2010, respectively, compared to 59% and 57% for the same periods in 2009.

Increases in products costs resulted in 1.8% and 0.8% decreases in our product gross margin percentages for the three- and nine-month periods, respectively. Increased freight costs resulting from increased shipment volumes, including the increased use of more expensive air freight to support new product introductions and meet increased demand for certain products, was a significant factor in the decreases in our product gross margin percentages for both periods. For the three-month period, changes in currency exchange rates also had a negative impact on our product gross margin percentage. For the nine-month period, a revised estimate for a royalty accrual resulting in a favorable adjustment during the second quarter of last year and sales promotions offered for our professional audio products during the first six months of 2010 were also factors in the product gross margin percentage decrease.

Our services gross margin percentages improved 1.5% and 3.1% for the three- and nine-month periods, respectively. These improvements were largely the result of improved utilization of services resources.

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