Avid Technology, Inc.

First-quarter revenue was $97.8 million, down 2.8% year over year and flat at constant currency. Total ARR was $247 million, up $19 million or 8% year over year and 9% at constant currency; subscription ARR was up 30% year over year, or 31% at constant currency, to $150 million. Subscription revenue was $39.4 million, up 19.5% year over year; maintenance revenue was $22.6 million, down 20%; Integrated Solutions revenue was $28.7 million, up 1.8%; non-GAAP gross margin was 64%, down 280 bps year over year; subscription and maintenance gross margin was 85.9%, up 320 bps; Integrated Solutions gross margin was 29.2%, down 1,200 bps; adjusted EBITDA was $12.7 million, down $6.5 million; non-GAAP EPS was $0.15, down $0.18; and free cash flow was negative $6.5 million. For Q2, Avid guided to ARR of $246 million to $251 million, revenue of $101 million to $111 million, adjusted EBITDA of $13 million to $20 million, and non-GAAP EPS of $0.15 to $0.30. For full-year 2023, guidance was reaffirmed for ARR of $270 million to $280 million, revenue of $447 million to $472 million, subscription and maintenance revenue of $292 million to $302 million, adjusted EBITDA of $95 million to $105 million, non-GAAP EPS of $1.53 to $1.75, and free cash flow as adjusted of $50 million to $60 million, including $7 million in cash restructuring charges.

Jeff Rosica emphasized three themes: subscription growth remains strong, hardware margin issues are temporary, and the company is staying focused on cost control while investing in growth. He highlighted Pro Tools and Media Composer strength, new music-creation initiatives like Sonic Drop, and new enterprise/cloud offerings such as Edit On Demand and storage products. His tone was confident but cautious on Q2, with repeated comments that supply-chain and hardware issues should improve through the second half.

Ken Gayron focused on the financial bridge from strong recurring revenue to weaker near-term profitability. He said subscription revenue grew to $39.4 million, subscription and maintenance gross margin was 85.9%, Integrated Solutions gross margin fell to 29.2%, and the hardware gross profit decline of $3.5 million flowed into operating income, EBITDA, and free cash flow. He also detailed cost actions: a voluntary early retirement program should save about $2 million in fiscal 2023, and a Q2 restructuring should save another $13 million, with operating expenses expected to be about $215 million for fiscal 2023. He noted net debt to EBITDA of 2.1x, $400,000 of share repurchases in the quarter, and full-year free cash flow guidance of $50 million to $60 million including $7 million of cash restructuring charges.

Analysts focused on whether subscription growth, bookings strength, and the reaffirmed guidance were enough to offset hardware weakness. Management said bookings were actually a bit better than expected, up more than 20% year over year, driven mainly by strategic channel partners and subscription bookings, and that the first quarter saw $15 million of year-over-year bookings growth, $11 million of which came from subscription. On MediaCentral renewals, Jeff said the first cohort starts in late Q3 into Q4 and that customers are stable, but he would not quantify conversion outcomes yet. On the writer strike, he said it could cause near-term deferrals in purchases or upgrades, but any delays would likely come back later rather than represent a lasting loss of demand.