Avid Restructures and Refinances as it Enters Final Phase of Corporate Transformation

Posted by Joe Zaller
Feb 29 2016

Avid_Logo (Black Background)

Avid Technologies said in regulatory filings that it has committed to a restructuring plan, which includes “reductions in workforce, facility consolidation, transferring resources to lower cost regions and reducing other third-party services costs.”

According to the company, these actions will enable Avid to “more efficiently operate in a leaner, and more directed cost structure.”

Avid says these actions represent “the final phase of talent alignment and facilities rationalization program – Avid is putting the right people in the right roles in the right locations with the right cost structure which will position Avid for the end of its transformation in 2017. In connection with this effort, redundant offices will also be closed or downsized.”

“Since we began Avid’s transformation, the Avid Everywhere vision – to build our portfolio of products as applications on a single platform, the Avid Media Central platform – has been central to our strategy to solve the industry’s most important issues with greater innovation, flexibility and efficiency. Avid is in the final stretches of its dramatic transformation and we’re pleased that the growing adoption, stability and maturation of the Media Central Platform will now allow us to fully realize its potential to drive a more efficient operating model by eliminating components and processes that are no longer required with a single global platform.” said Louis Hernandez, Jr, Chairman, President, and CEO of Avid.

Scheduled to be completed by the end of the second quarter of 2017, the restructuring plan is expected to deliver appropriately $68m of annualized costs savings.

Avid quantified these expectations, saying  “personnel related savings account for two-thirds of overall efficiency gains. Many of the personnel related actions have already been completed with savings expected to be realized on an accelerated basis with each successive quarter. The remainder of the efficiencies will be achieved through consolidating and darkening underutilized facilities and further rationalizing spend on external vendors.”

The company “expects to incur incremental cash expenditures of approximately $25 million relating to termination benefits, facility costs, employee overlap expenses and related actions.” Approximately $14 million of the expenditures will be recorded as restructuring expenses in the quarters ending December 31, 2015 through June 30, 2017.

In connection with the announced cost efficiency program, Avid entered into a new five-year, $105 million senior secured credit facility, which consists of a $100 million term loan and an undrawn $5 million revolver. The company borrowed the full amount of the Term Loan, or $100,000,000, as of the Closing Date (February 26, 2016), but did not borrow any amount under the Credit Facility as of the Closing Date.

Avid said the company “granted a security interest on substantially all of their assets to secure the obligations of all obligors under the Credit Facility and the Term Loan. Avid Worldwide provided a guarantee of all the Company’s obligations under the Financing Agreement. Future subsidiaries of the Company (other than certain foreign and immaterial subsidiaries) are also required to become a party to the applicable security agreements and guarantee the obligations under the Financing Agreement. The Financing Agreement includes covenants requiring the Company to maintain a Leverage Ratio (defined to mean the ratio of (a) consolidated total funded indebtedness to (b) consolidated EBITDA) of no greater than 4.35:1.00 for the four quarters ending June 30, 2016, 5.40:1.00 for the four quarters ending September 30, 2016, 4.20:1.00 for the four quarters ending December 31, 2016 and thereafter declining over time from 3.50:1.00 to 2.50:1.00.  The Financing Agreement also restricts the Company from making capital expenditures in excess of $20,000,000 in any fiscal year.”

Proceeds from the term loan will be used to replace the company’s existing $35 million revolving credit facility, finance the company’s efficiency program and other transformation initiatives, and provide operating flexibility throughout the remainder of the transformation in this period of heightened market volatility.

The company estimates that after paying for both debt issuance costs and the efficiency program, the new financing will provide approximately $70 million of available liquidity, about half of which replaces the existing revolving credit facility with the remainder providing incremental liquidity to strengthen the Company’s balance sheet.

“The new debt facility further strengthens our liquidity position and supports the execution of the last leg of our transformation, including the efficiency program,” said John Frederick, Chief Financial and Administrative Office of Avid. “We continue to expect positive adjusted free cash flow generation in 2016, although we do anticipate using cash in the first half of the year as we execute on the cost initiatives. We look forward to updating the investor community on our 2015 results and 2016 guidance, as well as sharing more details behind the 2016 growth and efficiency initiatives, in our fourth quarter and full-year 2015 earnings and business update call. We now have a capital structure that we believe allows us to make the investments necessary and finish executing on our plan.”

“Our clients and community are fully supportive of our vision, said Hernandez.  “Hundreds of large and sophisticated global media companies who have purchased over 32,000 Media Central licenses, punctuated by the record contract with Sinclair Broadcast Group signed in December 2015. Clients everywhere are enjoying the benefits of the platform as they look to capitalize on major industry shifts in the media landscape. For Avid, 2016 will be marked by a focus on additional platform-enabled growth and efficiency initiatives, which will demonstrate our ability to generate a meaningful financial return for our shareholders.”



Related Content:

Press Release: Avid Technology Announces Next Milestone in Company Transformation

Avid SEC Filing: February 26, 2016



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One Response

  1. Sean says:

    “For Avid, 2016 will be marked by a focus on additional platform-enabled growth and efficiency initiatives, which will demonstrate our ability to generate a meaningful financial return for our shareholders.”


    Over the last five years the stock is down from $25 a share to barely $7.

    At what point, I wonder, will the shareholders realize that this CEO, and this management team are delusional dinosaurs who not only have no idea what they are doing, but are in fact flailing around and throwing anything dung they can get their hands on against the wall in the hopes that something, anything, will finally stick?

    They’ve angered and disillusioned their entire customer base by attempting to force them into subscription schemes that nobody wants or finds value in, and now, ten years later, TEN YEARS, another in a string of incompetent CEOs is showing us all that he has no vision, no understanding of the marketplace or the industry he lives in, and when put under pressure, will resort to that classic wall-street crowd pleaser, the “downsize Restructure”.

    Downsize yourself, Hernandez, and downsize the top three tiers of corporate management. Then downsize the board of directors (including former incompetent CEO Gary Greenfield) and all the dishonest, conflicted interest investors who continue to lie to holders of common shares in this company as they squeeze whatever bonus money they can before the company goes under permanently.

    Avid is an American failure.

    That their management team and board of directors are still employed is proof that the suckers born every minute all own stock in Avid.

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