AVID TECHNOLOGY, INC. MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)

EXECUTIVE OVERVIEW

Company overview

We develop, market, sell, and support software and integrated solutions for
video and audio content creation, management and distribution. We are a leading
technology provider that powers the media and entertainment industry. We do this
by providing an open and efficient platform for digital media, along with a
comprehensive set of tools and workflow solutions. Our solutions are used in
production and post-production facilities; film studios; network, affiliate,
independent and cable television stations; recording studios; live-sound
performance venues; advertising agencies; government and educational
institutions; corporate communications departments; and by independent video and
audio creative professionals, as well as aspiring professionals. Projects
produced using our tools, platform, and ecosystem include feature films,
television programming, live events, news broadcasts, sports productions,
commercials, music, video, and other digital media content. With over one
million creative users and thousands of enterprise clients relying on our
technology platforms and solutions around the world, Avid enables the industry
to thrive in today's connected media and entertainment world.

Our mission is to empower media creators with innovative technology and
collaborative tools to entertain, inform, educate, and enlighten the world. Our
clients rely on Avid's products and solutions to create prestigious and
award-winning feature films, music recordings, television shows, live concerts,
sporting events, and news broadcasts. Avid has been honored for technological
innovation with 18 Emmy Awards, one Grammy Award, two Oscars, and the first ever
America Cinema Editors Technical Excellence Award.

Overview of operations

Our strategy for connecting creative professionals and media enterprises with
audiences in a powerful, efficient, collaborative, and profitable way leverages
our creative software tools, including Pro Tools for audio, Media Composer for
video, Sibelius for musical composition and our MediaCentral Platform - the
open, extensible, and customizable foundation that streamlines and simplifies
content workflows by integrating all Avid or third-party products and services
that run on top of it. The platform provides secure and protected access, and
enables fast and easy creation, delivery, and monetization of content.

We work to ensure that we are meeting customer needs, staying ahead of industry
trends, and investing in the right areas through a close and interactive
relationship with our customer base. The Avid Customer Association was
established to be an innovative and influential media technology community. It
represents thousands of organizations and over 30,000 professionals from all
levels of the industry including inspirational and award-winning thought
leaders, innovators, and storytellers. The Avid Customer Association fosters
collaboration between Avid, its customers, and other industry colleagues to help
shape our product offerings and provide a means to shape our industry together.

A key element of our strategy is our transition to a recurring revenue-based
model through a combination of subscription offerings and long-term agreements.
As of June 30, 2022, we had approximately 450,000 paid subscriptions. The
subscription count includes all paid and active seats under multi-seat licenses.
These licensing options offer choices in pricing and deployment to suit our
customers' needs. Our subscription offerings to date have been sold to creative
professionals and media enterprises. We expect to increase subscription sales to
media enterprises going forward as we expand offerings and move through customer
upgrade cycles, which we expect will further increase recurring revenue on a
longer-term basis. Our long-term agreements are comprised of multi-year
agreements with large media enterprise customers to provide specified products
and services, including SaaS offerings, and channel partners and resellers to
purchase minimum amounts of products and service over a specified period of
time.

Avid is committed to our digital transformation initiative, which focuses on
optimizing systems, processes, and back-office functions with the objective of
improving our operations related to our digital and subscription business. The
project started in the third quarter of 2021, has continued through the first
half of 2022 and is expected to continue through 2025. We plan to significantly
invest in transforming our enterprise-wide infrastructure and technologies to
benefit customers and drive enhanced performance across the company.

A summary of our sources of revenue for the three and six months ended June 30, 2022 and 2021 is as follows (in thousands):

                                       19
--------------------------------------------------------------------------------
                                                  Three Months Ended June 30,                 Six Months Ended June 30,
                                                   2022                  2021                  2022                  2021
Subscriptions                                $       34,142          $   21,508          $       67,096          $  46,376
Maintenance                                          27,775              30,443                  56,102             60,295
Subscriptions and Maintenance                        61,917              51,951                 123,198            106,671
Perpetual Licenses                                    2,742               5,860                   7,939             12,918
Software Licenses and Maintenance                    64,659              57,811                 131,137            119,589
Integrated solutions                                 28,013              31,318                  56,225             57,527
Professional services & training                      5,008               5,747                  10,967             12,124
Total revenue                                $       97,680          $   94,876          $      198,329          $ 189,240


Recent developments affecting our business

During the COVID-19 pandemic, our priority has been supporting our employees,
customers, partners and communities, while positioning Avid for the future. The
pandemic has driven organizations across the globe to digitize their operations
and support remote workforces at a faster speed and greater scale than ever
before. We have moved towards a hybrid work model in certain countries, giving
our employees the flexibility to work offsite or at onsite Avid locations.

The COVID-19 pandemic has negatively impacted the global economy, disrupted
global supply chains, and created significant volatility and disruption of
financial markets. We continue to manage through significant supply constraints
seen industry-wide due to component shortages caused, in part, by the COVID-19
pandemic, and for which the duration of such constraints is uncertain. These
shortages have resulted in increased costs (i.e., component and other commodity
costs, freight, expedite fees, etc.) which have had a negative impact on our
product gross margin and have resulted in extended lead times for us and our
customers.

The extent to which our operations may be impacted will depend largely on future
developments, which are highly uncertain and cannot be accurately predicted,
including the severity or resurgence of a COVID-19 outbreak, actions by
government authorities to contain an outbreak or treat its impact, actions by
government authorities to address inflationary and cost pressures, and the
severity, length and potential expansion of the conflict in Ukraine. The impacts
of these uncertain global economic and geopolitical conditions could result in
further supply chain disruptions, including the shortages of critical
components, and continued disruptions to, and volatility in, the financial
markets. Recent events surrounding the global economy, geopolitics, and the
COVID-19 pandemic continue to evolve.Although we believe that we will ultimately
emerge from these events well positioned for long-term growth, uncertainties
remain and, as such, we cannot reasonably estimate the duration or extent of
these adverse factors on our business, results of operations, financial position
or cash flows.

CRITICAL ACCOUNTING ESTIMATES

Our condensed consolidated financial statements have been prepared in accordance
with U.S GAAP. The preparation of these financial statements requires us to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosures of contingent assets and liabilities as of the
date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. We base our estimates and judgments on
historical experience and various other factors we believe to be reasonable
under the circumstances, the results of which form the basis for judgments about
the carrying values of assets and liabilities and the amounts of revenues and
expenses. Actual results may differ from these estimates.

We believe that our critical accounting policies and estimates are those related
to revenue recognition and allowances for sales returns and exchanges,
stock-based compensation, and income tax assets and liabilities. We believe
these policies and estimates are critical because they most significantly affect
the portrayal of our financial condition and results of operations and involve
our most complex and subjective estimates and judgments. A discussion of our
critical accounting policies and estimates may be found in our Annual Report on
Form 10-K for the year ended December 31, 2021 in Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations," under
the heading "Critical Accounting Policies and Estimates". There have been no
significant changes to our critical accounting policies and estimates since our
Annual Report on Form 10-K for the year ended December 31, 2021.
                                       20
--------------------------------------------------------------------------------

RESULTS OF OPERATIONS

The following table sets forth certain items from our condensed consolidated
statements of operations as a percentage of net revenues for the three and six
months ended June 30, 2022 and 2021:

                                                       Three Months Ended June 30,                        Six Months Ended June 30,
                                                      2022                     2021                     2022                     2021
Net revenues:
Subscriptions                                             35.0  %                  22.7  %                  33.8  %                  24.5  %
Maintenance                                               28.4  %                  32.1  %                  28.3  %                  31.9  %
Integrated solutions & other                              36.6  %                  45.2  %                  37.9  %                  43.6  %
Total net revenues                                       100.0  %                 100.0  %                 100.0  %                 100.0  %
Cost of revenues                                          35.1  %                  36.6  %                  34.4  %                  35.8  %
Gross margin                                              64.9  %                  63.4  %                  65.6  %                  64.2  %
Operating expenses:
Research and development                                  16.4  %                  17.0  %                  16.5  %                  16.7  %
Marketing and selling                                     24.2  %                  22.5  %                  23.0  %                  22.2  %
General and administrative                                13.7  %                  14.5  %                  14.2  %                  14.4  %
Restructuring costs, net                                   0.4  %                     -  %                   0.2  %                   0.6  %
Total operating expenses                                  54.7  %                  54.0  %                  53.9  %                  53.9  %
Operating income                                          10.2  %                   9.4  %                  11.7  %                  10.3  %
Interest expense, net                                     (2.0) %                  (1.9) %                  (1.7) %                  (2.1) %
Other income, net                                          0.1  %                   0.2  %                     -  %                  (1.8) %
Income before income taxes                                 8.3  %                   7.7  %                  10.0  %                   6.4  %
Provision for income taxes                                 0.7  %                   0.4  %                   0.9  %                   0.4  %
Net income                                                 7.5  %                   7.3  %                   9.1  %                   6.0  %



Net Revenues

Our net revenues are derived mainly from sales of subscription software
solutions, maintenance contracts, and integrated solutions for digital media
content production, management and distribution, and related professional
services. We commonly sell large, complex solutions to our customers that, due
to their strategic nature, have long lead times where the timing of order
execution and fulfillment can be difficult to predict. In addition, the rapid
evolution of the media industry is changing our customers' needs, businesses,
and revenue models, which is influencing their short-term and long-term
purchasing decisions. As a result of these factors, the timing and amount of
product revenue recognized related to orders for large, complex solutions, as
well as the services associated with them, can fluctuate from quarter to quarter
and cause significant volatility in our quarterly operating results. For a
discussion of these factors, see the risk factors discussed in Part I, Item 1A
under the heading "Risk Factors" in our Annual Report on Form 10-K for the year
ended December 31, 2021.

                    Net Revenues for the Three Months Ended June 30, 2022 and 2021
                                        (dollars in thousands)
                                              2022                  Change                  2021
                                          Net Revenues          $             %         Net Revenues
Subscriptions                            $      34,142      $ 12,634        58.7%      $      21,508
Maintenance                                     27,775        (2,668)      (8.8)%             30,443
Integrated solutions & other                    35,763        (7,162)      (16.7)%            42,925
Total net revenues                       $      97,680      $  2,804        3.0%       $      94,876



                                       21
--------------------------------------------------------------------------------


                  Net Revenues for the Six Months Ended June 30, 2022 and 2021
                                     (dollars in thousands)
                                          2022                  Change                 2021
                                      Net Revenues          $            %         Net Revenues
Subscriptions                        $      67,096      $ 20,720       44.7%      $      46,376
Maintenance                                 56,102      $ (4,193)      (7.0)%            60,295
Integrated solutions & other         $      75,131      $ (7,438)      (9.0)%     $      82,569
Total net revenues                   $     198,329      $  9,089        4.8%      $     189,240



The following table sets forth the percentage of our net revenues attributable
to geographic regions for the three and six months ended June 30, 2022 and 2021:

                                                      Three Months Ended June 30,                            Six Months Ended June 30,
                                                  2022                          2021                    2022                          2021
United States                                      41%                           44%                     43%                           43%
Europe, Middle East and Africa                     37%                           36%                     38%                           37%
Asia-Pacific                                       13%                           15%                     13%                           15%
Other Americas                                     9%                            5%                      7%                            5%



Subscription Revenues

Our subscription revenues are derived primarily from sales of our Media
Composer, MediaCentral, Pro Tools, and Sibelius offerings. Subscription revenues
increased $12.6 million, or 58.7%, for the three months ended June 30, 2022, and
increased $20.7 million, or 44.7% for the six months ended June 30, 2022,
compared to the same periods in 2021. The increase for the three and six months
ended June 30, 2022 was primarily a result of new customers adopting our
subscription solutions and customers transitioning from our perpetual product
licenses to our subscription-based model.

Maintenance income

Our maintenance revenues are derived from a variety of maintenance contracts for
our software and integrated solutions. Maintenance contracts allow each customer
to select the level of technical and operational support that they need to
maintain their operational effectiveness. Maintenance contracts typically
include the right to the latest software updates, call support, and, in some
cases, hardware maintenance. Maintenance revenues decreased $2.7 million, or
8.8%, for the three months ended June 30, 2022, and decreased $4.2 million or
7.0% for the six months ended June 30, 2022, compared to the same periods in
2021. The decrease for the three and six months ended June 30, 2022 was
primarily due to customers transitioning from our perpetual based licenses to
our subscription licenses. In addition, there was lower maintenance revenue
related to new integrated solutions sales due to delayed integrated solutions
shipments as a result of supply chain issues in the six months ended June 30,
2022 compared to the same period in 2021.

Embedded Solutions and Other Revenues

Our integrated solutions and other revenues are derived primarily from sales of
our storage and workflow solutions, media management solutions, video creative
tools, digital audio software and workstation solutions, and our control
surfaces, consoles, and live-sound systems, as well as professional and learning
services. Integrated solutions and other revenues decreased $7.2 million or
16.7% for the three months ended June 30, 2022, and decreased $7.4 million or
9.0% for the six months ended June 30, 2022, compared to the same periods in
2021 as the result of delayed shipments due to supply chain issues.


                                       22
--------------------------------------------------------------------------------

Revenue Cost, Gross Profit and Gross Margin Percentage

Cost of revenues consists primarily of costs associated with:
•procurement of components and finished goods;
•assembly, testing and distribution of finished goods;
•warehousing;
•customer support related to maintenance;
•royalties for third-party software and hardware included in our products; and
•professional services and training for customers.

Revenue costs and gross profit

                    Costs of Revenues and Gross Profit for the Three Months Ended June 30, 2022 and 2021
                                                   (dollars in thousands)
                                                     2022                          Change                           2021
                                                    Costs                $                     %                   Costs
Subscriptions                                    $   6,292          $   2,717                76.0%              $   3,575
Maintenance                                          5,253               (569)               (9.8)%                 5,822
Integrated solutions & other                        22,769             (2,572)              (10.1)%                25,341
  Total cost of revenues                         $  34,314          $    (424)               (1.2)%             $  34,738

Gross profit                                     $  63,366          $   3,228                 5.4%              $  60,138




                    Costs of Revenues and Gross Profit for the Six Months 

Ended June 30, 2022 and 2021

                                                  (dollars in thousands)
                                                     2022                          Change                          2021
                                                    Costs                $                     %                  Costs
Subscriptions                                    $  11,894          $   5,704                92.1%             $   6,190
Maintenance                                         10,530               (866)              (7.6)%                11,396
Integrated solutions & other                        45,775             (4,325)              (8.6)%                50,100
  Total cost of revenues                         $  68,199          $     513                0.8%              $  67,686

Gross profit                                     $ 130,130          $   8,576                7.1%              $ 121,554



Gross Margin Percentage

Gross margin percentage, which is net revenues less costs of revenues divided by
net revenues, fluctuates based on factors such as the mix of products sold, the
cost and proportion of third-party hardware and software included in the systems
sold, the offering of product upgrades, price discounts and other
sales-promotion programs, the distribution channels through which products are
sold, the timing of new product introductions, sales of aftermarket hardware
products, and currency exchange-rate fluctuations. For a discussion of these
factors, see the risk factors discussed in Part I, Item 1A under the heading
"Risk Factors" in our Annual Report on Form 10-K for the year ended December 31,
2021.

Our gross margin percentage increase for the three and six months ended
June 30, 2022 compared to the same periods in 2021, was primarily due to the increased volume of our higher-margin subscription revenue. This was partially offset by a decline in integrated solutions gross margin due to supply chain issues.

                                       23
--------------------------------------------------------------------------------
                                    Gross Margin % for the Three Months Ended June 30, 2022 and 2021
                                                       2022 Gross                                                          2021 Gross
                                                        Margin %                            Change                          Margin %
Subscription                                              81.6%                             (1.8)%                            83.4%
Maintenance                                               81.1%                              0.2%                             80.9%
Integrated solutions & other                              36.3%                             (4.7)%                            41.0%
Total                                                     64.9%                              1.5%                             63.4%



                                     Gross Margin % for the Six Months Ended June 30, 2022 and 2021
                                                       2022 Gross                                                          2021 Gross
                                                        Margin %                            Change                          Margin %
Subscription                                              82.3%                             (4.4)%                            86.7%
Maintenance                                               81.2%                              0.1%                             81.1%
Integrated solutions & other                              39.1%                             (0.2)%                            39.3%
Total                                                     65.6%                              1.4%                             64.2%




Operating expenses and operating income


                  Operating Expenses and Operating Income for the Three 

Months ended June 30, 2022 and 2021

                                                    (dollars in thousands)
                                                      2022                           Change                           2021
                                                    Expenses              $                      %                  Expenses
Research and development                          $  16,023          $     (70)               (0.4)%              $  16,093
Marketing and selling                                23,673              2,319                 10.9%                 21,354
General and administrative                           13,364               (314)               (2.3)%                 13,678
Restructuring costs, net                                342                327               2,180.0%                    15
Total operating expenses                          $  53,402          $   2,262                 4.4%               $  51,140

Operating income                                  $   9,964          $     966                 10.7%              $   8,998



                   Operating Expenses and Operating Income for the Six

Months ended June 30, 2022 and 2021

                                                   (dollars in thousands)
                                                      2022                          Change                           2021
                                                    Expenses              $                     %                  Expenses
Research and development                          $  32,759          $   1,249                 4.0%              $  31,510
Marketing and selling                                45,600              3,502                 8.3%                 42,098
General and administrative                           28,175                862                 3.2%                 27,313
Restructuring costs, net                                357               (732)              (67.2)%                 1,089
Total operating expenses                          $ 106,891          $   4,881                 4.8%              $ 102,010

Operating income                                  $  23,239          $   3,695                18.9%              $  19,544


                                       24
--------------------------------------------------------------------------------

Research and development costs

Research and development ("R&D") expenses include costs associated with the
development of new products and the enhancement of existing products, and
consist primarily of employee compensation and benefits, facilities costs,
depreciation, costs for consulting and temporary employees, and prototype and
other development expenses. The tables below provide further details regarding
the changes in components of research and development expenses.

Change in research and development expenses for the three months ended June 30, 2022 and 2021

                                           (dollars in thousands)
                                                                          

2022 Increase (Decrease) Compared to 2021

                                                                                $                     %
Consulting and outside services                                                    239                10.9  %
Other                                                                             (309)               (2.2) %
Total research and development expenses decrease                         $         (70)               (0.4) %



            Change in Research and Development Expenses for the Six Months

Ended June 30, 2022 and 2021

                                              (dollars in thousands)
                                                                                2022 Increase (Decrease) From 2021
                                                                                      $                     %
Personnel-related                                                                        212                 1.0  %
Consulting and outside services                                                        1,212                30.9  %
Other                                                                                   (175)               (2.4) %
Total research and development expenses increase                               $       1,249              4.0%


Change in R&D expenses for the nine months ended September 30, 2021 and 2020


The increase in R&D expenses for the six months ended June 30, 2022, compared to
the same period in 2021 was primarily due to increased consulting and outside
research and development services which is a result of both an increase in price
as well as increased usage of consultants. The decrease in other expenses for
the three months ended June 30, 2022, compared to the same period in 2021 was
due to increased capitalization of employees salaries for time spent on
internal-use software development.


Marketing and sales expenses

Marketing and selling expenses consist primarily of employee compensation and
benefits for selling, marketing and pre-sales customer support personnel,
commissions, travel expenses, advertising and promotional expenses, web design
costs, and facilities costs. The tables below provide further details regarding
the changes in components of marketing and selling expenses.
                                       25
--------------------------------------------------------------------------------

           Change in Marketing and Selling Expenses for the Three Months 

Ended June 30, 2022 and 2021

                                             (dollars in thousands)
                                                                                    2022 Increase From 2021
                                                                                     $                   %
Personnel-related                                                                     924                  5.7  %
Consulting and outside services                                                       497                 89.7  %
Foreign exchange (gains) and losses                                                   278                102.1  %
Other                                                                                 620                 14.5  %
Total marketing and selling expenses increase                                  $    2,319                 10.9  %



            Change in Marketing and Selling Expenses for the Six Months

Ended June 30, 2022 and 2021

                                             (dollars in thousands)
                                                                                    2022 Increase From 2021
                                                                                     $                   %
Personnel-related                                                                   1,149                  3.6  %
Advertising and promotions                                                            464                 35.1  %
Foreign exchange (gains) and losses                                                 1,005                480.3  %
Consulting and outside services                                                       865                 68.2  %
Other                                                                                  19                  0.3  %
Total marketing and selling expenses increase                                  $    3,502                  8.3  %



The increase in personnel-related expenses for the three and six months ended
June 30, 2022, compared to the same periods in 2021, was primarily the result of
resuming travel as well as annual salary increases. The increase in consulting
and outside services for the three and six months ended June 30, 2022 was
primarily due to an increase in price as well as use of external contractors to
provide marketing and promotional support, as well as scheduled events for
recognition and professional development of top sales individuals. The change in
foreign exchange translations for the three and six months ended June 30, 2022,
compared to the same periods in 2021, was due to foreign exchange gains and
losses from foreign currency denominated transactions and the revaluation of
foreign currency denominated assets and liabilities. These foreign exchange
changes were primarily due to the euro-dollar exchange rate volatility. The
increase in other expenses for the three months ended June 30, 2022 was related
to increased pricing on our third party software subscriptions as well as
increased spend on our information technology infrastructure to support ongoing
business operations.


General and administrative expenses

General and administrative ("G&A") expenses consist primarily of employee
compensation and benefits for administrative, executive, finance and legal
personnel, audit, legal and strategic consulting fees, and insurance,
information systems and facilities costs. Information systems and facilities
costs reported within general and administrative expenses are net of allocations
to other expenses categories. The tables below provide further details regarding
the changes in components of G&A expenses.

                                       26
--------------------------------------------------------------------------------

               Change in G&A Expenses for the Three Months Ended June 30, 2022 and 2021
                                        (dollars in thousands)
                                                                         2022 Increase (Decrease)
                                                                                 From 2021
                                                                           $                    %
Facilities and information                                                   249                16.8  %
Other                                                                       (563)               (4.6) %
Total G&A expenses decrease                                         $       (314)               (2.3) %




                   Change in G&A Expenses for the Six Months Ended June 30, 2022 and 2021
                                           (dollars in thousands)
                                                                                    2022 Increase
                                                                                      From 2021
                                                                                $                    %
Personnel-related                                                                 342                 2.5  %
Facilities and information                                                        401                13.4  %
Other                                                                             119                 1.2  %
Total G&A expenses increase                                              $        862              3.2%



The decrease in other expenses for the three months ended June 30, 2022,
compared to the same period in 2021, was primarily a result of business
development activities that have slowed in 2022. The increase in facilities and
information technology expenses for the three and six months ended June 30,
2022, compared to the same periods in 2021, related to increased spend on our
information technology infrastructure to support ongoing business operations.
The increase in personnel-related expenses for the six months ended June 30,
2022, compared to the same period in 2021, was primarily due to an increase in
variable related compensation and annual salary increases.


Provision for income taxes

                      Provision for Income Taxes for the Three Months Ended June 30, 2022 and 2021
                                                 (dollars in thousands)
                                                 2022                          Change                           2021
                                                                      $                     %
Provision for income taxes                   $     726          $      367               102.2%             $     359



                      Provision for Income Taxes for the Six Months Ended June 30, 2021 and 2020
                                                (dollars in thousands)
                                                 2022                          Change                          2021
                                                                     $                     %
Provision for income taxes                   $   1,852          $   1,011               120.2%             $     841



We had a tax provision of 9.0% and 9.3% as a percentage of income before tax for
the three month and six month periods ended June 30, 2022, respectively. The
increases in the tax provisions for the three and six month periods ended June
30, 2022, compared to the same periods in 2021, were driven primarily by the
increases in pre-tax income and the jurisdictional mix of earnings. No provision
or benefit was provided in the United States due to a full valuation on the
deferred tax asset.

                                       27
--------------------------------------------------------------------------------

CASH AND CAPITAL RESOURCES

Liquidity and sources of cash

Our principal sources of liquidity include cash and cash equivalents
totaling $44.3 million as of June 30, 2022, as well as the availability of
borrowings of up to $70.0 million under our revolving Credit Facility. As of
June 30, 2022, there was $19.0 million outstanding under the Credit Facility. We
have generally funded operations in recent years through the use of existing
cash balances, supplemented from time to time with the proceeds of long-term
debt and borrowings under our credit facilities.

Avid is committed to our digital transformation initiative, which focuses on
optimizing systems, processes, and back-office functions with the objective of
improving our operations related to our digital and subscription business. The
project started in the third quarter of 2021, has continued through the first
half of 2022 and is expected to continue through 2025. We plan to significantly
invest in transforming our enterprise-wide infrastructure and technologies to
benefit customers and drive enhanced performance across the company.

On January 5, 2021, we entered into the Credit Agreement with JPMorgan Chase
Bank, N.A. and a syndicate of banks, as collateral and administrative agent, and
the Lenders. Pursuant to the Credit Agreement, the Lenders agreed to provide us
with the Term Loan and the Credit Facility. We borrowed the full amount of the
Term Loan, or $180.0 million, on the closing date, but did not borrow any of the
$70.0 million available under the Credit Facility on the closing date. The
proceeds from the Term Loan, plus available cash on hand, were used to repay
outstanding borrowings of $201.0 million under the Company's prior credit
facility with Cerberus Business Finance, LLC, which was then terminated. Prior
to the maturity of the Credit Facility, any amounts borrowed under the Credit
Facility may be repaid and, subject to the terms and conditions of the Credit
Agreement, reborrowed in whole or in part without penalty.

On February 25, 2022, the Company executed the A&R Credit Agreement with
JPMorgan Chase Bank, N.A. and the Lenders. The A&R Credit Agreement extended the
term of the Term Loan by approximately one year to February 25, 2027, reduced
the applicable interest rate margins by 0.25%, removed the LIBOR floor, moved
the reference rate from LIBOR to SOFR, reset the principal amortization
schedule, and eliminated the fixed charge coverage ratio. The A&R Credit
Agreement contains a financial covenant to maintain a total net leverage ratio
of no more than 4.00 to 1.00 initially, with step downs thereafter. Other terms
of the A&R Credit Agreement remain substantially the same as the Credit
Agreement. The Term Loan, as amended, has an initial interest rate of SOFR plus
an applicable margin of 2.25%, with a 0% floor. The applicable margin for SOFR
loans under the A&R Credit Agreement ranges from 1.75% to 3.0%, depending on the
Company's total net leverage ratio. Both the Term Loan and the revolving Credit
Facility mature on February 25, 2027.

Our ability to satisfy the maximum total net leverage ratio covenant in the
future depends on our ability to maintain profitability and cash flow in line
with prior results. This includes our ability to maintain bookings and billings
in line with levels experienced over the last 12 months. In recent quarters, we
have experienced volatility in bookings and billings resulting from, among other
things, (i) our transition towards subscription and recurring revenue streams
and the resulting decline in traditional upfront perpetual software sales, (ii)
the rapid evolution of the media industry resulting in changes to our customers'
needs, (iii) the impact of new and anticipated product launches and features,
and (iv) volatility in currency rates.

In the event revenues in future quarters are lower than we currently anticipate,
we may be forced to take remedial actions which could include, among other
things (and where allowed by the lenders), (i) further cost reductions, (ii)
seeking replacement financing, (iii) raising funds through the issuance of
additional equity or debt securities or the incurrence of additional borrowings,
or (iv) disposing of certain assets or businesses. Such remedial actions, which
may not be available on favorable terms or at all, could have a material adverse
impact on our business. If we are not in compliance with the net leverage ratio
covenant and are unable to obtain an amendment or waiver, such noncompliance may
result in an event of default under the A&R Credit Agreement, which could permit
acceleration of the outstanding indebtedness under the A&R Credit Agreement and
require us to repay such indebtedness before the scheduled due date. If an event
of default were to occur, we might not have sufficient funds available to make
the payments required. If we are unable to repay amounts owed, the lenders may
be entitled to foreclose on and sell substantially all of our assets, which
secure our borrowings under the A&R Credit Agreement.

Our cash requirements vary depending on factors such as the growth of the
business, changes in working capital, and capital expenditures. We anticipate
that we will have sufficient internal and external sources of liquidity to fund
operations and anticipated working capital and other expected cash needs for at
least the next 12 months as well as for the foreseeable future. We also believe
that our financial resources will allow us to manage the anticipated impact of
COVID-19 on our business
                                       28
--------------------------------------------------------------------------------

operations and cash flows for the foreseeable future, which could include
reductions in revenue and delays in payments from customers and partners. The
challenges posed by COVID-19 on our business are constantly evolving.
Consequently, we will continue to evaluate our financial position in light of
future developments, particularly those relating to COVID-19.

Cash flow

The following table summarizes our cash flows for the periods presented (in
thousands):

                                                                          Six Months Ended June 30,
                                                                          2022                  2021
Net cash provided by operating activities                           $       15,221          $   18,898
Net cash used in investing activities                                       (7,359)             (2,275)
Net cash used in financing activities                                      (19,407)            (43,242)

Effect of exchange rates on cash, cash equivalents and restricted cash

                                                           (941)                 56

Net decrease in cash, cash equivalents and restricted cash ($12,486) ($26,563)

Cash flow from operating activities

Cash provided by operating activities aggregated $15.2 million for the six
months ended June 30, 2022. The decrease in cash provided by operations compared
to the six months ended June 30, 2021 was primarily due to a change in working
capital.

Cash flow from investing activities

For the six months ended June 30, 2022, net cash flows used in investing
activities reflected $7.4 million used for the purchase of property and
equipment which largely consist of computer hardware and software to support R&D
activities and information systems. In addition, we have increased resources to
spend time on the development of internal-use software as we upgrade and improve
our back-office applications, as well as development of our cloud related
infrastructure.

Cash flow from financing activities

For the six months ended June 30, 2022net cash used in financing activities was primarily the result of our proceeds on the revolving credit facility, offset by our share buyback program and common share buybacks for settlement withholding taxes net of share awards.

RECENT ACCOUNTING PRONOUNCEMENTS

Recently adopted accounting pronouncements and recent accounting pronouncements to be adopted

Our recently adopted and to be adopted accounting pronouncements are set out in Note 1 “Financial Information” to our Notes to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q.

                                       29

————————————————– ——————————

© Edgar Online, source Previews

About Jonathan J. Kramer

Check Also

Democratic Governor Dan McKee to face 4 challengers in Rhode Island: results

Rhode Island holds primary elections on Tuesday, the last day of primaries in the 2022 …