Q3 2021 Avid Technology Inc Earnings Call
Good afternoon, ladies and gentlemen, and welcome to the avid Technology's third quarter 2021 earnings Conference call. Today's call is being recorded at this time, let me turn the call over to your host for today's call wit, Rappolt Vice President of Investor Relations. Please go ahead.
Thank you Christy good afternoon, everyone and thank you for joining us today for avid technology's third quarter 2021 earnings call for the period ending September 32021, My name is with Rockwell.
But as vice President corporate development and Investor Relations with me. This afternoon are Jeff <unk>, Our Chief Executive Officer, and President and Ken gave Ron.
<unk> financial officer and EVP.
In their prepared remarks, Jeff will provide an overview of our business and then Ken will provide a detailed review of our financial and operating results followed by time for your questions.
We issued our earnings release earlier this afternoon, and we have prepared a slide presentation that we will refer to on this call. The press release and presentation are currently available on our website at IR Dot added dot com and a replay of this call will be available on our website for a limited time.
During today's call.
I'm, saying I'm on.
During today's call management will reference certain non-GAAP financial metrics and operational metrics in accordance with regulation G. Both the appendix to our earnings release today. The appendix of this presentation and our Investor website contain a reconciliation of the most closely associated GAAP financial information to the non-GAAP measures and also a definite.
<unk> for the operational metrics used on this call and in the presentation.
Unless otherwise noted all figures noted by management during the call are non-GAAP figures.
Separate revenue, which is always gap.
In addition, certain statements made during today's presentation contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095.
Our comments and answers to your questions on this call as well as the accompanying slide deck may include statements that are forward looking and that pertain to future results or outcomes actual future results or occurrences may differ materially from these forward looking statements for more information, including a discussion of some of the key risks and uncertainties associated with these forward looking statements.
Please see our press release issued today and our most recent annual report on Form 10-K, and quarterly reports on Form 10-Q filed with the SEC.
With that let me turn the call over to our CEO and President Jeff Rosen for his remarks. Thanks.
Thanks, Rick and thanks to everyone for joining us to review Avon's third quarter results.
We are pleased with our results and that we were able to significantly grow our revenue in Q3 due to the strong performance of our subscription business and by the continued strengthening recovery of our end markets, which allowed us to continue to deliver strong profitability and free cash flow with just continued positive trajectory of the business. It is clear to us that our strategy is working and we're seeing it.
The benefits.
So let's get started as there's a lot we wanted to share with all of you today.
During the third quarter. There are three main takeaways for the business performance I would like to delve into with you.
First we delivered strong subscription revenue growth driven by both our creative tools and enterprise offerings.
Next we saw that the continuous strengthening recovery of our end markets also contributed to robust overall growth.
And finally, we continue to deliver consistent and healthy profitability with strong free cash flow conversion.
Overall, we exceeded expectations for the third quarter and as we enter the fourth quarter, which is historically, our seasonally strongest quarter. We believe we are well positioned to finish 2021 on a high note and our momentum momentum gives us confidence as we look towards 2022.
Now, let me dig in a bit more and provide some more specifics on each of these areas.
We saw strong growth in our overall subscription business in the third quarter, including solid performance across our creative tools and strong enterprise subscription sales.
We signed several multi year enterprise subscription agreements in the quarter with large media companies around the world, including with the BBC.
And we continue to see sales of our media central and media composer enterprise subscription offerings to both new and existing customers during the third quarter, including Endemol Shine and Cao sur.
Our strategy for moving enterprise customers to subscription continues to pay off and enterprises are adopting our subscription products well ahead of our expectations and we do not expect this trend to slow down.
As we move these enterprise customers from perpetual and maintenance to subscription we continue to see meaningful uplift in our annual contract value.
We are at the early stage of this transition we believe there remains significant opportunity ahead of us in growing our enterprise subscription business.
Our creative tools continue to be in a central piece of our subscription growth and during the third quarter. We continued strong net adds for creative tools, we believe that the creative tools year over year growth is recovering as the large COVID-19 cohort of new adds from 2020 gets further behind us.
Specifically with regard to pro tools, we saw an acceleration in net adds in the third quarter versus the prior quarter and we like the direction, we're seeing so far.
These enterprise subscription sales and net adds from creative individuals' led to both healthy subscription license count and strong revenue growth.
During the third quarter the recovery of our end markets continue to strengthen benefiting all business areas and product segments. The.
This strength combined with the strong performance of our subscription business and our stable maintenance revenue stream led to double digit revenue growth in Q3.
We also realized an increase in annual contract value of over 20% driven by the strong subscription revenue growth and a significant increase in the value of our long term agreements from both new agreements signed and a significant increase in annual contract value of several agreements that were renewed in the quarter.
The solid year over year growth of our integrated solutions business was driven by a slightly different mix this quarter.
We saw strengthening of gross margins as volumes recover and as management focus on improving the product mix overall.
Our storage business continued to perform well as we see organizations continue to return to their facilities and productions head back towards normal globally.
Demand for audio interfaces and control surfaces was healthy and we continue to see strong demand for live sound solutions due to the return of many touring activities and live venues as Covid restrictions continue to be lifted.
During the third quarter and for several consecutive quarters, we've continued to deliver consistent healthy profitability and free cash flow.
Improving overall gross margins and revenue growth combined with the benefits from operational efficiency continued to deliver solid profitability with an adjusted EBITDA margin of 16, 8% in the quarter.
And while certain cost saving measures such as employee furloughs.
Temporary during the second and third quarters of 2020, we continue to remain diligent this year and our spending controls as we looked at smarter ways to manage our business. We did this while also investing in the digital transformation is important for our future and also investing in innovation to fuel our growth plan. Both are important elements of our company strategy that was <unk>.
Dented at our Investor day event back in May.
And finally, we once again delivered strong and steady free cash flow of $14 million in the quarter, which represents an over 150% increase quarter over quarter.
Now, let's talk about where we see things going forward from a business perspective.
As we enter the fourth quarter. We believe we are well positioned to finish 2021 strong and enter 2022 with good momentum we.
We expect a continued solid growth trajectory of subscription net adds for our creative tools and anticipate continued strong enterprise software subscription sales.
We will continue to innovate with new technologies develop new solutions and <unk> unique strategic partnerships that will contribute towards our strategic plan.
And that we believe will contribute to our growth expectations were.
We also plan to deliver a constant stream of new software releases that are designed to fuel our subscription business and contribute to its growth.
And we expect continued expansion of our SaaS and cloud partnerships as we see the opportunity for adoption of more cloud based workflows with enterprise organizations in support of our customers' demand for better enabling remote workers and more distributed workflows.
Also we will continue our efforts to improve efficiency and maintain the cost discipline that we've been so focused on the past couple of years how.
However, as I mentioned, a moment ago, we will also be making strategic investments in support of our five year growth plan.
In closing, we will continue to carefully evaluate how we deploy our capital to enhance shareholder value, while maintaining a healthy balance sheet and whether this is through continued share buybacks, we're making selective strategic investments to accelerate our growth plan.
With that let me now turn the call over to Ken to review more of the financial details, particularly weekend.
Thank you, Jeff and good afternoon, everyone.
We are pleased with our business and financial results for the third quarter of 2021 or.
Our continued year over year revenue growth driven by an acceleration of our subscription business and strong performance of our maintenance and integrated solutions revenues allowed us to deliver strong profits and pre free cash flow.
Our focus for the remainder of 2021 will be to continue building our subscription revenue improved renewal rates in our maintenance business and increase the nonrecurring portions of the business related to integrated solutions.
We are confident in our momentum and will continue to invest prudently in R&D and certain areas of our back office to support our long term business plan centered on expanding our subscription business by approximately a 30% CAGR through 2025, and improving overall free cash flow and free cash flow conversion.
With that let's now turn to the details of our third quarter financial results.
We are encouraged by the continued growth of our subscription base, which reached a new high in paid subscriptions. This includes not only individual creative tools subscriptions, but also the addition of multi seat subscriptions that are being sold by our channel partners and to educational institutions as well as ours.
Enterprise subscriptions, our total subscription count reached approximately 389000 at.
At the end of the third quarter, an increase of 35% year over year.
In the third quarter, we added roughly 19300 net new subscriptions with enterprise subscriptions adoption on top of the continued growth in creative licenses, including an acceleration of net adds in pro tools in the quarter as.
As we closed our books for the third quarter, we adjusted the numbers, we are reporting for cloud native software subscriptions as we discovered there were certain multi seat licenses that will be counted as one subscription and serve the actual number of acted and paid seats under the multi seat license the.
Impact of this change is an increase in our subscription count of 6% or approximately 23100 in the third quarter of 2021, and a similar amount in each of the past four quarters.
We have shown in the chart the adjusted count going back to the third quarter of 2020 there.
There is no revenue impact because of this change and it did not materially alter the trends our growth rates and subscriptions as all quarters were understated by a relatively similar amount.
Subscription growth was strong for all creative tools with pro tools up 29% year over year media composer up 41% year over year, and Sibelius up 35% year over year.
Now moving to the composition of our revenues.
The continued growth in the number of paid subscriptions for our creative tools as well as new subscriptions for media Central drove continued year over year growth in subscription revenue during the third quarter.
<unk> $28 million, an increase of 56, 4% year over year.
We see momentum as enterprises are adopting our subscription model faster than we had previously estimated with several large enterprise customers moving from perpetual to subscription during the third quarter with a favorable uplift and overall revenue to Abbott.
Although Q3 was a strong quarter for converting enterprises to subscription we continue to expect that the fourth quarter and first quarter of each fiscal year to provide the largest opportunity for enterprise subscription conversions, given the renewal cycle of enterprise maintenance contracts that are weighted more towards the calendar.
At year end.
Maintenance continues to be a strong contributor to revenue despite the transition to subscription.
Maintenance revenue was $30 7 million during the third quarter down <unk>, 4% year over year and up 0.9% sequentially.
Maintenance revenue remained stable as we saw improving renewal rates on our maintenance contracts and contribution from the stronger product sales offset by the transition of certain enterprise customers from maintenance to subscription.
Total subscription and maintenance revenue increased year over year by 25% in the third quarter the.
The subscription revenue growth was diluted by the slight decline in maintenance revenue, but combined subscription and maintenance revenue came in above our guidance for the third quarter.
Perpetual license revenue was $5 7 million down 37% year over year in the third quarter as we continued to deemphasize perpetual licenses and focus on strategic subscription revenue, even with the declining perpetual revenue total software revenue from combined subscription and perpetual licenses.
<unk> increased year over year by 25% in the third quarter.
Our integrated solutions business remained healthy with integrated solutions revenue up $31 2 million in the third quarter, an increase of 16, 3% year over year and roughly flat sequentially. The year over year growth was driven by recovery in audio hardware control surfaces live sound consoles in storage.
<unk> audio hardware revenue increased year over year in the third quarter driven by sales of the carbon interface.
Video control services revenue increased nicely year over year as many large studios continuing to add new capacity.
<unk> product revenue was up year over year as well due to the continued global market recovery as many venues and concerts.
<unk>.
Revenue from our storage products was also up slightly year over year as the end markets continued to improve.
The balance of our revenue comes from our professional and learning services business professional service revenue was $6 1 million in the third quarter, an improvement of two 7% year over year.
Now moving to recurring revenue and annual contract value.
Our strategy in recent years to focus on recurring revenue sources continues to pay off in.
In the third quarter LTM recurring revenue was 77% of total revenue up from 71% in the third quarter of 2020.
The LTM recurring revenue percentage increased due to the higher subscription revenue and revenue under long term agreements as well as from lower nonrecurring product revenue in the last 12 months compared to the prior 12 months.
Annual contract value was $328 million at the end of the quarter up 21% year over year.
<unk> benefited from strong year over year growth in subscription revenue stable maintenance revenue and improvement in contribution from strategic purchasing agreements with our channel partners.
During the quarter, we added two new strategic purchasing agreements, which added $3 5 million of total contract value and we successfully renewed five strategic purchasing agreements contributing to the sequential and year over year of growth in ACB.
Total contract value for the agreements were renewed in the third quarter increased 27% signifying the improving conditions in the overall market and the confidence our strategic partners place an avid to support their growth.
Now, let's look at the rest of our results for the third quarter.
Total revenue was $101 6 million in the third quarter, an increase of 12, 4% year over year and a seven 1% sequential increase and was above the top end of our third quarter guidance.
Year to date revenue through the nine months ended September 32021 was $209 9 million or 13, 6% improvement over the prior year period.
At constant currency, our third quarter 2021 revenue increased 11% year over year.
Non-GAAP gross margin was 65, 3% for the third quarter up 40 basis points year over year, and 140 basis points sequentially.
High margin subscription business made up a larger share of revenue in the third quarter, which aided in delivering higher gross margin both year over year and sequentially.
Non-GAAP operating expenses for the quarter were $51 3 million, a $10 million increase year over year and $4 3 million sequentially.
Non-GAAP operating expenses increased in the third quarter to support continued innovation and the growth in the business and included a 2 million dollar.
Bonus accrual true up given the improving performance of the business.
The company's strong recent performance, we slightly increased our R&D innovation expenses to help accelerate our growth plan, especially for our high margin subscription offerings.
Please remember that in the third quarter of 2020, non-GAAP operating expenses benefited from a significant temporary cost savings initiatives put in place due to COVID-19, including a $6 million from temporary employee furloughs affecting year over year comparisons while many of the temporary cost saving efforts are no longer in effect.
We have continued to exercise similar discipline in managing our expense structure. We are targeting fiscal year end 2021, total non-GAAP operating expenses of approximately $196 million as we continue to benefit from the cost saving measures put in place at the end of 2020.
Non-GAAP net income per share was 27 for the third quarter flat year over year, reflecting the higher gross profit on higher revenue and $2 9 million of lower interest expense. This year offsetting the benefits last year from temporary operating expense savings as described above adjusted.
<unk> EBITDA was $17 million in the third quarter down 11, 9% or $2 $3 million year over year, reflecting the improved revenue and gross profit this year offset by the temporary operating expense savings last year.
Adjusted EBITDA improved $1 2 million sequentially and year to date through the nine months ended September 30, adjusted EBITDA was $50 5 million up 37% from $37 million in the prior year period.
Free cash flow was $14 million in the third quarter down $1 $5 million year over year and up $8 5 million sequentially due to improved operating results and favorable working capital trends.
Year to date free cash flow was strong at $30 7 million for the nine months ended September 32021 up from $3 2 million from the same period last year the.
The growth in our subscription business and an increase in our recurring revenue per centers continues to make our free cash flow less variable quarter to quarter.
Working capital as a source of cash of $2 9 million in the quarter. We are continuing to see improvement in average working capital cycle as our business moves more to software and annual paid upfront subscriptions.
Expenditures were $2 5 million during the third quarter up slightly from the third quarter of 2020 as we have previously mentioned, we expect that capital expenditures will increase during the fourth quarter of 2021 and will be investing to improve our internal operations and support our expanding subscription business.
Now, let's turn to the balance sheet the cash balance at September 30 remained strong at $55 million down $2 9 million from June 30 cash benefited from the free cash flow during the quarter, but also reflects the use of $10 5 million to repurchase shares during the third quarter.
Accounts receivable decreased $1 6 million year over year due to improved collections.
Net inventory decreased $6 $2 million year over year due to the shift in the business towards software and subscription.
<unk> payable increased $8 $9 million year over year due to third quarter 2020 cost reduction initiatives, coupled with a moderate spend increase associated with our revenue growth.
Total debt decreased to $172 1 million, we ended the third quarter.
Net debt was $121 7 million at the end of the third quarter.
Our strong free cash flow and growth in LTM adjusted EBITDA resulted in net debt to LTM adjusted EBITDA of one seven times at the end of the quarter down from two seven times in the prior year period.
Overall, we are pleased with the health of our balance sheet as the reductions to long term debt and total leverage provide the company more flexibility to operate and grow its business and to explore capital allocation alternatives to drive long term shareholder value.
During the third quarter, we repurchased approximately 412000 shares for $11 2 million. Additionally.
Additionally, through November eight we repurchased an additional $8 8 million of our shares bringing total repurchases to date of $20 million under our $115 million authorization, we announced in September.
We believe that share repurchases are an important method for returning capital to our shareholders and provide a good return given our confidence in the long term plan.
Let's now turn to guidance.
Given the continued market recovery, coupled with our performance in the third quarter that was ahead of our total revenue and our subscription and maintenance revenue guidance. We are raising our full year 2021 guidance for subscription and maintenance revenue, we are raising the high end and tightening the range for our full year guidance for total revenue.
And we are tightening the range towards the high end of guidance on our full year 2021 guidance for non-GAAP net income per share adjusted EBITDA and free cash flow that we revised on August three 2021.
We are providing full year 2021 guidance as follows we are raising our full year 2021 revenue guidance to 398 million to $404 million a range, which represents year over year revenue growth of 11, 2% at the midpoint.
We are raising our subscription and maintenance revenue guidance for the full year 2021 to $225 million to $230 million, a range, which represents year over year growth of 15% at the midpoint.
We are tightening our non-GAAP net income per share guidance for the full year 2021 to $1 18 to $1 26, assuming 46 3 million shares outstanding.
We are tightening our adjusted EBITDA guidance for the full year 2021 to <unk> $73 million to $78 million.
We are also tightening our guidance for full year 2021 free cash flow to 52 million to $57 million as our year to date free cash flow performance and our trajectory gives us confidence in our 2021 free cash flow.
With that I would like to turn the call back to Whit.
Thank you Jeff. Thank you Ken that concludes our prepared remarks, and we're now happy to take your questions. Operator. Please go ahead.
Thank you if you'd like to ask a question. Please press star followed by the number one on your telephone keypad, if youre, calling from a speaker phone. Please make sure. Your mute function is off to assure your signal can reach our equipment.
And again, if you'd like to ask a question. Please press star one.
First we'll take Steven Frankel from Colliers Your line is open.
Good afternoon, and thanks for the opportunity to ask a question I just wanted to drill down on the subscription numbers a little bit you guys have made great progress here last quarter, you broke out the media central numbers and so.
Looking at what you disclosed here it seems like the creative ads.
We're about 17000 sequentially versus 38000 in the prior quarter or am I looking at this correctly.
Yes, Steve its <unk>.
That's correct, we did increase our.
License count five.
19300.
From Q3 to Q2.
The creative ads, we're roughly over 17000 of that with the balance in.
Media Central.
Okay and.
If we look back to Q2 over Q1 was it was there any change to that 38000.
Seats added in creative with the restatement or that's still the right number.
Okay.
No.
The trends with our license count continue to be.
Similar with the new reporting that we just provided.
At this point so.
Okay.
So I guess another way to go at it is.
This kind of the new level, we should think about for sequential growth for the creative so we through the Covid, obviously and.
The organic ability of this business to add subscribe.
Subscribers is similar here in 'twenty.
20000, a quarter pace at this point.
No.
In general we feel good about the direction of the ads.
Especially I think if you look at the pro tools, which.
Accelerated in terms of net adds obviously COVID-19 did have an impact.
As that cohorts came up for renewal in Q2, but that has now abated and we see an acceleration of those net adds and we feel good about the direction of the business at this point in the quarter for the fourth quarter.
As a result of the.
The business, we've increased our guidance for subscription and maintenance revenue.
And can you give us any insight on churn trends now that we're through Covid.
Yes.
I would say the retention rate is.
Is actually slightly improving and as we're coming out at the end of Covid and we feel good about the direction of the business and the subscription business.
Thats why we feel confident about increasing our guidance and all of our key metrics.
Okay, and then on the integrated solutions business the whole world is talking about supply chain challenges.
What's the supply chain like for your hardware business.
Yes, Steve This is Jeff I think I'll answer that.
Look I think we're all facing tighter component supply environment in the marketplace. So far I will say that our team is doing a very good job to navigate that and our team is staying ahead of it at this point and so we're quite quite pleased with what they've been able to achieve we obviously are going to be careful on the long term horizon, obviously keep a close.
Cyber right now.
So far our team has done a pretty good job to mitigate everything and so far so good.
I should say, but also component cost component costs are going up I mean that is that is a real.
World situation, we are making appropriate price adjustments, we executed a price increase that was public about a month ago, we increased our storage prices around 8% to 10%.
Both to protect margins, but also to be honest to optimize our margins and our products.
And we will continue to look at that very closely to make sure that we can again protect and even further optimize our margins of our integrated solutions.
Great and then one last question just some insight into the lower gross margins in that software business on a year over year basis.
Is that a mix issue towards the enterprise or is there something else thats, resulting from that.
In terms of gross margins first of all gross margin software improved sequentially.
And year over year, we did.
Some more I would say professionals in customer care.
To help with driving improving renewal rates and driving the topline those costs are in cost of sales and are impacting the gross margin slightly year over year more investment was made this year in that effort.
Okay, great I'll jump back into the queue. Thank you.
And next we will take Josh Nichols from B Riley Your line is open.
Yes, Thanks for taking my question great.
Great to see such a rapid acceleration in the subscription.
Growth for this quarter I was curious if you could maybe help me frame it.
Clearly a lot of growth with enterprise contributing to the subscription base this quarter, but.
You mentioned <unk>.
Just to be even bigger opportunities there could you kind of help frame, how we should think about the opportunities and what you did in <unk> on the enterprise side.
Relative to the potential for <unk> and <unk>.
Yeah, Hey, Josh Thanks, I think.
First of all I think that.
Our general sense of things have been that Q4, and Q1 are always going to be the strongest naturally the strongest quarters, especially for enterprise customers that were converting from a maintenance and perpetual program to subscription and that will be true I think what we found though is that in Q2 and definitely in Q3 again, we are seeing a really great adoption take up.
Wait well beyond our expectations for enterprise customers and even new customers that we've either recaptured or or have moved early so we've got we've seen a lot of strength in that part of the business that strength will continue for quite a while clearly it'll be Q4, and Q1 will be very strong too we believe.
<unk>.
Of course, I don't want to we're not giving specific guidance other than I think our guidance on the subscription revenue should probably be.
Subscription and maintenance revenue should probably be a pretty good hint of what we see going forward.
I would also say just on the creative tools.
We saw obviously as Ken talked about the cohort on creative tools, we've seen very good performance in Q3 on the creative tools side, and especially pro tools. We did see acceleration of the number of net adds in Q3 that we saw versus Q2. So again like we said, we see a good trajectory there.
I know before you kind of called it out certain quarters like.
How much of that is coming through I E are you seeing a lot coming from E. Commerce all of those things I'm just curious like from the sales channels and how some of these customers are coming in on the subscription side, whether it's direct or whatnot.
Yeah. Good question I think we're continuing to see growth in our E. Commerce engine, our digital direct engine, but what's happening we see as our channel partners are getting more and more positive around the migration to subscription models and so we're seeing.
Really significant improvements in our channel performance around subscription and then both our direct sales team and our higher end channel partners or play a big role in our enterprise subscription business too.
And then last question for me just.
So it sounds like good.
Acceleration that youre seeing in the creative tools space and enterprise tracking ahead of expectations.
If you kind of want to hit on I was curious for like the potential ogpu lift that you see as you move some of these people over from perpetual I would expect that would more than offset any decline that youre seeing there then is there any kind of margin profile.
Benefit that you get.
<unk> moved people over to.
To subscription or them versus creative.
So as we move the.
Enterprises from perpetual to subscription we're getting a bigger share of wallet, we are providing more value, but we are getting an uplift on the total revenue dollars.
We've seen uplifts of 200%, but I think in general 120% to 140% is probably the average that we've been discussing with the market and we continue to reaffirm that in our models.
And as those dollars come in.
They provide very strong margins and you can see.
The nice uptick that we've been having.
As we move more of the revenue dollars to subscription.
Even the historical performance of the company's gross margins and we see that continuing as we think about our long term plan in terms of driving more of the revenue dollars to that to the subscription line.
And we're very confident in that outlook.
Thanks, guys.
Thanks, Josh Thank you Josh.
And our next question comes from Anyhow taxi from Northland Capital markets. Your line is open.
Thank you and congrats on the strong acceleration of subscription results in.
But above guidance results.
You guys. Both have mentioned multiple times that you saw an acceleration pro tools net adds but I don't think you have provided the.
The driver behind why that happened any thoughts there.
I think I think a couple of things.
I think number one we're seeing.
I think the team is doing a really good job on both both very important metrics. One is net or gross adds people. They are attracting to bring in our digital marketing efforts and our marketing efforts overall.
Well also our channel has been performing better in this space combined with the fact that we've been doing as we've talked before a lot of work on making sure we minimize churn.
And obviously, we have a big churn metric as we talked about the cohort from 2000 Twenty's.
Terrific numbers and Thats starting to get in our rearview mirror now, but I think in general the team has done a great job in continuing to focus and we will not stop focusing on an acquisition and churn reduction.
Excellent great.
And then so you had implied for Q2, 'twenty, one guidance for maintenance or subscription.
Have more or less.
Through 'twenty, one guidance from maintenance to subscription the way I read.
<unk> got about a million dollar increase on that on the maintenance or subscription.
Spike a huge beat of about $6 million at the midpoint.
Is this due to basically you have a higher base of subscriptions in Q3 than expected and then Youre also looking at a pull forward of the enterprise deals that got recognized in Q3, rather than Q4.
I would say hey, we're pleased with our Q3 performance as we look at as we look at our guidance for Q4.
If you look at kind of our performance what we set out as guidance we typically.
See that as an area that we want to overachieve.
So at this point when we look at Q4, we feel good about what we've laid out publically and were going to work very hard to.
Overachieve, the mid point and get to the towards the higher end, but at this point.
Where we feel is reasonable for the market to assume and we.
We're going to work to continue to drive.
The performance on that on those numbers.
Okay, Great and then my final question is that you also did mentioned that you are seeing increasing value of long term agreements.
What is the primary driver of that increasing.
Value of the LTA.
Yes. This is.
Jeff So I think as Ken said in his prepared remarks, and I think he also on the previous question is that we.
<unk> seen really great success with our strategic partner agreements and these are purchase agreements, we have with our with some of our largest most strategic channel partners.
The program has been very successful for us, but it has also been successful for them and it's helped to grow their business and focusing on having to focus strategically on avid has been a real benefits again for both of us.
So as that program has been delivering success, it's allowed our commercial team to really drive big increases in the commitments year on year and basically grow the business with these with these partners. So I.
I would say, it's just great success of the program and it's good to see these renewals come in very strong as they as they come in.
Okay, Great just just to be clear is that a reflection.
Your enterprise customers adopting increasing functionality.
Yeah.
No. It's all the above I think channel partners, our channel partners sell to all levels of customers. They sell to the large enterprise they sell to small and medium sized businesses and they also sell the individual creatives, our creative teams and we're seeing that success and growth across all those segments.
The partners are.
I think its two things one is that I think they're getting more strategic with avid and theyre getting more focused on delivering results for avid which is good again good for us good for them. They also though are more and more embracing the move to subscription and that's really allowing them to go out and drive business and not just convert customers, but drive new business.
Avid so I think it's been really successful for them.
It's all of the above now it's across.
Great. Okay. Thank you for that clarification.
Okay.
And next we'll go to Jack Vander <unk> from Maxim Group. Your line is open.
Great.
Thanks, Great results, Thanks for taking my questions.
Allow me calls have been answered, but let me just touch on you guys. You guys. Each spoke kind of in your prepared remarks about integrated solutions.
Pretty granular detail.
Key takeaway was I didn't hear anything really negative.
So first I guess, just a fair takeaway not much negative across any of those categories and then Q for greater context can you maybe just compare how the recent revenue performance.
From storage lifestyle audio control some of these some of these categories that were maybe struggling during COVID-19, how that compares to levels pre COVID-19.
I think just improving or are they.
Those levels.
<unk>.
Yes, Hey, Jack So I think it's all of the above I think we have remember that last year, we talked about our strategic pivot and part of what we did to improve margins and just as we're working through what happened in the world and Covid. There's some product lines that we actually as we've talked about reduced or de emphasized in that so it's hard to do an apples to apples.
Comparisons I would say, though.
That the businesses are returning to not all of them, but most of returning to pre COVID-19 levels as much as you can compare them because again, we've trimmed some of those product lines, a bit and really to focus on the most profitable growing parts of that business going forward.
But I would say in some categories, we're seeing it back to pre COVID-19 levels. Other like live sound still have a little bit of a ways to go.
And so it's kind of I'd.
I'd say look I think it's it's been our expectations, which is great.
Things are returning.
And a very robust way now.
So we're happy to say overall, we're happy with Directionally, where it's going but remember that we are being more careful with that part of our business on a go forward basis, because we want to really maximize the opportunities that are more margin.
Margins and higher growth potential and we have been deemphasizing those things that don't fit that that picture.
Okay, Great and then.
Maybe just kind of an unrelated topic, but given the recent pause in the market with all the announcements of the.
The met averse and NFC is prior to that and how it kind of all of this is creating new world a new opportunities to create content create all sorts of creative innovations. How are you guys are you guys involved at all is there a place for avid and the better version.
The new stuff, that's being created in the blockchain universe as well just so you guys involved in this at all is there an opportunity there or are you guys staying in the physical world.
Well, yes, I mean I.
I'd say, we are in the virtual world too I mean, a lot of content. That's created virtually is created with avid tools I'm not sure I can answer it directly on the <unk> I think that's obviously, a very new subject I think clearly.
They are using high quality content in those areas. It gives us an opportunity to participate so I am not sure avid is squarely in the middle of that of that space as far as Nmc's note today, we don't we don't see that.
Space I will say that.
Things like blockchain et cetera, those technologies are important for us as we look at security in some of the strategic areas. We're looking at as a company, but I Wouldnt say that were necessarily right in the middle of let's say the NFC move.
<unk>.
It is interesting to see though I will say people like Fox and others, who have been implementing in ftes associated with some of their content to create opportunities. That's a good trend hopefully that's very successful for Fox and others that do that because that obviously makes the content itself more valuable to.
Got it I appreciate the color that's it for me guys. Thanks.
Thanks.
And with no further questions I will turn it back to Jeff Fresca for closing remarks.
Well. Thank you again for your participation and all of your questions as I mentioned before it let me leave you with the message that we believe we're well positioned to finish 2021 strong and our momentum gives us confidence as we look out to 2022 and beyond so with that thanks, again and goodbye for now.
And that does conclude our call for today. Thank you for your participation you may now disconnect.
Yeah.
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