Avid 2006 Annual Report Download - page 2

To our shareholders
Looking back on our performance in 2006, we achieved some significant milestones – but also fell short of others.
We grew our revenues to over $900 million for the first time in our company’s history, continuing a strong pattern
of growth over the past five years. At the same time, we delivered nearly $74 million of total operating income
from our reportable segments. We also grew our backlog of large deals significantly during the year, however,
operational issues hindered our ability to recognize revenue from these deals and fully achieve our 2006 operating
plan. Lessons learned in managing this backlog, as well as investor expectations, will be important to keep in
mind as we look forward to 2007.
Throughout the year, there were many important highlights across all of our segments. In our Professional Video
business, we continued to capitalize on a number of key trends, including the transition in post production from
standard-definition (SD) to high-definition (HD); the deployment of collaborative workflows built around shared-
storage, sophisticated media asset management, and workflow automation systems; and the conversion of
newsrooms from tape-based methods to all-digital production. Avid Professional Video closed the year with its
highest backlog ever – more than twice the amount we had at the end of 2005. And despite the difficulties of
converting some of this backlog into revenue, our Professional Video unit generated operating profit of over
$30 million in 2006. With new leadership in our Professional Video business, we are focusing on expanding our
offering to include valuable consulting expertise alongside our software and hardware solutions.
Our Audio business had a good year in 2006 – delivering more than a 13% increase in both revenues and
operating income. Demand for our Digidesign® ICON and VENUE families of computer-based mixing consoles
remained strong, while growth for our consumer audio products was fueled by home “hobbyist” musicians
seeking low-cost, high-quality solutions. Additionally, in July we expanded our reach into the important global
education market when we acquired Sibelius Software Ltd., a leading developer of music education solutions.
In Consumer Video, we made significant enhancements to the performance and features of Pinnacle Studio™
10 – our flagship consumer video editing application. We also updated the line-up of plug-in television viewing
products and feel we are well positioned to benefit as the mobile television viewing market continues its rapid
growth. While our Consumer Video unit operated at a loss in 2006, we restructured areas of this business in the
fourth quarter with the goal of positioning the segment to be profitable in the years ahead.
In 2007, we will celebrate our 20th year as a company, and there has never been a more exciting time to be at the
center of the digital media revolution. Although the world around us has evolved a great deal since our founding
two decades ago, our sole commitment to serve customers in the digital media marketplace remains unchanged.
As we continue to address the current trends that are driving our business forward – such as the transition to HD
and the digitization of the newsroom – we are also repositioning the company to capitalize on many emerging
opportunities, including user-generated content for the Internet, and the adoption of the “digital lifestyle” by
consumers and professionals. These emerging trends create an incremental growth opportunity for the entire
company – one that we refer to as “Avid 3.0.” On the following pages, we share our insights about what Avid 3.0
means for our customers and the markets that we serve and highlight our plans for carrying the momentum
we’ve created over the past 20 years well into the future.
David Krall
President and CEO
Avid Executive Team
back row: Jeffrey Hastings
Vice President and General Manager,
Consumer
David A. Krall President and
Chief Executive Officer
Michael J. Rockwell Vice President
and Chief Technology Officer
Sharad Rastogi Vice President
of Corporate Development
Graham Sharp Vice President and
General Manager, Avid Video
front row: Gregory A. Estes
Vice President and
Chief Marketing Officer
David M. Lebolt Vice President
and General Manager, Audio
Patricia A. Baker Vice President
of Human Resources
Joel E. Legon Vice President,
Acting Chief Financial Officer and
Corporate Controller
Paige Parisi Vice President,
General Counsel and
Corporate Secretary
‘02
‘03
‘04
‘05
‘06 $910.6
$775.4
$589.6
$471.9
$418.7
Consolidated Statement of Operations Data
(in thousands except per share data)
Year ended December 31, 2006 2005 2004
Net Revenues $910,578 $775,443 $589,605
Net income (loss) $(42,927) $33,980 $71,701
Net income (loss) per share – diluted $(1.03) $0.86 $2.05
Consolidated Balance Sheet Data
(in thousands except employee data)
As of December 31, 2006 2005 2004
Cash and marketable securities $172,107 $238,430 $155,419
Total assets $997,034 $1,062,046 $576,234
Total stockholders’ equity $780,381 $839,597 $424,621
Employees 2,792 2,613 2,014
Over the past five years, Avid Technology has
experienced significant growth. Our revenues
have more than doubled and we’ve continued
to diversify our business so that we can
effectively serve the dynamically evolving
digital media marketplace. As our business
has expanded, so has the complexity of our
operations, which ultimately had an impact
on the level of profitability we were able to
deliver to our shareholders in 2006. We
closed the year, however, with more than
$170M in cash and investments and no debt,
providing us with a strong foundation to
further build our business and execute our
plans for success in 2007 and beyond.
Financial Highlights
For further information regarding the total operating income for reportable segments referenced above, please see Footnote O in the enclosed 2006 Annual Report on Form 10-K.