Avid 2014 Annual Report Download - page 44

Download and view the complete annual report

Please find page 44 of the 2014 Avid annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 108

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108

38
consoles and live-sound systems decreased. The decrease in audio revenues was primarily the result of the previously discussed
lower amortization of deferred revenues attributable to transactions executed on or before December 31, 2010.
Services Revenues
2014 Compared to 2013
Services revenues are derived primarily from maintenance contracts, as well as professional services and training. The $16.3
million, or 9.7%, decrease in services revenues from continuing operations for 2014, compared to 2013, was primarily the result
of the previously discussed lower amortization of deferred revenues attributable to transactions executed on or before December
31, 2010.
2013 Compared to 2012
The $11.0 million, or 7.0%, increase in services revenues from continuing operations for 2013, compared to 2012, was primarily
the result of increased maintenance revenues, driven by maintenance contracts attached to new product sales. During 2013, we
continued to include a one-year maintenance contract with certain product sales, which we began during 2011. While this has had
a positive impact on 2012 and 2013 maintenance revenues, the effect on future maintenance revenues will depend on the level of
renewal rates on these contracts.
Revenue Backlog
At December 31, 2014, we had revenue backlog of approximately $540 million, compared to $559 million at December 31, 2013.
Revenue backlog, as we define it, consists of firm orders received and includes both (i) orders where the customer has paid in
advance of our performance obligations being fulfilled, which are reflected as deferred revenues in our balance sheet and (ii)
orders for future product deliveries or services that have not yet been invoiced by us. Revenue backlog associated with
arrangement consideration paid in advance primarily consists of deferred revenue related to (i) the undelivered portion of annual
support contracts, (ii) software arrangements for which VSOE of fair value of undelivered elements does not exist, (iii) Implied
Maintenance Release PCS performance obligations, and (iv) in-process installations that are subject to substantive customer
acceptance provisions. Revenue backlog associated with orders for future product deliveries and services where cash has not
been received primarily consists of (i) product orders received but not yet shipped, (ii) professional services not yet rendered and
(iii) future years of multi-year support agreements not yet billed.
A meaningful, albeit rapidly declining portion of our revenue backlog is attributable to deferred revenue related to transactions
that occurred prior to our January 1, 2011 adoption of the accounting guidance related to multiple-element arrangements (ASU
No. 2009-13) and the accounting guidance related to differentiating software and hardware in a combined product offering (ASU
No. 2009-14). Prior to our adoption of ASU No. 2009-14, the majority of our products were subject to software revenue
recognition guidance that required us to recognize revenue ratably for periods as long as eight years from product delivery
because we did not have VSOE of fair value for the Implied Maintenance Release PCS deliverable included in most of our
customer arrangements. Upon adoption of ASU No. 2009-14, most of our products are now excluded from the scope of software
revenue recognition, resulting in recognition of arrangement consideration upon product shipments (based on management’s best
estimate of selling price) with only the arrangement consideration attributable to Implied Maintenance Release PCS being
recognized ratably over an extended period of time. As a result of the change in accounting standards, even with consistent or
increasing aggregate order values, we will experience significant declines in revenues, deferred revenues and revenue backlog in
the coming years as revenue backlog associated with transactions occurring prior to January 1, 2011 decreases each quarter
without being replaced by comparable revenue backlog from new transactions.
The expected timing of recognition of revenue backlog as revenue in the future is as follows as of December 31, 2014 (in
thousands):