Avid 2014 Annual Report Download - page 24

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Our results of operations have been and may continue to be subject to significant quarterly variation. Our results through 2016
will, in particular, be affected by the amortization of deferred revenues relating to periods prior to 2011. Our revenues and
operating results for any particular quarter may also vary due to a number of factors, including, but not limited to, those
enumerated under the section “Cautionary Note on Forward-Looking Statements,” appearing elsewhere in this Form 10-K and:
• the timing of large or enterprise-wide sales and our ability to recognize revenues from such sales;
• demand planning and logistics;
• reliance on third-party reseller and distribution channels;
• changes in operating expenses;
• price protections and provisions for inventory obsolescence extended to resellers and distributors;
• seasonal factors, such as higher consumer demand at year-end; and
• complex accounting rules for revenue recognition.
The occurrence and interaction of these variables may cause our revenues and operating results to fluctuate from period to period.
As a result, period-to-period comparisons of our revenues and operating results may not provide a good indication of our future
performance.
Our revenue backlog estimates are based on certain assumptions and are subject to unexpected adjustments and
cancellations and backlog orders may not be timely converted to revenues in any particular fiscal period, if at all, or be
indicative of our actual operating results for any future period.
Our 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 on our balance sheet, and (ii)
orders for future product deliveries or services that have not yet been invoiced by us. To the extent that our customers cancel their
orders with us or reduce their requirements during a particular period for any reason, we will not realize revenue or profit from the
associated revenue backlog. Even where a project proceeds as scheduled, it is possible that the customer may default and fail to
pay amounts owed to us. Material delays, payment defaults or cancellations could reduce the amount of revenue backlog
currently reported, and consequently, could inhibit the conversion of that backlog into revenues. Furthermore, orders included in
our revenue backlog may not be profitable. We may experience variances in the realization of our revenue backlog because of
project delays or cancellations resulting from external market factors and economic factors beyond our control. As a result, even if
we realize all of the revenue from the projects in our revenue backlog, if our expenses associated with these projects are higher
than expected, our results of operations and financial condition would be adversely affected.
Fluctuations in foreign exchange rates may result in short-term currency exchange losses and could adversely affect our
revenues from foreign markets and our manufacturing costs in the long term.
Our international sales are, for the most part, transacted through foreign subsidiaries and generally in the currency of the end-user
customers. Consequently, we are exposed to short-term currency exchange risks that may adversely affect our revenues,
operating results and cash flows. The majority of our international sales are transacted in euros. To hedge against the dollar/euro
exchange exposure of the resulting forecasted payables, receivables and cash balances, we may enter into foreign currency
contracts. The success of our hedging programs depends on the accuracy of our forecasts of transaction activity in foreign
currency. To the extent that these forecasts are over- or understated during periods of currency volatility, we may experience
currency gains or losses. Our hedging activities may only offset a portion of the adverse financial impact resulting from
unfavorable movement in dollar/euro exchange rates, which could adversely affect our financial position or results of operations.
Furthermore, the significance to our business of sales in Europe subjects us to risks associated with long-term changes in the
dollar/euro exchange rate. A sustained strengthening of the U.S. dollar against the euro would decrease our expected future U.S.
dollar revenues from European sales and could have a significant adverse effect on our overall profit margins. During the past
few years, economic instability in Europe, including concern over sovereign debt in Greece, Italy, Ireland and certain other
European Union countries, caused significant fluctuations in the value of the euro relative to those of other currencies, including
the U.S. dollar. Continuing uncertainty regarding economic conditions, including the solvency of these countries and the stability
of the Eurozone, could lead to significant long-term economic weakness and reduced economic growth in Europe, the occurrence
of which, or the potential occurrence of which, could lead to a sustained strengthening of the U.S. dollar against the euro,
adversely affecting the profitability of our European operations.