Tom Fitzsimmons - VP, Investor Relations Louis Hernandez, Jr. - Chairman, President and CEO John Frederick - EVP, CFO and CAO

Steven Frankel - Dougherty & Company James Medvedeff - Cowen and Company

Good day and welcome to the Q4 2014 Earnings Release Call. Today’s call is being recorded. At this time, I would like to turn the call over to Tom Fitzsimmons. Please go ahead, sir.

Good afternoon. I am Tom Fitzsimmons, Vice President of Investor Relations for Avid. I would like to welcome you to today’s call. With me today are Louis Hernandez, Jr., Avid’s Chairman, Chief Executive Officer and President; and John Frederick, Executive Vice President, Chief Financial and Administrative Officer. Before we get started, we want to note that during this presentation we will be making forward-looking statements, including among others, statements related to our recently filed financial statements, future performance related to revenue, operating expenses, earnings, bookings, backlog, backlog amortization, bookings conversion rate, cost savings and free cash flow, our future strategy and business plans, our product plans and our liquidity. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Also these statements are based on expectations as of today, March 17, 2015 and we expressly disclaim any obligation or undertaking to update or revise these statements, whether as a result of new information, future events, or otherwise. Please review the description of these statements and the risk factors described in our reports filed with the SEC. In addition, we have presented a number of non-GAAP financial measures that we use to monitor our business, including non-GAAP operating results, adjusted EBITDA and free cash flow, all of which are defined and reconciled to the comparable GAAP measure in tables accompanying the release of our results. These non-GAAP measures reflect how Avid manages its businesses internally. Our non-GAAP measures may vary from all other companies presenting non-GAAP measures. Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles. Our non-GAAP information supplements and is not intended to represent a measure of performance in accordance with or disclosures required by generally accepted accounting principles or GAAP. When analyzing Avid’s operating performance, investors should not consider these non-GAAP financial measures as a substitute for net income or other measures prepared in accordance with GAAP. We also reference bookings and backlog, which are operational metrics we use to measure our business. Our definition of bookings and backlog are included in our SEC filings and financial press releases. You may replay this conference call by going to the Investor Relations page of our website and clicking the Events and Presentations tab. And now, I would like to turn the call over to our Chairman, Chief Executive Officer and President, Louis Hernandez, Jr. Louis Hernandez, Jr.: Thanks, Tom. Good afternoon, everyone and welcome. I am very pleased to be here today to provide a business update and review of our performance in 2014. Over the past year, Avid has made some remarkable progress on our three-pronged transformation effort, which included the most sweeping product announcements since our inception with Avid Everywhere, our groundbreaking service approach with the Avid Advantage, and the launch of the Avid Customer Association which some call the largest, most ambitious media collaborative network in the world. As a result of solid execution, we have delivered on our commitment to drive improved financial results, while also building a solid foundation for future growth and expansion. You recall that our first priority in the transformation was to create sustainable EBITDA and cash flow growth by stabilizing our bookings, expanding our margins and executing our efficiency program. The focus on products that address the most significant business issues the industry faces along with the targeted cost structure to drive growth and value has had a direct impact on our financial results. Newer high-margin products such as the Avid MediaCentral platform, new modules, the subscription and cloud offerings and the expansion to adjacent market has not only produced higher margins and stabilized bookings, it has also allowed us to accelerate the shift away from lower margins and lower growth products. Once we fully work through this transition away from lower margin products, you should begin to see higher bookings growth and ultimately greater revenue growth. This margin expansion along with the impact of the cost savings programs should convert into sustainable EBITDA and free cash flow growth. We are pleased that we have been able to see meaningful progress on our key initiatives that we outlined. In fact not only have bookings stabilized reversing a long-term negative trend, but in Q4 we delivered our highest bookings quarter since 2011, grew our revenue backlogs by 19% over 2013, continued to shift towards higher profit products and executed on our continued cost savings. These efforts culminated in $72 million worth of adjusted EBITDA which was at the high end of our recently increased guidance range. We are also pleased that we converted about 18% of that adjusted EBITDA to free cash flow, which is more than double the conversion rate of the previous year and in Q4 we had the highest quarter of free cash flow generation since 2012. Also contributing to the adjusted EBITDA success was $10 million of operating expense savings in 2014. As I mentioned earlier full year adjusted EBITDA of $72 million was at the high end of our recently raised guidance range. We accomplished these results largely from our higher margin products outperforming the rest of the suite, bookings and backlog converting more profitably to adjusted EBITDA, accelerating the adoption of the platform cloud and subscription offerings and continued cost reduction efforts. In the six quarter period ending Q4 2014, we reversed the trend of declining bookings by reporting year-over-year quarterly bookings growth in 5 quarters of the last 6 quarters. This booking stabilization is a clear sign that the transformation efforts have been successful despite the dampening effects of the restatement. Meanwhile and perhaps more importantly, we are concentrating our efforts on the most profitable offerings and those central to our strategy of addressing our customers’ most critical pain points. We conducted a deep review of our products and industry segments to determine which parts of the value chain were growing the fastest, which parts we are participating in, which products led to higher cross-selling and the related products or service profitability profile. We use this review to direct our investment and sales efforts towards products we believe will generate more profitable growth going forward. This strategy has allowed us to become more disciplined as we make product investments and evaluate individual deals in the sales process. We believe this discipline is reflected in the 7% annual growth of the higher margin products on a constant dollar basis. At the same time revenue visibility has also increased as backlog from transactions after 2010 has risen by about $72 million or 19% since the end of 2013. On the cost side we continue to see the impact of executing our cost savings projects. Non-GAAP annual operating expenses had decreased by 3% or $10 million compared to 2013. And we believe significant opportunities remain to reduce operating expenses even further. We also achieved another quarter on both sequential and year-over-year free cash flow improvement. Q4 free cash flow was about $16 million, representing an $8 million increase over 2013 and the highest quarterly free cash flow recorded since 2012 marking three consecutive quarters of material improvement. If you convert that free cash flow to a per share metric, we generated about $0.41 per share this last quarter as compared to $0.22 for Q4 2013. Our full year 2014 free cash flow of approximately $13 million represented 129% increase versus the prior period. We believe these results demonstrate that the growth strategy we put in place is working. A solid performance in Q4 capped off a transformational year for Avid and has set the stage for continued momentum in 2015. And of course goes without saying that we are excited to be back on NASDAQ and we are honored to ring the opening bell on January 16 which represented a ceremonial end to the restatement process and ushered Avid into its next phase of growth and success. I can tell you we are excited about 2015, which represents both an opportunity continue to execute on the progress we made to-date and a chance to break new ground as we rollout a steady diet of game changing innovations. Then John will discuss our 2015 guidance in more detail later, but at a high level, we will be guiding towards a 1% to 5% bookings growth on a constant dollar basis, a roughly 50% to 150% increase in free cash flow and a flat to 8% increase in adjusted EBITDA. Now, as a reminder, we believe that we have hit the floor on adjusted EBITDA for both 2015 and future adjusted EBITDA should not drop below our 2014 results. So that you fully appreciate the guidance keep in mind that we will still be working through about $33 million of non-cash restatement related revenue headwinds of 2015 from the 2011 non-cash revenue amortization. We are pleased that the increased visibility has put us significantly ahead of schedule in terms of overcoming that revenue pressure. Now, as we have met the investment committee, it was clear that we need to provide better visibility into the effects of the restatement. So, we are pleased to present what we think is a fairly simple, but effective approach to building our revenue models. Don will spend a little more time on that later on this guidance. I would now like to get a little more specific about how we expect to achieve our 2015 goals. We plan to continue executing on those parts of the strategy, where we have already seen progress and expand our work streams to include new opportunities that will advance our overall mission of helping content creators and distributors connect with consumers, more powerfully, more collaboratively, efficiently and of course more profitably. We generally think that our addressable market fall into three broad tiers. Tier 1 includes strategic and key accounts typically enterprise-level accounts. These will be accounts such as NBCUniversal, Disney, BBC and TV Global for example. Tier 2 consists of creative team, professional enterprises and institutions that include both traditional media types and non-media verticals. Examples of Tier 2 would include organizations like post houses, universities, film studios, houses of worship, local station groups just to name a few. Tier 3 consists of the independent creative professional and enthusiasts. And while we have historically focused on the top two tiers, the Tier 3 market thus far has been largely untapped by Avid. We have identified several growth opportunities that we believe will yield the greatest return. For Tier 1 and 2, we are focused on driving the adoption of the MediaCentral platform and then cross-selling and up-selling higher margin products across the entire workflow. We plan on building our creative suite by adding more and more applications to address the rest of the media value chain in a lower cost and more powerful way. For Tier 3, we will be launching a series of new products, including subscription and cloud offerings. This is a new area of focus that has already brought us thousands of new customers and opens the door to an almost $2 billion market not previously targeted. Today, the volume of creating content in demand by consumers and the population of artists producing that content are at all-time high. And we want to provide everyone with the tools to tell their story. Imagine that aspiring independent video professional just getting started could easily have access to the same tools that are used for television shows of the highest production quality, such as Game of Thrones or movies such as Birdman or American Sniper for only $49 per month via our cloud subscription model. For the indie recording artists who can create music using the same workstation as Pharrell Williams, the Foo Fighters, Katy Perry for only $24.99 per month. What’s even more exciting though I think is all those aspiring artists who can subscribe to our entry-level offering for free with the recently announced Pro Tools first. With Media Composer and Pro Tools cloud-based subscription offering creative artist at all levels now have the ability to use the best tools at a pricing models that works for them. You can use the best tools at pricing models that works for them. You can expect to see us continue to make more of our portfolio available on a cloud and subscription basis in the future. Next the Avid Marketplace will allow everyone on the MediaCentral platform to engage with the community of artists have access to plug-ins and apps on the App Store easily store and share their work for cloud collaboration and storage as well as buy and sell media assets on the content marketplace. The Avid Marketplace allows artists to distribute, be recognized for and be paid for their work by providing a safe and secure cloud based platform to monetize their assets among a massive global network of potential purchasers. The Avid Marketplace really is about engaging and growing the artist community which is a key to creating meaningful value through the various monetization channels available to us. The Tier 3 community not only can connect globally with each other but easily participate in the rest of the value chain with our Tier 1 and 2 media companies. We see a powerful ecosystem for anyone who wants to participate in media and a lifetime value of that customer can be very significant. Our free Pro Tools first offering is a good example of how we can efficiently accelerate community growth ultimate leading into upgrades, marketplace transactions, cloud storage and other revenue opportunities. Another important component that we have mentioned before is the development of the connectivity toolkit which spans all customer tiers. This tool allows third parties to create applications and plug-ins that leverage those common services on the Avid MediaCentral platform. These are tools built by partners so that their solutions interact with Avid products as if they were one of our own. These can span from high value workflow tools used by strategic enterprise customers such as newsroom graphics to a single audio plug-in aimed at Pro Tools first user and sold in our community marketplace. A great example is our recent announcement that Avid’s shared storage system now supports Adobe Premiere Pro. This unprecedented collaboration delivers the openness of Avid Everywhere. With the connectivity toolkit we are able to offer even more solutions across the workflow and participate in large portions of the overall media ecosystem. In connection with identifying these growth engines and better defining our accessible market, we have aligned how we go to market to coincide with each of these tiers. In Tier 1 and 2 we leveraged both our direct sales force and our broad resell and distribution networks to continue to drive platform adoption and cross sell activity. We recently rationalized our partner network to better align with the highest performing partners and we have invested in these partnerships through increased training and improved commercial terms designed to specifically align incentives with our strategic goals. In Tier 3, we will employ a focused digital strategy designed to attract, engage, convert and enthuse those independent professionals that they are new to the Avid family. Now turning to the operating model, we have also been laser focused on creating a leaner more directed cost structure. Our migration to a common platform architecture has enabled us to drive the efficiency while increasing the speed of new products to market. And while we have been successful thus far in reducing operating costs, we continue to see opportunity for increased savings of between 1% and 4% in 2015. So I hope this update was helpful in demonstrating execution on our strategy and areas of focus for 2015. You can see that we have been very busy and are pleased that we have delivered on our commitment initiatives such as sustainable EBITDA growth, greater future revenue visibility and efficient cost structure and improved cash generation. Our bookings reflect a focus on high profit higher growth products resulting in sustainable EBITDA and a growing backlog of recurring revenue. This provides the foundation for our next phase where we optimize existing growth engines and turn to new ones including accessing the multi-billion dollar independent professional market through our Tier 3 strategy. Our well-defined growth engines and efficient operating model provides an outstanding platform for both organic sustained earnings growth and for future acquisitions. Again the difference that we feel we make in this rapidly evolving media landscape is enabling the connection between content creators, distributors and consumers more powerfully, collaboratively, efficiently and profitably. We are building our heritage in addressing the most important issues to drive value for our community and our shareholders. So, with that, I would like to now turn over to John Frederick to review our detailed financial results. John?

Thanks, Louis. Before I get into the discussion of my financials, I wanted to remind everybody about the reason we have for the timing of our conference calls. As you know, the company has undergone tremendous changes and the financial expression of our business has developed meaningful complexity due to the impact of the restatement. To address that complexity, we have over the past few calls provided for additional time between filing our materials and holding our investor call to allow for some additional time for investors to absorb the materials. Additionally, we have produced a series of videos to help you better understand the business with the newest one being posted today, which provides help in modeling the company’s revenue. In the near future, we will be adding another video to help frame the Tier 3 market. We have received some great feedback from our investors on the video series and we will continue proactively posting informational videos to update our investors on our strategy, vision and plans. And finally, we have been actively engaging with existing shareholders as well as prospective shareholders, which we will continue to do to help them understand the power of this opportunity we have here at Avid. That said, as we exit 2014 now that we have dealt with some of the most intense complexity, we will be evaluating the best time to adapt to a more typical filing con call cadence that is filing after the close of trading and having the call shortly thereafter. So, as we reflect on 2014, we are pleased to have made so much progress on our strategic plan and that our financial results, reflects this progress. As Louis mentioned and as I want to reemphasize in 2014, our key goals were to first stabilize bookings while using product profitability as the guide to deemphasize less profitable products and emphasize more profitable platform-related products. Second, use a combination of improved product profitability and a leaner more directed cost structure to generate sustainable adjusted EBITDA growth. And finally, improve cash flow conversion of EBITDA and the free cash flow. Our results are in line with those targets and established a solid baseline from which to build towards 2015. Adjusted EBITDA of $72 million was at the high end of our guidance we provided in November, while on a year-over-year basis, we continue to have a difficult comp because of the pre-2011 deferred revenue runoff we are ahead of where we expected to be and continue to convert more current bookings to revenue. Annual bookings were $519 million as we closed the year with our strongest bookings quarter in 3 years. Due to the strengthening of the dollar, we experienced currency translation pressure, particularly on the euro and yen denominated business, which muted our performance somewhat. That said, bookings were flat on a year-over-year basis, on a constant dollar basis. Currency movements in 2014 had a nearly 1% unfavorable impact on our bookings growth rate for the year. We ended the year with $25 million of cash with nothing drawn on our asset-based revolver. Free cash flow for 2014 was $12.7 million or more than doubled the $5.5 million we have generated in 2013. We converted 18% of adjusted EBITDA on the free cash flow in 2014 as compared to a 7% conversion rate in 2013, so a significant improvement. As I have discussed in the past, our cash flow is heavily influenced by the timing of deal closure and the mix of bookings within a quarter, which I will discuss in a little bit more detail in a moment. The impact of timing and mix of bookings as well as the stronger dollar pushed cash flow results somewhat below guidance. Revenue for 2014 was $530 million, which was down 5.9% from 2013. Again, the significant strengthening of the dollar against the yen and the euro pushed the result slightly below our guidance. Gross margin of 61.6% was higher than expected as we continue to shift to more profitable products. When comparing against the prior year, our success stabilizing bookings with higher margin products helped offset the bottom line impact of the pre-2011 deferred revenue burn down. Operating expenses of $270 million was consistent with our guidance and almost $10 million less than 2013. So, with that, now I will turn to the key financial metrics for the fourth quarter. Q4 bookings were $153 million on a reported basis. And I mentioned – and as I mentioned we are the highest since Q4 2011. The bookings were heavily weighted to later in the quarter which impacted cash flow timing and was a factor in free cash flow results being blow guidance. We saw a continuation of a multi-quarter trend towards increasing contract support bookings both on an annual and multi-year basis. We believe the trend to a multi-year support contract reflects our clients acknowledging the platform’s strategic relevance to their businesses and continue to improve service resulting in longer term commitments and improved future revenue visibility. In addition we had encouraging adoption of annual support contracts by Media Composer and Pro Tools users. In fact we had over 90,000 Pro Tools and Media Composer software related annual contracts sold in the fourth quarter alone. As I mentioned the currency pressure we experienced – as I mentioned the currency pressure we experienced was significant, but on a constant dollar basis the fourth quarter bookings were up 4% on a year-over-year basis, while on a reported currency basis they were up about 2%. We talked a lot about the focus on higher profit products and if you highlight the sales progress on those higher margin products, we saw 7% growth on a constant dollar basis over the prior year, again outpacing the rest of the portfolio. We are continuing to convert more and more of adjusted EBITDA to free cash flow as free cash flow in the quarter was $16 million which represents the highest quarter of free cash flow since 2012. It was $8 million higher than the third quarter and almost doubled the same quarter last year. Adjusted EBITDA of $14 million was at the high end of our guidance coming out of Q3. And although it was down from last year by about $5 million if you consider the $10 million of pre-2011 deferred revenue amortization headwind, the operating performance actually improved. As a reminder this headwind will continue to impact results through 2016. We talked recently about the product – about the progress of our subscription base, as a reminder we launched our subscription offering for Media Composer in May of 2014 and experienced steady adoption since even without the benefit of heavy marketing support. We ended 2014 with over 5,300 subscribers which represented a 65% increase from the end of 2000 from – sorry from Q3 2014 and from the end of February we are up about 7,000 Media Composer subscribers, most of which who are new customers. We believe that many of these were Adobe customers who are now opting for more professionally oriented solutions at the same price point as the Adobe offering. And now that we have launched Pro Tools cloud subscription and collaboration in Q1 we will be much more aggressive with our digital strategy and related digital marketing efforts. And we will be certainly giving additional marketing support to these new offerings. I will now shift to our operating results on both GAAP and non-GAAP basis for the fourth quarter. As a reminder the tables in our press release provide a description and a reconciliation of non-GAAP to GAAP results. Revenue for the fourth quarter was $128.2 million as compared to $147.1 million for the same quarter last year. Much of this decrease was related to lower amortization from the pre-2011 period. We also saw a mix shift towards longer term contracts that closed late in Q4. And while they may not have been immediately accretive to revenue, they certainly help to drive an increase in revenue backlog by almost $72 million from the prior year, which improves revenue visibility and is a very profitable increase in revenue backlog. GAAP gross margin for the fourth quarter was 60.6%, which represented an increase of 140 basis points from the prior year. Non-GAAP gross margin was 60.8% for the fourth quarter and was 130 basis points higher year-over-year. We continue to focus on a leaner more directed cost structure and as a consequence our non-material cost of sales for the quarter was down meaningfully on a year-over-year basis. We also experienced stronger direct product margins as we accelerated the growth of higher margin products and deemphasized those with lower margins. GAAP operating expenses were $80.3 million, down about $5 million from the fourth quarter of 2013. Operating expenses included about $3.9 million of restatement related expenses as compared to $8.2 million in the same period last year. These lingering restatement expenses largely relate to continued investment in our systems and some accounting and consulting and process remediation related to significant deficiencies, material weaknesses we identified throughout the restatement process. Non-GAAP operating expenses of $67.5 million or $5.5 million or 8% lower than the fourth quarter of 2013 as we are clearly seeing the benefit of our strategic initiatives to drive a leaner, more directed cost structure. We have seen lower costs in almost all areas of spending, including compensation, travel, hardware development, communications and consulting just to name a few and expect to continue to see this trend into 2015, but more on that in a bit. Non-GAAP operating profit for the quarter was $10.4 million as compared to $14.4 million in the same period last year. Again, lower operating expenses and a higher gross margin as a percentage of revenue helped mute the negative effect of the restatement accounting. So, with that, I will turn to the balance sheet. As I mentioned earlier, we ended the quarter with $25 million of cash and no draw on our available line of credit. Accounts receivable of $55 million represents DSO of 38 days, which is consistent with last quarter and last year. It’s important to note however that until the amortization of the pre-2011 revenue dissipates, changes in DSO may not be representative of working capital management effectiveness. Inventory of $48 million was down 20% as compared to the end of 2013. Our annualized inventory turns for the fourth quarter were 4.2 turns as compared to 3.5 turns in the same period last year. We have made significant progress over the past 2 years of managing inventory and we believe we can continue to improve turns, but would expect inventory improvements to be more modest in 2015. Deferred revenue was $415 million at the end of 2014 as compared to $467 million at the end of the prior year. Deferred revenue was lower due to the amortization of pre-2011 transactions masking the growth for more recent sales activity. In fact, if you were to exclude the impact of these transactions, our deferred revenue has increased over $39 million or 14% in the past year. Revenue backlog was $540 million at the end of 2014 as compared to $559 million at the end of 2013. Again, if you remove the impact of the pre-2011 deferred revenue, revenue backlog grew almost $72 million or 19% to $455 million in the past year, reflecting the continued trend towards increased revenue visibility. Speaking of our balance sheet, I am sure you have taken note of the recent consolidation trends and what continues to be a highly fragmented industry. Central to our value creation strategy is the ability to consolidate other market participants on to our common platform and in the process expand our coverage of the media value chain. We believe that in order to execute on some of the strategic growth initiatives we may need to raise capital, but given the current nature of the debt markets, we see an opportunity to put some debt to capital to work on targeted transactions. Next, I will turn to 2015. Consistent with our historical practice, we will provide annual guidance and then update you on a quarterly basis. However, before I get into the specific guidance for 2015, I will touch on the impact of changing currency rates on our business. Like many other U.S. companies that do business globally, we have been impacted by the strengthening dollar causing our sales denominated in foreign currency to translate at a lower conversion rate. Approximately, 60% of our revenue was transacted outside the U.S. and about a third of our bookings are transacted in currencies that are primarily the euro, pound sterling and yen. We have sales offices and development centers around the world, which provides some natural hedge to profit against the strengthening dollar, however. We also monitor our local pricing for changes in the macroeconomic conditions and can adjust as appropriate. That said a strong dollar mutes our performance on a reported currency basis. So, with that as a backdrop, I would like to discuss our guidance for 2015. I will first start with our three key metrics: adjusted EBITDA, free cash flow and bookings. As we mentioned on our last call, we expected the low end of the 2014 guidance of $64 million to establish the floor for adjusted EBITDA. That said, based on the 2014 results and the outlook for 2015 driven by our expectation of a continued shift to higher margin products and the availability of incremental cost refinements, we expect our 2015 adjusted EBITDA to be in the range of $72 million to $78 million perhaps with a slight bias to the higher end of the range. We expect free cash flow generation to be in a range of $18 million to $30 million as compared to the $12.7 million we reported in 2014. This reflects an adjusted EBITDA conversion rate of 23% to 42% which would be a substantial improvement over the 18% in 2014 and the 7% in 2013. We expect annual bookings on a constant dollar basis to be up between 1% and 5% for the year. If the exchange rates stay at the current levels we would expect that the translation of reported results headwind could be approximately 2 percentage points. I would also like to mention that our quarterly skew maybe tilted us a bit towards the second half of the year as we fully implement our digital strategy for Tier 3 customers and the normally strong fourth quarter seasonality. Turning next to the P&L, we expect 2015 to be from flat to up 3% from last year as more of the building backlog converts to revenue. This is in spite of the continued reduction from the pre-2011 amortized revenue. In fact we expect about another $33 million left of this revenue amortization in 2015 further highlighting the growth in new cash generating profitable bookings to revenue. I know the impact of this amortization has proven to be a challenge for the investment community in creating a financial model for us here at Avid. In just a moment I will provide some suggestions to simply and effectively breakdown the primary drivers of revenue. These drivers should prove to be the basis for building what we think to be a reasonable revenue model. We expect non-GAAP gross margin to be between 60% and 61%, consistent with our 2014 performance even with reduction in pre-2011 revenue amortization. Non-GAAP operating expenses is expected to be flat to down 4% as compared to 2014. We expect to realize the full effect of cost programs that we started and implemented in 2014 as well as capitalize on some new cost refinement projects in 2015 like our wage rate arbitrage projects that we have going currently. GAAP to non-GAAP adjustments are expected to be approximately between $17 million and 20 million. As a reminder these items include costs associated with stock-based compensation, restatement, restructuring expenses, amortization of intangibles and tax related adjustments. As it relates to capital spending, we anticipate that 2015 capital expenditures will be between $18 million and $20 million. This is an increase over 2014 and it’s largely influenced by the investments in our digital marketplace strategy and facility and infrastructure builds in lower cost regions as we execute on our wage rate arbitrage projects. We believe that both of these investments have compelling return on investments in the near-term. As we traveled the country this past fall meeting with investors, we heard consistent feedback about the needs to offer a better predicted methodology for modeling our revenue. Given that pre-2011 revenue was a material, yet declining portion of our revenue and that simply excluding this revenue is not reflective of our operating performance, we have certainly taken that feedback to heart. I will walk through some of the components now as a way to think about our revenue modeling, but we are also posting an illustrative example on our IR website shortly after the call. There are two primary components in our revenue in any given period; First, revenue backlog that converts the revenue in the period. And second, revenue from current period bookings. We have disclosed revenue backlog at the end of 2014 in our earnings release supplemental schedules along with the annual amortization of that revenue backlog. As a reminder included in our revenue backlog includes revenue to be amortized from periods before 2011, revenue to be amortized from periods after 2010 and backlog. We have historically not provided an amortization schedule for revenue backlog, but have included one in the supplemental schedules to our earnings release and a revenue modeling presentation on our Investor Relations webpage, which will be posted shortly. We find it useful to break up revenue backlog as the pre-2011 deferred revenue is relatively fixed and will roll into revenue at known amounts every period. For the period after 2010, this amount of amortization changes every period as we add new bookings to the total. The last piece is simply the conversion of current bookings and the revenue. And in our suggested model, we would provide an assumed conversion rate to apply to forecasted bookings. This conversion rate would indicate how that revenue gets recognized over time and is based on our current product mix, but it’s certainly subject to fluctuation as that mix changes. So, for example, of our 2014 ending backlog of $540 million, we have disclosed that we expect $289 million to amortizing the revenue in 2015, $151 million to amortize in 2016, $62 million in 2017, and so on. We expect that 47% to 48% of our expected 2015 bookings range will convert to revenue during 2015 with the rest going in the backlog and recognized over the following years. That math adds up to a range of $530 million to $546 million for 2015 revenue, which aligns the revenue guidance we just provided. It also allows someone to model out the future years as well by applying an assumed conversion rate to future years’ bookings. We certainly hope that the formula provided provides some assistance in revenue modeling. Of course, the actual conversion of backlog and bookings into revenue in the future may vary meaningfully from rates in prior periods and from the rate we have assumed for purposes of our 2015 guidance. Also currency changes will impact the results, but at least this will hopefully provide our useful framework. Again, please refer to the materials that we posted on the IR website that we will be providing here shortly in terms of an illustrative model of our suggested formula. Of course, we will be happy to field questions offline as you all work through your individual models. So, with that, I will turn it back to Louis for some closing remarks. Louis Hernandez, Jr.: Hey, thanks John. We are very pleased to have delivered on the initiatives that we outlined before stabilization of bookings, shift to higher margin products, execution of our cost savings programs, reworking our channel, partner strategy and launching strategic new products and services. This work has laid the foundation for creating sustainable EBITDA growth and cash flow generations in the coming years as we optimize existing growth engines and turn to new ones, including accessing the multibillion dollar independent professional market through our cloud-based subscription and collaborative community marketplace. Ultimately, this is about driving value for our customers and of course our shareholders by solving the industry’s biggest issues in a unique and compelling way enabling that connection between content creators, distributors and consumers more powerfully, more collaboratively, efficiently and more profitably. So, on behalf of the entire Avid management team, thank you again for your support and we look forward to talking to you again soon. At this time, we would be happy to take questions. Operator?

Thank you. [Operator Instructions] We will take our first question from Steven Frankel with Dougherty & Company.

Good afternoon. Maybe we could start by sizing those late signing maintenance contracts that you got in Q4?

Yes. So, let me talk about it in the context of the full year and then I want to talk about kind of how the timing of bookings overall went through the fourth quarter. First, with respect to bookings in support contracts, we had a pretty significant uptick on a year-over-year basis. In fact, we went from roughly $107 million in maintenance last year to about $130 million this year. So, we were up about 21% to kind of put the growth rate in perspective. And then fourth quarter was a little bit unique in terms of the kind of the timing of bookings within the quarter. About 74% of our bookings happened in the third month of the quarter and in fact about half of our bookings happened in the last two weeks of the quarter. So, it was quite back-end loaded.

And then you talked a lot in your prepared remarks about these new higher growth, higher margin products, could you give us an idea of what percent of 2014 bookings were represented by these product families?

Sure. So, as we began the year marketed products, let me – I will flip it around and talk about the non-marketed products, we began the year with non-marketed products being give or take under say 10% of total bookings. And that number declined during the course of the year and has progressively gotten smaller. As it relates to the higher margin products, specifically these are the products that are really related to the – related to things around the platform. So, for instance, it would be anything like any new software around the platform, the MediaCentral platform, literally anything that’s attached to the platform all are highly biased towards software solutions, which have traditional software margins.

Again, so what percentage of bookings do they represent?

The platform – well, the marketed products is more than 90% of our total bookings. The platform-related products would be give or take roughly three quarters, maybe 80% of it.

And then would you be saying that all of those are constituted these higher margin, higher growth products, so you have made this transition already? Louis Hernandez, Jr.: We are down to the last. This is Louis. Yes, we are down to that last under 10%, but basically, we went through a review, Steve, of every existing product, its growth attributes, where it lied in the value chain, and what its margins were. And then every new product that we have launched has to meet a specific economic criteria and it’s those two that we would call actively marketed products that were – or the growth products. Now, we had had a portion of the product suite that we discontinued immediately essentially, not formal discontinued from an accounting sense, but deemphasized immediately and another approximately 10% that we over time wanted to deemphasize. And because of the success in the new products primarily, we were able to deemphasize those at a faster rate and the trade was stabilized bookings, but that’s why you have seen the margin rates come up combined with the cost savings has resulted in the EBITDA growing at a much faster rate.

I guess my initial reaction is I would think that these newer higher growth products could grow bookings faster than 7% or do you think that’s just kind of the market rates we should expect? Louis Hernandez, Jr.: Well, I think first as you know in our industry, those are very healthy growth rates for the heritage part of our business. And what we are trying to do is continue to launch new products which should see, continue to experience higher growth rates in the industry average on the creative side. As we move into the distribution and monetization side of the value chain, those growth rates tend to be much higher. Those are double-digits up to high double-digits. And so I think what you would want to pay attention to is right now we are launching new products that extend our anchor products on the creative side and we are trying to connect all the way to distribution. And as we continue to launch more and more products, we will move to the right of the creative side and those will result in – should result in higher bookings rates. And so you have seen us launch our strategy way back in 2013. We then had a technical whitepaper. We then launched the first platform in applications in April ‘14. We came right back at IBC, a whole new slew of products here at NAMM was the first time we got into the Tier 3 very aggressively with our first product, our subscription offerings etcetera. And then NAB coming up will be the next set and you will see a steady diet of new applications and that the growth rate should shift as we move over. What we wanted to start out with was those products that can build off our anchor heritage products, so that our cross-sell rates were much higher, because they were things that our clients, the decision-makers were used to doing. The only other thing I would add is Tier 3 is white space for us for the most part. And once we have begun to actively market there, I would suspect that you may see higher growth rates.

And that’s certainly not baked into our forward-looking projections in any material way. Louis Hernandez, Jr.: Because we don’t have a lot of experience there, I think you could see we have been pretty conservative and that’s why you saw even last year our guidance raise and then we went to the high end of that. I think that’s the kind of profile that we are going to have as a management team is always being conservative. John mentioned on the bookings that we are biased towards the high end of that range. I mean on the EBITDA the high end of the range and as we get more comfortable and see traction here we will reflect that in any guidance we provide.

And I think it’s helpful to kind of just remind ourselves kind of where we started when we joined here, bookings were in 2012 declined about 11%, 2013 declined 4%, but really the first half declined, they actually rebounded and we started to grow after we started the transformation. So if you kind of take out the change in strategy, 2013 would have declined much more than 4%. So the lead-in was we were really starting out at a point less than zero on a decline rate basis.

Okay. And then last one, would you care to give us a preview of what you are going to be talking about and showing at NAB? Louis Hernandez, Jr.: I can give you a high level at the level that we have been talking about with clients. So everything I am about to say is stuff that I have already said publicly to our clients. First of all, I have been on the road Steve for about 8 weeks. I just got back last night from Dubai. We have been talking about the subscription in Pro Tools, the first free version of Pro Tools and what that means to cloud-based storage in the marketplace. We have also talked about our metadata module to ensure that artists get paid. It’s an encrypted module that you have to have. So that if it shows up on YouTube, we know who the artist was, what session was it from and when it was created really fighting for artist. The things that we have hinted will be coming to NAB, is everything on our artist suite will eventually have a free version. As you know, it’s the free version of Pro Tools is a professional grade, but it has limited capabilities. You have three projects, three storage you can work on, limited plug-ins and limited tracks. The reason that’s important is once you collaborate with somebody else, if they don’t have Pro Tools they can download it and immediately begin working. Once they have tested out the three projects they will either have to upgrade or they have to buy storage and plug-ins from us. And it’s a way to engage also tied into our educational strategy which we signaled is also coming shortly you will have more first products coming. You will have our educational strategy most likely. We have signaled the people that there will be some enhancements to our media suite, which include the asset management where we have very strong position and that is a higher growth area we would like to capitalize on. You will also see some storage announcements and hopefully a series of other announcements that will fully demonstrate that we want to connect the creative process to the consumption of the asset around the content marketplace, the App Store, etcetera. Some of these very new areas that people are not used to seeing Avid deliver. So that’s a high-level preview of some of the things we have talked about publicly with our clients.

Okay, great. Thank you. I’ll let somebody else ask some questions. Louis Hernandez, Jr.: Thank you, Steve.

We will go next to James Medvedeff with Cowen and Company.

Hi, good afternoon. Thanks for taking my questions. Let’s see, I want to ask – just dig a little bit more into the 3 tier strategy, so the first two on the enterprise level what would you say your penetration rate is at the customers that you have already or what would you say the penetration potential might be un-penetrated potential at existing customers? Louis Hernandez, Jr.: The way I would think about it – James this is Louis. I will start and then John will add. But first of all Tier 1 accounts on the product, our heritage products we have very deep penetration, so what we are trying to do expand the wallet share into the rest of the – rest of the workflow. So to give you an example of major film studio is going to be probably 100% of the top studios use us for our creative tools. If you go into news and production, it’s probably between 70% to 80%. If you go into paid audio files for major recording studios you are probably talking around 70%. Now that penetration rate is only for a very narrow piece of the workflow being the creative suite. And as you know, we started by taking a piece of film for instance converting into a digital file record. Now, that the entire workflow has been digitized, we think there is anywhere between 3 and 10 times the amount of spend occurring that we can participate in by launching new apps that extend off our creative suite sharing a common services layer, which is called the Avid MediaCentral platform. For Tier 1, the strategy is we have long-term relationships with thousands of the largest media companies in the world. We are anchored there. And after they finish with our file, that file goes through a series of other steps before it’s consumed by you. And what we have been adding is continue to expand the products, so that we capture more of that wallet share, so we have high penetration rate in the products we have today, but we want to extend that wallet share over time. That’s the strategy for Tier 1. For Tier 2, it’s similar except they need less of the entire suite they want to pick and choose their anchor, where they participate in the ecosystem, sharing the same service platform that Tier 1 does, and then cross-sell from there. So, it’s less of an enterprise-wide sale. It starts with a specific functional usage and then expands from there. Tier 2, what’s important there is our channel strategy. We have recently as we mentioned before rationalized those channels and reduced almost half of the partners and now are investing in trying to get them to act as one organized sales organization, where we can push through campaigns and products globally. So, that was just completed at the end of the year. We are just rolling out campaigns now to the same thing launch new products capture more wallet share from our anchor tenancy. And then Tier 3, total wide space open opportunity, we really only participated there opportunistically and we are now launching a very aggressive digital strategy. We needed to get the platform up. We needed to get subscription for Media Composer and now for Pro Tools and with our first product and you will see more along with the marketplace and cloud-based storage, we have a way to price and package to really go aggressively after Tier 3 and that should be wide space primarily. And that’s the piece that John was mentioning, it’s not really built in, in any aggressive way into our models. We just felt like we don’t have enough experience to call out what’s possible there, but we are obviously very excited about the opportunity given the size of that market, which is just under $2 billion by our estimates. So that gives you hopefully a high level view of each of the tiers.

And so if you try to wrap some dollars around it and look at our market share for Tier 1, Tier 2 in total the total workflow is say give or take $54 billion to $55 billion market. We participate in about an $8 billion segment of that $54 billion or $55 billion market with about a 6% or 7% market share. So, reflecting on what Louis said, the more – when you had the anchor tenancy, it makes it a bit easier for you to cross-sell and up-sell across the value chain and because we are able to do that in a relatively efficient way having that anchor tenancy, it makes it easier for to access the rest of that $8 billion market. Louis Hernandez, Jr.: I can tell you that once our clients are on the platform, which you have heard. They start involving us in very strategic conversations, for instance. Let’s say, security has become a big issue with some of the studios. That file usually starts off a camera with our software. After that, it continues on its journey. Well, if you are going to add encryption, ghosting, watermarking the sooner in the value chain you added, the better. So, rather than going to a separate vendor who will have another siloed solution, why not just deliver that through another application on the common suite of ours. As an example of the kind of interest that our clients are having now that they bought into the platform approach, And so not only that we launch products already that were cross-selling, there is going to be a steady diet of apps that make it more efficient and more powerful to do earlier in the cycle, because of where we lie in the total workflow. And that’s what we are trying to capitalize on. And I would say that given the sales of the platform, you can anticipate there is a lot of conversations we are having in addition to the products we are launching, where people would rather do it on a common service platform, because it’s cheaper and it’s earlier in the workflow and it just makes it easier to do when you start earlier in the cycle.

Great, thanks. That’s a really good color. So, in many cases, this deeper or this cross-sell/up-sell may not even require you to displace another vendor, it’s sort of wide space within your existing customer base. Is that fair to say? Louis Hernandez, Jr.: Yes. There are some examples, where we would be replacing a vendor, other times that it would be wide space depending on what the feature and function is. And then separately, don’t forget we have this connectivity toolkit. We believe that 25% of the budgets are wasted just connecting all the pieces, because there is so much proprietary technology connecting this workflow. So, even if you don’t use us in a piece, if you have our platform, you can use the connectivity toolkit and more efficiently connect the other pieces whether or not it’s our product or somebody else’s. We have announced 22 certified vendors. We recently announced Adobe. And the point is, is that for all those Adobe clients, the problem is not a better editor, a better piece of storage, a better ingest, a better cloud, it’s the entire workflow more efficiently. And we provided with the platform a way to do that.

Great. Just one more on gross margins and the delta between sort of the anchor type products and the new products, is there a way that you can characterize which class of products or which class of customer is the higher margin and what the delta could be between the high and low end?

Well, if you are talking about it as a percentage gross margin, because they are mostly software applications margins, the margins tend to be quite high around the products around the platform, so kind of traditional enterprise software sort of margins generally.

Okay, that’s great. Thanks again. Louis Hernandez, Jr.: Thank you.

And that will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Fitzsimmons for any additional or closing remarks.

I would like to thank you all for joining the call today. And we look forward to seeing you soon. A - Louis Hernandez, Jr.: Thank you.

This does conclude the conference. We thank you for your participation.