Jonathan Huang - VP, IR and Treasury Louis Hernandez, Jr. - Chairman, President and CEO John Frederick - EVP, CFO and Chief Administrative Officer Ilan Sidi - Interim CFO and VP, HR Tony Callini - SVP, Finance

Steven Frankel - Dougherty & Company

Good day and ladies and gentlemen and welcome to the Avid First Quarter 2016 Earnings Release Conference Call. Today's call is being recorded. It is now my pleasure to turn the conference over to Mr. Jonathan Huang. Please go ahead, sir.

Good afternoon. I'm Jonathan Huang, Avid's VP of Investor Relations, and welcome to our Q1 2016 earnings call. With us today are Louis Hernandez, Jr., Avid's Chairman, CEO and President; John Frederick, Avid's Executive Vice President, Chief Financial and Administrative Officer; Ilan Sidi, Avid's Interim CFO and VP of Human Resources. On our call today, we will be using both non-GAAP measures and certain operational metrics, both of which are defined in our Form 8-K and supplemental financial and operational datasheet available on our Investor Relations webpage. These non-GAAP measures are also reconciled with GAAP measures in tables to our press release and in the supplemental financial and operational datasheet. I would also like to remind you that certain statements made on this call are considered forward-looking statements within the meaning of the securities laws such as, for example, statements about expected future operating results and financial performance and the progress of our transformation. Forward-looking statements are inherently uncertain, not guarantees of future performance and are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. Any forward-looking information relayed on this call speaks only as of this date and we undertake no obligations to update information, except as required by law. For additional information, including a discussion of some of the key risks and uncertainties associated with these forward-looking statements, please see the Forward-Looking Statements section of our press release issued today as well as the Risk Factors and Forward-Looking Statements section of our 2015 annual report on Form 10-K and the quarterly report on Form 10-Q filed with the SEC today May 4, 2016. Copies of these filings are available from the SEC, the Avid Technology website or our Investor Relations department. We've also added a supplemental presentation in an effort to complement today's narrative. We hope that you will find it helpful. We will be recording today's call, which will be made available for a two-week replay. You may replay this conference call and access the supplemental presentation by going onto the Investor Relations page of our website and clicking the Events & Presentations tab. Later, we will be conducting a question-and-answer session and instructions will be given at that time. And now, I would like to turn the call over to our Chairman, Chief Executive Officer and President, Louis Hernandez, Jr. Louis Hernandez, Jr.: Thank you, Jonathan. I'll turn over to Page 6 of the presentation. Hello, everyone and welcome. Before we go over the results, I just wanted to give a quick update on our progress. You can see I think that we're on track to complete the transformation and are sprinting to the finish and are excited about the financial model and once that's complete. On the investment's highlight slide you'll see the things we get excited about is very large and growing market, $54 billion that's heavily fragmented. The industry is in the middle of a pretty significant transition which we feel we're in a unique position to capitalize on, particularly with our deep penetration with our heritage clients in the media market with leading clients around the world. Our unique platform approach, which many of you have heard about maybe some of you have even seen, allows us to drive Wallet Share in ways that we think is unsurpassed industry. The first key part of course is the platform itself, which is growing nicely, we're over 35,000 units now on the MediaCentral platform which is about 51% increase year-over-year. And now we're really focused on continuing to dry that platform growth and expanding Wallet Share. Expand Wallet Share by launching new products to address more areas of the work flow to leverage this open and extensible platform that we built, by adding alliance partners to leverage our massive reseller network to more further drive Wallet Share and then expand our Eco-System one of the cool things about what we built is as, clients and partners such as Adobe become certified on the platform, we can then allow their clients to access other applications on the platform such as Storage or MAM. And so it opens up new markets for us. The strategy is clearly driving momentum. You read about the Sinclair Managed Services transaction with really validated and punctuated the building pipeline of the enterprise wide approach that we've built and it really has shown a shift in the way clients think about us, away from just the creative side which is our heritage and now, we're able to solve problems across the workflow much more efficiently. Platform adoption is up 51% as I said, but also active paying subscribers has increased three times in just the past year and the Efficiency program that is combined with the growth initiatives is on track and yielding savings today, we will comment more about that. On an LTM basis, adjusted EBITDA has increased by 28% and LTM revenue has increased by 3% and recall that means that had to overcome that pre-2011 amortization which is a negative adjustment to our revenue. Though, the fact that we're able to deliver growth I think shows the power of what we built. We're probably most excited about the attractive financial model post-transformation. We've a clear path to completion, the non-marketed products that we're rolling off and are completed as expected, the efficiency gains are on track and then the accounting adjustments will end towards the end of this year early next year, leaving us with an adjusted EBITDA and free cash flow, which are expected to increase dramatically post-transformation. I'm going to turn on to the next slide. Slide 7 now, and these are just some examples of the key metrics that are demonstrating success of the transformation itself. Platform adoption we mentioned upper left, 51% annual increase that's the key vehicle for cross-selling and optimizing lifetime value of each customer. You're seeing our Tier 3 now starting to surge with subscriptions in digital sales, surging up three times over Q1 in 2015 and digital sales are up 46% over Q1 of 2015. The marketed products on an LTM basis is up 8%. Those products were impacted by the NEXIS anticipation, which we believe slowed some of the sales because people heard that the next generation storage platform was coming out, it's gotten rave reviews, won awards at NAB. And the Tier 1 sector is continuing to be in transition and Avid I think, is in a good position to navigate that transition as evidenced some of the key projects that we've won. But strong growth at an LTM period. Recurring revenues which is the other thing we wanted to do in the lower left, was enhance our visibility. Recurring revenue bookings is accelerating 34% of Q1, 2016 [indiscernible] recurring bookings and you could see on an LTM basis, also very strong. And remember that's been a pretty significant increase since the transformation began. And also the cost efficiencies are on track. 7% annual reduction and normalized quarterly non-GAAP operation expense, John will talk more about that in a minute. I mean $33 million of annualized savings have been executed by the end of Q1, 2015. So right on track to complete those efficiency gains that we expect it to complete. I'm going to turn over to the next page now. Some of you might have even attended the Avid Connect in NAB, what a tremendous we had this year. The ACA, the Avid Customer Association has grown almost 5,500 members now. It's incredible new organization, a couple years growing the fast and the key for us is they've been guiding our product launches. We had over 1,300 participants attending this sold out event. If you were there, you know [indiscernible] we had the Fire Marshall there, making sure people didn't violate the fire code there. It was really exciting record attendance over 600 different organizations of 50 countries were represented, incredible group of speakers. And I think if you were there, you saw some of the largest media companies in the world and some of the most sophisticated media companies and individuals that really was exciting people took notice, we won Best in Show for the Avid NEXIS next generation platform. We'll talk about in a minute. Best in Show for the Booth itself and it's no surprise, we've issued 66 patents have been granted or applied for, this is real innovation we've had 25 product awards and growing, since we launched Avid Everywhere. There's no surprise, there's lot of excitement and I think the finest thing, if you were there. Was, how many different areas we cover. So if you're in film, you think about editing and storage, you don't realize we also do music mixing, consoles, maybe software. This folks don't realize we also do graphics for sports, we do news, storage, archive, management, cloud coloration really fun when it all comes together in a different client types of segments, to see the power of what the platform can do by connecting all these pieces. Page 9, just highlights what an incredible transformation we've gone onto and how many people have adopted the platform standing [ph] star. I've launched a lot of new products in my career. I've never had this kind of uptake and I know it speaks volumes about the power of the Avid brand. You see some particular logos here that we're excited about with the Rio Olympics, with NBC. The project on the video we're all leveraging Live Sports, one of the fastest growing areas for Rogers. WWE with disaster recovering some unique they're doing with us. I'm sure you heard about Sinclair by now, a revolutionary new service model, really create a lot of excitement, you probably knew back in December this groundbreaking agreement and I'll tell you what, if you heard them talk about why they signed, it sounded very familiar. Several locations of disparate products needing to be connected, they want a consistent product quality production quality, it won't be a reuse assets quickly, they wanted to integrated third parties applications, they wanted a full digital distribution, they wanted to do all that and save money and it's no surprise that we were the clear choice for them. Tremendous amount of people asking about this kind of deal. They were very popular if you were there at our event. Everybody wanted to talk to them. Our pipeline these kinds of conversations have certainly risen and we'll see whether or not they result in any transactions. But certainly a huge increase in interest as a result as people really to realize the power of the platform. And if you were there, you heard about several other wins like ZDF in Germany, like RTVE in Europe, Televisa in Latin America really very significant contracts we've been signing on the platform that we're excited about. Page 10 really highlights one of the finest [ph] things about the events was, the latest innovations that are available on the platform and similar to your smartphone, where you have a platform then you can buy apps. The fact that we continue to add our own apps, but also certified partners. So one of the most exciting is the next generation storage with NEXIS, a mind bending software defined storage platform for media. Dynamic virtualization adaptive, protection, collaboration. I'm not sure, you understand those technical pieces, but I'll tell you, it’s better, it's faster, it's cheaper. It's way more than powerful. Its went Best to Show, it's an incredible piece of mathematics and technology that we put together and it addresses all peers, cloud collaboration, connecting artist to the cloud, allowing to work together everywhere, wherever they are, as though they're next to each other, allows us to expand Wallet Share creating recurring revenues and addresses really that Tier 2 and Tier 3 market that we've already seen momentum in hope to continue. I'll tell you one of the finest things up and right certified partners. We demonstrated onstage with us, certified applications that work as though, we created them. Integrated into the platform seamlessly. It was really fun to show this, really brought home the factors the standard for open and extensible platforms allows us to address all the Tiers. We had incredible announcements in sports enhancements and graphics and news, etc. across all tiers. All design to open up new segment or expand Wallet Share and of course on the MediaCentral platform again new product categories across the suite. And I'll tell you one of the finest things was the demonstration we had of Adobe Premier fully integrated as a certified partners, where you can work with the same asset between Adobe and Media Composer, it was really truly showing the openness, the flexibility and integrated nature and I think that was probably the second and third most cheered for item because it's just mind-blowing to people that we would be doing such a thing, but really shows that we're trying to solve the bigger problem. The bigger problem today is not your editor, it's the full suite. Page 11, really talks about the transformation itself. As you know this is been an incredible journey, it's taken way more work that I originally thought, but we're now towards the final rows. We're sprinting towards the finish. We had laid out the events that would tie to the end of the transformation we completed the roll off a non-marketed products. We're on track to complete the optimization projects, they're exactly where we thought we're going to finish those up as expected and of course the end of the amortization, the pre-2011 deferred revenue will happen as expected. So we're right where we wanted to be at the bottom, the Page 11, the $68 million Efficiency program is on track in fact, we believe there is, there may be even more opportunity that we're working on. $33 million of annualized cost savings have already been executed by the end of the quarter $5 million of these reflected in Q1 and the full impact will begin to be reflected in Q2 of 2016. All the low cost facilities are open, we are hiring resources, we are transferring that talent and realizing those savings, to schedule personnel actions are completed as expected to-date, the auditor transition has been completed and the vendor management savings are all on track. We feel very good about the Efficiency program and where it is. So with that, I'd like to hand it over to John for more detail financial results. Before I do, as you guys know, John is going to be leaving to company to take care of some personal matters. John is a close personal friend of mine, he's worked with me on more than one company. He has been a key architect of this transformation. He and I as friends the last thing we wanted to see was not him leave, before he can really experience the joy of seeing the transformation completed but we want to support him in taking care of what he needs to go take care of. I know he'll be cheering us on, he'll be a shareholder. I also want to acknowledge Ilan Sidi, who is currently our VP of HR and he's perfectly qualified to take over the Interim role, while we complete search for a permanent replacement. You may now Ilan because he has been a CFO of a publicly traded company. He has a CPA, he has M&A experience, a financial background. He has handled as a CFO before of a publicly traded company. All of the services that he'll be handling in Interim role here so, we are really lucky that is he's perfectly aligned to handle this interim and he and John have been working closely with the transformation. So wanted to thank John and welcome, Ilan in the interim role and we'll sure to keep you up-to-date as we seek a permanent replacement. With that, let me turn over to John for more detailed financial results. John?

Hi, everybody and thanks for the kind words, Louis I appreciate it. So for the roughly last three and half years I've been with the company. It's really been an intense time, the team has made a significant amount of progress. The work here is really ranged from across the team developing strategies and the platform to address the market, that's really in a tectonic transition, to an unexpected [indiscernible] statement that took over a year and half to address. The common element here has been, we just have a great team. We've got a fine Interim CFO in Ilan Sidi, all being led by visionary CEO. So on one hand I feel very comfortable with the team, on the other hand I really wish I could stay at Avid as Louis mentioned I've got a personal matter that I need to attend to, so unfortunately I'm going to be rooting for the company from the sidelines. Okay, since this is my last call with Avid. I'm going to spend some time reviewing the results with you and Ilan will cover the guidance in just a moment. So with that, I'll turn to the next page and we'll talk about the Q1 results at a high level as it relates to the four key financial metrics. You'll notice that we met or exceeded our original guidance for three or the four with bookings really being the only but meaningful outlier. Bookings came in at $98 million on a constant currency basis and $92.5 million as reported basis. As compared to a constant currency range of $108 million to $118 million and as compared to a reported range of $100 million to $112 million. As we referenced in our release on the updated guidance last week. First quarter bookings performance was impacted by both delayed buying decisions which we believe is related to the anticipation of the next generation storage launch that we announced at NAB at mid-April. As well as the intrinsic volatility that's created by an industry going through in ongoing transition. We observe this volatility particularly focused on Tier 1 customers in the quarter that said as Louis mentioned coming out of NAB. We've been having more and more strategic conversations with customers on how to leverage the managed services models for their specific needs. The excitement and interest around these kinds of comprehensive service arrangements has growing and we expect to close at least a couple of these transactions this year. Notwithstanding the bookings missed drove lower end of quarter receivables which in turn will impact Q2 free cash flow and you'll hear Ilan review the Q2 guidance shortly. Non-GAAP revenue of $143.8 million compares with original guidance of $120 million to $125 million and reflects a 20% increase over Q1, 2015. This meaningful improvement is largely driven by $18 million from the conversion of revenue backlog to revenue in Q1, related to the release of Pro Tools version 12.5 late in the quarter, including the delivery of cloud collaboration to the market, as well as eliminating free support. Additionally, we are now experiencing faster revenue conversion of revenue backlog and from new bookings from products in our creative suite, a trend we expect to continue to going forward. The Pro Tools 12 revenue was revenue that we anticipated largely recognizing throughout the rest of 2016. So with the benefits of these transactions now being recorded in Q1, we've effectively help de-risk to a degree the income statement performance for the rest of year, having said all of that it's important for me to note that, absent this revenue acceleration we would have been within our original guidance for revenue and adjusted EBITDA. Adjusted EBITDA of $38.5 million compared to the original guidance range of $11 million to $14 million and reflects both the favorable impact of higher revenue as well as the impact of our efficiencies programs. This program was design to use the power of the platform to remove Siloed [ph] work streams and enable proper talent and cost alignment to achieve a learner more directing cost structure going forward for Avid. And as Louis mentioned, we're on track through the first quarter and expect to hit our full year efficiencies targets. Adjusted free cash flow with a use of $9.4 million in the first quarter compared to our original guidance of a use of between $9 million and $15 million in other words at the favorable end of our range. We had anticipated that adjusted free cash flow would be a use in the first half of the year and a source in the second half. You'll see the expectations and assumptions for Q2 and the second half of the year later in the presentation, when we review the guidance. The principal drivers of cash flow for remainder of the year or the execution of the remaining cost efficiency programs, which is on schedule and meeting our bookings expectations over the next few quarters. Including the traditional cash flow conversion of the new products announced at NAB in the back half of the year, that you've seen in recent years really being the most impactful. As it relates to bookings performance specifically, Q2 and Q3 bookings performance are the most impactful to the full year cash performance. And we'll talk about some of our underlying assumptions for performance in the back half or in the full year later. Moving to the full Q1 financial results. Bookings at $98 million on a constant currency basis or $92.5 million on a reported basis were down 18% and 17% respectively as compared to the prior year primarily for the reasons I just discussed. As I mentioned non-GAAP revenue of $144 million was about 20% higher than the same period in 2016. In addition to the $18 million of Pro Tools 12 revenue acceleration our results included products and services which converted faster in the revenue than originally planned, which offset some of the softness in bookings. Non-GAAP gross margins increased from 60.5% last year to 71.2% in Q1, 2016 representing a 10 percentage point annual improvement. If you remove the impact of Pro Tools accelerated revenue recognition you'll see an improvement in gross margins of roughly 670 basis points, which reflects better conversion of revenue backlog and other and lower non-variable cost of sales generated by the $68 million efficiencies program. We expect over the course of the year, non-GAAP gross margin will trend closer to the 61% for the full year. Next our non-GAAP operating expenses for the quarter were $67.5 million representing a 5.1% increase over Q1, 2015 but down 5.4% sequentially from the fourth quarter 2015. For comparison purposes it's worth remembering that we acquired or added at the end of Q2, last year. So there are about $5 million more operating expenses in the first quarter this year related to Orad. Additionally, there is about $3 million negative swing in non-cash foreign currency revaluation on the balance sheet that gets reflected in operating expenses. If you were to normalize the effects of Orad and the adverse impact of currency on the balance sheet revaluation. Our non-GAAP operating expenses would have been lower by about 7% on a year-over-year basis, reflecting the impact of the cost Efficiencies program. We're pleased to report that the Efficiencies program has started to take effect and as reflected we really see that reflected in stronger gross margins and expect to realize more overall savings both in cost of goods sold as well as operating expenses as the Efficiencies programs make greater impact to our reported results. Q1 adjusted EBITDA $38.5 million was three times the adjusted EBITDA reported in Q1, 2015 and more than double in Q4, 2015 reflecting both revenue acceleration, better revenue backlog conversion and an improved cost structure. Adjusted EBITDA margin of 26.8% for Q1 as compared to 9.8% in the year ago period and 12.2% in the Q4, 2015 period. Finally as I mentioned, adjusted free cash flow use of $9.4 million came in at favorable end of the range however it's down about $14 million from Q1, last year primarily reflecting the inventory build this year, with a next generation storage that you heard Louis talk about earlier which is called NEXIS. As you'll see later, we expect a material use again in the second quarter before reflecting generating cash starting in Q3, 2016. So given some of the volatility between quarterly results we think it's helpful to review the performance on a trailing 12-month basis to analyze longer trends. As we look at bookings on both the constant dollar and reported dollar basis, you'll see the currencies had a muting impact on our bookings growth, but on both reported and constant dollar basis, we've seen growth in the 12-month trailing period as more of our growth initiatives kick in. I spoke earlier about some of the specific Q1 drivers that put the pressure on bookings. But as you can see the trend over the last three years with and without the impact of currency changes. Revenue was increased in the trailing 12-month period over the prior year, even as we worked through the remainder of the accounting pre-2011 deferred revenue run off, which is revenue headwind that you'll recall that generally is been between $25 million and about $30 million. Additionally although, we did have an acceleration of revenue in Q1 from Pro Tools 12. The Pro Tools 12 released specifically, the improved business practice is many of the underlying transactions related to those items originated in the LTM period, which is frankly one of the reasons why we wanted to review the results on a trailing 12-month basis, as we think it's more reflective. Finally, for adjusted EBITDA we're also growth in the LTM period. Again notwithstanding the pre-2011 deferred revenue headwind driven primarily by better revenue conversion and lower cost. Speaking of lower cost after normalization of the acquired overhead cost, trailing 12-month adjusted operating expenses or $7 million lower than the same 12-month period in the prior year, even with the typical inflationary items. As we continue to execute on the cost Efficiencies program. You should continue to see normalized non-GAAP operating expenses come down as more actions are reflected in our ongoing run rate. It's also important to remember that the $6 million to $8 million cost savings program will be reflected in both operating expenses in and in the non-material portion of cost of sales. As a reminder, we estimated about 75% of savings would be operating expenses with the remainder being reflected in cost of sales. These efficiencies actions reflected in cost of sales, is one of the drivers for the material improvement in LTM non-GAAP gross margin improvement of 380 basis points. Additionally, the revenue acceleration and improved product mix is positively contributed to margin helping to offset the 100% margin pre-2011 deferred revenue run off in each period. The adjusted free cash flow trend has not reversed as quickly as other metrics. Although, we have reaffirmed our guidance for the full year driven the large part on reduced cost and as you'll see later in the presentation the company expects to generate free cash flow in the second half of the year. We talked a lot about our growth initiatives, platform adoption, growing Wallet Share, leveraging our reseller base and expanding our eco system and Louis provided an update on each of initiatives earlier. As we think about the relevant metrics to help track the progress of this initiatives, we think it's helpful to refer to some of our traditional growth metrics such as recurring revenue, subscription growth, revenue backlog and platform adoption. We continue to expand the amount of recurring revenue as a percentage of bookings both for the quarter and for the trailing 12-month periods. In Q1, 34% of our bookings were from recurring revenue sources compared to 29% in the same period a year ago. For the LTM period, we saw an increase from 28% for the 12 months ended March 31, 2015 to 39% in the last trailing 12-month period. Subscription growth is a useful metric to help measure our progress in the Tier 3 space and we began seeing strong quarterly growth in Q1. We look at subscription growth as an indicator of platform adoption and for the Tier 3 market. At the end of the market, we had about 35,000 active paying subscribers which is about 3x increase over the prior year and over 38% higher than the end of 2015 primarily driven by Pro Tools subscription adoption. As expected, as we made the benefits of platform more apparent to Pro Tools users, we've been able to tap into the Tier 3 market and demonstrate significant growth. Similarly in the Tier 1 market, the MediaCentral platform adoption ties directly to our growth initiatives as this informs future cross sales opportunities as we continue to expand the platform user base. This quarter, we added more than 2,500 users and at the end of quarter one. Our platform users totaled about 35,800 and more than 51% increase over Q1, 2015 and an 8% increase over the end of 2015. Finally, post 2010 revenue backlog of $480 million at March 31, 2016 continues to increase on an annual basis with 4% growth over the end of Q1, 2015. Total revenue backlog is down from the $552 million at the end of 2015, which primarily reflects the acceleration of Pro Tools related revenue into the first quarter and the continued amortization of the pre-2011 related revenue. Now let me shift over to highlight some of the progress we've made on the cost structure. We're continuing to lower our total non-GAAP operating expenses and you'll see that after normalizing for the acquisition that continues to be true, furthermore on a normalized basis since 2013 when we embark on our transformation non-GAAP operating expenses are down about 8% and this is even after we've added about $4 million to $5 million a year related to annual compensation and benefits inflations to our business. On a quarterly basis, if you would normalize the first quarter adjusted operating expenses of $67.5 million for the impact of Orad and the pressure of the balance sheet currency translation. Our adjusted operating expenses would have been about $61 million as compared to $66 million in Q1, 2015 when you normalize for the same sort of translation impact and that represents a 7% reduction. We're right on track executing our recently announced Efficiencies program and the impact on 2016 and beyond. We're aiming to achieve the $6 million to $8 million of annualized run rate savings as we enter 2017 and reflect about $40 million to $45 million of those savings in our 2016 operating results. The cost associated with the Efficiencies programs are expected to aggregate approximately $25 million, although we've spent less on the program cost in Q1 than we had originally anticipated. As the build out and adoption of our platform continues to mature, we are now positioned and more fully leveraged, it's common services aspect of the platform internally to scale more efficiently eliminate redundancies and further optimize cost. Lastly, we're in last phases of our talent alignment and facilities rationalization project design to get the right people in the right places to best serve our markets. Roughly two-thirds of our savings are personal related and the remaining savings will be generated from rationalizing underutilized facilities and optimizing third party vendor spend. The various efficiency work streams have started and we expect that there will be largely completed by the end of 2016 with much of the work completed by midyear. Through the end of the first quarter, we've realized about $5 million of calendar cost savings and then these actions will equate to roughly $33 million of the entire $68 million of savings on an annualized basis or almost 50% of the total actions. If you look at just the personal related actions after the first quarter, we're already more than half way through our annual target. As we implement this efficiency program. We've concluded that there are meaningful amount of incremental cost savings available to us over and above the already identified $6 million to $8 million. We are working to complete our analysis and you'll be hearing more about that in the future. Lastly before I turn the call over to Ilan to review Q1 guidance and the remainder of the year guidance. I'll review some balance sheet metrics. At the end of the first quarter, we had total liquidity of approximately $93 million including $88 million of cash, as you recall back in late February, we improved our liquidity with $100 million term loan raise, which gives us ample liquidity today to focus on making the investments to complete the transformation. At the end of the quarter, accounts receivables were $43.7 million, which is $15 million less than the end of 2015. Similarly, DSOs of 28 days were 11 days lower than the 38 days reported for the prior year. This lower balance and receivables puts some pressure on second quarter cash collections and you'll see the impact reflected in our adjusted free cash flow guidance in the second quarter. Inventory was $51.7 million, which is up from the comparable period as we begun to ramp for our next generation storage solution. Revenue backlog was $497 million on March 31, versus $529 million a year ago. If you remove the pre-2011 deferred revenue you'll see revenue backlog was $480 million up 4% year-over-year which provides significantly improved revenue visibility and reflects the continued shift to a more recurring revenue model. With that, I'll now turn the call over to Ilan to review the guidance for the remainder of the year. Ilan?

Thank you, John. Now I'll review the guidance for the second quarter and the full year 2016. Moving to Q2 2016 financial guidance, we expect booking between $99 million and $115 million on a reported basis, as compared to $180 million in Q2, 2015. Constant currency booking are expected to be $105 million to $120 million as compared to $122.6 million that we reported in Q2, 2015. Non-GAAP revenue is expected between $105 million to $120 million, which is roughly consistent with $109.8 million reported last year. Non-GAAP operating expenses of $62 million to $65 million are expected to be between 5% and 10% lower than last year. We expect an increase in adjusted EBITDA from $1.4 million in Q2, 2015 to between $3 million to $9 million this year. Finally as discussed earlier, we expect a material use of adjusted free cash flow in Q2 of $27.5 million to $32.5 million. The primary bridging item for adjusted free cash flow from Q1, 2016 to Q2, 2016 guidance is lower booking in Q1 and about $15 million less in accounts receivable at the beginning of Q2, as compared to the beginning of Q1. To help bridge Q2 guidance to adjusted free cash flow use of $31.2 million in Q2, 2015 the primary drivers are about $3 million more of debt services cost this year. Lower the gain in receivable partially offset by realized cost savings. As mentioned earlier and reflected in the full year guidance. We expect to begin generating adjusted free cash flow in the second half of 2016. Turning to the full year, we are reaffirming the 2016 guidance that we shared in March 15, 2016. While our Q1 results have effectively had a de-risking on the non-GAAP revenue and adjusted EBITDA full year guidance and our non-GAAP operating expenses are cracking to plan for full year, the reaffirmation of bookings is based upon a number of factors included but not limited to, the anticipated successful launch of the NEXIS next generation storage product. [Indiscernible] large managed services type arrangement in the second half of the year. Successful results from our growth initiatives around cross selling product from our new alliance partnerships, the recovery of Tier 1 market and traditionally and [indiscernible] buying seasonality. The reaffirmation of adjusted free cash flow is based on those three factors that will impact bookings, the timing of those transactions and execution of the $68 million of current efficiency opportunities and incremented savings that John mentioned earlier, which we're currently considering. I'll now turn it back to Louis for some closing remarks. Louis Hernandez, Jr.: Thanks, Ilan. Thanks everybody for listening today. These transformations as you know are never easy. We've made incredible progress I think, we're sprinting towards the finish. Solid Q1 behind us and the transformation is visible, what we think dramatically different financial model ahead of us. We believe there is tremendous value to unleash and our progress that we're on track. I want to thank you for your support and with that, we'll now turn over to questions. Operator?

[Operator Instructions] and we'll go to Steven Frankel with Dougherty and Company.

Louis, I wonder if you might start by characterizing the orders that you came out of NAB with this year versus last year. Louis Hernandez, Jr.: We don't disclose the amount of orders. I think the big difference though between the prior two years is, the time between the time we announced the product and the time it's available have been shortened greatly. So if you look at the NEXIS product as an example I think we were taking orders that day, wait [ph] for delivery four to five weeks later, which is unheard of for Avid historically. So we're pretty excited about the momentum, we're seeing but we haven't comment upon the size or the scope of the orders we've received to-date.

Upon the foot traffic we saw on the booth, we would characterize the foot traffic this year is certainly robust and would compare favorably to the prior year.

Okay and so you will ship, the plan is to ship at least some of those new NEXIS products, this quarter?

Yes, we plan to start shipping in the latter part of Q2 and then we'll have another segment of the product available later this year. So the mid-sized storage will be available in Q2 and the bigger storage will be available a little later in the year.

And the Tier 1 weakness you talked about, where do you think that's coming from and why do you have confidence that gets better? Louis Hernandez, Jr.: The way I would Steve and by the way thanks for coming to our event and hopefully you had a chance talk to lot of our clients. I know you're getting pretty knowledgeable and everything but I think if you talked to those folks, they're not spending less, what they're spending on and the sales cycle is elongating. I think as they're dealing with the increasing transformation of their own economies and I think what we're trying to do is make sure it's clear to them, as we've been able to demonstrate that Avid Everywhere can solve many of their problems and so what we're seeing is, they're continuing to want to understand about the efficiency gains that somebody like Sinclair has talked about, how they can deal with things like the cloud in the lower cost environment and some of the many other things you heard about virtualization, distribution. And so what we're finding is, it's not that they're not going to spending, they're spending more time to really be careful and understand about the ROI and the IRR, they're under tremendous pressure to address all the business changes and they want to make sure they're doing it very efficiently. So that's kind of what we're seeing and that's why we're getting confidence. We're not seeing people budget shri8nking. We're seeing a more strategic conversation both in part because of our product and also I left NAB by the way, I've been in the Middle East till yesterday, day before yesterday and every one of those conversations was very strategic conversation about how do we get more for less and how can you help me do that. And so they're becoming very strategic conversations driven not by Avid, driven by the changes in their own economics and their business pressures. So that's kind of how we see, what we see happening right now.

You know I think, I'll add to what Louis said. I think I would add to what Louis said, we're seeing an increasing a number of managed services deals and when I say managed services really in the true sense all the way from kind of managed services where we managed our infrastructure all the way through managing everything about their text [indiscernible]. So it's, the discussions are becoming bigger and more strategic as Louis mentioned and candidly, I think we're going to take more time but having said that, we were confident enough on those conversations that we baked in roughly one to two of those deals in the balance of the year guidance.

Okay and you talk about this 34% recurring revenue as a component in bookings. Can you define for me exactly, how you get there and what was maintenance revenue in the quarter and what was maintenance bookings in the quarter?

This is Tony Callini. Yes, so we're deferring recurring revenue is it would be maintenance and it would be subscription and also managed services which would be that Sinclair type contract or the Sinclair contract that we did in Q4, haven't typically disclosed the specific breakout of maintenance revenue historically but I think that, but it's predominantly that is predominantly maintenance that's running through there.

Okay and where is headcount today and kind of where was it last quarter and where should we think about it going from here?

So, we'll give you the specific headcount here in a moment. But the headcount has come down consistent with the efficiencies programs that we expected and we've also been increasing headcount in some of the lower cost areas to try to balance out, where we should have people. Actually giving you right now giving you the net, it's probably not going to be very helpful to you at the moment. But we can give you total headcount, total external headcount is. Yes, so the total headcount right now is about 2,017 and we'll, can you give us a second, we'll give you what the expected net change and headcount throughout the balance of the year.

And just one more thing while you're doing that, last year you had pushed out the bonuses which impacted cash flow, help Q1, hurt Q2. Did you pay bonuses in Q1?

As you can probably imagine bonuses are materially lower this year and they're going to be paid in the same quarter this year as it was last year, so Q2. Louis Hernandez, Jr.: Steve, this is Louis just trying to do the calculation. One thing on the talent alignment, is the net change for the year between the beginning of the year, end of the year is going to be around 10% in headcount, more significantly though is where those heads are located and so you probably saw a recent announcement and I know you saw at our event all the new office that we've opened in Taiwan, in the Philippines, the expansion of the Chechen [ph] office and then the Boca office where we've hired couple hundred, few hundred people and so the net change is going to be for the year around 10%, but the cost savings is much more significant because of the labor arbitrage that happened from where we're hiring them. The nice thing about it strategically was really about putting the right people in the right location to service our clients better, better match where the revenue to where we had the employees and so there is both. I actually believe we'll be able to improve service and the response times and lower our cost and deliver more efficient global model. So that's the way I would look at that question, so yes head will be less but they're not as materially less as the efficiency gains that we'll delivering of course. The efficiency gains also include things like indirect cost, the auditor fees change, the accounting fees and some other items as well, but that's obviously the biggest item is on the personnel side.

Okay, great. That's all for me for now. Louis Hernandez, Jr.: I appreciate it.

And we'll go to Hamed Khorsand with BSW Financial. Louis Hernandez, Jr.: Actually, before we, Hamed before we get into your questions. Going back to Steve's question on the net change. It's about, on around it's about 140 headcount, the net change.

Yes, this is Zahid [ph] calling in for Hamed. First question, could you just explain you're pretty much saying there's going to be huge [indiscernible] in the second quarter and how you can get to that breakeven by the end of the year?

Yes, so if you think about what we have in the back half of the year. Historically, we've had a significant amount of seasonality in the back half of the year. We also have our normal growth initiatives that will burn through the back half of the year, will generate cash so that would include cash converting the next generation storage and some of our alliance programs will also contribute to bookings growth, that will be a big feature in the balance of the year, but the biggest feature from a cash flow conversion perspective will the roughly $40 million of cost saves that we expect to see in the full year.

And then, if you could just talk a little bit about customer orders and purchasing trends. Are they asking for more or they dragging their feet with ordering in general? Louis Hernandez, Jr.: This is Louis, as the segments really matters. GL matters, segment matters, Tier matters. So let me go through each real quick. I think globally what we're seeing a large accounts continue to transition to their own realities. We mentioned 2.5 years ago, when we launched Avid Everywhere, we were kind of pulling people into the vision we had. We're clearly being pushed now because they're being pushed and so what's happening is, I think the platform is creating a halo effect on our heritage clients, our heritage sales but they're also causing people to really think how they can fully exploit to save more money and that's been the biggest thing. So like I mentioned, if we add more to the order, how much more do we save and that wasn't a conversation we were having just a year ago, even though it was the conversation we wanted to have and that's what caused these kind of enterprise wide managed services conversations Sinclair that we're having. If you go by Tier, we're seeing nice surge in Tier 3. Something where we were slow to get out of gates on and now we're seeing very nice momentum that's happening at the same time at the sales cycles elongating a bit for Tier 1 but I don't think that's a permanent. My own view is that's not a permanent, we don't see budgets declining, we just see people trying to get more value for what they spend and I think we're kind of perfectly positioned there. Tier 2 is probably the one that's it's hardest to read because it's all over the map in terms of what's happening to the economics of that section. If you're post house, you're having one dynamic, if you're a small work group you're having a different dynamics. Education institutional are growing, they're online offerings are growing and the course load is growing, so that's probably surging for us. So by Tier I would say, Tier 3 because we have more offerings now that are packets and priced to them off the same platform. Tier 1 elongating sales cycles because of the dynamics of their business and I think we're in all those conversations because we have one of the clearest tools to help and then when you go by geo, I think we mostly we have been bucking the trend in Europe I think for several quarters. We're continuing to see elongated sales cycles there, but we're knee deep in those deals, we're not losing details there. They're just, wanted to make sure they're getting good value out of that. Little bit softness in Americas as well, Asia and LATAM not much changed. So that would be my own take, John I don't know if you want to add anything?

No, that was comprehensive, I agree.

Okay, thank you.

Thank you and that concludes our Q&A session. I would like to turn the conference back over to Jonathan Huang. Please go ahead, sir.

Thank you. I want to thank everybody for joining our call today and we certainly look forward to connect to many of you soon and if you have any other questions, please direct them to the Investor Relations Department here on Avid and thank you, have a good evening.

Thank you and again ladies and gentlemen, that does conclude today's conference. Thank you all again for your participation.