Emily Walt - IR Louis Hernandez Jr. - Chairman & CEO Brian Agle - SVP & CFO

Matthew Galinko - Sidoti & Company Hamed Khorsand - BWS Financial Steven Frankel - Dougherty

Good day and welcome to the Avid Q2 2017 Earnings Release Call. Today’s call is being recorded. At this time, I’d like to turn the conference over to Emily Walt from Investor Relations. Please go ahead.

Good afternoon. Thank you, operator. My name is Emily Walt and on behalf of Investor Relations at Avid Technology I would like to welcome you to our second quarter 2017 earnings call. With me today are Louis Hernandez Jr., Jr., Avid's Chairman and CEO; and Brian Agle, Avid’s Senior Vice President and Chief Financial Officer. 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 the slide deck that accompanies this call, the tables to our press release and in the supplemental financial and operational datasheet available on the Investor Relations section of our website. 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 obligation to update the 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 sections of our 2016 Annual Report on Form 10-K 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 presentations by going to 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, and Chief Executive Officer, Louis Hernandez Jr. Louis Hernandez Jr.: Thank you, Emily. Hello everyone and thank you for joining us on our call today. I am going to be on Slide 6 of the presentation. First, I am pleased to say that again this quarter we met or exceeded our guidance for all financial metrics. Adjusted free cash flow was above the range and improved by over $36 million from a year ago. Bookings, revenue, non-GAAP, operating expenses and adjusted EBITDA were in line with guidance and we saw our second consecutive quarter of free cash flow. We completed the transformation we began in 2013 and I could not be prouder of this accomplishment. I wanted to thank all of our employees, our customers, our partners and our investors for supporting us through this incredible journey. We've built the industry's first cloud-enabled enterprise platform. It's essentially an operating system for the media industry. It's complemented with a comprehensive set of applications across the entire media workflow and we've certified almost 2,000 products to this ecosystem. This allows us to address the industry's most significant challenges and positions the company for long-term growth. Now the platform has allowed us to share common technologies across our suite of products, allowing us to create a leaner and more directed cost structure focused on high return investments and the agility to launch new products and services less expensively. In total, we are on target to reduce total spend by $106 million by year-end. At the same time, revenues have stabilized and adjusted EBITDA has improved. The end of the transformation also adds clarity and transparency to our financial results as the impact of nonmarketed products have run off and the accounting adjustments have ended. As the company transitions to the growth mode, the company's operating results have become more predictable and there has been a significant shift to higher recurring revenues. Revenues as I mentioned have stabilized despite the significant shift to recurring revenues [indiscernible] the company's a dip in revenues. So, we're very pleased that it stabled while we were shifting to recurring and adjusted EBITDA is converting to cash at a more normalized rate. The company's cloud-enabled platform, comprehensive application suite and marketplace of third-party products along with greater flexibility on delivering pricing has driven a significant increase in recurring revenue bookings and contractually committed backlog, which is providing improved visibility going forward. Today Avid's cloud-enabled enterprise platform has uniquely positioned the company to capitalize on opportunities ahead. The adoption of the media central platform by large media enterprises continues. We've now had several quarters of enterprise transactions with several large enterprise deals again this quarter, which I'll review in just a moment. On the opposite side of this spectrum, for individuals, new customers made up a substantial majority of paying individual cloud-enabled subscribers representing a 91% increase year-over-year. Our strategic alliance with Microsoft is going well and we're really excited about the coming quarters of cloud-related releases that we'll be announcing with them. While there obviously remain challenges ahead, I'm confident in the company's ability to execute on this strategy moving forward and look forward to sharing the results as we move to the second half of the year. I'm going to move through the next page now and I know we've talked -- some of you heard us talk about transformation recap upper left, we have this amazing distribution, great global brands, category-leading products but they were in slower growth areas. We built this enterprise platform for the entire workflow, put those applications on and then added applications to allow us to anticipate in the higher growth areas. We knew it had to be an open and flexible platform, which is on the right in the center there in blue are all the certified applications. So, if you want competitive products that can share the platform or third-party products they're all integrated onto a common platform. The result would be an ability for us to package and price products for both Tier 1 at the high end and also Tier 3 at the low end in a very cost-effective way, thereby expanding our market, increasing revenue stream and driving down costs. And the next page really highlights what it took to complete this transition and why we're so excited about our position for long-term growth. I think it would be hard for you to find many companies that have gone through the dramatic set of changes that Avid has. I know a lot of people talk about transformation, but if you look at some of these statistics I think you'll agree it's been pretty amazing journey for us. You know the amount of innovation that we've done during this change 20% of our entire code base has been written in the last 3.5 years. 22% of our patents, and you know we have a pretty large patent portfolio, have been granted during this transformation period. The platform that we have created, not only allowed us to lunch 44 new products, but actually decreased our development resource needs by 25% because of the flexibility and extensibility. This has been a major shift and a technology investment for this company. And of course, we needed a different kind of talent pool to help us address today's issues. 65% of the employees are new since we started the transformation, 65% of the entire direct employee community and what we really needed was the teams in the right place at the right people to drive this strategy. Of course, we also had -- we located 70% of our offices and redeployed our workforce to be closer to our customers to deliver better service. As a result of the changes in the investments, we've also been able to drive up efficiency. The $106 million savings program that we launched will be completed by the end of this year. We've already completed a majority of that and are on track to complete the planned changes this year. And as a result, you've seen us work through the nonmarketed products which we’re completely finished with now and the tail of the restatement with some of the accounting adjustments is also complete. The real thing I'm most excited about is why we did this in the first place and is to benefit our community, our customers, media center platform was designed to address the most significant problems the industry faces. We now have technologies and tools to allow much greater agility and flexibility and we can provide better service and deployment models to meet those customer's needs. In the end, it is an end-to-end solution for the media industry positioning Avid to have a much more strategic role. I think for investors also they'll benefit, clear financials are emerging due to the end of the revenue adjustments, improved predictability and visibility with increased recurring revenue and revenue backlog, consistent adjusted free cash flow growth and more importantly, a platform for long-term growth, which we're hoping to begin to see the second half of 2017. If you turn to the next slide, you'll see the success that we've had and the progress. You've seen before in upper left, the platform adoption. This is really large media organizations adopting an enterprise-wide operating system to drive down cost and then they buy applications and we try and cross-sell and upsell and increase in lifetime value over time. Upper right is the other side of the spectrum, individuals and small teams with subscriptions and digital sales, both surging and it's really those subscriptions as opposed to digital sales and the platform adoption, which have been flipping over to most of the multiyear enterprise deals, which is driving this huge shift to recurring revenue bookings. It started at a nascent level as you guys have heard a couple years ago and now is at the 42% this last quarter. Remember we started at about 13% before we started the transformation and that's what's driving this pretty significant increase in contractually committed backlog and that would both include the off-balance sheet contracts that are committed as well as deferred revenue, pretty significant investments in both cases -- increases in both cases, driving increased visibility. If you go to the next page, you'll see some examples of some of the traction. As I mentioned early on, I know you guys remember Sinclair or probably member Sinclair, which was the early canary in the coal mine about what was to come. We now have had a couple of quarters of pretty steady stream enterprise agreement and our pipeline continues to build. Most of these agreements have this typical characteristics, multiyear agreements, enterprise pricing models against multiple applications, sitting on top of media-central platform and then we usually bundle in products and services and they want operating models that are spread out over multiple years, drives down savings and efficiencies while delivering the best individual tools of the workflow and saves them money and for us, it increases our total revenue and makes it a recurring revenue element. Meredith is a good example; Meredith Corporation is one of America's leading media and marketing enterprises. In Q2 we signed a double-digit in millions multiyear agreement for the full media central platform and several applications, an example of what we're continuing to see in this area. If you look to the other side with individuals, what we've been able to do with the platform is deploy these individual applications at a much more cost-effective way. We've listed the first products, the free versions here and you can see the freemium model and what this has done, was allowing us to attract professional users that couldn't afford to participate in our ecosystem. What's happening is to become a powerful low-cost acquisition tool with very high conversion rates and that's what's leading to the cloud-enabled subscriptions which have now reached 78,000 in Q2. This is a 91% increase year-over-year in subscribers. The majority are net new customers and the great thing about it is the Avid digital ecosystem allows those individual customers to purchase additional cloud services, plug-in hardware, plug-in software to increase the lifetime value. So those are some examples about the kind of strategy you're seeing us follow, leading to my last slide on strategy, which is what's next. So, we've ended up with a platform that has a common shared services bus, multiple application sharing common user experience and those are the applications, those three levels in the upper left. In the blue on the right, is the ecosystem apartments, which we've certified, which all work on the same platform. Of course, you can deploy this on premise, private cloud or public cloud. So, what's next? We've had a couple of applications in the cloud. We need to put the whole platform into cloud, which we're doing with Microsoft and then you'll see us move to expand services offerings like things that used to be on premise, like data management services and employees as they move to the cloud, Avid will be able to participate in some of those revenue streams and of course we'll continue to add products as well. So, what's next for Avid, focus on clarifying the entire platform and all the applications, making everything that we have built just work better to make it more obvious. This is a better way to operate in the media ecosystem and to get more people to use it and that's what you'll see Avid focused on. And so, as I wrap up here, we started this transformation with a pretty amazing brand and market-changing heretic products. However, we were operating in a slow growth and increasingly commoditized area that didn't address the larger business needs of the industry, by creating an operating system for the media industry, the media center platform, we were able to allow our heritage products to operate at a lower cost with greater flexibility and we were able to add new products and services to address the more significant business issues while driving down the unit economics to be a part of the industry and allowing us to participate in higher growth areas with higher recurring revenues. At the core, we've been shifting to the recurring revenue model, which you've seen, driven by both subscriptions on the individuals and maintenance and also adding new services along with the enterprise customers embracing their strategy, which are increasing looking for multi-year more cost-effective subscription models. With the initial crate of product in the cloud our announcement with Microsoft to move the entire stack to the cloud, the most comprehensive in the industry, we feel we're poised to continue our momentum. Now that we've exited Avid's transformation phase, we can focus our efforts on taking advantage of the expanded market opportunities and the Avid Everywhere strategy overall. And with that, I'd like to turn over to Brian to review our more detailed financial results. Brian?

Thank you, Louis and good afternoon, everyone. We had a strong second order meeting or exceeding our guidance on all metrics. In particular, adjusted free cash flow was favorable to our guidance. Bookings, revenue, non-GAAP operating expenses and adjusted EBITDA fell within the guidance range. Let's move to Slide 15 to discuss the Q2 results in more detail. We were pleased with our performance this quarter. Excluding Greater China, bookings on a constant currency basis were $104.3 million, an increase of 3% year-over-year and flat sequentially. On a reported basis, bookings excluding Greater China were $98 million, an increase of 1% year-over-year and 2% sequentially, including storage which was up 19.8% and digital which was up 24% year-over-year. Non-GAAP revenue was $102.4 million for the second quarter down 2% sequentially and 24% year-over-year, excluding the impact of the pre-2011 revenue amortization and elimination of implied post-contract support or PCS, revenue was flat sequentially a positive indicator that revenue is stabilizing. We note a $22.6 million year-over-year decrease related to the impact of pre-2011 revenue amortization and the elimination of PCS. We are pleased to see these adjustments are moving to immaterial levels, providing a clear financial picture and also a better conversion of adjusted EBITDA to adjusted free cash flow. Non-GAAP gross margin as a percentage of revenue was 60.7%, as you normalize for the impact of pre-2011 revenue amortization and the elimination of PCS, our gross margin as a percentage of revenue was 60.5% down two percentage points sequentially and flat year-over-year. Non-GAAP operating expenses for the quarter were $56.6 million. Our non-GAAP operating expenses decreased $8 million year-over-year or 12% and increased $0.5 million sequentially or 1%. This small sequential increase is primarily due to an increase in seasonal marketing spend related to our customer conference. In addition, in the quarter -- in the current quarter we experienced $1.8 million of expense related to unrealized foreign currency loss from revaluation of our balance sheet. Adjusted EBITDA is $8.5 million for the quarter, excluding the impact of the pre-2011 revenue amortization and the elimination of implied PCS was up 33% year-over-year and down 22% sequentially. Adjusted EBITDA margin as a percentage of revenue was 8.7%. We were pleased to see a strong adjusted EBIT conversion rate to adjusted free cash flow. We note a year-over-year improvement of $36.4 million of adjusted free cash flow. As we turn to the next slide, we see the breakout of Greater China and rest of world bookings by quarter. We are pleased with rest of world bookings growth on a sequential and year-over-year basis. I should also note just in our Greater China business met their Q2 commitments. We continue to be positive on the commercial arrangement which is now in its third quarter of operations. From an operational perspective, the additional $30 million efficiency program savings in 2017 excuse me, we continue to execute on the additional $30 million efficiency program savings in 2017 by leveraging the development platform, enabling more opportunities for talent alignment, related facilities rationalization and improved product profitability. We are on track with this 2017 initiative. Of courses, this is in addition to the original $76 million annualized savings goal achieved last year. Now on to Slide 18, at June 30, 2017, we had total liquidity of $52.4 million including $47.4 million of cash and a $5 million undrawn revolver. Our accounts receivable balance was $34.4 million, a substantial reduction sequentially and year-over-year. Day sales outstanding or DSO was 31 days at the end of the quarter. Inventory was down by $7.9 million to $41.2 million sequentially with an inventory turn ratio of 3.9 times. Long-term debt the end of Q2 was $189.9 million. As outlined at the beginning of the year, our amended agreement with Servers provided more favorable leverage ratio requirements for future periods, beginning the quarter ending June 30, 2017. This quarter we saw the ratio improve to 4.2 from the original ratio of 3.5. Next quarter the leverage ratio moves to 4.8. Total revenue backlog at June 30, 2017 was $488 million. We continue to see year-over-year growth in total revenue backlog and excluding pre-2011 and elimination of PCS of $53.3 million. We continue to have mix changes between deferred revenue and off-balance-sheet backlog. The off-balance sheet backlog, which is contractually committed revenue increased $86.2 million year-over-year. More of our quarterly recognized revenue is coming directly from off-balance-sheet backlog. In Q2, 80% of our recognized revenue came from March 31, 2017, deferred revenue and off-balance-sheet backlog. As we've completed the transformation, we highlight to move to a recurring revenue model driven by our mix of bookings and specifically illustrate the growth of off-balance-sheet backlog. Since December 31, 2013, our off-balance-sheet backlog has grown from $92 million to $284 million as of June 30, 2017. This is an increase of $192 million over this period. Off-balance-sheet backlog is contractually committed bookings, representing future billings, revenue, EBITDA and cash. This is a valuable and material asset for us as we look forward. Now on to Slide 20. Turning to our adjusted free cash flow generation for the quarter, adjusted free cash flow increased $36.4 million year-over-year to $6.2 million. Please note in Q2 2016, a $9.1 million employee bonus was paid. In the current year, the bonus payout has been deferred to later this year. We are pleased that this is the third consecutive quarter of positive adjusted free cash flow and the second quarter of positive free cash flow. The increase was driven by continued execution of the efficiency program and working capital optimization. Consistent with last quarter, we have provided details of free cash flow and adjusted free cash flow. In the current quarter, our free cash flow of $1.2 million improved $37.8 million over last year. The Q2 2017, nonrecurring items were higher than expected due to higher restructuring payments. We expect these nonrecurring items to be materially lower in the next two quarters. On Slide 22, we present our Q3 2017 financial guidance. For the third quarter, we expect bookings on a constant currency basis to be between $95 million to $109 million and on an as-reported basis to be between $87 million to $201 million. Please note that guidance range exclude bookings for Greater China, which represented $4.3 million of bookings in the third quarter of 2016. We are guiding GAAP revenue for Q3 to be in the range of $94 million to $104 million and non-GAAP operating expenses to be in the range of $52 million to $56 million. Adjusted EBITDA is expected to be in the range of $8 million to $14 million. Adjusted free cash flow to be in the range of negative $7 million to positive $1 million. We are reaffirming our guidance for the full year of 2017 as we communicated to you on our earnings call on March 23, 2017. Let me summarize our Q2 financial performance. We met or exceeded our guidance, cash liquidity is steady and strengthening, backlog continues its growth trajectory and we are pleased to reaffirm our 2017 guidance. I'll now turn it back to Lewis for some closing remarks. Louis Hernandez Jr.: Thank you, Brian. And I'd like to wrap things up if you want to turn to Slide 25, we met or beat guidance on all metric performance drove an improvement in our liquidity position. These areas continue to be a top priority for Avid. Our key metrics for platform adoption, subscriptions, digital, recurring and efficiencies, demonstrate that Avid Everywhere strategy for enterprises and individuals is working. Q2 results and our reaffirmed 2017 guidance reveal a financial core model emerging that is clear, has greater visibility and is profitable with improved cash flow conversion. With the transformation complete, Avid is actively positioning itself for growth and profitability by offering the only cloud-enabled enterprise software platform, specifically for media. As more and more customers look for new and innovative ways to merge their needs and leverage the cloud, Avid's comprehensive platform delivers long-term value and improves total cost of ownership for both enterprises and the individuals, especially when compared to point solution providers. Now I look forward to sharing our accomplishments for the second half of the year. Before we go, we would like to invite you to attend our Presentation at the Canaccord Genuity Growth Conference next Thursday, August 10 at 10:30 AM. And with that operator, we would like to open it up for questions.

[Operator instructions] We'll go first to Matthew Galinko with Sidoti.

Hey. Good afternoon, guys. Louis, you touched on I think your words were just making the platform easier to use with more obvious benefits to the user. I am just wondering if you could fill that in a little bit more in terms of does that relate to feedback from early adopters or just your internal roadmap? And then how do you weigh that in terms of -- how important is that to getting more enterprise deals done? Louis Hernandez Jr.: First Matt, thanks for calling in. The enterprise pipeline is growing rather dramatically, absolutely we're learning a lot from the initial installation that we've done and I think we have a pretty steady stream now of enterprise deals coming in. If you remember early on it was hard for us to predict and what I would say is the reason I wanted to the point that out is there is no more huge heavy lifting left. The Nexis software define was a big step because you can be hardware independent and we certified as you know with our own, but it can also be put in the cloud and putting everything in the cloud is the next big thing, but there's no big infrastructure elements that we have to build and so we're going to turn our attention to just making everything better. And what I mean is the balance between an individual application let's say graphics or storage or media composer and the question we have to ask ourselves is it better to make that individual application work better for the user? Is it better to make an investment to show that it works in concert with the platform or make everything just simpler to use in a more integrated way and those are the kind of questions that we're now focused on as opposed to heavy component parts being built. So, if you look at for instance the Cloud UX, which we demonstrated at NAB, if you walk around any major media enterprise and you walk in their newsroom and then you go to editorial suite and then you go over to their studio or graphics and then you go over to their storage area, you'll see different applications and different providers. With a common U.S. on the platform it all look the same whether or not it Avid's products or in the future anybody else's and today they're all integrated. So that's an example where we want to make that integrated simplistic experience better and more efficient because training cost go down and it's all integrated. So that's what I meant by that. The way you onboard a new customer certified vendor, we want to make that simpler, the deployment model, the usability and we have the balance that Matt with still making sure our individual applications remain very competitive. So certainly, got a lot of great feedback from clients. We want to get more people to use it. It seems like the market is ready to help us get more people, but of course we're learning a lot about the things we need to change. The last thing I would mention as you know and we've talked about moving to these enterprise deployments we used to let's say install 150, 300 media composer and that was in enterprise deployment. You go to a big client. You turn them all on, they work and you basically left because if something happen, it didn't impact the rest of the workflow because they were individual components that the client put together. In our model now, how we deploy is quite different because we're deploying not only an end to end enterprise system, multiple applications at once and every one connects to the other parts. It makes it more efficient, but it also makes it a more complicated deployment. So, our training of our professional services, our project planning, the kind of people we have, the way we deliver a service, how long we're at the client is all changing and we're learning a lot from these early installation. So that's what we meant Matt.

Got it. Appreciate that. That's all for me for now. Louis Hernandez Jr.: Thanks Matt.

We'll take our next question from Hamed Khorsand with BWS Financial.

Hi. First question, you were just talking about free cash flow and the relationship with deferred bonuses, when do you expect to pay out those bonuses?

We plan to pay those bonuses later in the year. So, we are comfortable where we are and we have a plan to pay between now and of course the end of the year.

Okay. And then so going forward is that going to be something that is going to be towards the end of the year and so the beginning of the year then?

This year in particular it's more of an exception.

Okay. And then on your revenue guidance what is driving that number? Is it -- can you give some kind of background on what the drivers are?

Well the core drivers are we have good visibility into our deferred revenue. We know in our off-balance sheet backlog is scheduled to roll into revenue and we also have reasonably good visibility to not only our bookings forecast but also the conversion rate for revenue. Those are the three pieces that make up our revenue forecast and projections. Louis Hernandez Jr.: And I would say Hamed that one thing that's happening that it's not yet a majority but you're seeing the growth in our contractually committed backlog and that gives us more visibility into the coming quarters. So, the good news is as we enter a quarter, we know more about the percentage of revenue that's coming in. The bad news is we have less of a chance to impact the current quarter, because less converts in the quarter for what we're booking. And so, the good news is that visibility gives us a little more comfort into any successive quarter and as you can see, the revenue has stabilized while we’re shifting to this recurring and have greater visibility. So that's one of the things that gives us the confidence in reaffirming the full year.

Okay. And with the restructuring complete and it seems like most of the -- as you were saying, heavy lifting is out of the way when should we expect to see more meaningful impacts on the free cash flow line?

So, we -- as you look at our guidance for the year, clearly the Q3 guidance as well as the implied Q4 guidance gives you a view of where that is and we'll provide more information as we go into '18, but we're really pleased with our year-over-year progress.

Okay. Thank you.

[Operator instructions] We'll go next to Steven Frankel with Dougherty.

Good afternoon. I would like to revisit this bonus payment deferral issue, could you give us an idea of how much that was and again why late in the year I know one in the prior year it was pushed from Q1 to Q2. What made you push it further than that?

So, hi Steve, this is Brian. The amount of the bonus that will be paid later in the year is just over $10 million. We've decided to pay it later in the year to be very focused on our cash and want to make sure that we're being responsible as we pay those bonuses. We've communicated that and that's the path that we're taking.

So, let's define being responsible, that means if I'm an employee, that payment -- is that payment at risk if you don't hit your target between now and the end of the year?

It is not at risk.

Okay. And can we go and bridge your free cash flow guidance for Q3 and the year from the adjusted basis that you're giving to GAAP free cash flow?

So, as you do that, I would suggest that for the nonrecurring items, because that's the large reconciling item, what's left in the second half of the year for nonrecurring will end up -- that will end up being $5 million to $6 million of nonrecurring in Q3 and Q4.

And how much of that is in Q3?

It's about half-half.

All right. And that's the only difference between adjusted and GAAP or you say are there other things. Again, are there other things in there, before you said there were $15 million of adjustments for the year in your prior guide. Is that, still right?

Still the case. I would point you, we provided in some of the press release, but more specifically on Page 21 of the presentation it's laid out where we show the total nonrecurring and what you said the guidance we've given you previously does hold, yes, for the nonrecurring.

Okay. And gross margins were down sequentially, where do you think they bottomed or what is it take to start to make them ramp up from here?

So gross margin as you know I think the important thing to do as you highlighted you know this Steve is to probably parse out the pre-2011 and elimination of [PCS] [ph]. So, it's a moment we're just slightly north of 60%. I think it's probably fair to say, this is probably where we bottom out, it's probably steady and hopefully we'll see some improvement from here.

Okay. And you think from a product engineering standpoint, have you gotten the COGS down enough so that if volumes ramp, you can get better gross margins? Louis Hernandez Jr.: Yeah, I think, this is Louis, one of our opportunities deciding that we don't have any of these huge building blocks. We have a big cloud release of Microsoft coming up at IBC, another one at NAB and the last one at NAB -- I mean at IBC the following year will be the storage we said the last piece. But those development efforts are largely funded by Microsoft and so we have an opportunity to decide whether or not we want to gain more efficiencies or develop new growth areas and that's one of the things we're going to be considering for the second half of the year. But you can imagine, we've had some incredible work done by some fantastic employees building what we've had, but there's no big project left. So, there's a whole bunch of little things, we're deciding between I think we have an opportunity, that's one of the reasons we invested so much in this platform to decide whether or not at what level do we want to continue to innovate as opposed to just getting more people to use what we have and make it work better. So, I doubt there will be upward pressure given the current plan on our R&D lines.

And this IBC announcement with Microsoft, is this more around the development or actual product that will be available this year? Louis Hernandez Jr.: It'll be three -- I'm trying to what we said with Microsoft, so let me make sure I use the words correctly. If you look at the Avid Everywhere suite with media essential platform, we want to make the entire thing available in the cloud and that'll happen on key -- three key milestones. A big piece will be this IBC, which will mean it's available and announced. There will be a big piece at NAB and the final piece is planned to be announced at IBC and at that point, we should have the entire suite. Obviously now, we're selling enterprise deals now and we have a couple of applications in the cloud that's driving our subscriptions, but as you know Steve, the big shift is our large media companies shifting to this recurring model and they're doing that now and many times they want to make sure they have the option to ship to the cloud with their license agreement and with the type of terms that we're signing. But there'll be a big chunk at NAB, at IBC there'll be a big chunk at NAB and a smaller but important chunk at IBC in '18.

Okay. And Brian going back to cash flow, what's the kind of bare-bones maintenance CapEx that you have to do this year?

So, I think we've previously said that $10 million, $10 million is pretty bare-bones, but candidly at the moment I think we're even doing a little better than that. So, we've been very judicious in terms of how much we spent.

Yeah. So, I look at the first two quarters and say are you being judicious or are you starving the business just because where you are from a cash generation capability today?

No, I think Steve, I think we're being judicious. We know that what we have to do and we're making those investments, but we're just having some tight discipline. So, I would not use the term starving. I would simply say that I think the business we're very discreet when we look at the request.

Okay. And then in terms of inventory, was there anything in particular that drove such a sharp reduction in inventory in the quarter? Louis Hernandez Jr.: So, I think likewise, we put a lot of focus on inventory levels and as well as getting inventory out of the door to fulfill to our customers So I think it's really a combination of both purchases and outflows. I think that's right and a few things I would add to that Steve is culturally first of all, we've been you saw those statistics, massive changes going on. As things settle down and we realize what we've built, we start tightening up our processes internally. Also, storage was a big piece and we've done an excellent job of storage rebounding completely and that in anticipation of storage and actually there was a build-up and I would expect that the kind of working capital disciplined it that Brian and the team, Rashid and his team have enacted is probably what you'll see going forward. So, we probably were a little -- allowing a little bit of a build-up in anticipation of sales. Also, I think because we're so busy with everything else maybe didn't have that kind of discipline we would want to. I think as things have settled down enacted a little more discipline, new products are taking off. Probably you're going to see this kind of discipline going forward, I wouldn't expect anything other than the same kind of working capital management that you're seeing now.

Okay. Great. Thank you. Louis Hernandez Jr.: Thank you, Steve.

And that does conclude today's question-and-answer session. I'd like to turn it back to Louis Hernandez Jr. Jr. for closing remarks. Louis Hernandez Jr.: Okay. Thank you everybody for joining us. Good afternoon.

Thank you.

This does conclude today's call. Thank you for your participation. You may now disconnect.