Dean Ridlon - VP, IR Jeff Rosica - President and CEO Brian Agle - SVP and CFO

Steve Frankel - Dougherty Hamed Khorsand - BWS Financial Matthew Galinko - Sidoti

Good day and welcome to the Avid Q1 Earnings Conference Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Dean Ridlon, Vice President of Investor Relations. Please go ahead.

Thank you, and good evening, everyone. I am Dean Ridlon, Vice President of Investor Relations at Avid Technology. Welcome to our Q1 2018 earnings call. With me today are Jeff Rosica, our Avid’s CEO and President; 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 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 2017 Annual Report on Form 10-K available with 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 available as a replay for a limited time. You may replay this conference call and access the supplemental presentation by going on 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’d like to turn the call over to Jeff.

Thanks Dean, and thanks everyone for taking this opportunity to participate on our results call today. Brian and I are looking to cover a lot of ground quickly in our prepared remarks, so that we can spend most of our time together answering your questions. In a moment, I will be offering my takeaways on the performance of Q1, which clearly was a transition quarter for the management team. The first quarter is typically a more difficult one due to the seasonality of our business, but nonetheless, we met guidance for revenue and adjusted EBITDA while delivering continued growth in bookings excluding Greater China, gross margins and free cash flow during the period. I’ll also review some key aspects of management’s initial strategy to improve business performance over the coming months in order to help drive EBITDA margin growth and better free cash flow generation. As we look forward to future quarters, especially the second half of 2018, we’re rather optimistic due to the host of new product releases we have planned over the coming months. Our enthusiasm comes from our customers’ reaction to the new product announcements at our recent Avid Connect event and the NAB Show, where we had a wave of new major product launches, most of which are slated for 2018 availability. And on this call, I’ll begin to layout a new means for investors to better understand who Avid is today, our portfolio strategy, the markets we serve, and clearly see the opportunity going forward as we drive further advantages from our first mover status in software platforms, cloud and very soon with SaaS. Before we move on, I would like to congratulate Peter Westley on being elected as Avid’s new Chairman of the Board. He brings us the advantage of 30 years of experience in financial services working with media and technology companies. The management team looks forward to working closely with Peter in his board leadership capacity as we drive better performance and shareholder value. So, let’s get into the details. In our first quarter of 2018, bookings were up 5% year-over-year, excluding Greater China, with strong performance in our tier 2 market which is largely sold through our channel and the tier 2 market for creative individuals. Tier 2’s performance was driven by the sign of multiple key strategic purchase agreements with key channel partners globally tier 3 is continuing its strong growth driven by subscription which was up 40% year-over-year and digital e-commerce which was up 52% year-over-year. We did experience weaker performance in our tier 1 market for enterprise customers due to longer than expected sales cycles of several key projects which did partially offset the gains of tiers 2 and 3. Revenues were in line with guidance, but were slightly lower than previous year, and this is due to lower product deliveries in the quarter, resulting from timing of tier 1 customer decisions as well as some supply chain issues related to our audio products which placed some downward pressure on revenues. Adjusted EBITDA was in line with guidance, even though revenue came in at the lower end of guidance. With respect to our new distribution partners in China, the transition proceeded smoothly during the quarter and each of them met or exceeded their contractual commitments, and I’m quite pleased with the way our organizations have been collaborating so far. Non GAAP gross margins showed solid sequential improvement by increasing 300 basis points versus the prior quarter. This was driven by a significant improvement in our professional services margins as well as higher contribution margins from our better software mix and subscriptions. Margin improvement is going to continue to be a top priority for us which I’ll talk about further in a moment and therefore, we expect to see continued progress in 2018. Lastly, we also delivered growth of 82% in our free cash flow from the prior year at $3.3 million which was driven by strong collections and lower restructuring payments in the quarter. As I mentioned earlier, our first quarter was a transition quarter for current management team. We seized this opportunity to rapidly realign our priorities with the explicit goal of driving EBITDA and margin expansion and greater free cash flow generation. I want to share with you a few of the major initiatives that we began after the management transition. First, we launched a major cross-functional action plan to drive continued gross margin improvements which we believe is starting to show early signs of benefits. Next, we are redoubling our efforts to optimize our customer structure with an emphasis on reducing our non-personnel related indirect costs. We’re also accelerating our efforts to vastly improve our global supply chain to drive better hardware margins, increased supply chain velocity and reduce our working capital requirements. In addition, replacing heavier companywide emphasis on bookings to revenue conversion with key processes and policy improvements that are being that I believe will show benefits fairly soon. Finally, we are also carefully reprioritizing our product roadmap and adjusting our commercialization plans to optimize the near-term opportunities and help drive topline growth during 2018. I do look forward to continue to provide updates and share progress on these management priorities during future calls now. Now, in April, we gathered with a record number of Avid’s customers for our annual Avid Connect event, which again demonstrated the tremendous influence of the Avid Customer Association. This immediately preceded the NAB Show, which is our biggest trade event of the year. Avid capitalized on both events to launch a wide range of new products and innovations for all of our customer segments which generated some enthusiastic response from our customer base. Let me review a few of the key product announcements that I believe will help us create lift and drive revenue and margin contribution during the second half of 2018 and beyond. We debuted our initial SaaS offering, Avid on Demand, which is hosted on the Microsoft Azure cloud platform that is slated for release in late 2018. While this item may have limited revenue impact in 2018, it will position us well to capitalize on the growing cloud and SaaS opportunity and continue to lead the media industry. We also unveiled the next generation MediaCentral Cloud UX and key platform improvements, all of these are slated to start delivery in late June and continue to roll out in the second half, which will help us to open up additional customer upgrades, more expansion opportunities and help win more new projects. We also introduced new cloud-based MediaCentral platform apps services and workflow solutions that are further building out our cloud capabilities and opening up new business opportunities for the Company. We expanded our flagship Creative Tools software suite with a new tiered approach, which is repositioning us to better target users at all levels and thus growing the market opportunity for our subscriber business. This expanded family is actually releasing during the second quarter. Finally, we also expand our live sound product family to extend the offering and price points, which is opening up additional market opportunities in order to drive revenue. The first versions of this expanded product family begin delivery at the end of Q3 with subsequent rollouts over the course of Q4. I also do want to point out that Avid has enjoyed quite a successful year so far, having won a record number of industry awards recognizing our technology innovation. In fact, during NAB, we were happy to collect our 15th Emmy Award for technical excellence with the key innovation related to our Media Composer product. Now turning the page. Since I became CEO, I’ve been asked by many investors, analysts and others about how we, they should be thinking about our Company, our strategy, our markets and the overall investment opportunity. Thus, I am taking this opportunity on the call to begin to lay out what I hope is a clear picture. Avid is a leading technology provider of software tools and platforms that we believe power the media and entertainment industry from film and TV to music and live events. Avid’s users to customer base represents the who’s who of artists and creative professionals, as well as the top broadcast and media companies from every corner of the globe. And with an unrivaled technology and leadership position combined with our significant customer base, we really believe that Avid is uniquely positioned to capitalize on the market opportunity to help the entire media industry navigate the digital transition of their business and their creative endeavors. Now, when you think about Avid’s well-established and growing product portfolio, remember that we’re rooted in providing the entire market with an open and extensible product family that ensures our long-term position with these customers. To present a picture which is really more commensurate with the way we think about our business and the way we pursue our markets, this diagram on the slide reflects a clear and more simple way to think about our overall product and services portfolio. The standalone software portion of the business consists of our Creative Software Suite and our enterprise software suite. The Creative Software Suite includes our iconic Pro Tools, Media Composer and Sibelius Tools, as well as the Artist Community platform and the Avid Marketplace, all of which are key components of our cloud-enabled software subscription strategy. The enterprise software suite is built on the MediaCentral platform along with a rich suite of applications, modules and services, which is also the foundation of our cloud and SaaS offerings. Now over on the other side of the chart, you see the Integrated Solutions part of our business which mainly consists of four common hardware platforms with tightly integrated software elements that are key to the solutions. And when combined, they create very powerful solutions, all of which are designed to complement and enhance our overall software strategy. In the midterm, I’d tell you that we do expect to see continued and significant revenue and margin contribution from this category due to several recent product launches. But for the longer term, we are in the midst of developing concepts for future cloud employments and SaaS offerings for many of these Integrated Solutions. Now, all of this is supported by our comprehensive services offerings, including customer support, professional services, training and education. We will see increasing significance of software in our results, including continued positive trend of recurring revenue growth while we start to see new contributions from our breakthrough cloud and SaaS offerings later this year. In the second half, we plan to improve revenue [ph] visibility around these revenue categories, as well as several key related metrics, which we think will be important to align the way we think about our business with the way we reported to all of you. Now, when you think about Avid’s markets, it’s important to note that we cover the community with tools, solutions and platforms which are essential to their success in content creation, management and delivery. Avid’s iconic Creative Software Suite is integral to all of our customers and drives Avid’s subscription business and also the adoption of many other tools and solutions from Avid. Our cloud-based enterprise software suite ensures that any customer can take advantage of the platform paradigm to easily and incrementally expand their capabilities with storage complementary tools and hundreds of software add-ons. Avid’s integrated hardware and software solutions are an essential part of all of our key workflow solutions that we market to enterprises and creative teams but are also important to the IO and control surface needs of our independent creative professionals too. And Avid will continue to focus on producing software and platform product innovation that can yield growing opportunities for the Company from our target markets. But they can also optimize lifetime value of our customer relationships. Finally, I want to briefly highlight some of the differentiating attributes that underlie the opportunity before us. Avid operates in a large and growing market that is poised for transition as our customers face significant disruption and are needing make major changes and additional investments in their business and operations. We really believe in our heart of hearts that we are uniquely positioned to capture a significant opportunity that comes from our 30-year focus of being a technology innovator and a leader in the media and entertainment with a deeply entrenched position in a very loyal customer base. Avid is best positioned we believe to help the industry to navigate this disruption with our unique approach of a common technology platform, bearing software tools and end to end workflow solutions, all connected to a large and open ecosystem. And now the company is ready to intercept the next emerging opportunity of cloud, SaaS and AI through our tight partnership with Microsoft. We look forward to demonstrating more progress with our strategy, as I’ve just outlined, as well as our operational execution to support this. And now let me turn it over to our CFO, Brian Agle. He is going to step you through the details of our financial performance and outlook, and I’ll come back to you with a brief closing remarks before we take your questions. Brian?

Thank you, Jeff, and good afternoon, everyone. Q1 was a quarter of transition and change. From a leadership standpoint, Jeff took the reins as the CEO; from a financial reporting standpoint, we adopted ASC 606, the new revenue reporting -- the revenue recognition standard. Additionally, we have introduced some new revenue reporting to better represent the strategy and the underlying makeup of the business going forward. Let’s turn to slide 14. Q1 was a quarter of bookings growth and positive free cash flow. Both revenue and adjusted EBITDA for the quarter were within the guidance. Bookings were $101.6 million, an increase of 5% year-over-year. The China partnerships have started well with both partners meeting their minimum commitments during Q1. Revenue was $97.9 million for the quarter, within guidance. We had mixed results with strong growth for our digital e-commerce and subscription businesses, targeted at individuals and creative teams offset by enterprise revenues, which were impacted by customers delaying shipments. We expect enterprise to improve in Q2. As you may recall, we were disappointed with our Q4 gross margin. As discussed in our last call, we were focusing on making improvements. One such improvement has been higher professional services margins in Q1. Additionally, increased subscription revenue which is higher margin helped improve gross margin. Overall, gross margin was 59% for the first quarter, an increase of 300 basis points over Q4. We expect further improvement as the year progresses. Non-GAAP operating expenses for the quarter were $54.7 million, adjusted EBITDA was $6.3 million for the quarter. Free cash flow was $3.3 million in Q1, up $1.5 million from Q1 ‘17. Moving to the balance sheet on slide 15. During our Q4 results call, I discussed the expected impact, the adoption of ASC 606, the new revenue recognition standard would have on our financials. On this slide, we show the balances under 606 and what some of those line items would have been under the old standard. At March 31, 2017, -- actually 2018, we had cash of $48 million. Last quarter, we talked about our plans to transition from one of our large hardware suppliers during 2018. In connection with the transition, we issued an $8.5 million letter of credit to our current hardware supplier to help ensure the transition to a new supplier go smoothly. The letter of credit is reflected on our balance sheet under restricted cash. We ended Q1 at $52.5 million of accounts receivable. ASC 606 added approximate $21 million to the balance. Inventory was relatively flat but we expect to see an increase as we transition to our new hardware supplier. As expected, deferred revenue was the line was most affected by ASC 606, having been reduced by approximately $93 million. Please keep in mind that this reduction does not flow through the revenue line and went straight to equity. Contractually committed backlog was $328.6 million and represents future billings, revenue, EBITDA and cash. This backlog has grown by $57 million or 21% over the past year. We remain focused on harvesting our backlog to contribute to increase revenue and cash. At the end of Q1, long-term debt was $203.3 million. We were compliant with our covenant leverage ratio as of Q1. In a few minutes I’ll talk more about the debt amendment that we announced today. Now to slide 16. As you will recall, this year, free cash flow will be our primary reported cash flow metric. This graph shows the quarterly free cash flow as well as a normalized view of 2016 bonus payment made in Q4 2017. Free cash flow for the first quarter of 2018 was $3.3 million, an increase of $1.5 million over the prior year. The normalized view as shown by the dotted boxes will be more indicative of the 2018 seasonal free cash flow trending. Our 2017 bonus was paid in April 2018. Now, to slide 17. On this slide, we have provided details of free cash flow and adjusted free cash flow. In Q1, our adjusted free cash was $6.1 million. We continue to expect nonrecurring payments to total approximately $7 million for 2018. Turning to slide 18. This quarter, as Jeff mentioned, we took some initial steps towards enhancing our disclosure to help you better understand our business. The 10-Q includes a new table that illustrates how our revenue breaks down across several categories. Included in the breakdown is subscription services revenue, which totaled $8.5 million in Q1. This represents our revenue associated with subscriptions for Media Composer, Pro Tools and Sibelius. We do expect under 606, this revenue will be inherently more lumpy and less linear than it would have been under 605. We plan to provide additional reporting and metrics as the year progresses. Turning to slide 19 for guidance. As we said during our last call, on a quarterly basis, we will be guiding to revenue and adjusted EBITDA. For Q2 2018, our revenue guidance is $97 million to a $107 million, the adjusted EBITDA range is $4 million to $10 million. As you may have seen in today’s press release, we have entered into an amendment of our senior secured facility. Overall, we were pleased to work with our financing partner Cerberus to expand the facility on more favorable terms without incurring any fees. In terms of the specifics, our effective interest rate has been reduced by 125 basis points. We’ve expanded the credit facility by $35 million, including $22.7 million increase to our term loan and $12.5 million increase to our undrawn revolver. The term is five years and we have eliminated this springing maturity related to our convertible notes due in June 2020. The basket to retire the convertible notes has been increased to $40 million. In addition, our reduced amortization schedule will be a benefit to cash of almost $8 million in the first two years. This is additional cash that can be used towards retiring our convertible notes. We think this agreement is a strong step forward of improving our long-term capital structure. We also think the outcome reflects the strength of our credit profile and confidence with Avid’s business opportunity. With that, I’d like to turn the call back to Jeff for a few closing remarks.

Great, thanks Brian. So in closing, on behalf of Avid’s leadership team, I want to make a few simple points, reaffirming our commitment to improving business performance and thus driving shareholder value. There is still a lot of work to do to optimize our operational execution and drive business performance. Our management team is focused on driving better top-line growth through our new commercialization plans and product roadmap priorities, further optimizing our cost structure by reducing non-personnel expenses, and continuing to improve our gross margins. And we’re keeping our focus on achieving key strategic objectives to drive profitable growth and to improve visibility and cash flow. I described earlier how investors should now think about Avid, our strategy and the opportunity for which we’ve become well-positioned. Our goal is to ensure we’re reporting in a way that’s commensurate with our business today that will add clarity and visibility to allow you to better understand Avid in the future. The team is more confident than ever about Avid’s capacity to deliver new shareholder value. We are intensely focused on optimizing operational execution and demonstrating our ability to deliver improved results. Overall, our outlook and 2018 guidance reflect our confidence in our strategy, and our expectations for improved business performance in the coming quarters. With that I’ll hand the call back to the operator to take your questions.

Thank you. [Operator Instructions] We will first go to Steve Frankel with Dougherty.

Good afternoon and congratulations on renegotiating the service agreement. But before we go there, a couple of questions. Could you tell us a little more about this weakness in tier 1? Is this both a reduction in orders you thought you were going to get and some push-out of projects that you thought were going to revenue? And how long do you think this lasts?

This is Jeff. Let me answer that. So, I think most of it is really related to push-out. I think what we saw in the quarter is that as people are looking, especially with Avid Connect and NAB kind of looming in April, and a lot of people thinking about how much they are going to do in cloud deployments or on-prem deployments. I think the sales cycle is got a little bit longer on some of our projects as people are really spending more time to evaluate their options. So, I think our sales force is really heavily focused on getting these deals closed timely. But in the case of Q1, which is always seasonally a more difficult quarter, especially with enterprise customers, I think they saw a little bit of elongation. I think, as we look at Q2 and you look at the guidance, I think we are feeling good about delivering on the right results in tier 1 in the coming quarters.

And then, some clarification around your strength in Q2. You talked about these being channel partners. Is that to say that’s inventory going into the channel or those are the smaller distributors and that revenue was sold through to end customers?

If you remember when I talked about that it was bookings. And the strategic purchase agreements are with our larger partners that are -- partners that are willing to commit to their business over a period of quarters. These aren’t usually multiyear, these are usually one year agreements, but there are commitments. So there are bookings that go to backlog and they have commitments not only for the first quarter that they are going to delivery on but commitments in the future quarters. And so, these help us to kind of level off the business a bit and to get better visibility of our forecast when we go forward as well as our planning for our production supply chain.

Okay. So, again, that was bookings, not revenue where you…

That was -- some revenue -- yes, some revenue flows through, obviously, because when they book, some of the revenue can go into current quarter. But I was speaking to bookings. But every quarter we have revenues associated with these strategic agreements. We are just building that as a bigger part of our business each quarter. It’s a benefit because we start -- as we build those, as we start each quarter, we start with a higher starting point of committed business for revenue that quarter.

Yes. We have increasing layers that continue to roll up revenue. Yes.

And then, on the free cash flow, I guess I was under the assumption that bonuses were going to be paid in Q1, sounds like you paid them in Q2. How much of that was an impact on free cash flow?

Well, let me say, at the high level, we never pay a bonus in Q1. So, I apologize if there was a miscommunication on that. We don’t pay the bonuses until all the results are final for the quarter and we are ready for -- we know where the numbers are really at. So, there is work we have to go through before we get to that point.

Yes. We’ve always -- when we pay it normally, unlike last year it was different, we pay it in April. As Jeff mentioned, we basically complete the audit. When the audit is completed, we get approval to pay the bonus and then it takes a couple weeks to get it processed by the managers and actually paid.

I’d say this. I mean, it’s been in -- other than last year when paid in Q4, it’s always been paid in April or may be worse case, early May.

Okay. And would you expect to generate positive free cash flow in Q2 or because of the bonus payment, we should expect negative free cash flow in Q2?

Yes. So, I would -- looking at the seasonality on the -- as we presented sort of that dotted box, that would be negative in Q2.

Okay. And then, on the servers renegotiation, almost sounds too good to be true. You got basically everything on your wish list. What is they get out of this change.

They got frankly a continued customer relationship. They got a bigger deal and over time they are becoming more and more comfortable with our credit. I’ve mentioned it when I started. I think it was -- it took some time to build some trust and some credibility. And I think we’ve come a long way over the last year, year and half. And so, really happy, again, we’ve mentioned that over time this partnership and dealing with them has been a very positive thing.

And can we talk a little bit more about what it takes to drive gross margins up from here for the rest of the year?

Yes. I think there is a lot of levers we have on that, Steve. So, I mean obviously, as revenues grow, also when we have higher revenues in the latter part of the year which is typical, that does help with some gross margin growth. But really putting that aside, the levers that we’re really focused on is, we’ve got a team that’s spun up, that’s led by our Chief of Products that is looking at all elements of margins. They are looking at our pricing strategies; they are looking at our discount strategies and some of our direct sales force and our channel; they look closely at pricing strategies; they are looking at cost of goods very closely to look at where we can optimize our cost of goods. And so, all of that is obviously leverage we’re taking to optimize. Secondly, as our mix continues to improve, software content of our solutions and a subscription continues its growth, it’s going to keep contributing higher and higher margins to the business. Now, separately, as I mentioned, one of the initiatives we’re doing is, we talked last quarter’s earnings call about our global supply chain initiative. We actually, I would say put our foot down on the pedal to really accelerate that to get that done as quickly as we can because not only is it good for us from a managing our supply chain a better way, but it will also contribute to both, margin improvements in the cogs, will help take cost out of some of the cogs we believe. It’s also going to reduce OpEx because there is a lot of cost we have related to supporting that that will be more efficient. So, there is a number of levers we have to drive gross margin. And that’s a heavy, heavy focus of our team.

Yes. And just as we saw an improvement in professional services in Q1, we will continue to drive that as we go through the year.

Okay. And one more quick one. You in the past have released subscriber number and the MediaCentral license number. Is that something you want to continue to dispose on a quarterly basis.

Yes. It’s on our, if you remember, looking back, I know we went quickly, but on the slide six, there was the Q1 strategic metrics and we have those numbers there. We saw about 12% growth, sorry, 17%, I’m being corrected. 17% growth on MediaCentral licenses year-on-year, a little bit lower than again, probably because of the tier 1 but we still saw growth in that area. We are going to keep looking at metrics and keep looking at our revenue reporting categories, just to make sure we can get the right visibility. So, as I mentioned before, we’re working on that, Steve, and we’re going to continue to release information that will help give you better visibility and give you the right visibility as to what matters for our business.

Hey, Steve, you may know our Investor Relations datasheet. There is a section that includes that information on that particular document.

It’s not up yet. That’s why I was looking for it.

Oh, it’s not.

All right. I’ll let somebody else ask some questions and I’ll jump back in. Thank you.

All right. Thanks, Steve. Sorry, Steve, we’re going to put it up. I apologize, it’s not up yet.

Thank you. [Operator Instructions] We’ll next go to Hamed Khorsand with BWS Financial.

Hi. Just a follow-up here on the enterprise and push-outs. I know you guys will be talking about new products later. Is this really more about new products coming out or is more of quality control issue?

I’m not sure, I got Hamed, what your question was. There was nothing…

On enterprise, on the enterprise that you’re seeing softness this past quarter, was there a quality control issue with your products or is this purely customers holding off for new products?

No, no, really your latter, really more customers that -- it really is about customer timing. Now, there’re obviously some customers waiting for new releases of our MediaCentral but that wasn’t factored in our Q1. It really is a lot of customers in the tier 1 space, especially the very high end of tier 1 are doing a lot of planning to really understand how they’re going to deploy differently. We’re now on the cusp of cloud and virtualized deployments, and so some of those projects are taking a little bit longer to get over the finish line.

And have you lost customers since last year, because your -- your paid subs has gone up, your MediaCentral license has gone up, but revenue is declining from last year?

No, I wouldn’t say that’s the case. I think it’s more about product mix and some products and which products did well. There’s bit -- the tier 1 is a bit of a lumpy business. So, you are going to see kind of ups and down in tier 1. We’ve always talked about that as a company. So, I don’t think there’s any indication we have that we’re losing customers.

And as far as just -- are you seeing -- what kind of a mix are you seeing as far as the customers go? Is it more for the audio product or Pro Tools or is it more about the video?

No, I don’t think it’s -- I think it’s really across the board. It’s from the standpoint of the business that we’re winning the contracts we’re bringing in. On the revenue side, I did talk about a little bit but we did see softness in audio, which was -- a large part of that was our supply chain. We had actually a single card that’s a key part of a lot of our solutions that’s been slower, deliveries from our supplier, we’re now getting resolved, but it did have impact in Q1 on audio specifically.

Thank you. We’ll next go to Matthew Galinko with Sidoti.

So, I guess, what gives you confidence that Tier 1 is ready to I guess move forward on I guess fully embracing the cloud work? Why does that decision-making process conclude this year? Do you see any risk that ends up being a several-quarter process before they get fully comfortable with digging that investment?

I think, first of all, Matt, it’s going to be -- this is not going to be a one-time event. This is going to be a multiyear event as people migrate some of their operations to those kind of environments. I’d say the reason why I have optimism, first of all we are not just a cloud provider. So, we are provider of on-prem solutions; we are a provider of cloud solutions; and soon, we’ll even have full SaaS offerings. So, for us, I’d say, like to move them to more recurring revenue, but to a degree it doesn’t matter which way they go, we can offer them a hybrid or a transitory approach as a transition through the period. I’d say the reason why we have confidence that the customers are getting quite active is because we are just at the heels of NAB and Avid Connect. And personally myself and I know a lot of our key executives set in hundreds of meetings talking to customers and hearing where they’re at and where their projects are going, especially the big tier 1 customers. So, I think our information is pretty fresh from high-level executives in the media space that are talking about their plans and laying out their plans.

And then, you kind of called out the next generation MediaCentral Cloud UX as a I guess possible catalysts for getting more I think tier 1 customers in the door. I mean, did I understand that right? Why particularly that product release? Is that something that’s been a point of conversation? And maybe just highlight why that -- you see that as a driver for you.

To keep it simple, when we talk to not only the street but when talk to customers, Cloud UX is how we express a lot of the new infrastructure or the new platform, MediaCentral platform. In reality it’s not just the -- it is a very modern state-of-the-art user experience and user interface that are -- the name actually represents a whole new paradigm and how our platform is presented. It’s a very -- MediaCentral is kind of in its second generation, if I can call it that. It’s a very modulized approach to applications and software modules and services. It presents the new ways the platform is expressed. And there is a completely new environment for users to really experience it. And so, a lot of customers are looking at it for that reason. And one thing we shouldn’t miss is that, remember, we’ve talked previously about cloud deployments and not talking about SaaS. But where customers want to deploy their infrastructure in a cloud like let’s say like Microsoft Azure or another provider. In our industry, the hybrid deployment is a really important part of deployment where hybrid is simple way of saying, they want part of their operations in a traditional on-prem environment in their building and they want part of it in a cloud, public cloud or private cloud environment. Hybrid is where you deploy your infrastructure split between the two, but it looks transparent to the users or the operators in your infrastructure. Our hybrid deployment model is part of the new MediaCentral platform which Cloud UX is a part of. So, we are talking Cloud UX but Cloud UX represents a whole new generation of the platform. So that’s going to drive a lot of customer upgrades and expansions in our customer base as well as give us the ability to really aggressively attack a lot of new opportunities. But, it’s a pretty exciting product and the response we’re seeing from people is really exciting. They are just almost dying for us to get it fully released in the market.

We will next go to Steve Frankel with Dougherty.

I want to go back to your collections comment, interesting you called that out. So, what did you do to collect faster and was this on PaaS [ph] business or is it something with the business in quarter to incent customers to pay faster?

I think it’s all normal behavior that we do every quarter. But a lot of it was from - we did a lot of efforts also to try to make sure that our processes and procedures around billing enterprise agreements -- excuse me enterprise agreements billing service agreements. There was a lot of work done to make sure that that was done on time; that was done in time, both in later part of Q4, but also in early Q1. So, it gave our accounts receivables team a bigger opportunity to chase. But, Brian, maybe you make some specific.

No. I agree with that. I also think it’s just fundamentally within as an organization better execution; tax is clearly a focus. And so, whether it’s finance, working with sales, we’re just able to collect that cash more timely.

And I would say, I think we have a good team and good operation that is very good at minimizing our DSO and really getting cash in on time.

And how would you characterize the orders that you took at NAB this year versus the last couple of years?

First of all, the orders -- people don’t write multimillion dollar purchase orders on the floor with a pen and paper. Usually, it takes weeks or months afterwards to get them in. But, I will just say that for the moment, we’ll hold until we get to the Q2 earnings and will be sure to give an update because since NAB Connect was in April, obviously part of Q2 and we’ll announce that as part of our Q2. However, I will say that as I mentioned, when I got through the NAB slide in earlier slides, we’re really encouraged by the enthusiastic response we got, both at Avid Connect and NAB. And our key marketing metrics are really pointing to good direction. But now, we have to execute and team has to execute over the course of Q2, and quite frankly across Q3 because an event like NAB builds our funnel for a number of quarters.

That concludes today’s question-and-answer session. At this time, I will turn the conference back to Jeff Rosica with additional or closing remarks.

I think we’ve finished the call. I appreciate all the questions and we look forward to continue the dialogue over the coming quarters, and just thanks to everybody and we will talk soon.

Thank you for joining.

That concludes today’s conference. And thank you for your participation.