Ladies and gentlemen, good day and welcome to the Avid Technology Q1 2020 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Whit Rappole, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Abby. Good afternoon, everyone. And thank you for joining us today for Avid Technology's first quarter 2020 earnings call. My name is Whit Rappole, Avid's Vice President of Corporate Development and Investor Relations. With me this afternoon are Jeff Rosica, our Chief Executive Officer and President and Ken Gayron, our Chief Financial Officer and EVP. In their prepared remarks, Jeff will provide an overview of our business, and then Ken will provide a detailed review of our financial and operating results, followed by time for your questions. We issued our earnings release earlier this afternoon, and we have prepared a slide presentation that we will refer to on this call. The press release and presentation are currently available on our Web site, at ir.avid.com and a replay of this call will be available on our Web site for a limited time. During today's call, management will reference certain non-GAAP financial metrics and operational metrics. In accordance with Regulation G, both the appendix to our earnings release today and our investor Web site contain a reconciliation of the most closely associated GAAP financial information to the non-GAAP measures, and also definitions for the operational measures used on this call and in the presentation. Unless otherwise noted, all figures noted by management during the call are non-GAAP figures. In addition, certain statements made during today's presentation contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Our comments and answers to your questions on this call, as well as the accompanying slide deck may include statements that are forward-looking, and that pertain to future results or outcomes. Actual future results or occurrences may differ materially from these forward-looking statements. For more information, including a discussion of some of the key risks and uncertainties associated with these forward-looking statements, please see our press release issued today and 10-Q for the three months ending March 31, 2020 and our 10-K for the year ending December 31, 2019 on filed with the SEC. With that, let me turn the call over to our CEO and President, Jeff Rosica for his remarks.

Thanks Whit, and thanks everyone for joining us today to review the full details of Avid's Q1 2020 results that we release today, and which followed the business update we issued on April 7th. Avid is hard at work to help our customers succeed during this extraordinary time amid the COVID-19 global pandemic. We've been learning a lot from our communities capacity for rapid change to ensure business continuity and their ability to continue to deliver the high quality content that consumers are demanding. Today, along with Avid CFO, Ken Gayron, we will review our Q1 results, the effects of the global pandemic on our industry, its impacts on performance and what we expect going forward. We'll also review the action plan and significant cost savings measures that we immediately put into motion to help mitigate the business impacts of the global pandemic. In addition, we'll discuss the continued strength and advantage of our long-term strategy to grow recurring revenue streams, and increase our efficiency and effectiveness in the way we work and serve our customers. And we'll share how we're preparing to emerge from this challenging time in even stronger position when our customers across media entertainment are ready to return to full capacity. So let's get started with the important takeaways for Q1. Increasingly during the first quarter, Avid felt the effects of COVID-19 on our business and on our day-to-day customer engagements, especially with enterprises and productions urgently asking for our help to keep their people working and our operations running. This intensified during March as the COVID-19 situation unfolded quite rapidly on a global scale. Our industry has been impacted in the near-term from the effects of COVID-19 and especially from stay at home orders and social distancing efforts around the globe. For example, many types of film and TV productions have had to temporarily halt. Though some are finding unique ways to keep producing content, many of which rely on Avid. The most extreme examples are sports, live events like music festivals and tours and theatrical shows that have had to halt their schedules. Across all walks of media, customers have had to change the way they work and rethink their overall trends this year. Meanwhile, consumption of traditional TV and streaming media has grown dramatically as the world shelters at home, but some studios and production companies are working to maintain new content production, many others have had to pause their productions. So we do anticipate the potential surge in productions once work we’re placed and travel restrictions are eased as content creators do need to refill their production pipelines. The business headwinds that we experienced in Q1 and expect to see continuing in the near-term are related to the nonrecurring revenue parts of our business, which includes product sales and professional services for customer projects. As part of our business generally tends disproportionately on sales that close during the last few weeks of each quarter, which was severely impacted in March due to delays in purchasing decisions and customer projects, because of the unfolding COVID-19 global pandemic. The partner side of our first quarter performance came from the continued recurring revenue growth, reflecting our strategy over the past few years to build the strong recurring revenue business from subscriptions, maintenance and long-term agreements, a growing and stable foundation for us now representing nearly two-thirds of our revenue. And as the global pandemic unfolded, Avid quickly and decisively enacted a comprehensive crisis response management plan to mitigate the financial impacts to Avid to protect our employees and workplaces, to offer protect for active help for our customers and partners and to prepare us to capitalize on the opportunities as the eventual recovery begins. Avid’s successful long-term strategy to grow sources of recurring revenue performed well and continued it's positive trajectory in the first quarter, with the benefit of also helping to buffer against some impacts of COVID-19. Overall during the first quarter, LTM recurring revenue reached 66% of total revenue, which was up to 57% a year ago. Subscription revenue continued to grow rapidly, increasing approximately 50% year-over-year. We also added a record number of roughly 30,000 net new pay subscriptions in the quarter, continuing the acceleration we've seen in recent quarters. By comparison back in Q1 2019, we added about 12,000 subscriptions in the quarter. At the end of Q1, Avid had approximately 218,000 paid subscriptions for its creative tools, Media Composer, Pro Tools, and Sibelius products. The subscription growth includes the addition of several enterprises subscription customers in Q1. Our enterprise customers have initially responded well to the advantage of software subscription, and we expect more of them to adopt subscription in the second half of this year as we launch our complete enterprise subscription offerings. Additionally, as part of our COVID-19 response to support our clients, we have loaned approximately [125,090] days free of charge licenses for our Creative Tools to many of our enterprise and education customers, helping support their business continuity efforts and enabling their employees or faculty and students who work remotely. Many organizations appear to want to retain these new found remote working capabilities, which we expect will create additional business for Avid as we convert many of these initial free of charge licenses to one of several paid commercial options, including an enterprise wide subscription plan. And last month, Avid also announced that it reached over 2 million cumulative downloads of our first Created Tools for aspiring users. Downloads of these premium offerings have more than doubled since 2018, enabling new users to enjoy producing music and videos with industry leading tools for free and to have the option to upgrade to a full featured version with a paid subscription. And conversion rates were seeing show this part of our strategy is really an important contributor to help drive subscription growth. Maintenance revenue was also continued to stabilize as the headwinds from ending the sale of service contracts on certain legacy storage systems at the end of 2018 has significantly diminished and the other underlying strength of maintenance renewals plus benefits from new product sales has reemerged. In the first quarter, overall subscription and maintenance revenue was up 11% year over year. Revenue from long-term agreements was also up year over year, contributing to an 11% year over year growth in our annual contract value. Average secured [numerous] renewals and our multi-year customer agreements in Q1, including a new strategic purchasing agreement with one of our largest resellers, and an enterprise license agreement with an new major sports customer. Our cloud and SaaS business saw an upsurge in customer interest late in Q1 with the onset of COVID-19, which is driving for us accelerated demand for our offerings, including Avid Edit On Demand, which includes full media composer editing functionality and nexus intelligent storage hosted on Microsoft's Azure cloud platform. We also secured a new agreement with another one of the world's largest media companies that owns and operates TV networks and film studios globally. We have initially brought some of their broadcast news and TV production workflows into the cloud, so teams on several continents can continue collaborating to create and deliver their content during the pandemic. We hope to announce the details on this very soon. Additionally, Avid has already consulted with over 100 enterprise customers within just a matter of weeks to help them explore how cloud solutions could solve their issues arising from the COVID-19 situation. We've already helped several rapidly low cloud based workflow solutions to address their immediate needs and our responsiveness has resulted in new pipeline of over several million dollars for our cloud and SaaS solutions. Earlier this week, Avid announced a new five years strategic alliance agreement with Microsoft that builds on our early success in moving the film and TV content creation workflows into the cloud on Microsoft’s Azure. Our close working relationship with Microsoft allows us to move rapidly to numerous Avid clients that needed to transition their production personnel to working remotely. The strength of our partnership with Microsoft really shined through during this time, and we're quite excited about our continued close partnership with them. And during Q1, the intensification of the COVID-19 global pandemic did negatively impact the non-recurring portions of our business, mainly project based and run rate sales of our innovative solutions, perpetual software licenses and professional services. The suspension of sporting events, cancellation of music festivals and concert tours and the shuttering of television and film productions during March immediately impacted some of our customers' purchasing decisions. This significantly impacted our Q1 billings as seen particularly in the downturn of our run rate activity as some of our customers delayed projects and purchasing decisions, and as our chamber partners overall were a little more careful with restocking orders that are typical at quarter end and as they move to more tightly manage their own inventory levels. These impacts were strongest during the last month of the quarter when we typically generate the largest portion of our non-recurring product sales each quarter. Additionally, the travel restrictions and workplace closures hampered our ability to complete the delivery of certain projects and to deliver some professional services during Q1. That said, we are able to deliver many professional services and learning services remotely, which does help us keep a portion of services revenues intact during COVID-19. As I mentioned earlier, since the onset of COVID-19, we have rapidly moved to develop a comprehensive Crisis Response Management Plan. The fundamentals of the plan include; an internal Crisis Response program to institute policies, procedures and communications that keep our team operating smoothly with most employees unable to work from home; efforts to also ensure operational continuity to prevent disruptions to our supply chain and customer support; programs to help our customers and partners deal with disruptions from the crisis, such as our temporary creative tools, license software and our unique solutions for remote collaboration; also, a strategic focus on maximizing near-term business and revenue, including our opportunities for new cloud business, ongoing subscription growth and more long-term agreements; and finally, significant targeted cost reductions implemented beginning in April that we expect will reduce our operating expenses due in Q2 and throughout 2020, which Ken will give some details in a moment. We expect this overall trend will remain in place as required during 2020, and it will evolve depending upon the pace of improvements in the global situation and of course our business environment. While we have positive expectations for the business as we emerge from the COVID-19, Avid is navigating the current situation with an abundance of caution. Our management team and board are confident that Avid is doing the right work, and is in the best possible position to deliver on a consistently profitable and predictable financial model on growing recurring revenue streams. We remain enthusiastic about the accelerating long-term prospects from enterprise customers, moving their media production operations to cloud and SaaS. We believe we can continue to capitalize on the early market leading position we've established, and expect modest near-term growth in this part of our business. Avid continues to build underlying strengths from the execution of our long-term strategic plans, our heavy focus on quickly reducing costs and our continued plan of delivering new product and innovation, which should help to offset some of the challenges to the non-recurring revenue parts of our business, so long as the pandemic persists at the current level in the medium term. We believe there are high quality recurring revenue streams including our subscription business will continue to show strong growth in 2020. Our maintenance business will continue to be relatively stable and long-term agreements with enterprise customers and partners will continue to expand this year. We anticipate that the extraordinary factors that affected our Q1 will continue through the next couple of quarters, but likely dissipate as the global pandemic eases. We're encouraged to see more nations are easing restrictions so many people can return to work soon. Although, we can't forecast when the industry will get fully back in motion, we remain highly confident that Avid is quite effectively engaged to help our community endure and then rebound while improving our ability to capture the resulting opportunities. So with that, I'll now hand the call over to Ken Gayron, who will offer more details behind our Q1 2020 performance. Over to you, Ken.

Thank you, Jeff and good afternoon everyone. As noted above, Jeff and I are referring to non-GAAP figures unless noted in our comments. Overall, our business and financial results for the first quarter of 2020 were in line with the revised guidance provided in the business update we issued on April 7th. While our recurring revenue sources, including subscription and maintenance were strong, the nonrecurring portion of our business faced major headwinds late in the quarter due to the unfolding global pandemic. Our focus in the second quarter and beyond will be to react quickly to the current market conditions. As part of this effort, we have been revising our operating plans to adjust forecast and spending targets, and have instituted significant cost saving efforts that began in April. We are confident that with these efforts, we can weather the coming months and emerge on the other side as a stronger company, well prepared to deliver value to our customers and shareholders. With that, let's now get into the details of our fourth quarter financial results. GAAP revenue was $86.5 million during the first quarter, down 16.3% year-over-year. Recurring revenue was strong with growth in subscription and stable maintenance, while non-recurring revenue from hardware and perpetual licenses was down sharply due to the impact on sales of the COVID-19 pandemic. Combined subscriptions and maintenance revenue was $45.8 million, up 10.8% year-over-year, as the 50.4% growth in subscription revenue far exceeded the 0.7% decline in maintenance revenue. Excluding the decline in maintenance revenue from the [sun setting] legacy storage systems at the end of 2018, maintenance revenue would have been up 2.1% year-over-year. During the first quarter, revenue from the Americas was 48% of the total and down 10.4% year-over-year. Revenue from EMEA was 38% of the total and down 10.8% year-over-year, and revenue from Asia-Pacific was 13% of total and down 41% year-over-year, as the impacts from COVID-19 were seen in Asia-Pacific before other geographies. Please also recall that our first quarter 2019 revenue included a multimillion dollar storage order in Asia-Pacific that did not reoccur in the first quarter of 2020. At constant currency, our first quarter 2020 revenue was down 14.3% year-over-year, as the relatively stronger U.S. dollar compared to the euro negatively impacted revenue by approximately 2%. And when you further adjust for the large multimillion dollar storage deal that occurred in the first quarter of 2019, our first quarter 2020 normalized revenue on a constant currency basis would be down about 10%. Gross margin was 61.7% for the first quarter, up 40 basis points year-over-year. The increase was due to a more favorable revenue mix of higher margin subscription and maintenance revenue, offset in part by the impact of lower volumes on our products in our professional services gross margin. Operating expenses for the quarter were $51.3 million, a $1.8 million decrease year-over-year and $3.1 million decrease from the fourth quarter of 2019. The decrease in operating expenses was due to the benefits from our smart savings initiatives, as well as lower bonus accrual and savings and discretionary spending, which were offset in part by $600,000 bad debt write-off, foreign exchange charges of $500,000 and onetime costs related to the cancelled NAB Trade Show of $200,000. Adjusted EBITDA was $4.2 million in the first quarter, reflecting a margin of 4.8% for the quarter. Non-GAAP net loss per share was $0.08 for the first quarter, down $0.19 year-over-year, reflecting the decline in non-GAAP operating income. Free cash flow was $7.1 million negative in the quarter, down $11.7 million year over year impacted by the decline in net income, as well as the decline in billings and collections plus an increase in inventory due to lower than expected product sales. Now, moving to recurring revenue and annual contract value. The percentage of our revenue that is recurring continues to steadily increase. For the 12 months ending March 31, 2020, 66% of total revenue was recurring, up from 57% in the 12 months ending March 31, 2019. Recurring revenue percentage increased due to increased subscription revenue and revenue under long-term agreements, with maintenance revenue generally flat and lower nonrecurring products and professional services revenue. We expect recurring revenue percentage to continue increasing over time, given the growth we are seeing in subscriptions and our focus on adding new long-term agreements. Annual contract value was $264 million at the end of the quarter, up 11% year-over-year, benefiting from our strategy to focus on higher margin software [descriptions] and long-term agreements. The ACV from long-term agreements was $9.3 million or 13% year-over-year on continued growth in both enterprise agreements and strategic purchasing agreements. During the first quarter, we added two new strategic purchasing agreements. Our partners that are under strategic purchasing agreements exceeded in aggregate their total minimum purchase commitments in the first quarter of 2020. As we look into the detail of our revenue streams, we continue to be encouraged by the continued resilience and growth of our subscription base. In the first quarter, we added a record number of new subscriptions with nearly 30,000 net new subscriptions for our creative software solutions, and our total subscription counts reached nearly 218,000 at quarter end. Subscription growth was particularly strong in Pro Tools, up 68% year-over-year and Media Composer up 59% year-over-year. Additionally, we continue to see a shift towards annual paid upfront contracts, which we believe are higher quality revenue streams for Avid when compared to monthly paid subscriptions. Annual paid upfront subscriptions grew 254% year-over-year in the first quarter and now represent 18% of the total subscriptions, up from 8% a year ago. While month-to-month subscriptions were basically flat year-over-year and now account for 12% of the total subscriptions, down from 19% a year ago. We believe that month-to-month subscriptions will remain important to enable certain customers to temporarily increase their capacity for specific projects. However, we believe that the share of annual paid up front subscriptions will continue to grow as more of our enterprise customers adopt subscriptions, which will help augment our cash flow in the short-term and reduce churn in the long-term. From a cash perspective, billings for subscriptions increased 83% year-over-year in the first quarter, above the growth rate in total subscriptions due in part to the increase in customers who are selecting annual paid upfront contracts, coupled with price increases that went into effect in the third quarter of 2019. Now moving to the composition of our revenues. Maintenance revenue was $31.8 million during the first quarter, down 0.7% year-over-year. We continue to see the impact of the end of support for our legacy storage solutions and slowly declining noncash revenue that flows through maintenance revenue. Excluding noncash revenue and legacy storage maintenance revenue, maintenance revenue would have been up 2.1% year-over-year on a growing maintenance renewal base and the contributions from generally stronger product sales in 2019, offset in part by maintenance declines on legacy media management solutions and on media composer and Pro Tools as a portion of those users transition to subscription. While subscription revenue continues to grow, perpetual license revenue was down 33.9% year over year due to weakness in MediaCentral perpetual sales, particularly late in the quarter due to COVID-19 and to a portion of our customers selecting subscriptions rather than perpetual licenses for our creative software products. Gross margin on software licenses and maintenance was 82.5% in the quarter, up 40 basis points year over year. The company's hardware and integrated software revenue was 29.3 million in the first quarter, down 36.6% year over year due to the impact of COVID-19 on customer operations and purchasing decisions. This revenue line was impacted by declines in sales of storage solutions in video service due to impact of COVID-19 on studio in broadcast customers, as well as substantial decline in live sound audio sales on lower demand due to the impact of COVID-19 on music concerts and festivals. As companies and economies reopen, we expect to see improvement in hardware integrated software in future quarters as we believe there will be a strong resurgence in content creation that will require our solutions. Gross margin from hardware products and integrated software was 32.2% in the first quarter, down 1,160 basis points year over year as lower production volumes do not absorb as much manufacturing overhead in the quarter, plus some mix shifted within hardware towards more audio products and less storage. The balance of our revenue comes from our professional services business. Professional services revenue was 6 million in the first quarter, down 21.4% year over year as certain projects were pushed out and further delays caused by the limited availability of professional services personnel to be onsite due to the global pandemic. Gross margin on professional services was 5.7% in the quarter, down 880 basis points year over year due to lower utilization during the quarter. In response to the evolving COVID-19 situation, we rapidly implemented a significant cost savings effort starting in April 2020 to ensure that we are well positioned to survive the global pandemic. We expect the actions to reduce non-GAAP operating expenses by at least 30 million year over year for 2020. The cost savings actions include furloughs of three weeks per quarter for most employees or an equivalent temporary wage reduction during the second and third quarters. The company has structured the furloughs so that our customers will experience little to no impact during this period. Our executive officers and board of directors will also be taking similar temporary salary reductions in line with the non-executive employees. Our hiring freeze and elimination of merit increase in 401k matching, reductions in marketing spend related to cancel trade shows and other activities, reduced usage of contractors, consultants and outside services, reduced travel costs and reduction in other discretionary spending. These efforts are expected to have an immediate cash benefit starting in April 2020 with at least 9 million and year over year operating expense savings in the second quarter of 2020. The cost saving actions are also expected to yield $10 million year-over-year reduction in non-material cost of goods sold during 2020, which we expect will protect our gross margin at the expected lower product and professional services volumes. We have also reduced our 2020 capital expenditure plans, but we now expect that our capital expenditures for all of 2020 will be approximately 40% below the level we indicated in the guidance provided in November 2019. And we're also deferring the enterprise improvement spending that we planned for 2020. We're actively monitoring this situation and prepared to take further cost actions as necessary to enhance liquidity, preserve free cash flow and best position the company for longer term growth. Now turning to the balance sheet. As of March 31, 2020, we had cash balance of $81.2 million, up from $69.1 million at December 31, 2019. Cash balance increased on $22 million draw under our existing revolving credit facility, offset by negative free cash flow of 7.1 million during the first quarter of 2020. We ended the quarter with $60 million of accounts receivable, down $13.8 million from December 31, 2019 due primarily to reduced billings in the quarter. Inventory was $32.6 million at the end of the quarter, up $3.4 million from December 31, 2019 and down $1.7 million from March 31, 2019. Inventory levels were up due to lower than expected sales at the end of the quarter. We continue to be pleased with the performance of our new contract manufacturing partner in Mexico, and the new supply chain partners fully supported our first quarter production needs. Based on current information, Avid doesn't expect any production and issues that would impact its second quarter production. In early April in response to the COVID-19 pandemic, the Mexican government placed restrictions on businesses, including our contract manufacturers that limited their ability to produce non-essential items, such as products for the month of April. However, in early May, our contract manufacturing partners informed us that our under revised guidelines, they have resumed needed production of our products. We believe we have sufficient finished goods inventory in our logistics facilities in the U.S. to support our expected production needs during the second quarter. We will continue to monitor our supply chain providers globally as the global pandemic situation continues to evolve. Moving to contract assets, which increased $2.71 million during the quarter to $22.2 million from enterprise agreements, and increase in annual paid monthly subscriptions. Deferred revenue was $95.4 million at March 31, 2020, down $2.5 million from December 31, 2019 from the recognition of IPCS noncash revenue of $1.2 million and seasonal decline and maintenance deferred revenue. At the end of the quarter, long-term debt was $220.4 million, up $21.4 million from December 31st due to previously mentioned $22 million draw on the existing revolving credit facility. Now turning to our capitalization and credit metrics. As of March 31st, our leverage per our credit agreement was 4.6 times. We were in compliance with a 6 times leverage covenant given our liquidity level. Starting in June, the leverage covenant will start to gradually step down. We are monitoring our leverage covenant, and we expect our leverage multiple to gradually improve in the second half of 2020 as we fully realize the planned cost savings. Avid has also been evaluating stimulus and tax incentive programs, both in the U.S. and overseas so companies weather the pandemic. Earlier today, Avid signed an unsecured promissory note under the Paycheck Protection Program, which would be expected to result in Avid receiving a loan in the amount of $7.8 million that would accrue interest at a rate of 1%. If Avid needs certain conditions, some or all the $7.8 million loan maybe forgiven at a later date. Finally, our current plan is to repay our convertible notes due June 15, 2020 with cash on our balance sheet at maturity. Let's now turn to our outlook. The evolving COVID-19 global pandemic, and its potential impact on our business and market demand for our product is still uncertain. Given the level of uncertainty, we are not providing guidance for full year 2020 and we’ll provide limited outlook for the second quarter. Our current expectation for the second quarter is for a weakness that we saw at the end of the first quarter in hardware and integrated solutions, perpetual license and professional service to continue during the second quarter, resulting in a year-over-year decline in total revenue. We expect that growth in subscriptions will continue and maintenance revenue will be stable. So combined subscription plus maintenance revenue will continue to grow year-over-year. We expect that the cost savings efforts implemented starting in April 2020 will reduce operating expenses by at least $9 million year-over-year and help protect our gross margin. We expect sequentially higher adjusted EBITDA for the second quarter based on our outlook for lower year-over-year revenue in the quarter, and a significantly improved cost structure in the quarter. As we look to the remainder of 2020, we have been evaluating various scenarios for how the COVID-19 situation could play out in our business. We expect that the demand for many of our solutions that support new film and television production, live sports and live music to remain weak into the fall with pent up demand building that will resurface when the restrictions on production and performance is eased. We believe that demand for subscription offerings should remain healthy as content creators individually and within studios strive to continue delivering new content for their audiences. With all these expected challenges for our business, we have taken what we believe to be appropriate cost saving measures to deliver stable adjusted EBITDA margin and positive free cash flow for 2020. Finally, I want to repeat that we have quickly mobilized as the COVID-19 pandemic emerged to support our customers and employees through the crisis. We have revised our operating spending plans to control costs and preserve cash during the downturn. We expect these cost savings to have immediate impact during the second quarter. And we are aggressively building out our cloud practice to support our customers, business continuity and remote workflows during the pandemic and beyond. With that, I'd like to turn the call back to Whit Rappole.

Thank you, Ken. Thank you, Jeff. That concludes our prepared remarks and we are now happy to take your questions. Abby, please go ahead.

Thank you [Operator Instructions] And we will take our first question from Josh Nichols with B. Riley Financial.

I did want to ask, obviously, some headwinds facing the hardware that's not unexpected here, but phenomenal growth in the subscription business. Are you seeing that flow through now that we're like month and a week in the second quarter? Anything you could talk about the cadence that you're seeing thus far in subscription business as far as sustainability into 2Q?

Our expectations from the growth of subscriptions have not abated, it continued to be quite strong given single quarter yet but so far trends are continuing as we expected.

And then on the hardware front, if you could just provide a little bit more color. One, some of the stuff that is selling versus there’s -- I know Ken mentioned on the call that like there's the margin compression, and a lot of that maybe due to just similar audio versus storage solutions. Any color you could provide on the hardware sales generally? And what you're thinking as far as margin going forward broadly would be helpful?

In terms of our hardware margins, during the quarter, they were impacted by mix, our storage business, server businesses was down, our storage business tends to have higher margins than our audio business. With that said, we expect our hardware margins with this situation to be somewhat challenging. But as Jeff pointed out and -- in my prepared remarks, we expect this pent up demand. Our storage business will recover. And as a result, we expect hardware margins to increase in the back half of the year. When we look at our margins, typically Avid has reported hardware margins in the low 40s, we’re down about 1,000 basis points in the second quarter. We expect our margins to kind of get back to more normalized levels as we move through the year.

And then just talking about cadence a little bit. Obviously, we don't expect any kind of detailed guidance. But you did mention you do expect EBITDA to be actually up quarter-over-quarter in Q2. Does that kind of imply with the cost savings that you expect to be like the trough to be in Q1?

When we look at our model, the cost savings plan that we put in place will result in an immediate EBITDA improvement. These actions are already taken so the savings are already in the P&L. So we feel that we'll have a better performance in Q2 than Q1 and that will result in better EBITDA for the quarter. And we should see the business improve over time but we expect Q2 to be much better than first quarter.

And then just kind of generally speaking on the revenue front, like, I would expect Q2 revenue to be down quarter-over-quarter based on some of the commentary that you said. But as a lot of states are still in the early stages of reopening, I would expect you may start to see a little bit of a quarter over quarter uptick in the revenue line in 3Q. And then hopefully we get some professional and sports back in the fourth quarter, which is usually the strongest quarter a more meaningful potential uptick based on what we're seeing now at least regarding COVID-19 and what states have for the reopening schedule there. At a high level kind of what you guys have planned out for your internal model?

Yes, I would say that in general, although, we're not providing our 2020 guidance. The themes you've provided in terms of some challenges through the fall, but then pent up demand and that’s having a better impact in our revenue lines towards the second half of the year and then sports reopening, that will all benefit our revenues as we think about the second half of the year.

I just want to make sure directionally, I was thinking about the right way it seems like. And then I don't want to monopolize the call at the time, so I only have one more question that's really on the subscription funds and the growth there. Jeff, you mentioned that there was a number of enterprise customers that you’ve been dealing with and historically you've said that that the transition to enterprise subscription business was going to be like a handful number of years type situation. Based on what you're seeing currently, do you expect that that could be pulled forward and we could see a significant increase in the company's subscription revenue over the next 12 to 24 months from enterprise subscribers in the current environment?

Well, I would probably say what we said before, which is if you remember we talked about the fact that we've been piloting some of the enterprise subscription offerings. In the first half actually we did late in 2019 and then continued that in the first half of 2020. We still have to plan to launch the more wider offerings to subscription for the enterprise this summer. So we do see, as we said before that continuing to be a positive contributor even more so in the second half as we go through this couple of years. And then I will say that the market obviously is different today but it's probably a good way, it's been helping subscription.

We will take our next question from Jack Vander Aarde with Maxim Group.

I've had to jump back forth between calls as a lot of analysts, so I may have missed some comments. But I want to revisit the 2Q outlook, specifically for product revenue. I know it's really tough to tell and I know you said total revenue would be down through the Q year over year. But did you comment -- can you provide anything around 2Q product revenue, where you think it’s going to be down, or up or flat relative to Q1’s product revenue?

So, we're not giving up our guidance, specifically for Q2 in terms of specific revenue elements. I think what we believe is that our subscription and maintenance business, which has performed well in Q1. As Jeff pointed out, subscription is doing well already in April, we continue -- subscription maintenance will be healthy. With respect to product revenue, we see those challenges that were in Q1 continuing into Q2. But in general, I think what we see is really highlights on subscription maintenance for Q2. So I hope that kind of gives you some indication of what we expect for the quarter.

And if I just revisit again, what the Q1 -- as well as the product remain in Q1, the drop off. Was it -- it was my understand that was more related to new customers being kind of I guess halted, landing new customers towards the end of the quarter because of COVID. Now that the Mexico manufacturing and product manufacturing is back online. Is the hang up in product revenue going to be related to just the customer demand at the current time, or the ability to take on new product orders? Or is it -- because it doesn't seem like it's an inventory bottleneck or supply issue, it's just more related to the customers, I guess the logistics.

So there was no -- even though, we had some supply pausing in the last, let's say, month or so, it had no impact on our ability to supply our customers. We've had the right inventory buffer throughout the -- so supply has not been a constraint we've had or inventory. The issue is really customers demand and customers ability to execute, when everythings from Hollywood shows, or entertainment, or sports, or music program -- music tours are pausing, or suspending, or canceling the needs -- the immediate needs for the equipment or gear they were going to deploy isn't there. And so part of it’s just things that are being referred, because in a wait and see how things play out for their business. In other areas it’s because they were, they are, they were and are still quite busy dealing with their own business continuity and dealing with their own business issues. So it will gradually warm back up, but there will be some demand constraints from the customer sides that roll out as is this recovery.

And then just last…

And it wasn’t just -- you said new customers, it wasn't really our interest, there wasn't just new customers or there’s any customer, what is the customer upgrading or adding on, or spending in environment or new, it’s I would really characterize it one or the other.

And then I guess just lastly, I just want to revisit the cash conversion cycle, the billings collection process. How much of -- how big of an issue has that been or I guess how difficult or challenging has that been versus if you could parse out between demand from customers for your products versus in house that I guess relate to the billings collection process, which I think was an issue towards the end of last quarter as well, or this current quarter?

So in terms of our customer base, we’ve a fairly healthy customer base in terms of the credit worthiness of it. I would say the DSO did increase from year-end from March 31. We did see a lot of companies due to the work from home arrangement imposed by governments, there was less people in the office. So as we were making collection calls just naturally there was less response. But I would say our AR is -- the DSO is still roughly 60 days and that's fairly good metric when looking at our companies. But we're very focused on collections, we're engaging more and we're working with our sales team to make sure that we collect our receivables.

[Operator Instructions] And with no additional questions at this time, I would like to turn the conference back to Jeff Rosica for any additional or closing remarks.

Thank you, operator. So let me close by saying that Avid's collaboration with our customers to keep the industry work has shown us that steep capacity to adapt to this difficult situation quite rapidly. We are encouraged by the resilience and innovation both inside Avid and throughout our community, and our strong recurring revenue streams and increasingly rigorous operating and cost discipline combined with our unique position to help the industry today will enable Avid to endure and make the most from the global rebound. So I want to thank all of our investors, analysts and others for joining us today. And I hope everyone will remain safe and healthy as we look ahead to the eventual global recovery from COVID-19. Thanks.

Ladies and gentlemen, this concludes today's call and we thank you for your participation. You may now disconnect.