Avid Technology Inc (AVID) 2012 Q1 法說會逐字稿

Good day and welcome everyone to the Avid first quarter earnings results conference call. Today's call is being recorded. For opening remarks and introductions, I would like to call turn the call over to the Director of Investor Relations, Mr. Tom Fitzsimmons. Please go ahead sir.

Good afternoon. I am Tom Fitzsimmons, Director of Investor Relations for Avid. I would like to welcome to today's call. With me today are Gary Greenfield, Avid's Chairman and CEO, and Ken Sexton, Executive Vice President and Chief Financial and Administrative Officer.

Before we being please note that this call includes forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Including statements that relate to future results or events, and are based on Avid's current estimates and assumptions. Forward-looking statements may be identified by the use of forward-looking words, such as anticipate, should, believe, could, estimate, expect, or similar expressions. There are a number of other factors that could cause actual events or results in future periods to differ materially from those indicated by these forward-looking statements, such as accounting and other adjustments that may be made to Avid's financial results after we review the treatment of the 2007 intercompany loan,our ability to execute our strategic plan and meet customer needs, our ability to produce innovative products in response to changing market demand,particularly in the media industry. Competitive factors, fluctuations in our revenue based on among other things, Avid's performance in particular geographies or markets,Fluctuations in foreign currency exchange rates and seasonal factors, such as high consumer demand at year end,adverse changes in economic conditions, and our liquidity.

Other important risk factors and uncertainties are in our periodic reports and other filings with the SEC. In addition our forward-looking statements represent our estimates only as today, Thursday April 26, 2012, and should not be relied upon as representing our estimates or views on any subsequent date. We undertake no obligation to review or update these forward-looking statements, even if the estimates change.

During this call we will be referring to non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with General Accepted Accounting Principles, and may not be comparable to similar non-GAAP measures used or reported by other companies. The non-GAAP measures do not reflect all of the costs associated with the Company's operations determined in accordance with GAAP. The most directly comparable financial measures calculated in accordance with GAAP, and a reconciliation of GAAP to non-GAAP measures are contained in our press release announcing this quarter's results, and are available in the Investor Relations section of our website at www.avid.com.

For the purpose of understanding our future business model we will also provide some forward-looking analysis on the call on a non-GAAP and GAAP basis, and the differences between our future GAAP and Non-GAAP financial measures could be substantial. I also wanted to note the comment outlined in our earnings press release that we are currently reviewing our prior tax and accounting treatment of an intercompany loan made in 2007 between two of our international subsidiaries. The financial results for the first quarter of 2012, do not reflect the potential impact of this matter, and the final conclusions and results of our review could impact the final financial results for the fourth quarter of 2012, and the results of prior periods.

Based on the current status of our review which is in initial stages and subject to change, we currently believe that the impact of this matter could increase our tax expenses by $4.5 million. We currently believe that we can recover $3.7 millionof this amount in a subsequent period, resulting in a net tax expense of approximately $700,000 an a cumulative basis.

And now I would like to turn the call over to Gary.

Thank you Tom. And welcome to our conference call for the first quarter of 2012. For the first quarter of 2012, we reported revenues of $152 million, and an operating loss on a GAAP and non-GAAP basis. We experienced continued weakness in the creative enthusiasts portion of our business, with revenue down significantly and a more modest decline in the remainder of the business. As a reminder creative enthusiasts historically represented about 20% of our business, and for the first quarter was approximately 17% of overall revenue.

We remain in a solid financial position with quarter end cash balance of almost $50 million, an increase of over $16 million from the beginning of this year. We see positive signs in the post and professional as well as the media enterprise markets, as customers seek to become more competitive by moving to more seamless based workflows and embrace the concept of the integrated media enterprise. We were pleased with the customer reaction to our announcements at last week's National Association of Broadcasters show. I will talk more about these announcements and market dynamics in our industry in a moment, but first I would like to current the call over to Ken, to discuss our financial results in more detail.

Thank you Gary. Revenues for the first quarter were $152.1 million, down from $166.3 million for the same period in 2011, and down 18% sequentially from $185.3 million reported for the fourth quarter of 2011. The GAAP net loss for the first quarter was $15.6 million, or $0.40 per share. This compares to a net GAAP loss in the first quarter of last year of $5.1 million, or $0.13 per share.

The GAAP net loss for the first quarter of 2012 included amortization of intangible assets of $2.3 million, stock based compensation of $3.7 million, restructuring charges of $408,000, acquisition related costs of $231,000, and a favorable tax adjustment of $446,000, related to these items. Excluding these items which totals to $6.2 million, the first quarter non-GAAP net loss was $9.4 million, or $0.24 per share. This compares to a non-GAAP net loss of $840,000, or $0.02 per share for the first quarter of 2011, which excluded $4.3 million of similar charges. A reconciliation of GAAP to non-GAAP results is included in the press release announcing our first quarter results. I will now discuss the first quarter results in greater detail.

Our revenues for the quarter were down 9% year-on-year. Changes in currency exchange rates did not have a meaningful impact on year-on-year comparisons. Our product revenue for the first quarter was $119.9 million, down 13% year-on-year. Service revenues which include maintenance support, professional services and training were $32.2 million, up collectively 11% compared to last year's first quarter. All three service lines grew year-on-year.

Before reviewing audio and video revenue I wanted to provide a bit of color on the creative enthusiasts business, which was down 27% year-on-year. This portion of the business is largely handled through retail distribution and focuses on solutions for consumers. The product mix for this part of the business was roughly 85% audio and 15% video for the first quarter. The products sold to creative enthusiasts include studio monitors, keyboards, controllers, audio interfaces, as well as our consumer video editing software and hardware.

The audio portion of this business was negatively impacted by product transitions and the discontinuation of selected underperforming products, as well as the overall weakness in consumer demand. While consumer video editing was down significantly due to weakness in this market, along with the impact of new product releases as a portion of this decrease is related to the relatively strong quarter we had in the first quarter of 2011, due to the introduction of Avid Studio and release of Pinnacle Studio version 15 last year.

Now turning to the discussion of video and audio revenues for the quarter. Video revenues for the first quarter were $84 million, down 11% compared to the first quarter of 2011. The majority of our service revenue is related to video, and as I mentioned we had nice growth in both professional services and our customer support business for the quarter. However we did experience a 20% year-on-year decline in video product sales. In addition to consumer video editing being down year-on-year, we experienced revenue decline in our professional video editing product lines.

On the professional side of video editing, overall unit sales increased year-on-year by over 30%, with the majority of the increase coming from software sales. However, while media composers software revenue and unit sales were up, the hardware and software bundles dropped significantly compared to last year, resulting in lower revenue overall for professional video editing.

Our work flow and shared storage revenue continued to be strong, combined they grew 8% compared to last year's first quarter. We believe this growth validates the focus we have placed on providing compelling solutions for large enterprises across the world. We continue to invest in this area of growth in the Company, and Gary will speak to some of the recent product announcements that we believe will lead to continued growth in this space.

As a reminder, the video business quarterly skew can be lumpy, due to the timing of large transactions primarily with large Media Enterprise. For this reason we can experience volatility in our revenue numbers in video when looking at any one particular quarter. Audio first quarter revenueswere $68.1 million, down 5% compared to thesame period last year. As discussed earlier, the majority of the creative enthusiasts revenue, which was down significantly is related to audio products. Mainly speakers, MIDI controllers, and several of our recording and IO product lines.

However the professional side of audio revenue is up 8% compared to last year. This is attributable to our strong demand for our high-end Pro Tools HD Solutions, and the associated new HDX hardware. Additionally we continue to see strength in our audio live systems business, which was up over 15% year-on-year.

Now I will discuss the first quarter results beyond revenue on both a GAAP and a non-GAAP basis. On a GAAP basis we reported gross margins as a percentage of revenue of 50% down 2.1 percentage points year-on-year. Our non-GAAP gross margin was 50.6% and was also down 2.1 percentage points year-on-year. The year-on-year decline is attributable to weaker product gross margins, the lower product gross margins were mainly attributable to three factors. First we had lower revenue to cover the relatively fixed component of product costs for manufacturing and logistics. Second, the product mix was weighted towards some of the lower margin products, and finally we provided incentives to sell certain older products, which were at the end of life or transitioning to newer versions.

Our service gross margins on both a GAAP and a non-GAAP basis were up over 8 percentage points. This improvement is attributable to higher maintenance revenue on lower delivery costs, some of the increase in maintenance revenue is attributable to the success of our products and service bundles, in addition we improved gross margins for both training and professional services. Our GAAP operating expense was $91.3 million for the quarter, which was up $1.2 million year-on-year. Last year's first quarter operating expenses were loweredby a $2.2 million benefit related to our revised restructuring reserve estimate. Our non-GAAP operating expense for the first quarter was $85.5 million, which represents a $1.2 million decrease year-on-year, and a $2.5 million decrease on asequential basis.

Compensation expenses declined by almost $5 million year-on-year, primarily related to the restructuring actions taken in October of 2011. This decrease in compensation related expense is due to the restructuring was offset to some degree by our annual merit pay increase in April of 201, and an increase in professional fees related to our Q1 SEC filings. These items accounted for approximately $2.3 million of year-on-year increase in spending. The remaining change is attributable to the timing of expenses related to various projects and programs. The GAAP operating loss for the quarter was $15.2 million, compared to a $3.4 million loss for last year's first quarter. Excluding the items I mentioned earlier the non-GAAP operating loss for the quarter was $8.5 million, compared to a $941,000 non-GAAP operating profit in the first quarter of 2011.

Now turning to the balance sheet, we increased our cash balance by over $16 million sequentially, and ended the quarter with $49.7 million of cash, with no draw on our line of credit. For the quarter we generated $19 million of cash from operations, the first quarter cash from operations included $4 million of cash payments related to our restructuring activities. We continue to see improvements of our inventory, our inventory at the end of the first quarter was $103.5 million, which is down over $8 million from the beginning of the quarter. We continue to see the benefit of improved systems and process in balancing demand and supply. In addition as I mentioned, we had incentives during the quarter which moved some older inventory. We expect our inventory levels to come down further by the end of 2012. Our annualized inventory returns for the first quarter were 3 turns.

Our Accounts Receivable balance of $87.5 million is in line with our sequential decline in revenue. The Days Sales Outstanding for the quarter were 52 days, which is consistent with historical levels, and our aging improved compared to prior periods. On the personnel side, we ended the quarter with 1,790 employees and 447 contractors,which is down in the aggregate 212 people compared to September 30th, 2011. And now I would like to hand things back over to Gary who will provide an update on the business.

Thanks Ken. As I indicated earlier sales to our customers in the creative enthusiast segment were down. We experienced a year-on-year decline for the first quarter in both audio and video consumer enthusiast related products. Market data indicates that the US consumer video editing market experienced double-digit declines for the first quarter compared to last year, while the MI market had modest growth. We believe we were down more than others due to the relatively strong quarter for CE, for creative enthusiasts that we had for the first quarter of last year.

We are still seeing favorable reviews for our new Avid Studio app for the iPad, as well as Keystation Mini 32 Sibelius 7, Avid Studio, and Fast Track. We also made some progress optimizing our creative enthusiasts portfolio. With final sale dates established for Pro Keys and other M audio keyboard SKUs, as well as DJ products and accessories.

When we look at our business from a regional perspective, we did experience growth in Asia Pacific during the quarter , however this was offset by a downward turn in Europe, and to a lesser extent a downturn in the Americas. Our expectations are not too dissimilar to that of the survey respondents in the IABM industry trend survey analysis of November 2011 and presented at NAB 2012. According to the report, the 2012 outlook for broadcasters in Europe, particularly western Europe is cautious, while the outlook in APAC and North America is more optimistic, with the market in South America becoming even more important.

We have just returned from a very successful week at the National Association of Broadcaster Show in Las Vegas, Nevada. This was our largest NAB in over a decade, as we introduced over a dozen solutions designed to help our customers meet their core business challenges. You may recall in previous earnings call I talked about the trends we were seeing across the media industry, and how they are influencing the solutions we are developing. For our customers in both the Post and professional and media enterprise segments, our latest versions of creative tools like Media Composer 6, Pro Tools 10, and Avid Motion Graphics have been developed to give our professional customers the ability to work quickly and efficiently, by using Best-in-Class workflows. Our professional customers recognize this value , and they are helping to drive strong sales of our high end Pro Tools HD solutions, and the associated new HDX hardware.

Although our professional video editing sales were down this quarter, a recent third-party survey that asked about product preferences and expected spending in 2012, indicates our Pro video business should remain stable, and have 47% of the respondents indicated an intent to increase spending on Avid products this year. The survey was conducted with a sampling of post-production and broadcast professionals attending NAB 2012.

This industry continues to recognize the quality and innovation of the Media Composer, which is evidenced by strong unit growth for Media Composer year-on-year. Just this month Media Composer 6 was presented with two Studio prime awards in the post-production product upgrade category. One for most Integrated Feature Set, and the second for the Best User Interface. While at NAB, Media Composer 6 also received Digital Video magazine's Best of Show Black Diamond Award.

The increased demand for more high quality content and ability to store and quickly retrieve that content by our customers, particular those in the media enterprise segment, are driving strong sales of our storage and workflow products, which had good growth compared to last year's first quarter. At NAB last week we announced several extensions to the ISIS family of storage solutions, that help our customers manage more media, more cost effectively. These include enhancements to the ISIS 7000, our flagship realtime media network, which not only doubled the storage capacity on a single licensed engine, it also doubled the number of engines a customer can have on a single system and allows and increase in the number of ISIS 7000s in a single workgroup.

We also introduced a new storage tier to the ISIS line, the ISIS 2000, this product delivers high density storage at a much lower cost per terabyte, and specifically is designed for narrowline storage applications, providing our customers the ability to store and quickly access media that would otherwise be stored on tape. And finally we introduced AirSpeed 5000, our next generation video server with greater capacity and higher availability. The AirSpeed 5000 is completely redesigned for increased flexibility, and comes with DNxHD and HD codec technology that allows customers to create high quality HD media with significantly smaller file sizes. AirSpeed 5000 has also been designed to provide customers increased flexibility, giving them the choice of an Avid advantage workflow, when combined with Avid Interplay and iNEWS, or as a standalone option for complete flexibility. We believe that the workflow advantage is that these new storage and server solutions provide will provide a significant benefit to our customers.

We are also pleased to announce a new multi-platform distribution solution for our customers. According to the same IABM report that I referenced earlier, the top priority of media enterprise customers as it relates to their technology purchases, is the ability to develop high quality content to multiple platforms or screens. Our new multi platform distribution solution with an Avid Interplay and iNEWS, helps to address this challenge, by giving our customers the ability to connect the production platform with web, mobile, and social media platforms. Thereby giving them the capability to create content once and distribute it everywhere, eliminating the rework and redundancy issue previously faced by customers.

Our biggest announcement at NAB last week, was the introduction of our new cloud enabled solution, Enterprise Sphere. We believe this is a revolutionary solution that will fundamentally change the way our customers work in the field, by giving them the ability to easily tell their stories from anywhere the news is happening. The cloud based architecture used for Enterprise Sphere automatically does the work around media composing and transcoding, traditionally done back at the news room. It also provides intelligent upload, allowing the journalists in the field to upload data to the station in the background, while editing the story in the field. The realtime workgroup connectivity gives the field journalist the same exact editing experience in the field, as they have in the newsroom, so there is no need to learn anything new. Reaction to the capabilities offered with Interplay Sphere has been very positive, with some referring to it as a potentially game changer for remote editing. Interplay Sphere also received a vote of confidence earning two awards during the NAB show, the 2012 Superior Technology award recipient star award, and the In Broadcast Editors Award in the End Media category broadcast systems.

These recently announced solutions are just some of the ways we are delivering on the promise of the Integrated media enterprise. These solutions help our customers leverage their media assets to reach viewers on a multitude of platforms, while breaking down the walls of the newsrooms, so they can gather and deliver and completed new packages from many locations. These solutions also help our customers manage increasing volumes of media assets across complex workflows, some of the these benefits of these solutions will be realized by NBC, with the upcoming coverage of the Olympics. You may have seen our press release earlier this month outlining the solutions NBC will use to cover the Olympics. As Dave Mazza, Senior Vice President Engineering, NBC Olympics states in our press release, for our Olympics coverage we need industry leading partners that can deliver a level of quality, speed, and reliability everyone can rely on. And that is exactly what Avid gives us.

Some of the solutions NBC will use include seven Avid Symphony and 26 Media Composer systems for high end editing and 5.1 Surround Sound. These systems will be connected to an Avid ISIS shared storage and an Avid InterPlay Production Asset Management systems, where users will be able to quickly browse in Interplay MAM proxy and transfer material faster than realtime for use in Symphony and Media Composer editing software applications. AirSPEED 5000 will be used in conjunction with the ISIS 700 to create turnkey production islands at the Olympic venues, including gymnastics, swimming, diving, and track and field.

Changing consumer behavior impacts nearly every aspect of the media value chain, including content technologies, delivery channels, access devices, revenue models, rights acquisition, and management. We believe the solutions that we are developing to solve these business challenges will help to grow the business especially for our post and professional and media enterprise customers moving forward.

With that, I would like to turn the call back to Ken to offer some perspective on the 2012

Thank you Gary. Before talking about 2012 expectations I would like to remind you of our earlier disclaimer regarding forward-looking statements. For 2012 we expect revenue to be relatively flat to a modest growth year-on-year. We believe demand in the creative enthusiast market will remain challenged in 2012. We also expect to continue to trim some of our products with lower profits for those that do not meet our contribution goals.

We expect a modest full year improvement in gross margins as a percentage of revenue for 2012, a portion of this will come from productivity gains in our manufacturing logistics operations, a mix shift to higher margin products, and continued improvement in our service margins. We expect to improve our non-GAAP operating margin on a full-year basis when compared to 2011. As a reminder, our 2011 non-GAAP operating margin was 2.2% of revenue. As provided during our last earnings call, we would expect that our non-GAAP operating margin would be 5% of full revenue assuming our 2012 revenue is relatively flat with 2011.

We expect our non-GAAP taxes and interest to be in the range of $7 million to $9 million for 2012. The non-GAAP net income just outlined excludes stock based compensation,amortization of intangibles, restructuring, acquisition and other charges, and related taxes of $20 million to $25 million. Based on these expectations we could report breakeven for our GAAP net income for the full year in 2012. We expect to generate cash from operations in 2012, and believe that inventory levels will come down further by year end.

This concludes our remarks, and we would now be happy to take your questions.

Thank you. (Operator Instructions) We will go first to Paul Coster with JPMorgan.

I think I got a little bit lost at the end there in terms of the guidance, are you saying that you will generate 5% operating margins in 2012 off flattish revenues?

Yes, I said that on flattish revenue we would generate 5% non-GAAP operating margins for the full year.

And you are looking for flat to slightly up revenues?

The exact term was relatively flat to up modestly.

The gross margins this quarter were down, not withstanding the shift towards software, I didn't quite understand that. Surely the software product is delivering higher margins?

Yes, I said that was one of the factors. I think that the software shift was just really just that we talked about was in the Media Composer area of professional video editing, which is where we had lower overall revenue there. Which was caused by the shift to more pure software in that particular area.

Well my last point is that you have basically restated your expectations for the year despite having a weaker start to the year, obviously revenues are a bit challenging at the moment. What have you done that still allows you to get to the 5% pro forma operating margin for the year?

Well, I think the 5% operating margin is based on the flat revenue which was similar to what we said at the beginning.

I think this is consistent with the same guidance that we gave, we reported year-end results.

Not completely because we expected to breakeven in the first quarter and weren't. So obviously it started off weaker than expected.

Correct, but we did say 5% on flat revenue for the year, and we did say that, I think we said, I think the exact words that we used, and Tom might be able to verify this, we talked about low single-digit growth, and we were in essence saying the same thing. As do we feel spoke about, we do feel there is a lot of opportunity in the post and professional and the Media Enterprise space. We are seeing the strong unit sales in Media Composer. We're seeing a lot of strength in the HDX, and the high end Pro Tools solutionsthat are there. Where we do feel it is challenged is creative enthusiasts, and we are doing things to improve its profitability, as we talked about both in February when we reported the results, as well as we talked about in this script in terms of some of the product lines we have been trimming.

Okay, and the last point is that obviously the stock is not showing anything over the last ten years now, and this is a fairly significant, quite important software oriented company that seems like it should be generating profit, and even with modest profit it seems to be that you could be generated over a $1 in earnings, with which the stock would do brilliantly. I am just surprised you are not doing more to get to sustainable profitability as the baseline, rather than aspiring to it. If you can just comment on thatplease, Gary?

Yes, for me to comment on it. I think we are doing things Paul, you certainly have mentioned this before, both verbally as well as in some of your written reports, and I think that we are doing things to fix our underlying cost structure. And we are bringing down our breakeven points. We have continued to bring down our operating expense. The mix created a bit on the gross margins, but as Ken commented, we do expect gross margins to improve for the year as well. Some of those things may not be apparent in the financials that we report in Q1, we do have some pretty firm thoughts on how we will be getting to that higher level of profitability. 5% this year would be up from last year's percentage profitability, and we will continue that march forward.

We will go next to Mike Olson with Piper Jaffray.

You said Pro Video units were up 30% year-over-year and revenue was down year-over-year, what was the percent year-over-year decline in Pro Video revenue?

In the product side of Pro Video? I will let Ken or Tom answer that question.

Professional video editors for the quarter would have been down 30%.

So units were up 30%, but revenue was down 30%, is that correct?

That is for Pro Video editors only. Not the entire Pro Video category. Editors and systems, so right now we are getting closer and closer, we are kind of getting that edge where we will be probably in the next, sometime this year we may crossover where we are selling more than 50% software in that particular line of products.

As a reminder to everyone one of the things that we really focused in on as a Company, was to open up our products to work with other hardware. Particularly for those folks that wanted to transition from competitors, from competing editing software packages, it was important that they be able to reuse their hardware, we needed to open up Media Composer to be able to do that, that which we did, we now support five different vendors, video monitoring hardware that is there, that of course does impact our hardware sales. As we gained a lot of new users, but not necessarily users of the hardware systems that Avid provides.

Okay and you might have mentioned this, why was deferred revenue up so much in Q1, and how do you think that is going to trend over the next few quarters?

Usually deferred revenue because of the timing of maintenance contracts will peak during the fourth quarter of last year and the first quarter of the next year tend to be some of the higher quarters. In addition to that there could be, bookings were ahead of revenue in this particular quarter too, and there are some cases, some of that could be deferred projects or products and services revenue on the balance sheet, which also increased.

Okay. Thanks a lot.

(Operator Instructions) We will go next to Barbara Coffey with Brigantine.

Hi, a couple of questions. As you look on the storage side, that increasingly has been a larger percent of revenue. Can you speak to what is driving it, and what kind of growth you expect in that portion of the business, as well as you look at the end markets, where or not it is audio video storage, what is needed to grow revenue?Some sectors are growing 8 to 10, is it in some cases you have had unit growth, but because it hasn't had hardware or has lower prices, how do we see some revenue growth from some of these sectors?

Barbara I am actually going to answer the first part of your question, and attempt to answer your second one, I think I understood the second half. I think that I understood it. On the shared storage side what is driving the demand is a couple things. We have spoken for some time that the move to HD that there is still a lot left for the move to HD, and also to file-based workflows, and we try, find that many people move to HD are still using tape-based workflows that were there. So that has been driving the demand for what we refer to as asset-based workflows, and those asset-based workflows do in fact require a lot of storage. What has been driving the storage, so there is just that movement that is still going on. Second of all, there is just the amount of media that is being created in all of these workflows,it is just insatiable.

We have basically if you take a look at the amount of storage that can be used under Interplay production, we have increased from this point last year to this point now by about 12X, by increasing the size of ISIS, and the number of ISIS' that can be used underneath the Interplay production, we have 4.6 petabytes that are available, and our customers are going, can I get more. They have just this insatiable requirement to keep media online. We don't really give out forward-looking information on growth at that level. What I will say is that we do expect storage to continue to grow on a year on year , on the quarterly basis it did grow 8% in Interplay production, it grew nearly 20% on a year-on-year basis, and those do fuel each other that are there.

Relative to where we are going to see growth in the other segments it is clear that the message is about what I was speaking to about asset-based workflows. File-based workflows are simply captured on your video camera, whatever it is, and be able to edit it, but what people really want to be able to do now is manage the entire lifecycle, and capture the long tail of that asset. That long tail, is not as long as it used to be, formerly a TV series as an example before it would be resyndicated needed to be on air for at least three to five years, for three years that are out there. Now if the series makes it through the half seasons that you are seeing, the 13 episodes, you are seeing that almost immediately resyndicated on Netflix, Hulu, wherever it might be, if it even has to go the entire season, and to do that requires knowing where all of your assets are, and that is why Avid at NAB, and at other places continues to talk about asset-based workflows that are there.

When we are talking about things growing and we are talking about our professional lines for the Media Enterprise, we don't really go, okay, local storage is going to grow all by itself, it is part of that integrated Avid solution that is there. It might include news. It might include a sports workflow, so we think more about the workflows that are there, we are clearly broadly speaking in the content creation space, and then beyond that we think of the news workflows, we think of the sports workflows, we obviously think of the TV workflows for scripted and reality series long form that is out there. And that is how we are thinking about the segments growing. There is clearly a lot of new accounting being required, and we have an opportunity to play

Thank you.

I hope that helps a little bit, Barbara?

It does, thank you.

That concludes today's question and answer session, I will turn call over to Gary Greenfield for any additional or closing remarks.

I would like to thank all of you for joining us today. Should you have any further questions, all of us will be available for follow-up after today's call. We look forward to speaking to you next quarter. Thanks.

That concludes today's conference. We thank you for your participation.