AVID TECHNOLOGY, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)

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EXECUTIVE OVERVIEW

Company presentation

We develop, market, sell, and support software and integrated solutions for
video and audio content creation, management and distribution. We are a leading
technology provider that powers the media and entertainment industry. We do this
by providing an open and efficient platform for digital media, along with a
comprehensive set of tools and workflow solutions. Our solutions are used in
production and post-production facilities; film studios; network, affiliate,
independent and cable television stations; recording studios; live-sound
performance venues; advertising agencies; government and educational
institutions; corporate communications departments; and by independent video and
audio creative professionals, as well as aspiring professionals. Projects
produced using our tools, platform, and ecosystem include feature films,
television programming, live events, news broadcasts, sports productions,
commercials, music, video, and other digital media content. With over one
million creative users and thousands of enterprise clients relying on our
technology platforms and solutions around the world, Avid enables the industry
to thrive in today's connected media and entertainment world.

Our mission is to empower media creators with innovative technology and
collaborative tools to entertain, inform, educate, and enlighten the world. Our
clients rely on Avid's products and solutions to create prestigious and
award-winning feature films, music recordings, television shows, live concerts,
sporting events, and news broadcasts. Avid has been honored for technological
innovation with 18 Emmy Awards, one Grammy Award, two Oscars, and the first ever
America Cinema Editors Technical Excellence Award. In 2018, Avid was named the
recipient of the prestigious Philo T. Farnsworth Award by the Television Academy
to honor Avid's 30 years of continuous, transformative technology innovations,
including products that have improved and accelerated the editing and post
production process for television.

Overview of operations

Our strategy for connecting creative professionals and media enterprises with
audiences in a powerful, efficient, collaborative, and profitable way leverages
our creative software tools, including Pro Tools for audio and Media Composer
for video, and our MediaCentral Platform - the open, extensible, and
customizable foundation that streamlines and simplifies content workflows by
integrating all Avid or third-party products and services that run on top of it.
The platform provides secure and protected access, and enables fast and easy
creation, delivery, and monetization of content.

We work to ensure that we are meeting customer needs, staying ahead of industry
trends, and investing in the right areas through a close and interactive
relationship with our customer base. The Avid Customer Association was
established to be an innovative and influential media technology community. It
represents thousands of organizations and over 30,000 professionals from all
levels of the industry including inspirational and award-winning thought
leaders, innovators, and storytellers. The Avid Customer Association fosters
collaboration between Avid, its customers, and other industry colleagues to help
shape our product offerings and provide a means to shape our industry together.

A key element of our strategy is our transition to a recurring revenue-based
model through a combination of subscription offerings and long-term agreements.
As of September 30, 2021, we had approximately 389,000 paid subscriptions.
Starting in the third quarter of 2021, subscription count includes all paid and
active seats under multi-seat licenses. These licensing options offer choices in
pricing and deployment to suit our customers' needs. Our subscription offerings
to date have mostly been sold to creative professionals, although in the third
quarter of 2020 we introduced subscription offerings for our enterprise software
solutions. We expect to increase subscription sales to media enterprises going
forward as we expand offerings and move through customer upgrade cycles, which
we expect will further increase recurring revenue on a longer-term basis. Our
long-term agreements are comprised of multi-year agreements with large media
enterprise customers to provide specified products and services, including SaaS
offerings, and channel partners and resellers to purchase minimum amounts of
products and service over a specified period of time.

During the third quarter of 2021, Avid began implementing a Digital
Transformation which focuses on optimizing systems, processes, and back-office
functions with the objective of improving our operations related to our digital
and subscription business. Over the next four years, we plan to significantly
invest in transforming our enterprise-wide infrastructure and technologies to
benefit customers and drive enhanced performance across the company.

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A summary of our sources of income for the past three and nine months
September 30, 2021 and 2020 is as follows (in thousands):

                                                 Three Months Ended 

September

                                                              30,           

Nine months ended September 30,

                                                    2021               2020               2021                2020
Subscriptions                                   $   28,008          $ 17,907          $   74,384          $  48,292
Maintenance                                         30,702            30,826              90,997             93,190
Subscriptions and Maintenance                       58,710            48,733             165,381            141,482
Perpetual Licenses                                   5,678             8,972              18,596             21,165
Software Licenses and Maintenance                   64,388            57,705             183,977            162,647
Integrated solutions                                31,172            26,803              88,699             76,956
Professional services & training                     6,080             5,923              18,204             16,562
Total revenue                                   $  101,640          $ 90,431          $  290,880          $ 256,165


Impact of COVID-19 on our business

We have operations in a number of countries, which exposes us to risks
associated with public health crises such as the novel coronavirus (COVID-19)
that was declared a pandemic by the World Health Organization. COVID-19
adversely impacted our business operations and results of operations for the
year ended 2020. These economic impacts are the result of, but not limited to:

•the postponement or cancellation of film and television productions, major
sporting events, and live music events;
•delays in purchasing and projects by our enterprise customers and channel
partners;
•disruption to the supply chain caused by distribution and other logistical
issues, including disruptions arising from government restrictions; and
•decreased productivity due to travel restrictions, work-from-home policies or
shelter-in-place orders.

Our results for the first nine months of 2021 reflect a gradual recovery towards
pre-pandemic spending levels with the continuing positive signs of recovery from
the impacts of the COVID-19 pandemic driven by vaccination and government
stimulus programs, particularly in the US. At the same time, certain countries
continue to face challenges with renewed lockdowns and travel restrictions and
there remains uncertainty relating to the ongoing spread and severity of the
virus and its variants. While we are encouraged by the trends we have seen so
far in 2021, to the extent that the pandemic continues to have negative impacts
on economies, our results could be affected and uneven. We may be required to
take additional steps to preserve our liquidity depending on the duration and
severity of the pandemic and its impact on our operations and cash flows. For
further discussion of these issues, see "Liquidity and Capital Resources" below.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our condensed consolidated financial statements have been prepared in accordance
with GAAP. The preparation of these financial statements requires us to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosures of contingent assets and liabilities as of the
date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. We base our estimates and judgments on
historical experience and various other factors we believe to be reasonable
under the circumstances, the results of which form the basis for judgments about
the carrying values of assets and liabilities and the amounts of revenues and
expenses. Actual results may differ from these estimates.

We believe that our critical accounting policies and estimates are those related
to revenue recognition and allowances for sales returns and exchanges, discount
rates used for lease liabilities, stock-based compensation, income tax assets
and liabilities, and restructuring charges and accruals. We believe these
policies and estimates are critical because they most significantly affect the
portrayal of our financial condition and results of operations and involve our
most complex and subjective estimates and judgments. A discussion of our
critical accounting policies and estimates may be found in our Annual Report on
Form 10-K for the year ended December 31, 2020 in Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations," under
the heading "Critical Accounting Policies and Estimates" and below. There have
been no significant changes to the identification of the accounting policies and
estimates that are deemed critical.
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Revenue recognition

We enter into contracts with customers that include various combinations of
products and services, which are typically capable of being distinct and are
accounted for as separate performance obligations. We account for a contract
when (i) it has approval and commitment from both parties, (ii) the rights of
the parties have been identified, (iii) payment terms have been identified, (iv)
the contract has commercial substance, and (v) collectability is probable. We
recognize revenue upon transfer of control of promised products or services to
customers, which typically occurs upon shipment or delivery depending on the
terms of the underlying contracts, in an amount that reflects the consideration
we expect to receive in exchange for those products or services.

We often enter into contractual arrangements that have multiple performance
obligations, one or more of which may be delivered subsequent to the delivery of
other performance obligations. These arrangements may include a combination of
products, maintenance, training, and professional services. We allocate the
transaction price of the arrangement based on the relative estimated standalone
selling price of each distinct performance obligation.

See Note 9 "Revenue" of our Notes to Condensed Consolidated Financial Statements
under Part 1, Item 1 of this Form 10-Q for disaggregated revenue schedules and
further discussion on revenue and deferred revenue performance obligations and
the timing of revenue recognition.

Leases

We have operating leases for facilities and certain equipment in North America,
Europe, and Asia. Our operating lease right-of-use assets and liabilities are
recognized based on the present value of the future minimum lease payments over
the lease term at commencement date. As our leases generally do not provide an
implicit rate, we use our incremental borrowing rate based on the information
available at commencement date in determining the present value of future
payments. An average incremental borrowing rate of 6% as of January 1, 2019, the
adoption date of ASC 842, was used for our leases that commenced prior to that
date. We determined that the rate of 6% is appropriate for our operating leases
after we considered an estimated incremental borrowing rate provided by our
bank, the interest rate of our prior credit facility, and the terms and
geographic locations of our facilities.

See Note 5 “Leases” of our notes to the condensed consolidated financial statements in Part 1, Item 1 of this Form 10-Q for a more in-depth discussion of our leases.

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RESULTS OF OPERATIONS

The following table sets forth certain items from our condensed consolidated
statements of operations as a percentage of net revenues for the three and nine
months ended September 30, 2021 and 2020:
                                                     Three Months Ended September 30,                   Nine Months Ended September 30,
                                                      2021                      2020                     2021                      2020
Net revenues:
Product                                                    36.3  %                  39.6  %                   36.9  %                  38.3  %
Services                                                   63.7  %                  60.4  %                   63.1  %                  61.7  %
Total net revenues                                        100.0  %                 100.0  %                  100.0  %                 100.0  %
Cost of revenues                                           35.2  %                  35.6  %                   35.6  %                  36.4  %
Gross margin                                               64.8  %                  64.4  %                   64.4  %                  63.6  %
Operating expenses:
Research and development                                   16.9  %                  15.1  %                   16.7  %                  16.4  %
Marketing and selling                                      24.0  %                  22.1  %                   22.9  %                  25.4  %
General and administrative                                 14.7  %                  11.9  %                   14.5  %                  13.3  %
Restructuring costs, net                                   (0.1) %                   0.8  %                    0.3  %                   0.4  %
Total operating expenses                                   55.4  %                  49.9  %                   54.4  %                  55.5  %
Operating income                                            9.4  %                  14.5  %                   10.0  %                   8.1  %
Interest expense, net                                      (1.6) %                  (5.0) %                   (1.9) %                  (6.0) %
Other income, net                                           7.7  %                   0.1  %                    1.5  %                   0.1  %
Income before income taxes                                 15.5  %                   9.6  %                    9.6  %                   2.2  %
Provision for income taxes                                  1.0  %                   0.8  %                    0.6  %                   0.6  %
Net income                                                 14.5  %                   8.8  %                    9.0  %                   1.6  %



Net Revenues

Our net revenues are derived mainly from sales of products and solutions for
digital media content production, management and distribution, and related
professional services and maintenance contracts. We also sell individual
licenses for our software products through our webstore. We commonly sell large,
complex solutions to our customers that, due to their strategic nature, have
long lead times where the timing of order execution and fulfillment can be
difficult to predict. In addition, the rapid evolution of the media industry is
changing our customers' needs, businesses, and revenue models, which is
influencing their short-term and long-term purchasing decisions. As a result of
these factors, the timing and amount of product revenue recognized related to
these large orders, as well as the services associated with them, can fluctuate
from quarter to quarter and cause significant volatility in our quarterly
operating results. For a discussion of these factors, see the risk factors
discussed in Part I, Item 1A under the heading "Risk Factors" in our Annual
Report on Form 10-K for the year ended December 31, 2020.

                             Net Revenues for the Three Months Ended September 30, 2021 and 2020
                                                    (dollars in thousands)
                                                   2021                           Change                            2020
                                               Net Revenues              $                    %                 Net Revenues

Products and solutions                       $      36,850          $   1,075                3.0%             $      35,775
Services                                            64,790             10,134               18.5%                    54,656
Total net revenues                           $     101,640          $  11,209               12.4%             $      90,431




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                  Net Revenues for the Nine Months Ended September 30, 2021 and 2020
                                        (dollars in thousands)
                                                2021                 Change                 2020
                                            Net Revenues          $            %        Net Revenues

Products and solutions                     $     107,295      $  9,174       9.3%      $      98,121
Services                                         183,585        25,541       16.2%           158,044
Total net revenues                         $     290,880      $ 34,715       13.6%     $     256,165



The following table sets forth the percentage of our net revenues attributable
to geographic regions for the three and nine months ended September 30, 2021 and
2020:
                                                     Three Months Ended September 30,                           Nine Months Ended September 30,
                                                   2021                              2020                    2021                              2020
United States                                       44%                              40%                      43%                              41%
Other Americas                                      5%                                5%                      5%                                6%
Europe, Middle East and Africa                      38%                              42%                      38%                              39%
Asia-Pacific                                        13%                              13%                      14%                              14%


Products and solutions Turnover

Our products and solutions revenues are derived primarily from sales of our
storage and workflow solutions, media management solutions, video creative
tools, digital audio software and workstation solutions, and our control
surfaces, consoles, and live-sound systems. Products and solutions revenues
increased $1.1 million, or 3.0%, for the three months ended September 30, 2021,
and increased $9.2 million, or 9.3%, for the nine months ended September 30,
2021, compared to the same periods in 2020. The increase for the three and nine
months ended September 30, 2021 was primarily due to higher sales as a result of
the economy recovering from the COVID-19 pandemic, which negatively impacted
products and solutions revenues in 2020 for the reasons discussed above under
"Executive Overview - Impact of COVID-19 on Our Business."

Service revenues

Services revenues are derived primarily from maintenance contracts, subscription
services, and professional services and training. Services revenues increased
$10.1 million, or 18.5%, for the three months ended September 30, 2021, and
increased $25.5 million, or 16.2% for the nine months ended September 30, 2021
compared to the same periods in 2020. The increase for the three and nine months
ended September 30, 2021 was primarily due to increased subscription services
and professional services as a result of the economy recovering from the
COVID-19 pandemic, which negatively impacted products and solutions revenues in
2020 for the reasons discussed above under "Executive Overview - Impact of
COVID-19 on Our Business."

Cost of revenue, gross margin and percentage of gross margin

Cost of revenues consists primarily of costs associated with:
•procurement of components and finished goods;
•assembly, testing and distribution of finished products;
•warehousing;
•customer support related to maintenance;
•royalties for third-party software and hardware included in our products; and
•providing professional services and training.







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Revenue costs and gross profit

              Costs of Revenues and Gross Profit for the Three Months Ended September 30, 2021 and 2020
                                                (dollars in thousands)
                                                2021                          Change                          2020
                                               Costs                $                     %                  Costs
Products                                    $  20,468          $    (489)              (2.3)%             $  20,957
Services                                       15,269              4,052                36.1%                11,217
  Total cost of revenues                    $  35,737          $   3,563                11.1%             $  32,174

Gross profit                                $  65,903          $   7,646                13.1%             $  58,257




              Costs of Revenues and Gross Profit for the Nine Months Ended September 30, 2021 and 2020
                                               (dollars in thousands)
                                                2021                         Change                          2020
                                               Costs                $                    %                  Costs
Products                                    $  60,044          $   1,171                2.0%             $  58,873
Services                                       43,379              9,057               26.4%                34,322

  Total cost of revenues                    $ 103,423          $  10,228               11.0%             $  93,195

Gross profit                                $ 187,457          $  24,487               15.0%             $ 162,970




Gross Margin Percentage

Gross margin percentage, which is net revenues less costs of revenues divided by
net revenues, fluctuates based on factors such as the mix of products sold, the
cost and proportion of third-party hardware and software included in the systems
sold, the offering of product upgrades, price discounts and other
sales-promotion programs, the distribution channels through which products are
sold, the timing of new product introductions, sales of aftermarket hardware
products, and currency exchange-rate fluctuations. For a discussion of these
factors, see the risk factors discussed in Part I, Item 1A under the heading
"Risk Factors" in our Annual Report on Form 10-K for the year ended December 31,
2020.

Our gross margin percentage for the three months ended September 30, 2021
increased to 64.8% from 64.4% and for the nine months ended September 30, 2021
increased to 64.4% from 63.6%, compared to the same periods in 2020. These
increases were primarily due to increased products and subscription revenue as a
result of higher volumes, slightly offset by the increase in our stock based
compensation expense and reduction in professional services revenue while
maintaining the same cost structure.
              Gross Margin % for the Three Months Ended September 30, 2021 and 2020
                     2021 Gross                                                  2020 Gross
                      Margin %                       Change                       Margin %
    Products           44.5%                          3.1%                         41.4%
    Services           76.4%                         (3.1)%                        79.5%
    Total              64.8%                          0.4%                         64.4%



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              Gross Margin % for the Nine Months Ended September 30, 2021 and 2020
                      2021 Gross                                                 2020 Gross
                       Margin %                       Change                      Margin %
     Products           44.0%                          4.0%                        40.0%
     Services           76.4%                         (1.9)%                       78.3%
     Total              64.4%                          0.8%                        63.6%

Operating expenses and operating income

                Operating Expenses and Operating Income for the Three 

Ended months September 30, 2021 and 2020

                                                    (dollars in thousands)
                                                      2021                           Change                           2020
                                                    Expenses              $                      %                  Expenses
Research and development                          $  17,129          $   3,506                 25.7%              $  13,623
Marketing and selling                                24,413              4,415                 22.1%                 19,998
General and administrative                           14,901              4,105                 38.0%                 10,796
Restructuring costs, net                                (88)              (811)              (112.2)%                   723
Total operating expenses                          $  56,355          $  11,215                 24.8%              $  45,140

Operating income                                  $   9,548          $  (3,569)               (27.2)%             $  13,117



               Operating Expenses and Operating Income for the Nine Months 

Ended September 30, 2021 and 2020

                                                   (dollars in thousands)
                                                      2021                          Change                          2020
                                                    Expenses              $                     %                 Expenses
Research and development                          $  48,639          $   6,523                15.5%             $  42,116
Marketing and selling                                66,511              1,534                2.4%                 64,977
General and administrative                           42,214              8,070                23.6%                34,144
Restructuring costs, net                              1,001                 (7)              (0.7)%                 1,008
Total operating expenses                          $ 158,365          $  16,120                11.3%             $ 142,245

Operating income                                  $  29,092          $   8,367                40.4%             $  20,725


Research and development costs

Research and development ("R&D") expenses include costs associated with the
development of new products and the enhancement of existing products, and
consist primarily of employee compensation and benefits, facilities costs,
depreciation, costs for consulting and temporary employees, and prototype and
other development expenses. R&D expenses increased $3.5 million, or 25.7%, for
the three months ended September 30, 2021 and $6.5 million, or 15.5%, for the
nine months ended
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September 30, 2021, compared to the same periods in 2020. The tables below provide more details on the evolution of the components of R&D expenditure.

                  Change in R&D Expenses for the Three Months Ended September 30, 2021 and 2020
                                              (dollars in thousands)
                                                                                          2021 Increase
                                                                                            From 2020
                                                                                      $                    %
Personnel-related                                                                     1,615                18.4  %
Facilities and information technology                                                   878                35.7  %
Consulting and outside services                                                         645                32.3  %
Other                                                                                   368                92.4  %
Total R&D expenses decrease                                                    $      3,506                25.7  %




                   Change in R&D Expenses for the Nine Months Ended September 30, 2021 and 2020
                                              (dollars in thousands)
                                                                                          2021 Increase
                                                                                            From 2020
                                                                                      $                    %
Personnel-related                                                                     3,585                13.7  %
Facilities and information technology                                                 1,484                18.9  %
Consulting and outside services                                                         536                 7.8  %
Computer hardware                                                                       480                55.4  %
Other                                                                                   438               124.5  %
Total R&D expenses decrease                                                    $      6,523                15.5  %



The increase in facilities and information technology expenses and
personnel-related expenses for the three and nine months ended September 30,
2021, compared to the same periods in 2020, was primarily the result of the
wind-down of our employee furlough program, which was implemented in the second
and third quarters of 2020 to reduce costs in response to COVID-19. The increase
in consulting and outside services for the three and nine months ended
September 30, 2021, compared to the same periods in 2020, was primarily the
result of increased use if external contractors utilized for research and
development efforts. The increase in computer hardware and other expenses for
the three and nine months ended September 30, 2021, compared to the same periods
in 2020, was primarily the result of increased hardware purchases to aid in the
testing of our new product developments and prototypes.

Marketing and sales costs

Marketing and selling expenses consist primarily of employee compensation and
benefits for selling, marketing and pre-sales customer support personnel,
commissions, travel expenses, advertising and promotional expenses, web design
costs, and facilities costs. Marketing and selling expenses increased $4.4
million, or 22.1%, for the three months ended September 30, 2021, and increased
$1.5 million, or 2.4%, for the nine months ended September 30, 2021, compared to
the same periods in 2020. The tables below provide further details regarding the
changes in components of marketing and selling expenses.
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Change in marketing and sales expenses for the three months ended September 30, 2021 and 2020

                                             (dollars in thousands)
                                                                                    2021 Increase From 2020
                                                                                     $                   %
Personnel-related                                                                   2,120                14.1  %
Advertising and promotions                                                            819               633.8  %
Consulting and outside services                                                       908               117.6  %
Foreign exchange (gains) and losses                                                   534               769.2  %
Other                                                                                  34                 0.1  %
Total marketing and selling expenses decrease                                  $    4,415                22.1  %


Change in marketing and sales expenses for the nine months ended September 30, 2021 and 2020

                                              (dollars in thousands)
                                                                                2021 Increase (Decrease) From 2020
                                                                                      $                     %
Personnel-related                                                                      4,481                10.0  %
Facilities and information technology                                                 (1,556)              (13.5) %
Advertising and promotions                                                             1,182               108.8  %
Foreign exchange (gains) and losses                                                     (204)              (20.1) %
Consulting and outside services                                                         (794)              (21.2) %
Other                                                                                 (1,575)              (59.1) %
Total marketing and selling expenses increase                                  $       1,534                 2.4  %



The increase in personnel-related expenses for the three and nine months ended
September 30, 2021, compared to the same periods in 2020, was primarily due to
an increase in salary expense as a result of the furlough program and reduced
travel expenses in the 2020 periods in response to the COVID-19 pandemic. The
increase in advertising and promotions expenses for the three and nine months
ended September 30, 2021, compared to the same periods in 2020, were primarily
the result of resuming our programs that were paused in 2020 in response to
COVID-19. The increase in consulting and outside services for the three months
ended September 30, 2021 are primarily due to an increased used of in external
contractors to provide marketing and promotional support as well as assist in
our digital transformation initiative. The decrease in consulting and outside
services for the nine months ended September 30, 2021 was due to the
cancellation of certain trade shows and internal meetings in 2021, which still
took place during Q1 2020 before the COVID-19 pandemic began. The decrease in
facilities and information technology and other for the nine months ended
September 30, 2021 was primarily the result of a one-time bad debt expense in
2020 and a decrease in our facilities related costs as we continue to decrease
our footprint. The change in foreign exchange translations for the three and
nine months ended September 30, 2021, compared to the same periods in 2020, was
due to foreign exchange gains and losses from foreign currency denominated
transactions and the revaluation of foreign currency denominated assets and
liabilities. These foreign exchange changes were primarily due to the
euro-dollar exchange rate volatility.

General and administrative expenses

General and administrative ("G&A") expenses consist primarily of employee
compensation and benefits for administrative, executive, finance and legal
personnel, audit, legal and strategic consulting fees, and insurance,
information systems and facilities costs. Information systems and facilities
costs reported within general and administrative expenses are net of allocations
to other expenses categories. G&A expenses increased $4.1 million, or 38.0%, for
the three months ended September 30, 2021, and increased $8.1 million, or 23.6%,
for the nine months ended September 30, 2021, compared to the same periods in
2020. The tables below provide further details regarding the changes in
components of G&A expenses.
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                  Change in G&A Expenses for the Three Months Ended September 30, 2021 and 2020
                                              (dollars in thousands)
                                                                                          2021 Increase
                                                                                            From 2020
                                                                                      $                    %
Personnel-related                                                                     1,595                26.8  %
Consulting and outside services                                                       1,430                75.9  %
Other                                                                                 1,080                36.5  %
Total G&A expenses increase                                                    $      4,105                38.0  %



                  Change in G&A Expenses for the Nine Months Ended 

September 30, 2021 and 2020

                                             (dollars in thousands)
                                                                                    2021 Increase (Decrease)
                                                                                           From 2020
                                                                                     $                    %
Personnel-related                                                                    4,306                25.1  %
Consulting and outside services                                                      2,472                32.0  %
Facilities and information technology                                               (1,161)              (20.1) %
Other                                                                                2,453                67.2  %
Total G&A expenses decrease                                                    $     8,070                23.6  %



The increase in personnel-related expenses for the three and nine months ended
September 30, 2021, compared to the same periods in 2020, was primarily due to
increase in salary expense as a result of our furlough program and reduced
travel expenses in the prior year in response to the COVID-19 pandemic. The
increase in consulting and outside services and other for the three and nine
months ended September 30, 2021, compared to the same periods in 2020, was
primarily a result of resuming our programs that were previously paused in
response to COVID-19. In addition, we have incurred expenses in 2021 related to
our share repurchase program, business development activities, and our digital
transformation initiative.
Provision for Income Taxes
                   Provision for Income Taxes for the Three Months Ended September 30, 2021 and 2020
                                                (dollars in thousands)
                                                 2021                          Change                          2020
                                                                      $                    %
Provision for income taxes                   $     991          $      284               40.2%             $     707



                   Provision for Income Taxes for the Nine Months Ended September 30, 2021 and 2020
                                                (dollars in thousands)
                                                 2021                          Change                          2020
                                                                      $                    %
Provision for income taxes                   $   1,832          $      286               18.5%             $   1,546



The changes in the tax provision for the three month and nine-month periods
ended September 30, 2021 compared to the same periods in 2020 were driven
primarily by changes in income before income taxes and the jurisdictional mix of
earnings. No provision or benefit was provided in the United States due to a
full valuation on its deferred tax asset.

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LIQUIDITY AND CAPITAL RESOURCES

Liquidity and sources of liquidity

Our principal sources of liquidity include cash and cash equivalents
totaling $50.5 million as of September 30, 2021, as well as the availability of
borrowings of up to $70.0 million under our revolving Credit Facility. We have
generally funded operations in recent years through the use of existing cash
balances, supplemented from time to time with the proceeds of long-term debt and
borrowings under our credit facilities.

In quarter ended September 30, 2021, we committed to a digital transformation
initiative focused around modernizing our enterprise-wide infrastructure and
technologies to benefit our customers and drive enhanced performance across the
company. Over the next four years we plan to invest significant funds and
resources towards implementing these new technologies.

On January 5, 2021, we entered into the Credit Agreement with JPMorgan Chase
Bank, N.A. and a syndicate of banks, as collateral and administrative agent, and
the Lenders. Pursuant to the Credit Agreement, the Lenders agreed to provide us
with the Term Loan and the Credit Facility. We borrowed the full amount of the
Term Loan, or $180.0 million, on the closing date, but did not borrow any of the
$70.0 million available under the Credit Facility on the closing date. The
proceeds from the Term Loan, plus available cash on hand, were used to repay
outstanding borrowings of $201.0 million under the Company's prior credit
facility with Cerberus Business Finance, LLC, which was then terminated. Prior
to the maturity of the Credit Facility, any amounts borrowed under the Credit
Facility may be repaid and, subject to the terms and conditions of the Credit
Agreement, reborrowed in whole or in part without penalty. The Credit Agreement
contains two financial covenants. The Company is required to maintain a maximum
total net leverage ratio, generally defined as the ratio of (x) consolidated
total indebtedness minus liquidity maintained in the United States up to $25
million to (y) consolidated EBITDA, not to exceed 4.00 to 1.00 for the fiscal
quarters ending March 31, 2021 through June 30, 2021; 3.75 to 1.00 for the
fiscal quarters ending September 30, 2021 through December 31, 2021; 3.50 to
1.00 for the fiscal quarters ending March 31, 2022 through June 30, 2022; 3.25
to 1.00 for the fiscal quarters ending September 30, 2022 through December 31,
2022; and 3.00 to 1.00 for fiscal quarters ending on or after March 31, 2023.
The Company is also required to maintain a fixed charge coverage ratio not less
than 1.20 to 1.00 at the end of each fiscal quarter ending on or after March 31,
2021. The Credit Agreement's fixed charge coverage ratio is generally defined as
the ratio of (x) consolidated EBITDA minus unfinanced capital expenditures, cash
tax expense and certain restricted payments to (y) consolidated fixed charges.

Our ability to satisfy the two financial covenants in the future is dependent on
our ability to maintain profitability at or above levels experienced over the
last 12 months. In recent quarters, we have experienced volatility in revenues
resulting from, among other things, (i) our transition towards subscription and
recurring revenue streams and the resulting decline in traditional upfront
product sales, (ii) dramatic changes in the media industry and the impact it has
on our customers, (iii) the impact of new and anticipated product launches and
features, (iv) volatility in currency rates, and (v) in the four most recent
quarters, the economic impacts of the COVID-19 pandemic. If revenues were to
decrease from the levels of the last 12 months, we would need to reduce expenses
to maintain the required level of profitability. In light of the COVID-19
pandemic, we are closely monitoring our current and expected future liquidity
levels and covenant compliance.

As discussed above, while the duration and severity of the COVID-19 pandemic,
and resulting economic impacts, remain uncertain, we expect that our business
operations and results of operations may be affected and uneven by these
developments for at least the balance of 2021. To address actual and expected
reductions in net revenues, we have continued to keep our discretionary spending
low. We may be required to take additional remedial steps, depending on the
duration and severity of the pandemic and its impact on our operations, which
could include, among other things (and where allowed by the lenders), (i)
further cost reductions, (ii) seeking replacement financing, (iii) raising funds
through the issuance of additional equity or debt securities or the incurrence
of additional borrowings, or (iv) disposing of certain assets or businesses.
Such remedial actions, which may not be available on favorable terms or at all,
could have a material adverse impact on our business. If we are not in
compliance with the covenants and are unable to obtain an amendment or waiver,
such noncompliance may result in an event of default under the Credit Agreement,
which could permit acceleration of the outstanding indebtedness under the Credit
Agreement and require us to repay such indebtedness before the scheduled due
date. If an event of default were to occur, we might not have sufficient funds
available to make the payments required. If we are unable to repay amounts owed,
the lenders may be entitled to foreclose on and sell substantially all of our
assets, which secure our borrowings under the Credit Agreement.

On May 11, 2020, we received $7.8 million of proceeds in connection with our
incurrence of a loan under the PPP. The loan had a fixed interest rate of 1% and
was to mature on May 11, 2022. Interest payments are deferred until a
forgiveness decision is returned by the SBA. Pursuant to the CARES Act and
implementing rules and regulations, we applied to the SBA for the full
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amount of the PPP loan to be forgiven. On July 6, 2021, the Company received
notification from the Lender that the SBA approved the Company's PPP loan
forgiveness application for the entire PPP loan balance of $7.8 million plus all
accrued interest. The forgiveness of the PPP loan was recognized during the
period ending September 30, 2021 within other income on our Statement of
Operations.

Our cash requirements vary depending on factors such as the growth of the
business, changes in working capital, and capital expenditures. We anticipate
that we will have sufficient internal and external sources of liquidity to fund
operations and anticipated working capital and other expected cash needs for at
least the next 12 months as well as for the foreseeable future. We also believe
that our financial resources will allow us to manage the anticipated impact of
COVID-19 on our business operations and cash flows for the foreseeable future,
which could include reductions in revenue and delays in payments from customers
and partners. The challenges posed by COVID-19 on our business are constantly
evolving. Consequently, we will continue to evaluate our financial position in
light of future developments, particularly those relating to COVID-19.

Cash flow

The following table summarizes our cash flows for the periods presented (in thousands):

Nine months ended September 30,

                                                                           2021                   2020
Net cash provided by operating activities                           $         35,418          $    8,843
Net cash used in investing activities                                         (4,750)             (5,619)
Net cash used in financing activities                                        (59,156)            (24,313)

Effect of exchange rates on cash, cash equivalents and restricted cash

                                                             (927)              1,394

Net decrease in cash, cash equivalents and restricted cash $

(29,415) ($ 19,695)

Cash flow from operating activities

Cash provided by operating activities aggregated $35.4 million for the nine
months ended September 30, 2021. The increase in cash provided by operations
compared to the nine months ended September 30, 2020 was primarily due to an
increase in revenue and a change in working capital.

Cash flow from investing activities

For the nine months ended September 30, 2021, net cash flows used in investing
activities reflected $4.8 million used for the purchase of property and
equipment. Our purchases of property and equipment largely consist of computer
hardware and software to support R&D activities and information systems.

Cash flow from financing activities

For the nine months ended September 30, 2021, net cash flows used in financing
activities were primarily the result of our stock repurchase program and our
common stock repurchases for tax withholdings for net settlement of equity
awards. In addition, we paid down $28 million on our term loan as part of our
refinancing activity in January 2021.

RECENT ACCOUNTING POSITION STATEMENTS

Recently adopted accounting positions and recent accounting positions to be adopted

Our recently adopted and to be adopted accounting positions are presented in note 1 “Financial information” of our notes to the unaudited condensed consolidated financial statements in part I, item 1 of this form 10-Q.

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