EX-99.1 2 a11-09x18exhibit991.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1
Avid Technology Announces Q3 2018 Results and
Updates Full-Year 2018 Guidance

Operating Income increased 90% year-over-year and Adjusted EBITDA increased 26% year-over-year driven by an improvement in Gross Margin and reduction in Operating Expenses
Subscription revenue grew 27% year-over-year, largely driven by the Company’s e-commerce business which grew 43% year-over-year

BURLINGTON, Mass., November 7, 2018 Avid® (NASDAQ: AVID), the leading technology provider that powers the media and entertainment industry, today announced its third quarter 2018 financial results and updated its full-year 2018 guidance.

Highlights of Third Quarter 2018 Financial Results
•
Bookings were $119.4 million, an increase of 16% year-over-year and 8% sequentially.
•
Revenue was $104.0 million, a decrease of 1% year-over-year and an increase of 6% sequentially.
•
Gross Margin was 58.3%, up 90 basis points year-over-year, and non-GAAP Gross Margin was 60.2%, up 100 basis points year-over-year.
•
Operating Expenses were $53.6 million, a decrease of 5% year-over-year and 8% sequentially largely driven by savings from operational efficiency initiatives.
•
Operating Income was $7.0 million, an improvement of 90% or $3.3 million year-over-year and $9.1 million sequentially.
•
Adjusted EBITDA was $14.6 million, an increase of 26% year-over-year and 175% sequentially. Adjusted EBITDA Margin was 14%, up 300 basis points year-over-year and 860 basis points sequentially.
•
Net Cash Used in Operating Activities was $3.7 million due to changes in working capital.
•
Free Cash Flow was a deficit of $6.4 million, reflecting changes in working capital and the timing of billings.

Operational Metrics
•
Software revenue from subscriptions increased 27% year-over-year, with cloud-enabled software subscriptions now at approximately 116,000 at the end of the third quarter.
•
Revenue through the Company’s e-commerce activities was up 43% year-over-year.
•
Recurring Revenue was 60% of the Company’s revenue in Q3’18 up from 50% in Q3’17.
•
Annual Contract Value (ACV) was $249 million at the end of Q3’18 up from $222 million at the end of Q3’17, reflecting continuing growth in Avid’s high-margin subscription and maintenance revenues plus revenues under long-term agreements.

“We continued to make progress on our plan to drive better performance as evidenced by the improvement in our income statement,” said Jeff Rosica, Chief Executive Officer and President of Avid. “Our strategy to continue to move to higher margin subscription and software is progressing well as we saw double-digit growth in both subscriptions and e-commerce revenues. With that said, we will




continue with a sharp focus on operational improvements and driving revenue growth, which we believe will result in improved free cash flow generation.”

“During the third quarter, free cash flow was impacted by changes in working capital and the timing of billings,” commented Ken Gayron, Executive Vice President and Chief Financial Officer of Avid. “In the fourth quarter, we expect a return to revenue growth which, with continued operational improvements, should result in further improvement in operating income. We also expect to generate positive cash flow in the fourth quarter and full year due to improvements in operating income, a reversal of the negative impact of working capital from the prior quarter and stronger anticipated collections in the current quarter.”

Full Year 2018 Guidance
For full year 2018, Avid is reaffirming its Revenue and Adjusted EBITDA guidance and updating its Free Cash Flow guidance. This guidance reflects the adoption of the new revenue recognition standard ASC 606 as of January 1, 2018.
(in $ millions)
Full Year 2018
 
 
Revenue
$410 - $420
Adjusted EBITDA
$40 - $46
Free Cash Flow
$2 - $6

All guidance presented by the Company is inherently uncertain and subject to numerous risks and uncertainties. Avid’s actual future results of operations could differ materially from those shown in the table above. For a discussion of some of the key assumptions underlying the guidance, as well as the key risks and uncertainties associated with these forward-looking statements, please see “Forward-Looking Statements” below as well as the Avid Technology Q3 2018 Business Update presentation posted on Avid’s Investor Relations website.

2018 Investor Day
Avid will host an Investor Day on November 14, 2018 from 10:00 am to 3:00 pm Eastern Time at the Westin Grand Central located at 212 East 42nd Street, New York, NY. During the day, Avid will provide 2019 guidance and a detailed review of its business and strategy. Interested attendees should RSVP to Dean Ridlon, VP of Investor Relations, at Dean.Ridlon@Avid.com by November 9, 2018 to confirm attendance. A webcast and replay of the Investor Day will also be available on the Avid Investor Relations website.

Non-GAAP Financial Measures and Operational Metrics
Avid includes non-GAAP financial measures in this press release, including Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow, and non-GAAP Gross Margin. The Company also includes the operational metrics of Bookings, Cloud-enabled software subscriptions, Recurring Revenue and Annual Contract Value in this release. Avid believes the non-GAAP financial measures and operational metrics provided in this release provide helpful information to investors with respect to evaluating the Company’s performance. Unless noted, all financial and operating information is reported based on actual exchange rates. Definitions of the non-GAAP financial measures and operational metrics are included in our Form 8-K filed today. Reconciliations of the non-GAAP financial measures in this release to the Company's comparable GAAP financial measures for the periods presented are set forth




below and are also included in the supplemental financial and operational data sheet available on our investor relations webpage at ir.avid.com, which also includes definitions of all operational metrics.

The earnings release also includes forward-looking non-GAAP financial measures, including Adjusted EBITDA and Free Cash Flow. Reconciliations of these forward-looking non-GAAP financial measures are not included in the earnings release due to the high variability and difficulty in making accurate forecasts and projections of some of the excluded information, together with some of the excluded information not being ascertainable or accessible at this time. As a result, the Company is unable to quantify certain amounts that would be required to be included in the most directly comparable GAAP financial measure without unreasonable efforts.

Conference Call
Avid will host a conference call to discuss its financial results for the third quarter 2018 on Wednesday, November 7, 2018 at 5:00 p.m. ET. The call will be open to the public and can be accessed by dialing 334-323-0522 and referencing confirmation code 6405952. You may also listen to the call on the Avid Investor Relations website. To listen via the website, go to the events tab at ir.avid.com for complete details prior to the start of the conference call. A replay of the call will also be available on the Avid Investor Relations website shortly after the completion of the call.

Forward-Looking Statements
Certain information provided in this press release, including the tables attached hereto, include forward-looking statements that involve risks and uncertainties, including projections and statements about our anticipated plans, objectives, expectations and intentions. Among other things, this press release includes estimated results of operations for the year ending December 31, 2018, which estimates are based on a variety of assumptions about key factors and metrics that will determine our future results of operations, including, for example, anticipated market uptake of new products and market-based cost inflation. Other forward-looking statements include, without limitation, statements based upon or otherwise incorporating judgments or estimates relating to future performance such as future operating results and expenses; earnings; backlog; revenue backlog conversion rate; product mix and free cash flow; Recurring Revenue and Annual Contract Value; our future strategy and business plans; our product plans, including products under development, such as cloud and subscription based offerings; our ability to raise capital and our liquidity. The projected future results of operations, and the other forward-looking statements in this release, are based on current expectations as of the date of this release and subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including but not limited to the effect on our sales, operations and financial performance resulting from: our liquidity; our ability to execute our strategic plan, and meet customer needs; our ability to retain and hire key personnel; our ability to produce innovative products in response to changing market demand, particularly in the media industry; our ability to successfully accomplish our product development plans; competitive factors; history of losses; fluctuations in our revenue based on, among other things, our performance and risks in particular geographies or markets; our higher indebtedness and ability to service it and meet the obligations thereunder; restrictions in our credit facilities; our move to a subscription model and related effect on our revenues and ability to predict future revenues; fluctuations in subscription and maintenance renewal rates; elongated sales cycles; fluctuations in foreign currency exchange rates; seasonal factors; adverse changes in economic conditions; variances in our revenue backlog and the realization thereof; and the possibility of legal proceedings adverse to our company. Moreover, the business may be adversely affected by future legislative, regulatory or other changes, including tax law changes, as well as other economic, business and/or competitive factors. The risks included above are not exhaustive. Other factors that could adversely affect our business and prospects are set forth in our




public filings with the SEC. Forward-looking statements contained herein are made only as to the date of this press release and we undertake no obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required by law.

About Avid
Avid delivers the most open and efficient media platform, connecting content creation with collaboration, asset protection, distribution, and consumption. Avid’s preeminent customer community uses Avid’s comprehensive tools and workflow solutions to create, distribute and monetize the most watched, loved and listened to media in the world-from prestigious and award-winning feature films to popular television shows, news programs and televised sporting events, and celebrated music recordings and live concerts. With the most flexible deployment and pricing options, Avid’s industry-leading solutions include Media Composer®, Pro Tools®, Avid NEXIS®, MediaCentral®, iNEWS®, AirSpeed®, Sibelius®, Avid VENUE™, FastServe®, Maestro™, and PlayMaker™. For more information about Avid solutions and services, visit www.avid.com, connect with Avid on Facebook, Instagram, Twitter, YouTube, LinkedIn, or subscribe to Avid Blogs.

© 2018 Avid Technology, Inc. All rights reserved. Avid, the Avid logo, Avid NEXIS, Avid FastServe, AirSpeed, iNews, Maestro, MediaCentral, Media Composer, NewsCutter, PlayMaker, Pro Tools, Avid VENUE, and Sibelius are trademarks or registered trademarks of Avid Technology, Inc. or its subsidiaries in the United States and/or other countries. All other trademarks are the property of their respective owners. Product features, specifications, system requirements and availability are subject to change without notice.

Investor Contact:
Dean Ridlon
Avid
dean.ridlon@avid.com
(978) 640-3379

PR Contact:
Jim Sheehan
Avid
jim.sheehan@avid.com
(978) 640-3152

















AVID TECHNOLOGY, INC.
Condensed Consolidated Statements of Operations
(unaudited - in thousands except per share data)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2018

2017
 
2018
 
2017
Net revenues:
 
 
 
 
 
 
 
Products
$
52,133

 
$
54,319

 
$
144,922

 
$
152,980

Services
51,913

 
50,946

 
155,676

 
158,765

Total net revenues
104,046

 
105,265

 
300,598

 
311,745

 
 
 
 
 
 
 
 
Cost of revenues:
 
 
 
 
 
 
 
Products
27,042

 
29,485

 
79,684

 
80,478

Services
14,443

 
13,472

 
42,414

 
41,747

Amortization of intangible assets
1,950

 
1,950

 
5,850

 
5,850

Total cost of revenues
43,435

 
44,907

 
127,948

 
128,075

Gross profit
60,611

 
60,358

 
172,650

 
183,670

 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
Research and development
15,873

 
16,025

 
47,543

 
51,904

Marketing and selling
23,461

 
25,652

 
77,352

 
80,481

General and administrative
13,660

 
15,193

 
41,656

 
43,268

Amortization of intangible assets
363

 
362

 
1,089

 
1,088

Restructuring costs, net
226

 
(582
)
 
3,401

 
6,464

Total operating expenses
53,583

 
56,650

 
171,041

 
183,205

 
 
 
 
 
 
 
 
Operating income
7,028

 
3,708

 
1,609

 
465

 
 
 
 
 
 
 
 
Interest and other expense, net
(5,725
)
 
(4,701
)
 
(17,362
)
 
(13,465
)
Income (loss) before income taxes
1,303

 
(993
)
 
(15,753
)
 
(13,000
)
Provision for (benefit from) income taxes
425

 
(1,065
)
 
824

 
(326
)
Net income (loss)
$
878

 
$
72

 
$
(16,577
)
 
$
(12,674
)
 
 
 
 
 
 
 
 
Net income (loss) per common share – basic and diluted
$
0.02

 
$
0.00

 
$
(0.40
)
 
$
(0.31
)
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding – basic
41,792

 
41,133

 
41,596

 
40,954

Weighted-average common shares outstanding – diluted
42,226

 
41,355

 
41,596

 
40,954







AVID TECHNOLOGY, INC.
Reconciliations of GAAP financial measures to Non-GAAP financial measures
(unaudited - in thousands)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2018
 
2017
 
2018
 
2017
Non-GAAP revenue
 
 
 
 
 
 
 
GAAP revenue
$
104,046

 
$
105,265

 
$
300,598

 
$
311,745

Amortization of acquired deferred revenue
—

 
—

 
—

 
—

Non-GAAP revenue
104,046

 
105,265

 
300,598

 
311,745

Pre-2011 Revenue
—

 
142

 
—

 
907

Elim PCS
—

 
—

 
—

 
1,700

Non-GAAP Revenue w/o Pre-2011 and Elim
104,046

 
105,123

 
300,598

 
309,138

 
 
 
 
 
 
 
 
Non-GAAP gross profit


 


 
 
 
 
GAAP gross profit
60,611

 
60,358

 
172,650

 
183,670

Amortization of intangible assets
1,950

 
1,950

 
5,850

 
5,850

Stock-based compensation
95

 
63

 
222

 
547

Non-GAAP gross profit
62,656

 
62,371

 
178,722

 
190,067

Pre-2011 Revenue
—

 
142

 
—

 
907

Elim PCS
—

 
—

 
—

 
1,700

Non-GAAP gross profit w/o Pre-2011 and Elim
62,656

 
62,229

 
178,722

 
187,460

 


 


 
 
 
 
Non-GAAP operating expenses


 


 
 
 
 
GAAP operating expenses
53,583

 
56,650

 
171,041

 
183,205

Less Amortization of intangible assets
(363
)
 
(362
)
 
(1,089
)
 
(1,088
)
Less Stock-based compensation
(1,981
)
 
(2,418
)
 
(4,109
)
 
(5,327
)
Less Restructuring costs, net
(226
)
 
582

 
(3,401
)
 
(6,464
)
Less Restatement costs
(223
)
 
(284
)
 
(815
)
 
(726
)
Less Acquisition, integration and other costs
(17
)
 
244

 
(61
)
 
104

Less Efficiency program costs
(2
)
 
(483
)
 
(80
)
 
(3,054
)
Non-GAAP operating expenses
50,771

 
53,929

 
161,486

 
166,650

 


 


 
 
 
 
Non-GAAP operating income


 


 
 
 
 
GAAP operating income
7,028

 
3,708

 
1,609

 
465

Amortization of intangible assets
2,313

 
2,312

 
6,939

 
6,938

Stock-based compensation
2,076

 
2,481

 
4,331

 
5,874

Restructuring costs, net
226

 
(582
)
 
3,401

 
6,464

Restatement costs
223

 
284

 
815

 
726

Acquisition, integration and other costs
17

 
(244
)
 
61

 
(104
)
Efficiency program costs
2

 
483

 
80

 
3,054

Non-GAAP operating income
11,885

 
8,442

 
17,236

 
23,417

 


 
 
 
 
 
 




Adjusted EBITDA


 
 
 
 
 
 
Non-GAAP operating income (from above)
11,885

 
8,442

 
17,236

 
23,417

Depreciation
2,693

 
3,088

 
8,967

 
9,994

Adjusted EBITDA
14,578

 
11,530

 
26,203

 
33,411

Adjusted EBITDA margin
14
 %
 
11
%
 
9
 %
 
11
%
Pre-2011 Revenue
—

 
142

 
—

 
907

Elim PCS
—

 
—

 
—

 
1,700

Adjusted EBITDA w/o Pre-2011 and Elim
14,578

 
11,388

 
26,203

 
30,804

Adjusted EBITDA w/o Pre-2011 and Elim margin
14
 %
 
11
%
 
9
 %
 
10
%
 
 
 
 
 
 
 
 
Adjusted free cash flow
 
 


 
 
 
 
GAAP net cash (used in) provided by operating activities
(3,747
)
 
31

 
(4,248
)
 
6,103

Capital expenditures
(2,652
)
 
(3,017
)
 
(7,540
)
 
(6,125
)
Free Cash Flow
(6,399
)
 
(2,986
)
 
(11,788
)
 
(22
)
 


 
 
 
 
 
 
Non-Operational / One-time Items


 


 
 
 
 
Restructuring payments
1,156

 
2,546

 
5,027

 
9,540

Restatement payments
299

 
169

 
987

 
379

Acquisition, integration and other payments
2

 
174

 
(10
)
 
193

Efficiency program payments
3

 
634

 
134

 
3,363

Sub-Total Non-Operational / One-Time Items
1,460

 
3,523

 
6,138

 
13,475

 
 
 


 
 
 
 
Adjusted free cash flow
$
(4,939
)
 
$
537

 
$
(5,650
)
 
$
13,453

Adjusted free cash flow conversion of adjusted EBITDA
(34
)%
 
5
%
 
(22
)%
 
40
%

These non-GAAP measures reflect how Avid manages its businesses internally. Avid’s non-GAAP measures may vary from how other companies present non-GAAP measures. Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles. This non-GAAP information supplements, and is not intended to represent a measure of performance in accordance with, disclosures required by generally accepted accounting principles, or GAAP.  Non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP.







AVID TECHNOLOGY, INC.
Condensed Consolidated Balance Sheets
(unaudited - in thousands)
 
September 30,
 
December 31,
 
2018
 
2017
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
50,460

 
$
57,223

Restricted cash
8,500

 
—

Accounts receivable, net of allowances of $1,268 and $11,142 at September 30, 2018 and December 31, 2017, respectively
50,998

 
40,134

Inventories
32,111

 
38,421

Prepaid expenses
9,453

 
8,208

Contract assets
17,147

 
—

Other current assets
6,890

 
10,341

Total current assets
175,559

 
154,327

Property and equipment, net
19,350

 
21,903

Intangible assets, net
6,745

 
13,682

Goodwill
32,643

 
32,643

Long-term deferred tax assets, net
1,282

 
1,318

Other long-term assets
11,466

 
10,811

Total assets
$
247,045

 
$
234,684

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
33,593

 
$
30,160

Accrued compensation and benefits
21,666

 
25,466

Accrued expenses and other current liabilities
37,865

 
31,549

Income taxes payable
2,182

 
1,815

Short-term debt
1,401

 
5,906

Deferred revenue
73,935

 
121,184

Total current liabilities
170,642

 
216,080

Long-term debt
229,429

 
204,498

Long-term deferred revenue
14,289

 
73,429

Other long-term liabilities
6,820

 
9,247

Total liabilities
421,180

 
503,254

 
 
 
 
Stockholders’ deficit:
 
 
 
Common stock
423

 
423

Additional paid-in capital
1,028,468

 
1,035,808

Accumulated deficit
(1,192,913
)
 
(1,284,703
)
Treasury stock at cost
(6,717
)
 
(17,672
)
Accumulated other comprehensive loss
(3,396
)
 
(2,426
)
Total stockholders’ deficit
(174,135
)
 
(268,570
)
Total liabilities and stockholders’ deficit
$
247,045

 
$
234,684







AVID TECHNOLOGY, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited - in thousands)
 
Nine Months Ended
 
September 30,
 
2018
 
2017 (1)
Cash flows from operating activities:
 
 
 
Net loss
$
(16,577
)
 
$
(12,674
)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
 
 
 
Depreciation and amortization
15,905

 
16,932

Provision for (recovery from) doubtful accounts
61

 
(158
)
Stock-based compensation expense
4,331

 
5,874

Non-cash provision for restructuring
1,083

 
3,191

Non-cash interest expense
8,697

 
7,255

Unrealized foreign currency transaction (gains) losses
(794
)
 
6,885

Provision for (benefit from) deferred taxes
6

 
(925
)
Changes in operating assets and liabilities:
 

 
 

Accounts receivable
10,129

 
2,877

Inventories
294

 
9,542

Prepaid expenses and other assets
3,724

 
(3,958
)
Accounts payable
3,467

 
2,065

Accrued expenses, compensation and benefits and other liabilities
(12,453
)
 
543

Income taxes payable
423

 
(161
)
Deferred revenue and contract assets
(22,544
)
 
(31,185
)
Net cash (used in) provided by operating activities
(4,248
)
 
6,103

 
 
 
 
Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(7,540
)
 
(6,125
)
Increase in other long-term assets
(25
)
 
(24
)
Net cash used in investing activities
(7,565
)
 
(6,149
)
 
 
 
 
Cash flows from financing activities:
 

 
 

Proceeds from long-term debt
22,688

 
912

Repayment of debt
(7,808
)
 
(3,750
)
Proceeds from the issuance of common stock under employee stock plans
266

 
219

Common stock repurchases for tax withholdings for net settlement of equity awards
(957
)
 
(732
)
Net cash provided by (used in) financing activities
14,189

 
(3,351
)
 
 
 
 
Effect of exchange rate changes on cash, cash equivalents and restricted cash
(358
)
 
753

Net increase (decrease) in cash, cash equivalents and restricted cash
2,018

 
(2,644
)
Cash, cash equivalents and restricted cash at beginning of period
60,433

 
49,948

Cash, cash equivalents and restricted cash at end of period
$
62,451

 
$
47,304

Supplemental information:
 
 
 
Cash and cash equivalents
$
50,460

 
$
44,094

Restricted cash
8,500

 
—

Restricted cash included in other long-term assets
3,491

 
3,210

Total cash, cash equivalents and restricted cash shown in the statement of cash flows
$
62,451

 
$
47,304


(1) The Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2017 has been revised to reflect the adoption, on January 1, 2018, of ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The Condensed Consolidated Statements of Cash Flows reflects the changes during the periods in the total of cash, cash equivalents, and restricted cash. Therefore, restricted cash activity is included with cash when reconciling the beginning-of-period and end-of-period total amounts shown.




AVID TECHNOLOGY, INC.
Supplemental Revenue Information
(unaudited - in millions)

 
Backlog Disclosure for Quarter Ended September 30, 2018
 
 
 
 
 
 
December 31, 2017
 
 
 
 
As Previously
ASC 606
 
As
June 30,
September 30,
 
 
Reported
Adj.
 
Adjusted
2018
2018
 
Revenue Backlog*
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred Revenue

$194.6


($96.6
)
(1)

$98.0


$97.7


$88.2

 
Other Backlog
341.5

(6.6
)
(2)
334.9

350.5

370.9

 
Total Revenue Backlog

$536.1


($103.2
)
 

$432.9


$448.2


$459.1

 
 
 
 
 
 
 
 
 
The expected timing of recognition of revenue backlog as of September 30, 2018 is as follows:
 
 
 
 
 
 
 
 
 
 
 
2018
2019
 
2020
Thereafter
Total
 
 
 
 
 
 
 
 
 
Deferred Revenue

$32.0


$40.5

 

$10.3


$5.4


$88.2

 
Other Backlog
41.9

106.5

 
59.6

162.9

370.9

 
Total Revenue Backlog

$73.9


$147.0

 

$69.9


$168.3


$459.1

 
 
 
 
 
 
 
 
 
*A definition of Revenue Backlog is included in the supplemental financial and operational data sheet available on our investor relations webpage at ir.avid.com.
 
 
 
 
 
 
 
 
 
(1) The reduction is primarily attributable to the elimination of the requirement to have vendor specific objective evidence of fair value for undelivered elements that existed under ASC 605, the prior applicable accounting guidance, for software products, which no longer precludes revenue recognition under ASC 606. The impact of the adoption of ASC 606 reported in our Form 10-Q for the three months ended March 31, 2018 has been revised to reflect an additional reduction to deferred revenue and accumulated deficit as of January 1, 2018 of $3.8 million.
 
 
 
(2) For subscription contracts, we are now required under ASC 606 to record contract assets for annual and multi-year subscriptions that are billed monthly, resulting in an increase in contract assets at the date of adoption. In addition, some of our enterprise agreements have fixed payment schedules whereas the timing of the fulfillment of performance obligations under the contracts can vary, which can result in the fulfillment of performance obligations exceeding contract billings, which also results in contract assets.