Posts Tagged ‘Avid’

Avid has Strong Q2, Raises Full-Year Guidance

Analysis, Broadcast technology vendor financials, Quarterly Results | Posted by Josh Stinehour
Aug 08 2016

Avid Technology announced Q2 2016 GAAP revenue of $134.1 million, a year-over-year increase of 22.1% against Q2 2015, and a decline of 6.5% versus Q1 2016.  Avid Logo_ white background

Approximately 60% of the year-over-year growth is attributable to a change in the accounting treatment of revenue recognized for the release of the latest Pro Tools version 12.5.  The ability to more quickly recognize revenue reflects Avid’s progress over the past two years of eliminating the practice of implied support for products and transitioning to explicit support and recurring revenue models.

Avid did not disclose the amount of the growth attributable to revenue contribution from Orad, which was purchased in late June 2015.  As a reference, Orad had $10.4 million of revenue during Q1 2015.

Net income for the quarter was $13.0 million or $0.33 per share.  This compares to Q2 2016 net income of ($4.0) million or ($0.10) per share.  During the first quarter of 2016 Avid had net income of $20.9 million or $0.53 per share.

Gross margins (GAAP) for the quarter were 65.5%, an increase of 510 basis points when compared to the year earlier period, and a decrease of 420 basis points against the preceding quarter.

Operating income for Q2 2016 was $18.8 million, a substantial increase over the operating loss of $8.1 million in Q2 2015, though a decline of 26.8% versus Q1 2016.

R&D expense for the quarter were $21.4 million, an 8.1% decline against Q2 2015 R&D levels, and flat when compared to the first quarter of 2016.  As a percentage of revenue R&D expenses were 15.9% for the quarter, compared to 21.2% of total revenue in Q2 2015.

Sales and marketing costs for Q2 2016 were $30.2 million, representing an 8.0% decline versus Q2 2015 sales and marketing levels, and a decline of 4.4% versus Q1 2016.  Sales and marketing expenses were 22.5% of Q2 2016 revenue, a decline versus 29.9% of total revenue from the second quarter of 2015.

G&A expense was $16.8 million for Q2 2016, a decline of 3.5% versus the year-earlier quarter, and a decline of 5% against the preceding quarter.  Expressed in terms of total revenue, G&A expense was 12.5% of sales in Q2 2016 versus 15.9% in Q2 2015.

When considering the comparable period Q2 2015 figures do not include a full contribution of Orad’s operations (purchased in late June 2015), the decline across all operating expense categories – especially in sales – illustrates the impact of Avid’s recent restructuring initiatives.

There are many one-time expenses and non-cash items in Avid’s income statement results.  To provide a more normalized view of profitability Avid cites adjusted EBITDA, which is defined as operating income plus expense add backs for costs attributed to amortization, restructuring, restatements, stock-based compensation, acquisitions, integration activities, and efficiency program costs.  Adjusted EBITDA for the quarter was $29.4M, a substantial increase over the adjusted EBITDA of $1.4 million from Q2 2015.

Product and Services Revenue Breakdown

  • Product revenue for the quarter was $75.6 million, a slight decline of 0.7% versus the prior year, and a decline of 10.5% against the preceding quarter. Products represented 56.4% of overall revenue in the quarter, a decrease versus the 69.3% contribution during the second quarter of 2015.
    • Video solutions represented $44.5 million of Product sales, an increase of 3.9% versus the prior year. The primary cause of the increase in sales for the quarter was the contribution of revenues from the Orad acquisition.
    • Audio solution revenue for the quarter was $31.1 million, a decrease of 6.6% against the year-earlier period. Lower audio sales for the quarter were attributed to weaker Pro Tools sales.
  • Services revenue was $58.5 million, an increase of 73.9% versus the year-over-year period, and a slight decline of 0.8% against the preceding quarter. The rise in Services revenue was due to the accelerated revenue recognition associated with Pro Tools 12.5 sales.  For the quarter Services contributed 43.6% of total revenue, an increase versus the 30.6% contribution from Q2 2015.

Revenue by Geography

  • Revenues from the United States were $44.4 million for the quarter, an increase of 5.8% versus Q2 2015
  • Revenue contribution from Other Americas was $10.2 million, an increase of 54.2% on a year-over year basis
  • EMEA revenues were $58.9 million, a 25.3% increase against Q2 2015
  • The Asia-Pacific region contributed $20.5 million in revenue for the quarter, a rise of 44%

Update on Efficiency Initiative and Cash Generation

During the first quarter of 2016, Avid announced a $68 million (annualized) efficiency initiative.  As part of the Q2 2016 earnings release Avid’s management increased the efficiency target to $76 million.  A total of $57 million of the annualized savings have been achieved through the end of the second quarter.  The full savings are expected beginning in 2017.

Given the complexity of Avid’s financial statements, it is helpful to review the impact on the Company’s cash balance.  Cash used in operations for the quarter was $33.8 million.  This compares to cash used in operations of $30.8 in Q2 2015 and $11.2 million during the first quarter of 2016.

During Avid’s earlier first quarter release, Management cautioned the second quarter would experience negative cash flow between $27.5 million and $32.5 million.  It was attributable to a lower end of quarter accounts receivable balance for the first quarter, which was brought on by a decline in bookings.

Avid ended the quarter with $50.4 million in cash.  Avid had started the quarter with $87.8 million of cash.

Several factors have combined to make Avid’s financial disclosures difficult to comprehend, most notably the restatement in late 2014, which introduced a considerable amount of amortized revenue from prior financial periods.  Though this revenue is now recognized in Avid’s income statement, it does not represent any actual cash received from clients.  In other words, it is non-cash revenue with 100% gross margins.  Adding to this complexity are the effects of recent restructuring initiatives, the impact of the Orad acquisition, and the ongoing transition to a subscription model.  (Much of the complexity will abate during the second half of 2016.)

In an effort to better communicate the results of Avid’s ongoing transformation, management references several new metrics.

Update on Transformation:

Below is a chart from Avid’s investor presentation for Q2 2016 illustrating several areas of progress on the market adoption of Avid’s Everywhere Platform.

avid-transformation

Commenting on the transformation progress, Avid CEO Louis Hernandez, Jr. stated, “Our financial results and operational performance this quarter underscore the progress we are making to transform our company into a service-platform business with strong positions in higher-growth categories and a greater proportion of recurring revenue. We have a clear path to complete this transformation by our target of mid-2017, which will enable us to accelerate growth, realize a more efficient cost structure, increase revenue visibility, and generate enhanced value for our shareholders over the long-term.”

Business Outlook:

Bookings for the quarter were $102.2 million, a decline of 13.3% versus Q2 2015, and a 4.3% increase compared to the first quarter of 2016.  The original guidance for Q2 2016 bookings was for $99 million to $115 million, so the results were in line with Q1 guidance.

For Q3 2016, management provided guidance of bookings between $100 million and $120 million.  The full backlog (post impact of restatement) was $464.7 million at the end of second quarter, a 14% decrease over the backlog at the end of the second quarter of 2015.  Avid has worked through much of the backlog introduced from the 2014 financial restatement.  The balance for the “pre-2011” backlog has been reduced to $8 million as of the end of the quarter.

Avid is expecting to begin generating adjusted free cash flow in the second half of 2016, starting with a breakeven cash flow result for the third quarter of 2016.  As part of the earnings release, Avid increased its full year guidance for 2016 (link to previous guidance) to the following,

avid-guidance

“We are raising our full-year guidance range for non-GAAP revenue and adjusted EBITDA. We are also improving our guidance range for non-GAAP operating expenses because we are increasing our annualized run-rate cost savings target to $76 million. We are on track to be cash flow positive for the full year as we continue to execute our efficiency program and growth initiatives. We are reaffirming guidance for bookings, although we expect to be at the lower end of the range, due to higher than expected volatility in the media enterprise marketsaid Mr. Hernandez.

 

Related Content:

Press Release on Avid’s Q2 2016 Earnings Results:

Earnings Presentation Avid Q2 2016 Results

 

 

© Devoncroft Partners 2009 – 2016. All Rights Reserved.

 

 

Quantum Announces 20th Consecutive Quarter of Scale-out Storage Growth; Cites Large Virtual Reality Deal

Broadcast technology vendor financials, Quarterly Results | Posted by Josh Stinehour
Jul 28 2016

Quantum announced results for its first fiscal quarter of 2017, representing the three month period ending June 30, 2016.  QuantumTotal revenue for the quarter was $116.3 million, an increase of 4.9%
versus the year earlier period (FY Q1 2016), and a 3.1% decrease versus the preceding quarter (FY Q4 2016).  The first fiscal quarter of the year is generally Quantum’s weakest.

The quarter’s revenue of $116.3 million exceeded the high end of management’s guidance of $115 million (issued during the previous quarter).  The Company’s gross margins were in-line with guidance for the quarter, and its earnings result were slightly above earlier guidance.

Gross margins (GAAP) were 43.3% for the quarter, a slight improvement over the 42.4% gross margins from the year earlier period, and a slight decline compared to the 45.6% gross margins in the preceding quarter.

Net loss (GAAP) for the quarter was $3.8 million, equating to $0.01 loss per diluted share.  Quantum recorded a net loss of $10.7 million (or a loss of $0.04 per diluted share) during the year-earlier period and a net loss of $52.4 million in the preceding quarter.  The preceding quarter, fiscal fourth quarter of 2016, included a non-cash goodwill impairment charge of $55.6 million.

As of June 30, 2016 cash and cash equivalents were $34.5 million, a slight increase over the $33.8 million balance as of March 31, 2016.

Most relevant to Quantum’s activities in the media and entertainment segment, the Company’s scale-out storage business, which includes Quantum’s StorNext storage offerings, registered its 20th consecutive quarter of year-over-year growth.  Scale-out storage revenue was $30.8 million in the quarter, an 11% increase versus last year’s first quarter.

Management disclosed a win rate for scale-out storage in the quarter in the 70% range.  Over 120 new scale-out storage customers were added during the quarter, which compares favorably to the more than 90 new customers added in the first quarter of fiscal 2016.  During the call with equity analysts, management also highlighted several recent scale-out storage projects in the media and entertainment sector including a $200,000 plus deal “with one of the emerging leaders in virtual reality.”

The earnings release noted Quantum’s NAB Show announcement of integration between Avid’s Interplay MAM system and Quantum’s StorNext.  The integration enables media customers to control StorNext archive and restore functions through Interplay.  Commenting on the Avid Integration at the NAB Show, Geoff Stedman, SVP of Marketing at Quantum, said, “Through initiatives ranging from solution development to closer alignment of sales and support activities, Quantum is working closely with Avid to help Avid customers better manage their content over the long term. Together our technologies empower users to optimize their media storage and access to content on a broad range of archive platforms, providing significant time and cost savings that make it easier to achieve their creative and business goals.”

 

Update on Convertible Notes due November 2017

Quantum’s CFO Fuad Ahmad provided an update on Quantum’s efforts to address its convertible note balance, in the amount of $69.3 million, due in November 2017.  On the earnings call with analysts, Mr. Ahman said, “we want to be proactive, but sensible about our financing options. To that end, we’re in discussions with a number of financial institutions regarding expanding our credit lines to provide sufficient near and long-term liquidity and to create a clear and executable roadmap to address the convertible notes, which I may add will mature in another 15 months.”

Quantum had repurchased approximately $83 million dollars of prior convertible notes during November 2015.

 

Guidance for Fiscal Second Quarter, Full Year 2017

Quantum’s management issued guidance for the second fiscal quarter of revenue between $188 million to $122 million with GAAP gross margins of between 41% and 42% and a GAAP loss per share of $0.01 to $0.00.

Management also reaffirmed the full year guidance of at least $500 million in total revenue, equating to year-over-year growth of at least 5%.  Driving this growth is an expectation of a continued increase in scale-out storage revenue across Quantum’s vertical focus areas – Media and entertainment, surveillance and intelligence, and unstructured data archives for technical workflows.

Scale-out storage is expected to account for 35% to 40% of Quantum’s total revenue, which would represent a year-over-year growth of 40% to 60%, if achieved.

Quantum’s CEO Jon Gacek offered the following commentary on the outlook for scale-out storage, “Looking more closely at scale-out storage, Q1 was our 20thth consecutive year-over-year growth quarter, and given our increasing market traction and opportunity, we feel very good about our ability to achieve our scale-out growth objectives for the year.”

 

Related Content:

Press Release: Fiscal first quarter 2017 earnings release

 

 

© Devoncroft Partners 2009 – 2016. All Rights Reserved.

 

 

2016 Big Broadcast Survey (BBS) Reports Now Available

broadcast technology market research, Broadcast Vendor Brand Research, market research | Posted by Josh Stinehour
Jul 21 2016

The 2016 Big Broadcast Survey (BBS) Reports are now available.

We have been publishing the BBS Reports since 2009.  Each new edition is created through several months of research, including interviews with technology end-users, global surveys of technology decision makers, analysis of the end-user responses, and visualization of the data collected.  Now in its eighth year of publication, the BBS remains the most comprehensive annual study of technology end-users in the global broadcast and media technology industry.  Nearly 10,000 technology professionals in 100+ countries participate in the BBS each year, making it the largest market study of the media technology industry.

Based on feedback from technology vendors, media companies, and investors, we have updated the vendors, product categories, and market trends profiled in the 2016 BBS to better align with recent market developments.

Select updates include the global tracking of IP Standard Adoption, a product level review of the 4K upgrade cycle, and planned usage of programmatic advertising exchanges.

The continual updates over the past eight years have helped the BBS reports remain a critical reference for industry executives to improve strategic decision-making, customer engagement, marketing strategy, product planning, and sales execution.  In addition to technology vendor and service provider strategic planning, BBS reports are also used frequently for M&A and investment activities by both buyers and sellers.

Three types of 2016 BBS reports are available:

  • 2016 BBS Global Brand Reports: provides deep insight into how each more than 100 broadcast technology suppliers (see full list below) are perceived by market participants, along with comprehensive benchmarking of broadcast technology vendors on a wide variety of metrics
  • 2016 BBS Product Reports: provide detailed information from buyers, specifiers, and users of broadcast technology products in 32 separate categories (see full list below)
  • 2016 BBS Global Market Report: provides detailed information about industry trends, major projects being planned, products being evaluated for purchase, current and future plant infrastructure, broadcast technology budgets, and planned deployment of new technologies including 4K, HEVC compression, and IP-based technology infrastructure

 

For additional information on the 2016 BBS report, please call or email me.

As is Devoncroft’s custom, we will publish highlights from this year’s BBS reports on the Devoncroft website.  These articles are posted on a semi-regular basis, so please check back often.

To receive posts when published, please enter register with your email in the box in the upper right-hand corner of the page.

The below table of logos (in alphabetical order) lists the technology vendor brands covered in the 2016 BBS.

2016-BBS-Logos

 

Technology Product Categories & Vendor Brands Covered in the 2016 BBS, by Application Area

 

Acquisition & Production:

ENG Cameras

Canon, Hitachi, Ikegami, JVC, Panasonic, Sony

Large Format Single Sensor Cameras

ARRI, Blackmagic Design, Canon, Red, Sony

Production Switchers

Blackmagic Design, For-A, Grass Valley, NewTek, Panasonic, Ross Video, SAM, Sony

Studio / System Cameras

Grass Valley, Hitachi, Ikegami, JVC, Panasonic, Sony

 

 

Post Production: 

Graphics & Branding

Adobe, Autodesk, Avid/Orad, ChyronHego, Evertz, Grass Valley, Imagine Communications, Ross Video, Vizrt

Video Editing

Adobe, Apple, Avid, Blackmagic Design, EVS, Grass Valley, Imagine Communications, Sony

 

 

Content Communications and Infrastructure:

Bonded Cellular

Dejero, LiveU, Teradek, TVU

Routing Switchers

Blackmagic Design, Evertz, Grass Valley, Imagine Communications, Ross Video, SAM, Utah Scientific

Signal Processing / Interfacing / Modular

Aja Video, Axon, Blackmagic Design, Evertz, For-A, Grass Valley, Imagine Communication, Ross Video, SAM

Video Transport

Aspera, Cisco, Ericsson, Evertz, Harmonic, Imagine Communications, Lawo, Media Links, Net Insight, Nevion, Riedel, Signiant

 

 

Storage:

High Performance Shared Storage:

Avid, Harmonic, Hitachi, HPE, Isilon Systems/EMC, NetApp, Quantum

Playout / Transmission Servers

Avid, EVS, Grass Valley, Harmonic, Imagine Communications, Ross Video

Production Servers

EVS, Grass Valley, Harmonic, Rohde & Schwarz, SAM

 

 

Audio:

Audio Consoles

Avid, Calrec, Lawo, Salzbrenner Stagetec, Solid State Logic (SSL), Soundcraft, Studer, Wheatstone, Yamaha

Audio Processing & Monitoring

Adobe, Avid, Dolby, Linear Acoustic, RTW, TSL, Wohler

Intercom / Talkback

Clear-Com, Riedel, RTS Intercom Systems, Trilogy

Microphones

AKG, Audio-Technica, beyerdynamic, Electro Voice, Marshall Electronics, Neumann, Schoeps, Sennheiser, Shure, Sony

Monitors (speakers)

Adam, Avid, Focal, Genelec, JBL, KRK Systems, Mackie, Neumann, PMC,

 

 

System Automation and Control:

Broadcast Business Management Systems

arvato/S4M, Imagine Communications, MediageniX, MSA Focus, SintecMedia, Wide Orbit

Archive & Archive Management

Masstech, Oracle/Front Porch Digital, Quantum, SGL, XenData

Media Asset Management

arvato/S4M, Avid, Dalet, EVS, Imagine Communications, Prime Focus Technologies, Vizrt, VSN

Playout Automation

Grass Valley, Imagine Communications, Pebble Beach, Playbox, Snell

Workflow Orchestration / BPM

Aspera, Avid, Imagine Communications, IBM, Sony, Telestream

 

 

Playout and Delivery:

Encoding / Transcoding

Arris, ateme, Cisco, Dalet/AmberFin, Elemental Technologies, Ericsson, Harmonic, Imagine Communications, Telestream

Integrated Playout (Channel in a Box)

Evertz, Grass Valley, Harmonic, Imagine Communications, Pebble Beach, Playbox, SAM

On-line / Streaming Video Delivery Platforms

Brightcove, Kaltura, Neulion, Ooyala, Piksel

Transmitters

GatesAir, Hitachi, NEC, Plisch, Rohde & Schwarz, Screen Service, Toshiba

 

 

Test, Quality Control and Monitoring:

Multiviewers

Avitech, Axon, Evertz, For-A, Grass Valley, Imagine Communications

Test & Measurement

Imagine Communications, IneoQuest, Leader, Phabrix, Rohde & Schwarz, Tektronix

 

 

© Devoncroft Partners 2009 – 2016. All Rights Reserved.

 

 

Avid 2015 Revenue and Profitability Decrease with Continued Transformation

Analysis, Annual Results, Broadcast technology vendor financials, Quarterly Results | Posted by Josh Stinehour
Mar 21 2016

Avid Technology announced full year 2015 results.  Management also provided long-term guidance for financial performance through 2018. Avid Logo_ white background

Total revenue for 2015 was $505.6 million, a decrease of 4.6% versus 2014 revenue.  Product revenue for the year was $336.4 million, a decline of 11.1% against 2014.  Products represented 66.5% of overall revenue in 2015.  Services revenue was $169.2 million, an increase of 11.6% versus the year prior.  Services contributed 33.5% of total revenue for the year.

Net income was $2.4 million or $0.06 per share.  This compares to 2014 net income of $14.7 million, which was $0.38 per share.

Gross margins for 2015 were 60.9%, a slight decline versus the 61.4% from 2014.

Operating income for 2015 was $6.9 million, a decrease of 64.6% versus 2014 operating income.  2015 Operating income included a restructuring cost of $6 million.

R&D expense for the year was $95.8 million, a 6.1% increase over 2014 R&D levels.  As a percentage of total revenue, R&D expenses were 18.9%, compared to 17% of total revenue in 2014.

Sales and marketing costs for 2015 were $122.5 million, representing a 7.8% decline versus 2014 sales and marketing levels.  Sales and marketing expenses were 24.2% of 2015 revenue, a slight decline versus 25.1% of total revenue in 2014.

G&A expense was $74.1 million for 2015, a decline of 8.7% versus the prior year.  Expressed in terms of total revenue, G&A expense was 14.6% of sales in 2015 versus 15.3% in 2014.

When considering the 2015 figures included six months of Orad’s operations, the decline in S&M and G&A illustrates the impact of anticipated cost synergies from the acquisition and Avid’s restructuring initiatives.

There are many one-time expenses and non-cash items in Avid’s income statement results.  To provide a more normalized view of profitability Avid cites adjusted EBITDA, which is defined as operating income plus add-backs for costs attributed to amortization, restructuring, restatements, stock-based compensation, acquisitions, integration activities, and efficiency program costs.  Adjusted EBITDA was 2015 $41.5M, a decline of 26% versus the same figure in 2014.

Cash used in operations for 2015 was $34 million.  The net effect of financing events, capital expenditures, and the Orad acquisition left Avid with $17.9 million of cash at the end of 2015.  The balance sheet does not account for the recent financing initiative announced by Avid in February.

Several factors have combined to complicate Avid’s financial disclosures. Most notable, the restatement in late 2014 introduced a considerable amount of amortized revenue from prior financial periods.  Though this revenue is now recognized in Avid’s income statement, it does not represent any actual cash received from clients.  In other words, it is non-cash revenue with 100% gross margins.  In aggregate, changes in deferred revenue represented a negative cash adjustment (versus net income) of $65 million in 2015 and $51.9 million in 2014.  Adding to this complexity are the effects of recent restructuring initiatives, the impact of the Orad acquisition, and the ongoing transition to a subscription model.

CEO Louis Hernandez, Jr. commented on these challenges during Avid’s earnings call, noting “…I know that it would be nicer if the financial expression were more clear and didn’t have the noise of a couple of the variables, the non-marketed products, the amortization, that pre-2010 revenue or that even the shift to recurring.”

Management is aware of this difficulty and has attempted to introduce new metrics to allow analysts to better understand the transition of the business.

Update on Transformation:

Highlighting the progress was bookings growth of 26% in Q4 2015 driven by the largest transaction in Avid history with Sinclair Broadcast Group and the positive impact of the Orad acquisition.  Bookings related to recurring revenue were approximately 38% of total 2015 bookings, a substantial increase over the 26% from 2014.

Below is a chart from Avid’s investor presentation illustrating the recent positive trend in Avid’s bookings in the context of the Company’s continued transformation.

Avid-transformation

Management also disclosed several metrics on the adoption of Avid’s MediaCentral platform.  At the end of 2015 MediaCentral had over 32,000 users, a 54% increase above 2014 levels.  More than 25,000 of the users are paying subscribers.  This represents an increase of 400% in paying subscribers since the beginning of 2015.

Business Outlook:

Contained in Avid’s earning release was full year guidance for 2016 along with longer term guidance for 2017 and 2018.  These figures are provided in the below tables taken from Avid’s earnings release.

Commenting on both 2015 performance and the business outlook, Louis Herandez, Jr added, “Avid is in the final stretches of its dramatic transformation and the benefits of Avid’s Platform approach to solving the media industry’s more pressing needs is reflected in both a solid close to 2015 and dramatically improved financial expectations for 2016 and beyond.  We are on track to complete the transformation and position Avid for long term sustainable and profitable growth with an improved financial model.”

Avid-tables

 

Related Content:

Press Release on Avid’s 2015 Financial Results

Presentation on Avid’s 2015 Financial Results

 

 

© Devoncroft Partners 2009 – 2016. All Rights Reserved.

 

 

Avid Restructures and Refinances as it Enters Final Phase of Corporate Transformation

Analysis, Broadcast technology vendor financials, SEC Filings | Posted by Joe Zaller
Feb 29 2016

Avid_Logo (Black Background)

Avid Technologies said in regulatory filings that it has committed to a restructuring plan, which includes “reductions in workforce, facility consolidation, transferring resources to lower cost regions and reducing other third-party services costs.”

According to the company, these actions will enable Avid to “more efficiently operate in a leaner, and more directed cost structure.”

Avid says these actions represent “the final phase of talent alignment and facilities rationalization program – Avid is putting the right people in the right roles in the right locations with the right cost structure which will position Avid for the end of its transformation in 2017. In connection with this effort, redundant offices will also be closed or downsized.”

“Since we began Avid’s transformation, the Avid Everywhere vision – to build our portfolio of products as applications on a single platform, the Avid Media Central platform – has been central to our strategy to solve the industry’s most important issues with greater innovation, flexibility and efficiency. Avid is in the final stretches of its dramatic transformation and we’re pleased that the growing adoption, stability and maturation of the Media Central Platform will now allow us to fully realize its potential to drive a more efficient operating model by eliminating components and processes that are no longer required with a single global platform.” said Louis Hernandez, Jr, Chairman, President, and CEO of Avid.

Scheduled to be completed by the end of the second quarter of 2017, the restructuring plan is expected to deliver appropriately $68m of annualized costs savings.

Avid quantified these expectations, saying  “personnel related savings account for two-thirds of overall efficiency gains. Many of the personnel related actions have already been completed with savings expected to be realized on an accelerated basis with each successive quarter. The remainder of the efficiencies will be achieved through consolidating and darkening underutilized facilities and further rationalizing spend on external vendors.”

The company “expects to incur incremental cash expenditures of approximately $25 million relating to termination benefits, facility costs, employee overlap expenses and related actions.” Approximately $14 million of the expenditures will be recorded as restructuring expenses in the quarters ending December 31, 2015 through June 30, 2017.

In connection with the announced cost efficiency program, Avid entered into a new five-year, $105 million senior secured credit facility, which consists of a $100 million term loan and an undrawn $5 million revolver. The company borrowed the full amount of the Term Loan, or $100,000,000, as of the Closing Date (February 26, 2016), but did not borrow any amount under the Credit Facility as of the Closing Date.

Avid said the company “granted a security interest on substantially all of their assets to secure the obligations of all obligors under the Credit Facility and the Term Loan. Avid Worldwide provided a guarantee of all the Company’s obligations under the Financing Agreement. Future subsidiaries of the Company (other than certain foreign and immaterial subsidiaries) are also required to become a party to the applicable security agreements and guarantee the obligations under the Financing Agreement. The Financing Agreement includes covenants requiring the Company to maintain a Leverage Ratio (defined to mean the ratio of (a) consolidated total funded indebtedness to (b) consolidated EBITDA) of no greater than 4.35:1.00 for the four quarters ending June 30, 2016, 5.40:1.00 for the four quarters ending September 30, 2016, 4.20:1.00 for the four quarters ending December 31, 2016 and thereafter declining over time from 3.50:1.00 to 2.50:1.00.  The Financing Agreement also restricts the Company from making capital expenditures in excess of $20,000,000 in any fiscal year.”

Proceeds from the term loan will be used to replace the company’s existing $35 million revolving credit facility, finance the company’s efficiency program and other transformation initiatives, and provide operating flexibility throughout the remainder of the transformation in this period of heightened market volatility.

The company estimates that after paying for both debt issuance costs and the efficiency program, the new financing will provide approximately $70 million of available liquidity, about half of which replaces the existing revolving credit facility with the remainder providing incremental liquidity to strengthen the Company’s balance sheet.

“The new debt facility further strengthens our liquidity position and supports the execution of the last leg of our transformation, including the efficiency program,” said John Frederick, Chief Financial and Administrative Office of Avid. “We continue to expect positive adjusted free cash flow generation in 2016, although we do anticipate using cash in the first half of the year as we execute on the cost initiatives. We look forward to updating the investor community on our 2015 results and 2016 guidance, as well as sharing more details behind the 2016 growth and efficiency initiatives, in our fourth quarter and full-year 2015 earnings and business update call. We now have a capital structure that we believe allows us to make the investments necessary and finish executing on our plan.”

“Our clients and community are fully supportive of our vision, said Hernandez.  “Hundreds of large and sophisticated global media companies who have purchased over 32,000 Media Central licenses, punctuated by the record contract with Sinclair Broadcast Group signed in December 2015. Clients everywhere are enjoying the benefits of the platform as they look to capitalize on major industry shifts in the media landscape. For Avid, 2016 will be marked by a focus on additional platform-enabled growth and efficiency initiatives, which will demonstrate our ability to generate a meaningful financial return for our shareholders.”

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Related Content:

Press Release: Avid Technology Announces Next Milestone in Company Transformation

Avid SEC Filing: February 26, 2016

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© Devoncroft Partners 2009 – 2016. All Rights Reserved.

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2015 Big Broadcast Survey (BBS) Reports Now Available

broadcast technology market research | Posted by Joe Zaller
Aug 04 2015

The 2015 Big Broadcast Survey (BBS) Reports have now been published and are available from Devoncroft Partners.

We have been publishing the BBS Reports since 2009.  Each new edition is created through several months of research, including interviews with technology end-users, global surveys of technology decision makers, analysis of the end-user responses, and visualization of the data collected.  Now in its seventh year of publication, the BBS remains the most comprehensive annual study of technology end-users in the global broadcast and media technology industry.  Nearly 10,000 technology professionals in 100+ countries participated in the 2015 BBS, making it once again the largest market study of the media technology industry.

Based on feedback from technology vendors, media companies, and investors, we have updated the vendors, product categories, and market trends profiled in the 2015 BBS to better align with recent market developments.

These updates help ensure the BBS reports remains a critical reference for industry executives to improve strategic decision-making, customer engagement, marketing strategy, product planning, and sales execution.  In addition to technology vendor and service provider strategic planning, BBS reports are also used frequently for M&A and investment activities by both buyers and sellers.

Three types of 2015 BBS reports are available:

  • 2015 BBS Global Brand Reports: provides deep insight into how each more than 100 broadcast technology suppliers (see full list below) are perceived by market participants, along with comprehensive benchmarking of broadcast technology vendors on a wide variety of metrics

 

  • 2015 BBS Product Reports: provide detailed information from buyers, specifiers, and users of broadcast technology products in 30 separate categories (see full list below)

 

  • 2015 BBS Global Market Report: provides detailed information about industry trends, major projects being planned, products being evaluated for purchase, current and future plant infrastructure, broadcast technology budgets, and planned deployment of new technologies including 4K, HEVC compression, and IP-based technology infrastructure

 

For additional information on the 2015 BBS report, please email us.

As is Devoncroft’s custom, we will publish selected highlights from this year’s BBS reports on the Devoncroft website.  These articles are posted on a semi-regular basis, so please check back often.

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The tables below list the  technology vendor brands and product categories covered in the 2015 BBS.

 

All Brands Covered in 2015 Big Broadcast Survey (BBS)


Product Categories Covered in the 2015 Big Broadcast Survey

Technology Products & Vendor Brands Covered in the 2015 BBS, by Application Area

 

Acquisition & Production:

Camera Lenses

Angenieux, Canon, Fujinon

 

ENG Cameras

Canon, Hitachi, Ikegami, JVC, Panasonic, Sony

 

Large Format Single Sensor Cameras

ARRI, Blackmagic Design, Canon, Red Digital Cinema, Sony

 

Production Switchers

Blackmagic Design, Broadcast Pix, For-A, Grass Valley, NewTek, Panasonic, Ross Video, Snell, Sony

 

Studio/System Cameras

Grass Valley, Hitachi, Ikegami, JVC, Panasonic, Sony

 

 

Post Production:

 

Graphics & Branding

Adobe, Autodesk, Avid, ChyronHego, Evertz, Grass Valley, Imagine Communications, Orad, Pixel Power, Ross Video, Vizrt

 

Transcoding / Streaming

Dalet/AmberFin, Elemental Technologies, Envivio, Harmonic, Imagine Communications, Telestream

 

Video Editing

Adobe, Apple, Avid, EVS, Grass Valley, Imagine Communications, Sony

 

Infrastructure:

Bonded Cellular

Dejero, LiveU, Teradek, TVU, Vislink

 

Routing Switchers

Blackmagic Design, Evertz, Grass Valley, Imagine Communications, Nevion, Pesa, Ross Video, Snell, Utah Scientific

 

Signal Processing / Interfacing / Modular

Aja Video, Axon, Blackmagic Design, Evertz, For-A, Grass Valley, Imagine Communication, Ross Video, Snell

 

Video Transport

Arris, Aspera, Cisco, Ericsson, Evertz, Harmonic, Imagine Communications, Media Links, Net Insight, Nevion, Riedel, Signiant

 

 

Audio:

Audio Consoles

Avid, Calrec, Lawo, Salzbrenner Stagetec, Solid State Logic (SSL), Soundcraft, Studer, Wheatstone, Yamaha

 

Audio Processing & Monitoring

Adobe, Avid, Dolby, Linear Acoustic, RTW, TSL, Wohler

 

Intercom / Talkback

Clear-Com, Riedel, RTS Intercom Systems, Trilogy

 

Microphones

AKG, Audio-Technica, beyerdynamic, Electro Voice, Marshall Electronics, Neumann, Schoeps, Sennheiser, Shure, Sony

 

Monitors (speakers)

Adam, Avid, Focal, Genelec, JBL, KRK Systems, Mackie, Neumann, PMC,

 

 

Storage:

High Performance Shared Storage:

Avid, Harmonic, HP, IBM, Isilon Systems/EMC, NetApp, Quantum

 

Playout / Transmission Servers

Avid, EVS, Grass Valley, Harmonic, Imagine Communications, Ross Video

 

Production Servers

Avid, EVS, Grass Valley, Harmonic, Quantel

 

 

System Automation and Control:

Broadcast Business Management Systems

arvato/S4M, Imagine Communications, MediageniX, MSA Focus, SintecMedia/Pilat Media, VSN, Wide Orbit

 

Archive & Archive Management

ASG/Atempo, Masstech, Oracle/Front Porch Digital, Quantum, SGL, XenData

 

Playout Automation

Grass Valley, Imagine Communications, Pebble Beach, Playbox, Snell

 

Workflow / Asset Management

arvato/S4M, Avid, Dalet/Amberfin, EVS, Imagine Communications, Sony, Vizrt, VSN

 

 

Playout and Delivery:

Integrated Playout (Channel in a Box)

Evertz, Grass Valley, Harmonic, Imagine Communications, Pebble Beach, Playbox, Snell, Thomson Video Networks

 

On-line / Streaming Video Delivery Platforms

Brightcove, Kaltura, Ooyala, Piksel

 

Transmission Encoders

Arris, ATEME, Cisco, Elemental Technologies, Envivio, Ericsson, Harmonic, Imagine Communications, Thomson Video Networks

 

Transmitters

GatesAir, Hitachi, NEC, Plisch, Rohde & Schwarz, Screen Service, Toshiba

 

 

Test, Quality Control and Monitoring:

 

Multiviewers

Avitech, Axon, Evertz, For-A, Grass Valley, Imagine Communications

 

Test & Measurement

Imagine Communications, IneoQuest, Leader, Phabrix, Rohde & Schwarz, Tektronix

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© Devoncroft Partners 2009 – 2015. All Rights Reserved.

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As Media Companies Increase Cloud and IAAS Deployments, Amazon Reveals Scale of AWS

Analysis | Posted by Joe Zaller
Apr 28 2015

In a change that provides increased visibility into its cloud business, Amazon.com now breaks out the performance of Amazon Web Services (AWS) as a separate segment in its quarterly financial reporting.

This is a significant development for the media technology sector because AWS has become synonymous with discussions of Infrastructure as a Service (IaaS) and public cloud usage by media companies.  The topic has matured in the past few years and is now a central part of future technology strategies at media organizations.

However, Amazon  did not specifically address how much AWS revenue was attributable to the media industry.

Amazon reported that AWS revenue in the first quarter of 2015 was $1.57 billion, up 49% versus the same period a year ago. The reported figures for AWS consist of sales of compute, storage, database, and other AWS service offerings across all customer verticals.

AWS operating income in the first quarter of 2015 was $265m (a 16.9% operating margin), up 8% versus the same period a year ago. Excluding the favorable impact from foreign exchange, AWS segment operating income decreased 13%.

 

Amazon AWS Q1 2015 TTM Revenue and Operating Income - with source

 

In a letter to shareholders, Amazon CEO Jeff Bezos said AWS is “a $5 billion business and still growing fast — in fact it’s accelerating.”

Management attributed the growth to a rise in customer usage, though partially offset by reduction in pricing to customers.

The impact of pricing decreases is material.  AWS disclosed ‘usage’ growth in the fourth quarter of 2014 of 90% year-over-year. Though not a like-for-like comparison, it is a directional guidance for the gap between usage and revenue caused by pricing decreases.

 

Amazon Q1 2015 AWS Segment Results

 

On the company’s earnings call, Amazon SVP and CFO Tom Szkutak highlighted how the company continues to drive down the cost of AWS, saying “In terms of AWS, we’ve had 48 price decreases since inception. The team is doing a terrific job in terms of working on behalf of customers to pass on savings as they see it. So our model over the long-term really has been to innovate and to use our scale and position to be able to pass savings along to customers.”

For the first quarter of 2015, AWS contributed approximately 7% of the Company’s total revenue.  This was an increase versus the 5% of revenue AWS represented during the first quarter of 2014.  Despite representing only 7% of Amazon’s revenue, AWS contributed almost 38% of the Company’s operating income.  This is because AWS is a meaningfully more profitable business than Amazon’s traditional online retail operations.  AWS operating margins were nearly 17% in Q1 2015, which compares favorably to Amazon’s other businesses that in aggregate had operating margins of 2% during the first quarter.  A focus on operating margins ignores the interest expense attributable to the financing of equipment for AWS, which is not disclosed.

Even though growth was substantial at AWS during 2015, there is some curiosity around how the business scaled.  While revenue increased by 49%, operating income increased only 8% since operating expenses increased 61% over the same period.  The Company attributed the expense offset to investments in technology infrastructure to support business growth.  Some caution is necessary before drawing broader conclusions on how the business will scale since we have only limited data points at this time.

Additional disclosures in Amazon’s filings are illustrative of the level of investment in technology infrastructure.  The Company’s capital expenditures (cash) were $871 million in Q1 2015 and $1.1 billion in Q1 2014. A majority of this investment was attributable to AWS.  Property and equipment acquired under capital leases (non-balance sheet items) were $954 million in Q1 2015 and $716 million during Q1 2014. Again, the investments are primarily due to investments in technology infrastructure for AWS.

Discussing the ongoing investment required for the AWS business, Szkutak told analysts “from our perspective its business that’s still really in day one. A lot of potential innovation in front of us we believe. And so you can see we’re putting a lot of CapEx obviously there and including capital leases and we think over time we will be able to generate significant free cash flow with stronger ROICs.”

Whatever percentage a majority represents the resulting aggregate investment is considerable.  Media companies leveraging AWS are benefiting from a technology infrastructure built by investments made possible from expansive operations in other industries.  To put the scale of Amazon’s infrastructure in context to the media technology sector, consider the Company’s 2014 cash capital expenditures and equipment purchases under capital leases totaled a combined $8.9 billion (AWS is the largest driver of this spend, but does not consume all of this number).  This figure represents approximately one-third of all annual product sales in the media and broadcast technology sector based on the latest results of the IABM DC Global Market Valuation Report (www.iabmdc.com).

In his shareholder letter, Bezos said that even though AWS is highly capital-intensive, it is far less capital-intensive than the model it’s replacing.  Bezos cites utilization rates for internal data centers as almost always below 20%.  By aggregating workloads across customers AWS can then achieve much higher utilization rates and correspondingly improved capital efficiency.

This point was highlighted on the earnings call by Brian Olsavsky, VP and CFO of Amazon’s global consumer business, who said “It’s probably is worth adding that, although prices are factor, the primary factor for customers choosing with AWS is really around their ability to move quickly and to be nimble and agile. And so we’re very pleased with the kind of continued adoption and usage growth we’ve seen and obviously the benefits of AWS around their ability — customer’s ability — to be nimble as a primary factor.

CFO Szkutak added that the 48 price decreases since the launch of AWS is “one factor customers save a lot of money, but the primary motivator is really around the innovation that AWS enables and the ability for developers to move really quickly.”

Speed and agility are increasingly important to media companies, yet the specialized technology products used in media workflows often have low utilization rates – especially those used for certain types of news and sports applications.  In an environment where media companies are focused on greater efficiencies in technology infrastructure, improving these rates are a natural place to start.

The amount of revenue attributable to media and entertainment use cases is left to the imagination.  Amazon has stated publicly AWS has more than a million active customers.  Companies using AWS range across all sizes and business segment.  Media and entertainment examples include Netflix, Major League Baseball, PBS, and News Corp. During his fireside chat keynote at Shifting Media Economics: Impact on Strategy, Finance, and Technology” the annual conference co-produced by Devoncroft and organizers of the NAB Show, Bob Bowman President of MLB Advanced Media had high praise for AWS as a technology supplier.

To Amazon’s credit, the company participates at industry exhibitions including the recent NAB Show and the team is similarly visible at other industry events.  We are evangelists for broader IT vendors engaging with the industry vendor community and customer community.  Such focus has proven episodic from many large IT vendors historically, so it will be interesting to track Amazon’s engagement with interested parties in the sector going forward – a $5 billion business has many distractions.

AWS specifically and cloud vendors more broadly, are benefiting from a secular trend toward cloud usage among media and entertainment sector.  Included below is a slide taken from a Devoncroft presentation at the recent NAB Show; it offers context on the adoption of cloud by media companies. One of the benefits of having seven years of Big Broadcast Survey data is the ability to reflect on year-over-year trend information – even if the data is in the form of broadcaster commentary.  As illustrated in the below, the ‘cloud’ benefited from an embrace by technology purchasers during the 2013 calendar year.

cloud evolution

 

This increasing adoption and deployment of cloud technologies and services is in stark contrast with perspectives provided only a few years earlier.

Of course, any discussion of Cloud naturally transitions to a discussion of security given the recent high-profile security breaches.  We heard this multiple times from at the recent 2015 NAB Show during conversations with major media companies, broadcasters, and service providers.

Security of media assets in the cloud was also an important topic at “Shifting Media Economics: Impact on Strategy, Finance, and Technology” the annual conference co-produced by Devoncroft and organizers of the NAB Show. During a panel session featuring senior technology buyers from major North American media companies, it was observed by participants that businesses such as AWS are likely spending far more time, money, and resources on security than even the largest stand-alone media company could muster.

Whether such logic is extensible will translate into a shift of media infrastructure to public cloud providers such as AWS remains to be seen.

Our research shows that while many in the media industry are using AWS today for a variety of tasks, most high value content is currently being managed via private cloud implementations.

An interesting data point on the subject of private versus public cloud adoption in media was offered by Avid CEO Louis Hernandez, Jr. at the Jefferies Growth Conference earlier this year.  While describing how the company’s licensing models are evolving at different customer types, Hernandez said “Our large enterprise clients are sticking with on premise [implementations]… [they] are moving to a floating license and flexing in a pre-negotiated subscription on a project basis. Who’s buying cloud and subscriptions? Individuals.”

Nevertheless, AWS is a formidable business.  Amazon’s ability to continually invest the huge sums needed to greater compute, network, and storage performance at ever-lower prices can undoubtedly drive increased efficiencies for media companies.  Thus the market potential for AWS in the media space is potentially vast.  In his letter to shareholders, Jeff Bezos summed up as follows, “I believe AWS is one of those dreamy business offerings that can be serving customers and earning financial returns for many years into the future…I believe AWS is market-size unconstrained.”

 

 

Related Content:

Press Release: Amazon.com Announces First Quarter Sales Up 15% to $22.72 Billion

Q1 2015 Amazon.com, Inc. Earnings Conference Call Slides

Amazon Q1 2015 Form 10-Q Filing

Amazon.com Q1 2015 Letter to Shareholders

Industry Thought Leaders to Discuss “Shifting Media Economics: Impact on Strategy, Finance, and Technology” at 2015 NAB Show

 

© Devoncroft Partners 2009 – 2015. All Rights Reserved.

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Avid and Adobe Integrate Editing and Storage Systems

broadcast technology market research | Posted by Joe Zaller
Mar 10 2015

Adobe_LogoAvid Logo_ white  backgroundSince launching its Media Central platform last year, Avid been telling the industry that they are the “most open” company in the media technology space.

Today Avid went a long way towards putting its money where its mouth is, by announcing that its ISIS high-performance shared storage systems now fully support Adobe’s Premier Pro CC editing platform.

According to the two companies Adobe has made enhancements to Premiere Pro CC that “significantly improve its performance when connected to Avid ISIS® | 7500 and ISIS | 5500 shared storage systems.”

Adobe and Avid have also enabled interoperability between their editing systems, meaning “it’s now possible to mix Avid Media Composer and Adobe Premiere Pro CC on the same ISIS system in the same storage group, without worrying about complex configuration issues or performance compatibility.”  The collaboration also enables users to “edit higher resolution projects using Premiere Pro CC on ISIS shared storage more efficiently and cost effectively than ever before.”

Avid said the collaboration between the two companies is “unprecedented,” and “delivers on the openness of Avid Everywhere, by enabling flexible and efficient workflows for all video editors and creative professionals, regardless of their choice of editing application.”

“We are pleased that Avid’s shared storage systems now provide the high performance required for Adobe solutions,” said Simon Williams, director of strategic relations at Adobe. “With this news, Adobe Premiere Pro CC and Media Composer can share Avid DNxHD or Avid DNxHR media and other open file types on the same infrastructure. Our large base of shared customers will undoubtedly realize significant workflow benefits from this collaboration.”

“One of the critical issues facing broadcasters and post-production facilities is the drag on productivity caused by having to manage and integrate different solutions from different vendors with different standards,” said Ray Gilmartin, senior director, Product and Segment Marketing, Avid. “This collaboration between Avid and Adobe is an example of the openness and flexibility that we are committed to delivering to the industry with Avid Everywhere.”

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Related Content:

Press Release: Avid and Adobe Collaborate on Integration With Shared Storage to Enhance Openness, Flexibility, and Efficiency

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© Devoncroft Partners 2009 – 2015. All Rights Reserved.

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Avid Releases First Financial Results in Nearly Two Years, Revenue Down 11.4 Percent in 2013

Broadcast technology vendor financials, Quarterly Results, SEC Filings | Posted by Joe Zaller
Sep 12 2014

Avid released financial results for the first time in nearly two years, following a protracted audit of it historic accounting treatment of software upgrades, dating back to 2009, which were made available to certain of its customers at no-charge.

The company has now completed the audit, and released financial results for both 2012 and 2013.  Avid has also released re-stated results for 2009-2011, which reflect the results of the audit.

For the full year 2013, Avid’s revenue was $563.4m, down 11.4% versus the previous year.

GAAP net income for the full year 2013 was $21.2m, down sharply from $92.9m in 2012. Non-GAAP income from continuing operations was $57.2 million or $1.46 per share. The company attributed the decline in revenue and net income to the larger portion of revenue from periods prior to 2011 being amortized in 2012 as compared to 2013 due changes in accounting rules.

The results for 2012 and 2013 are shown below, along with re-stated results from 2009-2011.

 

Avid restated earnings

 

“As a result of our restatement and in accordance with GAAP, revenue that had originally been recognized in earlier periods is now being recognized ratably over an extended timeframe,” said Avid EVP and CFO John Frederick. “The amount of revenue earned or to be earned over the entire period of recognition essentially remains unchanged from the amount we historically recognized. There was no change to the cash characteristics of the transactions being restated nor to the Company’s liquidity directly relating to these transactions. As a result of the restatement, the balance sheet reflects a significant increase in deferred revenue, which will be recognized in revenue over a number of years and will provide significant visibility into our future revenues. The revenue recognized from deferred revenue originating in periods prior to 2011 will continue in declining amounts through 2016, creating downward pressure on revenue growth until 2017.”

“We have worked diligently for well over a year on the restatement and are delighted to have completed the process,” said Louis Hernandez, Jr., president and CEO of Avid. “Throughout this period, we have put a premium on maintaining our focus on continued innovation for our customers and reasserting our commitment to being a strategic leader for the media industry with our Avid Everywhere vision. I’m encouraged by the progress we’ve made in executing against our three phase transformational strategy, and specifically with the growth in bookings over the past few quarters. Now that we have completed the restatement process, we are excited to continue our work on the transformation and feel the momentum building.”

Following the filing of Avid’s first quarter 2014 financial report, Avid plans to apply for relisting on the NASDAQ stock exchange, and hopes to be relisted on the NASDAQ stock exchange sometime after becoming current with its SEC reporting obligations. In the interim, Avid stock will continue to trade on OTC Markets — OTC Pink Tier under the trading symbol AVID.

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Related Content:

Avid 2013 10-K Filing

Avid Nears Completion of Accounting Audit, Says Normal Financial Reporting Cycle to Resume in Q3 2014

Avid to be Delisted from NASDAQ on February 25, 2014

Avid Receives Anticipated NASDAQ Delist Letter

New Avid Rights Agreement Will Cause “Substantial Dilution” to Potential Acquirers

Avid Unlikely to Regain Compliance with NASDAQ Listing Requirements by March 2014 Deadline

Avid Technology and Computershare Trust Company as Rights Agent, Rights Agreement Dated as of January 6, 2014

Avid Receives Additional Notice of Potential NASDAQ Delisting

Avid Delays Filing of Q2 2013 Financial Results and Form 10-Q

New Avid Bonus Plan Contemplates “Reorganization Event”

Avid Says its 2009 – 2011 Financial Statements No Longer Reliable

Avid Delays Release of Q4 and Full Year 2012 Results, Shares Fall

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© Devoncroft Partners 2009 – 2014. All Rights Reserved.

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Avid Nears Completion of Accounting Audit, Says Normal Financial Reporting Cycle to Resume in Q3 2014

Broadcast technology vendor financials, Quarterly Results, SEC Filings | Posted by Joe Zaller
Aug 13 2014

Avid, which since February 2013 has been conducting an internal investigation into its current and historical accounting treatment related to software updates, said in a regulatory filing that in approximately four weeks, it expects to have completed its accounting audit and filed its annual report (Form 10-K) for the fiscal year ended December 31, 2013.

Because of its 18 month-long internal accounting audit, the company has not been able to file financial results with securities regulators since the third quarter of 2012.

This delay ultimately resulted in Avid’s stock being delisted from The NASDAQ Stock Market on February 25, 2014.

But with today’s announcement, it appears that the audit is nearly completed.

Avid now says that its 2013 Form 10-K will include results for the fiscal year ended December 31, 2012 and restated results for the fiscal year ended December 31, 2011. The company said it also intends to file its Form 10-Q for each of the three-month periods ended March 31, June 30 and September 30, 2013 concurrently with the 2013 Form 10-K filing.

The company will then file its Form 10-Q for the period ended March 31, 2014 approximately one week after filing the 2013 Form 10-K and file Form 10-Q for the period ended June 30, 2014 approximately 40 days later.

Avid then expects to be back to a normal reporting cycle beginning with the reporting of results for the third quarter of 2014.

When the Avid does report its financials, it will bring an end to a process that began in February 2013 when the company announced that it would delay the announcement of its Q4 and full year 2012 results in order “to provide additional time for the company to evaluate its current and historical accounting treatment related to bug fixes, upgrades and enhancements to certain products which the company has provided to certain customers.”

That news came just two weeks after Avid named Louis Hernandez, Jr. to replace Gary Greenfield as the company’s president and CEO.

In May of 2013, Avid said that, as a result of its internal review, the company had determined that its financial statements from 2009 – 2011 are no longer reliable, and must be restated “because of errors in the application of US GAAP.”

At issue is the historic accounting treatment the company applied for certain software upgrades, dating back to 2009, which were made available to certain of its customers at no-charge. Avid management said in August 2013 that it has now determined that these upgrades should have been accounted for as “implied post-contract customer support” under US GAAP accounting rules.

The problem is that Avid has had a lot of transactions since 2009, and each one must be reviewed.

In January 2014, the company said it had made significant progress toward completion of the restatement, including evaluating transactions over an eight-and-a-half year period, encompassing a review of approximately 5 million transaction lines and 700 software releases.

Not only is this a time-consuming process, it’s also expensive. In January 2014, Avid said its cash expenditures in 2014 related to the ongoing accounting evaluation through completion of the evaluation will amount to approximately $25m to $34m.

On June 30, 2014 Avid’s cash and debt balances were $23m and $5m respectively, $48m no debt at on December 31, 2013.

Avid says it expects remaining payments related to the restatement as of July 1, 2014 to amount to approximately $12m to $14m.

Despite its well-publicized financial woes over the past few years, our market research during this same period shows that Avid continues to enjoy a strong brand reputation and customer loyalty, particularly among broadcasters and large media companies.

It’s also interesting to note that, while it may be a coincidence, the timing of Avid planned release of its historic financials more or less exactly coincides with the AvidConnect Europe event, and the 2014 IBC trade show in Amsterdam.

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Related Content:

Press Release: Avid Announces Timeline for Restatement

Avid to be Delisted from NASDAQ on February 25, 2014

Avid Receives Anticipated NASDAQ Delist Letter

New Avid Rights Agreement Will Cause “Substantial Dilution” to Potential Acquirers

Avid Unlikely to Regain Compliance with NASDAQ Listing Requirements by March 2014 Deadline

Avid Technology and Computershare Trust Company as Rights Agent, Rights Agreement Dated as of January 6, 2014

Avid Receives Additional Notice of Potential NASDAQ Delisting

Avid Delays Filing of Q2 2013 Financial Results and Form 10-Q

New Avid Bonus Plan Contemplates “Reorganization Event”

Avid Says its 2009 – 2011 Financial Statements No Longer Reliable

Avid Delays Release of Q4 and Full Year 2012 Results, Shares Fall

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© Devoncroft Partners 2009 – 2014. All Rights Reserved.

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