On August 13, Avid issued a press release that provided a timeline for the release of its restated financial results. Comparing the figures with a past press release, it is possible to guestimate Avid’s cash burn.
- On Dec 31, 2014 Avid’s cash balance was $48M.
- On June 30, 2014 Avid’s cash balance was $23.0M with $5.0M of debt. So $18M after subtracting debt.
In the 2 quarters, Avid burned through $30M of cash. It may need to start drawing down its line of credit with Wells Fargo by the end of the year.
Some of Avid’s expenses are one-time expenses relating to the restatement. There are also expenses related to the ongoing SEC and DOJ inquiries. If these unusual expenses go away then Avid’s cash burn may diminish. If you take the cost estimates of the restatement given in the press releases at face value, then the company presumably spent between $13 and $20M during the 2 quarters. The operating business will have therefore burned through $10M to $17M in cash. Adding on the projection of $12M-$14M of restatement costs remaining, the company will have net cash of $5M to -$4M by the end of 2014.
Personally, I think that Avid’s losses will accelerate. Its competitors have been improving their products at a much faster pace while current management continues to run this business into the ground.
In my opinion, the company still has some good assets but has terrible management. It would make a good activist/turnaround target. Thankfully, Wall Street has not figured this out. As far as potential private acquirers go, one Autodesk manager does not seem particularly interested in buying Avid. A FXGuide.com interview with Stig Gruman (Autodesk Media and Entertainment’s VP of sales) states:
When we asked if AVID was for sale, he pointed out, any company is for sale at the right price, and that it appeared that AVID’s restructuring had been “tough road for them for a number of years”, harder and taken longer than they had expected. So speaking personally he commented that “I’m not sure I am looking for more challenging businesses to deal with (!)”, especially in the area of editing products.
*Disclosure: I am short Avid. If the stock falls, I may or may not cover my position to free up margin for a better short idea. Avid is not the worst of the worst.
You can find my previous posts on Avid by looking at posts tagged Avid. Or, use the search function.