Here’s a list of ideas I’ve talked about on this blog that could be relevant today.
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AVID
Avid’s deferred revenue accounting
Avid sells its software through different pricing structures. For some products, Avid offers support contracts. Deferring revenue makes sense for those contracts. However, Avid also sells software for one-time payments. In my opinion, deferring some of the revenue from such sales creates a major accounting distortion. Avid already has the customer’s money so it does not make much sense to defer the revenues and profits on such sales.
Avid’s restated financials
There’s some interesting stuff in the latest 10-K that Avid has filed. While some of these details are good for the short thesis, I still think that there are better shorts out there.
Avid: Starting to burn through cash
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.
Avid’s impending financial restatement
Oddly enough… I don’t think that there is major fraud occurring at Avid, a stock that I have blogged about a few times in the past.
Be careful of VIC writeups
On ValueInvestorsClub.com, there is a writeup on AVID which argues that 4K will drive the adoption of Avid products. 4K basically refers to film and/or video formats that have four times the pixels than HD formats. However, the reality is that Avid products cannot output at 4K resolution. Currently, a subset of Avid users are forced to use another product for their 4K conform/online editing/finishing needs (e.g. Resolve, Autodesk Smoke, etc.). If the project must be delivered in 4K, current Avid products cannot do the job.
Avid update
Today Avid dropped around 29% on basically no news. It issued a press release saying that Avid shares would be delisted, which they had already said would happen.
At a market cap of 192M, I think that Avid’s valuation is reasonable. While management is poor and the company hasn’t made GAAP profits in years, the assets are valuable. Avid’s video editing systems and Pro Tools are leaders in their field; Avid itself has strong turnaround potential. There is the possibility of a takeover as an Avid and Autodesk combination would make a lot of sense. Avid’s customers would certainly welcome such a merger/takeover.
*Disclosure: No position. I covered earlier today and missed most of the drop in price.
