Avid Technology, Inc. (NASDAQ: 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™, Avid FastServe®™, Maestro™, and PlayMaker™.
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On March 15th, 2019, the share price of AVID experienced a massive (+27%) surge with strong volumes, after it announced its fourth quarter and full-year 2018 financial results, provided guidance for the first quarter of 2019 and reaffirmed full-year 2019 guidance.
The company ended 2018 with strong momentum evidenced by its improving revenue streams, gross margin, and cash flow. With its extremely strong revenue backlog and the savings from its internal efficiency programs, the company has strong visibility to continued improvements in Free Cash Flow and Adjusted EBITDA during 2019.
- Key financial indicators in Q4 2018 are encouraging and showing progress, highlighted by First GAAP y/y revenue growth since Q2 2016 and Largest quarterly FCF generation in 7 years Confidence that the new leadership team and revised strategy and business plan are delivering better results
- Good progress on moving to more recurring revenue with continued growth in subscriptions and long-term agreements
- New product introductions driving growth – with more coming
- A constant focus on operational improvements and the company’ smart savings initiatives to deliver $20M savings target
- There is more work to do, and the new team is just getting started, but the company is on a better trajectory
“Our return to revenue growth and the improvement in our key financial metrics, including Free Cash Flow and Adjusted EBITDA, demonstrate an improving business profile for our Company,” said Jeff Rosica, Chief Executive Officer and President of Avid. “Additionally, the management team is focused on continuing to build upon a scalable, recurring revenue model as evidenced by our double-digit growth in subscriptions and e-commerce revenue. We intend to continue to drive R&D investments in key product areas in 2019 which are expected to set the foundation for future growth for the Company.”
Upcoming Milestones: For the first quarter of 2019, Avid is providing Revenue and Adjusted EBITDA guidance. Avid is also reaffirming its guidance for Revenue, Adjusted EBITDA and Free Cash Flow for full-year 2019.
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Looking Forward to 2019
- Continue to bring new, innovative products to market to delight its customers, further increase margins and help to build sustainable growth
- Further building up and expanding its e-commerce activities, which are a key growth engine Completing the supply chain transition, which will deliver better margins, lower costs and lower working capital
- Implement operational initiatives to reach previously announced $20 million annual savings target
- Delivering a more predictable financial model built on greater recurring revenues from growth in software subscriptions, SaaS offerings, and long-term agreements
Positive bias over the near to medium term:
- Avid is uniquely positioned in media technology with an unequaled platform strategy and entrenched market position, poised to capture the next big thing as the industry transitions to the cloud
- There are compelling points in the company’ metrics (Recurring Revenue, ACV and Backlog) that indicates the early success of its strategy, and point towards a positive trajectory ahead
- AVID has a clear and identified path to improved profitability and cash flow based on higher recurring revenue, significant backlog, an improving margin profile, and lower cost structure
- Avid today is a compelling investment opportunity, especially at current valuations, based on the potential near term and longer-term outcomes for the business
Diversified, differentiated and high-value portfolio:
- Large high-margin software and maintenance business
- Transitioning from license to subscription-based models
- Sets stage for more growth fueled by the move to cloud/SaaS
- Differentiated, high value-add integrated solutions
- Best-in-class HW platforms with integrated SW
- Good growth and margin profile moving forward
- Strategically important, but lower margin services business
- Moving towards higher value-add services in the future
- Meaningful opportunities to improve margins moving forward
Q4 2018 Business Performance
- Revenue was $112.7M, up 5% year over year
- LTM Recurring Revenue was 56% of Revenue, up from 49% in Q4 2017, and ACV was $248M, up 15% year over year
- Non-GAAP Gross Margin was 60.8%, up 480bps year over year, primarily from better-integrated solutions margins
- Non-GAAP OPEX was $50.2M, an improvement of the $3.2M year over year, driven by savings and efficiency initiatives
- Adjusted EBITDA was $21.3M, up 42% year over year, primarily from improved gross margin
- FCF was $17.7M, up from $10.4M in Q4 2017 – positively impacted by working capital and timing of billings/collections
Key Stock Influences:
- The company’ ability to ramp up operations, along with healthy cash accrual and a stable working capital cycle could lead to a considerably rating revision.
- The rapid evolution of the media industry is changing the company’ customers’ needs, businesses and revenue models, and if the company cannot anticipate these changes or adapt to them quickly, revenues will be affected, and its business could be impacted.
- The Company’ success depends in significant part on its ability to offer innovative products and solutions in response to dynamic and rapidly evolving market demand.
- On Friday, March 15th, 2019, AVID closed at $6.23 on a high volume of 2.86 million shares exchanging hands. Market capitalization is $260.742 million. The current RSI is 78.44
- In the past 52 weeks, shares of AVID have traded as low as $4.26 and as high as $6.99
- At $6.23, shares of AVID are trading above its 50-day moving average (MA) at $4.79 and above its 200-day MA at $5.37
- The present support and resistance levels for the stock are at $4.89 & $7.15 respectively.
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