After my weekly superstock scan, I was preparing the materials to blog about Avid Technologies (AVID) as a superstock. Digging further into...

Weekly Superstock Scan 8 Aug - 12 Aug 2016: Nil

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After my weekly superstock scan, I was preparing the materials to blog about Avid Technologies (AVID) as a superstock. Digging further into the company's financials, I changed my mind and thus there will not be any potential superstock report this week.


I was familiar with AVID, having blogged about it before revamping this blog and also made a small profit trading the stock.

Since then, AVID has done well transforming to a recurring revenue model and implementing a cost efficiency program that will result in large amount of savings. In the most recent result release, Avid announced a 22.1% year-on-year (yoy) increase in revenue and reported an EPS of $0.33 versus a loss of $0.10 in the same quarter a year ago.

AVID has also reported strong trends in key growth initiatives. Enterprise users on the MediaCentral platform increased 47% yoy while paying individual, cloud-enabled subscribers was up 3.9x yoy. Other matrices of the stock supports that AVID has the potential to be a superstock and is not overvalued.

So what stopped me from promoting AVID as a superstock?

Digging into the Form 10-Q, the part on revenue recognition interested me. 
"In the first quarter of 2016, in connection with the release of Cloud Collaboration in Pro Tools version 12.5, which was an undelivered feature that had prevented the Company from recognizing any revenue related to new Pro Tools 12 software sales as it represented a specified upgrade right for which vendor specific objective evidence (“VSOE”) of fair value was not available, the Company concluded that Implied Maintenance Release PCS for Pro Tools 12 product lines had also ended."

The impact of the above was: 
"As a result of the conclusion that Implied Maintenance Release PCS on Pro Tools 12 has ended, revenue and net income in the first quarter of 2016 increased approximately  $11.1 million , reflecting the recognition of orders received after the launch of Pro Tools 12 that would have qualified for earlier recognition using the residual method of accounting...  The reduction in the estimated amortization period of transactions being recognized on a ratable basis resulted in an additional $15.2 million  and $21.7 million of revenue during the three and six months ended June 30, 2016, respectively"

The GAAP revenue increased by around $25 million and income increased by $16 million yoy. Deducting the above which appeared as a one time profit, AVID actually did not experience any growth yoy. With that I am not even sure that AVID is a growth story. 

No doubt its transformation may be successful, I prefer to hear the story from the number to the management.


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