To misquote Mark Twain, reports of Avid’s death have been greatly exaggerated. For years the decline of the perceived fortunes of Avid, largely driven by the poor performance of the value of Avid stock, have fuelled rumours of the imminent demise of the makers of Pro Tools. it has to be said that while this has been a regular feature among the many distractions available in the internet, people using Avid products have been busily working, creating content and even getting paid!
In March 2018 Louis Hernandez, Jr left his position at Avid and was replaced by Jeff Rosica. Jeff joined Avid in early 2013 and has more than 30 years’ experience in broadcast, media and entertainment. Prior to his role as President, he served as Senior Vice President, Chief Sales and Marketing Officer for Avid.
A year ago the Avid stock price was $4.83. A month ago it was $4.97 but with the release of the 4th quarter earning results the price jumped 26% to $6.23!
Why Is Avid’s Stock Up?
Is this increased confidence in the value of Avid due to any change in direction at Avid or is it due to external forces, longer term trends or luck?
The last year has been a good time for Avid in terms of selling hardware to pro users in post production. We ran a story about how post houses in the UK are putting their prices up in response to increasing demand for the first time in years, an increase driven largely by demand from online platforms such as Netflix. The increasing demand for Dolby Atmos content has driven increasing numbers of post facilities to upgrade their rooms to meet this workflow and while many music clients are finding the need for DSP based Pro Tools systems to be less and less, for post production the limitations of native Pro Tools systems have driven demand for HDX systems and the announcement of upgrades to the voice limits in HDX and Ultimate systems is further evidence of the extra demands being placed on Pro Tools systems by Dolby Atmos.
Is The Avid Stock Price Up Because Of Hardware Sales?
While these sales haven’t hurt it looks like the real reason is because of recurring revenue, which is excellent news for Avid because recurring revenue happens every year, unlike a one off sale. Look at these bullet points from the Q4 results:
Fourth Quarter 2018 Financial and Business Highlights
Revenue was $112.7 million, an increase of 5% year-over-year and 8% sequentially. Revenue excluding non-cash revenue was $112.4 million, an increase of 7% year-over-year and 10% sequentially.
Software revenue from subscriptions increased 77% year-over-year, surpassing $10 million in
the quarter.
Revenue through the Company’s e-commerce activities was up 50% year-over-year.
The first point shows growth, but sub 10% growth doesn’t explain a 26% jump. The second two points are however much more significant as they relate to very significant growth, particularly the subscription element which by its nature is recurring so growth in this area is more valuable.
Subscription Is Here And It’s Not Going Away
Although subscription is unpopular with users, as we have shown with the results from the Nugen Audio survey, especially question 2 which asked “Which methods of purchase interest you?”, the case for Avid is so strong that, from a purely business point of view it would appear that it is worth losing some users who refuse subscription because overall the business case for the subscription model for Avid is so strong. If proof were needed just look at the figures.