CEO Louis Hernandez Jr. Says Company Will Not Force Customers to Cloud or Subscription Pricing

Avid's earnings came out of hiding this month, with the company finally announcing financial results for 2012, 2013 and the first quarter of 2014 following a lengthy financial restatement that resulted in the company's delisting from NASDAQ. Company executives told investors in a conference call today that Avid had passed an "inflection point" in revenue growth in the third quarter of 2013, with business now thought to be growing, albeit modestly, on a year-to-year basis. 

"We've had four consecutive quarters of year-over-year growth in bookings and lower operating costs," said Avid President and CEO Louis Hernandez Jr., citing figures tracking LTM bookings, or bookings made over the last 12 months. Avid uses the term bookings to describe the amount of revenue it expects to earn from customer agreements over the course of the agreements. It is not synonymous with revenue, and Avid's actual financial statements do not (yet) show revenue growth.

For Q1 2014, Avid reported net revenue of $135.0 million, down slightly from $136.1 million in the same period of 2013. However, due mainly to cost reductions during the quarter, Avid managed to eke out a gain in net income, which rose to $8.9 million in the quarter from $8.3 million in the previous year. (Avid also released its own preferred non-GAAP financial measures which, unsurprisingly, indicate stronger performance.)

Speaking to investors, Hernandez described a new strategy for the company that includes the introduction of the Avid Everywhere platform, the launch of the Avid Customer Association—which he said now numbers over 1,000 members—and the introduction of flexible pricing options that may make Avid's products more attractive to independent content creators, a segment that Hernandez called a "relatively untapped market" for Avid.

Hernandez did take pains to emphasize that Avid has no plans to force the transition to subscription pricing. "We want to provide deployment options, both in the cloud and on premise, by license or subscription," he said. "Some in the industry have been frustrated that they've been forced to a single delivery or pricing model, like cloud or subscription, that benefits the vendor more than the actual customer and, in fact, in some cases may be more costly and less flexible. Our customers will be limited by only their own imagination and strategy, not by limits dictated by their vendor."

Responding to a question about the separation between Avid's audio and video product lines, Hernandez said work has been done to close that gap. "One of the reasons the company has struggled historically is that are two different platforms," he said. "Avid MediaCentral puts a lot of the engines for both audio and video on the same platform. It makes it more economically advantageous for us to stay in the audio market because we're starting to share tools."

That shared platform will continue to be a financial boon, he said, allowing Avid to get better results as R&D expenditures decline. "The company has, historically, been very tied to hardware," Hernandez noted. "Obviously, we're moving to an IP-based system. Where we still have hardware, it's integrated into the software elements. You'll see us deliver more software-like margins, and part of the key is the platform we can leverage."

Avid has just finished a financial restatement that took more than a year, during which the company refigured its accounting, mainly to comply with new rules requiring certain types of revenue associated with product upgrades to be accounted for over the period of time when software updates were actually provided, rather than when original purchase transactions took place. The process saw Avid publish results this month for the 2012 and 2013 fiscal years, as well as restated results for 2011, but the company said it found no evidence of intentional misconduct in the original accounting. The main impact from the accounting changes was a large revenue shift from fiscal 2010 to later periods. Once the company publishes results for the second fiscal quarter, which it said should happen within 40 days, it will apply to be relisted on the NASDAQ stock exchange. (The company is currently traded only on the Pink Tier of OTC Markets.)