Specialist
Former senior executive at Avid Technology Inc
Agenda
- Update on Avid’s (NASDAQ: AVID) rumoured sale – possible buyers and market implications
- Avid’s positioning within the competitive landscape and key market share trends
- Updated product dynamics between Adobe (NASDAQ: ADBE) and Avid
- Regulatory precedent in the space and other hurdles to completing an acquisition
- Overview of recent financial performance and company health
Questions
1.
Could you give a brief overview of Avid’s operating environment and pull 2-3 key trends or drivers we should be paying attention to when looking at the business in the audio and video technology industry?
2.
I know Avid has been around for a really long time. At first, it was more of a hardware-based company. As the company has continued this transition to the cloud, would you say it has remained best in terms of reputation, being most used and having the same product differentiation and advantage on the cloud as it did with more of the hardware side?
3.
It was reported that Avid was looking at a possible sale, and that the company had requested buyers submit their final bids. What was your reaction to that news and the timing of it?
4.
From what you’ve seen since the report of a possible sale, there hasn’t been much news. Has there been anything to indicate to you that this won’t be done? Why have we not heard more about it over the last couple weeks?
5.
I’m curious about the timing of the potential sale announcement. I know you said investors entered a few years back and Avid obviously saw significant returns during the pandemic, getting almost to USD 40 or even reaching that at one point, but it’s coming off what was considered a very weak Q1 2023. Is it surprising that the company did that announcement on the heels of this? Could it potentially indicate more struggles to come over the next couple months or years?
6.
Who would you put at the top of the list as a potential strategic buyer of Avid?
7.
If there were to be a strategic acquisition, what elements of Avid do you think would be the greatest benefit to a player such as Adobe, whether it’s the product portfolio, customers, hardware, etc?
8.
You’ve mentioned a few times that Avid is the go-to and a lot of people have expertise using it. What about younger people coming in to the field? Are they learning on Adobe or Avid? As they get older and become the decision-makers, is it going to be the same dynamics of wanting to continue to use Avid’s technology?
9.
You’ve mentioned Final Cut Pro. Can you talk about Apple’s positioning in the space and whether it’s seen its market share grow? Has that impacted Avid at all?
10.
Is there anyone else in the competitive landscape that we should be paying attention to? Should we be thinking about players such as Sony, Grass Valley or Imagine? Are any of them still threatening Avid’s positioning at all?
11.
You said there’s a different competitive landscape across product areas. Is there any product area where you think Avid is currently losing share?
12.
When we think about the growth slowdown for Avid, what would you say are the key driving factors? Is it more so that the company is losing share, as we’re mentioning? Is there a lack of runway for new growth, or a lack of content being created that should re-accelerate?
13.
I know we talked about the transition to the cloud. Can you update us on your perceptions of how that’s going? Is Avid finding success converting people onto the SaaS models, where the company can start earning more on a yearly basis rather than people having to continue investing in hardware?
14.
Would you say people who have never been with Adobe or Avid and want to be on the cloud are picking Adobe more frequently? Would you say Adobe has a better cloud offering, even at the top?
15.
How do you expect competitive dynamics to trend, looking at Avid’s key customer segment at top of funnel over the next couple of years, as more people look to switch to the cloud? Do you think the company will see higher churn than it expects as people take that opportunity to switch to Adobe? Or do you think it’s good enough that it might lose a couple more of the new, smaller deals but won’t lose the really large, Hollywood-type films?
16.
Do you see a problem for Avid in the future where it’s not getting in on the lower levels and growing with people, so it’s already there when they get to mature enterprise-type size? Or has this always been the company’s strategy, and you think it’s comfortable with its go-to-market and current competitive dynamics?
17.
As we talk about the transition to the cloud, I know you said it hasn’t been as rapid as we might have expected. How far along would you say we are in that process?
18.
Could Avid still be up and running with the cloud and more legacy offerings 5-10 years down the road?
19.
For every cohort of customers Avid does get onto the cloud, do you view this as a significant tailwind for profitability and growth? Or is it going to take a long time to recognise those things as the company has to continue maintaining the legacy side and can’t really wind it down?
20.
Could you discuss Avid’s growth performance and strategy? I mentioned the report of the potential sale comes off of what was not exactly a strong financial couple of months. In the company’s Q1 2023 earnings report, it missed on both revenue and profitability, saw top line decline by 3% and saw a more significant QoQ drop in revenue. What do you attribute this to? How concerning was this?
21.
Do you view any of Avid’s product segments as having particular opportunity to become a growth engine, or to grow in terms of its overall contribution percentage?
22.
We’re talking about the short-term growth challenges, but in the longer term, Avid’s revenue is just about flat over the last 4-5 years or so. What should be making us believe the company will see some growth re-acceleration? Or is it just comfortable growing in single digits, holding onto its market share and going from there?
23.
On the profitability side, given that’s a key focus right now, how would you assess the job Avid has done expanding its margins? What opportunity could it have to continue seeing improvement there?
24.
Do you have any further thoughts on how the AI revolution and the introduction of new tools could potentially disrupt the competitive landscape? Are you thinking about that as more of a headwind or a tailwind?
25.
As you said, Avid can sometimes fall behind and it doesn’t really impact the company, because people aren’t going to churn to then go through a 1.5-year replacement process. Are you concerned that the company could be slow to react to or adopt AI, and that someone else could come in and grab market share or disrupt before it even has a chance to respond?
26.
Is there a more profitable segment that has seen Avid investing more in R&D or in sales and marketing, that could become a larger part of the business, given it’s more profitable?
27.
You mentioned one of the things that might be pushing Avid into a potential sale is that it has a group of investors who could want to see a return after years with the company. How do you think management feels about this? I know it has been public for 30-plus years, and I’m sure it has a lot of people that have been there for a really long time. Is there a risk that if it is sold, this management team is going to cash out and leave? Could that impact the company a lot?
28.
From your understanding of the industry and the players within it, would you view an Avid and Adobe combination as a monopoly within any particular market that would run into challenges from a government perspective?
29.
We’ve talked about the strategic acquisition route, but there’s obviously the PE option, which seems to be the more common way to go around USD 1bn valuations. If a PE firm took over Avid, where do you think it would look for margin expansion growth? What would it be doing differently from what the company is doing right now?
30.
In your experience working in M&A, do you think going in and doubling down on innovation is something a PE firm would be willing to do? Or does that not really fit a 5-7-year timeline?
31.
Do you think Avid would find a lot more success as a private company, given the public headwinds you’ve mentioned?
32.
Is there anything we haven’t covered so far or any points you want to put out there on Avid?
33.
Do you have a forecast or prediction for what ultimately is going to happen around Avid’s acquisition options?
