Portfolio Memo

Ticker AVID Current Price $ 22.28 52 weeks High$ 24.47/Low$4.67 Market Cap $838.6M

Company Description

Avid Technology, Inc. ventures in the development of a variety of software and systems. The Company markets digital editing, newsroom computer systems, and digital audio systems. Avid serves customers worldwide.

OVERVIEW

Movie and music makers are keen on Avid Technology. The organization provides digital media

soundtrack and editing software and hardware. Products by the company includes ProTools professional audio recording, Media Composer video editing systems and its and editing systems. Most of its products are used by music and motion picture studios, radio broadcasters, post-production facilities, independent professionals, TV stations, and amateurs’ producers. Besides, the company makes, digital storage systems, newsroom automation systems, and music notation and education-based software. With sales offices in approximately 25 countries, about 63% of the company’s revenue emanate from outside the US. Jurisprudence. Further, Avid makes hardware and software for editing, capturing, and distribution of digital video. Video based products account for 40% of revenue while audio products, 27%. About 33% of revenue comes from services.

Management:

Jeffrey James Rosica "Jeff" President/CEO 58 years old 3.1Tenure Start from 02/26/2018

Jeff was president from 12/2016-02/2018, Senior VP/Chief Sales & Mktg Offer from 01/2016-12/2016, Senior VP: Worldwide Field Ops from 01/2013-unknown for AVID.

Director for Grass Valley UK Ltd

Exec VP/Chief Sales & Mktg Offer for Grass Valley Inc

Dynamic, entrepreneurial and experienced international management executive with a 30+ year record of achievement and leadership in the Broadcast, Digital Media, Enterprise Video and Filmed Entertainment markets. Record of demonstrated success in driving growth and evolution in highly competitive technology markets. Very adept at motivating and improving team and business performance across functions, geographies and cultures. Aggressive in building new business, securing financial objectives, and forging strong relationships with both customers and business partners.

Jason A Duva Exec VP/Chief Legal & Administrative Officer 48years old 2.8 Tenure

start from 05/31/2018

He was also Senior VP: Strategic Initiatives, Assistant General Counsel, Corporate Counsel, and VP/Secretary/General Counsel

“I develop strategy, build collaborative teams, foster equitable cultures, and transform crises into new business, leveraging my experience leading legal, human resources, IT, and operations. I’m also a life-long martial artist, 6th degree black belt, and master instructor. As an avocation, I coach athletes across the country on the application of traditional philosophies to modern life, health, and performance.”

Financial Data:

Based on Avid technologies' financial ratios and Income statements, the Company is showing steady growth within the first quarter of 2021. The growth of the Company comes after it registered negative financial information in the second and fourth quarters of the 2020 financial year. The chart below summarizes the expected Company's growth based on the Earnings per Share (EPS).

However, analyzing on a timeframe of ten years, the Company's revenue has been decreasing. The table below shows the revenue of the Company from 2010 to 2020

The balance sheets indicate that as of December 2020, the Company had assets worth about $320 million. It also had a Cash & Short-Term Investment of $81.32 million, a total debt of 242.50 million, and total liabilities worth 438.06 M. It also had a free cash flow of about $30 million (Avid technology, 2021). Based on the above analysis, it is clear that the Company is a good investment as it is picking from a ten-year poor performance. Over the last two financial quarters, the Company has shown progress, and based on that; it is likely to have an annual percentage EPS growth of 51.24% over the next two years

In the past 5 years, the revenue of AVID is getting lower and lower till the year 2020, and in the year 2021, it starts to bounce back a little bit. Here are the exact revenues and growth percentage for AVID in last 5 years.

As we can see the percentage of its debts/ its revenue is getting higher and higher, we might consider that AVID is having troubles.

In 2016, AVID has $1.49 EPS and 332.0% growth rate. In 2017, AVID has $-0.13 EPS and growth rate for this year is not available. In 2018, AVID has $-0.14 EPS and -4.2% growth rate. In 2019, AVID has $0.26 EPS and growth rate for this year is not available. In 2020 by 09/30/2020, AVID has $0.47 EPS and 667.5% growth rate. For 2020 AVID estimate has $0.64 EPS and 143.0% growth rate. And for 2021, AVID estimate has $1.06 EPS with 65.4% growth rate.

After 2016, AVID’s EPS has a huge drop, and it keeps the negative for 2 years. From 2019- now, AVID’s EPS keeps going up.

The Net Income GAAP for AVID in past 5 years are: $48.2M in 2016 with 9.4% growth rate, $-13.6M in 2017 with -3.2% growth rate, $-10.7M in 2018 with -2.6% growth rate, $7.6M in 2019 with 1.8% growth rate, $19.3M in 2020 by 9/30/2020 with 5.2% growth rate, estimate get $22.7M in 2020 by end of the year with 6.3% growth rate. Estimate earn $41.1M by the end of year 2021 with 10.4% growth rate. The net income of AVID decreasing from 2016 to 2018, after 2018 the net income increasing constantly till current data, and will estimate keep increasing in 2020 and 2021.

Here is the market capitalization of AVID’s competitors. From the chart we can see ADOBE INC and DOCUSIGN INC are large-cap companies, which have $201.89B and $35.98B, they are the industry giants. Donnelley Financial Solutions Inc has the similar market capitalization with AVID has.

Analysis:

Sequential growth of revenue by 15.3% of the Avid Technology in the fourth quarter as the end market keeps retrieving from the pandemic downturn. Notably, 54.9% year-over subscription revenue development in the fourth quarter is steered by the net rise of about 27,000 solid enterprises and paid subscription sales of $30.7 million in Net generated by operating events in the fourth free cash flow amounting to $30.6 million in the quarter (Vogel &Harold)

Non: Recuring company revenue part of the firm's business connected to good and services kept to indicate intense recovery symptoms during the fourth quarter, but they still keep below pre-pandemic level. Moreover, the software license and incorporated solution raised the product revenue from 19.2% to 42.6% in the fourth quarter. However, it reduced by 28.7% year-over-year.

Avid revenues in the year 2020 negatively influenced by the COVID-19 pandemic, declining 12.5% from 2019. Nonetheless, subscription growth experienced from 61.2% to 72.8 million outstanding 20% of total revenue, from 11% 2019(Matteo, et al, pg. 383). Additionally, in 2020, the firm saw a 280-basis point rise in gross margin to 63.3%, initially due to an excellent mixture of software and sales subscription 2020. The advantage of higher gross amount and decline in operating expenses from the cost-saving recognized during the year leads to higher profitability and cash generation. Further, as of December 31, 2020, the firm had generated $79.9 million cash and cash identical.

The Acid technology 2020, the net income per common share stood at $0.16, decreasing from $0.35 in the fourth quarter of 2019. The previous year's net income per share included one time advantage of $0.14 per share relative to a different allowance against deferred tax assets. In the fourth quarter of 2019, the Non-GAAP net income per share stood at $0.33 from $ 0.28

The ordinary share's net income recorded in 2019 amounted to $0.25, up from $0.17. Further, the net income per share accounted for $0.66, a rise of 27.3% from $0.51 in 2019. The net cash generated by operating events amounted to $39.6 million in 2020, a rise of $19.9 million compared to net cash generated by $19.6 million in 2019. In 2020 the free cash flow amounted to $33.9, a rise of 21.4 million compared to free cash flow of $12.5 in 2019. 

Comparison with Competitors

Avid technology's outcome to its rivals, its total revenue declined in the fourth quarter of 2020 by -10.32% regardless of the revenue rise by most of its rivals of 15.55%. Moreover, with the global pandemic, its net margin stood 6.97%, reporting lower profitability than its competitor. The below is the loss for Avid technology rivals and their estimated performance.

The customer market is highly competitive and is incurred by rapid transition and decreasing average selling charges. The number of firms has exploded the competitive landscape, generating various categories of goods and services in different market and geographical locations. Several firms that compete with Avid technologies are listed below. The global market where more companies are struggling to make profit in the market, the companies can be benchmarked with other companies by ensuring that it maintains its market share in the global presence. Based on the financial statement and income statement, it is clear that for the past quoter, the company has made a change in the way they manage their finances because of the decrease in revenue. It is noted that other companies dealing with the same product made an increase in revenue but Avid made a decrease in revenue a fact that calls for change in management style for the next financial year. Some of the key reason behind this improvement is the introduction of the new market in other areas. For instance, while the competitors did not get enough resources to open new market, the company managed to work its ways to the new market.

Based on the benchmarking criteria, all the competing companies all remain in the portfolio growth potential in the coming. Avid has shown a poor performance through the past financial year however, its EPS indicate an increase in annual growth of about 51% for the next 2 years.

Chart 2: Avid revenue growth for the 4th quarter of 2020 compared to its competitors (AVID Sales vs. its Competitors Q4 2020, 2021).

Since the company still recorded a revenue increase of 15.4% in the 2020 financial year, it implies that its growth is slow compared to the competitors.

Aceto Chem Pvt Ltd

Market: NASDAQ

Market Cap: $444.78

Price: $14.70

52 weeks high: 21.40

52 weeks low: 9.71

Company Description

Aceto chem private Limited is a global company that specializes with the manufacturing of chemical products for industrial purposes. Main products by the company include dyes intermediates such as winthers, phenyl alpha naphthylamine, Neville and sodium naphthionate.

Overview

Insofar as the chemical market is concerned, Aceto is deemed to be the leading company because of its robust chemical distribution and virtual manufacturing. The company is key in science and advanced technology fields as it provides them with specialty chemicals and reagents that are impetus to many productions in the two industries. As it stands, the organization conducts its business in nine countries, distributing over 1100 chemical compounds used as basic elements to various industrial productions. Regarding its global outreach, the company has situated their staff in countries such as India and China. The company is highly valued by its customers as they regard it as a go-to market, whenever they need to purchase difficult to source and low-price materials for their endeavors. Furthermore, the organization has created a robust relationship with vital stakeholders in its niche, a factor that makes the organization reliable by its customers.

Management

Gilles Cottier

Cottier is the CEO since July 2019. Indeed, he is a suited personality for position as he possesses 30 years of industrial experience from the global arena. Before he became the CEO of ACETO, he acquainted himself with various aspects of industrial chemistry such as fine chemicals, life sciences, and research chemicals. The most recent position before he joined ACETO was at Lonza, where he acted as the head of Bioscience department.

Denis Micol

Micol is the president, Europe and Asia, since the November of 2019. He operates from Lyon, France. As the president of the aforementioned regions, all business units located in France, Netherlands, and Germany report to him. His credentials include being a consultant in the life science and chemicals space for at least 3 years. Besides, he spent over 20 years at Sigma Aldrich, where his track record is incredible, based on his rise through the ranks.

Varun Vijay Rao

Rao is the current Chief procurement officer at ACETO and is one of the most recent additions to its management. Having joined the company in 2020, the executive officer is based in India. As his tittle indicates, he is responsible for sourcing endeavors in India and China. His credentials include skills in marketing, procurement, Engineering, and Sales.

Financial Data

In the past three years, the revenue of the organization has been getting better after falling in the initial three years after filing. To be precise, the revenue of the company increased from $403.9 million through $594.4 in 2019 to 594.4 in 2020. Even though the figures seem to stabilize in the last two years, results from 2016 indicates that the company is moving on an upward trend.

Another notable feature about the company’s financial data is that its operating capital has been increasing over the years, an indication that the company is growing its endeavors. In relation to the company’s revenues, it can be observed that the more the operating capital the more the returns to the organization.

The Company has had positive growth throughout the last five years. In 2017, 2018, and 2019, the Company had an operating income of 38.71, 40.39, 59.44 (amount in a million Rs. Crore), respectively. The Company further had an interest coverage of 7.61, 10.42, 9.84 times in 2017, 2018, and 2019 respectively. The table below summarizes the financial performance of the Company in 2017, 2018, 2019. The Company has not released the 2020 financial results.

From the above, Aceto's performance has been an increase, an indicator that it is a good company to invest into. Aceto Chem Pvt Ltd will therefore remain part of this investment stock.

The health segment success is connected to the growth and development rate of the pharmaceutical, mineral, vitamin, and supplement market, which provide an adverse transition in the growth rate.The company stock repurchase program impacts the charge of a common share and raises volatility. In May 2017, the firm authorized the repurchase company program ending in May 2021. Under this program, the company has control and power but is not obligated under open market to buy up to 5000 shares, at a charge not to exceed such purchase at the market value of a common share. The program of stock repurchases terminated at any period.

Assets and Liabilities

As can be seen from the above financial data, the organization has been performing well in terms of availing current assets. In fact, the figures have been on the rise, in response to its growing revenues. Also, its total assets have increased significantly since the company’s filing in 2014. Besides, the company has managed to keep its liability at a manageable level, given that the figures, over the past three years have been kept below its assets. From the above data, it is visible that the company provides dependable stocks that one can invest.

Looking at the results as from the 2014, when the company started filing, one can see that 2016 was the least performing year. One of the major reasons why that happened is because the company did not make sales for its products both locally and internationally. In other words, no products were manufactured. Fast forward in the last two years, the organization improved its revenues because it had acquired other chemical producing companies and also, its running capital was increasing as a result of its global expansion strategies.

Analysis:

Aceto chem is categorized as Non -government firm and is registered in the registrar of the firm. The company share capital stood at 26,000,000, and its paid-up capital is Rs.26, 000,000. According to the report, in the 2018 second quarter, the calendar revenue for the company's revenue improved over the past three years (Matteo, et al, pg. 383). In the fourth quarter of 2019, Aceto Chem Pvt Ltd raised from $403.9 million through $594 in 2020. The firm authorized capital amount at Rs 1.0 lakhs which amount to the paid-up capital of 25%, accounting o Rs0.25 lakhs

The company indicated positive growth in the year 2019, amounting to $59.44 million with interest coverage of 9.84%

The health segment success is connected to the growth and development rate of the pharmaceutical, mineral, vitamin, and supplement market, which provide an adverse transition in the growth rate.

The company stock repurchase program impacts the charge of a common share and raises volatility. In May 2017, the firm authorized the repurchase company program ending in May 2021. Under this program, the company has control and power but is not obligated under open market to buy up to 5000 shares, at a charge not to exceed such purchase at the market value of a common share. The program of stock repurchases terminated at any period.

Comparison with Competitors

Some of Aceto’s key competitors include Omnova solution, Maroon group, KMG, and Parchem, among others. The pharmaceutical and chemical industry has been performing well over the past five years. Basically, all the companies have recorded consistent positive revenue growth. Therefore, Aceto’s performance is in line with the general trend of the entire industry.

The firm conducts its business in a highly competitive business surrounding. It competes by providing a quality goods and services generated globally y both large and small manufactures at attractive charges.

The company's excellent relationship with its suppliers and the nation's sourcing operations, such as India and China, ensure given goods and services adhere to the regulatory requirement. A competitive advantage environment distinguishes a certain company from its competitor’s, it establishes the company with an added advantage of brand loyalty, more customers and adjusting the prices of their products and services (Vogel & Harold). Aceto Chem Private Limited has numerous competitors who try to win their market share by cutting the available costs, lower prices of their products and improves their level of efficiency through innovations and creation of new products and services to aid in improving the state of the old ones. Competition gives the company an idea of giving their consumers goods and services at affordable rates. The main competitors of the firm are Maroon group, Parched, and KMG. The firm is performing well compared to its rival in the past five years which its performance is in line is in general trend with the overall industry.

Donnelley Financial Solution, Inc.

Market Cap: 951.51, 52-wk high: 29.78, 52-wk low: 4.04

The company offers financial infrastructures and data services. More so, it provides its customers with content and data management, multichannel content distribution, data analytics, collaborative workflow and business reporting tools, translations, and other language services around the world.

Overview

Being a company that specializes on financial matters, Donnelley Financial Solutions aims to help businesses how to comply with various regulations. Through its endeavor, the company offers technological services that enable its customers create, manage, and relay financial communications to businesses and corresponding regulators. Besides, the company offers data analytics and language interpretations to investors venturing in foreign countries. On one hand, the company offers analytical services to customers venturing in alternative investments while on the other hand, it provides language translations to life science firms, corporations, and legal partnerships. Insofar as market segmentation is concerned, the company provides its services to US and the international community, including Canada, Asia, Latin America, and Europe. The company’s area of focus is on global capital, language solutions global investment markets. On its translation niche, the organization has a capacity to translate documents in 140 various languages.

Management

Daniel N. Leib.

Leib is the President, CEO and Director of the company. He is an MBA holder from the University of Illinois. Previously, he was the CFO and an executive vice president of Donnelley and Sons. Co.

Richard L. Crandall

Crandall is the Chairman of the company. At age 76, he brings extensive experience in the organization after heading eight different companies. Furthermore, he is a founding member of several other companies such as Arbor Partners LLC.

Financial Data

The organization has experienced fluctuating capitalization values since 2016. It started from $749.1 before falling in the following three years and started to rise once again in 2020. At the moment, the organization has its highest capitalization at $951.5 million, an indication that the company is a small cap business. Despite the fact that fluctuations can be observed from the company’s market cap values, it is worth noting that its value in that regard has increased since May 2020, as indicated in the chart below.

Most interesting about the organization is its lowest and highest and lowest values of $29.78 and $4.04 million respectively. Thus, stocks from the organization can be unpredictable when factors are at their extreme end. Despite fluctuations in the past, the current trend in the organization’s financial data, displayed above indicates that the company is headed in the right direction.

Besides, from the net income displayed above, it can be seen that the organization has assumed a positive trajectory since 2020 and the future seems brighter as projections indicate increasing income despite the prevailing pandemic. Indeed, the experienced fall in net income of the organization was occasioned by uncertainties occasioned by the pandemic. Thus, a significant number of investors were reluctant to invest in the organization. In part, the indicated growth expectation, as shown by projections is hinged on the fact that, post the pandemic, various organizations are most chanced to require financial advice. Thus, the organization may seize the opportunity and grow its income. Apart from issues relating to the pandemic, other factors such as the eminent globalization of many companies could have resulted in the positive projections.

Insofar as keeping the balance sheet of the company manageable is concerned, the management has maintained a low debt value. As can be seen from the data above, the value of the company indicates that it is a small enterprise, thus fluctuations in its finances were expected as it became adaptable to its market. To make the organization, even more valuable, global strategies can help in reaching more customers and attracting more investors.

Financial expenditure and Cash Flow

The data above indicates that the organization accumulates much of its cash from daily operations. In addition, much of the expenditure emanates from capital expenditures, thus retaining sufficient cash for its everyday operations. Even though there is no proportionate relationship between cash from operations and capital expenditure, the organization has been consistent in its endeavor to make more investments. In 2021, the value of the organization improved because it did not make borrowings as compared to other years such as 2019. The most important aspect of the company to investors is that cash from operations has increased in the last two years, an indication that its stocks could be reliable, going forward.

Analysis:

From the fourth quarter of 2019, the company's net sales stood at $210.3 million, up to $20.0 million, handled by excellent IPO market and perused development in a software solution. Notably, the company quarterly software solution estimated at $542 million from the fourth quarter recorded in 2019, the company net sales amounted to 25.8% of fourth-quarter net sales in 2020 (Vogel & Harold)

Moreover, quarterly operating cash recorded cash flow of $101.7 million—a rise of $43.0 million from the fourth quarter in 2019. The free cash flow amounted to $95.1 million; the recording increases $46.1 million from the fourth quarter of 2019. Further, the firm announced a $50 million joint-stock repurchase program that terminates in December 2022, restoring its existing $25 million strategies, persisted to end in December 20201

Regardless of the COVID-19 pandemic influence on the business in the year, it delivered excellent financial results for 2020. It indicated a strong resilience of both business model and team. Moreover, in the 2020 fourth quarter, the adjusted EBITDA stood at $34. million, arise of $8.8 million in comparison to the fourth quarter 2019. For the period in 2020, the adjusted EBITDA margin stood at 16.6%, advancement of an estimated 290 basis point compared to the fourth quarter of 2019, initially driven by the effect of cost control initiatives, operating support on higher sales volume, and advances sales mix.

The company is satisfied by the great performance in the quarter, which added development of net sales of over 10% and quarterly mounted for both software. Fourth quarterly net sales dropped print and distribution, developed 20% year over year, guided by strong capital market transactional event.

The fourth quarter of 2020, net loss amounted to $35.8 million which was equivalent to $1.07 loss per charges. Moreover, the net loss was inclusive to tax price of $47.7 million (adding pre-tax $40.6 million). During 2019 the firm incurred a net earning amounting to $7.0 million equivalent to $0.20 per share.

The company Non-GAAP gross difference of 1.3x and non-GAAP difference of 0.9x below 0.9x and 11x correspondingly. Total debt from December 2019 amounted to $230.5 million while non-GAAP accounted to $156million

Comparison with Competitors

Donnelley Financial Solutions’ competitors include Vicor, Mercury Systems, New Relic, and Rogers companies. Compared to other firms in the industry, Donnelley is performing poorly despite making positive returns. Comparing the outcomes to its rival, Donnelley financial solution in indicated total revenue rise in the fourth quarter of 2020 by 10.15% year to year. Notably, the revenue growth was down Donnelley company rivals average revenue development of 10.51% stood in same quarter. Technology transformation, including distribution of electronic data, hosting media concept, improved digital printing, maintain to influence the market of the firm goods and services. The firm perceives to obtain distinctive capabilities of its goods and service to advance its customer communication. The firm perceives to generate a platform of excellent customer connection to develop larger customers print and relative service desires than its rivals.

It is therefore a good stock to hold as it shows growth potential as it is with the rest of competitors in the industry.

Chart 6: Revenue growth compared to competitors (Donnelley Financial Solutions, Inc. Analytics, 2021)

From the three companies, Aceto Chem Pvt Ltd is the best performing, followed by Donnelley Financial Solutions, and lastly Avid technology Inc. They all remain to be part of the portfolio as they show growth potential in the coming years. Donnelley has been performing positively throughout the past six years, so is Aceto. Although Avid has been performing poorly, its EPS shows a potential annual growth of about 51% for the next two years. This portfolio is a good investment as it will be profitable within a short period of fewer than five years.

Order of Ranking

Based on the risks involved in each stock, analyzed above, Donnelley Financial Solution, Inc. is the riskiest because its endeavors can be pursued by other means. For instance, while interpretation of languages is one of its key factors, other organizations can leverage on localizing their recruitments to ensure language barriers are dismissed. Besides, legal services can be sought from legal practitioners available in most places. Thus, such services may not be required. Next, in the ranking of risky investments is AVID technologies. While it ventures in technology, a key factor of growth in the contemporary world, it is worth noting that several other organizations are capable of providing similar services. Indeed, organizations can employ savvy employees in that regard. After all, not all small and medium cap organizations may need consultations on software management intrigues as they can develop the technology as the venture grows. In that case, the least risky organization, among the three is Aceto Chem Pvt Ltd. The company is positioned for growth, given the fact that it is situated in China and India. Notably, the two countries are known for their industrialization and utilization of chemicals in their endeavors.

Aceto Chem Pvt Ltd

FY 2014 373.6 FY 2015 343.8 FY 2016 291.10000000000002 FY 2017 387.1 FY 2018 403.9 FY 2019 594.4 Last 12M 594.4

Operating Income

FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Last 12M 25.9 24.6 46.2 78 77.400000000000006 92 92

Operating Income

Donnelly Cap

FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Current/LTM 749.1 656.8 478.4 358.1 565.1 951.5

Net Income

FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Current/LTM FY 2021 Est FY 2022 Est 57.4 104.3 65.400000000000006 46.3 54.8 44.1 39.5 41.5 54.9 71.8