As Accounting Review Continues, Company Says It May Face Delisting from NASDAQ in March
Avid has made two new executive appointments aimed at bolstering its customer service and software development efforts, the company said last week. Rick Lowenstein, formerly VP of consulting at Adobe, has been named senior VP of customer success and professional services, while Mitch Weaver joins from Cadence Design as VP of software development.
"These appointments are part of our ongoing efforts to develop deeper customer relationships and to remain at the forefront of innovation with solutions that solve our customers' most pressing current and future challenges," said Avid CEO Louis Hernandez Jr. in a prepared statement.
The company also announced a leadership slate for its Avid Customer Association (ACA) initiative, naming David Mash of Berklee College of Music chairman of the ACA executive board of directors. Fox Networks EVP and GM Richard Friedel and ZDF German Television EVP of Technology and Production Andreas Bereczky have been named vice chairmen. The board includes representatives from Al Jazeera Media Network, Harbor Picture Company, Todd-Soundelux, Endemol, Showtime Networks, and CBS News Technology and Operations, among others.
Avid also announced last week that Deloitte & Touche will replace Ernst & Young as its auditing firm, while insisting in a news release that the change was "not the result of any disagreement … on any matter of accounting principle or practice, financial statement disclosures, or auditing scope or procedure." The decision comes as Avid remains embroiled in the long process of re-evaluating its financial statements dating back to 2009 over its accounting treatment of software updates. The company had treated those updates as "bug fixes," but was considering whether they should have been treated as "post-contract customer support" instead under GAAP.
Those accounting questions have hung over the company all year. Last February, CEO Gary Greenfield was replaced by Hernandez, one of the company's directors since 2008, and two weeks later the company announced that it was postponing its regularly scheduled earnings report. The failure to file required documents with the Securities and Exchange Commission ran afoul of the rules of NASDAQ, which threatened to delist Avid. Now, almost a year later, Avid says it is "unlikely" to finish its accounting review in time to meet a March 14 NASDAQ deadline. If trading of Avid shares is suspended by NASDAQ, the company will trade on the Pink tier of OTC Markets until the financial restatements are complete and it can apply for relisting on NASDAQ, Avid said.
The company has indicated the accounting task is enormous, involving a review of "five million transaction lines and 700 software releases." As revenue is recognized in different ways over different periods, the company's deferred revenue liabilities, costs, and income taxes are also affected. "While the scope of the project is more involved than the company first expected, I believe that we have comprehensively assessed the revenue restatement and have a clear view to complete that work," said John Frederick, who became Avid's CFO in April 2013. "We look forward to working with our new audit team to deliver the audited financial statements to be included in our next annual report … as expeditiously as possible. We do not, however, believe we will be able to achieve the March 14, 2014, deadline established by NASDAQ."
Avid's cash balance at the end of 2013 was approximately $48 million, with no debt, the company said. Cash expenditures related to the accounting evaluation in 2014 will amount to between $25 million and $34 million, Avid said.
