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Avaya Reports Second Quarter Fiscal 2019 Financial Results

05-09-2019
  • GAAP revenue was $709 million; non-GAAP revenue was $714 million
  • GAAP operating margin of 5.4%; non-GAAP operating margin of 20.9%
  • Public cloud seats increased more than 165% year-over-year
  • Solid large deal activity with 78 deals over $1 million, 9 over $5 million, and 2 over $10 million
  • Engaged J.P. Morgan to evaluate strategic alternatives to maximize shareholder value

SANTA CLARA, Calif.--(BUSINESS WIRE)-- Avaya Holdings Corp. (NYSE: AVYA) today reported financial results for the second quarter ended March 31, 2019.

   

 

GAAP

Non-GAAP (1)
(In millions, except percentages) Q2 2019   Q1 2019   Q2 2018 Q2 2019   Q1 2019   Q2 2018
Revenue $ 709 $ 738 $ 672 $ 714 $ 748 $ 757
Gross margin 54.4 % 55.1 % 48.1 % 61.5 % 62.7 % 62.4 %
Operating margin 5.4 % 6.8 % (13.2 )% 20.9 % 22.7 % 20.7 %
 

"Our topline results and earnings fell short of expectations," said Jim Chirico, President and CEO of Avaya. "In response, we have implemented a number of corrective actions to drive improved performance. While I'm disappointed in our results last quarter, overall, I remain confident about our path forward given the momentum and traction we are seeing in many segments of our business including cloud, services and emerging technologies."

Mr. Chirico added, "Following the receipt of expressions of interest, the Company has engaged J.P. Morgan to assist in exploring strategic alternatives intended to maximize shareholder value. The Board has not set a timetable for the process nor has it made any decisions related to any strategic alternatives at this time. There can be no assurance that the exploration of strategic alternatives will result in any particular outcome. The Company does not intend to provide updates unless or until it determines that further disclosure is necessary."

Second Quarter Fiscal 2019 Financial Results:

  • On October 1, 2018, Avaya adopted the new revenue recognition standard, Accounting Standards Codification 606 ("ASC 606"), using the modified retrospective transition method. Accordingly, results for reporting periods beginning after September 30, 2018 are presented under ASC 606 while prior period financial information is not adjusted and continues to be reported in accordance with GAAP that existed prior to the adoption of ASC 606 ("ASC 605").
  • GAAP revenue was $709 million, $29 million lower than the first quarter of fiscal 2019, and $37 million higher than the second quarter of fiscal 2018ended March 31, 2018. Non-GAAP revenue(1) was $714 million, $34 million lower than the first quarter of fiscal 2019, and $43 million lower than the second quarter of fiscal 2018.
  • GAAP gross margin was 54.4%, compared to 55.1% for the first quarter of fiscal 2019 and 48.1% for the second quarter of fiscal 2018. Non-GAAP gross margin(1) was 61.5%, compared to 62.7% for the first quarter of fiscal 2019 and 62.4% for the second quarter of fiscal 2018.
  • GAAP operating income was $38 million, compared to GAAP operating income of $50 million for the first quarter of fiscal 2019 and an operating loss of $89 million for the second quarter of fiscal 2018. Non-GAAP operating income(1) was $149 million, compared to $170 million for the first quarter of fiscal 2019, and $157 million for the second quarter of fiscal 2018.
  • GAAP net loss was $13 million, compared to GAAP net income of $9 million for the first quarter of fiscal 2019, and GAAP net loss of $130 million for the second quarter of fiscal 2018.
  • Adjusted EBITDA(1) was $166 million or 23.2% of non-GAAP revenue, compared to adjusted EBITDA of $189 million, or 25.3% of non-GAAP revenue, for the first quarter of fiscal 2019 and $187 million, or 24.7% of non-GAAP revenue, for the second quarter of fiscal 2018.
  • Cash provided by operating activities was $37 million, compared to cash provided by operating activities of $86 million for the first quarter of fiscal 2019 and cash provided by operating activities of $54 million for the second quarter of fiscal 2018.
  • At the end of the second quarter of fiscal 2019, cash and cash equivalents totaled $735 million, compared to $743 million at the end of the first quarter of fiscal 2019 and $311 million at the end of the second quarter of fiscal 2018.

(1) Non-GAAP revenue, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP operating margin and adjusted EBITDA are not measures calculated in accordance with generally accepted accounting principles in the U.S. ("GAAP"). Refer to the Supplemental Financial Information accompanying this press release for more information, including a reconciliation of these measures to the most closely comparable measure calculated in accordance with GAAP.

Second Quarter Fiscal 2019 Business Metrics *

  • Total Contract Value (TCV) increased 3% year-over-year to $2.4 billion
  • 83% of non-GAAP revenue was Software & Services
  • 58% of non-GAAP product revenue was Software
  • 59% of non-GAAP revenue was Recurring
  • Added approximately 1,500 new logos
  • Generated $37 million in cash flow from operations, $11 million in free cash flow

*We define TCV as the value of all active ratable contracts that have not been recognized as revenue, including both billed and unbilled backlog. We define free cash flow as cash flow from operating activities less capital expenditures.

Second Quarter Fiscal 2019 Company Highlights

  • Introduced a cloud transformation program to help organizations map the most effective and efficient path to implement Avaya OneCloud solutions for public, private or hybrid communications deployments
  • Extended AI and Cloud integration with Google Cloud to provide customers with more intelligent, flexible solutions
  • Announced integration with Nuance to deliver new, easy-to-navigate conversational interfaces for AI-enhanced customer experiences
  • Launched Avaya for Communities program to provide economically disadvantaged women-owned small businesses in the US with communications and collaboration solutions to support their growth and success
  • Announced enhancements to Open SIP portfolio
  • Expanded video offerings to deliver intelligent huddle room experiences
  • Appointed Jacqueline Yeaney to Avaya's Board of Directors

Financial Outlook - Q3 Fiscal 2019 under ASC 606

Our financial outlook reflects the adoption of ASC 606, which became effective for Avaya on October 1, 2018. Avaya has adopted ASC 606 using the modified retrospective transition method.

  • GAAP revenue of $707-$722 million; non-GAAP revenue of $710-$725 million
  • GAAP operating income of $30-$40 million; GAAP operating margin of ~5%
  • Non-GAAP operating income of $140-$150 million; non-GAAP operating margin of ~20%
  • Adjusted EBITDA of $160-$170 million; Adjusted EBITDA margin of ~23%
  • Approximately 111 million weighted average shares outstanding

Financial Outlook - Fiscal 2019 under ASC 606

  • GAAP revenue of $2.900-$2.950 billion; non-GAAP revenue of $2.925-$2.975 billion
    • Cloud and innovation 11-12% of non-GAAP revenue
  • GAAP operating income of $163-$191 million; GAAP operating margin of ~6%
  • Non-GAAP operating income of $625-$660 million; non-GAAP operating margin of ~22%
  • Adjusted EBITDA of $700-$730 million; Adjusted EBITDA margin of ~24%
  • Cash flow from operations of 7-8% of non-GAAP revenue
  • Approximately 111 million weighted average shares outstanding
  • Cash requirements for restructuring, pension & OPEB, cash taxes, capital spending and interest expense for fiscal year 2019 are expected to be:
    • Restructuring: $50-$55 million
    • Pension/OPEB: ~$65 million
    • Cash Taxes: $55-$65 million
    • Capital Expenditures: ~$100 million
    • Interest Expense: $200-$205 million

Avaya's outlook does not include the potential impact of any business combinations, asset acquisitions, divestitures, strategic investments, or other significant transactions that may be completed after May 9, 2019. Actual results may differ materially from Avaya's outlook as a result of, among other things, the factors described under "Forward-Looking Statements" below.

Conference Call and Webcast

Avaya will host a live webcast and conference call to discuss its financial results at 8:30 a.m. Eastern Time on May 9, 2019. To access the live conference call by phone, listeners should dial +1-833-224-0545 in the U.S. or Canada and +1-647-689-4064 for international callers. To join the live webcast, listeners should access the investor page of Avaya's website at https://investors.avaya.com.

Following the live webcast, a replay will be available on the investor page of Avaya's website for a period of one year. A replay of the conference call will be available for one week soon after the call by phone by dialing +1-800-585-8367 in the U.S. or Canada and +1-416-621-4642 for international callers, using the conference access code: 6988044.

About Avaya

Businesses are built on the experiences they provide, and every day millions of those experiences are built by Avaya (NYSE: AVYA). For over one hundred years, we've enabled organizations around the globe to win - by creating intelligent communications experiences for customers and employees. Avaya builds open, converged and innovative solutions to enhance and simplify communications and collaboration - in the cloud, on-premise or a hybrid of both. To grow your business, we're committed to innovation, partnership, and a relentless focus on what's next. We're the technology company you trust to help you deliver Experiences that Matter. Visit us at www.avaya.com.

Cautionary Note Regarding Forward-Looking Statements

This document contains certain "forward-looking statements." All statements other than statements of historical fact are “forward-looking” statements for purposes of the U.S. federal and state securities laws. These statements may be identified by the use of forward looking terminology such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "our vision," "plan," "potential," "preliminary," "predict," "should," "will," or "would" or the negative thereof or other variations thereof or comparable terminology and include, but are not limited to, the outlook for the third quarter of fiscal 2019 and fiscal year 2019, including the expected impact of the adoption of ASC 606, and statements about the Board's exploration of strategic alternatives. The Company has based these forward-looking statements on its current expectations, assumptions, estimates and projections. While the Company believes these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond its control. Risks and uncertainties that may cause these forward-looking statements to be inaccurate include, among others: the announcement that the Board is exploring strategic alternatives and the potential impact of such announcement on the Company's current or potential customers, partners or personnel; the cost of such exploration and the disruption it may have on the Company's operations, including diverting the attention of the Company's management and employees; and other risks discussed in the Company's Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission (the "SEC"). These risks and uncertainties may cause the Company's actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. For a further list and description of such risks and uncertainties, please refer to the Company’s filings with the SEC that are available at www.sec.gov . The Company cautions you that the list of important factors included in the Company’s SEC filings may not contain all of the material factors that are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this report may not in fact occur. The Company undertakes no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

       

Avaya Holdings Corp.

Condensed Consolidated Statements of Operations (Unaudited)

(In millions, except per share amounts)

 
Successor Predecessor

Non-
GAAP
Combined (1)

Three
months
ended
March 31,
2019

 

Three
months
ended
March 31,
2018

 

Six
months
ended
March 31,
2019

 

Period from
December 16,
2017
through
March 31, 2018

Period from
October 1,
2017
through
December 15,
2017

Six months ended
March 31, 2018
REVENUE
Products $ 287 $ 293 $ 611 $ 364 $ 253 $ 617

Services

422   379   836   456   351   807  
709   672   1,447   820   604   1,424  
COSTS
Products:
Costs 105 110 220 143 84 227
Amortization of technology intangible assets 44 41 87 48 3 51
Services 174   198   347   228   155   383  
323   349   654   419   242   661  
GROSS PROFIT 386   323   793   401   362   763  
OPERATING EXPENSES
Selling, general and administrative 251 282 508 332 264 596
Research and development 52 50 105 59 38 97
Amortization of intangible assets 41 40 81 47 10 57
Restructuring charges, net 4   40   11   50   14   64  
348   412   705   488   326   814  
OPERATING INCOME (LOSS) 38 (89 ) 88 (87 ) 36 (51 )
Interest expense (58 ) (47 ) (118 ) (56 ) (14 ) (70 )
Other income (expense), net 1 (3 ) 23 (5 ) (2 ) (7 )
Reorganization items, net         3,416   3,416  
(LOSS) INCOME BEFORE INCOME TAXES (19 ) (139 ) (7 ) (148 ) 3,436 3,288
Benefit from (provision for) income taxes 6   9   3   255   (459 ) (204 )
NET (LOSS) INCOME $ (13 ) $ (130 ) $ (4 ) $ 107   $ 2,977   $ 3,084  
(LOSS) EARNINGS PER SHARE
Basic $ (0.12 ) $ (1.18 ) $ (0.04 ) $ 0.97   $ 5.19  
Diluted $ (0.12 ) $ (1.18 ) $ (0.04 ) $ 0.96   $ 5.19  
Weighted average shares outstanding
Basic 110.8   109.8   110.5   109.8   497.3  
Diluted 110.8   109.8   110.5   110.8   497.3  
 

(1) See "Use of non-GAAP (Adjusted) Financial Measures" below.

 
   

Avaya Holdings Corp.

Condensed Consolidated Balance Sheets (Unaudited)

(In millions, except per share and shares amounts)

 
March 31, 2019

September 30,
2018

ASSETS
Current assets:
Cash and cash equivalents $ 735 $ 700
Accounts receivable, net 300 377
Inventory 66 81
Contract assets 146
Contract costs 127
Other current assets 136   170
TOTAL CURRENT ASSETS 1,510 1,328
Property, plant and equipment, net 236 250
Deferred income taxes, net 26 29
Intangible assets, net 3,066 3,234
Goodwill 2,764 2,764
Other assets 105   74
TOTAL ASSETS $ 7,707   $ 7,679
LIABILITIES
Current liabilities:
Debt maturing within one year $ 29 $ 29
Accounts payable 275 266
Payroll and benefit obligations 117 145
Contract liabilities 500 484
Business restructuring reserve 42 51
Other current liabilities 143   148

TOTAL CURRENT LIABILITIES

1,106   1,123
Non-current liabilities:
Long-term debt, net of current portion 3,093 3,097

Pension obligations

622 671
Other post-retirement obligations 174 176
Deferred income taxes, net 160 140
Business restructuring reserve 39 47
Other liabilities 378   374
TOTAL NON-CURRENT LIABILITIES 4,466   4,505
TOTAL LIABILITIES 5,572   5,628
Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value; 55,000,000 shares authorized, no shares issued or outstanding at March 31, 2019 and September 30, 2018
Common stock, $0.01 par value; 550,000,000 shares authorized; 110,730,362 shares issued and 110,717,682 shares outstanding at March 31, 2019; and 110,218,653 shares issued and 110,012,790 shares outstanding at September 30, 2018 1 1
Additional paid-in capital 1,750 1,745
Retained earnings 378 287
Accumulated other comprehensive income 6   18
TOTAL STOCKHOLDERS' EQUITY 2,135   2,051
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,707   $ 7,679
 
       

Avaya Holdings Corp.

Condensed Statements of Cash Flows

(Unaudited; in millions)

 
Successor Predecessor

Non-GAAP
Combined (1)

Six
months
ended
March 31,
2019

 

Period from
December 16,
2017
through
March 31,
2018

Period from
October 1,
2017
through
December 15,
2017

Six months
ended
March 31,
2018

Net cash provided by (used for):
Operating activities $ 123 $ 94 $ (414 ) $ (320 )
Investing activities (48 ) (175 ) (13 ) (188 )
Financing activities (39 ) (11 ) (102 ) (113 )
Effect of exchange rate changes on cash, cash equivalents, and restricted cash (1 ) 9   (2 ) 7  
Net increase (decrease) in cash, cash equivalents, and restricted cash 35 (83 ) (531 ) (614 )
Cash, cash equivalents, and restricted cash at beginning of period 704   435   966   966  
Cash, cash equivalents, and restricted cash at end of period $ 739   $ 352   $ 435   $ 352  
 

(1) See "Use of non-GAAP (Adjusted) Financial Measures" below.

 

Use of non-GAAP (Adjusted) Financial Measures

The information furnished in this release includes non-GAAP financial measures that differ from measures calculated in accordance with generally accepted accounting principles in the United States of America ("GAAP"), including the combined six month period ending March 31, 2018 and financial measures labeled as "non-GAAP" or "adjusted."

Although GAAP requires that we report on our results for the periods October 1, 2017 through December 15, 2017 (the "Predecessor" period) and December 16, 2017 through March 31, 2018 (the "Successor" period), separately, management reviews the Company's operating results for the six months ended March 31, 2018 by combining the results of these periods because such presentation provides the most meaningful comparison of our results. The Company cannot adequately benchmark the operating results of the 106-day period ended March 31, 2018 against any of the previous periods reported in its condensed consolidated financial statements and does not believe that reviewing the results of this period in isolation would be useful in identifying any trends regarding the Company's overall performance. Management believes that the key performance metrics such as revenue, gross margin and operating income, among others, when combined for the six months ended March 31, 2018 provide meaningful comparisons to other periods and are useful in identifying current business trends.

EBITDA is defined as net income (loss) before income taxes, interest expense, interest income and depreciation and amortization. Adjusted EBITDA is EBITDA further adjusted to exclude certain charges and other adjustments described in our SEC filings and the tables below.

We believe that including supplementary information concerning adjusted EBITDA is appropriate because it serves as a basis for determining management and employee compensation and it is used as a basis for calculating covenants in our credit agreements. In addition, we believe adjusted EBITDA provides more comparability between our historical results and results that reflect purchase accounting and our current capital structure. We also present EBITDA and adjusted EBITDA because we believe analysts and investors utilize these measures in analyzing our results. Adjusted EBITDA measures our financial performance based on operational factors that management can impact in the short-term, such as our pricing strategies, volume, costs and expenses of the organization and it presents our financial performance in a way that can be more easily compared to prior quarters or fiscal years.

EBITDA and adjusted EBITDA have limitations as analytical tools. EBITDA measures do not represent net income (loss) or cash flow from operations as those terms are defined by GAAP and do not necessarily indicate whether cash flows will be sufficient to fund cash needs. However, these terms are not necessarily comparable to other similarly titled captions of other companies due to the potential inconsistencies in the method of calculation. Adjusted EBITDA excludes the impact of earnings or charges resulting from matters that we consider not to be indicative of our ongoing operations. In particular, our formulation of adjusted EBITDA allows adjustment for certain amounts that are included in calculating net income (loss), however, these are expenses that may recur, may vary and are difficult to predict.

We also present the measures non-GAAP revenue, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income and non-GAAP operating margin, as a supplement to our unaudited condensed consolidated financial statements presented in accordance with GAAP. We believe these non-GAAP measures are the most meaningful for period to period comparisons because they exclude the impact of the earnings and charges noted in the applicable tables below that resulted from matters that we consider not to be indicative of our ongoing operations.

The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, as substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and may be different from the non-GAAP financial measures used by other companies. In addition, these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP.

We do not provide a forward-looking reconciliation of expected third quarter and full year fiscal 2019 non-GAAP revenue, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP operating margin or adjusted EBITDA guidance as the amount and significance of special items required to develop meaningful comparable GAAP financial measures cannot be estimated at this time without unreasonable efforts. These special items could be meaningful.

The following tables present Successor, Predecessor and combined results and reconcile historical GAAP measures to non-GAAP measures.

       

Avaya Holdings Corp.

Supplemental Schedules of Non-GAAP Adjusted EBITDA

(Unaudited; in millions)

 
Successor Predecessor

Non-
GAAP
Combined

Three
months
ended
March 31,
2019

 

Three
months
ended
March 31,
2018

 

Six
months
ended
March 31,
2019

 

Period from
December 16,
2017
through
March 31,
2018

Period from
October 1,
2017
through
December 15,
2017

Six
months
ended
March 31,
2018

Net (loss) income $ (13 ) $ (130 ) $ (4 ) $ 107 $ 2,977 $ 3,084
Interest expense 58 47 118 56 14 70
Interest income (4 ) (1 ) (7 ) (1 ) (2 ) (3 )
(Benefit from) provision for income taxes (6 ) (9 ) (3 ) (255 ) 459 204
Depreciation and amortization 108   123   225   145   31   176  
EBITDA 143 30 329 52 3,479 3,531
Impact of fresh start accounting adjustments 6 86 9 113 113
Restructuring charges, net 4 40 11 50 14 64
Advisory fees 1 4 2 12 3 15
Acquisition-related costs 4 7 7 7 7
Reorganization items, net (3,416 ) (3,416 )
Non-cash share-based compensation 5 5 11 6 6
Loss on sale/disposal of long-lived assets, net 2 2 1 3

Resolution of certain legal matters

37 37
Change in fair value of Emergence Date Warrants (3 ) 10 (21 ) 15 15
Loss on foreign currency transactions 6 3 7 1 1
Pension/OPEB/nonretirement postemployment benefits and long-term disability costs         17   17  
Adjusted EBITDA $ 166   $ 187   $ 355   $ 258   $ 135   $ 393  
 
     

Avaya Holdings Corp.

Supplemental Schedules of Non-GAAP Revenue

(Unaudited; in millions)

 
Three Months Ended Change Three Months Ended

Mar. 31,
2019

 

Adj. for
Fresh Start
Accounting

 

Non-
GAAP
Mar. 31,
2019

 

Non-
GAAP
Mar. 31,
2018 (4)

Amount   Pct.  

Pct., net
of fx
impact

Non-
GAAP
Dec. 31,
2018 (1)

 

Non-
GAAP
Sept. 30,
2018 (2)

 

Non-
GAAP
June 30,
2018 (3)

Revenue by Segment

Products & Solutions $ 289 $ $ 289 $ 317 $ (28 ) (9 )% (8

)%

 

$ 326 $ 336 $ 322
Services 425 425 440 (15 ) (3 )%

(2

)%

422 434 433
Unallocated amounts (5 ) 5         n/a

n/a

 

   
Total revenue $ 709   $ 5   $ 714   $ 757   $ (43 ) (6 )% (4 )% $ 748   $ 770   $ 755
 

Revenue by Geography

U.S. $ 375   $ 3   $ 378   $ 409   $ (31 ) (8 )% (8 )% $ 401   $ 417   $ 399
International:
EMEA 188 1 189 196 (7 ) (4 )% (1 )% 200 202 202
APAC - Asia Pacific 79 1 80 83 (3 ) (4 )% (2 )% 79 81 86

Americas International

67     67   69   (2 ) (3 )%

2

%

68   70   68
Total International 334   2   336   348   (12 ) (3 )% (1 )% 347   353   356
Total revenue $ 709   $ 5   $ 714   $ 757   $ (43 ) (6 )% (4 )% $ 748   $ 770   $ 755
 
   

(1) - (4) Reconciliation of Non-GAAP measures above:

 
(1) Q119 Non-GAAP Results (2) Q418 Non-GAAP Results
Three Months Ended Three Months Ended

Dec. 31,
2018

 

Adj. for
Fresh Start
Accounting

 

Non-GAAP
Dec. 31, 2018

Sept. 30,
2018

 

Adj. for
Fresh Start
Accounting

 

Non-GAAP
Sept. 30, 2018

Revenue by Segment

Products & Solutions $ 326 $ $ 326 $ 336 $ $ 336
Services 422 422 434 434
Unallocated amounts (10 ) 10     (35 ) 35  
Total revenue $ 738   $ 10   $ 748   $ 735   $ 35   $ 770
 

Revenue by Geography

U.S. $ 394   $ 7   $ 401   $ 393   $ 24   $ 417
International:
EMEA 199 1 200 196 6 202
APAC - Asia Pacific 78 1 79 78 3 81
Americas International 67   1   68   68   2   70
Total International 344   3   347   342   11   353
Total revenue $ 738   $ 10   $ 748   $ 735   $ 35   $ 770
 
  (3) Q318 Non-GAAP Results   (4) Q218 Non-GAAP Results
Three Months Ended Three Months Ended

June 30,
2018

 

Adj. for
Fresh Start
Accounting

 

Non-GAAP
June 30, 2018

Mar. 31,
2018

 

Adj. for
Fresh Start
Accounting

 

Non-GAAP
Mar. 31, 2018

Revenue by Segment

Products & Solutions $ 322 $ 322 $ 317 $ 317
Services 433 433 440 440
Unallocated amounts (63 ) 63     (85 ) 85  
Total revenue $ 692   $ 63   $ 755   $ 672   $ 85   $ 757
 

Revenue by Geography

U.S. $ 356   $ 43   $ 399   $ 354   $ 55   $ 409
International:
EMEA 193 9 202 178 18 196
APAC - Asia Pacific 81 5 86 80 3 83
Americas International 62   6   68   60   9   69
Total International 336   20   356   318   30   348
Total revenue $ 692   $ 63   $ 755   $ 672   $ 85   $ 757
 
           

Avaya Holdings Corp.

Supplemental Schedules of Non-GAAP Reconciliations

(Unaudited; in millions)

 

Three Months Ended

Mar. 31,
2019

Dec. 31,
2018

Sept. 30,
2018

June 30,
2018

Mar. 31,
2018

Reconciliation of Non-GAAP Gross Profit and Non-GAAP Gross Margin

Gross Profit

$

386 $ 407 $ 390 $ 352 $ 323
Items excluded:
Adj. for fresh start accounting

9

19

54

69

106

Amortization of technology intangible assets

44

43

43

44

41

Loss on disposal of long-lived assets

2

2

Non-cash share-based compensation

 

 

1

 

 

 
Non-GAAP Gross Profit $ 439   $ 469   $488  

$467

 

$

472  
GAAP Gross Margin

54.4

%

55.1

%

53.1

%

50.9

%

48.1

%
Non-GAAP Gross Margin

61.5

%

62.7

%

63.4

%

61.9

%

62.4

%
 
Reconciliation of Non-GAAP Operating Income
Operating Income (Loss) $ 38 $ 50 $ 11 $ (49 ) $ (89 )
Items excluded:
Adj. for fresh start accounting

12

20

48

71

107

Amortization of intangible assets

85

83

84

83

81

Restructuring charges, net

4

7

1

30

40

Acquisition-related costs

4

3

4

4

7

Loss on disposal of long-lived assets

2

2

Advisory fees

1

1

3

3

4

Non-cash share-based compensation

5

 

6

 

6

 

7

 

5

 
Non-GAAP Operating Income $ 149   $ 170   $ 157  

$

151   $ 157  
GAAP Operating Margin

5.4

%

6.8

%

1.5

%

-7.1

%

-13.2

%
Non-GAAP Operating Margin

20.9

%

22.7

%

20.4

%

20.0

%

20.7

%
 
         

Avaya Holdings Corp.

Supplemental Schedules of Non-GAAP Reconciliation of Gross Profit and Gross Margin by Portfolio

(Unaudited; in millions)

 

Three months ended

Mar. 31,
2019

Dec. 31,
2018

Sept. 30,
2018

June 30,
2018

Mar. 31,
2018

Reconciliation of Non-GAAP Gross Profit and Non-GAAP Gross Margin - Products
Revenue $ 287 $ 324 $ 325 $ 300 $ 293
Costs

105

115

115

114

110

Amortization of technology intangible assets

44

 

43

 

43

 

44

 

41

 
GAAP Gross Profit

138

166

167

142

142

Items excluded:
Adj. for fresh start accounting

2

5

16

24

33

Amortization of technology intangible assets

44

43

43

44

41

Loss on disposal of long-lived assets

 

 

 

1

 

1

 
Non-GAAP Gross Profit $ 184  

$

214   $ 226   $ 211  

$

217  
GAAP Gross Margin

48.1

%

51.2

%

51.4

%

47.3

%

48.5

%
Non-GAAP Gross Margin

63.7

%

65.6

%

67.3

%

65.5

%

68.5

%
 
Reconciliation of Non-GAAP Gross Profit and Non-GAAP Gross Margin - Services
Revenue $ 422 $ 414 $ 410 $ 392 $ 379
Costs

174

 

173

 

187

 

182

 

198

 
GAAP Gross Profit

248

241

223

210

181

Items excluded:
Adj. for fresh start accounting

7

14

38

45

73

Loss on disposal of long-lived assets

 

1

1

Share-based comp

 

 

1

 

 

 
Non-GAAP Gross Profit

$

255   $ 255   $ 262   $ 256  

$

255  
GAAP Gross Margin

58.8

%

58.2

%  

54.4

%

53.6

%

47.8

%
Non-GAAP Gross Margin

60.0

%

60.4

%  

60.4

%

59.1

%

58.0

%
 
     

Avaya Holdings Corp.

Reconciliation of ASC 606 to ASC 605 GAAP results

Three months ended March 31, 2019

(Unaudited; in millions)

 

Q2 FY19 results
under ASC 606

ASC 606
Impact

Q2 FY19 results
under ASC 605

REVENUE
Products $ 287 $ (15 ) $ 272
Services

422

 

(21

)

401

 

709

 

(36

)

673

 
COSTS
Products:
Costs

105

(3

)

102

Amortization of technology intangible assets

44

44

Services

174

 

(7

)

167

 

323

 

(10

)

313

 
GROSS PROFIT

386

 

(26

)

360

 
OPERATING EXPENSES
Selling, general and administrative

251

(4

)

247

Research and development

52

52

Amortization of intangible assets

41

41

Restructuring charges, net

4

 

 

4

 

348

 

(4

)

344

 
OPERATING INCOME

38

(22

)

16

Interest expense

(58

)

(58

)
Other income, net

1

 

 

1

 
LOSS BEFORE INCOME TAXES

(19

)

(22

)

(41

)
Benefit from income taxes

6

 

11

 

17

 
NET LOSS $ (13 ) $ (11 )

$

(24 )
 

Source: Avaya Newsroom

Media Inquiries:
Alex Alias
669-242-8034
alalias@avaya.com

Investor Inquiries:
Michael McCarthy
919-425-8330
mikemccarthy@avaya.com

Source: Avaya Holdings Corp.

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