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Avaya Reports Second Quarter Fiscal 2020 Financial Results

05-11-2020

Revenue from Software and Services was a record of 88% of $682 million in revenue

Recurring revenue was 64% of revenue - up 5 points sequentially

Cloud, Alliance Partner & Subscription revenue increased 5 points sequentially to 23% of revenue

Avaya Cloud Office launched March 31st

Deployed over 2 million work from home licenses in just two months

SANTA CLARA, Calif.--(BUSINESS WIRE)-- Avaya Holdings Corp. (NYSE: AVYA) today reported financial results for the second quarter ended March 31, 2020.

Second Quarter Financial Highlights

  • Revenues of $682 million
  • GAAP Operating loss was $597 million; Non-GAAP Operating income was $125 million
  • Net loss was $672 million, which includes a non-cash goodwill impairment charge of $624 million
  • Adjusted EBITDA was $149 million
  • 79 deals signed with a TCV of over $1 million
  • Repurchased an additional $198 million of common stock in the quarter. As a result, we have repurchased a total of 28.9 million shares since program inception, achieving our FY20 target
  • Ending cash and cash equivalents were $553 million

"Avaya delivered a strong second quarter on multiple fronts and I couldn’t be prouder of how the company has executed in the face of the global COVID-19 crisis,” stated Jim Chirico, President and CEO, of Avaya. “The last several weeks have driven home the importance of communication and collaboration technology for all of us and especially the need for modernization of existing investments and infrastructure. Demand for video collaboration, with our Spaces solution, contact center upgrades to include remote work from anywhere capabilities, and the need for flexible consumption models like our cloud and subscription offers has accelerated, and no other company operates with the scale or reach that Avaya does. Our results underscore the mission critical nature of the solutions we provide, the value we deliver, and the partnership we have with our global base of customers.”

Mr. Chirico added, “The company has improved on all key strategic metrics as we continue the deliberate move to a SaaS and Cloud model. Recurring revenue was 64%, up five points sequentially and year over year, our CAPS revenue increased to 23% from 18% in the prior quarter, and software and services as a percent of revenue was 88% - all new highs for the company. The continued mix shift of our revenue reflects that the vision and strategy we laid out is taking hold and that our transformation to a software, SaaS, and Cloud focused company is irreversible.”

   

Financial Results for the Second Quarter

 

 

 

GAAP

 

Non-GAAP (1)

(In millions, except percentages)

 

2Q20

 

1Q20

 

2Q19

 

2Q20

 

1Q20

 

2Q19

Revenue

 

$

682

 

 

$

715

 

 

$

709

 

 

$

683

 

 

$

717

 

 

$

714

 

Gross margin

 

54.4

%

 

55.1

%

 

54.4

%

 

61.1

%

 

61.4

%

 

61.5

%

Operating (loss) income

 

$

(597

)

 

$

15

 

 

$

38

 

 

$

125

 

 

$

151

 

 

$

149

 

Net loss

 

$

(672

)

 

$

(54

)

 

$

(13

)

 

n/a

 

n/a

 

n/a

 

 

 

2Q20

 

1Q20

 

2Q19

Adjusted EBITDA(1)

 

$

149

 

 

$

174

 

 

$

166

 

Adjusted EBITDA margin(1)

 

21.8

%

 

24.3

%

 

23.2

%

Cash provided by operations

 

$

20

 

 

$

12

 

 

$

37

 

Cash and cash equivalents

 

$

553

 

 

$

766

 

 

$

735

 

During the quarter, Avaya recorded a non-cash goodwill impairment charge of $624 million related to the company’s Products & Solutions segment. The charge was prompted by a sustained decline in the company’s stock price during the period, which was consistent with the way the broader market was affected by COVID-19's impact on the global economy.

Additional Key Performance Metrics

  • Total Contract Value (TCV) of $2.3B*
  • 88% of revenue was Software & Services
  • 64% of revenue was Recurring
  • Added approximately 1,200 new logos
  • Large deal activity with 79 deals over $1 million, 12 over $5 million, and 3 over $10 million
  • Our Spaces video and collaboration usage grew 2,100% as we delivered nearly 400,000 new licenses this quarter
  • Subscription revenue grew ~200% quarter over quarter
  • We deployed over 2 million complementary licenses to support customer needs for business continuity and work from home

(1) Non-GAAP revenue, Non-GAAP gross margin, Non-GAAP operating margin, Non-GAAP operating income, adjusted EBITDA, and constant currency are not measures calculated in accordance with generally accepted accounting principles in the U.S. (“GAAP”). Adjusted EBITDA margin is calculated based on non-GAAP Revenue. Refer to the "Use of non-GAAP (Adjusted) Financial Measures" below for more information on the calculation of constant currency. 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. Unless otherwise noted, all references in this release to revenue are to GAAP revenue.

* We define TCV as the value of all active ratable contracts that have not been recognized as revenue, including both billed and unbilled backlog.

Business Highlights

  • Avaya launched our highly anticipated Avaya Cloud Office™ on March 31st. Avaya Cloud Office is the company’s UCaaS offering which enhances the way organizations communicate with customers, partners and colleagues across multiple channels.
  • Avaya Spaces video and collaboration solution has become a significant differentiator and market disruptor. With the rapid onset of requirements to work from home as a result of the COVID-19 pandemic, usage of Spaces increased 2,100% in the March quarter. This CPaaS-based technology is a cloud meeting and team collaboration app that effortlessly integrates voice, video, tasks, sharing and more into one app that can be accessed from any endpoint device.
  • Avaya was named a 2020 Channel Influencer Award winner by leading technology media Channel Partners and Channel Futures. The Avaya Edge Partner Program is a comprehensive approach that simplifies, integrates, and aligns with channel partner needs to help drive growth and introduce additional business opportunities.
  • Avaya was named by Nuance as both Top Producing Channel Partner and Top Growth Partner for AI-powered Solutions that Enable Customers and Employees To Work Smarter Together. Avaya also received the Global Channels Partner of the Year award from Verint Systems for its ability to accelerate successful transitions to the cloud and provide multiexperience contact center and workforce engagement solutions to tens of thousands of customers worldwide.
  • Avaya won a Best of Enterprise Connect 2020 award - with Avaya Spaces earning recognition as Best Innovation for Meeting Rooms.
  • Hybrid cloud has been another differentiator for Avaya, enabling us to address the full range of cloud deployment models for our enterprise customers. Our Avaya OneCloud™ ReadyNow private cloud solution has been recognized with a Unified Communications Excellence Award by TMC, for delivering UC and CC solutions in a secure private cloud environment.
  • Avaya achieved Top Leader ratings from two investment firms, State Street Global Advisors ("State Street") and Institutional Shareholder Services ("ISS"), for its Environmental, Social and Corporate Governance (ESG). These assessments provide insight into Avaya’s ESG leadership performance. State Street awarded us their rating based on how we incorporate material sustainability issues into our long-term strategy, coupled with the way we address what is material to Avaya’s business and publicly report on ESG performance. ISS describes the Prime rating it gave to Avaya as one that is “awarded to companies with an ESG performance above the sector-specific Prime threshold, which means that they fulfill ambitious absolute performance requirements”.

Financial Outlook - 3Q Fiscal 2020 - unless otherwise noted, values reflect March 31st, 2020 FX rates.

  • GAAP revenue of $674 million to $704 million; Non-GAAP revenue of $675 million to $705 million
    • This non-GAAP revenue figure reflects a constant currency decline of 5% to 1%
  • GAAP operating income of $23 million to $43 million; GAAP operating margin of ~3% to 6%
  • Non-GAAP operating income of $126 million to $146 million; non-GAAP operating margin of ~19% to 21%
  • Adjusted EBITDA of $150 million to $170 million; Adjusted EBITDA margin of ~22% to 24%

    The company has not quantitatively reconciled its guidance for adjusted EBITDA to its most comparable GAAP measure because certain of the reconciling items that impact adjusted EBITDA, including, provision for income taxes, restructuring charges, net of sublease income, advisory fees, acquisition-related costs, change in fair value of warrants and gain (loss) on marketable securities affecting the period, have not occurred, are out of the company’s control, or cannot be reasonably predicted. Accordingly, reconciliations to the nearest GAAP financial measures are not available without unreasonable effort. Please note that the unavailable reconciling items could significantly impact the company’s results.

Financial Outlook - Fiscal Year 2020

In light of the uncertainties in the global business environment arising from the effects of COVID-19, the company is withdrawing its prior annual guidance for fiscal year 2020.

Conference Call and Webcast

Avaya will host a live webcast and conference call to discuss its financial results at 8:30 AM Eastern Time on May 11, 2020. To access the live conference call by phone, listeners should dial +1-877-858-7671 in the U.S. or Canada and +1-201-389-0939 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 +1-877-660-6853 in the U.S. or Canada and +1-201-612-7415 for international callers, using the conference access code: 13702564.

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 release 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. The Company has based these forward-looking statements on its current expectations, assumptions, estimates and projections. These statements, including the Company’s outlook, does not include the potential impact of any business combinations, asset acquisitions, divestitures, strategic investments or other strategic transactions completed after the date hereof. 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 duration, severity and impact of the coronavirus disease (“COVID-19”), as well as governmental and business responses to it, and the affect the pandemic and such responses have on our business, financial performance and liquidity and other factors 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)

 

 

Three months ended
March 31,

 

Six months ended
March 31,

 

2020

 

2019

 

2020

 

2019

REVENUE

 

 

 

 

 

 

 

Products

$

245

 

 

$

287

 

 

$

543

 

 

$

611

 

Services

437

 

 

422

 

 

854

 

 

836

 

 

682

 

 

709

 

 

1,397

 

 

1,447

 

COSTS

 

 

 

 

 

 

 

Products:

 

 

 

 

 

 

 

Costs

92

 

 

105

 

 

196

 

 

220

 

Amortization of technology intangible assets

44

 

 

44

 

 

87

 

 

87

 

Services

175

 

 

174

 

 

349

 

 

347

 

 

311

 

 

323

 

 

632

 

 

654

 

GROSS PROFIT

371

 

 

386

 

 

765

 

 

793

 

OPERATING EXPENSES

 

 

 

 

 

 

 

Selling, general and administrative

248

 

 

251

 

 

531

 

 

508

 

Research and development

51

 

 

52

 

 

103

 

 

105

 

Amortization of intangible assets

41

 

 

41

 

 

82

 

 

81

 

Impairment of goodwill

624

 

 

 

 

624

 

 

 

Restructuring charges, net

4

 

 

4

 

 

7

 

 

11

 

 

968

 

 

348

 

 

1,347

 

 

705

 

OPERATING (LOSS) INCOME

(597

)

 

38

 

 

(582

)

 

88

 

Interest expense

(53

)

 

(58

)

 

(111

)

 

(118

)

Other income, net

15

 

 

1

 

 

29

 

 

23

 

LOSS BEFORE INCOME TAXES

(635

)

 

(19

)

 

(664

)

 

(7

)

(Provision for) benefit from income taxes

(37

)

 

6

 

 

(62

)

 

3

 

NET LOSS

$

(672

)

 

$

(13

)

 

$

(726

)

 

$

(4

)

LOSS PER SHARE

 

 

 

 

 

 

 

Basic

$

(7.24

)

 

$

(0.12

)

 

$

(7.24

)

 

$

(0.04

)

Diluted

$

(7.24

)

 

$

(0.12

)

 

$

(7.24

)

 

$

(0.04

)

Weighted average shares outstanding

 

 

 

 

 

 

 

Basic

93.0

 

 

110.8

 

 

101.1

 

 

110.5

 

Diluted

93.0

 

 

110.8

 

 

101.1

 

 

110.5

 

 

Avaya Holdings Corp.

Condensed Consolidated Balance Sheets (Unaudited)

(In millions, except per share and shares amounts)

 

 

March 31,
2020

 

September 30,
2019

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

553

 

 

$

752

 

Accounts receivable, net

262

 

 

314

 

Inventory

56

 

 

63

 

Contract assets

233

 

 

187

 

Contract costs

130

 

 

114

 

Other current assets

211

 

 

115

 

TOTAL CURRENT ASSETS

1,445

 

 

1,545

 

Property, plant and equipment, net

254

 

 

255

 

Deferred income taxes, net

27

 

 

35

 

Intangible assets, net

2,720

 

 

2,891

 

Goodwill, net

1,476

 

 

2,103

 

Operating lease right-of-use assets

175

 

 

 

Other assets

114

 

 

121

 

TOTAL ASSETS

$

6,211

 

 

$

6,950

 

LIABILITIES

 

 

 

Current liabilities:

 

 

 

Debt maturing within one year

$

 

 

$

29

 

Accounts payable

254

 

 

291

 

Payroll and benefit obligations

125

 

 

116

 

Contract liabilities

477

 

 

472

 

Operating lease liabilities

48

 

 

 

Business restructuring reserve

25

 

 

33

 

Other current liabilities

246

 

 

158

 

TOTAL CURRENT LIABILITIES

1,175

 

 

1,099

 

Non-current liabilities:

 

 

 

Long-term debt, net of current portion

2,883

 

 

3,090

 

Pension obligations

728

 

 

759

 

Other post-retirement obligations

197

 

 

200

 

Deferred income taxes, net

48

 

 

72

 

Contract liabilities

375

 

 

78

 

Operating lease liabilities

135

 

 

 

Business restructuring reserve

26

 

 

36

 

Other liabilities

313

 

 

316

 

TOTAL NON-CURRENT LIABILITIES

4,705

 

 

4,551

 

TOTAL LIABILITIES

5,880

 

 

5,650

 

Commitments and contingencies

 

 

 

Preferred stock, $0.01 par value; 55,000,000 shares authorized at March 31, 2020 and September 30, 2019

 

 

 

Convertible Series A, 125,000 shares issued and outstanding at March 31, 2020 and no shares issued and outstanding at September 30, 2019

127

 

 

 

STOCKHOLDERS' EQUITY

 

 

 

Common stock, $0.01 par value; 550,000,000 shares authorized; 82,654,594 shares issued and outstanding at March 31, 2020; and 111,046,085 shares issued and 111,033,405 shares outstanding at September 30, 2019

1

 

 

1

 

Additional paid-in capital

1,436

 

 

1,761

 

Accumulated deficit

(1,015

)

 

(289

)

Accumulated other comprehensive loss

(218

)

 

(173

)

TOTAL STOCKHOLDERS' EQUITY

204

 

 

1,300

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

6,211

 

 

$

6,950

 

 

Avaya Holdings Corp.

Condensed Statements of Cash Flows

(Unaudited; in millions)

 

 

 

Six months ended
March 31,

 

 

2020

 

2019

Net cash provided by (used for):

 

 

 

 

Operating activities

 

$

32

 

 

$

123

 

Investing activities

 

246

 

 

(48

)

Financing activities

 

(472

)

 

(39

)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

 

(5

)

 

(1

)

Net (decrease) increase in cash, cash equivalents, and restricted cash

 

(199

)

 

35

 

Cash, cash equivalents, and restricted cash at beginning of period

 

756

 

 

704

 

Cash, cash equivalents, and restricted cash at end of period

 

$

557

 

 

$

739

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 financial measures labeled as “non-GAAP” or “adjusted.”

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 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. Adjusted EBITDA excludes the impact of earnings or charges resulting from matters that we do not consider indicative of our ongoing operations but that still affect our net income. 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. In addition, these terms are not necessarily comparable to other similarly titled captions of other companies due to the potential inconsistencies in the method of calculation.

We also present the measures non-GAAP revenue, non-GAAP gross margin, 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 company presents constant currency information to provide a framework for assessing how the company’s underlying businesses performance excluding the effect of foreign currency rate fluctuations. To present this information current and comparative prior period results for entities reporting in currencies other than U.S. dollars are converted into U.S. dollars at the exchange rate in effect on the last day of the company’s prior fiscal year (i.e. September 30, 2019).

In addition, we present the liquidity measure of free cash flow. Free cash flow is calculated by subtracting capital expenditures from Net cash provided by operating activities. We believe free cash flow is a measure often used by analysts and investors to compare the cash flow and liquidity of companies in the same industry.

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 next quarter 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 reconcile historical GAAP measures to non-GAAP measures.

Supplemental Schedules

Avaya Holdings Corp.

Reconciliation of Non-GAAP Adjusted EBITDA

(Unaudited; in millions)

 

 

Three months ended
March 31,

 

Six months ended
March 31,

 

2020

 

2019

 

2020

 

2019

Net loss

$

(672

)

 

$

(13

)

 

$

(726

)

 

$

(4

)

Interest expense

53

 

 

58

 

 

111

 

 

118

 

Interest income

(2

)

 

(4

)

 

(5

)

 

(7

)

Provision for (benefit from) income taxes

37

 

 

(6

)

 

62

 

 

(3

)

Depreciation and amortization

105

 

 

108

 

 

212

 

 

225

 

EBITDA

(479

)

 

143

 

 

(346

)

 

329

 

Impact of fresh start accounting adjustments

(1

)

 

6

 

 

(1

)

 

9

 

Restructuring charges, net of sublease income

3

 

 

4

 

 

4

 

 

11

 

Advisory fees

1

 

 

1

 

 

40

 

 

2

 

Acquisition-related costs

 

 

4

 

 

 

 

7

 

Share-based compensation

8

 

 

5

 

 

14

 

 

11

 

Impairment of goodwill

624

 

 

 

 

624

 

 

 

Change in fair value of Emergence Date Warrants

(6

)

 

(3

)

 

(3

)

 

(21

)

Loss on foreign currency transactions

7

 

 

6

 

 

11

 

 

7

 

Gain on investments in equity and debt securities, net

(8

)

 

 

 

(20

)

 

 

Adjusted EBITDA

$

149

 

 

$

166

 

 

$

323

 

 

$

355

 

 

Avaya Holdings Corp.

Reconciliation of Non-GAAP Revenue

(Unaudited; in millions)

 

 

 

Three Months Ended

 

Change

 

Three Months Ended

 

 

Mar. 31,
2020

 

Adj. for
Fresh Start
Accounting

 

Non-
GAAP
Mar. 31,
2020

 

Mar. 31,
2019 (4)

 

Amount

 

Pct.

 

Pct. in
constant
currency*

 

Dec. 31,
2019 (1)

 

Sept. 30,
2019 (2)

 

June 30,
2019 (3)

Revenue by Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products & Solutions

 

$

245

 

 

$

 

 

$

245

 

 

$

289

 

 

$

(44

)

 

(15

)%

 

(14

)%

 

$

298

 

 

$

315

 

 

$

298

 

Services

 

438

 

 

 

 

438

 

 

425

 

 

13

 

 

3

%

 

4

%

 

419

 

 

411

 

 

422

 

Unallocated amounts

 

(1

)

 

1

 

 

 

 

 

 

 

 

n/a

 

n/a

 

 

 

 

 

 

Total revenue

 

$

682

 

 

$

1

 

 

$

683

 

 

$

714

 

 

$

(31

)

 

(4

)%

 

(4

)%

 

$

717

 

 

$

726

 

 

$

720

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue by Geography

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

384

 

 

$

1

 

 

$

385

 

 

$

378

 

 

$

7

 

 

2

%

 

2

%

 

$

395

 

 

$

393

 

 

$

394

 

International:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EMEA

 

172

 

 

 

 

172

 

 

189

 

 

(17

)

 

(9

)%

 

(7

)%

 

187

 

 

184

 

 

183

 

APAC - Asia Pacific

 

70

 

 

 

 

70

 

 

80

 

 

(10

)

 

(13

)%

 

(9

)%

 

77

 

 

86

 

 

85

 

Americas International

 

56

 

 

 

 

56

 

 

67

 

 

(11

)

 

(16

)%

 

(17

)%

 

58

 

 

63

 

 

58

 

Total International

 

298

 

 

 

 

298

 

 

336

 

 

(38

)

 

(11

)%

 

(10

)%

 

322

 

 

333

 

 

326

 

Total revenue

 

$

682

 

 

$

1

 

 

$

683

 

 

$

714

 

 

$

(31

)

 

(4

)%

 

(4

)%

 

$

717

 

 

$

726

 

 

$

720

 

* Constant Currency is a non-GAAP financial measure, as noted in "Use of non-GAAP (Adjusted) Financial Measures" above.

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

 

 

(1) Q120 Non-GAAP Results

 

(2) Q419 Non-GAAP Results

 

 

Three Months Ended

 

Three Months Ended

 

 

Dec. 31, 2019

 

Adj. for Fresh
Start
Accounting

 

Non-GAAP
Dec. 31, 2019

 

Sept. 31, 2019

 

Adj. for Fresh
Start
Accounting

 

Non-GAAP
Sept. 31, 2019

Revenue by Segment

 

 

 

 

 

 

 

 

 

 

 

 

Products & Solutions

 

$

298

 

 

$

 

 

$

298

 

 

$

315

 

 

 

 

$

315

 

Services

 

419

 

 

 

 

419

 

 

411

 

 

 

 

411

 

Unallocated amounts

 

(2

)

 

2

 

 

 

 

(3

)

 

3

 

 

 

Total revenue

 

$

715

 

 

$

2

 

 

$

717

 

 

$

723

 

 

$

3

 

 

$

726

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue by Geography

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

394

 

 

$

1

 

 

$

395

 

 

$

392

 

 

$

1

 

 

$

393

 

International:

 

 

 

 

 

 

 

 

 

 

 

 

EMEA

 

186

 

 

1

 

 

187

 

 

183

 

 

1

 

 

184

 

APAC - Asia Pacific

 

77

 

 

 

 

77

 

 

85

 

 

1

 

 

86

 

Americas International

 

58

 

 

 

 

58

 

 

63

 

 

 

 

63

 

Total International

 

321

 

 

1

 

 

322

 

 

331

 

 

2

 

 

333

 

Total revenue

 

$

715

 

 

$

2

 

 

$

717

 

 

$

723

 

 

$

3

 

 

$

726

 

 

 

 

(3) Q319 Non-GAAP Results

 

(4) Q219 Non-GAAP Results

 

 

Three Months Ended

 

Three Months Ended

 

 

June 30, 2019

 

Adj. for Fresh
Start
Accounting

 

Non-GAAP
June 30, 2019

 

Mar. 31, 2019

 

Adj. for Fresh
Start
Accounting

 

Non-GAAP
Mar. 31, 2019

Revenue by Segment

 

 

 

 

 

 

 

 

 

 

 

 

Products & Solutions

 

$

298

 

 

$

 

 

$

298

 

 

$

289

 

 

$

 

 

$

289

 

Services

 

422

 

 

 

 

422

 

 

425

 

 

 

 

425

 

Unallocated amounts

 

(3

)

 

3

 

 

 

 

(5

)

 

5

 

 

 

Total revenue

 

$

717

 

 

$

3

 

 

$

720

 

 

$

709

 

 

$

5

 

 

$

714

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue by Geography

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

392

 

 

$

2

 

 

$

394

 

 

$

375

 

 

$

3

 

 

$

378

 

International:

 

 

 

 

 

 

 

 

 

 

 

 

EMEA

 

183

 

 

 

 

183

 

 

188

 

 

1

 

 

189

 

APAC - Asia Pacific

 

85

 

 

 

 

85

 

 

79

 

 

1

 

 

80

 

Americas International

 

57

 

 

1

 

 

58

 

 

67

 

 

 

 

67

 

Total International

 

325

 

 

1

 

 

326

 

 

334

 

 

2

 

 

336

 

Total revenue

 

$

717

 

 

$

3

 

 

$

720

 

 

$

709

 

 

$

5

 

 

$

714

 

 

Avaya Holdings Corp.

Reconciliation of Non-GAAP Gross Margin and Operating Income

(Unaudited; in millions)

 

 

 

Three Months Ended

 

 

Mar. 31,
2020

 

Dec. 31,
2019

 

Sept. 30,
2019

 

Jun. 30,
2019

 

Mar. 31,
2019

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

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

$

371

 

 

$

394

 

 

$

392

 

 

$

390

 

 

$

386

 

Items excluded:

 

 

 

 

 

 

 

 

 

 

Amortization of technology intangible assets

 

44

 

 

43

 

 

44

 

 

43

 

 

44

 

Adj. for fresh start accounting

 

2

 

 

3

 

 

4

 

 

5

 

 

9

 

Non-GAAP Gross Profit

 

$

417

 

 

$

440

 

 

$

440

 

 

$

438

 

 

$

439

 

GAAP Gross Margin

 

54.4

%

 

55.1

%

 

54.2

%

 

54.4

%

 

54.4

%

Non-GAAP Gross Margin

 

61.1

%

 

61.4

%

 

60.6

%

 

60.8

%

 

61.5

%

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Non-GAAP Operating Income

 

 

 

 

 

 

 

 

 

 

Operating (Loss) Income

 

$

(597

)

 

$

15

 

 

$

52

 

 

$

(613

)

 

$

38

 

Items excluded:

 

 

 

 

 

 

 

 

 

 

Adj. for fresh start accounting

 

 

 

4

 

 

4

 

 

4

 

 

12

 

Amortization of intangible assets

 

85

 

 

84

 

 

84

 

 

84

 

 

85

 

Restructuring charges, net

 

4

 

 

3

 

 

10

 

 

1

 

 

4

 

Advisory fees

 

1

 

 

39

 

 

8

 

 

1

 

 

1

 

Acquisition-related costs

 

 

 

 

 

1

 

 

1

 

 

4

 

Share-based compensation

 

8

 

 

6

 

 

6

 

 

8

 

 

5

 

Impairment goodwill and intangible assets

 

624

 

 

 

 

 

 

659

 

 

 

Non-GAAP Operating Income

 

$

125

 

 

$

151

 

 

$

165

 

 

$

145

 

 

$

149

 

GAAP Operating Margin

 

-87.5

%

 

2.1

%

 

7.2

%

 

(85.5

)%

 

5.4

%

Non-GAAP Operating Margin

 

18.3

%

 

21.1

%

 

22.7

%

 

20.1

%

 

20.9

%

 

Avaya Holdings Corp.

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

(Unaudited; in millions)

 

 

 

Three Months Ended

 

 

Mar. 31,
2020

 

Dec. 31,
2019

 

Sept. 30,
2019

 

Jun. 30,
2019

 

Mar. 31,
2019

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

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

245

 

 

$

298

 

 

$

314

 

 

$

297

 

 

$

287

 

Costs

 

92

 

 

104

 

 

113

 

 

109

 

 

105

 

Amortization of technology intangible assets

 

44

 

 

43

 

 

44

 

 

43

 

 

44

 

GAAP Gross Profit

 

109

 

 

151

 

 

157

 

 

145

 

 

138

 

Items excluded:

 

 

 

 

 

 

 

 

 

 

Amortization of technology intangible assets

 

44

 

 

43

 

 

44

 

 

43

 

 

44

 

Adj. for fresh start accounting

 

1

 

 

 

 

2

 

 

2

 

 

2

 

Non-GAAP Gross Profit

 

$

154

 

 

$

194

 

 

$

203

 

 

$

190

 

 

$

184

 

GAAP Gross Margin

 

44.5

%

 

50.7

%

 

50.0

%

 

48.8

%

 

48.1

%

Non-GAAP Gross Margin

 

62.9

%

 

65.1

%

 

64.4

%

 

63.8

%

 

63.7

%

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

437

 

 

$

417

 

 

$

409

 

 

$

420

 

 

$

422

 

Costs

 

175

 

 

174

 

 

174

 

 

175

 

 

174

 

GAAP Gross Profit

 

262

 

 

243

 

 

235

 

 

245

 

 

248

 

Items excluded:

 

 

 

 

 

 

 

 

 

 

Adj. for fresh start accounting

 

1

 

 

3

 

 

2

 

 

3

 

 

7

 

Non-GAAP Gross Profit

 

$

263

 

 

$

246

 

 

$

237

 

 

$

248

 

 

$

255

 

GAAP Gross Margin

 

60.0

%

 

58.3

%

 

57.5

%

 

58.3

%

 

58.8

%

Non-GAAP Gross Margin

 

60.0

%

 

58.7

%

 

57.7

%

 

58.8

%

 

60.0

%

 

Avaya Holdings Corp.

Free Cash Flow

(Unaudited; in millions)

 

 

 

Three Months Ended

 

 

Mar. 31,
2020

 

Dec. 31,
2019

 

Sept. 30,
2019

 

Jun. 30,
2019

 

Mar. 31,
2019

Net cash provided by operating activities

 

$

20

 

 

$

12

 

 

$

66

 

 

$

52

 

 

$

37

 

Less:

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

22

 

 

26

 

 

29

 

 

37

 

 

26

 

Free cash flow

 

$

(2

)

 

$

(14

)

 

$

37

 

 

$

15

 

 

$

11

 

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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