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Avaya Reports Fourth Quarter and Fiscal 2017 Financial Results

December 22, 2017

SANTA CLARA, CA--(Marketwired - December 22, 2017) - Avaya Holdings Corp. ( OTCQX: AVYA)

Fourth Quarter Fiscal 2017:

  • Revenue of $790 million
  • Gross margin 62.7%, non-GAAP gross margin 63.2%,
  • Operating income of $64 million, non-GAAP operating income of $178 million or 22.5% of revenue
  • Adjusted EBITDA(1) of $225 AVmillion or 28.5% of revenue
  • Net income of $27 million, non-GAAP net income of $162 million or 20.5% of revenue
  • Positive cash flow from operations of $166 million for the fourth quarter

Fiscal Year 2017:

  • Revenue of $3,272 million
  • Gross margin 61.1%, non-GAAP gross margin 61.7%
  • Operating income of $137 million, non-GAAP operating income of $669 million or 20.4% of revenue
  • Adjusted EBITDA(1) of $866 million or 26.5% of revenue,
  • Net loss of $182 million, non-GAAP net income of $448 million or 13.7% of revenue
  • Positive cash flow from operations of $291 million for the year

Avaya Holdings Corp. ( OTCQX: AVYA) reported financial results for the fourth quarter and fiscal year ended September 30, 2017.

Total revenue for the fourth quarter was $790 million, down $13 million compared to the prior quarter and down $168 million year-over-year primarily as a result of the sale of the Networking business and lower demand for products and services primarily due to extended procurement cycles resulting from the chapter 11 filing. Fourth quarter 2017 results include $5 million of revenue from the Networking business sold on July 14, 2017. Excluding the impact of the sale of the Networking business, revenue improved approximately 5% from the prior quarter and declined approximately 10% compared to the fourth quarter of fiscal 2016. GAAP gross margin was 62.7% for the fourth quarter. Non-GAAP gross margin was 63.2%, which compares to 61.6% for the prior quarter and 61.8% for the fourth quarter of fiscal 2016. GAAP operating income was $64 million, which compares to a GAAP operating loss of $55 million for the prior quarter, and an operating loss of $425 million for the fourth quarter of fiscal 2016. Non-GAAP operating income was $178 million which compares to $157 million for the prior quarter and $232 million for the fourth quarter of fiscal 2016. GAAP net income was $27 million, which compares to a net loss of $98 million for the prior quarter, and a net loss of $483 million for the fourth quarter of fiscal 2016. Non-GAAP net income was $162 million which compares to $149 million for the prior quarter and $174 million for the fourth quarter of fiscal 2016. For the fourth quarter, adjusted EBITDA(1) was $225 million or 28.5% of revenue, and compares to adjusted EBITDA of $204 million or 25.4% for the prior quarter and $284 million or 29.6% for the fourth quarter of fiscal 2016.

For fiscal 2017, Avaya reported revenue of $3,272 million, down 12% compared to fiscal 2016, or down 11% in constant currency. GAAP gross margin for fiscal 2017 was 61.1%. Non-GAAP gross margin was 61.7%. GAAP operating income was $137 million, reflecting $117 million of impairments of both goodwill and indefinite-lived intangible assets, as well as $30 million of restructuring charges. Non-GAAP operating income was $669 million or 20.4% of revenue in fiscal 2017, which compares to $756 million or 20.4% of revenue in fiscal 2016. GAAP net loss for fiscal 2017 was $182 million which compares to a net loss of $730 million in the prior year. Non-GAAP net income for fiscal 2017 was $448 million, or 13.7% of revenue, which compares to $342 million for fiscal 2016. Fiscal 2017 adjusted EBITDA of $866 million represented 26.5% of revenue, and compares to $940 million for fiscal 2016.

Cash provided by operating activities was $166 million for the fourth fiscal quarter 2017, which compares to $72 million during the third fiscal quarter 2017, and $83 million during the fourth fiscal quarter 2016. Cash provided by operating activities for the fiscal year 2017 was $291 million compared to $113 million for fiscal 2016. Cash and cash equivalents totaled $876 million as of September 30, 2017, an increase of $147 million from the prior quarter and up $540 million from the fourth fiscal quarter of 2016.

"Our fourth quarter and fiscal year 2017 financial results were outstanding given the backdrop of chapter 11," said Jim Chirico, president and CEO. "The results demonstrate the resilience of our business model, the loyalty of our customers and partners, and the commitment of our employees. They also provide us solid momentum in our emergence as a public company."

"The reduction of our debt and certain other long-term obligations will improve annual cash flow by approximately $300 million compared to fiscal 2016," Chirico added. "These savings will enable Avaya to pursue future growth opportunities with a goal of creating long-term value for our new stockholders. We are excited to enter the New Year as a stronger and more competitive company, with new management, innovative products, and an abundance of opportunities ahead of us."

Fourth Fiscal Quarter Highlights

  • Reached a global resolution in chapter 11 restructuring with emergence as a public company
  • Announced a new management team including Jim Chirico as Chief Executive Officer
  • Signed over 3,600 major customer contracts since filing for chapter 11 through September 30, 2017
  • Closed on the sale of the Networking business to Extreme Networks on July 14, 2017
  • Company book-to-bill was greater than 1. Total bookings for the fourth fiscal quarter increased 7% from the prior quarter and were 17% below the prior year, in constant currency. Excluding the impact of the sale of the Networking business, total bookings increased 13% sequentially and were 10% lower year-over-year, in constant currency
  • Software and services accounted for over 79% of total revenue
  • Recurring revenue represented 57% of total revenue, up from 50% year-over-year, in constant currency
  • Net Promoter Score of 50 for customer satisfaction driven by industry-leading service and support
  • Product revenue of $343 million decreased 1% from the prior quarter and decreased 27% year-over-year, in constant currency. Excluding the impact of the sale of the Networking business, product revenue grew 12% sequentially and was 15% lower year-over-year, in constant currency
  • Service revenue of $447 million was down 3% sequentially and decreased 9% year-over-year, each in constant currency. Excluding the impact of the sale of the Networking business, service revenue decreased less than 1% sequentially and was 7% lower year-over-year, in constant currency
  • For the fourth fiscal quarter, percentage of revenue by geography was:
    - U.S. – 57% - EMEA – 24%
    - Asia-Pacific – 10% - Americas International – 9%

Fiscal Year Highlights

  • Announced post-emergence board of directors
  • Software and services accounted for 78% of total revenue in fiscal 2017, up from 75% for fiscal 2016
  • Recurring revenue represented 56% of total revenue for fiscal 2017, up from 51% of revenue for fiscal 2016, in constant currency
  • Cloud and managed services and professional services each accounted for >8% of total revenue for fiscal 2017
  • Non-GAAP gross margin was 61.7%, compared to 61.5% for fiscal 2016
  • Adjusted EBITDA was $866 million or 26.5% of revenue, compared to $940 million or 25.4% of revenue for fiscal 2016
  • For the fiscal year, percentage of revenue by geography in was:
    - U.S. – 55% - EMEA – 26%
    - Asia-Pacific – 10% - Americas International – 9%

Accompanying slides

Links to this financial results press release and accompanying slides are available on the investor page of Avaya's website (https://investors.avaya.com/).

About Avaya
Avaya is a leading global business communications company, providing an expansive portfolio of software and services for contact center and unified communications -- offered on premises, in the cloud, or as a hybrid solution. Today's digital world requires communications enablement, and no other company is better positioned to do this than Avaya. For more information, please visit 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, statements regarding, expected savings and growth opportunities, projections of future opportunities. 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. These factors, including, but not limited to timing of effectiveness of our registration statement, and those risks discussed in the Company's Registration Statement on Form 10, as amended, may cause its 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.

1 Refer to Supplemental Financial Information accompanying this press release for a reconciliation of GAAP to non-GAAP numbers and for reconciliation of adjusted EBITDA to net income for the fourth quarter of fiscal 2017.

   
   
Avaya Holdings Corp.  
(Debtor-in-possession)  
Consolidated Statements of Operations  
(Unaudited; in millions, except per share amounts)  
   
    Three months ended
September 30,
    Fiscal year ended
September 30,
 
   
    2017     2016     2017     2016  
REVENUE                                
  Products   $ 343     $ 469     $ 1,437     $ 1,755  
  Services     447       489       1,835       1,947  
      790       958       3,272       3,702  
COSTS                                
  Products:                                
    Costs     105       169       500       630  
    Amortization of acquired technology intangible assets     4       8       20       30  
  Services     186       198       753       797  
      295       375       1,273       1,457  
GROSS PROFIT     495       583       1,999       2,245  
OPERATING EXPENSES                                
  Selling, general and administrative     341       329       1,282       1,413  
  Research and development     48       64       229       275  
  Amortization of acquired intangible assets     34       100       204       100  
  Impairment of indefinite-lived intangible assets     -       442       65       442  
  Goodwill impairment     -       56       52       226  
  Restructuring charges, net     8       17       30       105  
      431       1,008       1,862       2,561  
OPERATING INCOME (LOSS)     64       (425 )     137       (316 )
  Interest expense     (17 )     (118 )     (246 )     (471 )
  Other income, net     7       5       9       68  
  Reorganization costs, net     (21 )     -       (98 )     -  
INCOME (LOSS) BEFORE INCOME TAXES     33       (538 )     (198 )     (719 )
(Provision for) benefit from income taxes     (6 )     55       16       (11 )
NET INCOME (LOSS)     27       (483 )     (182 )     (730 )
Less: Accretion and accrued dividends on Series A and Series B Preferred Stock     (8 )     (7 )     (31 )     (41 )
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS   $ 19     $ (490 )   $ (213 )   $ (771 )
Basic and diluted earnings per share attributable to common stockholders:                                
  Net income (loss) per share:                                
    Basic   $ 0.04     $ (0.98 )   $ (0.43 )   $ (1.54 )
    Diluted   $ 0.04     $ (0.98 )   $ (0.43 )   $ (1.54 )
  Weighted average shares outstanding:                                
    Basic     497.2       498.6       497.1       500.7  
    Diluted     502.5       498.6       497.1       500.7  
   
   
Avaya Holdings Corp.  
(Debtor-in-possession)  
Consolidated Balance Sheets  
(Unaudited; in millions, except share amounts)  
             
    September 30,
2017
    September 30,
2016
 
ASSETS                
Current assets:                
  Cash and cash equivalents   $ 876     $ 336  
  Accounts receivable, net     536       584  
  Inventory     96       153  
  Other current assets     269       187  
TOTAL CURRENT ASSETS     1,777       1,260  
  Property, plant and equipment, net     200       253  
  Acquired intangible assets, net     311       617  
  Goodwill     3,542       3,629  
  Other assets     68       62  
TOTAL ASSETS   $ 5,898     $ 5,821  
LIABILITIES                
Current liabilities:                
  Debt maturing within one year   $ 725     $ 6,018  
  Accounts payable     282       338  
  Payroll and benefit obligations     127       183  
  Deferred revenue     614       705  
  Business restructuring reserve, current portion     35       69  
  Other current liabilities     90       267  
TOTAL CURRENT LIABILITIES     1,873       7,580  
  Pension obligations     513       1,743  
  Other postretirement obligations     -       245  
  Deferred income taxes, net     32       167  
  Business restructuring reserve, non-current portion     34       65  
  Other liabilities     170       492  
TOTAL NON-CURRENT LIABILITIES     749       2,712  
LIABILITIES SUBJECT TO COMPROMISE     7,705       -  
Commitments and contingencies                
Equity awards on redeemable shares     7       6  
Preferred stock, par value $.001 per share, 250,000 shares authorized at September 30, 2017 and 2016                
  Convertible Series B, 48,922 shares issued and outstanding at September 30, 2017 and 2016     393       371  
  Series A, 125,000 shares issued and outstanding at September 30, 2017 and 2016     184       175  
STOCKHOLDER'S DEFICIENCY                
  Common stock     -       -  
  Additional paid-in capital     2,389       2,410  
  Accumulated deficit     (5,954 )     (5,772 )
  Accumulated other comprehensive loss     (1,448 )     (1,661 )
TOTAL STOCKHOLDER'S DEFICIENCY     (5,013 )     (5,023 )
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIENCY   $ 5,898     $ 5,821  
   
   
Avaya Holdings Corp.  
(Debtor-in-possession)  
Condensed Statements of Cash Flows  
(Unaudited; in millions)  
    Fiscal year ended
September 30,
 
    2017     2016  
Net cash (used for) provided by:                
  Net loss Net loss   $ (182 )   $ (730 )
    Adjustments to net loss for non-cash items     518       829  
    Changes in operating assets and liabilities     (45 )     14  
  Operating activities     291       113  
  Investing activities     (70 )     (100 )
  Financing activities     314       9  
  Effect of exchange rate changes on cash and cash equivalents     5       (9 )
Net increase in cash and cash equivalents     540       13  
Cash and cash equivalents at beginning of period     336       323  
Cash and cash equivalents at end of period   $ 876     $ 336  
 
 
 Avaya Holdings Corp.
 (Debtor-in-possession)
 Supplemental Schedules of Revenue
 (Unaudited; in millions)
                                           
Three Months Ended         Three Months Ended September 30,
          Revenues   Mix   Change
Dec. 31, 2016   Mar. 31, 2017   June 30, 2017       2017   2016   2017   2016   Amount   Pct.   Pct., net of FX impact
                                                   
                Revenue by Segment                                  
$ 346   $ 309   $ 302   GCS   $ 340   $ 392   43%   41%   $ (52)   -13%   -15%
55     39     43   Networking (1)     3     77   0%   8%     (74)   -96%   -96%
401     348     345   Total ECS product revenue     343     469   43%   49%     (126)   -27%   -27%
474     456     458   AGS     447     489   57%   51%     (42)   -9%   -9%
$ 875   $ 804   $ 803   Total revenue   $ 790   $ 958   100%   100%   $ (168)   -18%   -18%
                                                   
                                                   
                Revenue by Geography                                  
$ 466   $ 450   $ 435   U.S.   $ 447   $ 552   57%   58%   $ (105)   -19%   -19%
                International:                                  
234     202     204     EMEA     194     217   24%   22%     (23)   -11%   -13%
90     77     88     APAC - Asia Pacific     79     104   10%   11%     (25)   -24%   -24%
85     75     76     Americas International - Canada and Latin America     70     85   9%   9%     (15)   -18%   -19%
409     354     368   Total International     343     406   43%   42%     (63)   -16%   -17%
$ 875   $ 804   $ 803   Total revenue   $ 790   $ 958   100%   100%   $ (168)   -18%   -18%
                                                   
(1) Networking business was sold on July 14, 2017, therefore, the Company recognized no revenue after the date of sale                  

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 adjusted EBITDA.

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.

We believe that including supplementary information concerning adjusted EBITDA is appropriate because it serves as a basis for determining management and employee compensation. In addition, we believe adjusted EBITDA provides more comparability between our historical results and results that reflect purchase accounting and our current capital structure. Accordingly, 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. While EBITDA measures are frequently used as measures of operations and the ability to meet debt service requirements, 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) including, but not limited to reorganization, restructuring and impairment charges, certain fees payable to our private equity sponsors and other advisors, resolution of certain legal matters and a portion of our pension costs and post-employment benefits costs which represents the amortization of pension service costs and actuarial gain (loss) associated with these benefits. However, these are expenses that may recur, may vary and are difficult to predict.

The estimate of adjusted EBITDA provided in this press release has been determined consistent with the methodology for calculating adjusted EBITDA as set forth in Avaya Holdings Corp. Form 10 for the fiscal year end September 30, 2017.

These non-GAAP measures are not based on any comprehensive set of accounting rules or principles and have limitations as analytical tools in that they do not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP. As such, these measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP measures.

The following tables reconcile GAAP measures to non-GAAP measures:

   
   
Avaya Holdings Corp.  
(Debtor-in-possession)  
Supplemental Schedule of Non-GAAP Adjusted EBITDA  
(Unaudited; in millions)  
   
    Three months ended
September 30,
    Fiscal year ended
September 30,
 
   
    2017     2016     2017     2016  
Net income (loss)   $ 27     $ (483 )   $ (182 )   $ (730 )
  Interest expense     17       118       246       471  
  Interest income     (2 )     -       (4 )     (1 )
  Provision for (benefit from) income taxes     6       (55 )     (16 )     11  
  Depreciation and amortization     63       97       326       374  
EBITDA     111       (323 )     370       125  
    Restructuring charges, net     8       17       30       105  
    Sponsor and other advisory fees     3       28       85       43  
    Integration-related costs     -       -       1       2  
    Third-party sales transformation costs     -       -       -       5  
    Reorganization items, net     21       -       98       -  
    Share-based and other compensation     1       7       11       19  
    Loss on disposal of long-lived assets, net     -       1       -       1  
    Gain on sale of Networking business     (2 )     -       (2 )     -  
    Impairment of indefinite-lived intangible assets     -       100       65       100  
    Goodwill impairment     -       442       52       442  
    Impairment of long-lived asset     -       -       3       -  
    Loss on equity investment     -       11       -       11  
    Change in fair value of Preferred B embedded derivative     -       (17 )     -       (73 )
    Securities registration fees     -       -       -       1  
    Costs in connection with certain legal matters     64       -       64       106  
    Foreign currency gains, net     (1 )     -       (2 )     (10 )
    Pension/OPEB/nonretirement postemployment benefits and long-term disability costs     20       18       90       63  
    Other     -       -       1       -  
Adjusted EBITDA   $ 225     $ 284     $ 866     $ 940  
   
   
Avaya Holdings Corp.  
(Debtor-in-possession)  
Supplemental Schedules of Non-GAAP Reconciliations  
(Unaudited; in millions)  
   
    Three Months Ended  
    Sept. 30,     Dec. 31,     Mar. 31     June 30     Sept. 30  
    2016     2016     2017     2017     2017  
                                         
Reconciliation of Non-GAAP Gross Profit and Non-GAAP Gross Margin                                        
  Gross Profit   $ 583     $ 533     $ 481     $ 490     $ 495  
  Gross Margin     60.9 %     60.9 %     59.8 %     61.0 %     62.7 %
                                           
  Items excluded:                                        
    Amortization of acquired technology intangible assets     8       5       6       5       4  
    Share-based compensation     1       -       -       -       -  
  Non-GAAP Gross Profit   $ 592     $ 538     $ 487     $ 495     $ 499  
                                         
  Non-GAAP Gross Margin     61.8 %     61.5 %     60.6 %     61.6 %     63.2 %
                                         
                                         
Reconciliation of Non-GAAP Operating Income                                        
  Operating (Loss) Income   $ (425 )   $ 64     $ 64     $ (55 )   $ 64  
    Percentage of Revenue     -44.4 %     7.3 %     8.0 %     -6.8 %     8.1 %
                                         
  Items excluded:                                        
    Amortization of acquired intangible assets     64       62       62       62       38  
    Restructuring charges, net     17       10       4       8       8  
    Impairment charges     542       -       -       120       -  
    Advisory fees     27       48       14       18       3  
    Share-based compensation     7       2       4       4       1  
    Costs in connection with certain legal matters     -       -       -       -       64  
                                         
  Non-GAAP Operating Income   $ 232     $ 186     $ 148     $ 157     $ 178  
                                         
  Non-GAAP Operating Margin     24.2 %     21.3 %     18.4 %     19.6 %     22.5 %
                                         
   
Avaya Holdings Corp.  
(Debtor-in-possession)  
Supplemental Schedules of Non-GAAP Reconciliation of Gross Profit and Gross Margin by Portfolio  
(Unaudited; in millions)  
   
    Three Months Ended  
    Sept. 30,     Dec. 31,     Mar. 31,     June 30,     Sept. 30,  
    2016     2016     2017     2017     2017  
                                         
Reconciliation of Non-GAAP Gross Profit and Non-GAAP Gross Margin - Products                                        
    Revenue   $ 469     $ 401     $ 348     $ 345     $ 343  
    Costs (exclusive of amortization of technology intangible assets) Costs     169       146       127       122       105  
    Amortization of technology intangible assets Amortization of acquired technology intangible assets     8       5       6       5       4  
  GAAP Gross Profit     292       250       215       218       234  
  GAAP Gross Margin     62.3 %     62.3 %     61.8 %     63.2 %     68.2 %
                                         
  Items excluded:                                        
    Amortization of acquired technology intangible assets     8       5       6       5       4  
  Non-GAAP Gross Profit   $ 300     $ 255     $ 221     $ 223     $ 238  
                                         
  Non-GAAP Gross Margin     64.0 %     63.6 %     63.5 %     64.6 %     69.4 %
                                         
                                         
Reconciliation of Non-GAAP Gross Profit and Non-GAAP Gross Margin - Services                                        
    Revenue   $ 489     $ 474     $ 456     $ 458     $ 447  
    Costs     198       191       190       186       186  
  GAAP Gross Profit     291       283       266       272       261  
  GAAP Gross Margin     59.5 %     59.7 %     58.3 %     59.4 %     58.4 %
                                         
Items excluded:                                        
  Share-based and other compensation     1       -       -       -       -  
Non-GAAP Gross Profit   $ 292     $ 283     $ 266     $ 272     $ 261  
                                         
Non-GAAP Gross Margin     59.7 %     59.7 %     58.3 %     59.4 %     58.4 %
                                         
                                         
Avaya Holdings Corp.
(Debtor-in-possession)
Reconciliation of GAAP to Non-GAAP results
Three months ended September 30, 2017
(Unaudited; in millions)
         
                        Costs in
Connection
with Certain
Legal Matters
           
        Amortization
of Intangible
Assets
 
Restructuring
Charges, net
 
Reorganization
Items
  Share-based
and Other
Comp
          Q416
    GAAP
Results
  Advisory
Fees
  Non-GAAP
Results
  GAAP
Results
  Non-GAAP
Results
   
Revenue                                                            
  Products   $ 343   $ -   $ -   $ -   $ -   $ -   $ -   $ 343   $ 469   $ 469
  Services     447                                         447     489     489
      790     -     -     -     -     -     -     790     958     958
Costs                                                            
  Products:                                                            
    Costs     105                             -           105     169     169
    Amortization of acquired technology intangible assets     4     (4)                                   -     8     -
  Services     186                 -     -     -     -     186     198     197
      295     (4)     -     -     -     -     -     291     375     366
GROSS PROFIT     495     4     -     -     -     -     -     499     583     592
OPERATING EXPENSES                                                            
  Selling, general and administrative     341                       (1)     (64)     (3)     273     329     296
  Research and development     48                                         48     64     64
  Amortization of acquired intangible assets     34     (34)                                   -     56     -
  Impairment of indefinite-lived intangible assets     -                                         -     100     -
  Goodwill impairment     -                                         -     442     -
  Restructuring charges, net     8           (8)                             -     17     -
      431     (34)     (8)     -     (1)     (64)     (3)     321     1,008     360
OPERATING INCOME (LOSS)     64     38     8     -     1     64     3     178     (425)     232
  Interest expense     (17)                                         (17)     (118)     (118)
  Other income, net     7                                         7     5     5
  Reorganization items, net     (21)                 21                       -     -     -
INCOME (LOSS) BEFORE INCOME TAXES     33     38     8     21     1     64     3     168     (538)     119
(Provision for) benefit from income taxes     (6)                                         (6)     55     55
NET INCOME (LOSS)     27     38     8     21     1     64     3     162     (483)     174
Less: Accretion and accrued dividends on Series A and Series B Preferred Stock     (8)     -     -     -     -     -     -     (8)     (7)     (7)
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS   $ 19   $ 38   $ 8   $ 21   $ 1   $ 64   $ 3   $ 154   $ (490)   $
167
 
 
Avaya Holdings Corp.
(Debtor-in-possession)
Reconciliation of GAAP to Non-GAAP results
Fiscal year ended September 30, 2017
(Unaudited; in millions)
         
                            Costs in
Connection
with Certain
Legal Matters
           
        Amortization
of Intangible
Assets
              Share-based
and Other
Comp
          Q416 YTD
    GAAP
Results
  Restructuring
Charges, net
  Impairment
Charges
  Reorganization
Items
  Advisory
Fees
  Non-GAAP
Results
  GAAP
Results
  Non-GAAP
Results
   
Revenue                                                                  
  Products   $ 1,437   $ -   $ -   $ -   $ -   $ -   $ -   $ -   $ 1,437   $ 1,755   $ 1,755
  Services     1,835     -     -     -     -     -     -     -     1,835     1,947     1,947
      3,272     -     -     -     -     -     -     -     3,272     3,702     3,702
Costs                                                                  
  Products:                                                                  
    Costs     500     -     -     -     -     -     -     -     500     630     629
    Amortization of acquired technology intangible assets     20     (20)     -     -     -     -     -     -     -     30     -
  Services     753     -     -     -     -     -     -     -     753     797     795
      1,273     (20)     -     -     -     -     -     -     1,253     1,457     1,424
GROSS PROFIT     1,999     20     -     -     -     -     -     -     2,019     2,245     2,278
OPERATING EXPENSES                                                                  
  Selling, general and administrative     1,282     -     -     (3)     -     (11)     (64)     (83)     1,121     1,413     1,249
  Research and development     229     -     -     -     -     -     -     -     229     275     273
  Amortization of acquired intangible assets     204     (204)     -     -     -     -     -     -     -     226     -
  Impairment of indefinite-lived intangible assets     65     -     -     (65)     -     -     -     -     -     100     -
  Goodwill impairment     52     -     -     (52)     -     -     -     -     -     442     -
  Restructuring charges, net     30     -     (30)     -     -     -     -     -     -     105     -
      1,862     (204)     (30)     (120)     -     (11)     (64)     (83)     1,350     2,561     1,522
OPERATING INCOME (LOSS)     137     224     30     120     -     11     64     83     669     (316)     756
  Interest expense     (246)     -     -     -     -     -     -     -     (246)     (471)     (471)
  Other income, net     9     -     -     -     -     -     -     -     9     68     68
  Reorganization items, net     (98)     -     -     -     98     -     -     -     -     -     -
(LOSS) INCOME BEFORE INCOME TAXES     (198)     224     30     120     98     11     64     83     432     (719)     353
Benefit from (provision for) income taxes     16     -     -     -     -     -     -     -     16     (11)     (11)
NET (LOSS) INCOME     (182)     224     30     120     98     11     64     83     448     (730)     342
Less: Accretion and accrued dividends on Series A and Series B Preferred Stock     (31)     -     -     -     -     -     -     -     (31)     (41)     (41)
NET (LOSS) INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS   $ (213)   $ 224   $ 30   $ 120   $ 98   $ 11   $ 64   $ 83   $ 417   $ (771)   $
301

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Source: Avaya Newsroom

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