Attached files
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| EX-99.2 - EXHIBIT 99.2 - Avaya Holdings Corp. | ex992erpresentation1q18.htm |
| 8-K - 8-K - Avaya Holdings Corp. | form8-k1q18earnings.htm |
Media Inquiries: Investor Inquiries:
Debbie Lewandowski Peter Schuman
630-245-2720 669-242-8098
deblewan@avaya.com pschuman@avaya.com
Avaya Reports First Quarter Fiscal 2018 Financial Results
Combined First Quarter Fiscal 2018(1):
Revenue of $752 million, Non-GAAP(2) revenue of $775 million
Net income of $3,214 million, non-GAAP(2) net loss of $68 million
Adjusted EBITDA of $206 million(2) or 26.6% of non-GAAP revenue
Emerged from chapter 11 on December 15, 2017 and listed on the New York Stock
Exchange on January 17, 2018
Santa Clara, Calif., — Mar. 1, 2018 – Avaya Holdings Corp. (NYSE: AVYA) today reported
financial results for the first quarter of fiscal 2018 ended December 31, 2017. Due to the
company’s emergence from chapter 11 proceedings, and adoption of fresh start accounting
effective on December 15, 2017, the results for the quarter are required by GAAP to be presented
separately as the predecessor period from October 1, 2017 through December 15, 2017 (inclusive
of results prior to October 1, 2017, the “Predecessor” period) and the successor period from
December 16, 2017 through December 31, 2017 (the “Successor” period). The application of fresh
start accounting results in a new basis of accounting making the results of the Predecessor period
not comparable to the results of the Successor period. We have, however, combined results of the
Predecessor and Successor periods for discussion purposes as we believe it provides the most
meaningful basis to analyze our results.(1)
Revenue for the combined period from October 1, 2017 through December 31, 2017 (the
“Combined First Quarter Fiscal 2018” (1)), was $752 million, including $3 million related to Avaya’s
former Networking business, which was sold on July 14, 2017. Revenue for the fourth quarter
fiscal 2017 ending September 30, 2017 was $790 million, including $5 million related to the
Networking business, and $875 million for the first quarter fiscal 2017 ending December 31, 2016,
including $66 million related to the Networking business.
Non-GAAP revenue excluding the revenue of the Networking business for the Combined First
Quarter Fiscal 2018 was $772 million, $13 million lower than the fourth quarter ending September
30 2017, representing a decline of approximately 2%, primarily as a result of seasonality and $37
million lower than the first quarter ending fiscal 2017, representing a decline of 5%, primarily as a
result of the impact of the chapter 11 proceedings.
Gross margin for the Combined First Quarter Fiscal 2018 was 58.5%. Non-GAAP gross margin
was 61.8%, a record percentage for a first quarter result, compared to 63.3% for the prior quarter
and 61.7% for the first quarter of fiscal 2017.
Operating income for the Combined First Quarter Fiscal 2018 was $38 million, compared to
operating income of $69 million in the prior quarter and operating income of $70 million for the first
quarter of fiscal 2017. Non-GAAP operating income for the first quarter of fiscal 2018 was $172
million, or a first quarter record 22.2% percentage of non-GAAP revenue, compared to $183 million
for the prior quarter and $192 million for the first quarter of fiscal 2017. Net income for the
Combined First Quarter Fiscal 2018 was $3,214 million, compared to net income of $27 million for
the prior quarter, and a net loss of $103 million for the first quarter of fiscal 2017. The increase in
net income for Combined First Quarter Fiscal 2018 was primarily related to execution of the
reorganization plan and the impact of fresh start accounting. Non-GAAP net loss for the Combined
First Quarter Fiscal 2018 was $68 million compared to non-GAAP net income of $162 million for
the prior quarter and $19 million for the first quarter of fiscal 2017.
For the Combined First Quarter Fiscal 2018, adjusted EBITDA was $206 million or 26.6% of non-
GAAP revenue, compared to adjusted EBITDA of $225 million, or 28.5% of revenue, for the prior
quarter and $238 million, or 27.2% of revenue, for the first quarter of fiscal 2017.
Cash used for operating activities for the Combined First Quarter Fiscal 2018 was $374 million,
compared to cash provided by operating activities of $166 million during the fourth quarter of fiscal
2017, and cash used for operations of $44 million during the first quarter of fiscal 2017. Cash and
cash equivalents totaled $417 million as of December 31, 2017, compared to $876 million at the
end of the prior quarter and $209 million at the end of the first quarter of fiscal 2017. The
sequential change in cash and cash equivalents is primarily due to payments upon emergence
from bankruptcy to former debt holders, Pension Benefit Guarantee Corporation, and other
creditors, repayment of the Debtor-In-Possession loan facility, debt issuance costs and
professional fees, offset by proceeds of a new term loan.
“Our first quarter results represented a great start for the fiscal year and are a testimony to the
loyalty and dedication of our customers, partners and employees who supported us this past year,”
said Jim Chirico, president and CEO of Avaya. “These results demonstrate four straight quarters of
revenue stabilization in the business. We continued to drive momentum by improving our industry-
leading business model, generating over 10% of our revenue from the cloud. In addition, there
were sequential increases in midmarket/SMB cloud seats of 41% and in cloud activations of
96%. We added over 1,300 new customers and more than 265 partners to our ecosystem. We
utilized our new capital structure and announced the pending acquisition of Spoken
Communications, further fueling our cloud momentum.”
1 The results for the period from October 1, 2017 through December 31, 2018, the “Combined First Quarter
Fiscal 2018,” represent the sum of the reported amounts for the Predecessor period from October 1, 2017
through December 15, 2007 and the Successor period from December 16, 2017 through December 31,
2017. Refer to Supplemental Financial Information accompanying this press release for more information,
including a reconciliation of combined results to our Predecessor and Successor results.
2 Non GAAP revenue, Non-GAAP gross margin, Non-GAAP operating income, Non-GAAP net income and
Adjusted EBITDA are not measures calculated in accordance with generally accepted accounting principles
in the U.S. (“GAAP”). Refer to 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.
First Quarter Fiscal 2018 Highlights
Added over 1,300 new logos worldwide during the first fiscal quarter 2018, an increase of
6% sequentially.
Refreshed our management team, adding respected leaders with proven experience
driving transformation and growth.
More than three million cloud seats and growing.
Launched dedicated Cloud Business Unit, concentrating cloud assets for agile solution
delivery and growth.
Announced the acquisition of Spoken Communications, a leading innovator in Contact
Center as a Service (CCaaS) solutions. The Spoken platform will speed Avaya’s ability to
deliver a secure, reliable and highly scalable cloud platform for customers of all sizes, and
its intellectual property will accelerate our move into Big Data, Machine Learning and AI.
Avaya Private Cloud Services revenue for the Enterprise market grew 3% sequentially.
Midmarket/SMB cloud business seats grew 41% quarter-over-quarter, and monthly
recurring revenue (MRR) grew by 39% quarter-over-quarter.
Continued strength in our business model as a software & services company:
o Software and services accounted for a record 82% of total revenue, up year-over-
year from 76%
o Recurring revenue represented over 57% of total revenue, up year-over-year from
53%
o 89 deals over $1 million of Total Contract Value (TCV)
Showcased customer success stories with Avaya solutions across industries, and unveiled
a Happiness Index on Blockchain at the GITEX Technology Week in Dubai.
A record 3,000 customers and partners attended the Avaya Engage 2018 conference,
showcasing leading innovations and intelligent technologies such as AI, automated
workflows, and advanced analytics to shape the connected world.
Introduced Avaya AVA™, a cloud based AI solution that goes beyond bots to automate and
manage customer engagement through social media and messaging.
Listed on the New York Stock Exchange (NYSE) on January 17, 2018.
Second Quarter Fiscal 2018 Outlook
Revenue of $660-$680 million, non-GAAP revenue of $750-$770 million
GAAP operating loss of 16-20% of revenue, non-GAAP operating profit of 20-22% of non-
GAAP revenue
Net loss $1.35-$1.55 per diluted share, non-GAAP net income $0.80-$0.90 per diluted
share
Adjusted EBITDA of $180-$200 million or adjusted EBITDA margin of approximately 25%
of non-GAAP revenue
Fiscal Year 2018 Outlook
Revenue of $2,775-$2,900 million, non-GAAP revenue of $3,000-$3,100 million
GAAP operating loss of 4-6% of revenue, non-GAAP operating margin of 21-22% of non-
GAAP revenue
Approximately $175 million of expected cash interest expense
GAAP net income $2,850-$2,950 million
Capital expenditures of $60-$75 million
Approximately 110 million basic and diluted shares outstanding
Adjusted EBITDA of $750-$800 million or adjusted EBITDA margin of approximately 25-
26% of non-GAAP revenue
Avaya’s outlook does not include the potential impact of any business combinations, asset
acquisitions, divestitures, strategic investments, the pending Spoken acquisition, or other
significant transactions that may be completed after March 1, 2018. 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 financial results webcast and conference call to discuss its financial results and
Q&A at 6:00 AM PT/9:00 AM ET on March 1, 2018. On the call will be Jim Chirico, president and
CEO, and Pat O’Malley, senior vice president and CFO. The call will be moderated by Peter
Schuman, senior director of investor relations.
To join the financial results live webcast and view supplementary materials, listeners should
access the investor page of Avaya’s website https://investors.avaya.com. Following the live
webcast, a replay will be available at the same web address in the event archives for a period of
one year.
To access the financial results live by phone, dial 866-393-4306 in the U.S. or Canada and +1-734-
385-2616 for international callers. Listeners should access the webcast or the call 10-15 minutes
before the start time to ensure they are able to connect.
A replay of the financial results live conference call will be available for 2 business days soon after
the call by phone by dialing 855-859-2056 in the U.S. or Canada and +1-404-537-3406 for
international callers, using the conference access code: 2438229.
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 global leader in digital communications software, services and devices for businesses
of all sizes. Our open, intelligent and customizable solutions for contact centers and unified
communications offer the flexibility of Cloud, on-premises and hybrid deployments. Avaya shapes
intelligent connections and creates seamless communication experiences for our customers, and
their customers. Our professional planning, support and management services teams help
optimize solutions, for highly reliable and efficient deployments. Avaya Holdings Corp. is traded on
the NYSE under the ticker AVYA. 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, second
quarter fiscal 2018 and fiscal year 2018 outlook. 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 are discussed in the company’s
Registration Statement on Form 10 filed with the Securities and Exchange Commission (the
“SEC”), 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.
Successor
Period from
December 16, 2017
through
December 31, 2017
Period from
October 1, 2017
through
December 15, 2017
Three months
ended December
31, 2016
REVENUE
Products 71$ 253$ 401$
Services 77 351 474
148 604 875
COSTS
Products:
Costs 33 84 145
Amortization of technology intangible assets 7 3 5
Services 30 155 190
70 242 340
GROSS PROFIT 78 362 535
OPERATING EXPENSES
Selling, general and administrative 50 264 336
Research and development 9 38 62
Amortization of intangible assets 7 10 57
Restructuring charges, net 10 14 10
76 326 465
OPERATING INCOME 2 36 70
Interest expense (9) (14) (174)
Other (expense) income, net (2) (2) 4
Reorganization costs, net - 3,416 -
(LOSS) INCOME BEFORE INCOME TAXES (9) 3,436 (100)
Benefit from (provision for) income taxes 246 (459) (3)
NET INCOME (LOSS) 237$ 2,977$ (103)$
Predecessor
Avaya Holdings Corp.
Consolidated Statements of Operations
(Unaudited in millions)
Successor Predecessor
December 31,
2017
September 30,
2017
ASSETS
Current assets:
Cash and cash equivalents 417$ 876$
Accounts receivable, net 413 536
Inventory 124 96
Other current assets 230 269
TOTAL CURRENT ASSETS 1,184 1,777
Property, plant and equipment, net 306 200
Deferred income taxes, net 31 -
Intangible assets, net 3,421 311
Goodwill 2,632 3,542
Other assets 53 68
TOTAL ASSETS 7,627$ 5,898$
LIABILITIES
Current liabilities:
Debt maturing within one year -$ 725$
Long-term debt, current portion 29 -
Accounts payable 304 282
Payroll and benefit obligations 124 127
Deferred revenue 384 614
Business restructuring reserve, current portion 36 35
Other current liabilities 153 90
TOTAL CURRENT LIABILITIES 1,030 1,873
Long-term debt 2,867 -
Pension obligations 793 513
Other postretirement obligations 215 -
Deferred income taxes, net 444 32
Business restructuring reserve, non-current portion 34 34
Other liabilities 377 170
TOTAL NON-CURRENT LIABILITIES 4,730 749
LIABILITIES SUBJECT TO COMPROMISE - 7,705
TOTAL LIABILITIES 5,760 10,327
Commitments and contingencies
Predecessor equity awards on redeemable shares - 7
Predecessor preferred stock, $0.001 par value, 250,000 shares authorized at September 30, 2017
Convertible Series B preferred stock; 48,922 shares issued and outstanding at September 30, 2017 - 393
Series A preferred stock; 125,000 shares issued and outstanding at September 30, 2017 - 184
- -
STOCKHOLDERS' EQUITY (DEFICIT)
- -
1 -
Additional paid-in capital 1,642 2,389
Retained earnings (Accumulated deficit) 237 (5,954)
Accumulated other comprehensive loss (13) (1,448)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 1,867 (5,013)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) 7,627$ 5,898$
Predecessor common stock, $0.01 par value; 750,000,000 shares authorized, 494,768,243 issued
and outstanding at September 30, 2017
Successor common stock, $0.01 par value; 550,000,000 shares authorized, 110,000,000 issued and
109,794,137 outstanding at December 31, 2017
Successor preferred stock, $0.01 par value; 55,000,000 authorized, no shares issued or outstanding at
December 31, 2017
Avaya Holdings Corp.
(Unaudited; in millions, except share amounts)
Consolidated Balance Sheets
Successor Predecessor
Non-GAAP
Combined Predecessor
Period from
December 16,
2017 through
December 31,
2017
Period from
October 1,
2017 through
December 15,
2017
Three months
ended December
31, 2017
Three months
ended
December 31,
2016
Net cash provided by (used for):
Net income (loss) 237$ 2,977$ 3,214$ (103)$
Adjustments to net income (loss) for non-cash items (225) (3,410) (3,635) 141
Changes in operating assets and liabilities 54 (7) 47 (82)
Operating activities 66 (440) (374) (44)
Investing activities 8 8 16 (15)
Financing activities - (102) (102) (57)
Effect of exchange rate changes on cash and cash equivalents 3 (2) 1 (11)
Net increase (decrease) in cash and cash equivalents 77 (536) (459) (127)
Cash and cash equivalents at beginning of period 340 876 876 336
Cash and cash equivalents at end of period 417$ 340$ 417$ 209$
Avaya Holdings Corp.
Condensed Statements of Cash Flows
(Unaudited; in millions)
Avaya Holdings Corp.
Supplemental Schedules of Non-GAAP Revenue
(Unaudited; in millions)
Successor Predecessor Predecessor
Period from Period from Q118 Three Months
Dec. 16, 2017 Oct. 1, 2017 Adj. for Non-GAAP Ended Pct.,
through through Fresh Start Combined Dec. 31, net of Sept. 30, June 30, Mar. 31,
Dec. 31, 2017 Dec. 15, 2017 Accounting Results 2016 Amount Pct. FX impact 2017 2017 2017
Revenue by Segment
Total ECS product revenue 71 253 6 330 401 (71) -18% -19% 343 345 348
AGS 77 351 17 445 474 (29) -6% -8% 447 458 456
Total revenue 148$ 604$ 23$ 775$ 875$ (100)$ -11% -13% 790$ 803$ 804$
Revenue by Geography
U.S. 71$ 331$ 23$ 425$ 466$ (41)$ -9% -9% 447$ 435$ 450$
International:
EMEA 42 166 - 208 234 (26) -11% -15% 194 204 202
APAC - Asia Pacific 19 57 - 76 90 (14) -16% -17% 79 88 77
16 50 - 66 85 (19) -22% -25% 70 76 75
Total International 77 273 - 350 409 (59) -14% -17% 343 368 354
Total revenue 148$ 604$ 23$ 775$ 875$ (100)$ -11% -13% 790$ 803$ 804$
Americas International - Canada
and Latin America
Change
Predecessor
Three Months Ended
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 three month period ending December 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,
2007 and December 16, 2017 through December 31, 2017 separately, management reviews the Company’s
operating results for the three months ended December 31, 2017 by combining the results of these two
periods because such presentation provides the most meaningful comparison of our results. The company
cannot adequately benchmark the operating results of the 16-day period ended December 31, 2017 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 when combined for the three months ended December 31, 2017 provide
meaningful comparisons to other periods and are useful in identifying current business trends.
We also present the measures non-GAAP revenue, non-GAAP gross margin, non-GAAP operating income,
and non-GAAP net income 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
comparisons to prior periods because they exclude the impact of earnings or charges noted in the table
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
maybe different from the non-GAAP financial measures used by other companies. In addition, these non-
GAAP measures have limitation in that they do not reflect all of the amounts associated with the company’s
results of operations as determined in accordance with GAAP.
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. We also present EBITDA and Adjusted EBITDA
because we believe analysts and investors utilize these measures in analyzing our results. 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), 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.
Avaya believes that the presentation of all of these non-GAAP financial measures, when taken together with
the corresponding GAAP financial measures, provide meaningful supplemental information regarding the
company's performance by excluding certain items that may not be indicative of the company's core
business, operating results or future outlook. Avaya’s management uses, and believes that investors benefit
from referring to, these non-GAAP financial measures in assessing the company's operating results both as
a consolidated entity and at the business unit level, as well as when planning, forecasting and analyzing
future periods. These non-GAAP financial measures also facilitate comparisons of the company's
performance to prior periods.
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 present Successor, Predecessor and combined results and reconcile GAAP measures
to non-GAAP measures. We do not provide a forward-looking reconciliation of expected second quarter and
full fiscal 2018 Adjusted EBITDA guidance as the amount of significance of special items required to develop
meaningful comparable GAAP financial measures cannot be estimated at this time without unreasonable
efforts:
Successor
Period from
December 16,
2017 through
December 31,
2017
Period from
October 1,
2017 through
December 15,
2017
Three months
ended
December 31,
2016
Net income (loss) 237$ 2,977$ (103)$
Interest expense 9 14 174
Interest income - (2) -
(Benefit from) provision for income taxes (246) 459 3
Depreciation and amortization 22 31 90
22 3,479 164
Impact of fresh start accounting adjustments 27 - -
Restructuring charges, net 10 14 10
Sponsors' and other advisory fees 8 3 51
Reorganization items, net - (3,416) -
Share-based and other compensation 1 - 2
Loss on disposal of long-lived assets - 1 -
Costs in connection with certain legal matters - 37 -
Change in fair value of warrant liability 5 - -
Foreign currency gains, net (2) - (11)
Pension/OPEB/nonretirement postemployment benefits and
long-term disability costs - 17 21
Other - - 1
Adjusted EBITDA 71$ 135$ 238$
EBITDA
Avaya Holdings Corp.
Supplemental Schedule of Non-GAAP Adjusted EBITDA
(Unaudited; in millions)
Predecessor
Successor Predecessor
Period from Period from
Dec. 16, 2017 Oct. 1, 2017
through through Combined Sept. 30 June 30 Mar. 31 Dec. 31,
Dec. 31, 2017 Dec. 15, 2017 Results 2017 2017 2017 2016
Gross Profit 78$ 362$ 440$ 496$ 493$ 484$ 535$
Gross Margin 52.7% 59.9% 58.5% 62.8% 61.4% 60.2% 61.1%
Items excluded:
Adj. for fresh start accounting 29 - - - -
Amortization of technology intangible assets 10 4 5 6 5
Non-GAAP Gross Profit 479$ 500$ 498$ 490$ 540$
Non-GAAP Gross Margin 61.8% 63.3% 62.0% 60.9% 61.7%
Reconciliation of Non-GAAP Operating Income
Operating Income (Loss) 2$ 36$ 38$ 69$ (43)$ 75$ 70$
Percentage of Revenue 1.4% 6.0% 5.1% 8.7% -5.4% 9.3% 8.0%
Items excluded:
Adj. for fresh start accounting 33 - - - -
Amortization of intangible assets 27 38 62 62 62
Restructuring charges, net 24 8 8 4 10
Loss on disposal of long-lived assets 1 - - - -
Impairment charges - - 120 - -
Advisory fees 11 3 18 14 48
Share-based compensation 1 1 4 4 2
Costs in connection with certain legal matters 37 64 - - -
Non-GAAP Operating Income 172$ 183$ 169$ 159$ 192$
Non-GAAP Operating Margin 22.2% 23.2% 21.0% 19.8% 21.9%
Reconciliation of Non-GAAP Gross Profit
and Non-GAAP Gross Margin
Predecessor
Three Months Ended
Avaya Holdings Corp.
Supplemental Schedules of Non-GAAP Reconciliations
(Unaudited; in millions)
Successor Predecessor
Period from Period from
Dec. 16, 2017 Oct. 1, 2017
through through Combined Sept. 30, June 30, Mar. 31, Dec. 31,
Dec. 31, 2017 Dec. 15, 2017 Results 2017 2017 2017 2016
Revenue 71$ 253$ 324$ 343$ 345$ 348$ 401$
Costs 33 84 117 104 121 125 145
Amortization of technology intangible assets 7 3 10 4 5 6 5
GAAP Gross Profit 31 166 197 235 219 217 251
GAAP Gross Margin 43.7% 65.6% 60.8% 68.5% 63.5% 62.4% 62.6%
Items excluded:
Adj. for fresh start accounting 7 - - - -
Amortization of technology intangible assets 10 4 5 6 5
Non-GAAP Gross Profit 214$ 239$ 224$ 223$ 256$
Non-GAAP Gross Margin 64.8% 69.7% 64.9% 64.1% 63.8%
Revenue 77$ 351$ 428$ 447$ 458$ 456$ 474$
Costs 30 155 185 186 184 189 190
GAAP Gross Profit 47 196 243 261 274 267 284
GAAP Gross Margin 61.0% 55.8% 56.8% 58.4% 59.8% 58.6% 59.9%
Items excluded:
Adj. for fresh start accounting 22 - - - -
Non-GAAP Gross Profit 265$ 261$ 274$ 267$ 284$
Non-GAAP Gross Margin 59.6% 58.4% 59.8% 58.6% 59.9%
Avaya Holdings Corp.
Supplemental Schedules of Non-GAAP Reconciliation of Gross Profit and Gross Margin by Portfolio
(Unaudited; in millions)
Reconciliation of Non-GAAP Gross Profit
and Non-GAAP Gross Margin - Products
Reconciliation of Non-GAAP Gross Profit
and Non-GAAP Gross Margin - Services
Predecessor
Three Months Ended
Successor Predecessor
Period from Period from Loss on Costs in
December 16, 2017 October 1, 2017 Adj. for Amortization Disposal of Share-based Connection
through through Combined Fresh Start of Intangible Restructuring Long-lived Reorganization and Other with Certain Advisory Non-GAAP GAAP Non-GAAP
December 31, 2017 December 15, 2017 Results Accounting Assets Charges, net Assets Items Comp Legal Matters Fees Results Results Results
Revenue
Products 71$ 253$ 324$ 6$ -$ -$ -$ -$ -$ -$ -$ 330$ 401$ 401$
Services 77 351 428 17 445 474 474
148 604 752 23 - - - - - - - 775 875 875
Costs
Products:
Costs 33 84 117 (1) 116 145 145
Amortization of technology intangible assets 7 3 10 (10) - 5 -
Services 30 155 185 (5) - - - - - 180 190 190
70 242 312 (6) (10) - - - - - - 296 340 335
GROSS PROFIT 78 362 440 29 10 - - - - - - 479 535 540
OPERATING EXPENSES
Selling, general and administrative 50 264 314 (4) (1) (1) (37) (11) 260 336 286
Research and development 9 38 47 47 62 62
Amortization of intangible assets 7 10 17 (17) - 57 -
Restructuring charges, net 10 14 24 (24) - 10 -
76 326 402 (4) (17) (24) (1) - (1) (37) (11) 307 465 348
OPERATING INCOME 2 36 38 33 27 24 1 - 1 37 11 172 70 192
Interest expense (9) (14) (23) (23) (174) (174)
Other (expense) income, net (2) (2) (4) (4) 4 4
Reorganization items, net - 3,416 3,416 (3,416) - - -
(9) 3,436 3,427 33 27 24 1 (3,416) 1 37 11 145 (100) 22
Benefit from (provision for) income taxes 246 (459) (213) (213) (3) (3)
NET INCOME (LOSS) 237$ 2,977$ 3,214$ 33$ 27$ 24$ 1$ (3,416)$ 1$ 37$ 11$ (68)$ (103)$ 19$
Q117
(LOSS) INCOME BEFORE INCOME TAXES
Avaya Holdings Corp.
Reconciliation of GAAP to Non-GAAP results
Three months ended December 31, 2017
(Unaudited; in millions)
Source: Avaya Newsroom
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