Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - Avaya Holdings Corp. | ex991q118earningsrelease.htm |
| 8-K - 8-K - Avaya Holdings Corp. | form8-k1q18earnings.htm |
© 2018 Avaya Inc. All right reserved
AVAYA
Q1 FISCAL YEAR 2018
FINANCIAL RESULTS
March 1, 2018
I . l ri ts reserved.
© 2018 Avaya Inc. All rights reserved. 2
FORWARD LOOKING STATEMENTS
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.
This presentation should be read in conjunction with our first quarter fiscal 2018 earnings press release posted on March 1, 2018. Within this
presentation, we refer to certain non‐GAAP financial measures that involve adjustments to GAAP measures. Reconciliations between our non-
GAAP financial measures and GAAP financial measures are included on the last three slides of this presentation.
These slides, as well as current and historical financial data are available on our web site at investors.avaya.com
None of the information included on the website is incorporated by reference in this presentation.
© 2018 Avaya Inc. All rights reserved. 3
FISCAL Q1 2018 FINANCIAL HIGHLIGHTS
(Amounts are non-GAAP)
Revenue of $775 million
- Down 2% sequentially and down 11% from Q1FY’17
- Excluding the impact of the sale of the Networking business, revenue declined approximately 2% sequentially
and approximately 5% compared to Q1FY’17
– Software and Services a record 82% of total revenue, up year-over-year from 76%
– Recurring revenue over >57% of total revenue, up year-over-year from 53%
– Avaya Private Cloud Services for the Enterprise market & Professional Services each accounted for >9% of total
revenue
Non-GAAP product revenue of $330 million decreased 4% from the prior quarter and decreased 18% year-
over-year. Excluding the impact of the sale of the Networking business, product revenue decreased 4%
sequentially and was 4% lower year-over-year
Non-GAAP service revenue of $445 million was down less than 1% sequentially and decreased 6% year-over-
year. Excluding the impact of the sale of the Networking business, service revenue decreased less than 1%
sequentially and was 4% lower year-over-year
Total bookings for the first fiscal quarter decreased 14% 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
decreased 14% sequentially and were 10% lower year-over-year, in constant currency, reflecting extended
procurement cycles resulting from chapter 11
For a reconciliation of non-GAAP to GAAP financial information, please see the appendix.
© 2018 Avaya Inc. All rights reserved. 4
FISCAL Q1 2018 FINANCIAL HIGHLIGHTS
(Amounts are non-GAAP)
Continued…XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
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
Non-GAAP operating income of $172 million or 22.2% of revenue, a record percentage for a first quarter result,
compared to $183 million or 23.2% of revenue for the prior quarter and $192 million or 21.9% of revenue for the
first quarter of fiscal 2017
Adjusted EBITDA was $206 million or 26.6% of revenue, compared to $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 balance of $417 million
For a reconciliation of non-GAAP to GAAP financial information, please see the appendix.
*TCV excludes Networking
© 2018 Avaya Inc. All rights reserved. 5
Revenue: FQ1 2018 FQ4 2017 FQ1 2017
Product $330 $343 $401
Services $445 $447 $474
Total Revenue $775 $790 $875
Gross Margin:
Product 64.8% 69.7% 63.8%
Services 59.6% 58.4% 59.9%
Total Gross Margin 61.8% 63.3% 61.7%
Operating Margin 22.2% 23.2% 21.9%
Adjusted EBITDA $206 $225 $238
Adjusted EBITDA % 26.6%* 28.5% 27.2%
For a reconciliation of non-GAAP to GAAP financial information, please see the appendix and our Q1’18 and historical financials at investors.avaya.com
*FQ1 2018 Adjusted EBITDA % is based on non-GAAP Revenue
.
< ------------------ As Reported ------------------ >
QUARTERLY INCOME STATEMENT
(Amounts are non-GAAP and dollars in millions)
© 2018 Avaya Inc. All rights reserved. 6
QUARTERLY REVENUE BY REGION
(All dollars amounts are in millions)
Revenue FQ1 2018 FQ4 2017 FQ1 2017
U.S. $425 $447 $466
EMEA $208 $194 $234
APAC $76 $79 $90
AI $66 $70 $85
Total $775 $790 $875
% of Total Revenue
U.S. 55% 57% 53%
EMEA 27% 24% 27%
APAC 10% 10% 10%
AI 8% 9% 10%
Total 100% 100% 100%
< ------------------ As Reported ------------------ >
© 2018 Avaya Inc. All rights reserved. 7
Q1 FY’18 FINANCIAL HIGHLIGHTS
• Recurring revenue >57% of total revenue, up
YoY from 53%
• Software and Services accounted for a record
82% of total revenue, up YoY from 76%
• Added >1,300 new logos worldwide, up 6%
sequentially
• Midmarket/SMB cloud seats up 41% QoQ, and
monthly recurring revenue grew 39% QoQ
• Non-GAAP operating income of 22.2% of
revenue, a record % for a first quarter result
• Adj. EBITDA of 26.6% of revenue
• $417 million cash on balance sheet
($M, as reported)
Non-GAAP
1Q18
Actual
4Q17
Actual
1Q17
Actual
Revenue $775 $790 $875
Gross Margin % 61.8% 63.3% 61.7%
Oper Expense % 39.6% 40.1% 39.8%
Oper Income % 22.2% 23.2% 21.9%
Adj EBITDA $ $206 $225 $238
Adj EBITDA % 26.6% 28.5% 27.2%
Notable Q1’18 Stats (non-GAAP):
Revenue per employee* (TTM)
FQ1 2018 Adjusted EBITDA % is based on non-GAAP Revenue
*Headcount as of the end of the period indicated
For a reconciliation of non-GAAP to GAAP financial information, please see the appendix and our Q1’18 and historical earnings releases at investors.avaya.com
$328
$335
$347
$366
$376
$320
$330
$340
$350
$360
$370
$380
$390
$400
FY13 FY14 FY15 FY16 FY17
($000)
TTM-Trailing Twelve Months
Additional Highlights
• Announced acquisition of Spoken Communications, a leading
innovator in Contact Center as a Service (CCaaS) solutions
• A record 3,000 customers and partners attended Avaya Engage
2018 conference
• Listed on the New York Stock Exchange (NYSE) on January 17,
2018
© 2018 Avaya Inc. All rights reserved. 8
BALANCE SHEET AND OPERATING METRICS
(Dollars in millions, Balance sheet items as of the end of the period indicated)
FQ1 2018 FQ4 2017 FQ1 2017
Total Cash and Cash
Equivalents
$417 $876 $209
Cash from Operations ($374) $166 ($44)
Capital Expenditures and
Capitalized Software
$15 $17 $14
Days Sales Outstanding 48 60 55
Inventory Turns 12.1 12.3 9.1
Headcount
(as of the end of the period indicated)
8,525 8,712 9,771
Trailing Twelve Month
Revenue ($K) / Employee*
*(Headcount as of the end of the period indicated)
$372 $376 $370
FQ1 2018 Cash from Operations reflects includes emergence payments of $340M to PBGC, legal settlements and advisory payments of $74M, and a $49M pension catch-up
FQ1 2018 TTM Revenue ($K) / Employee based on non-GAAP Revenue
© 2018 Avaya Inc. All rights reserved. 9
NON-GAAP RECONCILIATION
ADJUSTED EBITDA
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
© 2018 Avaya Inc. All rights reserved. 10
NON-GAAP RECONCILIATION
GROSS MARGIN AND OPERATING INCOME
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)
© 2018 Avaya Inc. All rights reserved. 11
NON-GAAP RECONCILIATION
PRODUCT AND SERVICES GROSS MARGINS
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
© 2018 Avaya Inc. All rights reserved. 12
NON-GAAP RECONCILIATION
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)
© 2018 Avaya Inc. All rights reserved. 13