- GAAP revenue was $709 million; non-GAAP
revenue was $714 million
- GAAP operating margin of 5.4%; non-GAAP
operating margin of 20.9%
- Public cloud seats increased more than
165% year-over-year
- Solid large deal activity with 78 deals
over $1 million, 9 over $5 million, and 2 over $10 million
- Engaged J.P. Morgan to evaluate
strategic alternatives to maximize shareholder value
Avaya Holdings Corp. (NYSE: AVYA) today reported financial
results for the second quarter ended March 31, 2019.
GAAP
Non-GAAP (1) (In millions, except percentages)
Q2
2019 Q1 2019 Q2 2018 Q2 2019
Q1 2019 Q2 2018 Revenue $ 709 $ 738 $
672 $ 714 $ 748 $ 757 Gross margin 54.4 % 55.1 % 48.1 % 61.5 % 62.7
% 62.4 % Operating margin 5.4 % 6.8 % (13.2 )% 20.9 % 22.7 % 20.7 %
"Our topline results and earnings fell short of expectations,"
said Jim Chirico, President and CEO of Avaya. "In response, we have
implemented a number of corrective actions to drive improved
performance. While I'm disappointed in our results last quarter,
overall, I remain confident about our path forward given the
momentum and traction we are seeing in many segments of our
business including cloud, services and emerging technologies."
Mr. Chirico added, "Following the receipt of expressions of
interest, the Company has engaged J.P. Morgan to assist in
exploring strategic alternatives intended to maximize shareholder
value. The Board has not set a timetable for the process nor has it
made any decisions related to any strategic alternatives at this
time. There can be no assurance that the exploration of strategic
alternatives will result in any particular outcome. The Company
does not intend to provide updates unless or until it determines
that further disclosure is necessary."
Second Quarter Fiscal 2019 Financial
Results:
- On October 1, 2018, Avaya adopted the
new revenue recognition standard, Accounting Standards Codification
606 ("ASC 606"), using the modified retrospective transition
method. Accordingly, results for reporting periods beginning after
September 30, 2018 are presented under ASC 606 while prior period
financial information is not adjusted and continues to be reported
in accordance with GAAP that existed prior to the adoption of ASC
606 ("ASC 605").
- GAAP revenue was $709 million, $29
million lower than the first quarter of fiscal 2019, and $37
million higher than the second quarter of fiscal 2018 ended
March 31, 2018. Non-GAAP revenue(1) was $714 million, $34
million lower than the first quarter of fiscal 2019, and $43
million lower than the second quarter of fiscal 2018.
- GAAP gross margin was 54.4%, compared
to 55.1% for the first quarter of fiscal 2019 and 48.1% for the
second quarter of fiscal 2018. Non-GAAP gross margin(1) was 61.5%,
compared to 62.7% for the first quarter of fiscal 2019 and 62.4%
for the second quarter of fiscal 2018.
- GAAP operating income was $38 million,
compared to GAAP operating income of $50 million for the first
quarter of fiscal 2019 and an operating loss of $89 million for the
second quarter of fiscal 2018. Non-GAAP operating income(1) was
$149 million, compared to $170 million for the first quarter of
fiscal 2019, and $157 million for the second quarter of fiscal
2018.
- GAAP net loss was $13 million, compared
to GAAP net income of $9 million for the first quarter of fiscal
2019, and GAAP net loss of $130 million for the second quarter of
fiscal 2018.
- Adjusted EBITDA(1) was $166 million or
23.2% of non-GAAP revenue, compared to adjusted EBITDA of $189
million, or 25.3% of non-GAAP revenue, for the first quarter of
fiscal 2019 and $187 million, or 24.7% of non-GAAP revenue, for the
second quarter of fiscal 2018.
- Cash provided by operating activities
was $37 million, compared to cash provided by operating activities
of $86 million for the first quarter of fiscal 2019 and cash
provided by operating activities of $54 million for the second
quarter of fiscal 2018.
- At the end of the second quarter of
fiscal 2019, cash and cash equivalents totaled $735
million, compared to $743 million at the end of the first
quarter of fiscal 2019 and $311 million at the end of the second
quarter of fiscal 2018.
(1) Non-GAAP revenue, non-GAAP gross margin, non-GAAP operating
expenses, non-GAAP operating income, non-GAAP operating margin and
adjusted EBITDA are not measures calculated in accordance with
generally accepted accounting principles in the U.S. ("GAAP").
Refer to the Supplemental Financial Information accompanying this
press release for more information, including a reconciliation of
these measures to the most closely comparable measure calculated in
accordance with GAAP.
Second Quarter Fiscal 2019 Business
Metrics*
- Total Contract Value (TCV) increased 3%
year-over-year to $2.4 billion
- 83% of non-GAAP revenue was Software
& Services
- 58% of non-GAAP product revenue was
Software
- 59% of non-GAAP revenue was
Recurring
- Added approximately 1,500 new
logos
- Generated $37 million in cash flow from
operations, $11 million in free cash flow
*We define TCV as the value of all active ratable contracts that
have not been recognized as revenue, including both billed and
unbilled backlog. We define free cash flow as cash flow from
operating activities less capital expenditures.
Second Quarter Fiscal 2019 Company
Highlights
- Introduced a cloud transformation
program to help organizations map the most effective and efficient
path to implement Avaya OneCloud solutions for public, private or
hybrid communications deployments
- Extended AI and Cloud integration with
Google Cloud to provide customers with more intelligent, flexible
solutions
- Announced integration with Nuance to
deliver new, easy-to-navigate conversational interfaces for
AI-enhanced customer experiences
- Launched Avaya for Communities program
to provide economically disadvantaged women-owned small businesses
in the US with communications and collaboration solutions to
support their growth and success
- Announced enhancements to Open SIP
portfolio
- Expanded video offerings to deliver
intelligent huddle room experiences
- Appointed Jacqueline Yeaney to Avaya's
Board of Directors
Financial Outlook - Q3 Fiscal 2019
under ASC 606
Our financial outlook reflects the adoption of ASC 606, which
became effective for Avaya on October 1, 2018. Avaya has adopted
ASC 606 using the modified retrospective transition method.
- GAAP revenue of $707-$722 million;
non-GAAP revenue of $710-$725 million
- GAAP operating income of $30-$40
million; GAAP operating margin of ~5%
- Non-GAAP operating income of $140-$150
million; non-GAAP operating margin of ~20%
- Adjusted EBITDA of $160-$170 million;
Adjusted EBITDA margin of ~23%
- Approximately 111 million weighted
average shares outstanding
Financial Outlook - Fiscal 2019 under
ASC 606
- GAAP revenue of $2.900-$2.950 billion;
non-GAAP revenue of $2.925-$2.975 billion
- Cloud and innovation 11-12% of non-GAAP
revenue
- GAAP operating income of $163-$191
million; GAAP operating margin of ~6%
- Non-GAAP operating income of $625-$660
million; non-GAAP operating margin of ~22%
- Adjusted EBITDA of $700-$730 million;
Adjusted EBITDA margin of ~24%
- Cash flow from operations of 7-8% of
non-GAAP revenue
- Approximately 111 million weighted
average shares outstanding
- Cash requirements for restructuring,
pension & OPEB, cash taxes, capital spending and interest
expense for fiscal year 2019 are expected to be:
- Restructuring: $50-$55 million
- Pension/OPEB: ~$65 million
- Cash Taxes: $55-$65 million
- Capital Expenditures: ~$100
million
- Interest Expense: $200-$205
million
Avaya's outlook does not include the potential impact of any
business combinations, asset acquisitions, divestitures, strategic
investments, or other significant transactions that may be
completed after May 9, 2019. Actual results may differ
materially from Avaya's outlook as a result of, among other things,
the factors described under "Forward-Looking Statements" below.
Conference Call and Webcast
Avaya will host a live webcast and conference call to discuss
its financial results at 8:30 a.m. Eastern Time on May 9,
2019. To access the live conference call by phone, listeners should
dial +1-833-224-0545 in the U.S. or Canada and +1-647-689-4064 for
international callers. To join the live webcast, listeners should
access the investor page of Avaya's website at
https://investors.avaya.com.
Following the live webcast, a replay will be available on the
investor page of Avaya's website for a period of one year. A replay
of the conference call will be available for one week soon after
the call by phone by dialing +1-800-585-8367 in the U.S. or Canada
and +1-416-621-4642 for international callers, using the conference
access code: 6988044.
About Avaya
Businesses are built on the experiences they provide, and every
day millions of those experiences are built by Avaya (NYSE: AVYA).
For over one hundred years, we've enabled organizations around the
globe to win - by creating intelligent communications
experiences for customers and employees. Avaya builds open,
converged and innovative solutions to enhance and simplify
communications and collaboration - in the cloud, on-premise or a
hybrid of both. To grow your business, we're committed to
innovation, partnership, and a relentless focus on what's next.
We're the technology company you trust to help you deliver
Experiences that Matter. Visit us at www.avaya.com.
Cautionary Note Regarding Forward-Looking Statements
This document contains certain "forward-looking statements." All
statements other than statements of historical fact are
“forward-looking” statements for purposes of the U.S. federal and
state securities laws. These statements may be identified by the
use of forward looking terminology such as "anticipate," "believe,"
"continue," "could," "estimate," "expect," "intend," "may,"
"might," "our vision," "plan," "potential," "preliminary,"
"predict," "should," "will," or "would" or the negative thereof or
other variations thereof or comparable terminology and include, but
are not limited to, the outlook for the third quarter of fiscal
2019 and fiscal year 2019, including the expected impact of the
adoption of ASC 606, and statements about the Board's exploration
of strategic alternatives. The Company has based these
forward-looking statements on its current expectations,
assumptions, estimates and projections. While the Company believes
these expectations, assumptions, estimates and projections are
reasonable, such forward-looking statements are only predictions
and involve known and unknown risks and uncertainties, many of
which are beyond its control. Risks and uncertainties that may
cause these forward-looking statements to be inaccurate include,
among others: the announcement that the Board is exploring
strategic alternatives and the potential impact of such
announcement on the Company's current or potential customers,
partners or personnel; the cost of such exploration and the
disruption it may have on the Company's operations, including
diverting the attention of the Company's management and employees;
and other risks discussed in the Company's Annual Report on Form
10-K and subsequent Quarterly Reports on Form 10-Q filed with the
Securities and Exchange Commission (the "SEC"). These risks and
uncertainties may cause the Company's actual results, performance
or achievements to differ materially from any future results,
performance or achievements expressed or implied by these
forward-looking statements. For a further list and description of
such risks and uncertainties, please refer to the Company’s filings
with the SEC that are available at www.sec.gov. The Company
cautions you that the list of important factors included in the
Company’s SEC filings may not contain all of the material factors
that are important to you. In addition, in light of these risks and
uncertainties, the matters referred to in the forward-looking
statements contained in this report may not in fact occur. The
Company undertakes no obligation to publicly update or revise any
forward-looking statement as a result of new information, future
events or otherwise, except as otherwise required by law.
Avaya Holdings Corp.
Condensed Consolidated Statements of
Operations (Unaudited)
(In millions, except per share
amounts)
Successor Predecessor
Non-GAAPCombined(1)
ThreemonthsendedMarch
31,2019
ThreemonthsendedMarch
31,2018
SixmonthsendedMarch 31,2019
Period fromDecember
16,2017throughMarch 31, 2018
Period fromOctober
1,2017throughDecember 15,2017
Six months endedMarch 31, 2018 REVENUE Products $ 287
$ 293 $ 611 $ 364 $ 253 $ 617
Services
422 379 836 456 351 807
709 672 1,447 820 604 1,424
COSTS Products: Costs 105 110 220 143 84 227 Amortization of
technology intangible assets 44 41 87 48 3 51 Services 174
198 347 228 155 383 323
349 654 419 242 661 GROSS PROFIT
386 323 793 401 362 763
OPERATING EXPENSES Selling, general and administrative 251 282 508
332 264 596 Research and development 52 50 105 59 38 97
Amortization of intangible assets 41 40 81 47 10 57 Restructuring
charges, net 4 40 11 50 14 64
348 412 705 488 326 814
OPERATING INCOME (LOSS) 38 (89 ) 88 (87 ) 36 (51 ) Interest
expense (58 ) (47 ) (118 ) (56 ) (14 ) (70 ) Other income
(expense), net 1 (3 ) 23 (5 ) (2 ) (7 ) Reorganization items, net —
— — — 3,416 3,416 (LOSS)
INCOME BEFORE INCOME TAXES (19 ) (139 ) (7 ) (148 ) 3,436 3,288
Benefit from (provision for) income taxes 6 9 3
255 (459 ) (204 ) NET (LOSS) INCOME $ (13 ) $ (130 )
$ (4 ) $ 107 $ 2,977 $ 3,084 (LOSS) EARNINGS
PER SHARE Basic $ (0.12 ) $ (1.18 ) $ (0.04 ) $ 0.97 $ 5.19
Diluted $ (0.12 ) $ (1.18 ) $ (0.04 ) $ 0.96 $ 5.19
Weighted average shares outstanding Basic 110.8 109.8
110.5 109.8 497.3 Diluted 110.8
109.8 110.5 110.8 497.3
(1) See "Use of non-GAAP (Adjusted)
Financial Measures" below.
Avaya Holdings Corp.
Condensed Consolidated Balance Sheets
(Unaudited)
(In millions, except per share and
shares amounts)
March 31, 2019
September 30,2018
ASSETS Current assets: Cash and cash equivalents $ 735 $ 700
Accounts receivable, net 300 377 Inventory 66 81 Contract assets
146 — Contract costs 127 — Other current assets 136 170
TOTAL CURRENT ASSETS 1,510 1,328 Property, plant and equipment, net
236 250 Deferred income taxes, net 26 29 Intangible assets, net
3,066 3,234 Goodwill 2,764 2,764 Other assets 105 74
TOTAL ASSETS $ 7,707 $
7,679 LIABILITIES Current liabilities: Debt maturing
within one year $ 29 $ 29 Accounts payable 275 266 Payroll and
benefit obligations 117 145 Contract liabilities 500 484 Business
restructuring reserve 42 51 Other current liabilities 143
148
TOTAL CURRENT LIABILITIES
1,106 1,123 Non-current liabilities: Long-term debt, net of
current portion 3,093 3,097
Pension obligations
622 671 Other post-retirement obligations 174 176 Deferred income
taxes, net 160 140 Business restructuring reserve 39 47 Other
liabilities 378 374 TOTAL NON-CURRENT LIABILITIES 4,466
4,505
TOTAL LIABILITIES 5,572 5,628
Commitments and contingencies
STOCKHOLDERS' EQUITY Preferred
stock, $0.01 par value; 55,000,000 shares authorized, no shares
issued or outstanding at March 31, 2019 and September 30, 2018 — —
Common stock, $0.01 par value; 550,000,000 shares authorized;
110,730,362 shares issued and 110,717,682 shares outstanding at
March 31, 2019; and 110,218,653 shares issued and 110,012,790
shares outstanding at September 30, 2018 1 1 Additional paid-in
capital 1,750 1,745 Retained earnings 378 287 Accumulated other
comprehensive income 6 18 TOTAL STOCKHOLDERS' EQUITY 2,135
2,051
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$ 7,707 $ 7,679
Avaya Holdings Corp.
Condensed Statements of Cash
Flows
(Unaudited; in millions)
Successor Predecessor
Non-GAAPCombined(1)
SixmonthsendedMarch 31,2019
Period fromDecember
16,2017throughMarch 31,2018
Period fromOctober
1,2017throughDecember 15,2017
Six monthsendedMarch
31,2018
Net cash provided by (used for): Operating activities $ 123 $ 94 $
(414 ) $ (320 ) Investing activities (48 ) (175 ) (13 ) (188 )
Financing activities (39 ) (11 ) (102 ) (113 ) Effect of exchange
rate changes on cash, cash equivalents, and restricted cash (1 ) 9
(2 ) 7 Net increase (decrease) in cash, cash
equivalents, and restricted cash 35 (83 ) (531 ) (614 ) Cash, cash
equivalents, and restricted cash at beginning of period 704
435 966 966 Cash, cash equivalents, and
restricted cash at end of period $ 739 $ 352 $ 435
$ 352
(1) See "Use of non-GAAP (Adjusted)
Financial Measures" below.
Use of non-GAAP (Adjusted) Financial Measures
The information furnished in this release includes non-GAAP
financial measures that differ from measures calculated in
accordance with generally accepted accounting principles in the
United States of America ("GAAP"), including the combined six month
period ending March 31, 2018 and financial measures labeled as
"non-GAAP" or "adjusted."
Although GAAP requires that we report on our results for the
periods October 1, 2017 through December 15, 2017 (the
"Predecessor" period) and December 16, 2017 through March 31, 2018
(the "Successor" period), separately, management reviews the
Company's operating results for the six months ended March 31, 2018
by combining the results of these periods because such presentation
provides the most meaningful comparison of our results. The Company
cannot adequately benchmark the operating results of the 106-day
period ended March 31, 2018 against any of the previous periods
reported in its condensed consolidated financial statements and
does not believe that reviewing the results of this period in
isolation would be useful in identifying any trends regarding the
Company's overall performance. Management believes that the key
performance metrics such as revenue, gross margin and operating
income, among others, when combined for the six months ended March
31, 2018 provide meaningful comparisons to other periods and are
useful in identifying current business trends.
EBITDA is defined as net income (loss) before income taxes,
interest expense, interest income and depreciation and
amortization. Adjusted EBITDA is EBITDA further adjusted to exclude
certain charges and other adjustments described in our SEC filings
and the tables below.
We believe that including supplementary information concerning
adjusted EBITDA is appropriate because it serves as a basis for
determining management and employee compensation and it is used as
a basis for calculating covenants in our credit agreements. In
addition, we believe adjusted EBITDA provides more comparability
between our historical results and results that reflect purchase
accounting and our current capital structure. We also present
EBITDA and adjusted EBITDA because we believe analysts and
investors utilize these measures in analyzing our results. Adjusted
EBITDA measures our financial performance based on operational
factors that management can impact in the short-term, such as our
pricing strategies, volume, costs and expenses of the organization
and it presents our financial performance in a way that can be more
easily compared to prior quarters or fiscal years.
EBITDA and adjusted EBITDA have limitations as analytical tools.
EBITDA measures do not represent net income (loss) or cash flow
from operations as those terms are defined by GAAP and do not
necessarily indicate whether cash flows will be sufficient to fund
cash needs. However, these terms are not necessarily comparable to
other similarly titled captions of other companies due to the
potential inconsistencies in the method of calculation. Adjusted
EBITDA excludes the impact of earnings or charges resulting from
matters that we consider not to be indicative of our ongoing
operations. In particular, our formulation of adjusted EBITDA
allows adjustment for certain amounts that are included in
calculating net income (loss), however, these are expenses that may
recur, may vary and are difficult to predict.
We also present the measures non-GAAP revenue, non-GAAP gross
margin, non-GAAP operating expenses, non-GAAP operating income and
non-GAAP operating margin, as a supplement to our unaudited
condensed consolidated financial statements presented in accordance
with GAAP. We believe these non-GAAP measures are the most
meaningful for period to period comparisons because they exclude
the impact of the earnings and charges noted in the applicable
tables below that resulted from matters that we consider not to be
indicative of our ongoing operations.
The presentation of these non-GAAP financial measures is not
intended to be considered in isolation from, as substitute for, or
superior to, the financial information prepared and presented in
accordance with GAAP, and may be different from the non-GAAP
financial measures used by other companies. In addition, these
non-GAAP measures have limitations in that they do not reflect all
of the amounts associated with the Company's results of operations
as determined in accordance with GAAP.
We do not provide a forward-looking reconciliation of expected
third quarter and full year fiscal 2019 non-GAAP revenue, non-GAAP
gross margin, non-GAAP operating expenses, non-GAAP operating
income, non-GAAP operating margin or adjusted EBITDA guidance as
the amount and significance of special items required to develop
meaningful comparable GAAP financial measures cannot be estimated
at this time without unreasonable efforts. These special items
could be meaningful.
The following tables present Successor, Predecessor and combined
results and reconcile historical GAAP measures to non-GAAP
measures.
Avaya Holdings Corp.
Supplemental Schedules of Non-GAAP
Adjusted EBITDA
(Unaudited; in millions)
Successor Predecessor
Non-GAAPCombined
ThreemonthsendedMarch
31,2019
ThreemonthsendedMarch
31,2018
SixmonthsendedMarch 31,2019
Period fromDecember
16,2017throughMarch 31,2018
Period fromOctober
1,2017throughDecember 15,2017
SixmonthsendedMarch 31,2018
Net (loss) income $ (13 ) $ (130 ) $ (4 ) $ 107 $ 2,977 $ 3,084
Interest expense 58 47 118 56 14 70 Interest income (4 ) (1 ) (7 )
(1 ) (2 ) (3 ) (Benefit from) provision for income taxes (6 ) (9 )
(3 ) (255 ) 459 204 Depreciation and amortization 108 123
225 145 31 176 EBITDA 143 30 329
52 3,479 3,531 Impact of fresh start accounting adjustments 6 86 9
113 — 113 Restructuring charges, net 4 40 11 50 14 64 Advisory fees
1 4 2 12 3 15 Acquisition-related costs 4 7 7 7 — 7 Reorganization
items, net — — — — (3,416 ) (3,416 ) Non-cash share-based
compensation 5 5 11 6 — 6 Loss on sale/disposal of long-lived
assets, net — 2 — 2 1 3
Resolution of certain legal matters
— — — — 37 37 Change in fair value of Emergence Date Warrants (3 )
10 (21 ) 15 — 15 Loss on foreign currency transactions 6 3 7 1 — 1
Pension/OPEB/nonretirement postemployment benefits and long-term
disability costs — — — — 17 17
Adjusted EBITDA $ 166 $ 187 $ 355 $ 258
$ 135 $ 393
Avaya Holdings Corp.
Supplemental Schedules of Non-GAAP
Revenue
(Unaudited; in millions)
Three Months Ended Change Three Months
Ended
Mar. 31,2019
Adj. forFresh
StartAccounting
Non-GAAPMar.
31,2019
Non-GAAPMar.
31,2018 (4)
Amount Pct.
Pct., netof
fximpact
Non-GAAPDec.
31,2018 (1)
Non-GAAPSept.
30,2018 (2)
Non-GAAPJune
30,2018 (3)
Revenue by
Segment
Products & Solutions $ 289 $ — $ 289 $ 317 $ (28 ) (9 )% (8
)%
$ 326 $ 336 $ 322 Services 425 — 425 440 (15 ) (3 )%
(2
)%
422 434 433 Unallocated amounts (5 ) 5 — — —
n/a
n/a
— — — Total revenue $ 709 $ 5 $ 714
$ 757 $ (43 ) (6 )% (4 )% $ 748 $ 770 $
755
Revenue by
Geography
U.S. $ 375 $ 3 $ 378 $ 409 $ (31 ) (8
)% (8 )% $ 401 $ 417 $ 399 International: EMEA 188 1
189 196 (7 ) (4 )% (1 )% 200 202 202 APAC - Asia Pacific 79 1 80 83
(3 ) (4 )% (2 )% 79 81 86
Americas International
67 — 67 69 (2 ) (3 )%
2
%
68 70 68 Total International 334 2 336
348 (12 ) (3 )% (1 )% 347 353 356 Total
revenue $ 709 $ 5 $ 714 $ 757 $ (43 )
(6 )% (4 )% $ 748 $ 770 $ 755
(1) - (4) Reconciliation of Non-GAAP
measures above:
(1) Q119 Non-GAAP Results (2) Q418
Non-GAAP Results Three Months Ended Three Months
Ended
Dec. 31,2018
Adj. forFresh
StartAccounting
Non-GAAPDec. 31, 2018
Sept. 30,2018
Adj. forFresh
StartAccounting
Non-GAAPSept. 30, 2018
Revenue by
Segment
Products & Solutions $ 326 $ — $ 326 $ 336 $ — $ 336 Services
422 — 422 434 — 434 Unallocated amounts (10 ) 10 —
(35 ) 35 — Total revenue $ 738 $ 10 $ 748
$ 735 $ 35 $ 770
Revenue by
Geography
U.S. $ 394 $ 7 $ 401 $ 393 $ 24
$ 417 International: EMEA 199 1 200 196 6 202 APAC - Asia Pacific
78 1 79 78 3 81 Americas International 67 1 68
68 2 70 Total International 344 3 347
342 11 353 Total revenue $ 738 $ 10
$ 748 $ 735 $ 35 $ 770
(3) Q318 Non-GAAP Results (4) Q218
Non-GAAP Results Three Months Ended Three Months
Ended
June 30,2018
Adj. forFresh
StartAccounting
Non-GAAPJune 30, 2018
Mar. 31,2018
Adj. forFresh
StartAccounting
Non-GAAPMar. 31, 2018
Revenue by
Segment
Products & Solutions $ 322 — $ 322 $ 317 — $ 317 Services 433 —
433 440 — 440 Unallocated amounts (63 ) 63 — (85 ) 85
— Total revenue $ 692 $ 63 $ 755 $ 672
$ 85 $ 757
Revenue by
Geography
U.S. $ 356 $ 43 $ 399 $ 354 $ 55
$ 409 International: EMEA 193 9 202 178 18 196 APAC - Asia Pacific
81 5 86 80 3 83 Americas International 62 6 68
60 9 69 Total International 336 20 356
318 30 348 Total revenue $ 692 $ 63
$ 755 $ 672 $ 85 $ 757
Avaya Holdings Corp.
Supplemental Schedules of Non-GAAP
Reconciliations
(Unaudited; in millions)
Three Months Ended
Mar. 31,2019
Dec. 31,2018
Sept. 30,2018
June 30,2018
Mar. 31,2018
Reconciliation of Non-GAAP Gross Profit
and Non-GAAP Gross Margin
Gross Profit
$
386 $ 407 $ 390 $ 352 $ 323 Items excluded: Adj. for fresh start
accounting
9
19
54
69
106
Amortization of technology intangible assets
44
43
43
44
41
Loss on disposal of long-lived assets
—
—
—
2
2
Non-cash share-based compensation
—
—
1
—
—
Non-GAAP Gross Profit $ 439 $ 469 $488
$467
$
472 GAAP Gross Margin
54.4
%
55.1
%
53.1
%
50.9
%
48.1
% Non-GAAP Gross Margin
61.5
%
62.7
%
63.4
%
61.9
%
62.4
%
Reconciliation of Non-GAAP Operating Income
Operating Income (Loss) $ 38 $ 50 $ 11 $ (49 ) $ (89 ) Items
excluded: Adj. for fresh start accounting
12
20
48
71
107
Amortization of intangible assets
85
83
84
83
81
Restructuring charges, net
4
7
1
30
40
Acquisition-related costs
4
3
4
4
7
Loss on disposal of long-lived assets
—
—
—
2
2
Advisory fees
1
1
3
3
4
Non-cash share-based compensation
5
6
6
7
5
Non-GAAP Operating Income $ 149 $ 170 $ 157
$
151 $ 157 GAAP Operating Margin
5.4
%
6.8
%
1.5
%
-7.1
%
-13.2
% Non-GAAP Operating Margin
20.9
%
22.7
%
20.4
%
20.0
%
20.7
%
Avaya Holdings Corp.
Supplemental Schedules of Non-GAAP
Reconciliation of Gross Profit and Gross Margin by
Portfolio
(Unaudited; in millions)
Three months ended
Mar. 31,2019
Dec. 31,2018
Sept. 30,2018
June 30,2018
Mar. 31,2018
Reconciliation of Non-GAAP Gross Profit and Non-GAAP Gross
Margin - Products Revenue $ 287 $ 324 $ 325 $ 300 $ 293 Costs
105
115
115
114
110
Amortization of technology intangible assets
44
43
43
44
41
GAAP Gross Profit
138
166
167
142
142
Items excluded: Adj. for fresh start accounting
2
5
16
24
33
Amortization of technology intangible assets
44
43
43
44
41
Loss on disposal of long-lived assets
—
—
—
1
1
Non-GAAP Gross Profit $ 184
$
214 $ 226 $ 211
$
217 GAAP Gross Margin
48.1
%
51.2
%
51.4
%
47.3
%
48.5
% Non-GAAP Gross Margin
63.7
%
65.6
%
67.3
%
65.5
%
68.5
%
Reconciliation of Non-GAAP Gross Profit and Non-GAAP
Gross Margin - Services Revenue $ 422 $ 414 $ 410 $ 392 $ 379
Costs
174
173
187
182
198
GAAP Gross Profit
248
241
223
210
181
Items excluded: Adj. for fresh start accounting
7
14
38
45
73
Loss on disposal of long-lived assets
—
—
—
1
1
Share-based comp
—
—
1
—
—
Non-GAAP Gross Profit
$
255 $ 255 $ 262 $ 256
$
255 GAAP Gross Margin
58.8
%
58.2
%
54.4
%
53.6
%
47.8
% Non-GAAP Gross Margin
60.0
%
60.4
%
60.4
%
59.1
%
58.0
%
Avaya Holdings Corp.
Reconciliation of ASC 606 to ASC 605
GAAP results
Three months ended March 31,
2019
(Unaudited; in millions)
Q2 FY19 resultsunder ASC 606
ASC 606Impact
Q2 FY19 resultsunder ASC 605
REVENUE Products $ 287 $ (15 ) $ 272 Services
422
(21
)
401
709
(36
)
673
COSTS Products: Costs
105
(3
)
102
Amortization of technology intangible assets
44
—
44
Services
174
(7
)
167
323
(10
)
313
GROSS PROFIT
386
(26
)
360
OPERATING EXPENSES Selling, general and administrative
251
(4
)
247
Research and development
52
—
52
Amortization of intangible assets
41
—
41
Restructuring charges, net
4
—
4
348
(4
)
344
OPERATING INCOME
38
(22
)
16
Interest expense
(58
)
—
(58
) Other income, net
1
—
1
LOSS BEFORE INCOME TAXES
(19
)
(22
)
(41
) Benefit from income taxes
6
11
17
NET LOSS $ (13 ) $ (11 )
$
(24 )
Source: Avaya Newsroom
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190509005326/en/
Media Inquiries:Alex
Alias669-242-8034alalias@avaya.com
Investor Inquiries:Michael
McCarthy919-425-8330mikemccarthy@avaya.com
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