- GAAP revenue of $717 million; non-GAAP revenue of $720
million
- GAAP operating margin of (85.5)%; non-GAAP operating margin of
20.1%
- Recorded a non-cash goodwill impairment charge of $657
million
- Public cloud seats increased more than 170% year-over-year
- Awarded two landmark US Government opportunities in August,
including one with the Social Security Administration valued at up
to $400 million
Avaya Holdings Corp. (NYSE: AVYA) today reported financial
results for the third quarter ended June 30, 2019.
GAAP
Non-GAAP (1)
(In millions, except percentages)
Q3 2019
Q2 2019
Q3 2018
Q3 2019
Q2 2019
Q3 2018
Revenue
$
717
$
709
$
692
$
720
$
714
$
755
Gross margin
54.4
%
54.4
%
50.9
%
60.8
%
61.5
%
61.9
%
Operating margin
(85.5
)%
5.4
%
(7.1
)%
20.1
%
20.9
%
20.0
%
"I am pleased with our solid execution and the continued
strength in our strategic growth areas, especially in our public
and private cloud ReadyNow offers. We believe we are well
positioned to capitalize on these long-term growth opportunities,"
stated Jim Chirico, President and CEO of Avaya. "The progress we
have made drove third quarter financial results toward the high end
of our guidance and continued into the fourth quarter as
demonstrated by the two landmark government wins."
Mr. Chirico added, "As an update on the strategic alternatives
process we are conducting with J.P. Morgan, at this time we are in
advanced discussions with multiple parties on a range of strategic
transactions to maximize shareholder value. We expect to bring this
process to a conclusion within the next 30 days."
During the quarter, Avaya recorded a non-cash goodwill
impairment charge of $657 million related to the company’s Products
& Solutions segment. The charge was taken after an interim
assessment prompted by a sustained decline in the company’s stock
price during the period, which the company believes was due to
year-to-date financial results and revision of fiscal 2019
guidance. The company’s long-term forecast provided at its December
2018 investor day should no longer be relied upon. Management
expects to provide an updated long-term outlook upon completion of
the company’s review of its strategic alternatives.
Third Quarter Fiscal 2019 Financial
Results(1)
- 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
has not been adjusted and continues to be reported in accordance
with GAAP that existed prior to the adoption of ASC 606 ("ASC
605").
- GAAP revenue was $717 million, $8 million higher than the
second quarter of fiscal 2019, and $25 million higher than the
third quarter of fiscal 2018 ended June 30, 2018. Non-GAAP
revenue(1) was $720 million, $6 million higher than the second
quarter of fiscal 2019, and $35 million lower than the third
quarter of fiscal 2018.
- GAAP gross margin was 54.4%, compared to 54.4% for the second
quarter of fiscal 2019 and 50.9% for the third quarter of fiscal
2018. Non-GAAP gross margin(1) was 60.8%, compared to 61.5% for the
second quarter of fiscal 2019 and 61.9% for the third quarter of
fiscal 2018.
- GAAP operating loss was $613 million, primarily as a result of
the aforementioned impairment charge, compared to GAAP operating
income of $38 million for the second quarter of fiscal 2019 and an
operating loss of $49 million for the third quarter of fiscal 2018.
Non-GAAP operating income(1) was $145 million, compared to $149
million for the second quarter of fiscal 2019, and $151 million for
the third quarter of fiscal 2018.
- GAAP net loss was $633 million, primarily as a result of the
aforementioned impairment charge, compared to GAAP net loss of $13
million for the second quarter of fiscal 2019, and GAAP net loss of
$88 million for the third quarter of fiscal 2018.
- Adjusted EBITDA(1) was $167 million or 23.2% of non-GAAP
revenue, compared to adjusted EBITDA of $166 million, or 23.2% of
non-GAAP revenue, for the second quarter of fiscal 2019 and $175
million, or 23.2% of non-GAAP revenue, for the third quarter of
fiscal 2018.
- Cash provided by operating activities was $52 million, compared
to cash provided by operating activities of $37 million for the
second quarter of fiscal 2019 and cash provided by operating
activities of $83 million for the third quarter of fiscal
2018.
- At the end of the third quarter of fiscal 2019, cash and cash
equivalents totaled $729 million, compared to $735 million at the
end of the second quarter of fiscal 2019 and $685 million at the
end of the third quarter of fiscal 2018.
Third Quarter Fiscal 2019 Business
Metrics(1)
- Total Contract Value (TCV) of $2.4 billion*
- 84% of non-GAAP revenue was Software & Services
- 60% of non-GAAP product revenue was Software
- 59% of non-GAAP revenue was Recurring
- Added approximately 1,400 new logos
- Generated $52 million in cash flow from operations, $15 million
in free cash flow(1)
(1) Non-GAAP revenue, non-GAAP gross margin, non-GAAP operating
expenses, non-GAAP operating income, non-GAAP operating margin,
adjusted EBITDA and free cash flow 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.
* We define TCV as the value of all active ratable contracts
that have not been recognized as revenue, including both billed and
unbilled backlog.
Third Quarter Fiscal 2019 Company
Highlights
- In August, Avaya was awarded two landmark US Government
opportunities. Avaya, along with its service provider partner, was
selected by the Social Security Administration to modernize the
agency’s UC and CC infrastructure in a 10-year deal valued at up to
$400 million. The second is a multi-year award to provide secure
FedRamp Certified Cloud services across several agencies that could
be worth up to several hundred million dollars.
- Avaya was selected by Intel for Intel’s AI Builders Program.
Intel and Avaya engineers are now jointly engaged at deep technical
levels to improve the performance and scale of Avaya’s AI
solutions, such as Avaya Conversational Intelligence, when deployed
on Intel hardware.
- Announced partnership with Tenfold to help customers integrate
their Avaya contact center with leading CRM providers such as
Salesforce, Microsoft and ServiceNow.
- Announced partnership with Even Flow Distribution, a leading
South African based value-added distributor of unified
communication, telecom, video conferencing, wireless and networking
technology, to bring its solutions to market. Even Flow
Distribution will supply and support Avaya’s contact center and
unified communications solutions, with a particular focus on Avaya
IP Office.
- Announced that Avaya IX Workplace unified communications
solutions for the enterprise can now deliver emergency data to
public safety agencies through an integration with 911 Secure
SENTRY™ and RapidSOS.
- Announced partnership with Standard Chartered Bank to deliver a
multi-year client experience transformation project that will
enable the bank to more fully align its services with clients’
fast-paced, digitally connected lives. Using the Avaya OneCloud
Private solution enables Standard Chartered Bank to enhance its
customers’ experience by using Avaya’s unified communications and
contact center solutions being delivered on their own private
cloud.
- Received the 2019 Contact Center Vendor of the Year Award at
the Frost & Sullivan 2019 India ICT Awards.
Financial Outlook - Q4 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 $735 million to $755 million; non-GAAP revenue
of $738 million to $758 million
- GAAP operating income of $37 million to $52 million; GAAP
operating margin of ~5% to ~7%
- Non-GAAP operating income of $162 million to $177 million;
non-GAAP operating margin of ~22% to ~23%
- Adjusted EBITDA of $183 million to $198 million; Adjusted
EBITDA margin of ~25% to ~26%
- Approximately 111 million weighted average shares
outstanding
Financial Outlook - Fiscal 2019 under
ASC 606
- GAAP revenue of $2.90 billion to $2.92 billion; non-GAAP
revenue of $2.92 billion to $2.94 billion
- Cloud and innovation ~11% of non-GAAP revenue
- GAAP operating loss of $488 million to $473 million; GAAP
operating margin of ~(17)% to ~(16)%
- Non-GAAP operating income of $626 million to $641 million;
non-GAAP operating margin of ~21% to ~22%
- Adjusted EBITDA of $705 million to $720 million; Adjusted
EBITDA margin of ~24%
- Cash flow from operations of ~7% of non-GAAP revenue
- Approximately 111 million weighted average shares
outstanding
- Cash requirements for restructuring, pension & OPEB, cash
taxes, capital spending and net cash interest payments for fiscal
year 2019 are expected to be:
- Restructuring: $50 million to $55 million
- Pension/OPEB: ~$65 million
- Cash Taxes: $55 million to $65 million
- Capital Expenditures: ~$120 million
- Net Cash Interest Payments: ~$200 million
Avaya’s outlook does not include the potential impact of any
business combinations, asset acquisitions, divestitures, strategic
investments, potential impairments or other significant
transactions that may be completed after August 13, 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 August 13, 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 fourth 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- GAAP Combined(1)
Three months ended June 30,
2019
Three months ended June 30,
2018
Nine months ended June 30,
2019
Period from December 16, 2017
through June 30, 2018
Period from October 1, 2017
through December 15, 2017
Nine months ended June 30,
2018
REVENUE
Products
$
297
$
300
$
908
$
664
$
253
$
917
Services
420
392
1,256
848
351
1,199
717
692
2,164
1,512
604
2,116
COSTS
Products:
Costs
109
114
329
257
84
341
Amortization of technology intangible
assets
43
44
130
92
3
95
Services
175
182
522
410
155
565
327
340
981
759
242
1,001
GROSS PROFIT
390
352
1,183
753
362
1,115
OPERATING EXPENSES
Selling, general and administrative
253
281
761
613
264
877
Research and development
49
51
154
110
38
148
Amortization of intangible assets
41
39
122
86
10
96
Impairment charges
659
—
659
—
—
—
Restructuring charges, net
1
30
12
80
14
94
1,003
401
1,708
889
326
1,215
OPERATING (LOSS) INCOME
(613
)
(49
)
(525
)
(136
)
36
(100
)
Interest expense
(59
)
(56
)
(177
)
(112
)
(14
)
(126
)
Other income (expense), net
12
37
35
32
(2
)
30
Reorganization items, net
—
—
—
—
3,416
3,416
(LOSS) INCOME BEFORE INCOME TAXES
(660
)
(68
)
(667
)
(216
)
3,436
3,220
Benefit from (provision for) income
taxes
27
(20
)
30
235
(459
)
(224
)
NET (LOSS) INCOME
$
(633
)
$
(88
)
$
(637
)
$
19
$
2,977
$
2,996
(LOSS) EARNINGS PER SHARE
Basic
$
(5.70
)
$
(0.80
)
$
(5.75
)
$
0.17
$
5.19
Diluted
$
(5.70
)
$
(0.80
)
$
(5.75
)
$
0.17
$
5.19
Weighted average shares outstanding
Basic
111.0
109.8
110.7
109.8
497.3
Diluted
111.0
109.8
110.7
111.0
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)
June 30, 2019
September 30, 2018
ASSETS
Current assets:
Cash and cash equivalents
$
729
$
700
Accounts receivable, net
276
377
Inventory
71
81
Contract assets
178
—
Contract costs
128
—
Other current assets
149
170
TOTAL CURRENT ASSETS
1,531
1,328
Property, plant and equipment, net
243
250
Deferred income taxes, net
25
29
Intangible assets, net
2,978
3,234
Goodwill, net
2,105
2,764
Other assets
109
74
TOTAL ASSETS
$
6,991
$
7,679
LIABILITIES
Current liabilities:
Debt maturing within one year
$
29
$
29
Accounts payable
292
266
Payroll and benefit obligations
126
145
Contract liabilities
470
484
Business restructuring reserve
36
51
Other current liabilities
130
148
TOTAL CURRENT LIABILITIES
1,083
1,123
Non-current liabilities:
Long-term debt, net of current portion
3,091
3,097
Pension obligations
619
671
Other post-retirement obligations
181
176
Deferred income taxes, net
120
140
Business restructuring reserve
37
47
Other liabilities
390
374
TOTAL NON-CURRENT LIABILITIES
4,438
4,505
TOTAL LIABILITIES
5,521
5,628
Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value;
55,000,000 shares authorized, no shares issued or outstanding at
June 30, 2019 and September 30, 2018
—
—
Common stock, $0.01 par value; 550,000,000
shares authorized; 110,887,967 shares issued and 110,875,287 shares
outstanding at June 30, 2019; and 110,218,653 shares issued and
110,012,790 shares outstanding at September 30, 2018
1
1
Additional paid-in capital
1,756
1,745
(Accumulated deficit) retained
earnings
(255
)
287
Accumulated other comprehensive (loss)
income
(32
)
18
TOTAL STOCKHOLDERS' EQUITY
1,470
2,051
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY
$
6,991
$
7,679
Avaya Holdings Corp.
Condensed Statements of Cash
Flows
(Unaudited; in
millions)
Successor
Predecessor
Non-GAAP Combined(1)
Nine months ended June 30,
2019
Period from December 16, 2017
through June 30, 2018
Period from October 1, 2017
through December 15, 2017
Nine months ended June 30,
2018
Net cash provided by (used for):
Operating activities
$
175
$
177
$
(414
)
$
(237
)
Investing activities
(95
)
(192
)
(13
)
(205
)
Financing activities
(51
)
284
(102
)
182
Effect of exchange rate changes on cash,
cash equivalents, and restricted cash
1
(5
)
(2
)
(7
)
Net increase (decrease) in cash, cash
equivalents, and restricted cash
30
264
(531
)
(267
)
Cash, cash equivalents, and restricted
cash at beginning of period
704
435
966
966
Cash, cash equivalents, and restricted
cash at end of period
$
734
$
699
$
435
$
699
(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 nine
month period ending June 30, 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 June 30, 2018
(the "Successor" period) separately, management reviews the
Company’s operating results for the nine months ended June 30, 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 197-day
period ended June 30, 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 nine months ended June
30, 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
fourth 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- GAAP Combined
Three months ended June 30,
2019
Three months ended June 30,
2018
Nine months
ended June 30, 2019
Period from December 16, 2017
through June 30, 2018
Period from October 1, 2017
through December 15, 2017
Nine months ended June 30,
2018
Net (loss) income
$
(633
)
$
(88
)
$
(637
)
$
19
$
2,977
$
2,996
Interest expense
59
56
177
112
14
126
Interest income
(4
)
(1
)
(11
)
(2
)
(2
)
(4
)
(Benefit from) provision for income
taxes
(27
)
20
(30
)
(235
)
459
224
Depreciation and amortization
110
119
335
264
31
295
EBITDA
(495
)
106
(166
)
158
3,479
3,637
Impact of fresh start accounting
adjustments
(2
)
54
7
167
—
167
Restructuring charges, net
1
30
12
80
14
94
Advisory fees
1
3
3
15
3
18
Acquisition-related costs
1
4
8
11
—
11
Reorganization items, net
—
—
—
—
(3,416
)
(3,416
)
Non-cash share-based compensation
8
7
19
13
—
13
Impairment charges
659
—
659
—
—
—
Loss on sale/disposal of long-lived
assets, net
—
2
—
4
1
5
Resolution of certain legal matters
—
—
—
—
37
37
Change in fair value of Emergence Date
Warrants
(7
)
(6
)
(28
)
9
—
9
Loss (gain) on foreign currency
transactions
1
(25
)
8
(24
)
—
(24
)
Pension/OPEB/nonretirement postemployment
benefits and long-term disability costs
—
—
—
—
17
17
Adjusted EBITDA
$
167
$
175
$
522
$
433
$
135
$
568
Avaya Holdings Corp.
Supplemental Schedules of
Non-GAAP Revenue
(Unaudited; in
millions)
Three Months Ended
Change
Three Months Ended
June 30, 2019
Adj. for Fresh Start
Accounting
Non- GAAP June 30,
2019
Non- GAAP June 30, 2018
(4)
Amount
Pct.
Pct., net of fx impact
Non- GAAP Mar. 31, 2019
(1)
Non- GAAP Dec. 31, 2018
(2)
Non- GAAP Sept. 30, 2018
(3)
Revenue by
Segment
Products & Solutions
$
298
$
—
$
298
$
322
$
(24
)
(7
)%
(7
)%
$
289
$
326
$
336
Services
422
—
422
433
(11
)
(3
)%
(1
)%
425
422
434
Unallocated amounts
(3
)
3
—
—
—
n/a
n/a
—
—
—
Total revenue
$
717
$
3
$
720
$
755
$
(35
)
(5
)%
(3
)%
$
714
$
748
$
770
Revenue by
Geography
U.S.
$
392
$
2
$
394
$
399
$
(5
)
(1
)%
(1
)%
$
378
$
401
$
417
International:
EMEA
183
—
183
202
(19
)
(9
)%
(6
)%
189
200
202
APAC - Asia Pacific
85
—
85
86
(1
)
(1
)%
1
%
80
79
81
Americas International
57
1
58
68
(10
)
(15
)%
(12
)%
67
68
70
Total International
325
1
326
356
(30
)
(8
)%
(6
)%
336
347
353
Total revenue
$
717
$
3
$
720
$
755
$
(35
)
(5
)%
(3
)%
$
714
$
748
$
770
(1) - (4) Reconciliation of Non-GAAP
measures above:
(1) Q219 Non-GAAP
Results
(2) Q119 Non-GAAP
Results
Three Months Ended
Three Months Ended
Mar. 31, 2019
Adj. for Fresh Start
Accounting
Non-GAAP Mar. 31, 2019
Dec. 31, 2018
Adj. for Fresh Start
Accounting
Non-GAAP Dec. 31, 2018
Revenue by
Segment
Products & Solutions
$
289
$
—
$
289
$
326
$
—
$
326
Services
425
—
425
422
—
422
Unallocated amounts
(5
)
5
—
(10
)
10
—
Total revenue
$
709
$
5
$
714
$
738
$
10
$
748
Revenue by
Geography
U.S.
$
375
$
3
$
378
$
394
$
7
$
401
International:
EMEA
188
1
189
199
1
200
APAC - Asia Pacific
79
1
80
78
1
79
Americas International
67
—
67
67
1
68
Total International
334
2
336
344
3
347
Total revenue
$
709
$
5
$
714
$
738
$
10
$
748
(3) Q418 Non-GAAP
Results
(4) Q318 Non-GAAP
Results
Three Months Ended
Three Months Ended
Sept. 30, 2018
Adj. for Fresh Start
Accounting
Non-GAAP Sept. 30,
2018
June 30, 2018
Adj. for Fresh Start
Accounting
Non-GAAP June 30, 2018
Revenue by
Segment
Products & Solutions
$
336
$
—
$
336
$
322
—
$
322
Services
434
—
434
433
—
433
Unallocated amounts
(35
)
35
—
(63
)
63
—
Total revenue
$
735
$
35
$
770
$
692
$
63
$
755
Revenue by
Geography
U.S.
$
393
$
24
$
417
$
356
$
43
$
399
International:
EMEA
196
6
202
193
9
202
APAC - Asia Pacific
78
3
81
81
5
86
Americas International
68
2
70
62
6
68
Total International
342
11
353
336
20
356
Total revenue
$
735
$
35
$
770
$
692
$
63
$
755
Avaya Holdings Corp.
Supplemental Schedules of
Non-GAAP Reconciliations
(Unaudited; in
millions)
Three Months Ended
June 30, 2019
Mar. 31, 2019
Dec. 31, 2018
Sept. 30, 2018
June 30, 2018
Reconciliation of Non-GAAP Gross Profit
and Non-GAAP Gross Margin
Gross Profit
$
390
$
386
$
407
$
390
$
352
Items excluded:
Adj. for fresh start accounting
5
9
19
54
69
Amortization of technology intangible
assets
43
44
43
43
44
Loss on disposal of long-lived assets
—
—
—
—
2
Non-cash share-based compensation
—
—
—
1
—
Non-GAAP Gross Profit
$
438
$
439
$
469
$
488
$
467
GAAP Gross Margin
54.4
%
54.4
%
55.1
%
53.1
%
50.9
%
Non-GAAP Gross Margin
60.8
%
61.5
%
62.7
%
63.4
%
61.9
%
Reconciliation of Non-GAAP Operating
Income
Operating (Loss) Income
$
(613
)
$
38
$
50
$
11
$
(49
)
Items excluded:
Adj. for fresh start accounting
4
12
20
48
71
Amortization of intangible assets
84
85
83
84
83
Impairment charges
659
—
—
—
—
Restructuring charges, net
1
4
7
1
30
Acquisition-related costs
1
4
3
4
4
Loss on disposal of long-lived assets
—
—
—
—
2
Advisory fees
1
1
1
3
3
Non-cash share-based compensation
8
5
6
6
7
Non-GAAP Operating Income
$
145
$
149
$
170
$
157
$
151
GAAP Operating Margin
-85.5
%
5.4
%
6.8
%
1.5
%
-7.1
%
Non-GAAP Operating Margin
20.1
%
20.9
%
22.7
%
20.4
%
20.0
%
Avaya Holdings Corp.
Supplemental Schedules of
Non-GAAP Reconciliation of Gross Profit and Gross Margin by
Portfolio
(Unaudited; in
millions)
Three months ended
June 30, 2019
Mar. 31, 2019
Dec. 31, 2018
Sept. 30, 2018
June 30, 2018
Reconciliation of Non-GAAP Gross Profit
and Non-GAAP Gross Margin - Products
Revenue
$
297
$
287
$
324
$
325
$
300
Costs
109
105
115
115
114
Amortization of technology intangible
assets
43
44
43
43
44
GAAP Gross Profit
145
138
166
167
142
Items excluded:
Adj. for fresh start accounting
2
2
5
16
24
Amortization of technology intangible
assets
43
44
43
43
44
Loss on disposal of long-lived assets
—
—
—
—
1
Non-GAAP Gross Profit
$
190
$
184
$
214
$
226
$
211
GAAP Gross Margin
48.8
%
48.1
%
51.2
%
51.4
%
47.3
%
Non-GAAP Gross Margin
63.8
%
63.7
%
65.6
%
67.3
%
65.5
%
Reconciliation of Non-GAAP Gross Profit
and Non-GAAP Gross Margin - Services
Revenue
$
420
$
422
$
414
$
410
$
392
Costs
175
174
173
187
182
GAAP Gross Profit
245
248
241
223
210
Items excluded:
Adj. for fresh start accounting
3
7
14
38
45
Loss on disposal of long-lived assets
—
—
—
—
1
Share-based comp
—
—
—
1
—
Non-GAAP Gross Profit
$
248
$
255
$
255
$
262
$
256
GAAP Gross Margin
58.3
%
58.8
%
58.2
%
54.4
%
53.6
%
Non-GAAP Gross Margin
58.8
%
60.0
%
60.4
%
60.4
%
59.1
%
Avaya Holdings Corp.
Reconciliation of ASC 606 to
ASC 605 GAAP results
Three months ended June 30,
2019
(Unaudited; in
millions)
Q3 FY19 results under ASC
606
ASC 606 Impact
Q3 FY19 results under ASC
605
REVENUE
Products
$
297
$
(26
)
$
271
Services
420
(19
)
401
717
(45
)
672
COSTS
Products:
Costs
109
(4
)
105
Amortization of technology intangible
assets
43
—
43
Services
175
(7
)
168
327
(11
)
316
GROSS PROFIT
390
(34
)
356
OPERATING EXPENSES
Selling, general and administrative
253
(1
)
252
Research and development
49
—
49
Amortization of intangible assets
41
—
41
Impairment charges
659
—
659
Restructuring charges, net
1
—
1
1,003
(1
)
1,002
OPERATING LOSS
(613
)
(33
)
(646
)
Interest expense
(59
)
—
(59
)
Other income, net
12
—
12
LOSS BEFORE INCOME TAXES
(660
)
(33
)
(693
)
Benefit from (provision for) income
taxes
27
(37
)
(10
)
NET LOSS
$
(633
)
$
(70
)
$
(703
)
Avaya Holdings Corp.
Supplemental Schedules of Free
Cash Flow
(Unaudited; in
millions)
Three months ended
June 30, 2019
Mar. 31, 2019
Dec. 31, 2018
Sept. 30, 2018
June 30, 2018
Net cash provided by operating
activities
$
52
$
37
$
86
$
25
$
83
Less:
Capital expenditures
(37
)
(26
)
(21
)
(25
)
(18
)
Free cash flow
$
15
$
11
$
65
$
—
$
65
Source: Avaya Newsroom
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190813005258/en/
Media Inquiries: Alex Alias 669-242-8034 alalias@avaya.com
Investor Inquiries: Michael McCarthy 919-425-8330
mikemccarthy@avaya.com
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