Total revenue increased 8% year-over-year to
$738 million
Avaya OneCloud™ ARR increased 31% sequentially
to $344 million
Raising Revenue, OneCloud ARR, CAPS and Adj.
EBITDA Guidance for Fiscal 2021
Cloud, Alliance Partner & Subscription grew
to 40% of revenue
Avaya Holdings Corp. (NYSE: AVYA) today reported financial
results for the second quarter of fiscal 2021 ended March 31,
2021.
Second Quarter Financial
Highlights
- Revenues of $738 million, up 8% from a year ago
- OneCloud ARR was $344 million, up 31% sequentially
- CAPS (Cloud, Alliance Partner and Subscription) was 40% of
revenue, up from 23% a year ago
- Software and services were 90% of revenue, up from 88% a year
ago
- Recurring revenue was 66%, up from 64% a year ago
- GAAP Operating income was $44 million; Non-GAAP Operating
income was $148 million
- GAAP Net loss was $58 million; Non-GAAP Net income was $72
million
- Adjusted EBITDA was $177 million, 24.0% of revenue, up 220
basis points year over year
- Ending cash and cash equivalents were $593 million
- GAAP Loss Per Share of $0.70; Non-GAAP Earnings Per Share of
$0.74
“We drove solid second quarter results which highlight the
company’s continuing momentum. But more importantly, they represent
the significant work and strategic investments we have been making
over the last few years to reshape our company and portfolio to be
a leader in enterprise communications and collaboration,” said Jim
Chirico, president and CEO of Avaya. “The playbook for our industry
is not a secret. It is all about how you execute and I couldn’t be
more delighted with our performance, which is why we are again
raising guidance across several key financial metrics.”
GAAP
Non-GAAP (1)
(In millions, except percentages)
2Q21
1Q21
2Q20
2Q21
1Q21
2Q20
Revenue
$
738
$
743
$
682
$
738
$
743
$
682
Gross margin
55.8
%
56.0
%
54.4
%
61.8
%
61.8
%
61.1
%
Operating income (loss)
$
44
$
62
$
(597
)
$
148
$
163
$
125
Net (loss) income
$
(58
)
$
(4
)
$
(672
)
$
72
$
85
$
59
(Loss) earnings per share - Diluted
$
(0.70
)
$
(0.06
)
$
(7.24
)
$
0.74
$
0.90
$
0.57
2Q21
1Q21
2Q20
Adjusted EBITDA(1)
$
177
$
190
$
149
Adjusted EBITDA margin(1)
24.0
%
25.6
%
21.8
%
Cash (used for) provided by operations
$
(24
)
$
48
$
20
Cash and cash equivalents
$
593
$
750
$
553
Additional Second Quarter Fiscal 2021
Highlights
- Total Contract Value (TCV) of $2.1B*
- Added approximately 1,500 new logos
- Significant large deal activity with 107 deals over $1 million
TCV, 16 over $5 million, 7 over $10 million and 1 over $25
million
- Avaya Cloud Office™ now available in 13 countries.
- Avaya OneCloud CCaaS now available in approximately 40
countries.
- The Company completed a term loan amendment extending the
maturity of its outstanding Tranche B Term Loans due December 2024
to December 2027. In connection with the Amendment, the Company
made a $100 million prepayment of the existing Tranche B Term
Loans.
(1) Non-GAAP gross margin, Non-GAAP operating margin (used
below), Non-GAAP operating income, Non-GAAP net income, Non-GAAP
earnings per share, adjusted EBITDA, adjusted EBITDA margin and
constant currency are not measures calculated in accordance with
generally accepted accounting principles in the U.S. (“GAAP”).
Refer to the "Use of non-GAAP (Adjusted) Financial Measures" below
and the Supplemental Financial Information accompanying this press
release for more information on the calculation of constant
currency and a reconciliation of these non-GAAP 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.
Customer Highlights
- Avaya Spaces has helped Clemson University offer students a
more immersive learning experience. Even for Clemson’s hands-on
technical courses, the solution’s video and breakout room
functionality integrates seamlessly with the experiential content
in their learning experience platform for online and hybrid
learning that truly supports both teachers and students.
- Clarios, a world leader in advanced energy storage solutions,
is deploying Avaya OneCloud Private for 5,000 unified
communications users across 22 countries.
- AllOne Health Resources, Inc. ("AllOne") based in Wilkes-Barre,
PA signed a 3-year deal, choosing to implement Avaya OneCloud CCaaS
and Avaya Cloud Office. This powerful combination will support a
diverse workforce that includes in-house doctors, nurses, clinical
staff, health counselors and call center agents. AllOne has
successfully grown organically and through acquisition and needed a
communications platform that would deliver scalability and
reliability through the next stage of their growth plans.
- In the U.S., Atento expanded their investment in Avaya OneCloud
CCaaS to deliver custom integrations and additional agents for
their customers, including national healthcare and telemedicine
provider GoodRx. In addition to expanding capacity, this deal
enhances the analysis of interactions and performance and adds
advanced IVR capabilities that will enable GoodRx to enhance their
Customer Experience.
- Dauphin County, home to the state capital in Pennsylvania,
signed a 5-year deal to deploy Avaya Cloud Office for over 1,800
users.
- DHL Supply Chain ("DHL"), based in Singapore, has chosen Avaya
OneCloud Subscription to create an innovative, composable contact
center solution that will rapidly adapt to their customers’ needs.
DHL can assemble intelligent collaboration, contact center and
knowledge management capabilities on-demand to significantly reduce
time and effort in launching new customer environments. Through the
Avaya OneCloud Subscription offering, DHL can introduce automation
to hundreds of contact center agents and over 1,000 collaboration
users on Avaya Spaces.
- Ehli Auctions, a Washington-based online and in-person auction
company, selected Avaya Cloud Office for its features and
flexibility offered in a single solution to help digitally
transform its business.
- NEOBPO, a leading business outsourcer in Brazil working with
customers across all verticals leveraged Avaya’s Subscription
offering to move over 1,200 contact center seats.
- Seine Saint Denis, the host of the 2024 Olympics, adopted Avaya
Spaces as their work-from-anywhere collaboration solution for 8,000
users. After testing more than 10 alternative options, they chose
Spaces because of its security, scalability, feature-richness and
ease of use.
- Qatar Airways, serving customers in over 70 countries in 12
different languages, signed an Avaya OneCloud Private deal to
deploy Avaya’s advanced digital engagement, global workforce
optimization, and automation, in readiness for Qatar to host the
FIFA World Cup in 2022.
- The Round Rock Independent School District in Texas is
deploying Avaya OneCloud CPaaS, coupled with the Avaya Cloud
Notification Solution, across their 55 campuses for mass
notifications for scheduling and public safety announcements across
end points and apps, including mobile devices, email, social media,
indoor wallboards, and outdoor signage.
- South East Coast Ambulance Service in the United Kingdom has
deployed Avaya Cloud Office for their healthcare response.
Clinicians now securely contact patients from mobile devices,
providing assessments remotely, and ensuring ambulance trips are
prioritized for emergency cases.
Business Highlights
- Avaya was recognized by Verint as its North American Enterprise
Partner of the Year, EMEA Partner of the Year, and Latin American
Partner of the Year. Avaya was singled out for its achievements in
delivering innovation for customer engagement, and for outstanding
collaboration in helping organizations achieve business goals,
revenue objectives and growth.
- CRN®, a brand of The Channel Company, has given Avaya a 5-Star
rating in its 2021 Partner Program Guide for the 13th consecutive
year. To determine the 2021 5-Star ratings, the CRN® research team
analyzed myriad partner programs and scored them based on several
factors, including investments in program offerings, partner
profitability, partner training, education and support, marketing
programs and resources, sales support, and communication.
- CreditSights published their Environmental, Social and
Governance ("ESG") investing framework focusing on ESG measures
they have determined have the capacity to Materially Affect Credit
Risk ("MACR") in their coverage universe for U.S. Software &
Services resulting in a #2 ranking for Avaya.
Financial Outlook - 3Q Fiscal
2021 - unless otherwise noted, values reflect April 30,
2021 FX rates.
- Revenue of $720 million to $735 million
- GAAP operating income of $10 million to $20 million; GAAP
operating margin of 1% to 3%
- Non-GAAP operating income of $133 million to $143 million;
non-GAAP operating margin of 19% to 20%
- Adjusted EBITDA of $160 million to $170 million; Adjusted
EBITDA margin of 22% to 23%
- Non-GAAP EPS of $0.66 to $0.73
Financial Outlook - Fiscal Year
2021 - unless otherwise noted, values reflect April 30,
2021 FX rates.
- Revenue of $2.920 billion to $2.955 billion
- CAPS revenue will represent between 37% and 40% of Avaya's
total revenue guidance for FY21.
- OneCloud ARR expected to be ~$450 million to $460 million by
year end FY21
- GAAP operating income of $155 million to $185 million; GAAP
operating margin of 5% to 6%
- Non-GAAP operating income of $580 million to $610 million;
non-GAAP operating margin of 20% to 21%
- Adjusted EBITDA of $690 million to $720 million; Adjusted
EBITDA margin of ~24%
- Non-GAAP EPS of $3.02 to $3.20
- Cash flow from operations of 3% to 4% of revenue
- Approximately 87 million to 89 million weighted average shares
outstanding
The company has not quantitatively reconciled its guidance for
adjusted EBITDA, non-GAAP Operating income, or non-GAAP EPS to
their respective most comparable GAAP measure because certain of
the reconciling items that impact these metrics including,
provision for income taxes, restructuring charges, net of sublease
income, advisory fees, acquisition-related costs and change in fair
value of warrants affecting the period, have not occurred, are out
of the company’s control, or cannot be reasonably predicted.
Accordingly, reconciliations to the nearest GAAP financial measures
are not available without unreasonable effort. Please note that the
unavailable reconciling items could significantly impact the
company’s results as reported under GAAP.
As Avaya’s CAPS metric reflects revenue that is already
recognized, management believes it would be helpful to provide
investors with a better view into the performance of the company’s
broader-based OneCloud software solutions that are driving the
company’s recurring revenue growth by also providing a
forward-looking metric, Annualized Recurring Revenue, or OneCloud
ARR.
OneCloud ARR represents our estimate of the annualized revenue
run-rate of certain components from active term OneCloud contracts
(whether or not terminable) at the end of the reporting period.
More specifically, OneCloud ARR includes OneCloud subscription
revenue, ACO recurring revenue and revenue from CCaaS, Spaces,
CPaaS, DaaS and private cloud, and excludes maintenance, managed
services revenue and ACO one-time payments. The One Cloud ARR
metric, combined with the company’s CAPS metric, provides investors
enhanced visibility into Avaya’s transformational Cloud journey.
Per period OneCloud ARR figures are provided in the slides
published on Avaya’s website at http://www.avaya.com on the
Investor Relations page.
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 6, 2021. 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 AM Eastern Time on May 6, 2021. To
access the live conference call by phone, listeners should dial
+1-877-858-7671 in the U.S. or Canada and +1-201-389-0939 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 +1-877-660-6853 in the U.S. or Canada
and +1-201-612-7415 for international callers, using the conference
access code: 13717569.
About Avaya
Businesses are built by the experiences they provide, and
everyday millions of those experiences are delivered by Avaya
Holdings Corp. (NYSE: AVYA). Avaya is shaping what's next for the
future of work, with innovation and partnerships that deliver
game-changing business benefits. Our cloud communications solutions
and multi-cloud application ecosystem power personalized,
intelligent, and effortless customer and employee experiences to
help achieve strategic ambitions and desired outcomes. Together, we
are committed to help grow your business by delivering Experiences
that Matter. Learn more at http://www.avaya.com.
Cautionary Note Regarding Forward-Looking Statements
This release 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. The Company has
based these forward-looking statements on its current expectations,
assumptions, estimates and projections. These statements, including
the Company’s outlook, do not include the potential impact of any
business combinations, asset acquisitions, divestitures, strategic
investments or other strategic transactions completed after the
date hereof. 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,
termination or modification of current contracts which could impair
attainment of our OneCloud ARR metric; the duration, severity and
impact of the coronavirus pandemic (“COVID-19”), as well as
governmental and business responses to COVID-19, and the impact the
pandemic and such responses have on our business, financial
performance, liquidity; and other factors 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)
Three months ended
March 31,
Six months ended
March 31,
2021
2020
2021
2020
REVENUE
Products
$
226
$
245
$
492
$
543
Services
512
437
989
854
738
682
1,481
1,397
COSTS
Products:
Costs
92
92
197
196
Amortization of technology intangible
assets
43
44
86
87
Services
191
175
370
349
326
311
653
632
GROSS PROFIT
412
371
828
765
OPERATING EXPENSES
Selling, general and administrative
264
248
519
531
Research and development
57
51
112
103
Amortization of intangible assets
39
41
79
82
Impairment of goodwill
—
624
—
624
Restructuring charges, net
8
4
12
7
368
968
722
1,347
OPERATING INCOME (LOSS)
44
(597
)
106
(582
)
Interest expense
(59
)
(53
)
(115
)
(111
)
Other income, net
1
15
1
29
LOSS BEFORE INCOME TAXES
(14
)
(635
)
(8
)
(664
)
Provision for income taxes
(44
)
(37
)
(54
)
(62
)
NET LOSS
$
(58
)
$
(672
)
$
(62
)
$
(726
)
LOSS PER SHARE
Basic
$
(0.70
)
$
(7.24
)
$
(0.76
)
$
(7.24
)
Diluted
$
(0.70
)
$
(7.24
)
$
(0.76
)
$
(7.24
)
Weighted average shares outstanding
Basic
84.6
93.0
84.2
101.1
Diluted
84.6
93.0
84.2
101.1
Avaya Holdings Corp.
Condensed Consolidated Balance
Sheets (Unaudited)
(In millions, except per share
and shares amounts)
March 31, 2021
September 30, 2020
ASSETS
Current assets:
Cash and cash equivalents
$
593
$
727
Accounts receivable, net
289
275
Inventory
51
54
Contract assets, net
401
296
Contract costs
115
115
Other current assets
124
112
TOTAL CURRENT ASSETS
1,573
1,579
Property, plant and equipment, net
278
268
Deferred income taxes, net
42
31
Intangible assets, net
2,394
2,556
Goodwill, net
1,481
1,478
Operating lease right-of-use assets
152
160
Other assets
190
159
TOTAL ASSETS
$
6,110
$
6,231
LIABILITIES
Current liabilities:
Accounts payable
$
261
$
242
Payroll and benefit obligations
163
198
Contract liabilities
451
446
Operating lease liabilities
49
49
Business restructuring reserves
19
21
Other current liabilities
230
181
TOTAL CURRENT LIABILITIES
1,173
1,137
Non-current liabilities:
Long-term debt
2,800
2,886
Pension obligations
716
749
Other post-retirement obligations
149
215
Deferred income taxes, net
43
38
Contract liabilities
348
373
Operating lease liabilities
123
129
Business restructuring reserves
22
28
Other liabilities
310
312
TOTAL NON-CURRENT LIABILITIES
4,511
4,730
TOTAL LIABILITIES
5,684
5,867
Commitments and contingencies
Preferred stock, $0.01 par value;
55,000,000 shares authorized at March 31, 2021 and September 30,
2020
Convertible series A preferred stock;
125,000 shares issued and outstanding at March 31, 2021 and
September 30, 2020
130
128
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value; 550,000,000
shares authorized; 84,658,712 shares issued and outstanding at
March 31, 2021; and 83,278,383 shares issued and outstanding at
September 30, 2020
1
1
Additional paid-in capital
1,472
1,449
Accumulated deficit
(1,034
)
(969
)
Accumulated other comprehensive loss
(143
)
(245
)
TOTAL STOCKHOLDERS' EQUITY
296
236
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY
$
6,110
$
6,231
Avaya Holdings Corp.
Condensed Statements of Cash
Flows
(Unaudited; in
millions)
Six months ended
March 31,
2021
2020
Net cash provided by (used for):
Operating activities
$
24
$
32
Investing activities
(53
)
246
Financing activities
(108
)
(472
)
Effect of exchange rate changes on cash,
cash equivalents, and restricted cash
3
(5
)
Net decrease in cash, cash equivalents,
and restricted cash
(134
)
(199
)
Cash, cash equivalents, and restricted
cash at beginning of period
731
756
Cash, cash equivalents, and restricted
cash at end of period
$
597
$
557
Avaya Holdings Corp.
Supplemental Schedule of
Revenue by Segment and Geography
(Unaudited; in
millions)
Three months ended
March 31,
Change
Three months ended
December 31, 2020
2021
2020
Amount
Pct.
Pct., net of
fx impact
Revenue by
Segment
Products & Solutions
$
226
$
245
$
(19
)
(8
)
%
(9
)
%
$
266
Services
513
438
$
75
17
%
15
%
477
Unallocated amounts
(1
)
(1
)
—
(1)
(1)
—
Total revenue
$
738
$
682
$
56
8
%
7
%
$
743
Revenue by
Geography
U.S.
$
413
$
384
$
29
8
%
8
%
$
414
International:
EMEA
187
172
15
9
%
5
%
195
APAC - Asia Pacific
77
70
7
10
%
4
%
75
Americas International
61
56
5
9
%
8
%
59
Total International
325
298
27
9
%
6
%
329
Total revenue
$
738
$
682
$
56
8
%
7
%
$
743
(1) Not meaningful.
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 financial measures
labeled as “non-GAAP” or “adjusted.”
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
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. Adjusted EBITDA excludes the impact of earnings or
charges resulting from matters that we do not consider indicative
of our ongoing operations but that still affect our net income. 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. In addition, these terms are not
necessarily comparable to other similarly titled captions of other
companies due to the potential inconsistencies in the method of
calculation.
We also present the measures non-GAAP gross margin, non-GAAP
operating income, non-GAAP operating margin, non-GAAP net income
and non-GAAP earnings per share 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 company presents constant currency information to provide a
framework to assess how the company’s underlying businesses
performance excluding the effect of foreign currency rate
fluctuations. To present this information for current and
comparative prior period results for entities reporting in
currencies other than U.S. dollars, the amounts are converted into
U.S. dollars at the exchange rate in effect on the last day of the
company’s prior fiscal year (i.e. September 30, 2020).
In addition, we present the liquidity measures of free cash
flow. Free cash flow is calculated by subtracting capital
expenditures from Net cash provided by operating activities. We
believe free cash flow is a measure often used by analysts and
investors to compare the cash flow and liquidity of companies in
the same industry.
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 2021 non-GAAP gross margin,
non-GAAP operating expenses, non-GAAP operating income, non-GAAP
operating margin, non-GAAP earnings per share 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 reconcile historical GAAP measures to
non-GAAP measures.
Avaya Holdings Corp.
Supplemental Schedules of
Non-GAAP Adjusted EBITDA
(Unaudited; in
millions)
Three months ended,
March 31,
2021
December 31,
2020
March 31,
2020
Net loss
$
(58
)
$
(4
)
$
(672
)
Interest expense
59
56
53
Interest income
(1
)
—
(2
)
Provision for income taxes
44
10
37
Depreciation and amortization
106
103
105
EBITDA
150
165
(479
)
Impact of fresh start accounting
adjustments (1)
1
—
(1
)
Restructuring charges (2)
6
4
3
Advisory fees (3)
—
—
1
Share-based compensation
13
14
8
Impairment of goodwill
—
—
624
Gain on post-retirement plan
settlement
(14
)
—
—
Change in fair value of Emergence Date
Warrants
22
5
(6
)
(Gain) loss on foreign currency
transactions
(1
)
2
7
Gain on investments in equity and debt
securities, net (4)
—
—
(8
)
Adjusted EBITDA
$
177
$
190
$
149
(1)
The impact of fresh start accounting
adjustments in connection with the Company's emergence from
bankruptcy.
(2)
Restructuring charges represent employee
separation costs and facility exit costs (excluding the impact of
accelerated depreciation expense) related to the Company's
restructuring programs, net of sublease income.
(3)
Advisory fees represent costs incurred to
assist in the assessment of strategic and financial alternatives to
improve the Company's capital structure.
(4)
Realized and unrealized gains on
investments in equity securities, net of impairment of investments
in debt securities.
Avaya Holdings Corp.
Supplemental Schedules of
Non-GAAP Earnings per Share
(Unaudited; in
millions)
Three months ended,
March 31, 2021
December 31, 2020
March 31, 2020
GAAP Net Loss
$
(58
)
$
(4
)
$
(672
)
Non-GAAP Adjustments:
Impact of fresh start accounting
1
—
—
Restructuring charges, net (1)
7
4
3
Advisory fees
—
—
1
Share-based compensation
13
14
8
Impairment of goodwill
—
—
624
Gain on post-retirement plan
settlement
(14
)
—
—
Change in fair value of Emergence Date
Warrants
22
5
(6
)
(Gain) loss on foreign currency
transactions
(1
)
2
7
Gain on investments in equity and debt
securities, net
—
—
(8
)
Amortization of intangible assets
82
83
85
Income tax expense effects (2)
20
(19
)
17
Non-GAAP Net Income
$
72
$
85
$
59
Dividends and accretion to preferred
stockholders
$
(1
)
$
(1
)
$
(1
)
Undistributed Non-GAAP Income
71
84
58
Percentage allocated to common
stockholders (3)
91.3
%
91.2
%
92.2
%
Numerator for Non-GAAP diluted earnings
per common share
$
65
$
77
$
53
Diluted Weighted Average Shares - GAAP
84.6
83.8
93.0
Incremental shares (4)
2.7
1.4
0.3
Diluted Weighted Average Shares -
Non-GAAP
87.3
85.2
93.3
GAAP Loss per Share - Diluted
$
(0.70
)
$
(0.06
)
$
(7.24
)
Non-GAAP Earnings per Share - Diluted
$
0.74
$
0.90
$
0.57
(1) Restructuring charges, net represent
employee separation costs and facility exit costs related to the
Company's restructuring programs, net of sublease income.
(2) The Company’s calculation of non-GAAP
income taxes reflects a 25% fixed non-GAAP effective tax rate based
on a blended U.S. federal and state tax rate, given the Company’s
operating structure. The non-GAAP effective tax rate may differ
significantly from the GAAP effective tax rate. The non-GAAP
effective tax rate could be subject to change for a number of
reasons, including but not limited to, changes resulting from tax
legislation, material changes in revenues or expenses and other
significant events. The Company will continuously assess its
estimated non-GAAP effective tax rate in connection with its
calculation of non-GAAP net income and non-GAAP net income per
diluted share in future periods.
(3) The Company’s preferred shares are
participating securities, which requires the application of the
two-class method to calculate diluted earnings per share. Under the
two-class method, undistributed earnings are allocated to common
stock and participating securities according to their respective
participating rights in undistributed earnings. The percentage
allocated to common stockholders reflects the proportion of
weighted average common stock outstanding to the weighted average
of common stock and common stock equivalents (preferred
shares).
(4) In periods with a GAAP Net Loss, the
incremental shares reflects the dilutive impact of certain
securities, which are excluded from the computation of Diluted GAAP
(loss) earnings per share as they are anti-dilutive.
Avaya Holdings Corp.
Supplemental Schedules of
Non-GAAP Reconciliations of Gross Margin and Operating
Income
(Unaudited; in
millions)
Three months ended,
March 31, 2021
December 31, 2020
March 31, 2020
Reconciliation of Non-GAAP Gross Profit
and Non-GAAP Gross Margin
Gross Profit
$
412
$
416
$
371
Items excluded:
Amortization of technology intangible
assets
43
43
44
Adj. for fresh start accounting
1
—
2
Non-GAAP Gross Profit
$
456
$
459
$
417
GAAP Gross Margin
55.8
%
56.0
%
54.4
%
Non-GAAP Gross Margin
61.8
%
61.8
%
61.1
%
Reconciliation of Non-GAAP Operating
Income
Operating Income (Loss)
$
44
$
62
$
(597
)
Items excluded:
Amortization of intangible assets
82
83
85
Adj. for fresh start accounting
1
—
—
Restructuring charges, net
8
4
4
Advisory fees
—
—
1
Share-based compensation
13
14
8
Impairment of goodwill
—
—
624
Non-GAAP Operating Income
$
148
$
163
$
125
GAAP Operating Margin
6.0
%
8.3
%
(87.5
)
%
Non-GAAP Operating Margin
20.1
%
21.9
%
18.3
%
Avaya Holdings Corp.
Supplemental Schedules of
Non-GAAP Reconciliation of Gross Profit and Gross Margin by
Portfolio
(Unaudited; in
millions)
Three months ended,
March 31, 2021
December 31, 2020
March 31, 2020
Reconciliation of Non-GAAP Gross Profit
and Non-GAAP Gross Margin - Products & Solutions
Revenue
$
226
$
266
$
245
Costs
92
105
92
Amortization of technology intangible
assets
43
43
44
GAAP Gross Profit
91
118
109
Items excluded:
Amortization of technology intangible
assets
43
43
44
Adj. for fresh start accounting
—
—
1
Non-GAAP Gross Profit
$
134
$
161
$
154
GAAP Gross Margin
40.3
%
44.4
%
44.5
%
Non-GAAP Gross Margin
59.3
%
60.5
%
62.9
%
Reconciliation of Non-GAAP Gross Profit
and Non-GAAP Gross Margin - Services
Revenue
$
512
$
477
$
437
Costs
191
179
175
GAAP Gross Profit
321
298
262
Items excluded:
Adj. for fresh start accounting
1
—
1
Non-GAAP Gross Profit
$
322
$
298
$
263
GAAP Gross Margin
62.7
%
62.5
%
60.0
%
Non-GAAP Gross Margin
62.9
%
62.5
%
60.2
%
Avaya Holdings Corp.
Supplemental Schedules of Free
Cash Flow
(Unaudited; in
millions)
Three months ended,
March 31,
2021
Dec. 31,
2020
Sept. 30,
2020
June 30,
2020
March 31,
2020
Net cash (used for) provided by operating
activities
$
(24
)
$
48
$
70
$
45
$
20
Less:
Capital expenditures
26
27
26
24
22
Free cash flow
$
(50
)
$
21
$
44
$
21
$
(2
)
Source: Avaya Newsroom
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210506005226/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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