Avaya Holdings: 1Q Fy20 Gaap Revenue;

The following excerpt is from the company's SEC filing.

$717 million

1Q FY20 Non-GAAP revenue

Cloud, Alliance Partner & Subscription revenue was

Repurchased

10.7 million

shares of stock and paid down

$250 million

of long-term debt

Santa Clara, Calif.,

February 10, 2020

- Avaya Holdings Corp. (NYSE: AVYA) today reported financial results for the

quarter ended

December 31, 2019

Quarter Financial Highlights

GAAP Operating income was

$15 million

; Non-GAAP Operating income was

$151 million

Adjusted EBITDA was

$174 million

CFFO was

of revenue, and

of revenue when adjusted for one-time strategic deal payments

$132 million

of common stock, or

shares, at an average price of $12.27 per share

"Our solid operational execution resulted in revenues and adjusted EBITDA above the mid-point of our guidance for the quarter," stated Jim Chirico, President and CEO of Avaya. He added, “At the same time, we continued to strengthen our position in public, private, and hybrid cloud communications markets, including our newest cloud-based UCaaS offering, Avaya Cloud Office, which is on schedule for introduction at the end of March. The increased breadth and depth in our portfolio enable us to deliver innovative and tailored solutions using consumption models, such as subscription, that facilitates our customers transition to the cloud using Avaya technology."

Mr. Chirico concluded, "During the quarter, we made substantial progress in returning capital to our shareholders. In early November, we paid down

in long-term debt and by the end of December, we repurchased nearly

11 million

shares using approximately

of the

$500 million

program approved by our Board.”

Financial Results for the

(In millions, except percentages)

Revenue

Gross margin

Net (loss) income

Adjusted EBITDA margin

Cash provided by operations

Cash and cash equivalents

Additional Key Performance Metrics

Revenue year-over-year decline of

; non-

revenue year-over-year decline of

in constant currency

Total Contract Value (TCV) of

$2.3 billion

of non-GAAP revenue was Software & Services

of non-GAAP product revenue was Software

of non-GAAP revenue was Recurring

Added approximately

new logos

Large deal activity with

deals over $1 million,

over $5 million, and

over $10 million

Non-GAAP revenue, Non-GAAP gross margin, Non-GAAP operating margin, Non-GAAP operating income, adjusted EBITDA, and constant currency are not measures calculated in accordance with generally accepted accounting principles in the U.S. (“GAAP”). Adjusted EBITDA margin is calculated based on non-GAAP Revenue. Refer to the "Use of non-GAAP (Adjusted) Financial Measures" below for more information on the calculation of constant currency. 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.

Business Highlights

Avaya added several new well-recognized and respected industry leaders to strengthen the company’s position in the market as a leader in enterprise communications and accelerate the company’s momentum as it executes on its strategy and transformation to the cloud. They include Anthony Bartolo, executive vice president, Products and Solutions; Simon Harrison, Chief Marketing Officer; Jon Brinton, vice president,

North America Channel Sales; and William Madison, vice president North America Cloud Sales. Each of these leaders brings with them significant strategic and operational expertise along with proven track records in their respective disciplines.

Avaya was recognized with two Frost & Sullivan awards:

2019 Customer Value Leadership Award for Customer Journey Intelligence, recognizing the advanced AI and other Customer Journey Intelligence innovations that have been built into Avaya’s broad, industry-leading portfolio of customer and employee engagement solutions.

2019 North America Product Leadership Award in the enterprise safety solutions market for Public Safety Solutions.

Avaya IX™ Workspaces was named as a 2019 Contact Center Technology Award winner, presented by CUSTOMER magazine. Avaya IX Workspaces helps to improve agent productivity and the overall customer experience by integrating multiple applications into a single agent desktop and by empowering customer support personnel to personalize the customer experience by enabling them to view and interact with customer journey details.

Google Cloud Contact Center (CC) AI capabilities are now integrated with Avaya IX Contact Center solutions and is now available for customers globally. The powerful combination of Avaya AI conversation services and Google Cloud CC AI are providing a better experience for clients by seamlessly blending automated and assisted experiences throughout a customer’s interaction with the contact center.

Financial Outlook -

Fiscal

- unless otherwise noted, values reflect December 31

, 2019 FX rates

GAAP revenue of

$673 million

$698 million

; Non-GAAP revenue of

$675 million

$700 million

This non-GAAP revenue figure reflects a constant currency decline of

GAAP operating income of

$22 million

$32 million

; GAAP operating margin of

Non-GAAP operating income of

$116 million

$126 million

; non-GAAP operating margin of

Adjusted EBITDA of

$140 million

$150 million

; Adjusted EBITDA margin of

Financial Outlook - Fiscal Year

$2.83 billion

$2.91 billion

$2.84 billion

$2.92 billion

$130 million

$180 million

$560 million

$600 million

; non-GAAP operating margin of

$650 million

; Adjusted EBITDA margin of

CFFO of ~

of revenue, and ~

Approximately

93 million

97 million

weighted average shares outstanding; ending share count of approximately

83 million

Cash requirements for restructuring pension & OPEB, cash taxes, capital spending and net cash interest payments for fiscal year

are expected to be:

Restructuring:

$35 million

$40 million

Pension/OPEB: ~

$55 million

Cash Taxes:

$65 million

$75 million

Capital Expenditures: ~

$120 million

Net Cash Interest Payments:

$190 million

$195 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

. 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

. 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: 13698454.

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 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. While the Company believes these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond its control. These factors are discussed in the Company's Annual Report on Form 10-K and subsequent quarterly reports on Form 10-Q filed with the Securities and Exchange Commission (the “SEC”), and may cause its actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. For a further list and description of such risks and uncertainties, please refer to the Company’s filings with the SEC that are available at www.sec.gov. The Company cautions you that the list of important factors included in the Company’s SEC filings may not contain all of the material factors that are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this report may not in fact occur. The Company undertakes no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

Condensed Consolidated Statements of Operations (Unaudited)

(In millions, except per share amounts)

Three months ended

December 31,

REVENUE

Products:

Amortization of technology intangible assets

GROSS PROFIT

OPERATING EXPENSES

Selling, general and administrative

Research and development

Amortization of intangible assets

Restructuring charges, net

OPERATING INCOME

Interest expense

Other income, net

(LOSS) INCOME BEFORE INCOME TAXES

Provision for income taxes

NET (LOSS) INCOME

(LOSS) EARNINGS PER SHARE

Diluted

Weighted average shares outstanding

Condensed Consolidated Balance Sheets (Unaudited)

(In millions, except per share and shares amounts)

September 30, 2019

ASSETS

Current assets:

Accounts receivable, net

Inventory

Contract assets

Contract costs

Other current assets

TOTAL CURRENT ASSETS

Property, plant and equipment, net

Deferred income taxes, net

Intangible assets, net

Goodwill, net

Operating lease right-of-use assets

Other assets

TOTAL ASSETS

LIABILITIES

Current liabilities:

Debt maturing within one year

Accounts payable

Payroll and benefit obligations

Contract liabilities

Operating lease liabilities

Business restructuring reserve

Other current liabilities

TOTAL CURRENT LIABILITIES

Non-current liabilities:

Long-term debt, net of current portion

Pension obligations

Other post-retirement obligations

Other liabilities

TOTAL NON-CURRENT LIABILITIES

TOTAL LIABILITIES

Commitments and contingencies

Preferred stock, $0.01 par value; 55,000,000 shares authorized at December 31, 2019 and September 30, 2019

Convertible Series A, 125,000 shares issued and outstanding at December 31, 2019 and no shares issued and outstanding at September 30, 2019

STOCKHOLDERS' EQUITY

Common stock, $0.01 par value; 550,000,000 shares authorized; 100,505,954 shares issued and outstanding at December 31, 2019; and 111,046,085 shares issued and 111,033,405 shares outstanding at September 30, 2019

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive loss

TOTAL STOCKHOLDERS' EQUITY

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

Condensed Statements of Cash Flows

(Unaudited; in millions)

Net cash provided by (used for):

Operating activities

Investing activities

Financing activities

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

Net increase in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash at beginning of period

Cash, cash equivalents, and restricted cash at end of period

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. 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 revenue, non-GAAP gross margin, 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 Company presents constant currency information to provide a framework for assessing how the Company’s underlying businesses performance excluding the effect of foreign currency rate fluctuations. To present this information current and comparative prior period results for entities reporting in currencies other than U.S. dollars 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, 2019).

In addition, we present the liquidity measure 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 second quarter and full year of fiscal 2020 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 reconcile historical GAAP measures to non-GAAP measures.

Supplemental Schedules

Reconciliation of Non-GAAP Adjusted EBITDA

Net (loss) income

Interest expense

Interest income

Depreciation and amortization

Impact of fresh start accounting adjustments

Restructuring charges, net of sublease income

Advisory fees

Acquisition-related costs

Share-based compensation

Change in fair value of Emergence Date Warrants

Loss on foreign currency transactions

Gain on marketable securities

Reconciliation of Non-GAAP Revenue

Three Months Ended

Three Months Ended Dec. 31, 2018

Dec. 31, 2019

Adj. for Fresh Start Accounting

Non-GAAP Dec. 31, 2019

Amount

Pct. in Constant Currency

Sept. 30, 2019

June 30, 2019

Mar. 31, 2019

Revenue by Segment

Products & Solutions

Unallocated amounts

Total revenue

Revenue by Geography

International:

  EMEA

  APAC - Asia Pacific

  Americas International

Total International

Constant Currency is a non-GAAP financial measure, as noted in "Use of non-GAAP (Adjusted) Financial Measures" above.

(1) - (4)

Reconciliation of Non-GAAP measures above:

(1) Q419 Non-GAAP Results

(2) Q319 Non-GAAP Results

(3) Q219 Non-GAAP Results

(4) Q119 Non-GAAP Results

Non-GAAP Mar. 31, 2019

Non-GAAP Dec. 31, 2018

Reconciliation of Non-GAAP Gross Margin and Operating Income

March 31, 2019

Reconciliation of Non-GAAP Gross Profit and Non-GAAP Gross Margin

Items excluded:

Adj. for fresh start accounting

Reconciliation of Non-GAAP Operating Income

Operating Income (Loss)

Impairment charges

GAAP Operating Margin

Non-GAAP Operating Margin

Reconciliation of Non-GAAP Gross Profit and Gross Margin by Portfolio

June 30, 2019

Reconciliation of Non-GAAP Gross Profit and Non-GAAP Gross Margin - Products

Reconciliation of Non-GAAP Gross Profit and Non-GAAP Gross Margin - Services

Free Cash Flow

Capital expenditures

Source: Avaya Newsroom

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The above information was disclosed in a filing to the SEC. To see the filing, click here.

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