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Avaya Reports Third Quarter Fiscal 2020 Financial Results

·19 min read

GAAP Revenues of $721 million represented year-over-year growth
Revenue from Software and Services was 89%, a new record; Recurring revenue was 64%
Cloud, Alliance Partner & Subscription revenue increased from 23% to 30% of revenue
Booked ~$130 million of Avaya OneCloud Subscription Total Contract Value (TCV)

Avaya Holdings Corp. (NYSE: AVYA) today reported financial results for the third quarter ended June 30, 2020.

Third Quarter Financial Highlights

  • Revenues of $721 million

  • GAAP Operating income was $53 million; Non-GAAP Operating income was $164 million

  • Net income was $9 million

  • Adjusted EBITDA was $187 million, 25.9% of revenue

  • 104 deals signed with a TCV of over $1 million, 7 deals over $10 million TCV

  • Ending cash and cash equivalents were $742 million

Jim Chirico, President and CEO of Avaya stated, "We delivered strong quarterly results exceeding our guidance across all metrics. The company grew sequentially and year over year, which marks a major milestone for Avaya. Software and services as a percent of revenue was 89% - beating the record set this past March; recurring revenue was 64%, up 5 points year-over-year; and our CAPS revenue increased to 30% from 23% in the prior quarter. The strength in our business is a direct result of executing on the deliberate strategy we laid out over two years ago."

Mr. Chirico added, "Response to our Subscription offering continues to be strong, with just over $200 million of TCV having been booked since its launch back in Q1. This offering differentiates Avaya within the enterprise segment and answers a very clear demand from our customers for flexibility, access to our latest innovations and to provide a seamless path to move to the cloud at a time and pace they choose."

Financial Results for the Third Quarter

GAAP

Non-GAAP (1)

(In millions, except percentages)

3Q20

2Q20

3Q19

3Q20

2Q20

3Q19

Revenue

$

721

$

682

$

717

$

722

$

683

$

720

Gross margin

55.1

%

54.4

%

54.4

%

61.1

%

61.1

%

60.8

%

Operating income (loss)

$

53

$

(597

)

$

(613

)

$

164

$

125

$

145

Net income (loss)

$

9

$

(672

)

$

(633

)

n/a

n/a

n/a

3Q20

2Q20

3Q19

Adjusted EBITDA(1)

$

187

$

149

$

167

Adjusted EBITDA margin(1)

25.9

%

21.8

%

23.2

%

Cash provided by operations

$

45

$

20

$

52

Cash and cash equivalents

$

742

$

553

$

729

Additional Key Performance Highlights

  • Total Contract Value (TCV) of $2.2B*

  • Added approximately 900 new logos

  • Large deal activity with 104 deals over $1 million, 14 over $5 million, and 7 over $10 million

  • Avaya Cloud Office launched in Australia, Canada & the UK; enhanced with automated migration tools

  • Enhanced CCaaS offer with addition of digital channels

  • Avaya OneCloud Subscription TCV increased ~$130 million during the June quarter

(1) 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. Unless otherwise noted, all references in this release to revenue are to GAAP revenue.

* 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

  • A large US-based retailer signed a new three-year Avaya OneCloud Subscription agreement to fully modernize their Avaya infrastructure which supports 75,000 Unified Communication users and 25,000 Contact Center agents.

  • Vodafone, a long time Avaya customer, signed a new five-year Avaya OneCloud Subscription agreement to address their immediate collaboration and communications challenges responding to COVID-19, as well as to support their long term strategy to modernize their agent and customer experience. By upgrading its communications infrastructure with Avaya OneCloud Subscription to support 4,600 agents, this flexible model is ideal to support Vodafone’s digital transformation journey at a time when work from anywhere requirements have become a priority. Leveraging Avaya solutions, Vodafone has stated that its customer service team in the UK was running at full capability despite the pandemic, to serve the consumers and businesses who rely on them.

  • A leading European financial services company is leveraging our Avaya OneCloud Subscription offering to replace their UC and contact center systems. This customer needed to facilitate an enterprise wide systems transformation and wanted the flexibility, access to innovation like Spaces on demand, and the ability to integrate new digital applications that an opex model provides.

  • Closed the first seven-figured TCV deal for Avaya Cloud Office with a government customer based in the United Kingdom.

  • Waldorf Woodlands, a leading family of not-for-profit schools in Kenya that operates from two campus locations, is using Avaya Spaces to provide an immersive virtual learning experience. They are leveraging our cloud-based capability to integrate chat, voice, video, online meetings, content sharing and more, to deliver structured learning to their students through interactive virtual classes.

  • CTIntegrations adopted Avaya OneCloud CPaaS technology for their flagship product, CT Suite, a user-friendly agent desktop and multimodal contact center. APIs from Avaya’s CPaaS portfolio enable CT Suite to smoothly deliver proactive SMS messaging to mobile callers so their agents can provide faster service during peak demand periods.

  • Cincinnati Bell is implementing a new Avaya OneCloud CCaaS solution to support nearly 300 agents working remotely. They required a stable and reliable public cloud solution that could be deployed quickly and cost effectively to extend the capabilities of their existing Avaya contact center.

Business Highlights

  • IBM presented Avaya with the 2020 IBM Award for Hybrid Cloud Excellence in recognition for outstanding performance in providing enterprise organizations with a fast, convenient and automated path to a cloud communications solution using Avaya OneCloud ReadyNow.

  • Entry into a new partnership with NVIDIA, a leading graphics processor unit (GPU) design company that has helped to not only redefine modern computer graphics but more recently modern AI capabilities through GPU-enabled deep learning, has enabled Avaya to increase the impact and value of visual, audible and collaborative experiences through our Spaces offering.

  • Aragon Research included Avaya in their Aragon Research Globe for Intelligent Contact Center for 2020, recognizing that Avaya is at the forefront of applying emerging artificial intelligence technologies. In doing so, Aragon highlighted the depth and breadth of Avaya’s capabilities, which are both native and the result of strategic partnerships such as Google Contact Center AI, designed to enhance a customer’s experience and to help anticipate future customer needs.

  • Frost & Sullivan recognized Avaya with their 2020 North American Growth Innovation Leadership Frost Radar Award for innovative workforce engagement management solutions deployed across its contact center portfolio.

Financial Outlook - 4Q Fiscal 2020 - unless otherwise noted, values reflect June 30th, 2020 FX rates.

  • GAAP revenue of $719 million to $739 million; Non-GAAP revenue of $720 million to $740 million

  • GAAP operating income of $51 million to $71 million; GAAP operating margin of ~7% to 10%

  • Non-GAAP operating income of $146 million to $166 million; non-GAAP operating margin of ~20% to 22%

  • Adjusted EBITDA of $170 million to $190 million; Adjusted EBITDA margin of ~24% to 26%

Financial Outlook - Fiscal Year 2020 - unless otherwise noted, values reflect June 30th, 2020 FX rates.

  • GAAP revenue of $2.84 billion to $2.86 billion; Non-GAAP revenue of $2.84 billion to $2.86 billion

  • GAAP operating loss of $478 million to $458 million; GAAP operating margin of ~(17)% to (16)%

  • Non-GAAP operating income of $585 million to $605 million; non-GAAP operating margin of ~21%

  • Cash flow from operations is expected to be ~4% of full year GAAP revenue

  • Adjusted EBITDA of $680 million to $700 million; Adjusted EBITDA margin of ~24%

  • Weighted shares outstanding are expected to be ~93 million and total shares outstanding are expected to be ~83 million

    The company has not quantitatively reconciled its guidance for adjusted EBITDA to its most comparable GAAP measure because certain of the reconciling items that impact adjusted EBITDA, including, provision for income taxes, restructuring charges, net of sublease income, advisory fees, acquisition-related costs, change in fair value of warrants and gain (loss) on marketable securities 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.

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 August 10, 2020. 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: 13705768.

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. 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, 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
June 30,

Nine months ended
June 30,

2020

2019

2020

2019

REVENUE

Products

$

261

$

297

$

804

$

908

Services

460

420

1,314

1,256

721

717

2,118

2,164

COSTS

Products:

Costs

103

109

299

329

Amortization of technology intangible assets

43

43

130

130

Services

178

175

527

522

324

327

956

981

GROSS PROFIT

397

390

1,162

1,183

OPERATING EXPENSES

Selling, general and administrative

232

253

763

761

Research and development

52

49

155

154

Amortization of intangible assets

40

41

122

122

Impairment charges

659

624

659

Restructuring charges, net

20

1

27

12

344

1,003

1,691

1,708

OPERATING INCOME (LOSS)

53

(613

)

(529

)

(525

)

Interest expense

(51

)

(59

)

(162

)

(177

)

Other income, net

27

12

56

35

INCOME (LOSS) BEFORE INCOME TAXES

29

(660

)

(635

)

(667

)

(Provision for) benefit from income taxes

(20

)

27

(82

)

30

NET INCOME (LOSS)

$

9

$

(633

)

$

(717

)

$

(637

)

EARNINGS (LOSS) PER SHARE

Basic

$

0.08

$

(5.70

)

$

(7.61

)

$

(5.75

)

Diluted

$

0.08

$

(5.70

)

$

(7.61

)

$

(5.75

)

Weighted average shares outstanding

Basic

83.1

111.0

95.1

110.7

Diluted

83.3

111.0

95.1

110.7

Avaya Holdings Corp.

Condensed Consolidated Balance Sheets (Unaudited)

(In millions, except per share and shares amounts)

June 30, 2020

September 30, 2019

ASSETS

Current assets:

Cash and cash equivalents

$

742

$

752

Accounts receivable, net

260

314

Inventory

56

63

Contract assets

276

187

Contract costs

124

114

Other current assets

111

115

TOTAL CURRENT ASSETS

1,569

1,545

Property, plant and equipment, net

256

255

Deferred income taxes, net

27

35

Intangible assets, net

2,637

2,891

Goodwill, net

1,477

2,103

Operating lease right-of-use assets

167

Other assets

135

121

TOTAL ASSETS

$

6,268

$

6,950

LIABILITIES

Current liabilities:

Debt maturing within one year

$

50

$

29

Accounts payable

250

291

Payroll and benefit obligations

166

116

Contract liabilities

514

472

Operating lease liabilities

49

Business restructuring reserve

23

33

Other current liabilities

192

158

TOTAL CURRENT LIABILITIES

1,244

1,099

Non-current liabilities:

Long-term debt, net of current portion

2,888

3,090

Pension obligations

734

759

Other post-retirement obligations

194

200

Deferred income taxes, net

55

72

Contract liabilities

336

78

Operating lease liabilities

135

Business restructuring reserve

28

36

Other liabilities

315

316

TOTAL NON-CURRENT LIABILITIES

4,685

4,551

TOTAL LIABILITIES

5,929

5,650

Commitments and contingencies

Preferred stock, $0.01 par value; 55,000,000 shares authorized at June 30, 2020 and September 30, 2019

Convertible Series A, 125,000 shares issued and outstanding at June 30, 2020 and no shares issued and outstanding at September 30, 2019

128

STOCKHOLDERS' EQUITY

Common stock, $0.01 par value; 550,000,000 shares authorized; 82,864,260 shares issued and outstanding at June 30, 2020; and 111,046,085 shares issued and 111,033,405 shares outstanding at September 30, 2019

1

1

Additional paid-in capital

1,441

1,761

Accumulated deficit

(1,006

)

(289

)

Accumulated other comprehensive loss

(225

)

(173

)

TOTAL STOCKHOLDERS' EQUITY

211

1,300

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

6,268

$

6,950

Avaya Holdings Corp.

Condensed Statements of Cash Flows

(Unaudited; in millions)

Nine months ended
June 30,

2020

2019

Net cash provided by (used for):

Operating activities

77

$

175

Investing activities

340

(95

)

Financing activities

(425

)

(51

)

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

(2

)

1

Net (decrease) increase in cash, cash equivalents, and restricted cash

(10

)

30

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

756

704

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

$

746

$

734

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 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 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, 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 commonly 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 next quarter 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

Avaya Holdings Corp.

Reconciliation of Non-GAAP Adjusted EBITDA

(Unaudited; in millions)

Three months ended
June 30,

Nine months ended
June 30,

2020

2019

2020

2019

Net Income (loss)

$

9

$

(633

)

$

(717

)

$

(637

)

Interest expense

51

59

162

177

Interest income

(1

)

(4

)

(6

)

(11

)

Provision for (benefit from) income taxes

20

(27

)

82

(30

)

Depreciation and amortization

107

110

319

335

EBITDA

186

(495

)

(160

)

(166

)

Impact of fresh start accounting adjustments

1

(2

)

7

Restructuring charges

14

1

18

12

Advisory fees

1

40

3

Acquisition-related costs

1

8

Share-based compensation

7

8

21

19

Impairment charges

659

624

659

Change in fair value of Emergence Date Warrants

3

(7

)

(28

)

Loss on foreign currency transactions

5

1

16

8

Gain on investments in equity and debt securities, net

(29

)

(49

)

Adjusted EBITDA

$

187

$

167

$

510

$

522

Avaya Holdings Corp.

Reconciliation of Non-GAAP Revenue

(Unaudited; in millions)

Three Months Ended

Change

Three Months Ended

June 30,
2020

Adj. for
Fresh Start
Accounting

Non-
GAAP
June 30,
2020

June 30,
2019 (4)

Amount

Pct.

Pct. in
constant
currency*

Mar. 31,
2020 (1)

Dec. 31,
2019 (2)

Sept. 30,
2019 (3)

Revenue by Segment

Products & Solutions

262

$

$

262

298

$

(36

)

(12

)%

(12

)%

$

245

$

298

$

315

Services

460

460

422

38

9

%

11

%

438

419

411

Unallocated amounts

(1

)

1

n/a

n/a

Total revenue

721

$

1

$

722

720

$

2

%

%

$

683

$

717

$

726

Revenue by Geography

U.S.

415

$

$

415

394

$

21

5

%

5

%

$

385

$

395

$

393

International:

EMEA

178

178

183

...

(5

)

(3

)%

(2

)%

172

187

184

APAC - Asia Pacific

75

1

76

85

(9

)

(11

)%

(9

)%

70

77

86

Americas International

53

53

58

(5

)

(9

)%

(3

)%

56

58

63

Total International

306

1

307

326

(19

)

(6

)%

(4

)%

298

322

333

Total revenue

721

$

1

$

722

720

$

2

%

1

%

$

683

$

717

$

726

* 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) Q220 Non-GAAP Results

(2) Q120 Non-GAAP Results

Three Months Ended

Three Months Ended

Mar. 31, 2020

Adj. for Fresh
Start
Accounting

Non-GAAP
Mar. 31, 2020

Dec. 31, 2019

Adj. for Fresh
Start
Accounting

Non-GAAP
Dec. 31, 2019

Revenue by Segment

Products & Solutions

$

245

$

$

245

$

298

$

298

Services

438

438

419

419

Unallocated amounts

(1

)

1

(2

)

2

Total revenue

$

682

$

1

$

683

$

715

$

2

$

717

Revenue by Geography

U.S.

$

384

$

1

$

385

$

394

$

1

$

395

International:

EMEA

172

172

186

1

187

APAC - Asia Pacific

70

70

77

77

Americas International

56

56

58

58

Total International

298

298

321

1

322

Total revenue

$

682

$

1

$

683

$

715

$

2

$

717

(3) Q419 Non-GAAP Results

(4) Q319 Non-GAAP Results

Three Months Ended

Three Months Ended

Sept. 30, 2019

Adj. for Fresh
Start
Accounting

Non-GAAP
Sept. 30, 2019

June 30, 2019

Adj. for Fresh
Start
Accounting

Non-GAAP
June 30, 2019

Revenue by Segment

Products & Solutions

$

315

$

$

315

$

298

$

$

298

Services

411

411

422

422

Unallocated amounts

(3

)

3

(3

)

3

Total revenue

$

723

$

3

$

726

$

717

$

3

$

720

Revenue by Geography

U.S.

$

392

$

1

$

393

$

392

$

2

$

394

International:

EMEA

183

1

184

183

183

APAC - Asia Pacific

85

1

86

85

85

Americas International

63

63

57

1

58

Total International

331

2

333

325

1

326

Total revenue

$

723

$

3

$

726

$

717

$

3

$

720

Avaya Holdings Corp.

Reconciliation of Non-GAAP Gross Margin and Operating Income

(Unaudited; in millions)

Three Months Ended

June 30,
2020

Mar. 31,
2020

Dec. 31,
2019

Sept. 30,
2019

June 30,
2019

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

Gross Profit

$

397

$

371

$

394

$

392

$

390

Items excluded:

Amortization of technology intangible assets

43

44

43

44

43

Adj. for fresh start accounting

1

2

3

4

5

Non-GAAP Gross Profit

$

441

$

417

$

440

$

440

$

438

GAAP Gross Margin

55.1

%

54.4

%

55.1

%

54.2

%

54.4

%

Non-GAAP Gross Margin

61.1

%

61.1

%

61.4

%

60.6

%

60.8

%

Reconciliation of Non-GAAP Operating Income

Operating Income (Loss)

$

53

$

(597

)

$

15

$

52

$

(613

)

Items excluded:

Adj. for fresh start accounting

1

4

4

4

Amortization of intangible assets

83

85

84

84

84

Restructuring charges, net

20

4

3

10

1

Advisory fees

1

39

8

1

Acquisition-related costs

1

1

Share-based compensation

7

8

6

6

8

Impairment charges

624

659

Non-GAAP Operating Income

$

164

$

125

$

151

$

165

$

145

GAAP Operating Margin

7.4

%

(87.5

)%

2.1

%

7.2

%

(85.5

)%

Non-GAAP Operating Margin

22.7

%

18.3

%

21.1

%

22.7

%

20.1

%

Avaya Holdings Corp.

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

(Unaudited; in millions)

Three Months Ended

June 30,
2020

Mar. 31,
2020

Dec. 31,
2019

Sept. 30,
2019

June 30,
2019

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

Revenue

$

261

$

245

$

298

$

314

$

297

Costs

103

92

104

113

109

Amortization of technology intangible assets

43

44

43

44

43

GAAP Gross Profit

115

109

151

157

145

Items excluded:

Amortization of technology intangible assets

43

44

43

44

43

Adj. for fresh start accounting

1

1

2

2

Non-GAAP Gross Profit

$

159

$

154

$

194

$

203

$

190

GAAP Gross Margin

44.1

%

44.5

%

50.7

%

50.0

%

48.8

%

Non-GAAP Gross Margin

60.7

%

62.9

%

65.1

%

64.4

%

63.8

%

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

Revenue

$

460

$

437

$

417

$

409

$

420

Costs

178

175

174

174

175

GAAP Gross Profit

282

262

243

235

245

Items excluded:

Adj. for fresh start accounting

1

3

2

3

Non-GAAP Gross Profit

$

282

$

263

$

246

$

237

$

248

GAAP Gross Margin

61.3

%

60.0

%

58.3

%

57.5

%

58.3

%

Non-GAAP Gross Margin

61.3

%

60.0

%

58.7

%

57.7

%

58.8

%

Avaya Holdings Corp.

Free Cash Flow

(Unaudited; in millions)

Three Months Ended

June 30,
2020

Mar. 31,
2020

Dec. 31,
2019

Sept. 30,
2019

June 30,
2019

Net cash provided by operating activities

$

45

$

20

$

12

$

66

$

52

Less:

Capital expenditures

24

22

26

29

37

Free cash flow

$

21

$

(2

)

$

(14

)

$

37

$

15

Source: Avaya Newsroom

View source version on businesswire.com: https://www.businesswire.com/news/home/20200810005152/en/

Contacts

Media Inquiries:
Alex Alias
669-242-8034
alalias@avaya.com

Investor Inquiries:
Michael McCarthy
919-425-8330
mikemccarthy@avaya.com