(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||
(Address of Principal Executive Office) | (Zip Code) |
Title of Each Class | Trading Symbol(s) | Name of each exchange on which registered |
AVAYA HOLDINGS CORP. | |||
Date: May 11, 2020 | By: | /s/ Kieran J. McGrath | |
Name: | Kieran J. McGrath | ||
Title: | Executive Vice President and Chief Financial Officer |
• | Revenues of $682 million |
• | GAAP Operating loss was $597 million; Non-GAAP Operating income was $125 million |
• | Net loss was $672 million, which includes a non-cash goodwill impairment charge of $624 million |
• | Adjusted EBITDA was $149 million |
• | 79 deals signed with a TCV of over $1 million |
• | Repurchased an additional $198 million of common stock in the quarter. As a result, we have repurchased a total of 28.9 million shares since program inception, achieving our FY20 target |
• | Ending cash and cash equivalents were $553 million |
GAAP | Non-GAAP (1) | |||||||||||||||||||||||
(In millions, except percentages) | 2Q20 | 1Q20 | 2Q19 | 2Q20 | 1Q20 | 2Q19 | ||||||||||||||||||
Revenue | $ | 682 | $ | 715 | $ | 709 | $ | 683 | $ | 717 | $ | 714 | ||||||||||||
Gross margin | 54.4 | % | 55.1 | % | 54.4 | % | 61.1 | % | 61.4 | % | 61.5 | % | ||||||||||||
Operating (loss) income | $ | (597 | ) | $ | 15 | $ | 38 | $ | 125 | $ | 151 | $ | 149 | |||||||||||
Net loss | $ | (672 | ) | $ | (54 | ) | $ | (13 | ) | n/a | n/a | n/a |
2Q20 | 1Q20 | 2Q19 | ||||||||||
Adjusted EBITDA(1) | $ | 149 | $ | 174 | $ | 166 | ||||||
Adjusted EBITDA margin(1) | 21.8 | % | 24.3 | % | 23.2 | % | ||||||
Cash provided by operations | $ | 20 | $ | 12 | $ | 37 | ||||||
Cash and cash equivalents | $ | 553 | $ | 766 | $ | 735 |
• | Total Contract Value (TCV) of $2.3B* |
• | 88% of revenue was Software & Services |
• | 64% of revenue was Recurring |
• | Added approximately 1,200 new logos |
• | Large deal activity with 79 deals over $1 million, 12 over $5 million, and 3 over $10 million |
• | Our Spaces video and collaboration usage grew 2,100% as we delivered nearly 400,000 new licenses this quarter |
• | Subscription revenue grew ~200% quarter over quarter |
• | We deployed over 2 million complementary licenses to support customer needs for business continuity and work from home |
• | Avaya launched our highly anticipated Avaya Cloud Office™ on March 31st. Avaya Cloud Office is the company’s UCaaS offering which enhances the way organizations communicate with customers, partners and colleagues across multiple channels. |
• | Avaya Spaces video and collaboration solution has become a significant differentiator and market disruptor. With the rapid onset of requirements to work from home as a result of the COVID-19 pandemic, usage of Spaces increased 2,100% in the March quarter. This CPaaS-based technology is a cloud meeting and team collaboration app that effortlessly integrates voice, video, tasks, sharing and more into one app that can be accessed from any endpoint device. |
• | Avaya was named a 2020 Channel Influencer Award winner by leading technology media Channel Partners and Channel Futures. The Avaya Edge Partner Program is a comprehensive approach that simplifies, integrates, and aligns with channel partner needs to help drive growth and introduce additional business opportunities. |
• | Avaya was named by Nuance as both Top Producing Channel Partner and Top Growth Partner for AI-powered Solutions that Enable Customers and Employees To Work Smarter Together. Avaya also received the Global Channels Partner of the Year award from Verint Systems for its ability to accelerate successful transitions to the cloud and provide multiexperience contact center and workforce engagement solutions to tens of thousands of customers worldwide. |
• | Avaya won a Best of Enterprise Connect 2020 award - with Avaya Spaces earning recognition as Best Innovation for Meeting Rooms. |
• | Hybrid cloud has been another differentiator for Avaya, enabling us to address the full range of cloud deployment models for our enterprise customers. Our Avaya OneCloud™ ReadyNow private cloud solution has been recognized with a Unified Communications Excellence Award by TMC, for delivering UC and CC solutions in a secure private cloud environment. |
• | Avaya achieved Top Leader ratings from two investment firms, State Street Global Advisors ("State Street") and Institutional Shareholder Services ("ISS"), for its Environmental, Social and Corporate Governance (ESG). These assessments provide insight into Avaya’s ESG leadership performance. State Street awarded us their rating based on how we incorporate material sustainability issues into our long-term strategy, coupled with the way we address what is material to Avaya’s business and publicly report on ESG performance. ISS describes the Prime rating it gave to Avaya as one that is “awarded to companies with an ESG performance above the sector-specific Prime threshold, which means that they fulfill ambitious absolute performance requirements”. |
• | GAAP revenue of $674 million to $704 million; Non-GAAP revenue of $675 million to $705 million |
◦ | This non-GAAP revenue figure reflects a constant currency decline of 5% to 1% |
• | GAAP operating income of $23 million to $43 million; GAAP operating margin of ~3% to 6% |
• | Non-GAAP operating income of $126 million to $146 million; non-GAAP operating margin of ~19% to 21% |
• | Adjusted EBITDA of $150 million to $170 million; Adjusted EBITDA margin of ~22% to 24% |
Three months ended March 31, | Six months ended March 31, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
REVENUE | |||||||||||||||
Products | $ | 245 | $ | 287 | $ | 543 | $ | 611 | |||||||
Services | 437 | 422 | 854 | 836 | |||||||||||
682 | 709 | 1,397 | 1,447 | ||||||||||||
COSTS | |||||||||||||||
Products: | |||||||||||||||
Costs | 92 | 105 | 196 | 220 | |||||||||||
Amortization of technology intangible assets | 44 | 44 | 87 | 87 | |||||||||||
Services | 175 | 174 | 349 | 347 | |||||||||||
311 | 323 | 632 | 654 | ||||||||||||
GROSS PROFIT | 371 | 386 | 765 | 793 | |||||||||||
OPERATING EXPENSES | |||||||||||||||
Selling, general and administrative | 248 | 251 | 531 | 508 | |||||||||||
Research and development | 51 | 52 | 103 | 105 | |||||||||||
Amortization of intangible assets | 41 | 41 | 82 | 81 | |||||||||||
Impairment of goodwill | 624 | — | 624 | — | |||||||||||
Restructuring charges, net | 4 | 4 | 7 | 11 | |||||||||||
968 | 348 | 1,347 | 705 | ||||||||||||
OPERATING (LOSS) INCOME | (597 | ) | 38 | (582 | ) | 88 | |||||||||
Interest expense | (53 | ) | (58 | ) | (111 | ) | (118 | ) | |||||||
Other income, net | 15 | 1 | 29 | 23 | |||||||||||
LOSS BEFORE INCOME TAXES | (635 | ) | (19 | ) | (664 | ) | (7 | ) | |||||||
(Provision for) benefit from income taxes | (37 | ) | 6 | (62 | ) | 3 | |||||||||
NET LOSS | $ | (672 | ) | $ | (13 | ) | $ | (726 | ) | $ | (4 | ) | |||
LOSS PER SHARE | |||||||||||||||
Basic | $ | (7.24 | ) | $ | (0.12 | ) | $ | (7.24 | ) | $ | (0.04 | ) | |||
Diluted | $ | (7.24 | ) | $ | (0.12 | ) | $ | (7.24 | ) | $ | (0.04 | ) | |||
Weighted average shares outstanding | |||||||||||||||
Basic | 93.0 | 110.8 | 101.1 | 110.5 | |||||||||||
Diluted | 93.0 | 110.8 | 101.1 | 110.5 |
March 31, 2020 | September 30, 2019 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 553 | $ | 752 | |||
Accounts receivable, net | 262 | 314 | |||||
Inventory | 56 | 63 | |||||
Contract assets | 233 | 187 | |||||
Contract costs | 130 | 114 | |||||
Other current assets | 211 | 115 | |||||
TOTAL CURRENT ASSETS | 1,445 | 1,545 | |||||
Property, plant and equipment, net | 254 | 255 | |||||
Deferred income taxes, net | 27 | 35 | |||||
Intangible assets, net | 2,720 | 2,891 | |||||
Goodwill, net | 1,476 | 2,103 | |||||
Operating lease right-of-use assets | 175 | — | |||||
Other assets | 114 | 121 | |||||
TOTAL ASSETS | $ | 6,211 | $ | 6,950 | |||
LIABILITIES | |||||||
Current liabilities: | |||||||
Debt maturing within one year | $ | — | $ | 29 | |||
Accounts payable | 254 | 291 | |||||
Payroll and benefit obligations | 125 | 116 | |||||
Contract liabilities | 477 | 472 | |||||
Operating lease liabilities | 48 | — | |||||
Business restructuring reserve | 25 | 33 | |||||
Other current liabilities | 246 | 158 | |||||
TOTAL CURRENT LIABILITIES | 1,175 | 1,099 | |||||
Non-current liabilities: | |||||||
Long-term debt, net of current portion | 2,883 | 3,090 | |||||
Pension obligations | 728 | 759 | |||||
Other post-retirement obligations | 197 | 200 | |||||
Deferred income taxes, net | 48 | 72 | |||||
Contract liabilities | 375 | 78 | |||||
Operating lease liabilities | 135 | — | |||||
Business restructuring reserve | 26 | 36 | |||||
Other liabilities | 313 | 316 | |||||
TOTAL NON-CURRENT LIABILITIES | 4,705 | 4,551 | |||||
TOTAL LIABILITIES | 5,880 | 5,650 | |||||
Commitments and contingencies | |||||||
Preferred stock, $0.01 par value; 55,000,000 shares authorized at March 31, 2020 and September 30, 2019 | |||||||
Convertible Series A, 125,000 shares issued and outstanding at March 31, 2020 and no shares issued and outstanding at September 30, 2019 | 127 | — | |||||
STOCKHOLDERS' EQUITY | |||||||
Common stock, $0.01 par value; 550,000,000 shares authorized; 82,654,594 shares issued and outstanding at March 31, 2020; and 111,046,085 shares issued and 111,033,405 shares outstanding at September 30, 2019 | 1 | 1 | |||||
Additional paid-in capital | 1,436 | 1,761 | |||||
Accumulated deficit | (1,015 | ) | (289 | ) | |||
Accumulated other comprehensive loss | (218 | ) | (173 | ) | |||
TOTAL STOCKHOLDERS' EQUITY | 204 | 1,300 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 6,211 | $ | 6,950 |
Six months ended March 31, | ||||||||
2020 | 2019 | |||||||
Net cash provided by (used for): | ||||||||
Operating activities | $ | 32 | $ | 123 | ||||
Investing activities | 246 | (48 | ) | |||||
Financing activities | (472 | ) | (39 | ) | ||||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (5 | ) | (1 | ) | ||||
Net (decrease) increase in cash, cash equivalents, and restricted cash | (199 | ) | 35 | |||||
Cash, cash equivalents, and restricted cash at beginning of period | 756 | 704 | ||||||
Cash, cash equivalents, and restricted cash at end of period | $ | 557 | $ | 739 |
Three months ended March 31, | Six months ended March 31, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Net loss | $ | (672 | ) | $ | (13 | ) | $ | (726 | ) | $ | (4 | ) | |||
Interest expense | 53 | 58 | 111 | 118 | |||||||||||
Interest income | (2 | ) | (4 | ) | (5 | ) | (7 | ) | |||||||
Provision for (benefit from) income taxes | 37 | (6 | ) | 62 | (3 | ) | |||||||||
Depreciation and amortization | 105 | 108 | 212 | 225 | |||||||||||
EBITDA | (479 | ) | 143 | (346 | ) | 329 | |||||||||
Impact of fresh start accounting adjustments | (1 | ) | 6 | (1 | ) | 9 | |||||||||
Restructuring charges, net of sublease income | 3 | 4 | 4 | 11 | |||||||||||
Advisory fees | 1 | 1 | 40 | 2 | |||||||||||
Acquisition-related costs | — | 4 | — | 7 | |||||||||||
Share-based compensation | 8 | 5 | 14 | 11 | |||||||||||
Impairment of goodwill | 624 | — | 624 | — | |||||||||||
Change in fair value of Emergence Date Warrants | (6 | ) | (3 | ) | (3 | ) | (21 | ) | |||||||
Loss on foreign currency transactions | 7 | 6 | 11 | 7 | |||||||||||
Gain on investments in equity and debt securities, net | (8 | ) | — | (20 | ) | — | |||||||||
Adjusted EBITDA | $ | 149 | $ | 166 | $ | 323 | $ | 355 |
Three Months Ended | Change | Three Months Ended | ||||||||||||||||||||||||||||||||||||
Mar. 31, 2020 | Adj. for Fresh Start Accounting | Non-GAAP Mar. 31, 2020 | Mar. 31, 2019 (4) | Amount | Pct. | Pct. in constant currency* | Dec. 31, 2019 (1) | Sept. 30, 2019 (2) | June 30, 2019 (3) | |||||||||||||||||||||||||||||
Revenue by Segment | ||||||||||||||||||||||||||||||||||||||
Products & Solutions | $ | 245 | $ | — | $ | 245 | $ | 289 | $ | (44 | ) | (15 | )% | (14 | )% | $ | 298 | $ | 315 | $ | 298 | |||||||||||||||||
Services | 438 | — | 438 | 425 | 13 | 3 | % | 4 | % | 419 | 411 | 422 | ||||||||||||||||||||||||||
Unallocated amounts | (1 | ) | 1 | — | — | — | n/a | n/a | — | — | — | |||||||||||||||||||||||||||
Total revenue | $ | 682 | $ | 1 | $ | 683 | $ | 714 | $ | (31 | ) | (4 | )% | (4 | )% | $ | 717 | $ | 726 | $ | 720 | |||||||||||||||||
Revenue by Geography | ||||||||||||||||||||||||||||||||||||||
U.S. | $ | 384 | $ | 1 | $ | 385 | $ | 378 | $ | 7 | 2 | % | 2 | % | $ | 395 | $ | 393 | $ | 394 | ||||||||||||||||||
International: | ||||||||||||||||||||||||||||||||||||||
EMEA | 172 | — | 172 | 189 | (17 | ) | (9 | )% | (7 | )% | 187 | 184 | 183 | |||||||||||||||||||||||||
APAC - Asia Pacific | 70 | — | 70 | 80 | (10 | ) | (13 | )% | (9 | )% | 77 | 86 | 85 | |||||||||||||||||||||||||
Americas International | 56 | — | 56 | 67 | (11 | ) | (16 | )% | (17 | )% | 58 | 63 | 58 | |||||||||||||||||||||||||
Total International | 298 | — | 298 | 336 | (38 | ) | (11 | )% | (10 | )% | 322 | 333 | 326 | |||||||||||||||||||||||||
Total revenue | $ | 682 | $ | 1 | $ | 683 | $ | 714 | $ | (31 | ) | (4 | )% | (4 | )% | $ | 717 | $ | 726 | $ | 720 |
* 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) Q120 Non-GAAP Results | (2) Q419 Non-GAAP Results | |||||||||||||||||||||||
Three Months Ended | Three Months Ended | |||||||||||||||||||||||
Dec. 31, 2019 | Adj. for Fresh Start Accounting | Non-GAAP Dec. 31, 2019 | Sept. 31, 2019 | Adj. for Fresh Start Accounting | Non-GAAP Sept. 31, 2019 | |||||||||||||||||||
Revenue by Segment | ||||||||||||||||||||||||
Products & Solutions | $ | 298 | $ | — | $ | 298 | $ | 315 | — | $ | 315 | |||||||||||||
Services | 419 | — | 419 | 411 | — | 411 | ||||||||||||||||||
Unallocated amounts | (2 | ) | 2 | — | (3 | ) | 3 | — | ||||||||||||||||
Total revenue | $ | 715 | $ | 2 | $ | 717 | $ | 723 | $ | 3 | $ | 726 | ||||||||||||
Revenue by Geography | ||||||||||||||||||||||||
U.S. | $ | 394 | $ | 1 | $ | 395 | $ | 392 | $ | 1 | $ | 393 | ||||||||||||
International: | ||||||||||||||||||||||||
EMEA | 186 | 1 | 187 | 183 | 1 | 184 | ||||||||||||||||||
APAC - Asia Pacific | 77 | — | 77 | 85 | 1 | 86 | ||||||||||||||||||
Americas International | 58 | — | 58 | 63 | — | 63 | ||||||||||||||||||
Total International | 321 | 1 | 322 | 331 | 2 | 333 | ||||||||||||||||||
Total revenue | $ | 715 | $ | 2 | $ | 717 | $ | 723 | $ | 3 | $ | 726 |
(3) Q319 Non-GAAP Results | (4) Q219 Non-GAAP Results | |||||||||||||||||||||||
Three Months Ended | Three Months Ended | |||||||||||||||||||||||
June 30, 2019 | Adj. for Fresh Start Accounting | Non-GAAP June 30, 2019 | Mar. 31, 2019 | Adj. for Fresh Start Accounting | Non-GAAP Mar. 31, 2019 | |||||||||||||||||||
Revenue by Segment | ||||||||||||||||||||||||
Products & Solutions | $ | 298 | $ | — | $ | 298 | $ | 289 | $ | — | $ | 289 | ||||||||||||
Services | 422 | — | 422 | 425 | — | 425 | ||||||||||||||||||
Unallocated amounts | (3 | ) | 3 | — | (5 | ) | 5 | — | ||||||||||||||||
Total revenue | $ | 717 | $ | 3 | $ | 720 | $ | 709 | $ | 5 | $ | 714 | ||||||||||||
Revenue by Geography | ||||||||||||||||||||||||
U.S. | $ | 392 | $ | 2 | $ | 394 | $ | 375 | $ | 3 | $ | 378 | ||||||||||||
International: | ||||||||||||||||||||||||
EMEA | 183 | — | 183 | 188 | 1 | 189 | ||||||||||||||||||
APAC - Asia Pacific | 85 | — | 85 | 79 | 1 | 80 | ||||||||||||||||||
Americas International | 57 | 1 | 58 | 67 | — | 67 | ||||||||||||||||||
Total International | 325 | 1 | 326 | 334 | 2 | 336 | ||||||||||||||||||
Total revenue | $ | 717 | $ | 3 | $ | 720 | $ | 709 | $ | 5 | $ | 714 |
Three Months Ended | ||||||||||||||||||||
Mar. 31, 2020 | Dec. 31, 2019 | Sept. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | ||||||||||||||||
Reconciliation of Non-GAAP Gross Profit and Non-GAAP Gross Margin | ||||||||||||||||||||
Gross Profit | $ | 371 | $ | 394 | $ | 392 | $ | 390 | $ | 386 | ||||||||||
Items excluded: | ||||||||||||||||||||
Amortization of technology intangible assets | 44 | 43 | 44 | 43 | 44 | |||||||||||||||
Adj. for fresh start accounting | 2 | 3 | 4 | 5 | 9 | |||||||||||||||
Non-GAAP Gross Profit | $ | 417 | $ | 440 | $ | 440 | $ | 438 | $ | 439 | ||||||||||
GAAP Gross Margin | 54.4 | % | 55.1 | % | 54.2 | % | 54.4 | % | 54.4 | % | ||||||||||
Non-GAAP Gross Margin | 61.1 | % | 61.4 | % | 60.6 | % | 60.8 | % | 61.5 | % | ||||||||||
Reconciliation of Non-GAAP Operating Income | ||||||||||||||||||||
Operating (Loss) Income | $ | (597 | ) | $ | 15 | $ | 52 | $ | (613 | ) | $ | 38 | ||||||||
Items excluded: | ||||||||||||||||||||
Adj. for fresh start accounting | — | 4 | 4 | 4 | 12 | |||||||||||||||
Amortization of intangible assets | 85 | 84 | 84 | 84 | 85 | |||||||||||||||
Restructuring charges, net | 4 | 3 | 10 | 1 | 4 | |||||||||||||||
Advisory fees | 1 | 39 | 8 | 1 | 1 | |||||||||||||||
Acquisition-related costs | — | — | 1 | 1 | 4 | |||||||||||||||
Share-based compensation | 8 | 6 | 6 | 8 | 5 | |||||||||||||||
Impairment of goodwill and intangible assets | 624 | — | — | 659 | — | |||||||||||||||
Non-GAAP Operating Income | $ | 125 | $ | 151 | $ | 165 | $ | 145 | $ | 149 | ||||||||||
GAAP Operating Margin | -87.5 | % | 2.1 | % | 7.2 | % | (85.5 | )% | 5.4 | % | ||||||||||
Non-GAAP Operating Margin | 18.3 | % | 21.1 | % | 22.7 | % | 20.1 | % | 20.9 | % |
Three Months Ended | ||||||||||||||||||||
Mar. 31, 2020 | Dec. 31, 2019 | Sept. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | ||||||||||||||||
Reconciliation of Non-GAAP Gross Profit and Non-GAAP Gross Margin - Products | ||||||||||||||||||||
Revenue | $ | 245 | $ | 298 | $ | 314 | $ | 297 | $ | 287 | ||||||||||
Costs | 92 | 104 | 113 | 109 | 105 | |||||||||||||||
Amortization of technology intangible assets | 44 | 43 | 44 | 43 | 44 | |||||||||||||||
GAAP Gross Profit | 109 | 151 | 157 | 145 | 138 | |||||||||||||||
Items excluded: | ||||||||||||||||||||
Amortization of technology intangible assets | 44 | 43 | 44 | 43 | 44 | |||||||||||||||
Adj. for fresh start accounting | 1 | — | 2 | 2 | 2 | |||||||||||||||
Non-GAAP Gross Profit | $ | 154 | $ | 194 | $ | 203 | $ | 190 | $ | 184 | ||||||||||
GAAP Gross Margin | 44.5 | % | 50.7 | % | 50.0 | % | 48.8 | % | 48.1 | % | ||||||||||
Non-GAAP Gross Margin | 62.9 | % | 65.1 | % | 64.4 | % | 63.8 | % | 63.7 | % | ||||||||||
Reconciliation of Non-GAAP Gross Profit and Non-GAAP Gross Margin - Services | ||||||||||||||||||||
Revenue | $ | 437 | $ | 417 | $ | 409 | $ | 420 | $ | 422 | ||||||||||
Costs | 175 | 174 | 174 | 175 | 174 | |||||||||||||||
GAAP Gross Profit | 262 | 243 | 235 | 245 | 248 | |||||||||||||||
Items excluded: | ||||||||||||||||||||
Adj. for fresh start accounting | 1 | 3 | 2 | 3 | 7 | |||||||||||||||
Non-GAAP Gross Profit | $ | 263 | $ | 246 | $ | 237 | $ | 248 | $ | 255 | ||||||||||
GAAP Gross Margin | 60.0 | % | 58.3 | % | 57.5 | % | 58.3 | % | 58.8 | % | ||||||||||
Non-GAAP Gross Margin | 60.0 | % | 58.7 | % | 57.7 | % | 58.8 | % | 60.0 | % |
Three Months Ended | ||||||||||||||||||||
Mar. 31, 2020 | Dec. 31, 2019 | Sept. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | ||||||||||||||||
Net cash provided by operating activities | $ | 20 | $ | 12 | $ | 66 | $ | 52 | $ | 37 | ||||||||||
Less: | ||||||||||||||||||||
Capital expenditures | 22 | 26 | 29 | 37 | 26 | |||||||||||||||
Free cash flow | $ | (2 | ) | $ | (14 | ) | $ | 37 | $ | 15 | $ | 11 |
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