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Avaya Holdings Corp. – ‘8-K’ for 8/13/19 – ‘EX-99.1’

On:  Tuesday, 8/13/19, at 7:26am ET   ·   For:  8/13/19   ·   Accession #:  1418100-19-87   ·   File #:  1-38289

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  As Of               Filer                 Filing    For·On·As Docs:Size

 8/13/19  Avaya Holdings Corp.              8-K:2,7,9   8/13/19    3:4.1M

Current Report   —   Form 8-K   —   Sect. 13 / 15(d) – SEA’34
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K         Current Report                                      HTML     22K 
 2: EX-99.1     Miscellaneous Exhibit                               HTML    329K 
 3: EX-99.2     Miscellaneous Exhibit                               HTML     29K 


‘EX-99.1’   —   Miscellaneous Exhibit


This Exhibit is an HTML Document rendered as filed.  [ Alternative Formats ]



 <!   C:   C: 
  Exhibit  
Exhibit 99.1

avayalogoera10.jpg

        
Media Inquiries:                            Investor Inquiries:
Alex Alias                                Michael McCarthy
669-242-8034                                919-425-8330
alalias@avaya.com                             mikemccarthy@avaya.com



Avaya Reports Third Quarter Fiscal 2019 Financial Results


GAAP revenue of $717 million; non-GAAP revenue of $720 million
GAAP operating margin of (85.5)%; non-GAAP operating margin of 20.1%
Recorded a non-cash goodwill impairment charge of $657 million
Public cloud seats increased more than 170% year-over-year
Awarded two landmark US Government opportunities in August, including one with the Social Security Administration valued at up to $400 million

Santa Clara, Calif. - August 13, 2019 - Avaya Holdings Corp. (NYSE: AVYA) today reported financial results for the third quarter ended June 30, 2019.
 
GAAP
 
Non-GAAP (1)
(In millions, except percentages)
 
Q3 2019
 
Q2 2019
 
Q3 2018
 
Q3 2019
 
Q2 2019
 
Q3 2018
Revenue
 
$
717

 
$
709

 
$
692

 
$
720

 
$
714

 
$
755

Gross margin
 
54.4
 %
 
54.4
%
 
50.9
 %
 
60.8
%
 
61.5
%
 
61.9
%
Operating margin
 
(85.5
)%
 
5.4
%
 
(7.1
)%
 
20.1
%
 
20.9
%
 
20.0
%

"I am pleased with our solid execution and the continued strength in our strategic growth areas, especially in our public and private cloud ReadyNow offers. We believe we are well positioned to capitalize on these long-term growth opportunities," stated Jim Chirico, President and CEO of Avaya. "The progress we have made drove third quarter financial results toward the high end of our guidance and continued into the fourth quarter as demonstrated by the two landmark government wins."

Mr. Chirico added, "As an update on the strategic alternatives process we are conducting with J.P. Morgan, at this time we are in advanced discussions with multiple parties on a range of strategic transactions to maximize shareholder value. We expect to bring this process to a conclusion within the next 30 days."





During the quarter, Avaya recorded a non-cash goodwill impairment charge of $657 million related to the company’s Products & Solutions segment. The charge was taken after an interim assessment prompted by a sustained decline in the company’s stock price during the period, which the company believes was due to year-to-date financial results and revision of fiscal 2019 guidance. The company’s long-term forecast provided at its December 2018 investor day should no longer be relied upon. Management expects to provide an updated long-term outlook upon completion of the company’s review of its strategic alternatives.

Third Quarter Fiscal 2019 Financial Results(1) 
On October 1, 2018, Avaya adopted the new revenue recognition standard, Accounting Standards Codification 606 ("ASC 606"), using the modified retrospective transition method. Accordingly, results for reporting periods beginning after September 30, 2018 are presented under ASC 606 while prior period financial information has not been adjusted and continues to be reported in accordance with GAAP that existed prior to the adoption of ASC 606 ("ASC 605").
GAAP revenue was $717 million, $8 million higher than the second quarter of fiscal 2019, and $25 million higher than the third quarter of fiscal 2018 ended June 30, 2018. Non-GAAP revenue(1) was $720 million, $6 million higher than the second quarter of fiscal 2019, and $35 million lower than the third quarter of fiscal 2018.
GAAP gross margin was 54.4%, compared to 54.4% for the second quarter of fiscal 2019 and 50.9% for the third quarter of fiscal 2018. Non-GAAP gross margin(1) was 60.8%, compared to 61.5% for the second quarter of fiscal 2019 and 61.9% for the third quarter of fiscal 2018.
GAAP operating loss was $613 million, primarily as a result of the aforementioned impairment charge, compared to GAAP operating income of $38 million for the second quarter of fiscal 2019 and an operating loss of $49 million for the third quarter of fiscal 2018. Non-GAAP operating income(1) was $145 million, compared to $149 million for the second quarter of fiscal 2019, and $151 million for the third quarter of fiscal 2018.
GAAP net loss was $633 million, primarily as a result of the aforementioned impairment charge, compared to GAAP net loss of $13 million for the second quarter of fiscal 2019, and GAAP net loss of $88 million for the third quarter of fiscal 2018.
Adjusted EBITDA(1) was $167 million or 23.2% of non-GAAP revenue, compared to adjusted EBITDA of $166 million, or 23.2% of non-GAAP revenue, for the second quarter of fiscal 2019 and $175 million, or 23.2% of non-GAAP revenue, for the third quarter of fiscal 2018.
Cash provided by operating activities was $52 million, compared to cash provided by operating activities of $37 million for the second quarter of fiscal 2019 and cash provided by operating activities of $83 million for the third quarter of fiscal 2018.




At the end of the third quarter of fiscal 2019, cash and cash equivalents totaled $729 million, compared to $735 million at the end of the second quarter of fiscal 2019 and $685 million at the end of the third quarter of fiscal 2018.

Third Quarter Fiscal 2019 Business Metrics(1) 
Total Contract Value (TCV) of $2.4 billion*
84% of non-GAAP revenue was Software & Services
60% of non-GAAP product revenue was Software
59% of non-GAAP revenue was Recurring
Added approximately 1,400 new logos
Generated $52 million in cash flow from operations, $15 million in free cash flow(1) 


(1) Non-GAAP revenue, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP operating margin, adjusted EBITDA and free cash flow are not measures calculated in accordance with generally accepted accounting principles in the U.S. ("GAAP"). Refer to the Supplemental Financial Information accompanying this press release for more information, including a reconciliation of these measures to the most closely comparable measure calculated in accordance with GAAP.

* We define TCV as the value of all active ratable contracts that have not been recognized as revenue, including both billed and unbilled backlog.

Third Quarter Fiscal 2019 Company Highlights
In August, Avaya was awarded two landmark US Government opportunities. Avaya, along with its service provider partner, was selected by the Social Security Administration to modernize the agency’s UC and CC infrastructure in a 10-year deal valued at up to $400 million. The second is a multi-year award to provide secure FedRamp Certified Cloud services across several agencies that could be worth up to several hundred million dollars.
Avaya was selected by Intel for Intel’s AI Builders Program. Intel and Avaya engineers are now jointly engaged at deep technical levels to improve the performance and scale of Avaya’s AI solutions, such as Avaya Conversational Intelligence, when deployed on Intel hardware.
Announced partnership with Tenfold to help customers integrate their Avaya contact center with leading CRM providers such as Salesforce, Microsoft and ServiceNow.
Announced partnership with Even Flow Distribution, a leading South African based value-added distributor of unified communication, telecom, video conferencing, wireless and networking technology, to bring its solutions to market. Even Flow Distribution will supply and support Avaya’s contact center and unified communications solutions, with a particular focus on Avaya IP Office.




Announced that Avaya IX Workplace unified communications solutions for the enterprise can now deliver emergency data to public safety agencies through an integration with 911 Secure SENTRY™ and RapidSOS.
Announced partnership with Standard Chartered Bank to deliver a multi-year client experience transformation project that will enable the bank to more fully align its services with clients’ fast-paced, digitally connected lives. Using the Avaya OneCloud Private solution enables Standard Chartered Bank to enhance its customers’ experience by using Avaya’s unified communications and contact center solutions being delivered on their own private cloud.
Received the 2019 Contact Center Vendor of the Year Award at the Frost & Sullivan 2019 India ICT Awards.

Financial Outlook - Q4 Fiscal 2019 under ASC 606
Our financial outlook reflects the adoption of ASC 606, which became effective for Avaya on October 1, 2018. Avaya has adopted ASC 606 using the modified retrospective transition method.
GAAP revenue of $735 million to $755 million; non-GAAP revenue of $738 million to $758 million
GAAP operating income of $37 million to $52 million; GAAP operating margin of ~5% to ~7%
Non-GAAP operating income of $162 million to $177 million; non-GAAP operating margin of ~22% to ~23%
Adjusted EBITDA of $183 million to $198 million; Adjusted EBITDA margin of ~25% to ~26%
Approximately 111 million weighted average shares outstanding

Financial Outlook - Fiscal 2019 under ASC 606
GAAP revenue of $2.90 billion to $2.92 billion; non-GAAP revenue of $2.92 billion to $2.94 billion
Cloud and innovation ~11% of non-GAAP revenue
GAAP operating loss of $488 million to $473 million; GAAP operating margin of ~(17)% to ~(16)%
Non-GAAP operating income of $626 million to $641 million; non-GAAP operating margin of ~21% to ~22%
Adjusted EBITDA of $705 million to $720 million; Adjusted EBITDA margin of ~24%
Cash flow from operations of ~7% of non-GAAP revenue
Approximately 111 million weighted average shares outstanding
Cash requirements for restructuring, pension & OPEB, cash taxes, capital spending and net cash interest payments for fiscal year 2019 are expected to be:
Restructuring: $50 million to $55 million
Pension/OPEB: ~$65 million




Cash Taxes: $55 million to $65 million
Capital Expenditures: ~$120 million
Net Cash Interest Payments: ~$200 million

Avaya’s outlook does not include the potential impact of any business combinations, asset acquisitions, divestitures, strategic investments, potential impairments or other significant transactions that may be completed after August 13, 2019. Actual results may differ materially from Avaya’s outlook as a result of, among other things, the factors described under "Forward-Looking Statements" below.

Conference Call and Webcast
Avaya will host a live webcast and conference call to discuss its financial results at 8:30 a.m. Eastern Time on August 13, 2019. To access the live conference call by phone, listeners should dial +1-833-224-0545 in the U.S. or Canada and +1-647-689-4064 for international callers. To join the live webcast, listeners should access the investor page of Avaya's website at https://investors.avaya.com.

Following the live webcast, a replay will be available on the investor page of Avaya's website for a period of one year. A replay of the conference call will be available for one week soon after the call by phone by dialing +1-800-585-8367 in the U.S. or Canada and +1-416-621-4642 for international callers, using the conference access code: 6988044.

About Avaya
Businesses are built on the experiences they provide, and every day millions of those experiences are built by Avaya (NYSE: AVYA). For over one hundred years, we’ve enabled organizations around the globe to win - by creating intelligent communications experiences for customers and employees. Avaya builds open, converged and innovative solutions to enhance and simplify communications and collaboration - in the cloud, on-premise or a hybrid of both. To grow your business, we’re committed to innovation, partnership, and a relentless focus on what’s next. We’re the technology company you trust to help you deliver Experiences that Matter. Visit us at www.avaya.com.

Cautionary Note Regarding Forward-Looking Statements
This document contains certain "forward-looking statements." All statements other than statements of historical fact are “forward-looking” statements for purposes of the U.S. federal and state securities laws. These statements may be identified by the use of forward looking terminology such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "our vision," "plan," "potential," "preliminary," "predict," "should," "will," or "would" or the negative thereof or other variations thereof or comparable terminology and include, but are not limited to, the outlook for the fourth quarter of fiscal 2019 and fiscal year 2019, including the expected impact of the adoption of ASC 606, and statements about the Board's exploration of strategic alternatives. The Company has based these forward-looking statements on its current expectations, assumptions, estimates and




projections. While the Company believes these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond its control. Risks and uncertainties that may cause these forward-looking statements to be inaccurate include, among others: the announcement that the Board is exploring strategic alternatives and the potential impact of such announcement on the Company's current or potential customers, partners or personnel; the cost of such exploration and the disruption it may have on the Company's operations, including diverting the attention of the Company's management and employees; and other risks discussed in the Company's Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission (the "SEC"). These risks and uncertainties may cause the Company's actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. For a further list and description of such risks and uncertainties, please refer to the Company’s filings with the SEC that are available at www.sec.gov. The Company cautions you that the list of important factors included in the Company’s SEC filings may not contain all of the material factors that are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this report may not in fact occur. The Company undertakes no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.




Avaya Holdings Corp.
Condensed Consolidated Statements of Operations (Unaudited)
(In millions, except per share amounts)

 
 
Successor
 
 
Predecessor
 
Non- GAAP Combined(1)
 
 
Three months ended
June 30, 2019
 
Three months ended
June 30, 2018
 
Nine months ended
June 30, 2019
 
 
 
 
Nine months ended
June 30, 2018
REVENUE
 
 
 
 
 
 
 
 
 
 
 
 
 
Products
 
$
297

 
$
300

 
$
908

 
$
664

 
 
$
253

 
$
917

Services
 
420

 
392

 
1,256

 
848

 
 
351

 
1,199

 
 
717

 
692

 
2,164

 
1,512

 
 
604

 
2,116

COSTS
 
 
 
 
 
 
 
 
 
 
 
 
 
Products:
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs
 
109

 
114

 
329

 
257

 
 
84

 
341

Amortization of technology intangible assets
 
43

 
44

 
130

 
92

 
 
3

 
95

Services
 
175

 
182

 
522

 
410

 
 
155

 
565

 
 
327

 
340

 
981

 
759

 
 
242

 
1,001

GROSS PROFIT
 
390

 
352

 
1,183

 
753

 
 
362

 
1,115

OPERATING EXPENSES
 
 
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative
 
253

 
281

 
761

 
613

 
 
264

 
877

Research and development
 
49

 
51

 
154

 
110

 
 
38

 
148

Amortization of intangible assets
 
41

 
39

 
122

 
86

 
 
10

 
96

Impairment charges
 
659

 

 
659

 

 
 

 

Restructuring charges, net
 
1

 
30

 
12

 
80

 
 
14

 
94

 
 
1,003

 
401

 
1,708

 
889

 
 
326

 
1,215

OPERATING (LOSS) INCOME
 
(613
)
 
(49
)
 
(525
)
 
(136
)
 
 
36

 
(100
)
Interest expense
 
(59
)
 
(56
)
 
(177
)
 
(112
)
 
 
(14
)
 
(126
)
Other income (expense), net
 
12

 
37

 
35

 
32

 
 
(2
)
 
30

Reorganization items, net
 

 

 

 

 
 
3,416

 
3,416

(LOSS) INCOME BEFORE INCOME TAXES
 
(660
)
 
(68
)
 
(667
)
 
(216
)
 
 
3,436

 
3,220

Benefit from (provision for) income taxes
 
27

 
(20
)
 
30

 
235

 
 
(459
)
 
(224
)
NET (LOSS) INCOME
 
$
(633
)
 
$
(88
)
 
$
(637
)
 
$
19

 
 
$
2,977

 
$
2,996

(LOSS) EARNINGS PER SHARE
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
(5.70
)
 
$
(0.80
)
 
$
(5.75
)
 
$
0.17

 
 
$
5.19

 
 
Diluted
 
$
(5.70
)
 
$
(0.80
)
 
$
(5.75
)
 
$
0.17

 
 
$
5.19

 
 
Weighted average shares outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
111.0

 
109.8

 
110.7

 
109.8

 
 
497.3

 
 
Diluted
 
111.0

 
109.8

 
110.7

 
111.0

 
 
497.3

 
 
 
(1)  See "Use of non-GAAP (Adjusted) Financial Measures" below.






Avaya Holdings Corp.
Condensed Consolidated Balance Sheets (Unaudited)
(In millions, except per share and shares amounts)

 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
729

 
$
700

Accounts receivable, net
276

 
377

Inventory
71

 
81

Contract assets
178

 

Contract costs
128

 

Other current assets
149

 
170

TOTAL CURRENT ASSETS
1,531

 
1,328

Property, plant and equipment, net
243

 
250

Deferred income taxes, net
25

 
29

Intangible assets, net
2,978

 
3,234

Goodwill, net
2,105

 
2,764

Other assets
109

 
74

TOTAL ASSETS
$
6,991

 
$
7,679

LIABILITIES
 
 
 
Current liabilities:
 
 
 
Debt maturing within one year
$
29

 
$
29

Accounts payable
292

 
266

Payroll and benefit obligations
126

 
145

Contract liabilities
470

 
484

Business restructuring reserve
36

 
51

Other current liabilities
130

 
148

TOTAL CURRENT LIABILITIES
1,083

 
1,123

Non-current liabilities:
 
 
 
Long-term debt, net of current portion
3,091

 
3,097

Pension obligations
619

 
671

Other post-retirement obligations
181

 
176

Deferred income taxes, net
120

 
140

Business restructuring reserve
37

 
47

Other liabilities
390

 
374

TOTAL NON-CURRENT LIABILITIES
4,438

 
4,505

TOTAL LIABILITIES
5,521

 
5,628

Commitments and contingencies
 
 
 
STOCKHOLDERS' EQUITY
 
 
 
Preferred stock, $0.01 par value; 55,000,000 shares authorized, no shares issued or outstanding at June 30, 2019 and September 30, 2018

 

Common stock, $0.01 par value; 550,000,000 shares authorized; 110,887,967 shares issued and 110,875,287 shares outstanding at June 30, 2019; and 110,218,653 shares issued and 110,012,790 shares outstanding at September 30, 2018
1

 
1

Additional paid-in capital
1,756

 
1,745

(Accumulated deficit) retained earnings
(255
)
 
287

Accumulated other comprehensive (loss) income
(32
)
 
18

TOTAL STOCKHOLDERS' EQUITY
1,470

 
2,051

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
6,991

 
$
7,679






Avaya Holdings Corp.
Condensed Statements of Cash Flows
(Unaudited; in millions)

 
 
Successor
 
 
Predecessor
 
Non-GAAP Combined(1)
 
 
Nine months ended June 30, 2019
 
 
 
 
Nine months ended
June 30, 2018
Net cash provided by (used for):
 
 
 
 
 
 
 
 
 
Operating activities
 
$
175

 
$
177

 
 
$
(414
)
 
$
(237
)
Investing activities
 
(95
)
 
(192
)
 
 
(13
)
 
(205
)
Financing activities
 
(51
)
 
284

 
 
(102
)
 
182

Effect of exchange rate changes on cash, cash equivalents, and restricted cash
 
1

 
(5
)
 
 
(2
)
 
(7
)
Net increase (decrease) in cash, cash equivalents, and restricted cash
 
30

 
264

 
 
(531
)
 
(267
)
Cash, cash equivalents, and restricted cash at beginning of period
 
704

 
435

 
 
966

 
966

Cash, cash equivalents, and restricted cash at end of period
 
$
734

 
$
699

 
 
$
435

 
$
699

 
(1)  See "Use of non-GAAP (Adjusted) Financial Measures" below.


Use of non-GAAP (Adjusted) Financial Measures
The information furnished in this release includes non-GAAP financial measures that differ from measures calculated in accordance with generally accepted accounting principles in the United States of America (“GAAP”), including the combined nine month period ending June 30, 2018 and financial measures labeled as “non-GAAP” or “adjusted.”
Although GAAP requires that we report on our results for the periods October 1, 2017 through December 15, 2017 (the "Predecessor" period) and December 16, 2017 through June 30, 2018 (the "Successor" period) separately, management reviews the Company’s operating results for the nine months ended June 30, 2018 by combining the results of these periods because such presentation provides the most meaningful comparison of our results. The Company cannot adequately benchmark the operating results of the 197-day period ended June 30, 2018 against any of the previous periods reported in its condensed consolidated financial statements and does not believe that reviewing the results of this period in isolation would be useful in identifying any trends regarding the Company’s overall performance. Management believes that the key performance metrics such as revenue, gross margin and operating income, among others, when combined for the nine months ended June 30, 2018 provide meaningful comparisons to other periods and are useful in identifying current business trends.
EBITDA is defined as net income (loss) before income taxes, interest expense, interest income and depreciation and amortization. Adjusted EBITDA is EBITDA further adjusted to exclude certain charges and other adjustments described in our SEC filings and the tables below.
We believe that including supplementary information concerning adjusted EBITDA is appropriate because it serves as a basis for determining management and employee compensation and it is used as a basis for calculating covenants in our credit agreements. In addition, we believe adjusted EBITDA provides more comparability between our historical results and results




that reflect purchase accounting and our current capital structure. We also present EBITDA and adjusted EBITDA because we believe analysts and investors utilize these measures in analyzing our results. Adjusted EBITDA measures our financial performance based on operational factors that management can impact in the short-term, such as our pricing strategies, volume, costs and expenses of the organization, and it presents our financial performance in a way that can be more easily compared to prior quarters or fiscal years.
EBITDA and adjusted EBITDA have limitations as analytical tools. EBITDA measures do not represent net income (loss) or cash flow from operations as those terms are defined by GAAP and do not necessarily indicate whether cash flows will be sufficient to fund cash needs. However, these terms are not necessarily comparable to other similarly titled captions of other companies due to the potential inconsistencies in the method of calculation. Adjusted EBITDA excludes the impact of earnings or charges resulting from matters that we consider not to be indicative of our ongoing operations. In particular, our formulation of adjusted EBITDA allows adjustment for certain amounts that are included in calculating net income (loss), however, these are expenses that may recur, may vary and are difficult to predict.
We also present the measures non-GAAP revenue, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income and non-GAAP operating margin as a supplement to our unaudited condensed consolidated financial statements presented in accordance with GAAP. We believe these non-GAAP measures are the most meaningful for period to period comparisons because they exclude the impact of the earnings and charges noted in the applicable tables below that resulted from matters that we consider not to be indicative of our ongoing operations.
The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, as substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and may be different from the non-GAAP financial measures used by other companies. In addition, these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP.
We do not provide a forward-looking reconciliation of expected fourth quarter and full year fiscal 2019 non-GAAP revenue, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP operating margin or adjusted EBITDA guidance as the amount and significance of special items required to develop meaningful comparable GAAP financial measures cannot be estimated at this time without unreasonable efforts. These special items could be meaningful.
The following tables present Successor, Predecessor and combined results and reconcile historical GAAP measures to non-GAAP measures.





Avaya Holdings Corp.
Supplemental Schedules of Non-GAAP Adjusted EBITDA
(Unaudited; in millions)


 
 
Successor
 
 
Predecessor
 
Non-GAAP Combined
 
 
Three months ended June 30, 2019
 
Three months ended June 30, 2018
 
Nine months ended June 30, 2019
 
 
 
 
Nine months ended June 30, 2018
Net (loss) income
 
$
(633
)
 
$
(88
)
 
$
(637
)
 
$
19

 
 
$
2,977

 
$
2,996

Interest expense
 
59

 
56

 
177

 
112

 
 
14

 
126

Interest income
 
(4
)
 
(1
)
 
(11
)
 
(2
)
 
 
(2
)
 
(4
)
(Benefit from) provision for income taxes
 
(27
)
 
20

 
(30
)
 
(235
)
 
 
459

 
224

Depreciation and amortization
 
110

 
119

 
335

 
264

 
 
31

 
295

EBITDA
 
(495
)
 
106

 
(166
)
 
158

 
 
3,479

 
3,637

Impact of fresh start accounting adjustments
 
(2
)
 
54

 
7

 
167

 
 

 
167

Restructuring charges, net
 
1

 
30

 
12

 
80

 
 
14

 
94

Advisory fees
 
1

 
3

 
3

 
15

 
 
3

 
18

Acquisition-related costs
 
1

 
4

 
8

 
11

 
 

 
11

Reorganization items, net
 

 

 

 

 
 
(3,416
)
 
(3,416
)
Non-cash share-based compensation
 
8

 
7

 
19

 
13

 
 

 
13

Impairment charges
 
659

 

 
659

 

 
 

 

Loss on sale/disposal of long-lived assets, net
 

 
2

 

 
4

 
 
1

 
5

Resolution of certain legal matters
 

 

 

 

 
 
37

 
37

Change in fair value of Emergence Date Warrants
 
(7
)
 
(6
)
 
(28
)
 
9

 
 

 
9

Loss (gain) on foreign currency transactions
 
1

 
(25
)
 
8

 
(24
)
 
 

 
(24
)
Pension/OPEB/nonretirement postemployment benefits and long-term disability costs
 

 

 

 

 
 
17

 
17

Adjusted EBITDA
 
$
167

 
$
175

 
$
522

 
$
433

 
 
$
135

 
$
568

 





Avaya Holdings Corp.
Supplemental Schedules of Non-GAAP Revenue
(Unaudited; in millions)
 
 
Three Months Ended
 
Change
 
Three Months Ended
 
 
 
Adj. for Fresh Start Accounting
 
Non-GAAP June 30, 2019
 
Non-GAAP June 30, 2018 (4)
 
Amount
 
Pct.
 
Pct., net of fx impact
 
Non-GAAP Mar. 31, 2019 (1)
 
Non-GAAP Dec. 31, 2018 (2)
 
Non-GAAP Sept. 30, 2018 (3)
Revenue by Segment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Products & Solutions
 
$
298

 
$

 
$
298

 
$
322

 
$
(24
)
 
(7
)%
 
(7
)%
 
$
289

 
$
326

 
$
336

Services
 
422

 

 
422

 
433

 
(11
)
 
(3
)%
 
(1
)%
 
425

 
422

 
434

Unallocated amounts
 
(3
)
 
3

 

 

 

 
n/a

 
n/a

 

 

 

Total revenue
 
$
717

 
$
3

 
$
720

 
$
755

 
$
(35
)
 
(5
)%
 
(3
)%
 
$
714

 
$
748

 
$
770

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue by Geography
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S.
 
$
392

 
$
2

 
$
394

 
$
399

 
$
(5
)
 
(1
)%
 
(1
)%
 
$
378

 
$
401

 
$
417

International:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  EMEA
 
183

 

 
183

 
202

 
(19
)
 
(9
)%
 
(6
)%
 
189

 
200

 
202

  APAC - Asia Pacific
 
85

 

 
85

 
86

 
(1
)
 
(1
)%
 
1
 %
 
80

 
79

 
81

  Americas International
 
57

 
1

 
58

 
68

 
(10
)
 
(15
)%
 
(12
)%
 
67

 
68

 
70

Total International
 
325

 
1

 
326

 
356

 
(30
)
 
(8
)%
 
(6
)%
 
336

 
347

 
353

Total revenue
 
$
717

 
$
3

 
$
720

 
$
755

 
$
(35
)
 
(5
)%
 
(3
)%
 
$
714

 
$
748

 
$
770

(1) - (4) Reconciliation of Non-GAAP measures above:
 
 
(1) Q219 Non-GAAP Results
 
(2) Q119 Non-GAAP Results
 
 
Three Months Ended
 
Three Months Ended
 
 
 
Adj. for Fresh Start Accounting
 
Non-GAAP Mar. 31, 2019
 
 
Adj. for Fresh Start Accounting
 
Non-GAAP Dec. 31, 2018
Revenue by Segment
 
 
 
 
 
 
 
 
 
 
 
 
Products & Solutions
 
$
289

 
$

 
$
289

 
$
326

 
$

 
$
326

Services
 
425

 

 
425

 
422

 

 
422

Unallocated amounts
 
(5
)
 
5

 

 
(10
)
 
10

 

Total revenue
 
$
709

 
$
5

 
$
714

 
$
738

 
$
10

 
$
748

 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue by Geography
 
 
 
 
 
 
 
 
 
 
 
 
U.S.
 
$
375

 
$
3

 
$
378

 
$
394

 
$
7

 
$
401

International:
 
 
 
 
 
 
 
 
 
 
 
 
  EMEA
 
188

 
1

 
189

 
199

 
1

 
200

  APAC - Asia Pacific
 
79

 
1

 
80

 
78

 
1

 
79

  Americas International
 
67

 

 
67

 
67

 
1

 
68

Total International
 
334

 
2

 
336

 
344

 
3

 
347

Total revenue
 
$
709

 
$
5

 
$
714

 
$
738

 
$
10

 
$
748


 
 
(3) Q418 Non-GAAP Results
 
(4) Q318 Non-GAAP Results
 
 
Three Months Ended
 
Three Months Ended
 
 
 
Adj. for Fresh Start Accounting
 
 
 
Adj. for Fresh Start Accounting
 
Non-GAAP June 30, 2018
Revenue by Segment
 
 
 
 
 
 
 
 
 
 
 
 
Products & Solutions
 
$
336

 
$

 
$
336

 
$
322

 

 
$
322

Services
 
434

 

 
434

 
433

 

 
433

Unallocated amounts
 
(35
)
 
35

 

 
(63
)
 
63

 

Total revenue
 
$
735

 
$
35

 
$
770

 
$
692

 
$
63

 
$
755

 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue by Geography
 
 
 
 
 
 
 
 
 
 
 
 
U.S.
 
$
393

 
$
24

 
$
417

 
$
356

 
$
43

 
$
399

International:
 
 
 
 
 
 
 
 
 
 
 
 
  EMEA
 
196

 
6

 
202

 
193

 
9

 
202

  APAC - Asia Pacific
 
78

 
3

 
81

 
81

 
5

 
86

  Americas International
 
68

 
2

 
70

 
62

 
6

 
68

Total International
 
342

 
11

 
353

 
336

 
20

 
356

Total revenue
 
$
735

 
$
35

 
$
770

 
$
692

 
$
63

 
$
755






Avaya Holdings Corp.
Supplemental Schedules of Non-GAAP Reconciliations
(Unaudited; in millions)
 
 
Three Months Ended
 
 
 
 
 
 
Reconciliation of Non-GAAP Gross Profit and Non-GAAP Gross Margin
 
 
 
 
 
 
 
 
 
 
Gross Profit
 
$
390

 
$
386

 
$
407

 
$
390

 
$
352

Items excluded:
 
 
 
 
 
 
 
 
 
 
Adj. for fresh start accounting
 
5

 
9

 
19

 
54

 
69

Amortization of technology intangible assets
 
43

 
44

 
43

 
43

 
44

Loss on disposal of long-lived assets
 

 

 

 

 
2

Non-cash share-based compensation
 

 

 

 
1

 

Non-GAAP Gross Profit
 
$
438

 
$
439

 
$
469

 
$
488

 
$
467

GAAP Gross Margin
 
54.4
 %
 
54.4
%
 
55.1
%
 
53.1
%
 
50.9
 %
Non-GAAP Gross Margin
 
60.8
 %
 
61.5
%
 
62.7
%
 
63.4
%
 
61.9
 %
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of Non-GAAP Operating Income
 
 
 
 
 
 
 
 
 
 
Operating (Loss) Income
 
$
(613
)
 
$
38

 
$
50

 
$
11

 
$
(49
)
Items excluded:
 
 
 
 
 
 
 
 
 
 
Adj. for fresh start accounting
 
4

 
12

 
20

 
48

 
71

Amortization of intangible assets
 
84

 
85

 
83

 
84

 
83

Impairment charges
 
659

 

 

 

 

Restructuring charges, net
 
1

 
4

 
7

 
1

 
30

Acquisition-related costs
 
1

 
4

 
3

 
4

 
4

Loss on disposal of long-lived assets
 

 

 

 

 
2

Advisory fees
 
1

 
1

 
1

 
3

 
3

Non-cash share-based compensation
 
8

 
5

 
6

 
6

 
7

Non-GAAP Operating Income
 
$
145

 
$
149

 
$
170

 
$
157

 
$
151

GAAP Operating Margin
 
-85.5
 %
 
5.4
%
 
6.8
%
 
1.5
%
 
-7.1
 %
Non-GAAP Operating Margin
 
20.1
 %
 
20.9
%
 
22.7
%
 
20.4
%
 
20.0
 %





Avaya Holdings Corp.
Supplemental Schedules of Non-GAAP Reconciliation of Gross Profit and Gross Margin by Portfolio
(Unaudited; in millions)


 
 
Three months ended
 
 
 
 
 
 
Reconciliation of Non-GAAP Gross Profit and Non-GAAP Gross Margin - Products
 
 
 
 
 
 
 
 
 
 
Revenue
 
$
297

 
$
287

 
$
324

 
$
325

 
$
300

Costs
 
109

 
105

 
115

 
115

 
114

Amortization of technology intangible assets
 
43

 
44

 
43

 
43

 
44

GAAP Gross Profit
 
145

 
138

 
166

 
167

 
142

Items excluded:
 
 
 
 
 
 
 
 
 
 
Adj. for fresh start accounting
 
2

 
2

 
5

 
16

 
24

Amortization of technology intangible assets
 
43

 
44

 
43

 
43

 
44

Loss on disposal of long-lived assets
 

 

 

 

 
1

Non-GAAP Gross Profit
 
$
190

 
$
184

 
$
214

 
$
226

 
$
211

GAAP Gross Margin
 
48.8
%
 
48.1
%
 
51.2
%
 
51.4
%
 
47.3
%
Non-GAAP Gross Margin
 
63.8
%
 
63.7
%
 
65.6
%
 
67.3
%
 
65.5
%
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of Non-GAAP Gross Profit and Non-GAAP Gross Margin - Services
 
 
 
 
 
 
 
 
 
 
Revenue
 
$
420

 
$
422

 
$
414

 
$
410

 
$
392

Costs
 
175

 
174

 
173

 
187

 
182

GAAP Gross Profit
 
245

 
248

 
241

 
223

 
210

Items excluded:
 
 
 
 
 
 
 
 
 
 
Adj. for fresh start accounting
 
3

 
7

 
14

 
38

 
45

Loss on disposal of long-lived assets
 

 

 

 

 
1

Share-based comp
 

 

 

 
1

 

Non-GAAP Gross Profit
 
$
248

 
$
255

 
$
255

 
$
262

 
$
256

GAAP Gross Margin
 
58.3
%
 
58.8
%
 
58.2
%
 
54.4
%
 
53.6
%
Non-GAAP Gross Margin
 
58.8
%
 
60.0
%
 
60.4
%
 
60.4
%
 
59.1
%














Avaya Holdings Corp.
Reconciliation of ASC 606 to ASC 605 GAAP results
Three months ended June 30, 2019
(Unaudited; in millions)
 
 
Q3 FY19 results
under ASC 606
 
ASC 606 Impact
 
Q3 FY19 results
under ASC 605
REVENUE
 
 
 
 
 
 
Products
 
$
297

 
$
(26
)
 
$
271

Services
 
420

 
(19
)
 
401

 
 
717

 
(45
)
 
672

COSTS
 
 
 
 
 
 
Products:
 
 
 
 
 
 
Costs
 
109

 
(4
)
 
105

Amortization of technology intangible assets
 
43

 

 
43

Services
 
175

 
(7
)
 
168

 
 
327

 
(11
)
 
316

GROSS PROFIT
 
390

 
(34
)
 
356

OPERATING EXPENSES
 
 
 
 
 
 
Selling, general and administrative
 
253

 
(1
)
 
252

Research and development
 
49

 

 
49

Amortization of intangible assets
 
41

 

 
41

Impairment charges
 
659

 

 
659

Restructuring charges, net
 
1

 

 
1

 
 
1,003

 
(1
)
 
1,002

OPERATING LOSS
 
(613
)
 
(33
)
 
(646
)
Interest expense
 
(59
)
 

 
(59
)
Other income, net
 
12

 

 
12

LOSS BEFORE INCOME TAXES
 
(660
)
 
(33
)
 
(693
)
Benefit from (provision for) income taxes
 
27

 
(37
)
 
(10
)
NET LOSS
 
$
(633
)
 
$
(70
)
 
$
(703
)

Avaya Holdings Corp.
Supplemental Schedules of Free Cash Flow
(Unaudited; in millions)
 
 
Three months ended
 
 
 
 
 
 
Net cash provided by operating activities
 
$
52

 
$
37

 
$
86

 
$
25

 
$
83

Less:
 
 
 
 
 
 
 
 
 
 
Capital expenditures
 
(37
)
 
(26
)
 
(21
)
 
(25
)
 
(18
)
Free cash flow
 
$
15

 
$
11

 
$
65

 
$

 
$
65



Source: Avaya Newsroom


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