Chronicle Journal: Finance

Avaya Reports First Quarter Fiscal 2018 Financial Results

By: via Marketwired

SANTA CLARA, CA --(Marketwired - March 01, 2018) -

Combined First Quarter Fiscal 2018(1):

/T/

-- Revenue of $752 million, Non-GAAP(2) revenue of $775 million

-- Net income of $3,214 million, non-GAAP(2) net loss of $68 million

-- Adjusted EBITDA of $206 million(2) or 26.6% of non-GAAP revenue

-- Emerged from chapter 11 on December 15, 2017 and listed on the New York

Stock Exchange on January 17, 2018

/T/

Avaya Holdings Corp. (NYSE: AVYA) today reported financial results for the first quarter of fiscal 2018 ended December 31, 2017. Due to the company's emergence from chapter 11 proceedings, and adoption of fresh start accounting effective on December 15, 2017, the results for the quarter are required by GAAP to be presented separately as the predecessor period from October 1, 2017 through December 15, 2017 (inclusive of results prior to October 1, 2017, the "Predecessor" period) and the successor period from December 16, 2017 through December 31, 2017 (the "Successor" period). The application of fresh start accounting results in a new basis of accounting making the results of the Predecessor period not comparable to the results of the Successor period. We have, however, combined results of the Predecessor and Successor periods for discussion purposes as we believe it provides the most meaningful basis to analyze our results.(1)

Revenue for the combined period from October 1, 2017 through December 31, 2017 (the "Combined First Quarter Fiscal 2018"(1)), was $752 million, including $3 million related to Avaya's former Networking business, which was sold on July 14, 2017. Revenue for the fourth quarter fiscal 2017 ending September 30, 2017 was $790 million, including $5 million related to the Networking business, and $875 million for the first quarter fiscal 2017 ending December 31, 2016, including $66 million related to the Networking business.

Non-GAAP revenue excluding the revenue of the Networking business for the Combined First Quarter Fiscal 2018 was $772 million, $13 million lower than the fourth quarter ending September 30 2017, representing a decline of approximately 2%, primarily as a result of seasonality and $37 million lower than the first quarter ending fiscal 2017, representing a decline of 5%, primarily as a result of the impact of the chapter 11 proceedings.

Gross margin for the Combined First Quarter Fiscal 2018 was 58.5%. Non-GAAP gross margin was 61.8%, a record percentage for a first quarter result, compared to 63.3% for the prior quarter and 61.7% for the first quarter of fiscal 2017.

Operating income for the Combined First Quarter Fiscal 2018 was $38 million, compared to operating income of $69 million in the prior quarter and operating income of $70 million for the first quarter of fiscal 2017. Non-GAAP operating income for the first quarter of fiscal 2018 was $172 million, or a first quarter record 22.2% percentage of non-GAAP revenue, compared to $183 million for the prior quarter and $192 million for the first quarter of fiscal 2017. Net income for the Combined First Quarter Fiscal 2018 was $3,214 million, compared to net income of $27 million for the prior quarter, and a net loss of $103 million for the first quarter of fiscal 2017. The increase in net income for Combined First Quarter Fiscal 2018 was primarily related to execution of the reorganization plan and the impact of fresh start accounting. Non-GAAP net loss for the Combined First Quarter Fiscal 2018 was $68 million compared to non-GAAP net income of $162 million for the prior quarter and $19 million for the first quarter of fiscal 2017.

For the Combined First Quarter Fiscal 2018, adjusted EBITDA was $206 million or 26.6% of non-GAAP revenue, compared to adjusted EBITDA of $225 million, or 28.5% of revenue, for the prior quarter and $238 million, or 27.2% of revenue, for the first quarter of fiscal 2017.

Cash used for operating activities for the Combined First Quarter Fiscal 2018 was $374 million, compared to cash provided by operating activities of $166 million during the fourth quarter of fiscal 2017, and cash used for operations of $44 million during the first quarter of fiscal 2017. Cash and cash equivalents totaled $417 million as of December 31, 2017, compared to $876 million at the end of the prior quarter and $209 million at the end of the first quarter of fiscal 2017. The sequential change in cash and cash equivalents is primarily due to payments upon emergence from bankruptcy to former debt holders, Pension Benefit Guarantee Corporation, and other creditors, repayment of the Debtor-In-Possession loan facility, debt issuance costs and professional fees, offset by proceeds of a new term loan.

"Our first quarter results represented a great start for the fiscal year and are a testimony to the loyalty and dedication of our customers, partners and employees who supported us this past year," said Jim Chirico, president and CEO of Avaya. "These results demonstrate four straight quarters of revenue stabilization in the business. We continued to drive momentum by improving our industry- leading business model, generating over 10% of our revenue from the cloud. In addition, there were sequential increases in midmarket/SMB cloud seats of 41% and in cloud activations of 96%. We added over 1,300 new customers and more than 265 partners to our ecosystem. We utilized our new capital structure and announced the pending acquisition of Spoken Communications, further fueling our cloud momentum."

1 The results for the period from October 1, 2017 through December 31, 2018, the "Combined First Quarter Fiscal 2018," represent the sum of the reported amounts for the Predecessor period from October 1, 2017 through December 15, 2007 and the Successor period from December 16, 2017 through December 31, 2017. Refer to Supplemental Financial Information accompanying this press release for more information, including a reconciliation of combined results to our Predecessor and Successor results.

2 Non GAAP revenue, Non-GAAP gross margin, Non-GAAP operating income, Non-GAAP net income and Adjusted EBITDA are not measures calculated in accordance with generally accepted accounting principles in the U.S. ("GAAP"). Refer to 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.

First Quarter Fiscal 2018 Highlights

/T/

-- Added over 1,300 new logos worldwide during the first fiscal quarter

2018, an increase of 6% sequentially.

-- Refreshed our management team, adding respected leaders with proven

experience driving transformation and growth.

-- More than three million cloud seats and growing.

-- Launched dedicated Cloud Business Unit, concentrating cloud assets for

agile solution delivery and growth.

-- Announced the acquisition of Spoken Communications, a leading innovator

in Contact Center as a Service (CCaaS) solutions. The Spoken platform

will speed Avaya's ability to deliver a secure, reliable and highly

scalable cloud platform for customers of all sizes, and its intellectual

property will accelerate our move into Big Data, Machine Learning and

AI.

-- Avaya Private Cloud Services revenue for the Enterprise market grew 3%

sequentially.

-- Midmarket/SMB cloud business seats grew 41% quarter-over-quarter, and

monthly recurring revenue (MRR) grew by 39% quarter-over-quarter.

-- Continued strength in our business model as a software & services

company:

-- Software and services accounted for a record 82% of total revenue, up

year-over-year from 76%

-- Recurring revenue represented over 57% of total revenue, up year-

over-year from 53%

-- 89 deals over $1 million of Total Contract Value (TCV)

/T/

/T/

-- Showcased customer success stories with Avaya solutions across

industries, and unveiled a Happiness Index on Blockchain at the GITEX

Technology Week in Dubai.

-- A record 3,000 customers and partners attended the Avaya Engage 2018

conference, showcasing leading innovations and intelligent technologies

such as AI, automated workflows, and advanced analytics to shape the

connected world.

-- Introduced Avaya AVA™, a cloud based AI solution that goes beyond bots

to automate and manage customer engagement through social media and

messaging.

-- Listed on the New York Stock Exchange (NYSE) on January 17, 2018.

/T/

Second Quarter Fiscal 2018 Outlook

/T/

-- Revenue of $660-$680 million, non-GAAP revenue of $750-$770 million

-- GAAP operating loss of 16-20% of revenue, non-GAAP operating profit of

20-22% of non-GAAP revenue

-- Net loss $1.35-$1.55 per diluted share, non-GAAP net income $0.80-$0.90

per diluted share

-- Adjusted EBITDA of $180-$200 million or adjusted EBITDA margin of

approximately 25% of non-GAAP revenue

/T/

Fiscal Year 2018 Outlook

/T/

-- Revenue of $2,775-$2,900 million, non-GAAP revenue of $3,000-$3,100

million

-- GAAP operating loss of 4-6% of revenue, non-GAAP operating margin of 21-

22% of non-GAAP revenue

-- Approximately $175 million of expected cash interest expense

-- GAAP net income $2,850-$2,950 million

-- Capital expenditures of $60-$75 million

-- Approximately 110 million basic and diluted shares outstanding

-- Adjusted EBITDA of $750-$800 million or adjusted EBITDA margin of

approximately 25-26% of non-GAAP revenue

/T/

Avaya's outlook does not include the potential impact of any business combinations, asset acquisitions, divestitures, strategic investments, the pending Spoken acquisition, or other significant transactions that may be completed after March 1, 2018. 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 financial results webcast and conference call to discuss its financial results and Q&A at 6:00 AM PT/9:00 AM ET on March 1, 2018. On the call will be Jim Chirico, president and CEO, and Pat O'Malley, senior vice president and CFO. The call will be moderated by Peter Schuman, senior director of investor relations.

To join the financial results live webcast and view supplementary materials, listeners should access the investor page of Avaya's website https://investors.avaya.com. Following the live webcast, a replay will be available at the same web address in the event archives for a period of one year.

To access the financial results live by phone, dial 866-393-4306 in the U.S. or Canada and +1-734-385-2616 for international callers. Listeners should access the webcast or the call 10-15 minutes before the start time to ensure they are able to connect.

A replay of the financial results live conference call will be available for 2 business days soon after the call by phone by dialing 855-859-2056 in the U.S. or Canada and +1-404-537-3406 for international callers, using the conference access code: 2438229.

Links to this financial results press release and accompanying slides are available on the investor page of Avaya's website https://investors.avaya.com.

About Avaya

Avaya is a global leader in digital communications software, services and devices for businesses of all sizes. Our open, intelligent and customizable solutions for contact centers and unified communications offer the flexibility of Cloud, on-premises and hybrid deployments. Avaya shapes intelligent connections and creates seamless communication experiences for our customers, and their customers. Our professional planning, support and management services teams help optimize solutions, for highly reliable and efficient deployments. Avaya Holdings Corp. is traded on the NYSE under the ticker AVYA. For more information, please visit 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, second quarter fiscal 2018 and fiscal year 2018 outlook. 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 Registration Statement on Form 10 filed with the Securities and Exchange Commission (the "SEC"), 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.

/T/

Avaya Holdings Corp.

Consolidated Statements of Operations

(Unaudited; in millions)

Successor Predecessor

------------- ----------------------------

Period from Period from

December 16, October 1, Three months

2017 through 2017 through ended

December 31, December 15, December 31,

2017 2017 2016

------------- ------------- -------------

REVENUE

Products $ 71 $ 253 $ 401

Services 77 351 474

------------- ------------- -------------

148 604 875

------------- ------------- -------------

COSTS

Products:

Costs 33 84 145

Amortization of technology

intangible assets 7 3 5

Services 30 155 190

------------- ------------- -------------

70 242 340

------------- ------------- -------------

GROSS PROFIT 78 362 535

------------- ------------- -------------

OPERATING EXPENSES

Selling, general and

administrative 50 264 336

Research and development 9 38 62

Amortization of intangible

assets 7 10 57

Restructuring charges, net 10 14 10

------------- ------------- -------------

76 326 465

------------- ------------- -------------

OPERATING INCOME 2 36 70

Interest expense (9) (14) (174)

Other (expense) income, net (2) (2) 4

Reorganization costs, net - 3,416 -

------------- ------------- -------------

(LOSS) INCOME BEFORE INCOME

TAXES (9) 3,436 (100)

Benefit from (provision for)

income taxes 246 (459) (3)

------------- ------------- -------------

NET INCOME (LOSS) $ 237 $ 2,977 $ (103)

============= ============= =============

/T/

/T/

Avaya Holdings Corp.

Consolidated Balance Sheets

(Unaudited; in millions, except share amounts)

Successor Predecessor

------------- -------------

December 31, September 30,

2017 2017

------------- -------------

ASSETS

Current assets:

Cash and cash equivalents $ 417 $ 876

Accounts receivable, net 413 536

Inventory 124 96

Other current assets 230 269

------------- -------------

TOTAL CURRENT ASSETS 1,184 1,777

Property, plant and equipment, net 306 200

Deferred income taxes, net 31 -

Intangible assets, net 3,421 311

Goodwill 2,632 3,542

Other assets 53 68

------------- -------------

TOTAL ASSETS $ 7,627 $ 5,898

============= =============

LIABILITIES

Current liabilities:

Debt maturing within one year $ - $ 725

Long-term debt, current portion 29 -

Accounts payable 304 282

Payroll and benefit obligations 124 127

Deferred revenue 384 614

Business restructuring reserve, current

portion 36 35

Other current liabilities 153 90

------------- -------------

TOTAL CURRENT LIABILITIES 1,030 1,873

------------- -------------

Long-term debt 2,867 -

Pension obligations 793 513

Other postretirement obligations 215 -

Deferred income taxes, net 444 32

Business restructuring reserve, non-current

portion 34 34

Other liabilities 377 170

------------- -------------

TOTAL NON-CURRENT LIABILITIES 4,730 749

LIABILITIES SUBJECT TO COMPROMISE - 7,705

------------- -------------

TOTAL LIABILITIES 5,760 10,327

Commitments and contingencies

Predecessor equity awards on redeemable shares - 7

Predecessor preferred stock, $0.001 par value,

250,000 shares authorized at September 30,

2017

Convertible Series B preferred stock; 48,922

shares issued and outstanding at September

30, 2017 - 393

Series A preferred stock; 125,000 shares

issued and outstanding at September 30, 2017 - 184

Successor preferred stock, $0.01 par value;

55,000,000 authorized, no shares issued or

outstanding at December 31, 2017 - -

STOCKHOLDERS' EQUITY (DEFICIT)

Predecessor common stock, $0.01 par value;

750,000,000 shares authorized, 494,768,243

issued and outstanding at September 30, 2017 - -

Successor common stock, $0.01 par value;

550,000,000 shares authorized, 110,000,000

issued and 109,794,137 outstanding at

December 31, 2017 1 -

Additional paid-in capital 1,642 2,389

Retained earnings (Accumulated deficit) 237 (5,954)

Accumulated other comprehensive loss (13) (1,448)

------------- -------------

TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 1,867 (5,013)

------------- -------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

(DEFICIT) $ 7,627 $ 5,898

============= =============

/T/

/T/

Avaya Holdings Corp.

Condensed Statements of Cash Flows

(Unaudited; in millions)

Non-GAAP

Successor Predecessor Combined Predecessor

------------- ------------- ------------- -------------

Period from Period from

December 16, October 1,

2017 through 2017 through

Three months Three months

ended ended

December 31, December 15, December 31, December 31,

2017 2017 2017 2016

------------- ------------- ------------- -------------

Net cash

provided by

(used for):

Net income

(loss) $ 237 $ 2,977 $ 3,214 $ (103)

Adjustments to

net income

(loss) for

non-cash

items (225) (3,410) (3,635) 141

Changes in

operating

assets and

liabilities 54 (7) 47 (82)

------------- ------------- ------------- -------------

Operating

activities 66 (440) (374) (44)

Investing

activities 8 8 16 (15)

Financing

activities - (102) (102) (57)

Effect of

exchange rate

changes on

cash and cash

equivalents 3 (2) 1 (11)

------------- ------------- ------------- -------------

Net increase

(decrease) in

cash and cash

equivalents 77 (536) (459) (127)

Cash and cash

equivalents at

beginning of

period 340 876 876 336

------------- ------------- ------------- -------------

Cash and cash

equivalents at

end of period $ 417 $ 340 $ 417 $ 209

============= ============= ============= =============

/T/

/T/

Avaya Holdings Corp.

Supplemental Schedules of Non-GAAP Revenue

(Unaudited; in millions)

Successor Predecessor

----------- -----------

Period from Period from Predecessor

-------------

Dec. 16, Oct. 1,

2017 2017 Three Months

through through Q118 Ended

Adj. for Non-GAAP

Dec. 31, Dec. 15, Fresh Start Combined Dec. 31,

2017 2017 Accounting Results 2016

----------- ----------- ----------- ----------- -------------

Revenue by

Segment

Total ECS

product

revenue 71 253 6 330 401

AGS 77 351 17 445 474

----------- ----------- ----------- ----------- -------------

Total

revenue $ 148 $ 604 $ 23 $ 775 $ 875

=========== =========== =========== =========== =============

Revenue by

Geography

U.S. $ 71 $ 331 $ 23 $ 425 $ 466

----------- ----------- ----------- ----------- -------------

Internationa

l:

EMEA 42 166 - 208 234

APAC - Asia

Pacific 19 57 - 76 90

Americas

Internatio

nal -

Canada and

Latin

America 16 50 - 66 85

----------- ----------- ----------- ----------- -------------

Total

Internation

al 77 273 - 350 409

----------- ----------- ----------- ----------- -------------

Total

revenue $ 148 $ 604 $ 23 $ 775 $ 875

=========== =========== =========== =========== =============

Avaya Holdings Corp.

Supplemental Schedules of Non-GAAP Revenue

(Unaudited; in millions)

Predecessor

-----------------------------------

Change Three Months Ended

--------------------------- -----------------------------------

Pct., net

of Sept. 30, June 30, Mar. 31,

Amount Pct. FX impact 2017 2017 2017

------- ------ ---------- ----------- ----------- -----------

Revenue by

Segment

Total ECS

product

revenue (71) -18% -19% 343 345 348

AGS (29) -6% -8% 447 458 456

------- ----------- ----------- -----------

Total

revenue $ (100) -11% -13% $ 790 $ 803 $ 804

======= =========== =========== ===========

Revenue by

Geography

U.S. $ (41) -9% -9% $ 447 $ 435 $ 450

------- ----------- ----------- -----------

Internationa

l:

EMEA (26) -11% -15% 194 204 202

APAC - Asia

Pacific (14) -16% -17% 79 88 77

Americas

Internatio

nal -

Canada and

Latin

America (19) -22% -25% 70 76 75

------- ----------- ----------- -----------

Total

Internation

al (59) -14% -17% 343 368 354

------- ----------- ----------- -----------

Total

revenue $ (100) -11% -13% $ 790 $ 803 $ 804

======= =========== =========== ===========

/T/

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 three month period ending December 31, 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, 2007 and December 16, 2017 through December 31, 2017 separately, management reviews the Company's operating results for the three months ended December 31, 2017 by combining the results of these two periods because such presentation provides the most meaningful comparison of our results. The company cannot adequately benchmark the operating results of the 16-day period ended December 31, 2017 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 when combined for the three months ended December 31, 2017 provide meaningful comparisons to other periods and are useful in identifying current business trends.

We also present the measures non-GAAP revenue, non-GAAP gross margin, non-GAAP operating income, and non-GAAP net income 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 comparisons to prior periods because they exclude the impact of earnings or charges noted in the table 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 maybe different from the non-GAAP financial measures used by other companies. In addition, these non-GAAP measures have limitation in that they do not reflect all of the amounts associated with the company's results of operations as determined in accordance with GAAP.

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.

We believe that including supplementary information concerning adjusted EBITDA is appropriate because it serves as a basis for determining management and employee compensation. 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. Accordingly, 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. While EBITDA measures are frequently used as measures of operations and the ability to meet debt service requirements, 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.

The estimate of adjusted EBITDA provided in this press release has been determined consistent with the methodology for calculating adjusted EBITDA as set forth in Avaya Holdings Corp. Form 10 for the fiscal year end September 30, 2017.

Avaya believes that the presentation of all of these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding the company's performance by excluding certain items that may not be indicative of the company's core business, operating results or future outlook. Avaya's management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing the company's operating results both as a consolidated entity and at the business unit level, as well as when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate comparisons of the company's performance to prior periods.

These non-GAAP measures are not based on any comprehensive set of accounting rules or principles and have limitations as analytical tools in that they do not reflect all of the amounts associated with the company's results of operations as determined in accordance with GAAP. As such, these measures should only be used to evaluate the company's results of operations in conjunction with the corresponding GAAP measures.

The following tables present Successor, Predecessor and combined results and reconcile GAAP measures to non-GAAP measures. We do not provide a forward-looking reconciliation of expected second quarter and full fiscal 2018 Adjusted EBITDA guidance as the amount of significance of special items required to develop meaningful comparable GAAP financial measures cannot be estimated at this time without unreasonable efforts:

/T/

Avaya Holdings Corp.

Supplemental Schedule of Non-GAAP Adjusted EBITDA

(Unaudited; in millions)

Successor Predecessor

------------- ----------------------------

Period from Period from

December 16, October 1, Three months

2017 through 2017 through ended

December 31, December 15, December 31,

2017 2017 2016

------------- ------------- -------------

Net income (loss) $ 237 $ 2,977 $ (103)

Interest expense 9 14 174

Interest income - (2) -

(Benefit from) provision for

income taxes (246) 459 3

Depreciation and amortization 22 31 90

------------- ------------- -------------

EBITDA 22 3,479 164

Impact of fresh start

accounting adjustments 27 - -

Restructuring charges, net 10 14 10

Sponsors' and other advisory

fees 8 3 51

Reorganization items, net - (3,416) -

Share-based and other

compensation 1 - 2

Loss on disposal of long-lived

assets - 1 -

Costs in connection with

certain legal matters - 37 -

Change in fair value of warrant

liability 5 - -

Foreign currency gains, net (2) - (11)

Pension/OPEB/nonretirement

postemployment benefits and

long-term disability costs - 17 21

Other - - 1

------------- ------------- -------------

Adjusted EBITDA $ 71 $ 135 $ 238

============= ============= =============

/T/

/T/

Avaya Holdings Corp.

Supplemental Schedules of Non-GAAP Reconciliations of Non-GAAP Gross Profit

and Non-GAAP Gross Margin

(Unaudited; in millions)

Successor Predecessor

----------- -----------

Period from Period from

Dec. 16, Oct. 1,

2017 2017

through through Combined

Dec. 31, Dec. 15,

2017 2017 Results

----------- ----------- -----------

Reconciliation

Gross Profit $ 78 $ 362 $ 440

Gross Margin 52.7% 59.9% 58.5%

Items excluded:

Adj. for fresh start accounting 29

Amortization of technology

intangible assets 10

-----------

Non-GAAP Gross Profit $ 479

===========

Non-GAAP Gross Margin 61.8%

===========

Reconciliation of Non-GAAP Operating

Income

Operating Income (Loss) $ 2 $ 36 $ 38

Percentage of Revenue 1.4% 6.0% 5.1%

Items excluded:

Adj. for fresh start accounting 33

Amortization of intangible assets 27

Restructuring charges, net 24

Loss on disposal of long-lived

assets 1

Impairment charges -

Advisory fees 11

Share-based compensation 1

Costs in connection with certain

legal matters 37

-----------

Non-GAAP Operating Income $ 172

===========

Non-GAAP Operating Margin 22.2%

===========

Avaya Holdings Corp.

Supplemental Schedules of Non-GAAP Reconciliations of Non-GAAP Gross

Profit and Non-GAAP Gross Margin

(Unaudited; in millions)

Predecessor

-------------------------

Three Months Ended

-------------------------

Sept. Dec.

30 June 30 Mar. 31 31,

2017 2017 2017 2016

------- ------- ------- -------

Reconciliation

Gross Profit $ 496 $ 493 $ 484 $ 535

Gross Margin 62.8% 61.4% 60.2% 61.1%

Items excluded:

Adj. for fresh start accounting - - - -

Amortization of technology

intangible assets 4 5 6 5

------- ------- ------- -------

Non-GAAP Gross Profit $ 500 $ 498 $ 490 $ 540

======= ======= ======= =======

Non-GAAP Gross Margin 63.3% 62.0% 60.9% 61.7%

======= ======= ======= =======

Reconciliation of Non-GAAP Operating

Income

Operating Income (Loss) $ 69 $ (43) $ 75 $ 70

Percentage of Revenue 8.7% -5.4% 9.3% 8.0%

Items excluded:

Adj. for fresh start accounting - - - -

Amortization of intangible assets 38 62 62 62

Restructuring charges, net 8 8 4 10

Loss on disposal of long-lived

assets - - - -

Impairment charges - 120 - -

Advisory fees 3 18 14 48

Share-based compensation 1 4 4 2

Costs in connection with certain

legal matters 64 - - -

------- ------- ------- -------

Non-GAAP Operating Income $ 183 $ 169 $ 159 $ 192

======= ======= ======= =======

Non-GAAP Operating Margin 23.2% 21.0% 19.8% 21.9%

======= ======= ======= =======

/T/

/T/

Avaya Holdings Corp.

Supplemental Schedules of Non-GAAP Reconciliation of Gross Profit and

Gross Margin by Portfolio

(Unaudited; in millions)

/T/

/T/

Successor Predecessor

------------- -------------

Period from Period from

Dec. 16, 2017 Oct. 1, 2017

through through Combined

Dec. 31, 2017 Dec. 15, 2017 Results

------------- ------------- --------

Reconciliation of Non-GAAP Gross

Profit and Non-GAAP Gross Margin -

Products

Revenue $ 71 $ 253 $ 324

Costs 33 84 117

Amortization of technology

intangible assets 7 3 10

------------- ------------- --------

GAAP Gross Profit 31 166 197

GAAP Gross Margin 43.7% 65.6% 60.8%

Items excluded:

Adj. for fresh start accounting 7

Amortization of technology

intangible assets 10

--------

Non-GAAP Gross Profit $ 214

========

Non-GAAP Gross Margin 64.8%

========

Reconciliation of Non-GAAP Gross

Profit and Non-GAAP Gross Margin -

Services

Revenue $ 77 $ 351 $ 428

Costs 30 155 185

------------- ------------- --------

GAAP Gross Profit 47 196 243

GAAP Gross Margin 61.0% 55.8% 56.8%

Items excluded:

Adj. for fresh start accounting 22

--------

Non-GAAP Gross Profit $ 265

========

Non-GAAP Gross Margin 59.6%

========

Predecessor

---------------------------------------

Three Months Ended

---------------------------------------

Sept. 30, June 30, Mar. 31, Dec. 31,

2017 2017 2017 2016

--------- -------- -------- --------

Reconciliation of Non-GAAP Gross

Profit and Non-GAAP Gross Margin -

Products

Revenue $ 343 $ 345 $ 348 $ 401

Costs 104 121 125 145

Amortization of technology

intangible assets 4 5 6 5

--------- -------- -------- --------

GAAP Gross Profit 235 219 217 251

GAAP Gross Margin 68.5% 63.5% 62.4% 62.6%

Items excluded:

Adj. for fresh start accounting - - - -

Amortization of technology

intangible assets 4 5 6 5

--------- -------- -------- --------

Non-GAAP Gross Profit $ 239 $ 224 $ 223 $ 256

========= ======== ======== ========

Non-GAAP Gross Margin 69.7% 64.9% 64.1% 63.8%

========= ======== ======== ========

Reconciliation of Non-GAAP Gross

Profit and Non-GAAP Gross Margin -

Services

Revenue $ 447 $ 458 $ 456 $ 474

Costs 186 184 189 190

--------- -------- -------- --------

GAAP Gross Profit 261 274 267 284

GAAP Gross Margin 58.4% 59.8% 58.6% 59.9%

Items excluded:

Adj. for fresh start accounting - - - -

--------- -------- -------- --------

Non-GAAP Gross Profit $ 261 $ 274 $ 267 $ 284

========= ======== ======== ========

Non-GAAP Gross Margin 58.4% 59.8% 58.6% 59.9%

========= ======== ======== ========

/T/

/T/

Avaya Holdings Corp.

Reconciliation of GAAP to Non-GAAP results

Three months ended December 31, 2017

(Unaudited; in millions)

/T/

/T/

Successor Predecessor

------------------ ------------------

Period from Period from

December 16, 2017 October 1, 2017 Adj. for Amortization

through through Combined Fresh Start of Intangible

December 31, 2017 December 15, 2017 Results Accounting Assets

------------------ ------------------ --------- ------------ --------------

Revenue

Products $ 71 $ 253 $ 324 $ 6 $ -

Services 77 351 428 17

------------------- ------------------- ---------- ------------- ---------------

148 604 752 23 -

------------------- ------------------- ---------- ------------- ---------------

Costs

Products:

Costs 33 84 117 (1)

Amortization of technology intangible assets 7 3 10 (10)

Services 30 155 185 (5)

------------------- ------------------- ---------- ------------- ---------------

70 242 312 (6) (10)

------------------- ------------------- ---------- ------------- ---------------

GROSS PROFIT 78 362 440 29 10

------------------- ------------------- ---------- ------------- ---------------

OPERATING EXPENSES

Selling, general and administrative 50 264 314 (4)

Research and development 9 38 47

Amortization of intangible assets 7 10 17 (17)

Restructuring charges, net 10 14 24

------------------- ------------------- ---------- ------------- ---------------

76 326 402 (4) (17)

------------------- ------------------- ---------- ------------- ---------------

OPERATING INCOME 2 36 38 33 27

Interest expense (9) (14) (23)

Other (expense) income, net (2) (2) (4)

Reorganization items, net - 3,416 3,416

------------------- ------------------- ---------- ------------- ---------------

(LOSS) INCOME BEFORE INCOME TAXES (9) 3,436 3,427 33 27

Benefit from (provision for) income taxes 246 (459) (213)

------------------- ------------------- ---------- ------------- ---------------

NET INCOME (LOSS) $ 237 $ 2,977 $ 3,214 $ 33 $ 27

------------------- ------------------- ---------- ------------- ---------------

Loss on Costs in

Disposal of Share-based Connection

Restructuring Long-lived Reorganization and Other with Certain

Legal

Changes, net Assets Items Comp. Matters

-------------- ------------ --------------- ------------ -------------

Revenue

Products $ - $ - $ - $ - $ -

Services

--------------- ------------- ---------------- ------------- --------------

- - - - -

--------------- ------------- ---------------- ------------- --------------

Costs

Products:

Costs

Amortization of technology intangible assets

Services - - - -

--------------- ------------- ---------------- ------------- --------------

- - - - -

--------------- ------------- ---------------- ------------- --------------

GROSS PROFIT - - - - -

--------------- ------------- ---------------- ------------- --------------

OPERATING EXPENSES

Selling, general and administrative (1) (1) (37)

Research and development

Amortization of intangible assets

Restructuring charges, net (24)

--------------- ------------- ---------------- ------------- --------------

(24) (1) - (1) (37)

--------------- ------------- ---------------- ------------- --------------

OPERATING INCOME 24 1 - 1 37

Interest expense

Other (expense) income, net

Reorganization items, net (3,416)

--------------- ------------- ---------------- ------------- --------------

(LOSS) INCOME BEFORE INCOME TAXES 24 1 (3,416) 1 37

Benefit from (provision for) income taxes

--------------- ------------- ---------------- ------------- --------------

NET INCOME (LOSS) $ 24 $ 1 $ (3,416) $ 1 $ 37

--------------- ------------- ---------------- ------------- --------------

Q117

------------------

Advisory Non-GAAP GAAP Non-GAAP

Resu

Fees Results lts Results

--------- --------- ----- ---------

Revenue

Products $ - $ 330 $ 401 $ 401

Services 445 474 474

---------- ---------- ------ ----------

- 775 875 875

---------- ---------- ------ ----------

Costs

Products:

Costs 116 145 145

Amortization of technology intangible assets - 5 -

Services - 180 190 190

---------- ---------- ------ ----------

- 296 340 335

---------- ---------- ------ ----------

GROSS PROFIT - 479 535 540

---------- ---------- ------ ----------

OPERATING EXPENSES

Selling, general and administrative (11) 260 336 286

Research and development 47 62 62

Amortization of intangible assets - 57 -

Restructuring charges, net - 10 -

---------- ---------- ------ ----------

(11) 307 465 348

---------- ---------- ------ ----------

OPERATING INCOME 11 172 70 192

Interest expense (23) (174) (174)

Other (expense) income, net (4) 4 4

Reorganization items, net - - -

---------- ---------- ------ ----------

(LOSS) INCOME BEFORE INCOME TAXES 11 145 (100) 22

Benefit from (provision for) income taxes (213) (3) (3)

---------- ---------- ------ ----------

NET INCOME (LOSS) $ 11 $ (68) $ (103) $ 19

---------- ---------- ------ ----------

/T/

Follow Avaya on Twitter, Facebook, YouTube, LinkedIn, Flickr and the Avaya Connected Blog.

Source: Avaya Newsroom

Contact Information:

Data & News supplied by www.cloudquote.io
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.