Avaya Reports Fourth Quarter and Fiscal 2017 Financial Results
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SANTA CLARA, CA -- (Marketwired) -- 12/22/17 --
Avaya Holdings Corp. (OTCQX: AVYA)
Fourth Quarter Fiscal 2017:
- Revenue of $790 million
- Gross margin 62.7%, non-GAAP gross margin 63.2%,
- Operating income of $64 million, non-GAAP operating income of $178 million or 22.5% of revenue
- Adjusted EBITDA(1) of $225 million or 28.5% of revenue
- Net income of $27 million, non-GAAP net income of $162 million or 20.5% of revenue
- Positive cash flow from operations of $166 million for the fourth quarter
Fiscal Year 2017:
- Revenue of $3,272 million
- Gross margin 61.1%, non-GAAP gross margin 61.7%
- Operating income of $137 million, non-GAAP operating income of $669 million or 20.4% of revenue
- Adjusted EBITDA(1) of $866 million or 26.5% of revenue,
- Net loss of $182 million, non-GAAP net income of $448 million or 13.7% of revenue
- Positive cash flow from operations of $291 million for the year
Avaya Holdings Corp. (OTCQX: AVYA) reported financial results for the fourth quarter and fiscal year ended September 30, 2017.
Total revenue for the fourth quarter was $790 million, down $13 million compared to the prior quarter and down $168 million year-over-year primarily as a result of the sale of the Networking business and lower demand for products and services primarily due to extended procurement cycles resulting from the chapter 11 filing. Fourth quarter 2017 results include $5 million of revenue from the Networking business sold on July 14, 2017. Excluding the impact of the sale of the Networking business, revenue improved approximately 5% from the prior quarter and declined approximately 10% compared to the fourth quarter of fiscal 2016. GAAP gross margin was 62.7% for the fourth quarter. Non-GAAP gross margin was 63.2%, which compares to 61.6% for the prior quarter and 61.8% for the fourth quarter of fiscal 2016. GAAP operating income was $64 million, which compares to a GAAP operating loss of $55 million for the prior quarter, and an operating loss of $425 million for the fourth quarter of fiscal 2016. Non-GAAP operating income was $178 million which compares to $157 million for the prior quarter and $232 million for the fourth quarter of fiscal 2016. GAAP net income was $27 million, which compares to a net loss of $98 million for the prior quarter, and a net loss of $483 million for the fourth quarter of fiscal 2016. Non-GAAP net income was $162 million which compares to $149 million for the prior quarter and $174 million for the fourth quarter of fiscal 2016. For the fourth quarter, adjusted EBITDA(1) was $225 million or 28.5% of revenue, and compares to adjusted EBITDA of $204 million or 25.4% for the prior quarter and $284 million or 29.6% for the fourth quarter of fiscal 2016.
For fiscal 2017, Avaya reported revenue of $3,272 million, down 12% compared to fiscal 2016, or down 11% in constant currency. GAAP gross margin for fiscal 2017 was 61.1%. Non-GAAP gross margin was 61.7%. GAAP operating income was $137 million, reflecting $117 million of impairments of both goodwill and indefinite-lived intangible assets, as well as $30 million of restructuring charges. Non-GAAP operating income was $669 million or 20.4% of revenue in fiscal 2017, which compares to $756 million or 20.4% of revenue in fiscal 2016. GAAP net loss for fiscal 2017 was $182 million which compares to a net loss of $730 million in the prior year. Non-GAAP net income for fiscal 2017 was $448 million, or 13.7% of revenue, which compares to $342 million for fiscal 2016. Fiscal 2017 adjusted EBITDA of $866 million represented 26.5% of revenue, and compares to $940 million for fiscal 2016.
Cash provided by operating activities was $166 million for the fourth fiscal quarter 2017, which compares to $72 million during the third fiscal quarter 2017, and $83 million during the fourth fiscal quarter 2016. Cash provided by operating activities for the fiscal year 2017 was $291 million compared to $113 million for fiscal 2016. Cash and cash equivalents totaled $876 million as of September 30, 2017, an increase of $147 million from the prior quarter and up $540 million from the fourth fiscal quarter of 2016.
"Our fourth quarter and fiscal year 2017 financial results were outstanding given the backdrop of chapter 11," said Jim Chirico, president and CEO. "The results demonstrate the resilience of our business model, the loyalty of our customers and partners, and the commitment of our employees. They also provide us solid momentum in our emergence as a public company."
"The reduction of our debt and certain other long-term obligations will improve annual cash flow by approximately $300 million compared to fiscal 2016," Chirico added. "These savings will enable Avaya to pursue future growth opportunities with a goal of creating long-term value for our new stockholders. We are excited to enter the New Year as a stronger and more competitive company, with new management, innovative products, and an abundance of opportunities ahead of us."
Fourth Fiscal Quarter Highlights
- Reached a global resolution in chapter 11 restructuring with emergence as a public company
- Announced a new management team including Jim Chirico as Chief Executive Officer
- Signed over 3,600 major customer contracts since filing for chapter 11 through September 30, 2017
- Closed on the sale of the Networking business to Extreme Networks on July 14, 2017
- Company book-to-bill was greater than 1. Total bookings for the fourth fiscal quarter increased 7% from the prior quarter and were 17% below the prior year, in constant currency. Excluding the impact of the sale of the Networking business, total bookings increased 13% sequentially and were 10% lower year-over-year, in constant currency
- Software and services accounted for over 79% of total revenue
- Recurring revenue represented 57% of total revenue, up from 50% year-over-year, in constant currency
- Net Promoter Score of 50 for customer satisfaction driven by industry-leading service and support
- Product revenue of $343 million decreased 1% from the prior quarter and decreased 27% year-over-year, in constant currency. Excluding the impact of the sale of the Networking business, product revenue grew 12% sequentially and was 15% lower year-over-year, in constant currency
- Service revenue of $447 million was down 3% sequentially and decreased 9% year-over-year, each in constant currency. Excluding the impact of the sale of the Networking business, service revenue decreased less than 1% sequentially and was 7% lower year-over-year, in constant currency
- For the fourth fiscal quarter, percentage of revenue by geography was:
- U.S. – 57% - EMEA – 24%
- Asia-Pacific – 10% - Americas International – 9%
Fiscal Year Highlights
- Announced post-emergence board of directors
- Software and services accounted for 78% of total revenue in fiscal 2017, up from 75% for fiscal 2016
- Recurring revenue represented 56% of total revenue for fiscal 2017, up from 51% of revenue for fiscal 2016, in constant currency
- Cloud and managed services and professional services each accounted for >8% of total revenue for fiscal 2017
- Non-GAAP gross margin was 61.7%, compared to 61.5% for fiscal 2016
- Adjusted EBITDA was $866 million or 26.5% of revenue, compared to $940 million or 25.4% of revenue for fiscal 2016
- For the fiscal year, percentage of revenue by geography in was:
- U.S. – 55% - EMEA – 26%
- Asia-Pacific – 10% - Americas International – 9%
Accompanying slides
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 leading global business communications company, providing an expansive portfolio of software and services for contact center and unified communications -- offered on premises, in the cloud, or as a hybrid solution. Today's digital world requires communications enablement, and no other company is better positioned to do this than Avaya. 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, statements regarding, expected savings and growth opportunities, projections of future opportunities. 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, including, but not limited to timing of effectiveness of our registration statement, and those risks discussed in the Company's Registration Statement on Form 10, as amended, 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.
1 Refer to Supplemental Financial Information accompanying this press release for a reconciliation of GAAP to non-GAAP numbers and for reconciliation of adjusted EBITDA to net income for the fourth quarter of fiscal 2017.
Avaya Holdings Corp.
(Debtor-in-possession)
Consolidated Statements of Operations
(Unaudited; in millions, except per share amounts)
Three months ended Fiscal year ended
September 30, September 30,
2017 2016 2017 2016
--------- --------- --------- ---------
REVENUE
Products $ 343 $ 469 $ 1,437 $ 1,755
Services 447 489 1,835 1,947
--------- --------- --------- ---------
790 958 3,272 3,702
--------- --------- --------- ---------
COSTS
Products:
Costs 105 169 500 630
Amortization of acquired
technology intangible assets 4 8 20 30
Services 186 198 753 797
--------- --------- --------- ---------
295 375 1,273 1,457
--------- --------- --------- ---------
GROSS PROFIT 495 583 1,999 2,245
--------- --------- --------- ---------
OPERATING EXPENSES
Selling, general and
administrative 341 329 1,282 1,413
Research and development 48 64 229 275
Amortization of acquired
intangible assets 34 100 204 100
Impairment of indefinite-lived
intangible assets - 442 65 442
Goodwill impairment - 56 52 226
Restructuring charges, net 8 17 30 105
--------- --------- --------- ---------
431 1,008 1,862 2,561
--------- --------- --------- ---------
OPERATING INCOME (LOSS) 64 (425) 137 (316)
Interest expense (17) (118) (246) (471)
Other income, net 7 5 9 68
Reorganization costs, net (21) - (98) -
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME
TAXES 33 (538) (198) (719)
(Provision for) benefit from
income taxes (6) 55 16 (11)
--------- --------- --------- ---------
NET INCOME (LOSS) 27 (483) (182) (730)
Less: Accretion and accrued
dividends on Series A and
Series B Preferred Stock (8) (7) (31) (41)
--------- --------- --------- ---------
NET INCOME (LOSS) ATTRIBUTABLE
TO COMMON STOCKHOLDERS $ 19 $ (490) $ (213) $ (771)
========= ========= ========= =========
Basic and diluted earnings per
share attributable to common
stockholders:
Net income (loss) per share:
Basic $ 0.04 $ (0.98) $ (0.43) $ (1.54)
========= ========= ========= =========
Diluted $ 0.04 $ (0.98) $ (0.43) $ (1.54)
========= ========= ========= =========
Weighted average shares
outstanding:
Basic 497.2 498.6 497.1 500.7
========= ========= ========= =========
Diluted 502.5 498.6 497.1 500.7
========= ========= ========= =========
Avaya Holdings Corp.
(Debtor-in-possession)
Consolidated Balance Sheets
(Unaudited; in millions, except share amounts)
September 30, September 30,
2017 2016
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 876 $ 336
Accounts receivable, net 536 584
Inventory 96 153
Other current assets 269 187
------------- -------------
TOTAL CURRENT ASSETS 1,777 1,260
------------- -------------
Property, plant and equipment, net 200 253
Acquired intangible assets, net 311 617
Goodwill 3,542 3,629
Other assets 68 62
------------- -------------
TOTAL ASSETS $ 5,898 $ 5,821
============= =============
LIABILITIES
Current liabilities:
Debt maturing within one year $ 725 $ 6,018
Accounts payable 282 338
Payroll and benefit obligations 127 183
Deferred revenue 614 705
Business restructuring reserve, current
portion 35 69
Other current liabilities 90 267
------------- -------------
TOTAL CURRENT LIABILITIES 1,873 7,580
------------- -------------
Pension obligations 513 1,743
Other postretirement obligations - 245
Deferred income taxes, net 32 167
Business restructuring reserve, non-current
portion 34 65
Other liabilities 170 492
------------- -------------
TOTAL NON-CURRENT LIABILITIES 749 2,712
LIABILITIES SUBJECT TO COMPROMISE 7,705 -
------------- -------------
Commitments and contingencies
Equity awards on redeemable shares 7 6
Preferred stock, par value $.001 per share,
250,000 shares authorized at September 30,
2017 and 2016
Convertible Series B, 48,922 shares issued
and outstanding at September 30, 2017 and
2016 393 371
Series A, 125,000 shares issued and
outstanding at September 30, 2017 and 2016 184 175
STOCKHOLDER'S DEFICIENCY
Common stock - -
Additional paid-in capital 2,389 2,410
Accumulated deficit (5,954) (5,772)
Accumulated other comprehensive loss (1,448) (1,661)
------------- -------------
TOTAL STOCKHOLDER'S DEFICIENCY (5,013) (5,023)
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIENCY $ 5,898 $ 5,821
============= =============
Avaya Holdings Corp.
(Debtor-in-possession)
Condensed Statements of Cash Flows
(Unaudited; in millions)
Fiscal year ended
September 30,
------------------------
2017 2016
----------- -----------
Net cash (used for) provided by:
Net loss Net loss $ (182) $ (730)
Adjustments to net loss for non-cash items 518 829
Changes in operating assets and liabilities (45) 14
----------- -----------
Operating activities 291 113
Investing activities (70) (100)
Financing activities 314 9
Effect of exchange rate changes on cash and cash
equivalents 5 (9)
----------- -----------
Net increase in cash and cash equivalents 540 13
Cash and cash equivalents at beginning of period 336 323
----------- -----------
Cash and cash equivalents at end of period $ 876 $ 336
=========== ===========
Avaya Holdings Corp.
(Debtor-in-possession)
Supplemental Schedules of Revenue
(Unaudited; in millions)
Three Months Ended
--------------------------
Dec.
31, Mar. 31, June 30,
2016 2017 2017
------- -------- ---------
Revenue by Segment
-------------------
$ 346 $ 309 $ 302 GCS
55 39 43 Networking (1)
------- -------- ---------
Total ECS product
401 348 345 revenue
474 456 458 AGS
------- -------- ---------
$ 875 $ 804 $ 803 Total revenue
======= ======== =========
Revenue by
Geography
-------------------
$ 466 $ 450 $ 435 U.S.
------- -------- ---------
International:
234 202 204 EMEA
APAC - Asia
90 77 88 Pacific
Americas
International -
Canada and Latin
85 75 76 America
------- -------- ---------
409 354 368 Total International
------- -------- ---------
$ 875 $ 804 $ 803 Total revenue
======= ======== =========
(1) Networking business was sold on July 14,
2017, therefore, the Company recognized no
revenue after the date of sale
Three Months Ended Three Months Ended September 30,
----------------------------------------------------------------------------
Revenues Mix Change
--------------- ----------- ----------------------
Pct.,
Dec. net of
31, Mar. 31, June 30, FX
2016 2017 2017 2017 2016 2017 2016 Amount Pct. impact
------- -------- ---------------- ------- ----- ----- -------- ----- -------
$ 346 $ 309 $ 302$ 340 $ 392 43% 41% $ (52) -13% -15%
55 39 43 3 77 0% 8% (74) -96% -96%
------- -------- ---------------- ------- ----- ----- --------
401 348 345 343 469 43% 49% (126) -27% -27%
474 456 458 447 489 57% 51% (42) -9% -9%
------- -------- ---------------- ------- ----- ----- --------
$ 875 $ 804 $ 803$ 790 $ 958 100% 100% $ (168) -18% -18%
======= ======== ================ ======= ===== ===== ========
$ 466 $ 450 $ 435$ 447 $ 552 57% 58% $ (105) -19% -19%
------- -------- ---------------- ------- ----- ----- --------
234 202 204 194 217 24% 22% (23) -11% -13%
90 77 88 79 104 10% 11% (25) -24% -24%
85 75 76 70 85 9% 9% (15) -18% -19%
------- -------- ---------------- ------- ----- ----- --------
409 354 368 343 406 43% 42% (63) -16% -17%
------- -------- ---------------- ------- ----- ----- --------
$ 875 $ 804 $ 803$ 790 $ 958 100% 100% $ (168) -18% -18%
======= ======== ================ ======= ===== ===== ========
(1) Networking business was sold on July 14,
2017, therefore, the Company recognized no
revenue after the date of sale
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 adjusted EBITDA.
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. 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) including, but not limited to reorganization, restructuring and impairment charges, certain fees payable to our private equity sponsors and other advisors, resolution of certain legal matters and a portion of our pension costs and post-employment benefits costs which represents the amortization of pension service costs and actuarial gain (loss) associated with these benefits. 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.
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 reconcile GAAP measures to non-GAAP measures:
Avaya Holdings Corp.
(Debtor-in-possession)
Supplemental Schedule of Non-GAAP Adjusted EBITDA
(Unaudited; in millions)
Three months ended Fiscal year ended
September 30, September 30,
2017 2016 2017 2016
----------- ----------- ----------- -----------
Net income (loss) $ 27 $ (483) $ (182) $ (730)
Interest expense 17 118 246 471
Interest income (2) - (4) (1)
Provision for (benefit
from) income taxes 6 (55) (16) 11
Depreciation and
amortization 63 97 326 374
----------- ----------- ----------- -----------
EBITDA 111 (323) 370 125
Restructuring charges,
net 8 17 30 105
Sponsor and other
advisory fees 3 28 85 43
Integration-related
costs - - 1 2
Third-party sales
transformation costs - - - 5
Reorganization items,
net 21 - 98 -
Share-based and other
compensation 1 7 11 19
Loss on disposal of
long-lived assets,
net - 1 - 1
Gain on sale of
Networking business (2) - (2) -
Impairment of
indefinite-lived
intangible assets - 100 65 100
Goodwill impairment - 442 52 442
Impairment of long-
lived asset - - 3 -
Loss on equity
investment - 11 - 11
Change in fair value
of Preferred B
embedded derivative - (17) - (73)
Securities
registration fees - - - 1
Costs in connection
with certain legal
matters 64 - 64 106
Foreign currency
gains, net (1) - (2) (10)
Pension/OPEB/nonretire
ment postemployment
benefits and long-
term disability costs 20 18 90 63
Other - - 1 -
----------- ----------- ----------- -----------
Adjusted EBITDA $ 225 $ 284 $ 866 $ 940
=========== =========== =========== ===========
Avaya Holdings Corp.
(Debtor-in-possession)
Supplemental Schedules of Non-GAAP Reconciliations
(Unaudited; in millions)
Three Months Ended
-------------------------------------------------
Sept. 30, Dec. 31, Mar. 31 June 30 Sept. 30
2016 2016 2017 2017 2017
--------- -------- -------- -------- --------
Reconciliation of Non-
GAAP Gross Profit and
Non-GAAP Gross Margin
Gross Profit $ 583 $ 533 $ 481 $ 490 $ 495
Gross Margin 60.9% 60.9% 59.8% 61.0% 62.7%
Items excluded:
Amortization of
acquired technology
intangible assets 8 5 6 5 4
Share-based
compensation 1 - - - -
--------- -------- -------- -------- --------
Non-GAAP Gross Profit $ 592 $ 538 $ 487 $ 495 $ 499
========= ======== ======== ======== ========
Non-GAAP Gross Margin 61.8% 61.5% 60.6% 61.6% 63.2%
========= ======== ======== ======== ========
Reconciliation of Non-
GAAP Operating Income
Operating (Loss) Income $ (425) $ 64 $ 64 $ (55) $ 64
Percentage of Revenue -44.4% 7.3% 8.0% -6.8% 8.1%
Items excluded:
Amortization of
acquired intangible
assets 64 62 62 62 38
Restructuring charges,
net 17 10 4 8 8
Impairment charges 542 - - 120 -
Advisory fees 27 48 14 18 3
Share-based
compensation 7 2 4 4 1
Costs in connection
with certain legal
matters - - - - 64
--------- -------- -------- -------- --------
Non-GAAP Operating
Income $ 232 $ 186 $ 148 $ 157 $ 178
========= ======== ======== ======== ========
Non-GAAP Operating
Margin 24.2% 21.3% 18.4% 19.6% 22.5%
========= ======== ======== ======== ========
Avaya Holdings Corp.
(Debtor-in-possession)
Supplemental Schedules of Non-GAAP Reconciliation of Gross Profit and Gross
Margin by Portfolio
(Unaudited; in millions)
Three Months Ended
--------------------------------------------------
Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30,
2016 2016 2017 2017 2017
--------- -------- -------- -------- ---------
Reconciliation of Non-
GAAP Gross Profit and
Non-GAAP Gross Margin -
Products
Revenue $ 469 $ 401 $ 348 $ 345 $ 343
Costs (exclusive of
amortization of
technology intangible
assets) Costs 169 146 127 122 105
Amortization of
technology intangible
assets Amortization
of acquired
technology intangible
assets 8 5 6 5 4
--------- -------- -------- -------- ---------
GAAP Gross Profit 292 250 215 218 234
GAAP Gross Margin 62.3% 62.3% 61.8% 63.2% 68.2%
Items excluded:
Amortization of
acquired technology
intangible assets 8 5 6 5 4
--------- -------- -------- -------- ---------
Non-GAAP Gross Profit $ 300 $ 255 $ 221 $ 223 $ 238
========= ======== ======== ======== =========
Non-GAAP Gross Margin 64.0% 63.6% 63.5% 64.6% 69.4%
========= ======== ======== ======== =========
Reconciliation of Non-
GAAP Gross Profit and
Non-GAAP Gross Margin -
Services
Revenue $ 489 $ 474 $ 456 $ 458 $ 447
Costs 198 191 190 186 186
--------- -------- -------- -------- ---------
GAAP Gross Profit 291 283 266 272 261
GAAP Gross Margin 59.5% 59.7% 58.3% 59.4% 58.4%
Items excluded:
Share-based and other
compensation 1 - - - -
--------- -------- -------- -------- ---------
Non-GAAP Gross Profit $ 292 $ 283 $ 266 $ 272 $ 261
========= ======== ======== ======== =========
Non-GAAP Gross Margin 59.7% 59.7% 58.3% 59.4% 58.4%
========= ======== ======== ======== =========
Avaya Holdings Corp.
(Debtor-in-possession)
Reconciliation of GAAP to Non-GAAP results
Three months ended September 30, 2017
(Unaudited; in millions)
Amortization Share-
of Reorganiz- based
Intangible Restructuring ation and Other
Assets Charges, net Items Comp
GAAP
Results
Revenue
Products $ 343 $ - $ - $ - $ -
Services 447
------- ------------ ------------- --------- ---------
790 - - - -
------- ------------ ------------- --------- ---------
Costs
Products:
Costs 105
Amortization of
acquired
technology
intangible assets 4 (4)
Services 186 - -
------- ------------ ------------- --------- ---------
295 (4) - - -
------- ------------ ------------- --------- ---------
GROSS PROFIT 495 4 - - -
------- ------------ ------------- --------- ---------
OPERATING EXPENSES
Selling, general
and administrative 341 (1)
Research and
development 48
Amortization of
acquired
intangible assets 34 (34)
Impairment of
indefinite-lived
intangible assets -
Goodwill impairment -
Restructuring
charges, net 8 (8)
------- ------------ ------------- --------- ---------
431 (34) (8) - (1)
------- ------------ ------------- --------- ---------
OPERATING INCOME
(LOSS) 64 38 8 - 1
Interest expense (17)
Other income, net 7
Reorganization
items, net (21) 21
------- ------------ ------------- --------- ---------
INCOME (LOSS) BEFORE
INCOME TAXES 33 38 8 21 1
(Provision for)
benefit from income
taxes (6)
------- ------------ ------------- --------- ---------
NET INCOME (LOSS) 27 38 8 21 1
Less: Accretion and
accrued dividends
on Series A and
Series B Preferred
Stock (8) - - - -
------- ------------ ------------- --------- ---------
NET INCOME (LOSS)
ATTRIBUTABLE TO
COMMON STOCKHOLDERS $ 19 $ 38 $ 8 $ 21 $ 1
======= ============ ============= ========= =========
Costs in
Connection
with Certain
Legal Matters
Q416
-------------------
Advisory Non-GAAP GAAP Non-GAAP
Fees Results Results Results
Revenue
Products $ - $ - $ 343 $ 469 $ 469
Services 447 489 489
-------------- ---------- ---------- --------- ---------
- - 790 958 958
-------------- ---------- ---------- --------- ---------
Costs
Products:
Costs - 105 169 169
Amortization of
acquired
technology
intangible assets - 8 -
Services - - 186 198 197
-------------- ---------- ---------- --------- ---------
- - 291 375 366
-------------- ---------- ---------- --------- ---------
GROSS PROFIT - - 499 583 592
-------------- ---------- ---------- --------- ---------
OPERATING EXPENSES
Selling, general
and administrative (64) (3) 273 329 296
Research and
development 48 64 64
Amortization of
acquired
intangible assets - 56 -
Impairment of
indefinite-lived
intangible assets - 100 -
Goodwill impairment - 442 -
Restructuring
charges, net - 17 -
-------------- ---------- ---------- --------- ---------
(64) (3) 321 1,008 360
-------------- ---------- ---------- --------- ---------
OPERATING INCOME
(LOSS) 64 3 178 (425) 232
Interest expense (17) (118) (118)
Other income, net 7 5 5
Reorganization
items, net - - -
-------------- ---------- ---------- --------- ---------
INCOME (LOSS) BEFORE
INCOME TAXES 64 3 168 (538) 119
(Provision for)
benefit from income
taxes (6) 55 55
-------------- ---------- ---------- --------- ---------
NET INCOME (LOSS) 64 3 162 (483) 174
Less: Accretion and
accrued dividends
on Series A and
Series B Preferred
Stock - - (8) (7) (7)
-------------- ---------- ---------- --------- ---------
NET INCOME (LOSS)
ATTRIBUTABLE TO
COMMON STOCKHOLDERS$ 64 $ 3 $ 154 $ (490) $ 167
============== ========== ========== ========= =========
Avaya Holdings Corp.
(Debtor-in-possession)
Reconciliation of GAAP to Non-GAAP results
Fiscal year ended September 30, 2017
(Unaudited; in millions)
Amortization
of
Intangible
Assets
Reorganizat-
GAAP Restructuring Impairment ion
Results Charges, net Charges Items
Revenue
Products $ 1,437 $ - $ - $ - $ -
Services 1,835 - - - -
------- ------------ ------------- ---------- -----------
3,272 - - - -
------- ------------ ------------- ---------- -----------
Costs
Products:
Costs 500 - - - -
Amortization of
acquired
technology
intangible
assets 20 (20) - - -
Services 753 - - - -
------- ------------ ------------- ---------- -----------
1,273 (20) - - -
------- ------------ ------------- ---------- -----------
GROSS PROFIT 1,999 20 - - -
------- ------------ ------------- ---------- -----------
OPERATING
EXPENSES
Selling, general
and
administrative 1,282 - - (3) -
Research and
development 229 - - - -
Amortization of
acquired
intangible
assets 204 (204) - - -
Impairment of
indefinite-
lived
intangible
assets 65 - - (65) -
Goodwill
impairment 52 - - (52) -
Restructuring
charges, net 30 - (30) - -
------- ------------ ------------- ---------- -----------
1,862 (204) (30) (120) -
------- ------------ ------------- ---------- -----------
OPERATING INCOME
(LOSS) 137 224 30 120 -
Interest expense (246) - - - -
Other income,
net 9 - - - -
Reorganization
items, net (98) - - - 98
------- ------------ ------------- ---------- -----------
(LOSS) INCOME
BEFORE INCOME
TAXES (198) 224 30 120 98
Benefit from
(provision for)
income taxes 16 - - - -
------- ------------ ------------- ---------- -----------
NET (LOSS) INCOME (182) 224 30 120 98
Less: Accretion
and accrued
dividends on
Series A and
Series B
Preferred Stock (31) - - - -
------- ------------ ------------- ---------- -----------
NET (LOSS) INCOME
ATTRIBUTABLE TO
COMMON
STOCKHOLDERS $ (213) $ 224 $ 30 $ 120 $ 98
======= ============ ============= ========== ===========
Costs in
Connection
with Certain
Legal Matters
Share-
based
and Other
Comp Q416 YTD
---------------
Non-
Advisory Non-GAAP GAAP GAAP
Fees Results Results Results
Revenue
Products $ - $ - $ - $ 1,437 $ 1,755 $ 1,755
Services - - - 1,835 1,947 1,947
--------- ------------- --------- --------- ------- -------
- - - 3,272 3,702 3,702
--------- ------------- --------- --------- ------- -------
Costs
Products:
Costs - - - 500 630 629
Amortization of
acquired
technology
intangible
assets - - - - 30 -
Services - - - 753 797 795
--------- ------------- --------- --------- ------- -------
- - - 1,253 1,457 1,424
--------- ------------- --------- --------- ------- -------
GROSS PROFIT - - - 2,019 2,245 2,278
--------- ------------- --------- --------- ------- -------
OPERATING
EXPENSES
Selling, general
and
administrative (11) (64) (83) 1,121 1,413 1,249
Research and
development - - - 229 275 273
Amortization of
acquired
intangible
assets - - - - 226 -
Impairment of
indefinite-
lived
intangible
assets - - - - 100 -
Goodwill
impairment - - - - 442 -
Restructuring
charges, net - - - - 105 -
--------- ------------- --------- --------- ------- -------
(11) (64) (83) 1,350 2,561 1,522
--------- ------------- --------- --------- ------- -------
OPERATING INCOME
(LOSS) 11 64 83 669 (316) 756
Interest expense - - - (246) (471) (471)
Other income,
net - - - 9 68 68
Reorganization
items, net - - - - - -
--------- ------------- --------- --------- ------- -------
(LOSS) INCOME
BEFORE INCOME
TAXES 11 64 83 432 (719) 353
Benefit from
(provision for)
income taxes - - - 16 (11) (11)
--------- ------------- --------- --------- ------- -------
NET (LOSS) INCOME 11 64 83 448 (730) 342
Less: Accretion
and accrued
dividends on
Series A and
Series B
Preferred Stock - - - (31) (41) (41)
--------- ------------- --------- --------- ------- -------
NET (LOSS) INCOME
ATTRIBUTABLE TO
COMMON
STOCKHOLDERS $ 11 $ 64 $ 83 $ 417 $ (771) $ 301
========= ============= ========= ========= ======= =======
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Source: Avaya Newsroom
Source: Avaya
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