Avaya Holdings Corp. (NYSE: AVYA) today reported financial results for the fourth quarter of fiscal 2021 ended September 30, 2021.
Financial Highlights
"Fiscal year 2021 for Avaya was a year marked by many firsts, and the outstanding results we delivered exceeded expectations on most every front. Most impressive is the fact that we reversed over a decade of annual revenue declines, delivering year over year growth closing up approximately $100 million, while we also grew ARR 177% to $530 million," said Jim Chirico, President and CEO of Avaya. "This year marked a real and substantive milestone for the company and I couldn't be prouder of the performance or more thankful for the commitment of our customers and partners and performance of our global team as we've navigated a purposeful and deliberate journey of transformation to be an enterprise cloud leader."
|
|
GAAP |
|
Non-GAAP (2) |
||||||||||||||||||||
(In millions, except percentages) |
|
4Q21 |
|
3Q21 |
|
4Q20 |
|
4Q21 |
|
3Q21 |
|
4Q20 |
||||||||||||
Revenue(1) |
|
$ |
760 |
|
|
$ |
732 |
|
|
$ |
755 |
|
|
$ |
760 |
|
|
$ |
732 |
|
|
$ |
755 |
|
Gross margin |
|
54.6 |
% |
|
55.6 |
% |
|
55.4 |
% |
|
60.4 |
% |
|
61.5 |
% |
|
61.3 |
% |
||||||
Operating income |
|
$ |
33 |
|
|
$ |
41 |
|
|
$ |
74 |
|
|
$ |
145 |
|
|
$ |
146 |
|
|
$ |
170 |
|
Net income |
|
$ |
6 |
|
|
$ |
43 |
|
|
$ |
37 |
|
|
$ |
74 |
|
|
$ |
73 |
|
|
$ |
86 |
|
Earnings per share - Diluted |
|
$ |
0.06 |
|
|
$ |
0.43 |
|
|
$ |
0.39 |
|
|
$ |
0.77 |
|
|
$ |
0.75 |
|
|
$ |
0.93 |
|
|
|
GAAP |
|
Non-GAAP (2) |
||||||||||||||
(In millions, except percentages) |
|
FY21 |
|
FY20 |
|
FY21 |
|
FY20 |
||||||||||
Revenue(1) |
|
$ |
2,973 |
|
|
|
$ |
2,873 |
|
|
|
$ |
2,973 |
|
|
$ |
2,873 |
|
Gross margin |
|
55.5 |
|
% |
|
55.0 |
|
% |
|
61.4 |
% |
|
61.3 |
% |
||||
Operating income (loss) |
|
$ |
180 |
|
|
|
$ |
(455 |
) |
|
|
$ |
602 |
|
|
$ |
610 |
|
Net (loss) income |
|
$ |
(13 |
) |
|
|
$ |
(680 |
) |
|
|
$ |
304 |
|
|
$ |
309 |
|
(Loss) earnings per share - Diluted |
|
$ |
(0.20 |
) |
|
|
$ |
(7.45 |
) |
|
|
$ |
3.16 |
|
|
$ |
3.03 |
|
(In millions, except percentages) |
|
4Q21 |
|
3Q21 |
|
4Q20 |
|
FY21 |
|
FY20 |
|||||||||||
Adjusted EBITDA(2) |
|
$ |
179 |
|
|
$ |
173 |
|
|
$ |
200 |
|
|
$ |
719 |
|
|
$ |
710 |
|
|
Adjusted EBITDA margin(2) |
|
23.6 |
% |
|
23.6 |
% |
|
26.5 |
% |
|
24.2 |
% |
|
24.7 |
% |
||||||
Cash (used for) provided by operations |
|
$ |
(5 |
) |
|
|
$ |
11 |
|
|
$ |
70 |
|
|
$ |
30 |
|
|
$ |
147 |
|
Cash and cash equivalents |
|
$ |
498 |
|
|
$ |
562 |
|
|
$ |
727 |
|
|
$ |
498 |
|
|
$ |
727 |
|
Additional Fourth Quarter Fiscal 2021 Highlights
(1) During fiscal 2021, the Company identified an understatement of revenue by $3 million and $5 million in the Consolidated Statements of Operations for fiscal 2020 and 2019, respectively, and in an understatement of the opening Retained earnings adjustment recorded upon adoption of Accounting Standards Update No. 2014-09, "Revenue from Contracts with Customers" by $7 million. The Company concluded that the impacts were not material to the current period or any prior period financial statements. As a result, the cumulative effect of the understatement was recorded during fiscal 2021, resulting in an increase to Revenue and Provision for income taxes and a decrease to Net loss of $15 million, $2 million, and $13 million, respectively, predominantly within the Products and Solutions operating segment.
(2) Non-GAAP gross margin, Non-GAAP operating margin (used below), Non-GAAP operating income, Non-GAAP net income, Non-GAAP earnings per share, adjusted EBITDA, adjusted EBITDA margin and constant currency are not measures calculated in accordance with generally accepted accounting principles in the U.S. ("GAAP"). Refer to the "Use of non-GAAP (Adjusted) Financial Measures" below and the Supplemental Financial Information accompanying this press release for more information on the calculation of constant currency and a reconciliation of these non-GAAP 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.
Customer Highlights
Business Highlights
Financial Outlook - 1Q Fiscal 2022 - unless otherwise noted, values reflect October 31, 2021 FX rates.
Financial Outlook - Fiscal Year 2022 - unless otherwise noted, values reflect October 31, 2021 FX rates.
Financial Outlook - Fiscal Year 2023 and 2024 - unless otherwise noted, values reflect October 31, 2021 FX rates. We are targeting:
The company has not quantitatively reconciled its guidance for adjusted EBITDA, non-GAAP Operating income, or non-GAAP EPS to their respective most comparable GAAP measure because certain of the reconciling items that impact these metrics including, provision for income taxes, restructuring charges, net of sublease income, advisory fees, acquisition-related costs and change in fair value of warrants affecting the period, have not occurred, are out of the company's control, or cannot be reasonably predicted. Accordingly, reconciliations to the nearest GAAP financial measures are not available without unreasonable effort. Please note that the unavailable reconciling items could significantly impact the company's results as reported under GAAP.
As Avaya's CAPS metric reflects revenue that is already recognized, management believes it would be helpful to provide investors with a better view into the performance of the company's broader-based OneCloud software solutions that are driving the company's recurring revenue growth by also providing a forward-looking metric, Annualized Recurring Revenue, or OneCloud ARR.
OneCloud ARR represents our estimate of the annualized revenue run-rate of certain components from active term OneCloud contracts (whether or not terminable) at the end of the reporting period. More specifically, OneCloud ARR includes OneCloud subscription revenue, ACO recurring revenue and revenue from CCaaS, Spaces, CPaaS, DaaS and private cloud, and excludes maintenance, managed services revenue and ACO one-time payments. The One Cloud ARR metric, combined with the company's CAPS metric, provides investors enhanced visibility into Avaya's transformational Cloud journey. Per period OneCloud ARR figures are provided in the slides published on Avaya's website at http://www.avaya.com on the Investor Relations page.
Avaya's outlook does not include the potential impact of any business combinations, asset acquisitions, divestitures, strategic investments, or other significant transactions that may be completed after the date hereof. 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 AM Eastern Time on November 22, 2021. To access the live conference call by phone, listeners should dial +1-877-858-7671 in the U.S. or Canada and +1-201-389-0939 for international callers. To join the live webcast, listeners should access the investor page of Avaya's website at https://investors.avaya.com.
Following the live webcast, a replay will be available on the investor page of Avaya's website for a period of one year. A replay of the conference call will be available for one week soon after the call by phone by dialing +1-877-660-6853 in the U.S. or Canada and +1-201-612-7415 for international callers, using the conference access code: 13724532.
About Avaya
Businesses are built by the experiences they provide, and everyday millions of those experiences are delivered by Avaya Holdings Corp. (NYSE: AVYA). Avaya is shaping what's next for the future of work, with innovation and partnerships that deliver game-changing business benefits. Our cloud communications solutions and multi-cloud application ecosystem power personalized, intelligent, and effortless customer and employee experiences to help achieve strategic ambitions and desired outcomes. Together, we are committed to help grow your business by delivering Experiences that Matter. Learn more at http://www.avaya.com.
Cautionary Note Regarding Forward-Looking Statements
This release contains certain "forward-looking statements." All statements other than statements of historical fact are "forward-looking" statements for purposes of the U.S. federal and state securities laws. These statements may be identified by the use of forward-looking terminology such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "our vision," "plan," "potential," "preliminary," "predict," "should," "will," or "would" or the negative thereof or other variations thereof or comparable terminology. The Company has based these forward-looking statements on its current expectations, assumptions, estimates and projections. These statements, including the Company's outlook, do not include the potential impact of any business combinations, asset acquisitions, divestitures, strategic investments or other strategic transactions completed after the date hereof. While the Company believes these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond its control. Risks and uncertainties that may cause these forward-looking statements to be inaccurate include, among others, termination or modification of current contracts which could impair attainment of our OneCloud ARR metric; the duration, severity and impact of the coronavirus pandemic ("COVID-19"), including the emergence of new variants, governmental and business responses to COVID-19, changes in infection rates and the effectiveness of vaccines, as well as the speed with which the vaccine can be distributed, and the impact the pandemic and such responses have on our business, financial performance, liquidity; and other factors discussed in the Company's Annual Report on Form 10-K and subsequent quarterly reports on Form 10-Q filed with the Securities and Exchange Commission (the "SEC"). These risks and uncertainties may cause the Company's actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. For a further list and description of such risks and uncertainties, please refer to the Company's filings with the SEC that are available at www.sec.gov. The Company cautions you that the list of important factors included in the Company's SEC filings may not contain all of the material factors that are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this report may not in fact occur. The Company undertakes no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.
Avaya Holdings Corp. Condensed Consolidated Statements of Operations (Unaudited) (In millions, except per share amounts) |
||||||||||||||||
|
Three months ended September 30, |
|
Fiscal years ended September 30, |
|||||||||||||
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|||||||||
REVENUE |
|
|
|
|
|
|
|
|||||||||
Products |
$ |
246 |
|
|
$ |
269 |
|
|
$ |
992 |
|
|
$ |
1,073 |
|
|
Services |
514 |
|
|
486 |
|
|
1,981 |
|
|
1,800 |
|
|||||
|
760 |
|
|
755 |
|
|
2,973 |
|
|
2,873 |
|
|||||
COSTS |
|
|
|
|
|
|
|
|||||||||
Products: |
|
|
|
|
|
|
|
|||||||||
Costs |
103 |
|
|
106 |
|
|
398 |
|
|
405 |
|
|||||
Amortization of technology intangible assets |
44 |
|
|
44 |
|
|
173 |
|
|
174 |
|
|||||
Services |
198 |
|
|
187 |
|
|
752 |
|
|
714 |
|
|||||
|
345 |
|
|
337 |
|
|
1,323 |
|
|
1,293 |
|
|||||
GROSS PROFIT |
415 |
|
|
418 |
|
|
1,650 |
|
|
1,580 |
|
|||||
OPERATING EXPENSES |
|
|
|
|
|
|
|
|||||||||
Selling, general and administrative |
268 |
|
|
250 |
|
|
1,053 |
|
|
1,013 |
|
|||||
Research and development |
61 |
|
|
52 |
|
|
228 |
|
|
207 |
|
|||||
Amortization of intangible assets |
40 |
|
|
39 |
|
|
159 |
|
|
161 |
|
|||||
Impairment charges |
? |
|
|
? |
|
|
? |
|
|
624 |
|
|||||
Restructuring charges, net |
13 |
|
|
3 |
|
|
30 |
|
|
30 |
|
|||||
|
382 |
|
|
344 |
|
|
1,470 |
|
|
2,035 |
|
|||||
OPERATING INCOME (LOSS) |
33 |
|
|
74 |
|
|
180 |
|
|
(455 |
) |
|||||
Interest expense |
(53 |
) |
|
(64 |
) |
|
(222 |
) |
|
(226 |
) |
|||||
Other income, net |
33 |
|
|
7 |
|
|
44 |
|
|
63 |
|
|||||
INCOME (LOSS) BEFORE INCOME TAXES |
13 |
|
|
17 |
|
|
2 |
|
|
(618 |
) |
|||||
(Provision for) benefit from income taxes |
(7 |
) |
|
20 |
|
|
(15 |
) |
|
(62 |
) |
|||||
NET INCOME (LOSS) |
$ |
6 |
|
|
$ |
37 |
|
|
$ |
(13 |
) |
|
$ |
(680 |
) |
|
EARNINGS (LOSS) PER SHARE |
|
|
|
|
|
|
|
|||||||||
Basic |
$ |
0.06 |
|
|
$ |
0.40 |
|
|
$ |
(0.20 |
) |
|
$ |
(7.45 |
) |
|
Diluted |
$ |
0.06 |
|
|
$ |
0.39 |
|
|
$ |
(0.20 |
) |
|
$ |
(7.45 |
) |
|
Weighted average shares outstanding |
|
|
|
|
|
|
|
|||||||||
Basic |
84.5 |
|
|
83.4 |
|
|
84.5 |
|
|
92.2 |
|
|||||
Diluted |
86.9 |
|
|
84.3 |
|
|
84.5 |
|
|
92.2 |
|
Avaya Holdings Corp. Condensed Consolidated Balance Sheets (Unaudited) (In millions, except per share and shares amounts) |
||||||||
|
|
As of September 30, |
||||||
|
|
2021 |
|
2020 |
||||
ASSETS |
|
|
|
|
||||
Current assets: |
|
|
|
|
||||
Cash and cash equivalents |
|
$ |
498 |
|
|
$ |
727 |
|
Accounts receivable, net |
|
307 |
|
|
275 |
|
||
Inventory |
|
51 |
|
|
54 |
|
||
Contract assets, net |
|
518 |
|
|
296 |
|
||
Contract costs |
|
117 |
|
|
115 |
|
||
Other current assets |
|
100 |
|
|
112 |
|
||
TOTAL CURRENT ASSETS |
|
1,591 |
|
|
1,579 |
|
||
Property, plant and equipment, net |
|
295 |
|
|
268 |
|
||
Deferred income taxes, net |
|
40 |
|
|
31 |
|
||
Intangible assets, net |
|
2,235 |
|
|
2,556 |
|
||
Goodwill |
|
1,480 |
|
|
1,478 |
|
||
Operating lease right-of-use assets |
|
135 |
|
|
160 |
|
||
Other assets |
|
209 |
|
|
159 |
|
||
TOTAL ASSETS |
|
$ |
5,985 |
|
|
$ |
6,231 |
|
LIABILITIES |
|
|
|
|
||||
Current liabilities: |
|
|
|
|
||||
Accounts payable |
|
$ |
295 |
|
|
$ |
242 |
|
Payroll and benefit obligations |
|
193 |
|
|
198 |
|
||
Contract liabilities |
|
360 |
|
|
446 |
|
||
Operating lease liabilities |
|
49 |
|
|
49 |
|
||
Business restructuring reserves |
|
19 |
|
|
21 |
|
||
Other current liabilities |
|
181 |
|
|
181 |
|
||
TOTAL CURRENT LIABILITIES |
|
1,097 |
|
|
1,137 |
|
||
Non-current liabilities: |
|
|
|
|
||||
Long-term debt |
|
2,813 |
|
|
2,886 |
|
||
Pension obligations |
|
648 |
|
|
749 |
|
||
Other post-retirement obligations |
|
153 |
|
|
215 |
|
||
Deferred income taxes, net |
|
53 |
|
|
38 |
|
||
Contract liabilities |
|
305 |
|
|
373 |
|
||
Operating lease liabilities |
|
102 |
|
|
129 |
|
||
Business restructuring reserves |
|
25 |
|
|
28 |
|
||
Other liabilities |
|
267 |
|
|
312 |
|
||
TOTAL NON-CURRENT LIABILITIES |
|
4,366 |
|
|
4,730 |
|
||
TOTAL LIABILITIES |
|
5,463 |
|
|
5,867 |
|
||
Commitments and contingencies |
|
|
|
|
||||
Preferred stock, $0.01 par value; 55,000,000 shares authorized at September 30, 2021 and 2020 |
|
|
|
|
||||
Convertible series A preferred stock; 125,000 shares issued and outstanding at September 30, 2021 and 2020 |
|
130 |
|
|
128 |
|
||
STOCKHOLDERS' EQUITY |
|
|
|
|
||||
Common stock, $0.01 par value; 550,000,000 shares authorized; 84,115,602 shares issued and outstanding at September 30, 2021; and 83,278,383 shares issued and outstanding at September 30, 2020 |
|
1 |
|
|
1 |
|
||
Additional paid-in capital |
|
1,467 |
|
|
1,449 |
|
||
Accumulated deficit |
|
(985 |
) |
|
(969 |
) |
||
Accumulated other comprehensive loss |
|
(91 |
) |
|
(245 |
) |
||
TOTAL STOCKHOLDERS' EQUITY |
|
392 |
|
|
236 |
|
||
TOTAL LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS' EQUITY |
|
$ |
5,985 |
|
|
$ |
6,231 |
|
Avaya Holdings Corp. Condensed Statements of Cash Flows (Unaudited; in millions) |
||||||||
|
|
Fiscal years ended September 30, |
||||||
|
|
2021 |
|
2020 |
||||
Net cash provided by (used for): |
|
|
|
|
||||
Operating activities |
|
$ |
30 |
|
|
$ |
147 |
|
Investing activities |
|
(117 |
) |
|
314 |
|
||
Financing activities |
|
(142 |
) |
|
(489 |
) |
||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash |
|
? |
|
|
3 |
|
||
Net decrease in cash, cash equivalents, and restricted cash |
|
(229 |
) |
|
(25 |
) |
||
Cash, cash equivalents, and restricted cash at beginning of period |
|
731 |
|
|
756 |
|
||
Cash, cash equivalents, and restricted cash at end of period |
|
$ |
502 |
|
|
$ |
731 |
|
Avaya Holdings Corp. Supplemental Schedule of Revenue by Segment and Geography (Unaudited; in millions) |
||||||||||||||||||||||||||||||||
|
|
Three months ended
|
|
Change |
|
Three months ended
|
|
Fiscal year ended
|
|
Fiscal year ended
|
||||||||||||||||||||||
|
|
2021 |
|
2020 |
|
Amount |
|
Pct. |
|
Pct., net of fx impact |
|
|
|
|||||||||||||||||||
Revenue by Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Products & Solutions |
|
$ |
246 |
|
|
$ |
269 |
|
|
$ |
(23 |
) |
|
(9 |
) |
% |
|
(8 |
) |
% |
|
$ |
254 |
|
|
$ |
992 |
|
|
$ |
1,074 |
|
Services |
|
514 |
|
|
488 |
|
|
26 |
|
|
5 |
|
% |
|
6 |
|
% |
|
478 |
|
|
1,982 |
|
|
1,805 |
|
||||||
Unallocated amounts |
|
? |
|
|
(2 |
) |
|
2 |
|
|
(1 |
) |
|
|
(1 |
) |
|
|
? |
|
|
(1 |
) |
|
(6 |
) |
||||||
Total revenue |
|
$ |
760 |
|
|
$ |
755 |
|
|
$ |
5 |
|
|
1 |
|
% |
|
1 |
|
% |
|
$ |
732 |
|
|
$ |
2,973 |
|
|
$ |
2,873 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Revenue by Geography |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
U.S. |
|
$ |
459 |
|
|
$ |
447 |
|
|
$ |
12 |
|
|
3 |
|
% |
|
3 |
|
% |
|
$ |
418 |
|
|
$ |
1,704 |
|
|
$ |
1,640 |
|
International: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Europe, Middle East and Africa |
|
169 |
|
|
178 |
|
|
(9 |
) |
|
(5 |
) |
% |
|
(4 |
) |
% |
|
181 |
|
|
732 |
|
|
714 |
|
||||||
Asia Pacific |
|
73 |
|
|
74 |
|
|
(1 |
) |
|
(1 |
) |
% |
|
? |
|
% |
|
72 |
|
|
297 |
|
|
296 |
|
||||||
Americas International - Canada and Latin America |
|
59 |
|
|
56 |
|
|
3 |
|
|
5 |
|
% |
|
1 |
|
% |
|
61 |
|
|
240 |
|
|
223 |
|
||||||
Total International |
|
301 |
|
|
308 |
|
|
(7 |
) |
|
(2 |
) |
% |
|
(2 |
) |
% |
|
314 |
|
|
1,269 |
|
|
1,233 |
|
||||||
Total revenue |
|
$ |
760 |
|
|
$ |
755 |
|
|
$ |
5 |
|
|
1 |
|
% |
|
1 |
|
% |
|
$ |
732 |
|
|
$ |
2,973 |
|
|
$ |
2,873 |
|
(1) |
Not meaningful. |
Use of non-GAAP (Adjusted) Financial Measures
The information furnished in this release includes non-GAAP financial measures that differ from measures calculated in accordance with generally accepted accounting principles in the United States of America ("GAAP"), including financial measures labeled as "non-GAAP" or "adjusted."
EBITDA is defined as net income (loss) before income taxes, interest expense, interest income and depreciation and amortization. Adjusted EBITDA is EBITDA further adjusted to exclude certain charges and other adjustments described in our SEC filings and the tables below.
We believe that including supplementary information concerning adjusted EBITDA is appropriate because it serves as a basis for determining management and employee compensation and it is used as a basis for calculating covenants in our credit agreements. In addition, we believe adjusted EBITDA provides more comparability between our historical results and results that reflect purchase accounting and our current capital structure. We also present adjusted EBITDA because we believe analysts and investors utilize these measures in analyzing our results. Adjusted EBITDA measures our financial performance based on operational factors that management can impact in the short-term, such as our pricing strategies, volume, costs and expenses of the organization, and it presents our financial performance in a way that can be more easily compared to prior quarters or fiscal years.
EBITDA and adjusted EBITDA have limitations as analytical tools. EBITDA measures do not represent net income (loss) or cash flow from operations as those terms are defined by GAAP and do not necessarily indicate whether cash flows will be sufficient to fund cash needs. Adjusted EBITDA excludes the impact of earnings or charges resulting from matters that we do not consider indicative of our ongoing operations but that still affect our net income. In particular, our formulation of adjusted EBITDA allows adjustment for certain amounts that are included in calculating net income (loss), however, these are expenses that may recur, may vary and are difficult to predict. In addition, these terms are not necessarily comparable to other similarly titled captions of other companies due to the potential inconsistencies in the method of calculation.
We also present the measures non-GAAP gross margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP earnings per share as a supplement to our unaudited condensed consolidated financial statements presented in accordance with GAAP. We believe these non-GAAP measures are the most meaningful for period to period comparisons because they exclude the impact of the earnings and charges noted in the applicable tables below that resulted from matters that we consider not to be indicative of our ongoing operations.
The company presents constant currency information to provide a framework to assess how the company's underlying businesses performance excluding the effect of foreign currency rate fluctuations. To present this information for current and comparative prior period results for entities reporting in currencies other than U.S. dollars, the amounts are converted into U.S. dollars at the exchange rate in effect on the last day of the company's prior fiscal year (i.e. September 30, 2020).
In addition, we present the liquidity measures of free cash flow. Free cash flow is calculated by subtracting capital expenditures from Net cash provided by operating activities. We believe free cash flow is a measure often used by analysts and investors to compare the cash flow and liquidity of companies in the same industry.
The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, as substitute for, or superior to, the financial information prepared and presented in accordance with GAAP and may be different from the non-GAAP financial measures used by other companies. In addition, these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP.
We do not provide a forward-looking reconciliation of expected first quarter and full year fiscal 2022 non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP operating margin, non-GAAP earnings per share or adjusted EBITDA guidance as the amount and significance of special items required to develop meaningful comparable GAAP financial measures cannot be estimated at this time without unreasonable efforts. These special items could be meaningful.
The following tables reconcile historical GAAP measures to non-GAAP measures.
Avaya Holdings Corp. Supplemental Schedules of Non-GAAP Adjusted EBITDA (Unaudited; in millions) |
||||||||||||||||||||
|
Three months ended, |
|
Fiscal years ended, |
|||||||||||||||||
|
September 30, 2021 |
|
June 30, 2021 |
|
September 30, 2020 |
|
September 30, 2021 |
|
September 30, 2020 |
|||||||||||
Net income (loss) |
$ |
6 |
|
|
$ |
43 |
|
|
$ |
37 |
|
|
$ |
(13 |
) |
|
$ |
(680 |
) |
|
Interest expense |
53 |
|
|
54 |
|
|
64 |
|
|
222 |
|
|
226 |
|
||||||
Interest income |
? |
|
|
? |
|
|
? |
|
|
(1 |
) |
|
(6 |
) |
||||||
Provision for (benefit from) income taxes |
7 |
|
|
(46 |
) |
|
(20 |
) |
|
15 |
|
|
62 |
|
||||||
Depreciation and amortization |
111 |
|
|
105 |
|
|
104 |
|
|
425 |
|
|
423 |
|
||||||
EBITDA |
177 |
|
|
156 |
|
|
185 |
|
|
648 |
|
|
25 |
|
||||||
Impact of fresh start accounting adjustments (1) |
? |
|
|
1 |
|
|
1 |
|
|
2 |
|
|
1 |
|
||||||
Restructuring charges (2) |
13 |
|
|
5 |
|
|
2 |
|
|
28 |
|
|
20 |
|
||||||
Advisory fees (3) |
? |
|
|
? |
|
|
? |
|
|
? |
|
|
40 |
|
||||||
Acquisition-related costs |
1 |
|
|
2 |
|
|
? |
|
|
3 |
|
|
? |
|
||||||
Share-based compensation |
14 |
|
|
14 |
|
|
9 |
|
|
55 |
|
|
30 |
|
||||||
Impairment of goodwill |
? |
|
|
? |
|
|
? |
|
|
? |
|
|
624 |
|
||||||
Pension and post-retirement benefit costs |
? |
|
|
(1 |
) |
|
? |
|
|
(1 |
) |
|
? |
|
||||||
Gain on post-retirement plan settlement |
? |
|
|
? |
|
|
? |
|
|
(14 |
) |
|
? |
|
||||||
Change in fair value of Emergence Date Warrants |
(26 |
) |
|
? |
|
|
3 |
|
|
1 |
|
|
3 |
|
||||||
(Gain) loss on foreign currency transactions |
? |
|
|
(4 |
) |
|
? |
|
|
(3 |
) |
|
16 |
|
||||||
Gain on investments in equity and debt securities, net(4) |
? |
|
|
? |
|
|
? |
|
|
? |
|
|
(49 |
) |
||||||
Adjusted EBITDA |
$ |
179 |
|
|
$ |
173 |
|
|
$ |
200 |
|
|
$ |
719 |
|
|
$ |
710 |
|
(1) |
The impact of fresh start accounting adjustments in connection with the Company's emergence from bankruptcy. |
|
(2) |
Restructuring charges represent employee separation costs and facility exit costs (excluding the impact of accelerated depreciation expense) related to the Company's restructuring programs, net of sublease income. |
|
(3) |
Advisory fees represent costs incurred to assist in the assessment of strategic and financial alternatives to improve the Company's capital structure. |
|
(4) |
Realized and unrealized gains on investments in equity securities, net of impairment of investments in debt securities. |
Avaya Holdings Corp. Supplemental Schedules of Non-GAAP Earnings per Share (Unaudited; in millions) |
|||||||||||||||||||||||||
|
|
Three months ended, |
|
Fiscal years ended, |
|||||||||||||||||||||
|
|
September 30, 2021 |
|
June 30, 2021 |
|
September 30, 2020 |
|
September 30, 2021 |
|
September 30, 2020 |
|||||||||||||||
GAAP Net Income (Loss) |
|
$ |
6 |
|
|
|
$ |
43 |
|
|
|
$ |
37 |
|
|
|
$ |
(13 |
) |
|
|
$ |
(680 |
) |
|
Non-GAAP Adjustments: |
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Impact of fresh start accounting |
|
? |
|
|
|
1 |
|
|
|
1 |
|
|
|
2 |
|
|
|
6 |
|
|
|||||
Restructuring charges, net(1) |
|
13 |
|
|
|
5 |
|
|
|
2 |
|
|
|
29 |
|
|
|
25 |
|
|
|||||
Advisory fees(2) |
|
? |
|
|
|
? |
|
|
|
? |
|
|
|
? |
|
|
|
40 |
|
|
|||||
Acquisition-related costs |
|
1 |
|
|
|
2 |
|
|
|
? |
|
|
|
3 |
|
|
|
? |
|
|
|||||
Share-based compensation |
|
14 |
|
|
|
14 |
|
|
|
9 |
|
|
|
55 |
|
|
|
30 |
|
|
|||||
Impairment of goodwill |
|
? |
|
|
|
? |
|
|
|
? |
|
|
|
? |
|
|
|
624 |
|
|
|||||
Pension and post-retirement benefit costs |
|
? |
|
|
|
(1 |
) |
|
|
? |
|
|
|
(1 |
) |
|
|
? |
|
|
|||||
Gain on post-retirement plan settlement |
|
? |
|
|
|
? |
|
|
|
? |
|
|
|
(14 |
) |
|
|
? |
|
|
|||||
Change in fair value of Emergence Date Warrants |
|
(26 |
) |
|
|
? |
|
|
|
3 |
|
|
|
1 |
|
|
|
3 |
|
|
|||||
(Gain) loss on foreign currency transactions |
|
? |
|
|
|
(4 |
) |
|
|
? |
|
|
|
(3 |
) |
|
|
16 |
|
|
|||||
Gain on investments in equity and debt securities, net(3) |
|
? |
|
|
|
? |
|
|
|
? |
|
|
|
? |
|
|
|
(49 |
) |
|
|||||
Amortization of intangible assets |
|
84 |
|
|
|
83 |
|
|
|
83 |
|
|
|
332 |
|
|
|
335 |
|
|
|||||
Income tax expense effects(4) |
|
(18 |
) |
|
|
(70 |
) |
|
|
(49 |
) |
|
|
(87 |
) |
|
|
(41 |
) |
|
|||||
Non-GAAP Net Income |
|
$ |
74 |
|
|
|
$ |
73 |
|
|
|
$ |
86 |
|
|
|
$ |
304 |
|
|
|
$ |
309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Dividends and accretion to preferred stockholders |
|
(1 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
|
|
(4 |
) |
|
|
(7 |
) |
|
|||||
Undistributed Non-GAAP Income |
|
$ |
73 |
|
|
|
$ |
72 |
|
|
|
$ |
85 |
|
|
|
$ |
300 |
|
|
|
$ |
302 |
|
|
Percentage allocated to common stockholders(5) |
|
91.2 |
|
% |
|
91.3 |
|
% |
|
91.2 |
|
% |
|
91.2 |
|
% |
|
92.8 |
|
% |
|||||
Numerator for Non-GAAP diluted earnings per common share |
|
$ |
67 |
|
|
|
$ |
66 |
|
|
|
$ |
78 |
|
|
|
$ |
274 |
|
|
|
280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Diluted Weighted Average Shares - GAAP |
|
86.9 |
|
|
|
88.0 |
|
|
|
84.3 |
|
|
|
84.5 |
|
|
|
92.2 |
|
|
|||||
Share adjustment(6) |
|
? |
|
|
|
(0.2 |
) |
|
|
? |
|
|
|
2.3 |
|
|
|
0.3 |
|
|
|||||
Diluted Weighted Average Shares - Non-GAAP |
|
86.9 |
|
|
|
87.8 |
|
|
|
84.3 |
|
|
|
$ |
86.8 |
|
|
|
92.5 |
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
GAAP Earnings (Loss) per Share - Diluted |
|
$ |
0.06 |
|
|
|
$ |
0.43 |
|
|
|
$ |
0.39 |
|
|
|
$ |
(0.20 |
) |
|
|
$ |
(7.45 |
) |
|
Non-GAAP Earnings per Share - Diluted |
|
$ |
0.77 |
|
|
|
$ |
0.75 |
|
|
|
$ |
0.93 |
|
|
|
$ |
3.16 |
|
|
|
$ |
3.03 |
|
|
(1) |
Restructuring charges, net represent employee separation costs and facility exit costs related to the Company's restructuring programs, net of sublease income. | |
(2) |
Advisory fees represent costs incurred to assist in the assessment of strategic and financial alternatives to improve the Company's capital structure. | |
(3) |
Realized and unrealized gains on investments in equity securities, net of impairment of investments in debt securities. | |
(4) |
The Company's calculation of non-GAAP income taxes reflects a 25% fixed non-GAAP effective tax rate based on a blended U.S. federal and state tax rate, given the Company's operating structure. The non-GAAP effective tax rate may differ significantly from the GAAP effective tax rate. The non-GAAP effective tax rate could be subject to change for a number of reasons, including but not limited to, changes resulting from tax legislation, material changes in revenues or expenses and other significant events. The Company will continuously assess its estimated non-GAAP effective tax rate in connection with its calculation of non-GAAP net income and non-GAAP net income per diluted share in future periods. | |
(5) |
The Company's preferred shares are participating securities, which requires the application of the two-class method to calculate diluted earnings per share. Under the two-class method, undistributed earnings are allocated to common stock and participating securities according to their respective participating rights in undistributed earnings. The percentage allocated to common stockholders reflects the proportion of weighted average common stock outstanding to the weighted average of common stock and common stock equivalents (preferred shares). | |
(6) |
Includes the impact of our bond hedge transaction which is anti-dilutive in diluted GAAP earnings (loss) per share but is expected to mitigate the dilutive effect of our convertible notes and therefore are included in the calculations of non-GAAP diluted shares outstanding. In periods with a GAAP net loss, the share adjustment also reflects the dilutive impact of certain securities, which are excluded from the computation of diluted GAAP loss per share as they are anti-dilutive. |
Avaya Holdings Corp. Supplemental Schedules of Non-GAAP Reconciliations of Gross Margin and Operating Income (Unaudited; in millions) |
|||||||||||||||||||||
|
|
Three months ended, |
|
Fiscal years ended, |
|||||||||||||||||
|
|
September 30, 2021 |
|
June 30, 2021 |
|
September 30, 2020 |
|
September 30, 2021 |
|
September 30, 2020 |
|||||||||||
Reconciliation of Non-GAAP Gross Profit and Non-GAAP Gross Margin |
|
|
|
|
|
|
|
|
|
|
|||||||||||
Gross Profit |
|
$ |
415 |
|
|
$ |
407 |
|
|
$ |
418 |
|
|
$ |
1,650 |
|
|
$ |
1,580 |
|
|
Items excluded: |
|
|
|
|
|
|
|
|
|
|
|||||||||||
Adj. for fresh start accounting |
|
? |
|
|
? |
|
|
1 |
|
|
1 |
|
|
7 |
|
|
|||||
Amortization of technology intangible assets |
|
44 |
|
|
43 |
|
|
44 |
|
|
173 |
|
|
174 |
|
|
|||||
Non-GAAP Gross Profit |
|
$ |
459 |
|
|
$ |
450 |
|
|
$ |
463 |
|
|
$ |
1,824 |
|
|
$ |
1,761 |
|
|
GAAP Gross Margin |
|
54.6 |
% |
|
55.6 |
% |
|
55.4 |
% |
|
55.5 |
% |
|
55.0 |
|
% |
|||||
Non-GAAP Gross Margin |
|
60.4 |
% |
|
61.5 |
% |
|
61.3 |
% |
|
61.4 |
% |
|
61.3 |
|
% |
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Reconciliation of Non-GAAP Operating Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating Income (Loss) |
|
$ |
33 |
|
|
$ |
41 |
|
|
$ |
74 |
|
|
$ |
180 |
|
|
$ |
(455 |
) |
|
Items excluded: |
|
|
|
|
|
|
|
|
|
|
|||||||||||
Adj. for fresh start accounting |
|
? |
|
|
1 |
|
|
1 |
|
|
2 |
|
|
6 |
|
|
|||||
Amortization of intangible assets |
|
84 |
|
|
83 |
|
|
83 |
|
|
332 |
|
|
335 |
|
|
|||||
Restructuring charges, net |
|
13 |
|
|
5 |
|
|
3 |
|
|
30 |
|
|
30 |
|
|
|||||
Advisory fees |
|
? |
|
|
? |
|
|
? |
|
|
? |
|
|
40 |
|
|
|||||
Acquisition-related costs |
|
1 |
|
|
2 |
|
|
? |
|
|
3 |
|
|
? |
|
|
|||||
Share-based compensation |
|
14 |
|
|
14 |
|
|
9 |
|
|
55 |
|
|
30 |
|
|
|||||
Impairment of goodwill |
|
? |
|
|
? |
|
|
? |
|
|
? |
|
|
624 |
|
|
|||||
Non-GAAP Operating Income |
|
$ |
145 |
|
|
$ |
146 |
|
|
$ |
170 |
|
|
$ |
602 |
|
|
$ |
610 |
|
|
GAAP Operating Margin |
|
4.3 |
% |
|
5.6 |
% |
|
9.8 |
% |
|
6.1 |
% |
|
(15.8 |
) |
% |
|||||
Non-GAAP Operating Margin |
|
19.1 |
% |
|
19.9 |
% |
|
22.5 |
% |
|
20.2 |
% |
|
21.2 |
|
% |
Avaya Holdings Corp. Supplemental Schedules of Non-GAAP Reconciliation of Gross Profit and Gross Margin by Portfolio (Unaudited; in millions) |
|||||||||||||||||||||
|
|
Three months ended, |
|
Fiscal years ended, |
|||||||||||||||||
|
|
September 30, 2021 |
|
June 30, 2021 |
|
September 30, 2020 |
|
September 30, 2021 |
|
September 30, 2020 |
|||||||||||
Reconciliation of Non-GAAP Gross Profit and Non-GAAP Gross Margin - Products & Solutions |
|
|
|
|
|
|
|
|
|
|
|||||||||||
Revenue |
|
$ |
246 |
|
|
$ |
254 |
|
|
$ |
269 |
|
|
|
$ |
992 |
|
|
$ |
1,073 |
|
Costs |
|
103 |
|
|
98 |
|
|
106 |
|
|
|
398 |
|
|
405 |
|
|||||
Amortization of technology intangible assets |
|
44 |
|
|
43 |
|
|
44 |
|
|
|
173 |
|
|
174 |
|
|||||
GAAP Gross Profit |
|
99 |
|
|
113 |
|
|
119 |
|
|
|
421 |
|
|
494 |
|
|||||
Items excluded: |
|
|
|
|
|
|
|
|
|
|
|||||||||||
Adj. for fresh start accounting |
|
? |
|
|
? |
|
|
(1 |
) |
|
|
? |
|
|
1 |
|
|||||
Amortization of technology intangible assets |
|
44 |
|
|
43 |
|
|
44 |
|
|
|
173 |
|
|
174 |
|
|||||
Non-GAAP Gross Profit |
|
$ |
143 |
|
|
$ |
156 |
|
|
$ |
162 |
|
|
|
$ |
594 |
|
|
$ |
669 |
|
GAAP Gross Margin |
|
40.2 |
% |
|
44.5 |
% |
|
44.2 |
|
% |
|
42.4 |
% |
|
46.0 |
% |
|||||
Non-GAAP Gross Margin |
|
58.1 |
% |
|
61.4 |
% |
|
60.2 |
|
% |
|
59.9 |
% |
|
62.3 |
% |
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Reconciliation of Non-GAAP Gross Profit and Non-GAAP Gross Margin - Services |
|
|
|
|
|
|
|
|
|
|
|||||||||||
Revenue |
|
$ |
514 |
|
|
$ |
478 |
|
|
$ |
486 |
|
|
|
$ |
1,981 |
|
|
$ |
1,800 |
|
Costs |
|
198 |
|
|
184 |
|
|
187 |
|
|
|
752 |
|
|
714 |
|
|||||
GAAP Gross Profit |
|
316 |
|
|
294 |
|
|
299 |
|
|
|
1,229 |
|
|
1,086 |
|
|||||
Items excluded: |
|
|
|
|
|
|
|
|
|
|
|||||||||||
Adj. for fresh start accounting |
|
? |
|
|
? |
|
|
2 |
|
|
|
1 |
|
|
6 |
|
|||||
Non-GAAP Gross Profit |
|
$ |
316 |
|
|
$ |
294 |
|
|
$ |
301 |
|
|
|
$ |
1,230 |
|
|
$ |
1,092 |
|
GAAP Gross Margin |
|
61.5 |
% |
|
61.5 |
% |
|
61.5 |
|
% |
|
62.0 |
% |
|
60.3 |
% |
|||||
Non-GAAP Gross Margin |
|
61.5 |
% |
|
61.5 |
% |
|
61.9 |
|
% |
|
62.1 |
% |
|
60.7 |
% |
Avaya Holdings Corp. Supplemental Schedules of Free Cash Flow (Unaudited; in millions) |
||||||||||||||||||||
|
|
Three months ended, |
||||||||||||||||||
|
|
Sept. 30, 2021 |
|
June 30, 2021 |
|
Mar. 31, 2021 |
|
Dec. 31, 2020 |
|
Sept. 30, 2020 |
||||||||||
Net cash (used for) provided by operating activities |
|
$ |
(5 |
) |
|
$ |
11 |
|
|
$ |
(24 |
) |
|
$ |
48 |
|
|
$ |
70 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
||||||||||
Capital expenditures |
|
28 |
|
|
25 |
|
|
26 |
|
|
27 |
|
|
26 |
|
|||||
Free cash flow |
|
$ |
(33 |
) |
|
$ |
(14 |
) |
|
$ |
(50 |
) |
|
$ |
21 |
|
|
$ |
44 |
|
Source: Avaya Newsroom
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