Avaya Reports First Quarter Fiscal 2016 Financial Results

08 Feb 2016
First Quarter Fiscal 2016:
·         Revenue of $958 million
·         Operating Income of $91 million, Non-GAAP Operating Income(1) of $185 million
·         Adjusted EBITDA(1) of $228 million, 23.8% of revenue
·         Signed $189 million in cloud and managed service contracts
Santa Clara, Calif. — Monday, February 8, 2016 – Avaya reported financial results for the first fiscal quarter ended December 31, 2015.
Total revenue for the first quarter was $958 million, down $50 million compared to the prior quarter, down $121 million year-over-year, and below the Company’s expected range.  For the quarter, adjusted EBITDA(1) was $228 million which compares to adjusted EBITDA of $246 million for the prior quarter and $239 million for the first quarter of fiscal 2015. GAAP operating income was $91 million and non-GAAP operating income was $185 million which compares to non-GAAP operating income of $202 million for the prior quarter and $193 million for the first quarter of fiscal 2015.  
 “In the first fiscal quarter, the company’s business model advanced, continuing the transition to a software and services platform.  Estimated total contract value increased sequentially and year-over-year to record levels and key metrics, such as non-GAAP gross margins, non-GAAP operating margin, and adjusted EBITDA as a percentage of revenue increased year-over-year.  Revenue declined year-over-year and was below our expectations while free cash flow was positive and we continued to execute on our cost reduction initiatives,” said Kevin Kennedy, president and CEO.  “As we progress through fiscal 2016, Avaya expects further improvements to our cost structure while driving progress on our key initiatives.”
First Fiscal Quarter Highlights
·         Estimated total contract value was $3.1 billion up 5% from the first quarter of fiscal 2015 in constant currency.  This amount includes over $900 million for private cloud and managed services, a 16% increase from the first quarter of fiscal 2015 in constant currency.
·         Revenue from flagship products and services accounted for a record 49.6% of total revenue and revenue from core products and services accounted for 43.7% of total revenue.  Cloud and managed services revenue grew 5% year-over-year and contact center revenue grew 5% year-over-year on a normalized basis.
·         Gross margin was 60.4% compared to 61.1% for the prior quarter and 59.1% for the first quarter of fiscal 2015 
·         Non-GAAP gross margin was 61.3% compared to 62.0% for the prior quarter and 60.1% for the first quarter of fiscal 2015
·         Adjusted EBITDA was $228 million or 23.8% of revenue compared to $246 million or 24.4% of revenue for the prior quarter and $239 million or 22.2% of revenue for the first quarter of fiscal 2015
·         For the first fiscal quarter, percentage of revenue by geography was: 
-          U.S. – 55%                                           -     EMEA – 25%
-          Asia-Pacific – 11%                                 -     Americas International – 9%
Conference Call and Webcast
Avaya will host a financial results webcast and conference call to discuss its financial results and Q&A at 2:00 PM PST on February 8, 2016.  On the call will be Kevin Kennedy, president and CEO, and Dave Vellequette, CFO. The call will be moderated by John Nunziati, 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 (www.avaya.com/investors).  Following the live webcast, a replay will be available at the same web address in the event archives. 
To access the financial results live webcast by phone, dial 888-632-3381 in the U.S. or Canada and 785-424-1678 for international callers, using the conference ID:  AVQ116.  Listeners should access the webcast or the call 10-15 minutes before the start time to ensure they are connected prior to the start time.  
A replay of the financial results live webcast and conference call will be available beginning at 2:00 PM PST on February 9 through March 9, 2016, by accessing event archives from the investor page of Avaya’s website (www.avaya.com/investors).
About Avaya
Avaya is a leading provider of solutions that enable customer and team engagement across multiple channels and devices for better customer experience, increased productivity and enhanced financial performance. Its world-class contact center and unified communications technologies and services are available in a wide variety of flexible on-premise and cloud deployment options that seamlessly integrate with non-Avaya applications. The Avaya Engagement Environment enables third parties to create and customize business applications for competitive advantage.  Avaya’s fabric-based networking solutions help simplify and accelerate the deployment of business critical applications and services. For more information please visit www.avaya.com.
Certain statements contained in this press release may be forward-looking statements, including statements about our future financial and operational performance, planned and unrealized future savings, as well as statements about our future growth plans and drivers. 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," "predict," "should," "will" or "would" or the negative thereof or other variations thereof or other comparable terminology.  We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors may cause our 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 list and description of such risks and uncertainties, please refer to Avaya's filings with the SEC that are available at www.sec.gov and in particular, our 2015 Form 10-K filed with the SEC on November 23, 2015.  Avaya disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
[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 for the fourth quarter of fiscal 2015 see our Form 8-K filed with the SEC on November 16, 2015 at www.sec.gov.

Christina Knittel