Avaya Reports Fourth Quarter and Fiscal Year 2015 Financial Results

11 Nov 2015

Fourth Quarter Fiscal 2015:

Revenue of $1,008 million
Operating Income of $100 million, Non-GAAP Operating Income(1) of $202 million
Adjusted EBITDA⁽¹⁾ of $246 million, 24.4% of revenue

Fiscal Year 2015:

Revenue of $4,081 million
Operating Income of $371 million, Non-GAAP Operating Income⁽¹⁾ of $718 million
Adjusted EBITDA⁽¹⁾ of $900 million, 22.1% of revenue
Record levels for Product Gross Margin and Service Gross Margin

Santa Clara, Calif. — Wednesday, November 11, 2015 – Avaya reported financial results for the fourth fiscal quarter and fiscal year ended September 30, 2015.

Total revenue for the fourth quarter was $1,008 million, up $9 million compared to the prior quarter, down year-over-year, and within the Company’s expected range. For the quarter, adjusted EBITDA⁽¹⁾ was $246 million which compares to adjusted EBITDA of $207 million for the prior quarter and $253 million for the fourth quarter of fiscal 2014. GAAP operating income was $100 million and non-GAAP operating income was $202 million which compares to non-GAAP operating income of $161 million for the prior quarter and $212 million for the fourth quarter of fiscal 2014.

For fiscal 2015, Avaya reported revenue of $4,081 million, down 7% compared to fiscal 2014 revenue of $4,371 million, or down 4% in constant currency. GAAP operating income was $371 million and non-GAAP operating income was $718 million in fiscal 2015 compared to $727 million in fiscal 2014. Fiscal 2015 adjusted EBITDA of $900 million was $2 million higher compared to fiscal 2014. Free cash flow was $91 million for the fiscal year, with cash and cash equivalents totaling $323 million as of September 30, 2015.

“The transformation of the company advanced throughout fiscal 2015. We saw positive leading indicators of demand and grew revenue in our areas of investment and diversification. Operationally, we extended our multi-year upward trend of increased gross margin and adjusted EBITDA percentage for the fifth consecutive year,” said Kevin Kennedy, president and CEO. “In fiscal 2016, Avaya will continue to focus on operational optimization to increase its margins and will continue providing the market with industry leading products and services.”

Fourth Fiscal Quarter Highlights

Product book-to-bill for the quarter was greater than 1.0. Total bookings for the fourth quarter were 3% below the prior year in constant currency
Total revenue under contract was $3.0 billion and increased 1% from the fourth quarter of fiscal 2014 in constant currency. Included in revenue under contract is contracted revenue for private cloud and managed services which increased 11% from the fourth quarter of fiscal 2014 in constant currency, ending the quarter at over $800 million
Revenue from flagship products and services accounted for a record 49% of total revenue and revenue from core products and services accounted for 43% of total revenue
Gross margin was 61.1% compared to 58.5% for the prior quarter and 58.2% for the fourth quarter of fiscal 2014
Non-GAAP gross margin was 62.0% compared to 59.5% for the prior quarter and 59.7% for the fourth quarter of fiscal 2014
Adjusted EBITDA was $246 million or 24.4% of revenue compared to $207 million or 20.7% of revenue for the prior quarter and $253 million or 22.5% of revenue for the fourth quarter of fiscal 2014
For the fourth fiscal quarter, percentage of revenue by geography was:
- U.S. – 56%; EMEA – 24%; Asia-Pacific – 11%; Americas International – 9%

Fiscal Year Highlights

Total bookings for the fiscal year were down 2% compared to fiscal 2014 in constant currency
Revenue of $4,081 million was down $290 million compared to fiscal 2014, and was $168 million lower in constant currency
Product revenue of $2,029 million was down $167 million compared to fiscal 2014, and was $123 million lower in constant currency
Services revenue of $2,052 million down $123 million compared to fiscal 2014, and was $45 million lower in constant currency
Gross margin was 59.5% compared to 57.2% for fiscal 2014
Non-GAAP gross margin was 60.5% compared to 58.9% for fiscal 2014
Adjusted EBITDA was $900 million or 22.1% of revenue compared to $898 million or 20.5% of revenue for fiscal 2014
For the fiscal year, percentage of revenue by geography was:
- U.S. – 54%; EMEA – 26%; Asia-Pacific – 10%; Americas International – 10%

Conference Call and Webcast

Avaya will host a financial results webcast and conference call to discuss its financial results and Q&A at 11:00 AM PST on November 11, 2015. 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 877-876-9177 in the U.S. or Canada and 785-424-1666 for international callers, using the conference ID: AVQ415. 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 11:00 AM PST on November 12 through December 12, 2015, by dialing 800-688-4915 within the United States or 402-220-1319 outside the United States.

2015 Analyst and Investor Meeting

Avaya announced previously that it will be hosting a meeting for analysts and investors on Thursday, November 12, 2015 at 1:00 PM PST. The meeting will be webcast live for remote participation. Details for accessing the webcast and supporting slides, which will be posted before the start of the event, can be found on the Investor Relations page of the company’s website, at this link: http://www.avaya.com/investors/events/avaya-2015-analyst-and-investor-meeting/ Access to an archived replay of the event will be available at the same site, starting at 8 AM PST on Friday, November 13, 2015.

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. These statements may be identified by the use of forward-looking terminology such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "plan," "potential," "predict," "should" or "will" or other similar 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 involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors may cause our actual results to differ materially from any future results 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. Avaya disclaims any intention or obligation to update or revise any forward-looking statements.

¹Refer 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 third quarter of fiscal 2015 see our Form 8-K filed with the SEC on August 4, 2015 at www.sec.gov.

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