Avaya Reports First Quarter Fiscal 2021 Financial Results

Sydney, Australia - February 11, 2021 – Avaya Holdings Corp. (NYSE: AVYA) today reported financial results for the first quarter of fiscal 2021 ended December 31, 2020.

First Quarter Financial Highlights

1. Revenues of $743 million
2. OneCloud ARR was $262 million, up 38% sequentially
3. CAPS (Cloud, Alliance Partner and Subscription) revenue was 34%, up from 18% a year ago
4. Software and services were 88% of revenue, up from 86% a year ago
5. Recurring revenue was 65%, up from 59% a year ago
6. GAAP Operating income was $62 million; Non-GAAP Operating income was $163 million
7. GAAP Net loss was $4 million; Non-GAAP Net income was $85 million
8. Adjusted EBITDA was $190 million, 25.6% of revenue
9. Ending cash and cash equivalents were $750 million
10. GAAP Loss Per Share of $0.06; Non-GAAP Earnings Per Share of $0.90

“We are pleased to report first quarter results that exceeded expectations across all key metrics. Navigating a very challenging business environment, we emerged from 2020 even stronger. This success reflects the significant progress we continue to make on our transformation into an enterprise leader in cloud-based communications and collaboration solutions,” said Jim Chirico, President and CEO of Avaya. “The investments we have made in the business are generating strong traction across all segments in which we operate and, as a result, we are increasing our guidance for revenue, ARR, profitability and CFFO for the fiscal year.”

Additional First Quarter Fiscal 2021 Highlights

1. Total Contract Value (TCV) of $2.2B*
2. Avaya OneCloud Subscription booked additional TCV of over $180 million during the December quarter
3. Added over 1,600 new logos
4. Significant large deal activity with 119 deals over $1 million TCV, 14 over $5 million, 6 over $10 million and 3 over $25 million
5. Avaya Cloud Office™ launched in Austria, Belgium, Germany, Italy, and Spain.
6. The Company is launching a Term Loan Amendment transaction today to extend the maturity of its outstanding Tranche B Term Loans due December 2024 to September 2027. In connection with the Amendment, the Company will make a $100 million prepayment of the existing Tranche B Term Loans.

(1) 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

1. Prodec Networks, which has historically been focused on their on-prem IP Office and Aura solutions to address their needs within the public sector and enterprise space, continues to invest heavily in its UCaaS strategy using Avaya Cloud Office to deliver effective, easy to manage communication tools for home workers based on their forecasted growth for organizations migrating to the cloud.
2. DB Systel UK Ltd, the UK IT arm of the 2nd largest global transportation company, based in Europe, signed a three year ACO deal that will initially cover several hundred users. Their key criteria were flexibility, ease of use, and simple deployment in order to serve their customers globally.
3. Engagent Health adopted Avaya OneCloud CCaaS across locations to meet existing needs and facilitate ambitious growth plans that will see them increase their contact center capacity by over 5x in 2021. This customer also chose Avaya Cloud Office to communicate internally to solve client and customer problems in real-time while executive management and multiple global operation centers share information quickly through one simple, mobile, easy-to-use solution.
4. Cenlar, the nation’s leading loan servicing provider, concluded that Avaya offered a more comprehensive and integrated private cloud UC/CC solution able to meet their performance requirements and address future expansion plans as they migrated away from their on-prem UC and CC deployment.
5. United BioSource (UBC), a leading provider of pharmaceutical support services, will deploy our AI-based Avaya Conversational Intelligence cloud service into their on-site contact center as a hybrid enhancement. Initial use cases include natural language processing to extract key phrases from patient statements related to medications.
6. Nebraska Medicine adopted Avaya OneCloud CPaaS across its organization to manage the enormous change in patient interactions because of the pandemic. Menus are easily being altered based on the changing environment and are providing direction on COVID-19 testing, vaccine administration and proactive appointment management.
7. In choosing Avaya OneCloud CPaaS, Ingolstadt Clinic, one of the largest hospitals in Bavaria, Germany, extended their long-term relationship with Avaya to create a highly-available and secure communications platform that would digitize processes and enable over 3,500 staff to work with each other, their partners and their patients while they are in physically separate locations.
8. Avaya Spaces was chosen by Dubai World Trade Centre to be the workstream collaboration platform enabling blended conference experiences, beginning with Gitex Technology week in December 2020. Gitex is the largest technology event of its kind, and the only one to go live in 2020. In a truly global event, over 30,000 virtual attendees used Spaces to engage with 350 technology experts representing 30 countries.
9. The Contact Company, a longstanding UK-based customer, decided to use Avaya OneCloud Subscription as it provides them with the flexible consumption and commercial model they require to enable 1,500 agents to work remotely, as well as from 2 campus sites to serve their large customer base.

Business Highlights

1. Avaya Earned the Frost & Sullivan Award for Excellence in Healthcare Solutions.
2. Avaya named one of 2021 America’s Most Responsible Companies by Newsweek magazine based on key performance indicators derived from CSR Reports, Sustainability Reports, and Corporate Citizenship Reports, as well as an independent survey of U.S. residents.
3. TrustRadius recognized Avaya with the 2020 Tech Cares Award for going above and beyond to provide global communities, clients, and frontline workers with support during the COVID-19 crisis.
4. Avaya Spaces placed in Leaders category in IDC MarketScape: European Collaboration Tools for Education 2020 Vendor Assessment.

Financial Outlook - 2Q Fiscal 2021 - unless otherwise noted, values reflect January 31, 2021 FX rates.

1. Revenue of $710 million to $725 million
2. GAAP operating income of $35 million to $50 million; GAAP operating margin of 5% to 7%
3. Non-GAAP operating income of $135 million to $150 million; non-GAAP operating margin of 19% to 21%
4. Adjusted EBITDA of $160 million to $175 million; Adjusted EBITDA margin of 23% to 24%
5. Non-GAAP EPS of $0.70 to $0.82

Financial Outlook - Fiscal Year 2021 - unless otherwise noted, values reflect January 31, 2021 FX rates.

1. Revenue of $2.90 billion to $2.94 billion
2. CAPS revenue growth of ~$300 million, which will represent between 35% and 40% of Avaya's total revenue in FY21.
3. OneCloud ARR expected to be $415 million to $425 million by year end FY21
4. GAAP operating income of $151 million to $191 million; GAAP operating margin of 5% to 7%
5. Non-GAAP operating income of $578 million to $618 million; non-GAAP operating margin of 20% to 21%
6. Adjusted EBITDA of $680 million to $720 million; Adjusted EBITDA margin of 23% to 24%
7. Non-GAAP EPS of $3.05 to $3.37
8. Cash flow from operations of 3% to 4% of revenue
9. Approximately 83 million to 86 million weighted average shares outstanding

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, change in fair value of warrants and gain (loss) on marketable securities 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. Quarterly and annual OneCloud ARR 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 February 9, 2021. 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 February 9, 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: 13714638.

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”), as well as governmental and business responses to COVID-19, 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.

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