Transcript Driving To Solutions

Avaya Q1 2015 Financial Results
Goldman Sachs TMT Leveraged Finance Conference
March 11, 2015
Forward - Looking Statements
Certain statements contained in this presentation are forward-looking statements, including
statements regarding our future financial and operating performance, as well as statements
regarding 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," "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 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 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 our filings with the SEC that are available at www.sec.gov and in particular, our 2014 Form 10-K
filed with the SEC on November 26, 2014. We disclaim any intention or obligation to update or
revise any forward-looking statements, whether as a result of new information, future events or
otherwise.
This presentation should be read in conjunction with our Form 8-K filed with the SEC on February
9, 2015. Within this presentation, we refer to certain non‐GAAP financial measures that involve
adjustments to GAAP measures. Reconciliations between our non-GAAP financial measures and
GAAP financial measures are included in the appendix of this presentation.
These slides, as well as current and historical financial data are available on our web site at
www.avaya.com/investors . None of the information included on the website is incorporated by
reference in this presentation.
Historical amounts presented reflect the sale of ITPS.
© 2015 Avaya
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Avaya Now
Portfolio Position ($ / Seat)
Customer
Engagement
Solutions
Team
Engagement
Solutions
3rd Party
Business
Applications
Engagement Environment
Partner Enablement
Global Services
Mobility
Fabric Networking Solutions
Cloud
Customer Engagement
Team Engagement
Fabric
Portfolio Position (Value / Seat)
High
Low
Text Chat
Application Sharing
Customer Care
Avaya Private Cloud Services
Professional
Services
Non-Recurring
© 2015 Avaya
Revenue Category (# of seats)
Recurring (3 year)
Revenue Category (term)
Recurring (5 year)
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Fiscal Q1 2015 Financial Highlights
(Amounts are non-GAAP)
 Revenue of $1,079 million down $47 million from the prior quarter
In constant currency, down 3% sequentially and year-over-year
In line with low end of historical sequential pattern
– Private cloud and managed services business and our leading edge contact center
–
–
–
–
solutions grew both sequentially and year-over-year
Revenue from products focused on the midmarket was up 5% sequentially and up 2%
year-over-year
Networking product revenues grew 15% sequentially and 2% year-over year
In constant currency, EMEA revenue was up 3% year-over-year and AI was up 2%
Product bookings were up year-over-year, while product book-to-bill was below 1.0
 Gross margin reached new record of 60.1%
– Increased 40 basis points sequentially and 200 basis points year-over-year
 Operating income of $193 million and 17.9% operating margin
 Adjusted EBITDA of $239 million and 22.2% of revenue
 Cash increased sequentially and year-over-year to $328 million
– Reflects $19.5M debt reduction from $10M paid against Cash Flow revolver
and $9.5M in term loan principal
– Free Cash Flow positive for the quarter
© 2015 Avaya
NOTE: Historical amounts presented reflect the sale of ITPS
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Financial Summary
($M)
Non-GAAP
4Q14
1Q15
Actual Actual
Revenue
$1,126
$1,079
$1,100 – $1,150
Gross Margin %
59.7%
60.1%
58.5% – 59.5%
Oper Expense %
40.9%
42.3%
38.5% – 39.5%
Oper Income %
18.8%
17.9%
19% – 20.5%
Adj EBITDA $
$253
$239
$250 – $275
Adj EBITDA %
22.5%
22.2%
22.7% – 23.9%
Business
Model
For a reconciliation of non-GAAP to GAAP financial information, please see www.avaya.com/investors
.
Products & Services* (% of Total Avaya Revenue)
FY 11
FY 12
FY 13
FY 14
1QF14
4QF14
1QF15
Flagship
32%
35%
39%
43%
43%
44%
45%
Core
48%
49%
47%
45%
45%
47%
45%
Q1 Revenue: $1,079M;
down $47M sequentially
– $13M currency impact
– $19M due to sales execution
– Private cloud & managed
services up 7% YoY
– Networking product revenue
up YoY
Gross Margin 60.1%
Operating Income 17.9%
Adjusted EBITDA 22.2%
of revenue
– All 3 are fiscal Q1 record
levels on an as reported basis
We have structured our model such that, assuming quarterly revenue between $1.1 billion and $1.15 billion
dollars, our operational performance should generate adjusted EBITDA in the range of $250 and $275 million
* Flagship includes Video, Avaya Aura®, IP Office, leading edge Contact Center, Wireless LAN, SBC, Ethernet/fabric switching, Avaya
professional services, Avaya cloud and Avaya managed services
Core includes phones, gateways, servers, core contact center, and other managed and maintenance support services
Legacy includes legacy Nortel and Tenovis, excluding Networking
© 2015 Avaya
For a reconciliation of non-GAAP to GAAP financial information, please see our
most recent SEC filings and the tables
at the
end of thisamounts
presentation
NOTE:
Historical
presented reflect
the sale of ITPS
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Avaya Debt Maturity Profile
($ in Billions, by calendar year)
Overall Average Portfolio Interest Rate
$4.0
6.9%
$3.5
$3.0
$2.0
$2.5
$2.0
$1.1
$1.5
$1.0
$1.4
$1.3
Today
3/11/15
$0.12
$0.5
$0.0
2015
2016
2017
2018
2019
2020
2021
 Reduced debt by $19.5M in Q1 FY ’15
– $10M against Cash Flow revolver and $9.5M in term loan principal
 Additional liquidity available through Asset-Backed & Cash Flow revolvers
 Annual cash needs for Pension, Interest, Restructuring, CapEx, and Cash
taxes expected to be below $900M in FY 15
 Long Term Debt (net of $0.3B cash) totals $5.6B
NOTE: Amounts shown are expected balances at maturity date; 2017 & 2018 are net of principal payments which total approximately $9.5M quarterly
© 2015 Avaya
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A Software and Services Company
FQ1’15 Results
Avaya Now
Net Promoter Score
50
New Customer Acquisition
*17%
Software and Services
69%
Revenue / Headcount
$343K
Gross Margin
60%
Operating Income
18%
Adjusted EBITDA %
22%
New Metrics portray a company that evidences a:
 New business model
 New momentum
 New basis of work and market engagement
*As of Q4FY14
© 2015 Avaya
For a reconciliation of non-GAAP to GAAP financial information, please see www.avaya.com/investors
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© 2015 Avaya
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