Avaya Announces Q3 2017 Financial Results

Avaya reported financial results for the third fiscal quarter ended June 30, 2017.

Total revenue for the third quarter was $803 million, down $1 million compared to the prior quarter and down $79 million year-over-year primarily as a result of lower demand for products and services primarily due to extended procurement cycles resulting from the chapter 11 filing. Non-GAAP gross margin was 61.6%, which compares to 60.6% for the prior quarter and 62.4% for the third quarter of fiscal 2016. GAAP operating loss was $44 million, inclusive of $52 million of goodwill impairment and $53 million of costs in connection with certain legal matters, which compares to operating income of $64 million for the prior quarter and $58 million for the third quarter of fiscal 2016. Non-GAAP operating income was $156 million which compares to $148 million for the prior quarter and $180 million for the third quarter of fiscal 2016. For the third quarter, adjusted EBITDA⁽¹⁾ was $204 million or 25.4% of revenue, a record percentage of revenue for a third fiscal quarter, and compares to adjusted EBITDA of $199 million for the prior quarter and $223 million for the third quarter of fiscal 2016.

Cash provided by operating activities was $72 million for the third fiscal quarter 2017, compared to $97 million during the second fiscal quarter 2017 and $23 cash used from operations during the third fiscal quarter 2016. Cash and cash equivalents totaled $729 million as of June 30, 2017.

“The support of our amended Plan of Reorganization by a majority of holders of our first lien debt and the settlement reached with the U.S. Pension Benefit Guaranty Corporation gives us a clear and viable path to emerge from chapter 11 this fall,” said Kevin Kennedy, president and CEO.

“As we work through our debt restructuring, Avaya continues to transform into a leading provider of software and services focused on delivering cloud-based business communications and innovative next-generation workflow automation solutions with world-class customer satisfaction. In addition, we continue to build momentum with our newest generation of solutions including Avaya Oceana™, Avaya Equinox™, Avaya Breeze™, Zang™ Office and Zang Spaces,” continued Mr. Kennedy.

Third Fiscal Quarter Highlights

• Filed an amended plan of reorganization, with emergence from chapter 11 expected this fall
• Signed over 2,400 major customer contracts since filing for chapter 11 through June 30, 2017
• Over 3,000 attendees at Avaya Engage Mexico and an additional 3,700 watched via live streaming
• Closed on sale of the Networking business to Extreme Networks on July 14
• Total bookings for the third fiscal quarter increased 3% from the prior quarter and were 12% below the prior year in constant currency, reflecting extended procurement cycles resulting from the chapter 11 filing
• Software and services accounted for approximately 79% of total revenue in third quarter 2017
• Recurring revenue represented 58% of total revenue, a company record, up from 55% year-over-year, in constant currency
• Net Promoter Score of 49 for customer satisfaction driven by industry-leading service and support
• Product revenue of $345 million decreased 1% from the prior quarter and 13% year-over-year, service revenue of $458 million was slightly higher sequentially and decreased 5% year-over-year, each in constant currency
• For the third fiscal quarter, percentage of revenue by geography was: