Avaya — Q4 2021 Earnings Presentation
38 slides from Avaya's earnings presentation, Nov 22, 2021
Slide 1: Investor Presentation 4Q FY21
Investor Presentation 4Q FY21 November 22, 2021 © 2021 Avaya Inc. All rights reserved Exhibit 99.2
Slide 2: Cautionary Note Regarding Forward-Looking Statements
Cautionary Note Regarding Forward-Looking Statements This presentation 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 identifie
Slide 3: Use of non-GAAP (Adjusted) Financial Measures
Use of non-GAAP (Adjusted) Financial Measures The information furnished in this presentation includes non-GAAP financial measures that differ from measures calculated in accordance with generally accepted accounting principles in the United States of America (“GAAP”). EBITDA is defined as net income
Slide 4: Avaya's FY21 at a Glance
Avaya's FY21 at a Glance 40% 88% $530M Cloud, Alliance Software & Services Revenue (3) • Avaya is a leading pure-play Unified Communications & Collaboration and OneCloud Partner & ARR (1)(2) Subscription (3) 66% Contact Center software company with Revenue Recurring Revenue (3) ~90,000 global custom
Slide 5: Global and Enterprise Experts
Global and Enterprise Experts 4 deals over $25M TCV 20+ deals over $10M TCV 60+ deals over $5M TCV 400+ deals over (1) $1M TCV 6,000+ new logos Start of FY21 (1) © 2021 Avaya Inc. All rights reserved TCV is defined as the value of all active ratable contracts that have not 5 been recognized as reven
Slide 6: A Different Company
A Different Company Transformation Growth and Relevance OneCoud in Motion <$200M $500M to $1B $2B+ OneCloud ARR OneCloud ARR OneCloud ARR Invest, reskill, stabilize Execute, reposition, focus Scale, simplify, accelerate Software, SaaS, Cloud Strategic cloud platform Leading cloud company © 2021 Avay
Slide 7: Avaya OneCloud
TM Avaya OneCloud Composability at the Core to Empower Innovation and Control at the Edge Low code / no code AI workflows Makes AI pervasive in every use case Multi-cloud application ecosystem Extends market leading capabilities and value Advanced hybrid cloud architecture Path to cloud with minimiz
Slide 8: ESG - Enhancing Sustainable Value in an Evolving Landscape
ESG - Enhancing Sustainable Value in an Evolving Landscape Environment Social Governance • ISO 14001 Certified Design for • Human Capital • Board Committee Monitors ESG Environment Management System ◦ Diversity Equity Inclusion & Performance ◦ Improving Energy Efficiency Belonging • Tone at the Top
Slide 9: Positioned to Win
Positioned to Win © 2021 Avaya Inc. All rights reserved 9
Slide 10: Financial Overview
Financial Overview © 2021 Avaya Inc. All rights reserved
Slide 11: 4Q FY21 Financial Highlights
4Q FY21 Financial Highlights $760M $2.0B 60% (1) Revenue Total Contract Value Non-GAAP Gross Margin* Revenue $530M 44% 87% (2) Cloud, Alliance Software & 67% OneCloud ARR Partner & Recurring Revenue Subscription Revenue Services Revenue (1) TCV is defined as the value of all active ratable contracts
Slide 12: Financial Strength & Flexibility
Financial Strength & Flexibility As we return to growth in FY21, we remain highly profitable with strong liquidity. $719M $30M 3.2x 24.2% of 1% of $498M Revenue Revenue (1) Net-debt / Cash Flow Provided Cash Balance (2) Adj. EBITDA (1)* (1) Adj. EBITDA By Operations (1) For and as of FY21 ending Sep
Slide 13: Business Model Transformation
Business Model Transformation(1) FY18* FY19* FY20 FY21 • FY21 up 3% Y/Y as reported, first year over year growth in a decade Revenue YoY Growth(2) (2)% (4)% —% +2% • Transforming the business to a Revenue from Software recurring revenue and software- 82% 83% 88% 88% and Services oriented model, incl
Slide 14: Cloud & ARR Progress
Cloud & ARR Progress CAPS as % Revenue(1) OneCloud ARR Growth ($M) $600 FY19 FY20 FY21 $530 $500 $425 $400 15% 26% 40% $344 $300 4Q19 4Q20 4Q21 $262 $200 $191 $113 $100 $69 $35 $47 15% 33% 44% $0 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 All Other CAPS OneCloud ARR >$1M ARR (1) FY19 calculated wi
Slide 15: Transformational KPIs
Transformational KPIs Total Revenue ($M) CAPS Revenue ($M) OneCloud ARR - Exiting FY ($M) $3,100 $1,600 $1,000 $3,000 $1,400 $800 $2,900 $1,200 $600 $2,800 $1,000 $400 $2,700 $800 $2,600 $600 $200 $2,500 $400 $— FY20A FY21A FY22E FY20A FY21A FY22E FY20A FY21A FY22E FY22 Growth YoY: FY22 Growth YoY:
Slide 16: Financial Objectives: The Roadmap
Financial Objectives: The Roadmap FY21 FY22 FY23 FY24 Actuals Guidance Targets Targets (1) 2% 1 - 2% Low-to-Mid Mid-to-High Revenue Constant Currency Constant Currency Single Digit Single Digit Adj. EBITDA Margin* % 24% ~24% 23 - 24% 23 - 24% Mid-to-High Low CFFO % of Revenue 1% ~1% Single Digit Dou
Slide 17: FY24E Targets Underpinned by Shift to OneCloud
FY24E Targets Underpinned by Shift to OneCloud Revenue OneCloud ARR (20%) CAGR 55% CAGR 85% CAGR ~$2,250M (10%) CAGR ~$190M (20%) CAGR (30%) CAGR FY20A FY24E FY20A FY24E FY20A FY24E Premise Product OneCloud OneCloud Managed Services Premise Maintenance © 2021 Avaya Inc. All rights reserved CAGR Calc
Slide 18: OneCloud ARR is the True Gauge of Our Progress
OneCloud ARR is the True Gauge of Our Progress ARR Mix from Larger Customers OneCloud ARR ($M) 100% 2,500 90% 80% 2,000 70% 60% 1,500 60% 50% 94% 40% 1,000 60% 30% 65% 60% 20% 500 60% 40% 10% 26% 40% 40% 40% —% 0 FY19A FY20A FY21A FY22E FY23E FY24E > $5m ARR % > $1m ARR % > $100k ARR % UC Segment CC
Slide 19: Non-GAAP EPS
Non-GAAP EPS Avaya's non-GAAP EPS measure incorporates both operational performance and the impact of our capital allocation actions. We introduced the measure in 1Q21 as the year-on-year comparability issues that resulted from fresh start accounting (in Fiscal Years 2018 and 2019) no longer impact
Slide 20: Financial Policy & Capital Allocation
Long-Term Targets Financial Policy & Capital Allocation 2.5x ~$400M Minimum ~$250-300M Prioritized net leverage improvement Net Leverage(1) Cash Balance M&A focusing on strategically aligned tuck-ins Low to Mid Limited use of share buybacks until leverage close to target ~$550M BB/Ba range Minimum L
Slide 21: Appendix
Appendix © 2021 Avaya Inc. All rights reserved
Slide 22: Significant Uses of Cash
Significant Uses of Cash ($M) $592 29 90 $483 $476 56 77 101 $417 $397 27 60 127 126 108 117 112 47 34 23 59 20 42 43 37 270 194 191 187 188 FY18A FY19A FY20A FY21A FY22E Net cash interest payments Pension & OPEB Restructuring payments Capex Tax payments Note: Net Cash Interest Payments includes int
Slide 23: 4Q FY21 Update
• Florida’s Leon County Government is benefiting from migrating to an Avaya Aura Subscription solution that 4Q FY21 Update brings Avaya Spaces™ collaboration and ease of growth/license management. • U.S. national rail operator Amtrak recently chose an Avaya OneCloud Public solution for workforce eng
Slide 24: Quarterly Income Statement
Quarterly Income Statement (Amounts are GAAP and dollars in millions) Revenue: 4Q21 3Q21 4Q20 Product $ 246 $ 254 $ 269 Services 514 478 486 Total Revenue $ 760 $ 732 $ 755 GAAP Gross Margin: Product 40.2 % 44.5 % 44.2 % Services 61.5 % 61.5 % 61.5 % GAAP Total Gross Margin 54.6 % 55.6 % 55.4 % GAAP
Slide 25: Quarterly Non-GAAP Income Statement Information
Quarterly Non-GAAP Income Statement Information (All dollars amounts are in millions) Revenue*: 4Q21 3Q21 4Q20 Product $ 246 $ 254 $ 269 Services 514 478 486 Total Revenue $ 760 $ 732 $ 755 Non-GAAP Gross Margin*: Product 58.1 % 61.4 % 60.2 % Services 61.5 % 61.5 % 61.9 % Non-GAAP Total Gross Margin
Slide 26: Quarterly Revenue by Region
Quarterly Revenue by Region (All dollars amounts are in millions) Revenue 4Q21 3Q21 4Q20 U.S. 459 $ 418 $ 447 EMEA 169 181 178 APAC 73 72 74 AI 59 61 56 Total $ 760 732 $ 755 % of Total Revenue U.S. 60 % 57 % 59 % EMEA 22 % 25 % 24 % APAC 10 % 10 % 10 % AI 8% 8% 7% Total 100 % 100 % 100 % © 2021 Ava
Slide 27: Balance Sheet and Operating Metrics
Balance Sheet and Operating Metrics (Dollars in millions unless indicated otherwise, Balance sheet items as of the end of the period indicated) 4Q21 3Q21 4Q20 Total Cash and Cash Equivalents $ 498 $ 562 $ 727 Cash (used for) provided by Operations $ (5) $ 11 $ 70 Capital Expenditures and Capitalized
Slide 28: Avaya OneCloud ARR
Avaya OneCloud ARR What is OneCloud ARR? 4Q21 • A baseline for expected cloud revenue over the 25% Growth QoQ next 12 months What's Included: • OneCloud Subscription, ACO Recurring, CCaaS, ~60% of ARR from customers paying TM over $1M annually Spaces , CPaaS, DaaS, Private Cloud What's Excluded: • M
Slide 29: Subscription Revenue & Cash Dynamics
Subscription Revenue & Cash Dynamics Avaya is transforming our Subscription-based software generally relates business by shifting to a to a monthly or annual licensing model, Subscription Licensing Model allowing users to pay a per-user fee over a pre-determined time period (pay over time). Subscrip
Slide 30: Subscription Revenue, ARR & Cash Dynamics
Subscription Revenue, ARR & Cash Dynamics © 2021 Avaya Inc. All rights reserved 30
Slide 31: Non-GAAP Reconciliation
Non-GAAP Reconciliation Adjusted EBITDA Three months ended, (In millions) Sept. 30, 2021 June 30, 2021 Sept. 30, 2020 Net income $ 6 $ 43 $ 37 Interest expense 53 54 64 Interest income — — — Provision for (benefit from) income taxes 7 (46) (20) Depreciation and amortization 111 105 104 EBITDA 177 15
Slide 32: Non-GAAP Reconciliation
Non-GAAP Reconciliation Successor Predecessor Non-GAAP Combined Adjusted EBITDA cont'd Fiscal years ended September 30, Period from December Period from October 1, 16, 2017 through 2017 through Fiscal year ended (In millions) 2021 2020 2019 September 30, 2018 December 15, 2017 September 30, 2018 Net
Slide 33: Non-GAAP Reconciliation
Non-GAAP Reconciliation Net Income (Loss) and Earnings (Loss) per Share Three months ended, Sept. 30, 2021 June 30, 2021 Mar. 31, 2021 Dec. 31, 2020 Sept. 30, 2020 GAAP Net Income (Loss) $ 6 $ 43 $ (58) $ (4) $ 37 Non-GAAP Adjustments: Impact of fresh start accounting — 1 1 — 1 Restructuring charges
Slide 34: Non-GAAP Reconciliation
Non-GAAP Reconciliation Gross Margin and Operating Income Three months ended, (In millions) Sept. 30, 2021 June 30, 2021 Mar. 31, 2021 Dec. 31, 2020 Sept. 30, 2020 Reconciliation of Non-GAAP Gross Profit and Non-GAAP Gross Margin Gross Profit $ 415 $ 407 $ 412 $ 416 $ 418 Items excluded: Adj. for fr
Slide 35: Non-GAAP Reconciliation
Non-GAAP Reconciliation Operating Expenses Three months ended, (In millions) Sept. 30, 2021 June 30, 2021 Sept. 30, 2020 Reconciliation of Non-GAAP Operating Expenses Operating Expenses $ 382 $ 366 $ 344 Items excluded: Adj. for fresh start accounting — 1 — Amortization of intangible assets 40 40 39
Slide 36: Non-GAAP Reconciliation
Non-GAAP Reconciliation Revenue and Gross Margin Successor Predecessor Non-GAAP Combined Period from December Period from October Fiscal year ended 16, 2017 through 1, 2017 through Fiscal year ended (In millions) September 30, 2019 September 30, 2018 December 15, 2017 September 30, 2018 Reconciliati
Slide 37: Non-GAAP Reconciliation
Non-GAAP Reconciliation Product and Services Gross Margins Three months ended, Fiscal years ended, (In millions) Sept. 30, 2021 June 30, 2021 Sept. 30, 2020 Sept. 30, 2021 Sept. 30, 2020 Reconciliation of Non-GAAP Gross Profit and Non-GAAP Gross Margin - Products & Solutions Revenue $ 246 $ 254 $ 26
Slide 38: Non-GAAP Reconciliation
Non-GAAP Reconciliation Supplemental Schedules Free Cash Flow Net-Debt / Adjusted EBITDA Sept. 30, Three Months Ended 2021 Sept. 31, June 30, Mar. 31, Dec. 31, Sept. 30, Debt maturing within one year $ — (In millions) 2021 2021 2021 2020 2020 Long-term debt, net of current Net cash (used for) provid