Avaya Inc

Avaya — Q1 FY2022 Earnings Presentation

36 slides from Avaya's earnings presentation, Feb 9, 2022

  1. Slide 1: Investor Presentation 1Q FY22

    © 2022 Avaya Inc. All rights reserved Investor Presentation 1Q FY22 February 9, 2022 Exhibit 99.2

  2. Slide 2: Cautionary Note Regarding Forward-Looking Statements

    2© 2022 Avaya Inc. All rights reserved 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

  3. Slide 3: Use of non-GAAP (Adjusted) Financial Measures

    3© 2022 Avaya Inc. All rights reserved 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 (“

  4. Slide 4: Avaya's 1Q22 at a Glance

    4© 2022 Avaya Inc. All rights reserved $129M Adj. EBITDA(1)* ~100M Unified Communications Lines(3) ~190 Countries(3) ~6M Contact Center Seats(3) (1) For and as of 1Q FY22 ending December 31, 2021. (2) See Appendix for further definition and information on OneCloud ARR metric. $713M Revenue(1) >$200M

  5. Slide 5: Global and Enterprise Experts

    © 2022 Avaya Inc. All rights reserved 5 Global and Enterprise Experts Trailing Twelve Months 6,200+ new logos 400+ deals over $1M TCV(1) 60+ deals over $5M TCV 20+ deals over $10M TCV 3 deals over $25M TCV (1) TCV is defined as the value of all active ratable contracts that have not been recognized

  6. Slide 6: A Different Company: OneCloud in Motion

    © 2022 Avaya Inc. All rights reserved 6 Transformation <$200M OneCloud ARR Invest, reskill, stabilize Software, SaaS, Cloud Growth and Relevance $500M to $1B OneCloud ARR Execute, reposition, focus Strategic cloud platform OneCloud in Motion $2B+ OneCloud ARR Scale, simplify, accelerate Leading clou

  7. Slide 7: © 2022 Avaya Inc. All rights reserved 7

    © 2022 Avaya Inc. All rights reserved 7

  8. Slide 8: ESG - Enhancing Sustainable Value in an Evolving Landscape

    © 2022 Avaya Inc. All rights reserved 8 ESG - Enhancing Sustainable Value in an Evolving Landscape Environment • ISO 14001 Certified Design for Environment Management System ◦ Improving Energy Efficiency ▪ Increasing energy responsible devices ◦ Reducing Single Use Plastic • Climate Risk Disclosures

  9. Slide 9: Catalysts to Fuel the Journey

    © 2022 Avaya Inc. All rights reserved 9 Catalysts to Fuel the Journey

  10. Slide 10: Financial Overview

    © 2022 Avaya Inc. All rights reserved Financial Overview

  11. Slide 11: 1Q FY22 Financial Highlights

    11© 2022 Avaya Inc. All rights reserved $620M OneCloud ARR(1) 44% Cloud, Alliance Partner & Subscription Revenue 58% Non-GAAP Gross Margin* $2.3B Remaining Performance Obligations $713M Revenue Revenue 62% Software Revenue (1) See Appendix for further definition and information on OneCloud ARR metri

  12. Slide 12: Profit & Liquidity Profile

    © 2022 Avaya Inc. All rights reserved 12 $129M 18% of Revenue Adj. EBITDA(1)* $354M Cash Balance(1) 3.7x Net-debt / Adj. EBITDA(2) (1) For and as of 1Q FY22 ending December 31, 2021. (2) Net-debt / Adj. EBITDA as of December 31, 2021, defined as short term debt and long term debt less cash and cash

  13. Slide 13: Business Model Transformation

    © 2022 Avaya Inc. All rights reserved 13 • Transforming the business to a recurring revenue and software-oriented model, including the introduction of ARR • Achieved 44% CAPS as % of revenue • Investing substantially in R&D and Go-To-Market to address the growing Cloud-First TAM (1) FY18* FY19* FY20

  14. Slide 14: Cloud & ARR Progress

    14© 2022 Avaya Inc. All rights reserved FY19 15% FY20 26% 1Q20 18% 1Q21 34% 1Q22 44% OneCloud ARR Growth ($M) $35 $47 $69 $113 $191 $262 $344 $425 $530 $620 OneCloud ARR >$1M ARR 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 $0 $100 $200 $300 $400 $500 $600 $700 CAPS as % Revenue(1) See Appendix

  15. Slide 15: ARR Mix from Larger Customers

    15© 2022 Avaya Inc. All rights reserved ARR Mix from Larger Customers 17% 59% 95% > $5m ARR % > $1m ARR % > $100k ARR % —% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% ▪ ARR build so far shows clear enterprise bias: ▪ ~20% ARR from $5M+ customers ▪ ~60% ARR from $1M+ customers ▪ ~95% ARR from $100K+ cus

  16. Slide 16: Transformational KPIs

    16© 2022 Avaya Inc. All rights reserved Total Revenue ($M) FY20A FY21A FY22E $2,500 $2,600 $2,700 $2,800 $2,900 $3,000 $3,100 CAPS Revenue ($M) FY20A FY21A FY22E $400 $600 $800 $1,000 $1,200 $1,400 $1,600 OneCloud ARR - Exiting FY ($M) FY20A FY21A FY22E $— $200 $400 $600 $800 $1,000 FY22 Growth YoY:

  17. Slide 17: Financial Policy & Capital Allocation: Long-Term Targets

    17© 2022 Avaya Inc. All rights reserved 2.5x ~$550M Low to Mid BB/Ba ~$400M Minimum ~$250-300M Net Leverage(1) Cash Balance Minimum Liquidity (Cash + ABL Revolver Availability) Senior Secured Debt Rating(2) (1) Net Leverage defined as Debt minus Cash and Cash equivalents divided by LTM Adj. EBITDA*

  18. Slide 18: Appendix

    © 2022 Avaya Inc. All rights reserved Appendix

  19. Slide 19: Significant Uses of Cash

    19© 2022 Avaya Inc. All rights reserved $592 $483 $476 $397 $397 270 194 191 187 188 126 59 42 43 37 77 47 34 23 20 90 127 108 117 112 29 56 101 27 40 Net cash interest payments Pension & OPEB Restructuring payments Capex Tax payments FY18A FY19A FY20A FY21A FY22E Note: Net Cash Interest Payments in

  20. Slide 20: 1Q Financial Highlights and 1Q FY22 Update

    20© 2022 Avaya Inc. All rights reserved 1Q Financial Highlights $M 1Q22 4Q21 1Q21 Revenue $ 713 $ 760 $ 743 Non-GAAP Gross Margin* 57.6 % 60.4 % 61.8 % Non-GAAP Operating Expense* (% of revenue) 43.3 % 41.3 % 39.8 % Non-GAAP Operating Margin* 14.3 % 19.1 % 21.9 % Adjusted EBITDA* $ 129 $ 179 $ 190 A

  21. Slide 21: Quarterly Income Statement

    © 2022 Avaya Inc. All rights reserved 21 Revenue: 1Q22 4Q21 1Q21 Product $ 231 $ 246 $ 266 Services 482 514 477 Total Revenue $ 713 $ 760 $ 743 GAAP Gross Margin: Product 33.8 % 40.2 % 44.4 % Services 60.4 % 61.5 % 62.5 % GAAP Total Gross Margin 51.8 % 54.6 % 56.0 % GAAP Operating Margin (0.1) % 4.3

  22. Slide 22: Quarterly Non-GAAP Income Statement Information

    © 2022 Avaya Inc. All rights reserved 22 Revenue*: 1Q22 4Q21 1Q21 Product $ 231 $ 246 $ 266 Services 482 514 477 Total Revenue $ 713 $ 760 $ 743 Non-GAAP Gross Margin*: Product 51.9 % 58.1 % 60.5 % Services 60.4 % 61.5 % 62.5 % Non-GAAP Total Gross Margin* 57.6 % 60.4 % 61.8 % Non-GAAP Operating Mar

  23. Slide 23: Quarterly Revenue by Region

    © 2022 Avaya Inc. All rights reserved 23 Quarterly Revenue by Region (All dollars amounts are in millions) Revenue 1Q22 4Q21 1Q21 U.S. 375 $ 459 $ 414 EMEA 192 169 195 APAC 81 73 75 AI 65 59 59 Total $ 713 760 $ 743 % of Total Revenue U.S. 53 % 60 % 56 % EMEA 27 % 22 % 26 % APAC 11 % 10 % 10 % AI 9

  24. Slide 24: Balance Sheet and Operating Metrics

    © 2022 Avaya Inc. All rights reserved 24 Balance Sheet and Operating Metrics (Dollars in millions unless indicated otherwise, Balance sheet items as of the end of the period indicated) 1Q22 4Q21 1Q21 Total Cash and Cash Equivalents $ 354 $ 498 $ 750 Cash (used for) provided by Operations $ (111) $ (

  25. Slide 25: What is OneCloud ARR?

    25© 2022 Avaya Inc. All rights reserved What is OneCloud ARR? • A baseline for expected cloud revenue over the next 12 months What's Included: • OneCloud Subscription, ACO Recurring, CCaaS, SpacesTM, CPaaS, DaaS, Private Cloud What's Excluded: • Maintenance, Managed Services, ACO One Time Payment 1Q

  26. Slide 26: Subscription Revenue & Cash Dynamics

    26© 2022 Avaya Inc. All rights reserved Subscription Revenue & Cash Dynamics Avaya is transforming our business by shifting to a Subscription Licensing Model Subscription Contracts have different Cash Flow dynamics when compared to a Perpetual License Model (the primary former model that Avaya sold

  27. Slide 27: Subscription Revenue, ARR & Cash Dynamics

    © 2022 Avaya Inc. All rights reserved 27 Subscription Revenue, ARR & Cash Dynamics

  28. Slide 28: Business Model Transformation Appendix

    28© 2022 Avaya Inc. All rights reserved Business Model Transformation Appendix (1) FY18 and FY19 calculated with Non-GAAP Revenue*; FY20, FY21, and 1Q22 calculated with GAAP Revenue. (2) FY18 revenue growth not adjusted for constant currency; FY19, FY20, FY21, and 1Q22 revenue growth on a constant c

  29. Slide 29: Non-GAAP Reconciliation Adjusted EBITDA

    29© 2022 Avaya Inc. All rights reserved Three months ended, (In millions) Dec. 31, 2021 Sept. 30, 2021 Dec. 31, 2020 Net (loss) income $ (66) $ 6 $ (4) Interest expense 54 53 56 Provision for income taxes 18 7 10 Depreciation and amortization 104 111 103 EBITDA 110 177 165 Restructuring charges (1)

  30. Slide 30: Adjusted EBITDA Reconciliation Fiscal Years

    30© 2022 Avaya Inc. All rights reserved Successor Predecessor Non-GAAP Combined Fiscal years ended September 30, Period from December 16, 2017 through September 30, 2018 Period from October 1, 2017 through December 15, 2017 Fiscal year ended September 30, 2018(In millions) 2021 2020 2019 Net (loss)

  31. Slide 31: Non-GAAP Net Income Reconciliation

    31© 2022 Avaya Inc. All rights reserved Three months ended, Dec. 31, 2021 Sept. 30, 2021 June 30, 2021 Mar. 31, 2021 Dec. 31, 2020 GAAP Net (Loss) Income $ (66) $ 6 $ 43 $ (58) $ (4) Non-GAAP Adjustments: Impact of fresh start accounting — — 1 1 — Restructuring charges, net (1) 7 13 5 7 4 Acquisitio

  32. Slide 32: Non-GAAP Reconciliation Gross Margin and Operating Income

    32© 2022 Avaya Inc. All rights reserved Non-GAAP Reconciliation Gross Margin and Operating Income Three months ended, (In millions) Dec. 31, 2021 Sept. 30, 2021 June 30, 2021 Mar. 31, 2021 Dec. 31, 2020 Reconciliation of Non-GAAP Gross Profit and Non-GAAP Gross Margin Gross Profit $ 369 $ 415 $ 407

  33. Slide 33: Non-GAAP Reconciliation Operating Expenses

    33© 2022 Avaya Inc. All rights reserved Non-GAAP Reconciliation Operating Expenses Three months ended, (In millions) Dec. 31, 2021 Sept. 30, 2021 Dec. 30, 2020 Reconciliation of Non-GAAP Operating Expenses Operating Expenses $ 370 $ 382 $ 354 Items excluded: Amortization of intangible assets 40 40 4

  34. Slide 34: Non-GAAP Reconciliation Revenue and Gross Margin

    34© 2022 Avaya Inc. All rights reserved Non-GAAP Reconciliation Revenue and Gross Margin Successor Predecessor Non-GAAP Combined Fiscal year ended September 30, 2019 Period from December 16, 2017 through September 30, 2018 Period from October 1, 2017 through December 15, 2017 Fiscal year ended Septe

  35. Slide 35: Non-GAAP Reconciliation Product and Services Gross Margins

    35© 2022 Avaya Inc. All rights reserved Non-GAAP Reconciliation Product and Services Gross Margins Three months ended, (In millions) Dec. 31, 2021 Sept. 30, 2021 June 30, 2021 Mar. 31, 2021 Dec. 31, 2020 Reconciliation of Non-GAAP Gross Profit and Non-GAAP Gross Margin - Products & Solutions Revenue

  36. Slide 36: Non-GAAP Reconciliation Supplemental Schedules

    36© 2022 Avaya Inc. All rights reserved Three Months Ended (In millions) Dec. 30, 2021 Sept. 30, 2021 June 30, 2021 Mar. 31, 2021 Dec. 31, 2020 Net cash (used for) provided by operating activities $ (111) $ (5) $ 11 $ (24) $ 48 Less: Capital expenditures 27 28 25 26 27 Free cash flow $ (138) $ (33)

Avaya Holdings — Q1 FY2022 Earnings Presentation on 6ix