SOURCE: Avaya Inc.

Avaya Inc.

August 08, 2013 16:01 ET

Avaya Reports Third Fiscal Quarter 2013 Results

SANTA CLARA, CA--(Marketwired - Aug 8, 2013) -

Third Quarter 2013

  • Revenue of $1.15 billion
  • Operating Income of $14 million, Non-GAAP Operating Income(1) of $171 million
  • Adjusted EBITDA(1) of $225 million

Avaya Inc., a global provider of business communications and collaboration systems, software and services, today reported results for the third quarter of fiscal 2013. For the third fiscal quarter, revenue was $1.15 billion, up 2.9% compared to the prior quarter, primarily due to increases in demand in the U.S. and the U.S. federal government sectors. On a year over year basis revenue was down 8% compared to the third quarter of fiscal 2012. Non-GAAP operating income was $171 million compared to non GAAP operating income of $113 million for the prior quarter and $159 million for the third quarter of fiscal 2012. Third quarter adjusted EBITDA was $225 million which compares to adjusted EBITDA of $172 million for the prior quarter and $225 million for the third quarter of fiscal 2012. Cash flow from operations was $11 million for the third quarter. Cash and cash equivalents totaled $271 million as of June 30, 2013.

"Avaya's third quarter results reflected growth in product revenue from unified communications, contact centers, IP Office and networking. Avaya Global Services revenue also benefited from growth in cloud services," said Kevin Kennedy, president and CEO, Avaya. "We continue to execute our transformational initiatives which include expanding into the mid-market and advancing our business model."

Third Fiscal Quarter Highlights

  • Revenue of $1.15 billion increased 2.9% compared to the prior quarter and decreased 8.0% compared to the third quarter of fiscal 2012
  • Gross margin was 54.5% compared to 52.4% for the prior quarter and 49.8% for the third quarter of fiscal 2012
  • Non-GAAP gross margin(1) was 56.0% compared to 53.7% for the prior quarter and 53.9% for the third quarter of fiscal 2012 
  • Adjusted EBITDA was $225 million or 19.5% of revenue compared to $172 million or 15.4% of revenue for the prior quarter and $225 million or 18.0% of revenue for the third quarter of fiscal 2012
  • Product revenue of $560 million increased by 5.9% compared to the prior quarter and decreased by 11.7% compared to the third quarter of fiscal 2012 
  • Avaya Global Services revenue of $590 million increased 0.2% compared to the prior quarter and decreased 4.2% compared to the third quarter of fiscal 2012
  • For the third fiscal quarter, percentage of revenue by geography was, U.S. with 56%, EMEA with 26%, Asia - Pacific with 9% and Americas International with 9%

Conference Call and Webcast
Avaya will host a conference call to discuss these results at 5:00 p.m. EDT on Thursday, August 8, 2013. To access the conference call, dial 800-882-9327 in the U.S. or Canada and 706-645-9730 for international callers and provide the operator the conference passcode number of 22323223. To ensure you are on the call from the start, we suggest you access the call 10-15 minutes prior to the start of the call.

For those unable to participate, a replay of the conference call will be available beginning at 8:00 p.m. EDT on August 9 through September 9, by dialing 855-859-2056 within the United States and 404-537-3406 outside the United States. The replay access code is 22323223.

WEBCAST Information: Avaya will webcast this conference call live. To ensure that you are on the webcast, we suggest that you access our website (www.avaya.com/investors) 10-15 minutes prior to the start. Supplementary materials accompanying the conference call are available at the same location. Following the live webcast, a replay will be available on our archives at the same web address.

About Avaya
Avaya is a global provider of business collaboration and communications solutions, providing unified communications, contact centers, networking and related services to companies of all sizes around the world. For more information please visit www.avaya.com.

Certain statements contained in this press release may be forward-looking statements. 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 are reasonable, such forward looking statements involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors may cause our actual results to differ materially from any future results expressed or implied by these forward-looking statements. For a list and description of such risks and uncertainties, please refer to Avaya's filings with the SEC that are available at www.sec.gov. Avaya disclaims any intention or obligation to update or revise any forward-looking statements.

   
   
   
Avaya Inc.  
Consolidated Statements of Operations  
(Unaudited; in millions)  
             
    For the three months ended June 30,     For the nine months ended June 30,  
    2013     2012     2013     2012  
REVENUE                                
  Products   $ 560     $ 634     $ 1,720     $ 2,020  
  Services     590       616       1,788       1,874  
      1,150       1,250       3,508       3,894  
COSTS                                
  Products:                                
    Costs (exclusive of amortization of intangibles)     234       271       731       862  
    Amortization of technology intangible assets     13       47       49       146  
  Services     276       309       849       946  
      523       627       1,629       1,954  
GROSS PROFIT     627       623       1,879       1,940  
OPERATING EXPENSES                                
  Selling, general and administrative     380       405       1,145       1,252  
  Research and development     112       116       343       344  
  Amortization of intangible assets     57       57       171       169  
  Goodwill impairment     -       -       89       -  
  Restructuring and impairment charges, net     63       21       165       132  
  Acquisition-related costs     1       1       1       4  
      613       600       1,914       1,901  
OPERATING INCOME (LOSS)     14       23       (35 )     39  
Interest expense     (122 )     (107 )     (346 )     (324 )
Loss on extinguishment of debt     -       -       (6 )     -  
Other (expense) income, net     (5 )     6       (9 )     (7 )
LOSS BEFORE INCOME TAXES     (113 )     (78 )     (396 )     (292 )
Benefit from (provision for) income taxes     3       (88 )     9       (62 )
NET LOSS   $ (110 )   $ (166 )   $ (387 )   $ (354 )
   
   
   
Avaya Inc.  
Consolidated Balance Sheets  
(Unaudited; in millions)  
   
    June 30,     September 30,  
    2013     2012  
ASSETS                
Current assets:                
  Cash and cash equivalents   $ 271     $ 337  
  Accounts receivable, net     662       782  
  Inventory     256       255  
  Deferred income taxes, net     17       18  
  Other current assets     267       252  
TOTAL CURRENT ASSETS     1,473       1,644  
  Property, plant and equipment, net     354       364  
  Deferred income taxes, net     48       43  
  Intangible assets, net     1,554       1,775  
  Goodwill     4,092       4,188  
  Other assets     181       180  
TOTAL ASSETS   $ 7,702     $ 8,194  
LIABILITIES                
Current liabilities:                
  Debt maturing within one year   $ 35     $ 37  
  Accounts payable     410       438  
  Payroll and benefit obligations     232       262  
  Deferred revenue     663       616  
  Business restructuring reserve, current portion     119       84  
  Other current liabilities     272       302  
TOTAL CURRENT LIABILITIES     1,731       1,739  
  Long-term debt     6,059       6,084  
  Pension obligations     1,648       1,763  
  Other postretirement obligations     325       360  
  Deferred income taxes, net     218       204  
  Business restructuring reserve, non-current portion     62       51  
  Other liabilities     456       429  
TOTAL NON-CURRENT LIABILITIES     8,768       8,891  
Commitments and contingencies                
DEFICIENCY                
  Common stock     -       -  
  Additional paid-in capital     2,932       2,926  
  Accumulated deficit     (4,623 )     (4,236 )
  Accumulated other comprehensive loss     (1,106 )     (1,126 )
TOTAL DEFICIENCY     (2,797 )     (2,436 )
TOTAL LIABILITIES AND DEFICIENCY   $ 7,702     $ 8,194  
   
   
   
Avaya Inc.  
Condensed Statements of Cash Flows  
(Unaudited; in millions)  
       
    For the nine months ended June 30,  
    2013     2012  
Net cash (used for) provided by:                
    Net loss   $ (387 )   $ (354 )
    Adjustments to net loss     428       478  
    Changes in operating assets and liabilities     58       (184 )
  Operating activities     99       (60 )
  Investing activities     (89 )     (237 )
  Financing activities     (68 )     167  
  Effect of exchange rate changes on cash and cash equivalents     (8 )     1  
Net decrease in cash and cash equivalents     (66 )     (129 )
Cash and cash equivalents at beginning of period     337       400  
Cash and cash equivalents at end of period   $ 271     $ 271  
                 
                 
                               
    Avaya Inc.                          
    Supplemental Schedules of Revenue                          
    (Unaudited; in millions)                          
                               
For the Three Months Ended         For the Three Months Ended June 30,  
Sept. 30,   Dec. 31,   Mar. 31,         Revenues     Mix     Change  
2012   2012   2013         2013   2012     2013     2012     Amount     Pct.  
                                                           
                  Revenue by Segment                                        
$ 588   $ 573   $ 473   Global Communications Solutions   $ 497   $ 561     43 %   45 %   $ (64 )   -11.4 %
  -     -     -     Purchase accounting adjustments     (1 )   (1 )   0 %   0 %     -     -  
  64     58     56   Networking     64     74     6 %   6 %     (10 )   -13.5 %
  652     631     529   Total ECS product revenue     560     634     49 %   51 %     (74 )   -11.7 %
  625     609     589   AGS     590     616     51 %   49 %     (26 )   -4.2 %
$ 1,277   $ 1,240   $ 1,118   Total revenue   $ 1,150   $ 1,250     100 %   100 %   $ (100 )   -8.0 %
                                                           
                                                           
                  Revenue by Geography                                        
$ 694   $ 670   $ 592   U.S.     $639   $ 666     56 %   53 %   $ (27 )   -4.1 %
                  International:                                        
  327     331     298     EMEA     297     330     26 %   27 %     (33 )   -10.0 %
  126     123     116     APAC - Asia Pacific     105     128     9 %   10 %     (23 )   -18.0 %
  130     116     112     Americas International - Canada and Latin America     109     126     9 %   10 %     (17 )   -13.5 %
  583     570     526   Total International     511     584     44 %   47 %     (73 )   -12.5 %
$ 1,277   $ 1,240   $ 1,118   Total Revenue   $ 1,150   $ 1,250     100 %   100 %   $ (100 )   -8.0 %
   
   
   
Avaya Inc.  
Supplemental Schedule of Non-GAAP Adjusted EBITDA  
(Unaudited; in millions)  
                         
    For the three months ended June 30,     For the nine months ended June 30,  
    2013     2012     2013     2012  
Net loss   $ (110 )   $ (166 )   $ (387 )   $ (354 )
  Interest expense     122       107       346       324  
  Interest income     (1 )     (1 )     (2 )     (3 )
  (Benefit from) provision for income taxes     (3 )     88       (9 )     62  
  Depreciation and amortization     110       140       331       426  
EBITDA     118       168       279       455  
  Impact of purchase accounting adjustments     1       1       1       2  
  Restructuring charges, net     63       17       165       128  
  Sponsors' fees     1       1       5       5  
  Acquisition-related costs     1       1       1       4  
  Integration-related costs     3       6       12       14  
  Loss on extinguishment of debt     -       -       6       -  
  Third-party fees expensed in connection with the debt modification     -       -       18       -  
  Non-cash share-based compensation     4       2       7       7  
  Write-down of assets held for sale to net realizable value     -       4       -       4  
  (Gain) loss on investments and sale of long-lived assets, net     (1 )     -       (1 )     3  
  Goodwill impairment     -       -       89       -  
  Impairment of long-lived assets     1       2       1       2  
  Venezuela hyperinflationary and devaluation charges     -       -       1       -  
  Resolution of legal matters     10       -       10       -  
  Loss (gain) on foreign currency transactions     5       (5 )     (10 )     7  
  Pension / OPEB / nonretirement postemployment benefits and long-term disability costs     19       28       64       73  
Adjusted EBITDA   $ 225     $ 225     $ 648     $ 704  
   
   
   
Avaya Inc.  
Supplemental Schedules of Non-GAAP Reconciliations  
(Unaudited; in millions)  
                               
       
    June 30,     Sept. 30,     Dec. 31,     Mar. 31,     June 30,  
    2012     2012     2012     2013     2013  
                                         
Reconciliation of Non-GAAP Gross Profit and Non-GAAP Gross Margin                                        
  GAAP Gross Profit   $ 623     $ 646     $ 666     $ 586     $ 627  
  GAAP Gross Margin     49.8 %     50.6 %     53.7 %     52.4 %     54.5 %
                                         
  Items excluded:                                        
    Amortization of technology intangible assets     47       46       22       14       13  
    Impairment of capitalized software development costs     2       4       -       -       1  
    Share-based compensation     1       1       1       -       2  
    Purchase accounting adjustments     1       1       -       -       1  
  Non-GAAP Gross Profit   $ 674     $ 698     $ 689     $ 600     $ 644  
                                         
  Non-GAAP Gross Margin     53.9 %     54.7 %     55.6 %     53.7 %     56.0 %
                                         
                                         
Reconciliation of Non-GAAP Operating Income                                        
  GAAP Operating Income (Loss)   $ 23     $ 76     $ 23     $ (72 )   $ 14  
    Percentage of Revenue     2 %     6 %     2 %     -6 %     1 %
                                         
  Items excluded:                                        
    Amortization of acquired assets     104       103       79       71       70  
    Restructuring and impairment charges, net     21       15       84       18       63  
    Acquisition / integration-related costs     6       6       5       6       5  
    Share-based compensation     2       1       2       1       4  
    Impairment of capitalized software development costs     2       4       -       -       1  
    Incremental accelerated depreciation     -       -       -       -       3  
    Goodwill impairment     -       -       -       89       -  
    Resolution of legal matters     -       -       -       -       10  
    Purchase accounting adjustments     1       1       -       -       1  
                                         
  Non-GAAP Operating Income   $ 159     $ 206     $ 193     $ 113     $ 171  
                                         
  Percentage of Revenue     12.7 %     16.1 %     15.6 %     10.1 %     14.9 %

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