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Monday, 16 May 2022 19:12

Avaya Reports Second Quarter Fiscal 2022 Financial Results Featured

By Avaya

COMPANY NEWS: Avaya Holdings Corp. (NYSE: AVYA) has reported financial results for the second quarter of fiscal 2022 ended March 31, 2022.

Second Quarter Financial Highlights

  • Revenues of $716 million, down 2 per cent year over year in constant currency
  • OneCloud ARR (Annualised Recurring Revenue) was $750 million, up 21 per cent sequentially and 118 per cent from a year ago
  • CAPS (Cloud, Alliance Partner and Subscription) was 54 per cent of revenue, up from 40 per cent a year ago
  • Software and Services were 89 per cent of revenue; Software was 67 per cent of revenue
  • Recurring revenue was 69 per cent of revenue, up from 66 per cent a year ago
  • GAAP Operating income was $23 million and Non-GAAP Operating income was $115 million
  • GAAP Net loss was $1 million and Non-GAAP Net income was $51 million
  • Adjusted EBITDA was $145 million, 20 per cent of revenue, down 370 basis points year over year
  • GAAP Diluted Loss Per Share of $0.02 and Non-GAAP Diluted Earnings Per Share of $0.53
  • Ending cash and cash equivalents were $324 million

“We drove record growth for Avaya OneCloud ARR with a $130 million quarter over quarter increase and an over $400 million year over year increase, to $750 million. The path to hit the $1 billion ARR mark by the end of calendar year 2022 is well paved,” said Jim Chirico, President and CEO of Avaya.

“We are successfully repositioning the company from our historic one-time revenue model to a recurring one, in fact 75 per cent of our new bookings were Avaya OneCloud. Our strategy is clearly taking hold faster than we anticipated leading to a significant and fundamental shift in our business.”

Additional Second Quarter Fiscal 2022 Highlights

  • Remaining Performance Obligations ("RPO") of $2.3 billion
  • Added over 1,400 new logos
  • Significant large deal activity with 97 deals over $1 million TCV, 18 over $5 million TCV, eight over $10 million TCV and 2 over $25 million TCV
  • ~20% of OneCloud ARR came from customers generating $5 million or more in annual recurring revenue
  • ~60% of OneCloud ARR came from customers generating $1 million or more in annual recurring revenue
  • ~95% of OneCloud ARR came from customers generating $100,000 or more in annual recurring revenue
  • ~60% of OneCloud ARR came from Contact Centre customers

(1) Non-GAAP gross margin, Non-GAAP operating margin (used below), Non-GAAP operating income, Non-GAAP net income, Non-GAAP earnings per share, adjusted EBITDA, adjusted EBITDA margin and constant currency are not measures calculated in accordance with generally accepted accounting principles in the U.S. (“GAAP”). Refer to the "Use of non-GAAP (Adjusted) Financial Measures" below and the Supplemental Financial Information accompanying this press release for more information on the calculation of constant currency and a reconciliation of these non-GAAP measures to their most closely comparable measure calculated in accordance with GAAP.

Customer Highlights

  • Westpac, the second largest bank in Australia, has extended their partnership with Avaya and chose Avaya OneCloud Subscription for its 9,700+ contact centre agents. This three-year deal will see the bank compose new solutions around the Avaya Media Processing Core ("MPC"), including the ability to build new experiences on-demand, and the introduction of AI-based channel automation that will reduce both the time and cost of change dramatically. Westpac chose Avaya based on the strength of our relationship with our partner Optus, the flexibility of our subscription model, and the intelligent cloud ecosystem they now have access to.
  • Finanz Informatik, the central service provider for savings banks in Germany, providing data centre, applications, networks and related IT services, has chosen to place the Avaya Media Processing Core at the heart of its environment, operating a private UC cloud platform powered by Avaya technology for 313 banks, representing 230,000 seats and two million calls per day. The partnership between Finanz Informatik and Avaya is underpinned by a five-year ARR deal that utilises all aspects of Avaya’s expertise. Finanz Informatik will be able to compose flexible, unique experiences for their customers wherever and whenever they are needed.
  • Carter Machinery, the third largest Caterpillar dealership network in North America, has selected Avaya Cloud Office, OneCloud CCaaS, Avaya Devices as a Service, and OneCloud CPaaS Virtual Agent for a five-year deal that will reach more than 2,000 users spanning 34 sites. This was a competitive new customer win for Avaya, displacing Cisco. Carter Machinery chose Avaya specifically because of the strength of its AI, automation, and strong partnership with ConvergeOne.
  • The University of Iowa Hospitals and Clinics chose an Avaya OneCloud Private Cloud solution after a highly competitive RFP process. Recognised as one of the best hospitals in the United States, it is Iowa's only comprehensive academic medical centre and a regional referral centre. The solution includes 25,000 UCaaS and 750 CCaaS users and Avaya OneCloud CPaaS (our largest CPaaS deal to date) to compose superior patient services and communications, a robust resiliency strategy for the main campus and remote sites, long-term growth flexibility as well as improved experiences for its students and employees, staff and trainees.
  • Watson Clinic has chosen Avaya Cloud Office to replace an aging Siemens platform for their 3,600 users across 15 locations. Based in Lakeland, Florida, Watson Clinic is now in its 9th decade and serves almost a million patients each year. In a competitive evaluation, Watson Clinic chose Avaya because of the ease of centralised management, integration between sites, improved patient experience, and expansion of channels to include voice, video, chat, conferencing and file sharing all centralised in one platform. Additionally, Watson Clinic expects to save over $600,000 because of their implementation.
  • Life Insurance Company of Alabama had an end of life/on premise phone system and chose to move to a public cloud CCaaS solution integrated with Avaya Cloud Office to solve for their numerous challenges. Their customer service reps now have full voice and digital channels to serve policy holders and its agency field force along with video conferencing and Efax capability. Their agency field force collaborates with CSRs in-real-time through Avaya Cloud Office to provide their policy holders and agency field force superior service. A public cloud solution allows flexibility for people to work remotely while having access to all the same tools they would if they were in the office creating improved customer AND employee experience.
  • In Kuwait, the Ministry of State for Communications and Information Technology has created the Sahel app, leveraging Avaya technology to create seamless experiences for users across touchpoints. Sahel is an application that enables citizens and residents to access government services and complete transactions easily, quickly, and securely. Sahel integrates seamlessly with Avaya OneCloud contact centre technology, providing a digital window through which citizens and residents can receive notifications and announcements from any government agency, improving the provision of digital services.
  • In the UK, a top retail insurer is moving to a cloud-based system to accelerate their business transformation. They needed to support at-home agents - but beyond the pandemic, also require a more flexible solution to solve for increased traffic to over 5,500 agents during peak periods such as storms or other damaging events. A three-year Avaya OneCloud Private Cloud Solution was selected to deliver Contact Centre Subscription services to this long-time Avaya customer.
  • In Fort Worth, Texas, Cook Children’s Health Care System has chosen Avaya OneCloud as the ecosystem for their entire enterprise in a three-year, multi-million-dollar deal that covers more than 14,000 seats across central campus sites and 2,700 seats for remote clinics. In a competitive deal, Cook Children’s chose Avaya because of the unique way that the Avaya Media Processing Core enables a hybrid implementation including cloud, and brings together expertise across the enterprise to provide a better user and patient experience, and ultimately improve outcomes in a pediatric health care system.

Business Highlights

  • Avaya launched the Avaya Virtual Agent, a ready-to-deploy, configurable service that delivers the full benefits of virtual, AI-based communication experiences to businesses – immediately elevating their customer experience and dramatically reducing the complexity associated with virtualising customer interactions. Avaya Virtual Agent removes this complexity, enabling organisations to quickly deploy Avaya-designed, pre-built, cloud-based self-service agents instead of building them from scratch. This solution leverages the Avaya OneCloud Experience Platform, which reimagines communications composability, providing customers with the option of constructing their own workflows or subscribing to pre-built experiences.
  • Avaya also announced we are expanding our strategic partnership with Microsoft, building on the success of our current CCaaS go-to-market initiatives. We will add the Avaya OneCloud portfolio to the Microsoft Azure Marketplace, giving customers the agility to create communications and collaboration experiences with the broadest range of options for public, private or hybrid cloud delivery approaches to fit their needs. Avaya CCaaS customers also gain access to the power of Nuance’s Contact Centre AI technology integrated with OneCloud. The combined capabilities of Microsoft and Nuance give our customers flexibility to create and deliver intelligent, personalised, and impactful consumer interactions with long-term investment protection and control of their data. This represents a tremendous opportunity for customers to accelerate their cloud journey, and for Avaya to expand its go-to-market reach through collaboratively selling with Microsoft.
  • Avaya and Alcatel-Lucent Enterprise (ALE) entered into a strategic partnership that extends the availability of Avaya’s OneCloud CCaaS (Contact Centre as a Service) composable solutions to ALE’s global base of customers while also making ALE’s digital networking solutions available on a global basis to Avaya customers.
  • Frost & Sullivan presented Avaya with the 2022 Competitive Leadership Award for Best Practices in North American Government Solutions, citing Avaya’s strong overall performance for communications, collaboration, and customer experience (CX) solutions designed for the government vertical as factors in recognising Avaya OneCloud.
  • Avaya was named the winner of a Gold Stevie Award in the Emerging Technology category for Avaya OneCloud in The Annual American Business Awards. The American Business Awards are the U.S.A.’s premier business awards program. All organisations operating in the U.S.A. are eligible to submit nominations – public and private, for-profit and non-profit, large and small.

Financial Outlook - 3Q Fiscal 2022- unless otherwise noted, values reflect April 30, 2022 FX rates.

  • Revenue of $685 million to $700 million
  • GAAP operating income of $14 million to $24 million; GAAP operating margin of 2 per cent to 3 per cent
  • Non-GAAP operating income of $111 million to $121 million; non-GAAP operating margin of 16 per cent to 17 per cent
  • Adjusted EBITDA of $140 million to $150 million; Adjusted EBITDA margin of 20 per cent to 21 per cent
  • Non-GAAP Diluted EPS of $0.48 to $0.56

Financial Outlook - Fiscal Year 2022- unless otherwise noted, values reflect April 30, 2022 FX rates.

  • Revenue of $2.815 billion to $2.855 billion
  • OneCloud ARR expected to be $940 million to $960 million by year end FY22
  • CAPS revenue will represent between ~47 per cent to 50 per cent of Avaya's total revenue for FY22
  • GAAP operating income of $76 million to $96 million; GAAP operating margin of ~3 per cent
  • Non-GAAP operating income of $466 million to $486 million; non-GAAP operating margin of ~17 per cent
  • Adjusted EBITDA of $580 million to $600 million; Adjusted EBITDA margin of ~21 per cent
  • Non-GAAP Diluted EPS of $2.09 to $2.25
  • Cash flow from operations expected to be approximately (7) per cent of revenue, as an outcome of the company’s accelerated success in moving to a recurring revenue model which is resulting in higher working capital requirements
  • Approximately 87 million to 88 million diluted weighted average shares outstanding

The company has not quantitatively reconciled its guidance for adjusted EBITDA, non-GAAP Operating income, or non-GAAP EPS to their respective most comparable GAAP measure because certain of the reconciling items that impact these metrics including, provision for income taxes, restructuring charges, net of sublease income, advisory fees, acquisition-related costs and change in fair value of warrants affecting the period, have not occurred, are out of the company’s control, or cannot be reasonably predicted. Accordingly, reconciliations to the nearest GAAP financial measures are not available without unreasonable effort. Please note that the unavailable reconciling items could significantly impact the company’s results as reported under GAAP.

As Avaya’s CAPS metric reflects revenue that is already recognised, management believes it is helpful to provide investors with a better view into the performance of the Company’s broader-based OneCloud software solutions that are driving the company’s recurring revenue growth by also providing a forward-looking metric, Annualised Recurring Revenue, or OneCloud ARR.

OneCloud ARR represents our estimate of the annualised revenue run-rate of certain components from active term OneCloud contracts (whether or not terminable) at the end of the reporting period. More specifically, OneCloud ARR includes OneCloud subscription revenue, ACO recurring revenue and revenue from CCaaS, Spaces, CPaaS, DaaS and private cloud, and excludes maintenance, managed services revenue and ACO one-time payments. The One Cloud ARR metric, combined with the company’s CAPS metric, provides investors enhanced visibility into Avaya’s transformational Cloud journey. Per period OneCloud ARR figures are provided in the slides published on Avaya’s website at https://www.avaya.com on the Investor Relations page.

Avaya’s outlook does not include the potential impact of any business combinations, asset acquisitions, divestitures, strategic investments, or other significant transactions that may be completed after the date hereof. Actual results may differ materially from Avaya’s outlook as a result of, among other things, the factors described under “Forward-Looking Statements” below.

About Avaya

Businesses are built by the experiences they provide, and everyday millions of those experiences are delivered by Avaya Holdings Corp. (NYSE: AVYA). Avaya is shaping what's next for the future of work, with innovation and partnerships that deliver game-changing business benefits. Our cloud communications solutions and multi-cloud application ecosystem power personalised, intelligent, and effortless customer and employee experiences to help achieve strategic ambitions and desired outcomes. Together, we are committed to help grow your business by delivering Experiences that Matter. Learn more at https://www.avaya.com.

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