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Avaya Reports Fourth Quarter and Fiscal 2021 Financial Results, Provides Fiscal 2023 and Fiscal 2024 Targets

Announcement posted by Avaya 24 Nov 2021

Q4 revenues of $760 million; FY21 revenue $2.973 billion - an increase of 3.5% year over year Avaya OneCloud™ ARR for Q4 increased 177% year over year to $530 million Cloud, Alliance Partner and Subscription revenue was a record 44% for Q4 and 40% for FY2

Sydney, Australia - November 24, 2021 - Avaya Holdings Corp. (NYSE: AVYA) today reported financial results for the fourth quarter of fiscal 2021 ended September 30, 2021.

Financial Highlights

  • Q4 Revenues of $760 million and fiscal 2021 revenues of $2.973 billion. Fiscal 2021 revenue includes an adjustment of approximately $15 million for the cumulative effect of an understatement of revenue in prior periods.(1)
  • OneCloud ARR (Annualised Recurring Revenue) was $530 million, up 25 per cent sequentially and 177 per cent from a year ago.
  • CAPS (Cloud, Alliance Partner and Subscription) was 44 per cent of revenue, up from 33 per cent a year ago; and 40 per cent for fiscal 2021.
  • For fiscal 2021, software and services were 88 per cent of revenue, flat year over year.
  • Recurring revenue was 66 per cent for fiscal 2021, up from 63 per cent a year ago.
  • GAAP Operating income was $33 million and Non-GAAP Operating income was $145 million; for fiscal 2021 GAAP Operating income was $180 million and Non-GAAP Operating income was $602 million.
  • GAAP Net income was $6 million and Non-GAAP Net income was $74 million; for fiscal 2021 GAAP Net loss was $13 million and Non-GAAP Net income was $304 million.
  • Adjusted EBITDA was $179 million, 23.6 per cent of revenue, down 290 basis points year over year; for fiscal 2021 Adjusted EBITDA was $719 million, 24.2 per cent of revenue.
  • GAAP Earnings Per Share of $0.06 and Non-GAAP Earnings Per Share of $0.77; for fiscal 2021 GAAP Loss Per Share was $0.20 and Non-GAAP Earnings Per Share was $3.16.
  • Ending cash and cash equivalents were $498 million.

“Fiscal year 2021 for Avaya was a year marked by many firsts, and the outstanding results we delivered exceeded expectations on most every front.  Most impressive is the fact that we reversed over a decade of annual revenue declines, delivering year over year growth closing up approximately $100 million, while we also grew ARR 177 per cent to $530 million,” said Jim Chirico, President and CEO of Avaya. 

“This year marked a real and substantive milestone for the company and I couldn’t be prouder of the performance or more thankful for the commitment of our customers and partners and performance of our global team as we’ve navigated a purposeful and deliberate journey of transformation to be an enterprise cloud leader.”

FY21 Q4 Earnings Release

Additional Fourth Quarter Fiscal 2021 Highlights

  • Total Contract Value ("TCV") of $2.0B*.
  • Added approximately 1,600 new logos.
  • Significant large deal activity with 119 deals over $1 million TCV, 18 over $5 million TCV and 7 over $10 million TCV.
  • ~20 per cent of OneCloud ARR came from customers generating $5 million or more in annual recurring revenue.
  • ~60 per cent of OneCloud ARR came from customers generating $1 million or more in annual recurring revenue.
  • ~95 per cent of OneCloud ARR came from customers generating $100K or more in annual recurring revenue.
  • ~60 per cent of OneCloud ARR came from Contact Centre customers.

(1)During fiscal 2021, the Company identified an understatement of revenue by $3 million and $5 million in the Consolidated Statements of Operations for fiscal 2020 and 2019, respectively, and in an understatement of the opening Retained earnings adjustment recorded upon adoption of Accounting Standards Update No. 2014-09, "Revenue from Contracts with Customers" by $7 million.  The Company concluded that the impacts were not material to the current period or any prior period financial statements. As a result, the cumulative effect of the understatement was recorded during fiscal 2021, resulting in an increase to Revenue and Provision for income taxes and a decrease to Net loss of $15 million, $2 million, and $13 million, respectively, predominantly within the Products and Solutions operating segment.

(2)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 the most closely comparable measure calculated in accordance with GAAP.

* We define TCV as the value of all active rateable contracts that have not been recognised as revenue, including both billed and unbilled backlog.

Customer Highlights

Florida’s Leon County Government is benefiting from migrating to an Avaya Aura Subscription solution that 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 engagement to deliver advanced quality monitoring and biometrics that will reduce losses from fraud by ~50 per cent and drive up customer satisfaction through a deeper understanding of each interaction. In a competitive bid for the three-year contract supporting hundreds of Amtrak agents and supervisors, our ability to fully understand the customer’s needs and deliver full-cloud capabilities immediately was key to being chosen ahead of the incumbent provider as well as multiple other competitors.

Finanz Informatik, the central service provider for savings banks in Germany, relies on an Avaya OneCloud Private UCaaS platform to deliver data center, applications, networks and related IT services to 300 savings banks, with 221,000 seats and two million calls per day. A new service contract is structured to deliver best-in-class service today and in the future, including Avaya Professional Services and Avaya Service Management and Maintenance.

In India, global outsourcer Wipro BPM chose Avaya OneCloud Subscription as the next step on the digital transformation journey for their contact centre due to ease of expansion, flexible migration as part of their cloud and automation plans, and based on Avaya’s many years of consistent service levels, including operations across 40+ ODC’s globally. Wipro’s approximately 3,500 agents can continue to deliver exceptional experiences to customers who are increasingly consuming all-digital services, with a full solution suite which includes multiple ecosystem components from our API Exchange hub marketplace.

Transcosmos, a Japan-based global BPO, is composing effortless customer experiences, reducing wait times, and improving efficiencies and all-around satisfaction through the partnership of Avaya OneCloud CCaaS and Google Cloud Contact Center AI. This solution will drive productivity through intuitive and natural conversation interactions across any touchpoint with no agent intervention, and by providing sentiment analysis and contextual insights to agents during live conversations.

MAHLE, a global automotive supplier with over 70,000 employees and 160 production locations, was struggling with inconsistent customer and employee experiences from their 19 disparate voice vendors. An Avaya OneCloud Private Cloud solution with Unified Communications now integrates with Microsoft Teams, providing MAHLE with a single partner and contract, a homogenous feature set, and SLA for all locations, as they also enjoy investment protection and reduced administration costs.

Waste management, processing and recycling company Van Happen Containers in the Netherlands is leaving its on-premise model for a cloud strategy based on Avaya OneCloud CCaaS and Avaya Cloud Office. They will benefit from reliability, greatly reduced on-site systems maintenance, and platform integrations, along with the ability to connect and expand online services such as chat functionalities through Whatsapp and Facebook, all integrated with its CRM. Staff can communicate and collaborate across locations, in real time, with Avaya Cloud Office while agents serve customers via CCaaS applications for inquiries, scheduling drop-off and pick-up of trash and containers through customer selected contact channels.

Preferred Home Care of New York receives thousands of calls per day. Their complicated and outdated phone system suffered from persistent outages that left patients at risk, staff stranded and agents at a standstill. Avaya Cloud Office by RingCentral provides a single, easy-to-administer collaboration platform across their locations for a reliable, consistent experience for patients, caregivers and employees. Their teams can even create call flows and queues to support the unique needs of different users.

The Infoline subsidiary of OmanTel, the leading SP in the Sultanate of Oman, is one of the fastest-growing BPOs in the Middle East. Infoline decided to shift from a competitor’s on-premise solution to Avaya OneCloud CCaaS to meet projected market growth and to help them enhance customer, client, and employee experiences. With this public cloud solution, the BPO can deliver meaningful experiences for end customers via voice, web chat or email, supported by intelligent routing and composable workspaces that bring customer information from different applications into a single pane of glass.

Business Highlights

  • Avaya was recognised as one of the Forbes 2021 "World's Best Employers," receiving this coveted distinction for the second consecutive year.
  • Avaya and Microsoft announced a strategic relationship to create a powerful set of joint cloud communications solutions to define the future of customer and employee experiences.  The joint solutions include the award-winning Avaya OneCloud CPaaS solution, now integrated with the voice, video, chat and SMS capabilities of Microsoft Azure Communication Services for combined global reach, scale and functionality.
  • Avaya and Microsoft have also strengthened the integration of Avaya OneCloud CCaaS and Microsoft Azure to support:
  • The globally expanding availability of Avaya OneCloud CCaaS hosted in Azure
  • Avaya OneCloud CCaaS natively integrated with Microsoft Teams via the Microsoft Teams Connected Contact Center Certification Program
  • Avaya OneCloud CCaaS integration with Microsoft Dynamics 365
  • Avaya Session Border Controller is also now certified for Microsoft Teams Direct Routing and Media Bypass, all designed to complement Avaya’s OneCloud CCaaS solutions
  • Avaya Spaces made a significant leap to the Visionary quadrant in the Gartner Magic Quadrant for Meeting Solutions in 2021, and did so in less than two years of availability in the market.  According to Gartner, “Meeting solutions blend communications, collaboration and content sharing to enable virtual meeting scenarios to satisfy a variety of use cases. By 2024, the virtual visual campus will become the centre of 30 per cent of meeting experiences, up from 5 per cent today, as focus shifts to enabling collaboration equity to drive interactive and dynamic engagement.”  In a landscape that was largely unchanged from 2020, Avaya was one of only two vendors to see a quadrant leap in the MQ.  This is an unprecedented accomplishment for Avaya and a clear validation of the company’s strategy, completeness of vision, and ability to execute.
  • Avaya Experience Builders™ was launched, as a global ecosystem of Avaya services, partners and developers focused on helping organisations build better experiences for employees and customers, wherever and whenever communications and collaboration happen. The needs of customers have changed dramatically, and this ecosystem is uniquely positioned to deliver next-generation customer and employee experiences through the Avaya OneCloud AI-powered experience platform.
  • Avaya was recognised by Metrigy as a MetriStar Top Provider for Workforce Optimisation (WFO) Platform and with a MetriStar Top Customer Sentiment award for Avaya OneCloud™ UCaaS. Avaya was singled out based on its achievements in delivering innovation for customer engagement, and helping organisations achieve business goals, revenue objectives and efficiencies.
  • Avaya earned Frost & Sullivan’s Competitive Strategy Leadership Award for Avaya OneCloud CPaaS. According to the report, Avaya stands out in the CPaaS marketplace in important ways, particularly when compared to transactional CPaaS providers. This includes an enterprise focus that understands the unique challenges of vertical industries and integrating with critical business applications rather than overlaying another solution or service on a customer’s existing applications.
  • Avaya was recognised with two UC Today 2021 Awards: Best Use of AI for the Avaya Spaces workstream collaboration solution; and Best CPaaS Solution for Avaya OneCloud CPaaS.
  • Avaya released its annual Corporate Responsibility Report, highlighting the progress made regarding prioritised environmental, social and governance initiatives, including climate, diversity, and cybersecurity and data privacy.  The report showcases the policies and programs that drive the company’s commitment to creating value and making a positive and lasting impact for its stakeholders, reducing its impact on the environment, offering a safe and inclusive workplace for all employees and giving back to the communities where Avayans live and work.
  • CRN®, a brand of The Channel Company, named Hope Davó, Avaya National Partner Manager, to its 2021 list of Rising Female Stars. This list honours up-and-coming, talented women in the IT channel whose contributions are shaping the future of the channel through their leadership, tireless dedication and innovative ideas.  Selected by the CRN editorial team, the second annual Rising Female Stars list is made up of exceptional channel leadership candidates. Honorees are selected for their unique experience, expertise, impact on their partners and dedication to the IT channel.

Financial Outlook - 1Q Fiscal 2022 - unless otherwise noted, values reflect October 31, 2021 FX rates.

  • Revenue of $725 million to $745 million.
  • GAAP operating income of $33 million to $48 million; GAAP operating margin of 5 per cent to 6 per cent.
  • Non-GAAP operating income of $131 million to $146 million; non-GAAP operating margin of ~18 per cent to 20 per cent.
  • Adjusted EBITDA of $160 million to $175 million; Adjusted EBITDA margin of ~23 per cent.
  • Non-GAAP EPS of $0.63 to $0.75.

Financial Outlook - Fiscal Year 2022 - unless otherwise noted, values reflect October 31, 2021 FX rates.

  • Revenue of $2.975 billion to $3.025 billion.
  • OneCloud ARR expected to be $880 million to $910 million by year end FY22
  • CAPS revenue will represent between 45 per cent and 50 per cent of Avaya's total revenue for FY22.
  • GAAP operating income of $193 million to $213 million; GAAP operating margin of ~7 per cent.
  • Non-GAAP operating income of $577 million to $597 million; non-GAAP operating margin of ~19 per cent to 20 per cent.
  • Adjusted EBITDA of $700 million to $720 million; Adjusted EBITDA margin of ~24 per cent.
  • Non-GAAP EPS of $2.85 to $3.03.
  • Cash flow from operations expected to be approximately 1 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 88 million to 90 million diluted weighted average shares outstanding.

Financial Outlook - Fiscal Year 2023 and 2024 - unless otherwise noted, values reflect October 31, 2021 FX rates. We are targeting:

  • Revenue growth in the low to mid-single digit percent range year-over-year in fiscal 2023 and in the mid- to high-single digit percent range year-over-year in fiscal 2024.
  • OneCloud ARR of $2 billion at end of fiscal 2024.
  • Adjusted EBITDA margin of 23 per cent to 24 per cent.
  • Cash flow from operations in the mid- to high-single digit percent of revenue for fiscal 2023, and low-double digit percent of revenue for fiscal 2024.

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 would be 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 http://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.

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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 http://www.avaya.com.