Exhibit 99.1
Media Inquiries: | Investor Inquiries: | |||||
Lynn Newman | Matthew Booher | |||||
908-953-8692 (office) | 908-953-7500 (office) | |||||
908-672-1321 (mobile) | mbooher@avaya.com | |||||
lynnnewman@avaya.com |
AVAYA REPORTS FOURTH FISCAL QUARTER AND FISCAL YEAR 2007 RESULTS
— | Q4 Revenues increase to $1.429 Billion, the Highest Level in Six Years; 4.8% increase compared to Prior Year |
— | Q4 Sales of Products increase 7.8%, with a 9.5% increase in Converged Voice Applications Revenues and Company Record for IP Telephony Line Shipments |
— | Q4 Gross Margin Increased to 47.4% |
— | Q4 Cash Flows from Operations Total $228 Million, the Highest Quarterly Cash Flow in Three Years; FY07 Cash Flows from Operations Total $637 Million |
— | Q4 GAAP Operating Income was $35 Million; FY07 GAAP Operating Income was $276 Million |
— | Q4 Non-GAAP Operating Income1 was $139 Million; FY07 Non-GAAP Operating Income1 was $417 Million |
— | Q4 GAAP EPS was 8 Cents; FY07 GAAP EPS was 47 Cents |
— | Q4 Non-GAAP EPS1 was 19 Cents; FY07 Non-GAAP EPS1 was 61 Cents |
FOR IMMEDIATE RELEASE: October 18, 2007
BASKING RIDGE, N. J. – Avaya Inc., (NYSE:AV) a leading global provider of business communications applications, systems and services, today announced net income of $35 million and earnings per share of 8 cents for the fourth fiscal quarter of 2007 on a U.S. generally accepted accounting principles (GAAP) basis. This compares with net income of $48 million and earnings per share of 10 cents for the fourth fiscal quarter of 2006. Non-GAAP net income1 was $87 million or 19 cents per share compared with non-GAAP net income1 for the fourth fiscal quarter of 2006 of $80 million or 17 cents per share.
Avaya’s fourth fiscal quarter 2007 revenues increased 4.8 percent to $1.429 billion compared to $1.364 billion in the same period last year. The company shipped a record number of IP lines and over one million IP lines for the sixth consecutive quarter. Sales of products increased 7.8 percent, including a 9.5 percent increase in converged voice applications revenues. Services revenues increased 5.4 percent and rental and managed services revenues declined 10.6 percent. U.S. revenues declined by 1.6 percent. The weaker U.S. dollar favorably impacted international regions, and accounted for a $39 million year-over-year revenue increase. EMEA and APAC revenues grew by 10.7 percent and 15.5 percent, respectively. Revenues in the Americas, non-U.S., grew by 25.3 percent.
1 | Avaya defines non-GAAP operating income, non-GAAP net income and non-GAAP earnings per share as excluding the impact of restructuring charges, acquisition and merger-related charges and certain income tax items. See “Reconciliation of Non-GAAP Financial Measures” accompanying this release. |
The company’s gross margin increased to 47.4 percent for the fourth fiscal quarter of 2007 compared to 46.6 percent for the same period last year.
Selling, general and administrative expenses were $39 million higher, and research and development expenses were relatively flat when compared to the same period last year.
The company reported operating income for the fourth fiscal quarter of 2007 of $35 million and non-GAAP operating income1 of $139 million. In the fourth fiscal quarter of 2006, the company reported operating income of $75 million and non-GAAP operating income1 of $137 million. Operating income for the fourth quarter of fiscal 2007 includes $7 million of business restructuring charges and $97 million of merger-related costs, of which $90 million relates to the accelerated vesting of stock options and restricted stock units in connection with the acquisition of Avaya by affiliates of Silver Lake Partners and TPG Capital, two private equity firms. These amounts have been excluded in calculating non-GAAP operating income1 and non-GAAP net income1 for the fourth quarter of fiscal 2007.
Avaya’s effective tax rate was 32.7% for the fourth quarter of fiscal 2007. The provision for income taxes includes $21 million of favorable tax items which have been excluded in calculating non-GAAP net income1.
Avaya generated $228 million in operating cash flow during the fourth fiscal quarter of 2007 compared to $191 million in the fourth fiscal quarter of 2006. Avaya’s cash balance at the end of the fourth quarter of fiscal 2007 was $1.270 billion, compared with $899 million as of September 30, 2006.
Fiscal Year 2007 Results
Revenues for fiscal 2007 were $5.279 billion compared to $5.148 billion last year. The weaker U.S. dollar favorably impacted international regions, and accounted for the revenue increase. The company earned GAAP net income of $218 million and earnings per share of 47 cents for fiscal 2007, compared to net income of $201 million and earnings per share of 43 cents for fiscal 2006. Non-GAAP net income1 was $281 million, or 61 cents per share for fiscal 2007 compared with $241 million, or 49 cents per share for fiscal 2006. Fiscal 2007 GAAP operating income was $276 million compared to $263 million for fiscal 2006. Non-GAAP operating income1 for fiscal 2007 was $417 million compared to $367 million for fiscal 2006. Operating cash flow for fiscal 2007 was $637 million compared to $647 million for fiscal 2006.
- 2 -
Update on Closing of Acquisition of Avaya
Avaya also confirmed today that the acquisition of the company by affiliates of Silver Lake Partners and TPG Capital is scheduled to close by the end of October.
Fourth Quarter Highlights
Since the end of the last quarter, Avaya has announced several customer wins, new offers and awards including:
Bell Canada announced an agreement to standardize on the full portfolio of Avaya IP Telephony solutions. This is the first time Bell Canada has standardized a full product line in over 13 years.
Black & Decker selected Avaya to power the company’s communications. Avaya will help Black & Decker build an IP Telephony-based network for nearly 200 locations with highly diverse needs around the globe. The implementation will help the company improve productivity and customer service, control costs, and support new ways of doing business.
Avaya delivered an IP telephony system toTelemarketing Japan, Inc. (TMJ), one of the major telemarketing outsourcers in Japan. The system allows TMJ to centralize operations and management of their data center, enabling TMJ to increase the overall availability of the system, reduce equipment cost and to develop an infrastructure flexible to business expansion.
As Villanova University, the most wired college in the U.S. (PC Magazine, Dec. 2006), plots its technology future, new intelligent communications networking and applications give it a powerful, flexible foundation to further its vision and provide a wealth of new capabilities today. The new Avaya and Extreme Networks IP telephony network now links 60 buildings on Villanova’s Philadelphia campus. With new intelligent communications capabilities – including converged networking, unified communications and contact center applications – the university now is extending its technology leadership and improving campus safety.
Avaya announced a new solution that provides users ofNokia “E Series” business deviceswith one number access and advanced enterprise telephony capabilities as they travel across private Wi-Fi and public cellular networks. With a single Voice over IP-enabled mobile device, workers can “handoff” phone calls using dual mode communications, as they travel from inside a company building (Wi-Fi) to the outside environment (cellular) – and vice versa. This provides mobile workers a more convenient and productive way to manage their communications, while giving organizations a more cost-effective way to manage enterprise mobility.
The solution – Avaya one-X Mobile Dual Mode – combines Avaya’s IP-based applications with Nokia E series business devices (Nokia E60, Nokia E61 and Nokia E70 models) to deliver the full benefits of fixed mobile convergence. Calls made to a worker’s deskphone can be received on a Nokia E series business device, ensuring mobile workers remain accessible to customers and colleagues wherever they go.
Avaya debuted new versions of its industry-leading self-service software. The enhancements make it easier and more cost-effective to improve customer service with speech automation, and provide a foundation for using self-service to create faster, more productive business processes. The new products includeAvaya Voice Portal 4.0,the company’s flagship self-service software, andInteractive Response 3.0, one of the industry’s most widely-deployed self-service platforms. Also unveiled was the new version ofAvaya Dialog Designer 4.0, a tool for developing next-generation speech self-service applications.
- 3 -
Avaya receivedFrost & Sullivan’s 2007 North American Market Leadership Awardfor Interactive Voice Response (IVR) based on its leading market share and strategy in IVR solutions. According to Frost & Sullivan’s latest research, Avaya leads the North American IVR market with a 22.7 percent share. The company’s success is led by sales of the Avaya Voice Portal, a software platform that uses Web Services to provide companies with a faster, easier way to deliver speech-enabled self-service across highly distributed enterprises.
Avaya widened its lead in worldwide enterprise IP telephony revenues, according toSynergy Research Group’s 2Q 2007 Enterprise Voice Market Shares Report. With this report, Avaya marks another quarter of leadership in this market, as more businesses around the globe evolve their voice networks to IP telephony. Avaya is a global provider of business communications applications, systems and services.
The report shows Avaya as the #1 vendor in IP telephony revenues as defined by Synergy with 25.4 percent of the global market for the second quarter of 2007. In addition, the report shows that Avaya retained its leadership position in the worldwide overall enterprise telephony market in revenue, with nearly 19 percent of the market in the second quarter of 2007, more than 2 percentage points over its nearest competitor.
Forward-Looking Statements
Certain statements made in this press release are forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements regarding Avaya’s expected performance and outlook for operating results are based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. These risks and uncertainties include, but are not limited to:
• | price and product competition, including from competitors who may offer products and applications similar to those we offer as part of another offering, and from current leaders in information technology which benefit from the convergence of enterprise voice and data networks; |
• | rapid or disruptive technological development, including the effects of the technology shift from traditional TDM to IP telephony; |
• | dependence on new product development; |
• | customer demand for our products and services, including risks specifically associated with the services business and, in particular, the maintenance and rental and managed services lines of business, primarily due to renegotiations of customer contracts and changes in scope, pricing erosion and cancellations; |
• | supply issues related to our outsourced manufacturing operations, logistics, distribution or components; |
• | risks related to inventory, including warranty costs, obsolescence charges, excess capacity, material and labor costs, and our distributors’ decisions regarding their own inventory levels; |
• | general industry and market conditions and growth rates and general domestic and international economic conditions including interest rate and currency exchange rate fluctuations; |
• | the economic, political and other risks associated with international sales and operations, including increased exposure to currency fluctuations and to European economies as a result of a large percentage of our business being conducted in Europe; |
• | the ability to successfully integrate acquired companies, which may require significant management time and attention; |
- 4 -
• | the ability to attract and retain qualified employees; |
• | control of costs and expenses, including difficulties in completing restructuring actions in a timely and efficient manner due to labor laws and required approvals; |
• | U.S. and non-U.S. government regulation; and |
• | the ability to form and implement alliances. |
In addition, we may not be able to complete the proposed sale of the company on the terms summarized in Avaya’s filings with the SEC or on other acceptable terms, or at all, due to a number of factors, including the failure to satisfy customary closing conditions.
For a further list and description of such risks and uncertainties, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of Avaya’s filings with the SEC, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, which are available atwww.sec.gov. Avaya disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Use of Non-GAAP Financial Measures
In an effort to provide investors with additional information regarding the company’s results as determined by GAAP, the company has also disclosed non-GAAP operating income, non-GAAP net income and non-GAAP earnings per share in this press release.
These non-GAAP financial measures are not in accordance with, or an alternative for, generally accepted accounting principles in the United States and they have limitations in that they do not reflect all amounts associated with Avaya’s results of operations as determined in accordance with GAAP. These measures should only be used in evaluating Avaya’s results of operations together with the corresponding GAAP measures.
Avaya believes that the presentation of non-GAAP operating income, non-GAAP net income and non-GAAP earnings per share, which exclude the impact of restructuring charges, acquisition and merger-related charges and certain income tax items, provides meaningful supplemental information regarding Avaya’s performance. These non-GAAP financial measures also help investors compare Avaya’s financial results for the current quarter to its financial results for prior quarters and the prior fiscal year. In addition, Avaya’s management uses these measures when reviewing the company’s financial results and to further understand the company’s operating performance.
The reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures is included at the end of this press release.
About Avaya
Avaya delivers Intelligent Communications solutions that help companies transform their businesses to achieve marketplace advantage. More than 1 million businesses worldwide, including more than 90 percent of the FORTUNE 500 (R), use Avaya solutions for IP Telephony, Unified Communications, Contact Centers and Communications Enabled Business Processes. Avaya Global Services provides comprehensive service and support for companies, small to large. For more information visit the Avaya Web site:http://www.avaya.com.
- 5 -
Avaya Inc.
Consolidated Statements of Income
(Unaudited; Dollars and Shares in Millions, except per share amounts)
For the three months ended September 30, | For the twelve months ended September 30, | |||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||
REVENUE | ||||||||||||||
Sales of products | $ | 744 | $ | 690 | $ | 2,628 | $ | 2,510 | ||||||
Services | 542 | 514 | 2,067 | 2,017 | ||||||||||
Rental and managed services | 143 | 160 | 584 | 621 | ||||||||||
1,429 | 1,364 | 5,279 | 5,148 | |||||||||||
COST | ||||||||||||||
Sales of products | 349 | 312 | 1,241 | 1,168 | ||||||||||
Services | 334 | 349 | 1,294 | 1,325 | ||||||||||
Rental and managed services | 68 | 68 | 272 | 265 | ||||||||||
751 | 729 | 2,807 | 2,758 | |||||||||||
GROSS MARGIN | 678 | 635 | 2,472 | 2,390 | ||||||||||
OPERATING EXPENSES | ||||||||||||||
Selling, general and administrative | 427 | 388 | 1,611 | 1,595 | ||||||||||
Research and development | 112 | 110 | 444 | 428 | ||||||||||
Restructuring charges, net | 7 | 62 | 36 | 104 | ||||||||||
Merger-related costs | 97 | — | 105 | — | ||||||||||
TOTAL OPERATING EXPENSES | 643 | 560 | 2,196 | 2,127 | ||||||||||
OPERATING INCOME | 35 | 75 | 276 | 263 | ||||||||||
Other income, net | 17 | 8 | 40 | 24 | ||||||||||
Interest expense | — | — | (1 | ) | (3 | ) | ||||||||
INCOME BEFORE INCOME TAXES | 52 | 83 | 315 | 284 | ||||||||||
Provision for income taxes | 17 | 35 | 97 | 83 | ||||||||||
NET INCOME | $ | 35 | $ | 48 | $ | 218 | $ | 201 | ||||||
EARNINGS PER SHARE—BASIC | $ | 0.08 | $ | 0.11 | $ | 0.48 | $ | 0.43 | ||||||
EARNINGS PER SHARE—DILUTED | $ | 0.08 | $ | 0.10 | $ | 0.47 | $ | 0.43 | ||||||
Weighted Average Shares Outstanding—Basic | 457 | 454 | 454 | 463 | ||||||||||
Weighted Average Shares Outstanding—Diluted | 467 | 459 | 461 | 469 |
- 6 -
Avaya Inc.
Operating Segments
Revenue and Operating Income
Quarterly Trend
(Unaudited; Dollars in Millions)
REVENUE
For the Fiscal Year Ended September 30, 2006 | For the Fiscal Year Ended September 30, 2007 | |||||||||||||||||||||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | YTD | Q1 | Q2 | Q3 | Q4 | YTD | |||||||||||||||||||||||||||||
Global Communications Solutions | $ | 661 | $ | 661 | $ | 704 | $ | 760 | $ | 2,786 | $ | 682 | $ | 698 | $ | 686 | $ | 804 | $ | 2,870 | ||||||||||||||||||
Avaya Global Services | 588 | 577 | 593 | 604 | 2,362 | 598 | 596 | 590 | 625 | 2,409 | ||||||||||||||||||||||||||||
Corporate | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Total Avaya | $ | 1,249 | $ | 1,238 | $ | 1,297 | $ | 1,364 | $ | 5,148 | $ | 1,280 | $ | 1,294 | $ | 1,276 | $ | 1,429 | $ | 5,279 | ||||||||||||||||||
OPERATING INCOME | ||||||||||||||||||||||||||||||||||||||
For the Fiscal Year Ended September 30, 2006 | For the Fiscal Year Ended September 30, 2007 | |||||||||||||||||||||||||||||||||||||
Q1 | Q2 | Q3 | Q4 | YTD | Q1 | Q2 | Q3 | Q4 | YTD | |||||||||||||||||||||||||||||
Global Communications Solutions | $ | 43 | $ | 32 | $ | 36 | $ | 86 | $ | 197 | $ | 22 | $ | 38 | $ | 25 | $ | 90 | $ | 175 | ||||||||||||||||||
Avaya Global Services | 60 | 41 | 34 | 36 | 171 | 53 | 56 | 63 | 75 | 247 | ||||||||||||||||||||||||||||
Corporate: (A) | 4 | (20 | ) | (42 | ) | (47 | ) | (105 | ) | 15 | (13 | ) | (18 | ) | (130 | ) | (146 | ) | ||||||||||||||||||||
Total Avaya | $ | 107 | $ | 53 | $ | 28 | $ | 75 | $ | 263 | $ | 90 | $ | 81 | $ | 70 | $ | 35 | $ | 276 | ||||||||||||||||||
(A) | The segments are managed as two individual businesses and, as a result, include certain allocated costs and expenses of shared services, such as information technology, human resources, legal and finance. At the beginning of each fiscal year, the amount of certain corporate overhead expenses, including targeted annual incentive awards, to be charged to operating segments is determined and fixed for the entire year in the annual plan. The annual incentive award accrual is adjusted quarterly based on actual year to date results and those estimated for the remainder of the year. This adjustment of the annual incentive award accrual, as well as any other over/under absorption of corporate overheads against plan is recorded and reported within the Corporate caption. In addition, certain items such as charges related to restructuring actions, as well as merger-related costs, are not allocated to the operating segments and remain in Corporate. Included in merger-related costs for the fourth quarter of fiscal 2007 is $90 million related to the accelerated vesting of stock options and restricted stock units in connection with the acquisition of Avaya by affiliates of Silver Lake Partners and TPG Capital, two private equity firms. |
- 7 -
Avaya Inc.
Condensed Statements of Cash Flows
For the Twelve Months Ended September 30, 2007 and 2006
(Unaudited; Dollars in Millions)
For the twelve months ended September 30, 2007 | For the twelve months ended September 30, 2006 | |||||||
Net cash provided by operating activities | $ | 637 | $ | 647 | ||||
Net cash (used for) investing activities | (360 | ) (a) | (189 | ) (a) | ||||
Net cash provided by (used for) financing activities | 54 | (b) | (315 | ) (b) | ||||
Effect of exchange rate changes on cash and cash equivalents | 40 | 6 | ||||||
Net increase in cash and cash equivalents | 371 | 149 | ||||||
Cash and cash equivalents at beginning of the period | 899 | 750 | ||||||
Cash and cash equivalents at end of the period | $ | 1,270 | $ | 899 | ||||
(a) | Includes capital expenditures of $120 and $117 and capitalized software development costs of $93 and $71 for the twelve months ended September 30, 2007 and 2006, respectively. |
The twelve months ended September 30, 2007 also include $147 used for the acquisition of Ubiquity and $15 used for the acquisition of Traverse Networks
(b) | The net cash provided by financing activities as of September 30, 2007 includes $115 received from the exercise of stock options. |
The twelve months ended September 30, 2007 and 2006 include $94 and $328, respectively, related to the repurchase of Avaya common stock.
- 8 -
Avaya Inc.
Supplemental Revenue Tables
(Unaudited, Dollars in Millions)
Revenue by Geography | |||||||||||||||||||||||||||||||
Fourth Fiscal Quarter | |||||||||||||||||||||||||||||||
2007 | 2006 | Mix | |||||||||||||||||||||||||||||
4Q06 | 1Q07 | 2Q07 | 3Q07 | Dollars in millions | 2007 | 2006 | Change | ||||||||||||||||||||||||
$ | 788 | $ | 732 | $ | 746 | $ | 694 | U.S. | $ | 775 | $ | 788 | 54 | % | 58 | % | $ | (13 | ) | -2 | % | ||||||||||
Outside the U.S: | |||||||||||||||||||||||||||||||
183 | 186 | 178 | 172 | Germany | 192 | 183 | 13 | % | 13 | % | 9 | 5 | % | ||||||||||||||||||
208 | 203 | 190 | 216 | EMEA - Europe/Middle East/Africa (Excluding Germany) | 241 | 208 | 17 | % | 15 | % | 33 | 16 | % | ||||||||||||||||||
391 | 389 | 368 | 388 | Total EMEA | 433 | 391 | 30 | % | 28 | % | 42 | 11 | % | ||||||||||||||||||
110 | 88 | 111 | 116 | APAC - Asia Pacific | 127 | 110 | 9 | % | 8 | % | 17 | 15 | % | ||||||||||||||||||
75 | 71 | 69 | 78 | Americas, non-U.S. | 94 | 75 | 7 | % | 6 | % | 19 | 25 | % | ||||||||||||||||||
576 | 548 | 548 | 582 | Total outside the U.S. | 654 | 576 | 46 | % | 42 | % | 78 | 14 | % | ||||||||||||||||||
$ | 1,364 | $ | 1,280 | $ | 1,294 | $ | 1,276 | Total revenue | $ | 1,429 | $ | 1,364 | 100 | % | 100 | % | $ | 65 | 5 | % | |||||||||||
Revenue by Type | |||||||||||||||||||||||||||||||
Fourth Fiscal Quarter | |||||||||||||||||||||||||||||||
2007 | 2006 | Mix | |||||||||||||||||||||||||||||
4Q06 | 1Q07 | 2Q07 | 3Q07 | Dollars in millions | 2007 | 2006 | Change | ||||||||||||||||||||||||
$ | 690 | $ | 619 | $ | 639 | $ | 626 | Sales of products | $ | 744 | $ | 690 | 52 | % | 50 | % | $ | 54 | 8 | % | |||||||||||
514 | 509 | 509 | 507 | Services (b) | 542 | 514 | 38 | % | 38 | % | 28 | 5 | % | ||||||||||||||||||
160 | 152 | 146 | 143 | Rental and managed services (a), (b) | 143 | 160 | 10 | % | 12 | % | (17 | ) | -11 | % | |||||||||||||||||
$ | 1,364 | $ | 1,280 | $ | 1,294 | $ | 1,276 | Total revenue | $ | 1,429 | $ | 1,364 | 100 | % | 100 | % | $ | 65 | 5 | % | |||||||||||
Sales of Products by Channel | |||||||||||||||||||||||||||||||
Fourth Fiscal Quarter | |||||||||||||||||||||||||||||||
2007 | 2006 | Mix | |||||||||||||||||||||||||||||
4Q06 | 1Q07 | 2Q07 | 3Q07 | Dollars in millions | 2007 | 2006 | Change | ||||||||||||||||||||||||
$ | 302 | $ | 259 | $ | 277 | $ | 258 | Direct | $ | 332 | $ | 302 | 45 | % | 44 | % | $ | 30 | 10 | % | |||||||||||
388 | 360 | 362 | 368 | Indirect | 412 | 388 | 55 | % | 56 | % | 24 | 6 | % | ||||||||||||||||||
$ | 690 | $ | 619 | $ | 639 | $ | 626 | Total sales of products | $ | 744 | $ | 690 | 100 | % | 100 | % | $ | 54 | 8 | % | |||||||||||
GCS Revenue by Class | |||||||||||||||||||||||||||||||
Fourth Fiscal Quarter | |||||||||||||||||||||||||||||||
2007 | 2006 | Mix | |||||||||||||||||||||||||||||
4Q06 | 1Q07 | 2Q07 | 3Q07 | Dollars in millions | 2007 | 2006 | Change | ||||||||||||||||||||||||
$ | 483 | $ | 435 | $ | 440 | $ | 437 | Large Communications Systems | $ | 519 | $ | 483 | 64 | % | 64 | % | $ | 36 | 7 | % | |||||||||||
96 | 85 | 84 | 74 | Small Communications Systems | 85 | 96 | 11 | % | 13 | % | (11 | ) | -11 | % | |||||||||||||||||
169 | 151 | 162 | 153 | Converged Voice Applications | 185 | 169 | 23 | % | 22 | % | 16 | 9 | % | ||||||||||||||||||
12 | 11 | 12 | 22 | Other | 15 | 12 | 2 | % | 1 | % | 3 | 25 | % | ||||||||||||||||||
$ | 760 | $ | 682 | $ | 698 | $ | 686 | Total revenue - GCS | $ | 804 | $ | 760 | 100 | % | 100 | % | $ | 44 | 6 | % | |||||||||||
AGS Revenue by Class | |||||||||||||||||||||||||||||||
Fourth Fiscal Quarter | |||||||||||||||||||||||||||||||
2007 | 2006 | Mix | |||||||||||||||||||||||||||||
4Q06 | 1Q07 | 2Q07 | 3Q07 | Dollars in millions | 2007 | 2006 | Change | ||||||||||||||||||||||||
$ | 404 | $ | 411 | $ | 412 | $ | 408 | Product Support Services (b) | $ | 416 | $ | 404 | 67 | % | 67 | % | $ | 12 | 3 | % | |||||||||||
111 | 58 | 97 | 99 | Consulting and Systems Integration (b) | 126 | 111 | 20 | % | 18 | % | 15 | 14 | % | ||||||||||||||||||
89 | 89 | 87 | 83 | Global Managed Services (b) | 83 | 89 | 13 | % | 15 | % | (6 | ) | -7 | % | |||||||||||||||||
$ | 604 | $ | 598 | $ | 596 | $ | 590 | Total revenue - AGS | $ | 625 | $ | 604 | 100 | % | 100 | % | $ | 21 | 3 | % | |||||||||||
(a) | The services portion falls within the global managed services line in the AGS Revenue by Class chart and the product portion is spread among the applicable line items in the GCS Revenue by Class chart. |
(b) | Prior year revenue amounts have been reclassified to conform to current period presentation. |
- 9 -
Avaya Inc.
Supplemental Revenue Tables
(Unaudited, Dollars in Millions)
Revenue by Geography
Twelve Months Ended September 30, | |||||||||||||||||||
Mix | |||||||||||||||||||
Dollars in millions | 2007 | 2006 | 2007 | 2006 | Change | ||||||||||||||
U.S. | $ | 2,947 | $ | 2,994 | 56 | % | 58 | % | $ | (47 | ) | -2 | % | ||||||
Outside the U.S: | |||||||||||||||||||
Germany | 728 | 733 | 14 | % | 14 | % | (5 | ) | -1 | % | |||||||||
EMEA—Europe/Middle East/Africa | �� | ||||||||||||||||||
(Excluding Germany) | 850 | 765 | 16 | % | 15 | % | 85 | 11 | % | ||||||||||
Total EMEA | 1,578 | 1,498 | 30 | % | 29 | % | 80 | 5 | % | ||||||||||
APAC—Ask Pacific | 442 | 383 | 8 | % | 8 | % | 59 | 15 | % | ||||||||||
Americas, non-U.S. | 312 | 273 | 6 | % | 5 | % | 39 | 14 | % | ||||||||||
Total outside the U.S. | 2,332 | 2,154 | 44 | % | 42 | % | 178 | 8 | % | ||||||||||
Total revenue | $ | 5,279 | $ | 5,148 | 100 | % | 100 | % | $ | 131 | 3 | % | |||||||
Revenue by Type | |||||||||||||||||||
Twelve Months Ended September 30, | |||||||||||||||||||
Mix | |||||||||||||||||||
Dollars in millions | 2007 | 2006 | 2007 | 2006 | Change | ||||||||||||||
Sales of products | $ | 2,628 | $ | 2,510 | 50 | % | 49 | % | $ | 118 | 5 | % | |||||||
Services (b) | 2,067 | 2,017 | 39 | % | 39 | % | 50 | 2 | % | ||||||||||
Rental and managed services (a), (b) | 584 | 621 | 11 | % | 12 | % | (37 | ) | -6 | % | |||||||||
Total revenue | $ | 5,279 | $ | 5,148 | 100 | % | 100 | % | $ | 131 | 3 | % | |||||||
Sales of Products by Channel | |||||||||||||||||||
Twelve Months Ended September 30, | |||||||||||||||||||
Mix | |||||||||||||||||||
Dollars in millions | 2007 | 2006 | 2007 | 2006 | Change | ||||||||||||||
Direct | $ | 1,126 | $ | 1,097 | 43 | % | 44 | % | $ | 29 | 3 | % | |||||||
Indirect | 1,502 | 1,413 | 57 | % | 56 | % | 89 | 6 | % | ||||||||||
Total sales of products | $ | 2,628 | $ | 2,510 | 100 | % | 100 | % | $ | 118 | 5 | % | |||||||
GCS Revenue by Class | |||||||||||||||||||
Twelve Months Ended September 30, | |||||||||||||||||||
Mix | |||||||||||||||||||
Dollars in millions | 2007 | 2006 | 2007 | 2006 | Change | ||||||||||||||
Large Communications Systems | $ | 1,831 | $ | 1,765 | 64 | % | 63 | % | $ | 66 | 4 | % | |||||||
Small Communications Systems | 328 | 370 | 11 | % | 13 | % | (42 | ) | -11 | % | |||||||||
Converged Voice Applications | 651 | 605 | 23 | % | 22 | % | 46 | 8 | % | ||||||||||
Other | 60 | 46 | 2 | % | 2 | % | 14 | 30 | % | ||||||||||
Total revenue—GCS | $ | 2,870 | $ | 2,786 | 100 | % | 100 | % | $ | 84 | 3 | % | |||||||
AGS Revenue by Class | |||||||||||||||||||
Twelve Months Ended September 30, | |||||||||||||||||||
Mix | |||||||||||||||||||
Dollars in millions | 2007 | 2006 | 2007 | 2006 | Change | ||||||||||||||
Product Support Services (b) | $ | 1,647 | $ | 1,621 | 68 | % | 69 | % | $ | 26 | 2 | % | |||||||
Consulting and Systems Integration (b) | 420 | 401 | 18 | % | 17 | % | 19 | 5 | % | ||||||||||
Global Managed Services (b) | 342 | 340 | 14 | % | 14 | % | 2 | 1 | % | ||||||||||
Total revenue—AGS | $ | 2,409 | $ | 2,362 | 100 | % | 100 | % | $ | 47 | 2 | % | |||||||
(a) | The services portion falls within the managed services line in the AGS Revenue by Class chart and the product portion is spread among the applicable line items in the GCS Revenue by Class chart. |
(b) | Prior year revenue amounts have been reclassified to conform to current period presentation. |
- 10 -
Avaya Inc.
Reconciliation of Non-GAAP Financial Measures
(Unaudited; Dollars and Shares in Millions, except per share amounts)
Operating Income: | For the three months ended 2007 | For the three months ended 2006 | ||||||
GAAP Operating Income | $ | 35 | $ | 75 | ||||
Items Included in Operating Income: | ||||||||
Restructuring charges, net | (7 | ) | (62 | ) | ||||
Merger-related costs | (97 | ) | — | |||||
Total Items Included in Operating Income | (104 | ) | (62 | ) | ||||
Non-GAAP Operating Income | $ | 139 | $ | 137 | ||||
Net Income: | For the three months ended 2007 | For the three months ended 2006 | ||||||
GAAP Net Income | $ | 35 | $ | 48 | ||||
Items Included in Net Income: | ||||||||
Restructuring charges, net, after tax | (4 | ) | (43 | ) | ||||
Merger-related costs, after tax | (69 | ) | — | |||||
Net favorable tax items included in provision for income taxes | 21 | 11 | ||||||
Total Items Included in Net Income | (52 | ) | (32 | ) | ||||
Non-GAAP Net Income | $ | 87 | $ | 80 | ||||
Diluted Shares | 467 | 459 | ||||||
Non-GAAP EPS (Non-GAAP Net Income / Diluted Shares) | $ | 0.19 | $ | 0.17 | ||||
GAAP EPS | $ | 0.08 | $ | 0.10 | ||||
Avaya defines non-GAAP operating income, non-GAAP net income and non-GAAP earnings per share as excluding the impact of restructuring charges, acquisition and merger-related charges and certain income tax items.
- 11 -
Avaya Inc.
Reconciliation of Non-GAAP Financial Measures
(Unaudited; Dollars and Shares in Millions, except per share amounts)
Operating Income: | For the twelve months ended 2007 | For the twelve months ended 2006 | ||||||
GAAP Operating Income | $ | 276 | $ | 263 | ||||
Items Included in Operating Income: | ||||||||
Restructuring charges, net | (36 | ) | (104 | ) | ||||
Merger-related costs | (105 | ) | — | |||||
Total Items Included in Operating Income | (141 | ) | (104 | ) | ||||
Non-GAAP Operating Income | $ | 417 | $ | 367 | ||||
Net Income: | For the twelve months ended 2007 | For the twelve months ended 2006 | ||||||
GAAP Net Income | $ | 218 | $ | 201 | ||||
Items Included in Net Income: | ||||||||
Restructuring charges, net, after tax | (23 | ) | (72 | ) | ||||
Merger-related costs, after tax | (74 | ) | — | |||||
Net favorable tax items included in provision for income taxes | 34 | 32 | ||||||
Total Items Included in Net Income | (63 | ) | (40 | ) | ||||
Non-GAAP Net Income | $ | 281 | $ | 241 | ||||
Diluted Shares | 461 | 469 | ||||||
Non-GAAP EPS (Non-GAAP Net Income / Diluted Shares) | $ | 0.61 | $ | 0.49 | ||||
GAAP EPS | $ | 0.47 | $ | 0.43 | ||||
Avaya defines non-GAAP operating income, non-GAAP net income and non-GAAP earnings per share as excluding the impact of restructuring charges, acquisition and merger-related charges and certain income tax items.
- 12 -