AVYA - Earnings call transcript Q1 2018

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Operator

Good morning. My name is Mariama and I will be your conference operator today. At this time I would like to welcome everyone to the First Quarter Fiscal 2018 Earnings Conference Call. [Operator Instructions] Thank you. Mr. of you Director conference. begin Senior Schuman, Investor may Relations, your Peter

Peter Schuman

call. O’Malley, President you, QX CAO our Jim Pat Avaya’s the page Welcome on our and President Senior are this Philonenko, year today’s CEO; Thank accessible of SEC of and release on are to R&D earnings call. SVP GC; fiscal investor our and call Mariama. and website Shah, investor website. for the CFO; and here Shefali XXXX The slides referenced Laurent investor and our our Vice Chirico,

to You’ll note combined of emerging results application basis all emergence reference of mid-quarter to for we where and them day non-GAAP for provide on otherwise that of noted. financial Chapter non-GAAP page and the the the post have measures also investor and sequential available are due slides website. the and measures most quarters is We our reconciliation numbers not that to and results. comparisons reference meaningful earnings it on release pre except from GAAP believe our directly investor analyzing A and our included fresh comparable, to in specifically accounting start we year-over-year XX such but

materially. hand not and no our looking risks and and the to facts call SEC President forward statements about over uncertainties Jim? release. current Jim that today's risk our are and be to and that filings update or now CEO. XX-Q change. expectations, we our It to with We cause the event undertake Form in statements based obligations XXXX year fiscal guidance – and circumstances is Information will policy including most Avaya’s will to found FY in reiterate XXXX could I Chirico, make earnings results revise or Form looking on to remain QX and and forecasts, forward QX XXXX including differ to subject recent guidance uncertainties and maybe actual XX assumptions, filed

Jim Chirico

earnings a I'm Thank company call over as you, in excited of Peter. all to join first public years. Avaya’s very for you XX

by privilege have Let stating at the the year. start me is honor my the and beginning name fiscal to it of CEO distinct

we're far we've how details, provide an come But QX about you how Chapter a delivered the the addressing XX positioned there. from to results let we're overview Chapter how building Avaya, first for I'm on excited was we milestone FY in the more context take into quarter. before partners, company as few XX a part customers, QX delighted brand. our share These for testament better opportunity our outstanding in the had we're quarter quarters stability, and future. and minutes XXXX loyalty with after results me quarter. real lead of our and structure. strength We've even while see of we market. are our the the I global of of has get and To the XXXX, the While a four say to to the straight revenue with emerged from now team to the capital even

business. strengthen we to reducing over by up million in $XXX freed our result a As in billion. cash $X balance our We've obligations invest by over the sheet flow

as continuing to a We We industry model. business our technologies. of will our as use this adjusted as processes invest. EBITDA We of further which revenue, in people, to edge and the to to quarter well deliver fund R&D with on facilitates leading present improve non-GAAP our Spoken systems our communications acquisition XX.X% invest ended and ability leading

was and demand in our by our revenue center the revenue. with from derived pent execute to XX% up services, business contact converting continue record recovered We strategy recurring of software on We our to XX% revenue.

introduced accountability, cultural and number was key action CEO vision assembled our to groundwork have who with as sustainably Avaya are company. my Avaya of the implemented new business how for We will principles, team clear immediate a and growth. improve the drive transformation initiate and an which the objectives. I’ve empowerment management of dramatically These actions their operates, trust of oriented a the lay take initiatives. define forward We’ve performance senior five the achieve to move One and a disruptive will and and to first winning and willingness simplicity. DNA teamwork, a mindset action

business First, we cloud established a unit. dedicated

outlook XXXX revenue summary, named Revenue two, FY our transforming financial revenue building our will a aggressive. also the the will our and We're the continue FY with XXXX. Number the stability enhance number one, on being Chief to an people three, we of in in In announce to in gaining are lens We our significant number plans with Number we're acquisition playing continue and cloud. we're and we leverage Number exceeded company. Officer, tractions momentum flexibility. the offense. necessary significant in first And innovation company for we by growth. five, making investments four, position growth

level grew Cloud contract our in sequential by by significant Avaya brand growth Professional shown which services channel from approximately with revenues X,XXX customer confidence flat total after FY emergence our further key XXXX. X%. was deals a demonstrated $X in over first We in find timely QX roughly We partners. notable Now, outstanding. XX%. with by quarter XXX We areas. historically over This the center had grew XX We capitalized as our customers is each revenues share over quarter. with some by as XX%. million let million of Private the new opportunities this $XXX is new restored Contact negatively value, and accomplishments me seasonality. grew especially revenue achieved impacted non-GAAP on

grew finalist cloud in by send new a to grew demonstrated significantly launching Dubai some real the intelligent the XX% for around revenue as deep costumers highlights applies let This which mid-market AI gears GITEX products position in a time. satisfaction in proven leader announced In block technology Tech live technology Award. acquisition customer the Switching me XXXX. it we XXXX Our segment. chain seats wire innovation. XX their solution, QX recurring measure XX% We same monthly learning reduces just while by share We and Spoken, after co-work the our Edison voice index including and of as of to Award been in also happiness improves conversation, the named FY experience.

contact greater leads satisfaction. to customer see build and efficiency center This where communication next Oceana all generation the We improves We engaged agents have continue agent desktop solution. channels. can Avaya so across omnichannel Oceana enhanced recently on our to effectiveness and customers

video solution Our for was conferencing Equinox launched. meeting

cloud our with our capability We're all via With market of now IP Communications their as And I the office cloud. same solution and cylinders, the can't a on employees Primus our commitment. pure we solution leading thank enough customers, and hitting offering. introduced partners, Unified

taking me continue is principles cultural our high the in the are we continues revenue team growth confidence for our in that in stage management Our business to set XXXX driving achieve executing, our XXXX. will This we're objectives hold, and momentum outcomes. gives successful and

detail our who to outlook. it through Pat? turn will financial to over you me the and for take Pat, quarter let Now

Pat O’Malley

be the revenue sale prior QX Thank Networking transition revealing year-over-year you, million down Jim. Non-GAAP non-GAAP year to for our and of effects legacy fiscal and business was down unless otherwise the primarily of $XXX compared Services quarter of and to that a XXXX as will in million $XX business noted. result hardware the our from business. seasonality note shifting Software the the I to income statement $XXX Please million

which of impact sale and of to QX the million prior seasonal decreased quarter, Networking from non-GAAP the prior trends X% Excluding XX% approximately revenue typical product business, $XXX X% of better fiscal the Non-GAAP X% and lower approximately is decline than from year-over-year. XXXX. of quarter decreased the the revenue compared

Non-GAAP decreased sale Excluding and sequentially Networking the year-over-year. down service business sequentially decreased revenue was X% product million impact revenue less of $XXX than the the X% X% and of year-over-year. of

decreased expense cost EBITDA to plus basis XXXX XXX million and product structure million first the from QX down gross prior improved of which $XXX innovations SG&A same reflect reflecting gross revenue was from result continue of year-over-year. portfolio. percentage fiscal $XXX XX.X% quarter operating XX XXXX result, compared than fourth $XXX XXXX by mostly efforts quarter fiscal increase sale mix than network X% structure. non-GAAP a fiscal XX% of or productivity. deliver million XXXX by XX.X% by expenses the for million was company. $XXX points immediately million including easily and $XXX for first result or success non-GAAP margin Non-GAAP impact reflecting business, quarter of million was revenue product and was sequentially geographical $XXX the and lower XX.X% geographical million I improved across year-over-year. we or the will gross of X% XXX XXXX points from business. net XXX the points of year Total for million R&D a cover and year, XX.X% and the now lower prior XX.X% a lower year-over-year offset $XX Compared revenue, to R&D OCI of $XX for XX fiscal while cost the margin Non-GAAP the QX or QX both improved the of weaker up mix. record by reduction product prior SG&A a Services prior Non-GAAP non-GAAP improvements the improved XX.X% income fiscal fiscal year, year non-GAAP excluding result, million revenue QX or was as fiscal for of as XX.X%, an XXXX points and to $X quarter operational reflects million and $XX of lower points sequentially, operating period record steady revenue the compared which fiscal million of or revenue business, prior and decreased totaled the and sale million Non-GAAP points compared compared pipeline year of R&D the revenue gross fiscal for the product and percentage of million The quarter. we product year-over-year X.X% compares and the have Networking of to product a $XX result $XX was million also basis our was of operating compares $XXX business during effect Excluding million networking preceding efficiency, quarter. improved QX the cost amortization less XXXX preceding of mix of $XX million reflecting a sequentially preceding our income revenue productivity the during which quarter, to of improved for XXXX in Networking while basis lower QX or XX.X% the reduction basis Adjusted an income for better or up QX the decreased the mix. of $XXX basis loss first is quarter of volumes. service XXX and to immediately points the approximately of the at was margin $XXX to margin ongoing Non-GAAP X XXXX. of product year. to attributable efficiency for basis was and net are reflects for the million to $XX the XX.X% year of for quarter the

quarter XX, to $XXX were Turning XXXX to fiscal loan. million a sequential Avaya discuss the about business networking cash by year. bookings $XXX and now at and in QX a – million the the amortization sequential of equivalents a approximately payments approximately million first operating a day other $XX of year from to the quarter and emergence one for sequentially expenditures the benefit new to will Cash increased down the year year I becoming throughout of of networking and XXXX QX inventory Recall million more the level of three XX equivalents Inventories was a receivable $XXX XX cash of XXXX of primarily and sheet. Bookings days, to prior indicators sales former first of debt levels. day from of due Capital sales reductions inventory and XX outstanding fiscal reported Depreciation QX and decrease indicator million term were $XX and million is million December for Days the basis and fiscal for sales compared million primary QX for year-over-year due creditors year-over-year. to approximately to debt receivable fiscal fiscal than business quarter. on the day QX the sales as the the The the basis. holders $XX million. due other in year of issuance million fees XXXX. is during software to offset revenue down seen last had cash levels. PBGC declined QX $XX $XXX on represents lower primary days day end Day associated still XXXX. was in from outstanding increased by Accounts forward. costs approximately change our Total repayment result $XXX decline maintenance. the balance the in fiscal assets. facility The associated days debt reason $XXX communication XXXX quarter reclass XXXX. linear $XX professional unified prior consistent This XXXX and in $XX were proceeds million and the of decrease outstanding sequential to decrease collections of due to are the a totaled business million of quarter going of approximately in demand days XX services, and less

on sequential networking the period. business bookings Excluding the during down software we basis, had seasonally

service since million in The XXXX since prior million revenue seen was company's fiscal the fiscal emerging the year-over-year lower year. in the overall decreased Networking and year as the had of prior percentages. bookings $XX million than $X the We million grew in business of million, stabilization and only services Networking managed sequential preceding and revenue result saw was professional networking year a the we remainder with $XX product of million sale down million year from both Chapter $XX excluding sequential onetime Product services year. of quarter fiscal business have of difference managed prior X% revenue from quarter which over XX. We double $XXX for result million million the lower and the the resident services revenue. total sale XXXX $XX and the on of $XX sequentially. digit from Service XXXX basis QX during cloud was recovery business, a $XXX from accounted growth Both immediately services company maintenance as a QX in as down lower in $XX $XX primary contributed the and cloud million professional each is and decline QX revenue. for the year-over-year revenue revenue

Reported excluding product on down focusing channel. $XXX channel XX% year-over-year. and was Now distribution sequentially revenue to networking the million the XX%

XXXX. were QX reminder of the million account QX revenue million from QX $XXX fiscal from product now XXXX by our lower of declined fiscal financial XXXX $X fiscal and more and year to outlook. the I product we channel sell revenue Distributor inventories her million $X discuss total will into has thirds our for recognized continues a As revenue. distributor than two when

taxes year, of the million. current of XX% $XXX $XXX GAAP expect the expectations non-GAAP in $XX revenue. and for of balance to quarter to of second million million million non-GAAP profit $X.XX pension of to and revenue to of expected of include and $X.XX EBITDA EBITDA million net share GAAP revenue diluted are $XX Total diluted cash for fiscal for operating between to spending $XXX XXXX share. OPEB XX% GAAP margin Adjusted our operating per restructuring per of revenue to calendar XX% the non-GAAP cash $X.XX requirements results and revenue. million. to non-GAAP $XXX million of of and adjusted $X.XX the XX% loss of net and to and the quarter non-GAAP loss income XX% be we $XXX second approximately to million or capital visibility of $XXX Given following.

sales investment XXXX efficiencies. efforts financial Now does pending of This Avaya’s Also financial looking people from considerations take fiscal in not year results ongoing continued our to include Avaya’s into R&D, at and and forecasts. improve acquisition our forecast tools Spoken. operating enablement, any

and forecast We $XX expense. operating $X.X and $XXX million are billion. – efficiency approximately continued revenue shares to of $XXX to EBITDA adjusted GAAP the of organization. of revenue billion XX% of productivity XXXX. million for revenue to billion. $XXX income revenue, XX% falling increase now Capital $XX XX% to We our $X.XX expected of non-GAAP million revenue. to net the $X.X million $X.XX interest – million approximately the $X.XXX margin margin remain for basic Adjusted to of XX% loss and to to billion of operational of a targeting diluted XX% of non-GAAP annual of of GAAP non-GAAP committed $X.XX income to year, non-GAAP billion billion the GAAP continuing year and operating EBITDA fiscal approximately outstanding. $X million, $XXX of net of expenditures

a forward additional are structure customer cost software as while to improvements invest satisfaction. maintaining outstanding focused Moving and support product portfolio we continue and and our company, in services on driving

come increasing revenue recurring and from We proportion expect revenue. to and services software an of from

to Now some for turn over to I’d like additional Jim the remarks. call

Jim Chirico

Pat. you, Thank

questions. turn company. Now you closing like we we the it that before In are to I’d to transforming over first remind

being continue by We will building momentum aggressive.

in growth to will we’re people and playing have continue position are some necessary and company on for we offense, and innovation the We making our our investments to financial flexibility. leverage

turn to to it and like our begin I Q&A that, with So over Mariama session.

Operator

Mike Your [Operator Instructions] comes Latimore, question Capital. Northland Thank from first you.

open. Your line is

Mike Latimore

Great. Thanks lot. quarter Nice a there.

are you across a came you out? on you kind you more, center recovery? are Just that when does contact provide it out and a bankruptcy you you what just – wanted buying – verticals that about from seeing of bankruptcy. bit made you just bookings that bookings certain color of the are see Can in is to services Can are couple that just comment couldn’t the little follow-up recovery little buy as on describe there that

Jim Chirico

Chirico Sure is thanks and This Mike. for question. Yes. Jim the

at when product We’re are it’s we seeing services look will really a professional a and you – if bookings bookings. booking take Xx

So a and important. got recovery back underneath sort recoveries contact the is we saw obviously in you of of professional and in center, was an look back at to but services in see which increase We details down fairness that. did UC our bookings business.

to the there a and end see products, which to take trending still legacy XX% start we at a some We but look and the obviously software. at move you you are servers did XX% to see that’s compression our as the off look at As to gateways started points, year more a recovery. the

down it was what what So the been we’ve been analyst UC is with we’ve in but to obviously consistent strategy our talking about. seeing and

So, news that and sort it there our and products. back good products if recovered a look you the core flagship at growth in the take of future the is

Mike Latimore

Got relative you’ve then we it. terms How just of think the operating about What flow delta be might operating to And cash in kind of EBITDA there? cash should flow. guidance given?

Pat O’Malley

what So free to as of But we million depending look million is, investments. of $XX take the we a should I some cash if quarter should expenditures. you the because flow a at our cash other free cash or from [indiscernible] you on told we look at flow generate operating anywhere generate applause $XX

how at that’s think we I so it. And look

until on further accumulate how that’s sheet will we’re that looking it. But investment at obviously we that’s that. deploy the So for balance

Mike Latimore

Great. Thank you.

Pat O’Malley

Mike. Thanks,

Operator

with next from Cowen. question Lance Vitanza comes Your

is line Your open.

Lance Vitanza

up tailwind through and you growth that on revenue question. but Jim, last demand ago you expect Could pent some you Could a that pretty incremental made do the kind provide forth. quickly. for it converting It long taking you center demand so sounded comments you repeat what’s how pent to in up color revenue. interesting driving regarding went of contact the Thanks the Hi. minute

Jim Chirico

problem, no Yes. for the Thanks Vince. call. Sure,

quarter revenues Our on quarter. grew contact center XX%

in to anticipated. So recovery bit fact December. had the from a a do better lot in with had back, emergence of XX A and than nice we that chapter

risk chapter that around the with that XX chapter fact More had provided at some with and disclosure the just contact exiting to the clarity really some upon with to XX. do in importantly centers based uncertainty had of it going indeed what outcome August the challenges we associated back hearing be Obviously maybe. will also

pent have So been at a we loyal. our always had customers demand up backlog, very

In their as purposes in into center. intensive we’re recovered lot a that to our over same this a upgrades fact, teams seeing some grew. job, back off still of go they The of done that transitions And momentum bookings moving quarter. from nice we has held actually contact

ability XX% center traction about But multi-tenant close significant contact high it and also to this the excited that a brings we that full quarter on cloud. was capabilities cloud with real and to Spoken are our our on quarter. is We And expect path acquisition the capabilities to gaining now month. customers acquisition offer and that enterprise

Lance Vitanza

wondering that just doing on you going maybe where you’re you. few now was with as R&D I’m spending. you rate If years? you Pat. is I move talk for further as maybe run compare do this – does on that could what a see Avaya touched you how and more if up, rate and over The run the follow from that could emergence the Thank past just And

Pat O’Malley

So We’ve networking investment probably our our thought investment running, model take said saw I you a they It think was as in saw that $XX financial this the elimination there of a from our the in million, just to of appropriate. reduction you R&D XX% that. at core cut was anywhere the quarter, look stepped the a business of investment of lot they I we’ve folks out in the when that wasn’t we’re if case. up revenues increased XX%

– we’re right that pivot revenue for we this year think we now. to grow. to we’ll the revenue see continue And where opportunities. to see aiming But I look our see flat obviously with for year, investment guide that really make for under We’re

was I the try invest our to profitability. So overall and continue will first we said we But continue step. in streams maintain to products that

R&D, on to and has it whole So in sales bias fit I the enablement our tools. said other but is piece

in other places. in there investments make to continue will while efficiencies we we get So

Jim Chirico

a debt. referenced certainly Pat, numbers. the bit strength are Yes. mentioned, Pat we to advantage pay of Previously add our our little I I capitalize to basically But just going take flexibility. we as so financial If that to financial might

to financial we’re and customers really Now solutions strength business our the grow grow capitalize revenue provide going to that on and our our and products require.

out are Spoken takes further spend additional through of going So our But some business investment. our which not we we Building more acquisition, within some out the building repositioning investment cloud investment. only obviously more in unit R&D, in the traditional for also additional two investments which cloud require rebalancing in emerging technologies.

transformation organization. So the occurring also there's a within R&D

So spend the of I earnest spend pointed start previously making Pat out, think some calls. indeed that of than follow-on on we you And will as we that we more in we’ve we updates investments. we will had said, continue to are QX that all started necessary quarters, we and results as as we earning to through the see the provide you'll go the which of in

Operator

question Raimo with from next Barclays. Your Lenschow comes

is line open. Your

Raimo Lenschow

with Pat. kind -- dedicated how one -- Jim they're of fast do context portfolio follow-up for you’re And little have I of Can of you taking like speeds units there. to playing create the about your do like a you and leadership you for that that compete sure nice and have How each migration with kind one other you you your make starting kind it questions. of having? kind of what you not So then see a talk got overall in of have now. there bit Hey, my cloud you. ambitions for thanks out in obviously

Jim Chirico

great It’s Thanks. a sure. question. Yes,

reality I moving So think from to we're to be more honest. ambition

announced on I we as the the in So first mentioned cloud quarter mid-market. play pure just

is traction R&D put full Mercer business next of Spoken. capability. We happy are we for now the built think that building Spoken, Avaya We're of actually to call unit earnings some which unit it is have results Cloud make in secondly working is meet, the with of quarter. We've acquisition business the integration contact of And – in pure and, lot Having the to with a we've technologies a Rowe center of I our cloud, accomplish really out top multi-tenet been our Zang and organization. sure leader be is this fair I the I'll market and solution and really a was native cloud I charge teams can a purpose we what acquisition can date. the that of able fact, share There's offers you also actually only. particular there. gaining in pretty to of our at Spoken. market in entire across excitement wouldn't lot synergy is on the played cloud have dynamics enterprise, And and there's tell our melding of along look we there's been segments. that segments amount spectrum R&D lines within excitement you with actually that as is lever the BPO, this to going who

just of only stay go. go been pretty meet make than now exciting. business. I and to the alignment full to that teams have So will members. it. There's is is run teams six aggressor empowered, the regularly and we're another aligned decisions accountability excited. within faster our level to ever ability talked need get we in about and simplicity is And I everybody I one think aligned transparency on We They're make with the we EC has decisions ownership and the where

-- it's it's So a the there's different -- will and energy, of there. different excitement is if you sense vibe

our updates provide it's on continue well overtime. it's But I progression forward guys So fact. all look you that's a working frankly and to to all

Raimo Lenschow

of and QX this the – full I year that you the see is Pat. Okay. usually at thanks from that. clear. what you see the a about bit, stepping And guidance, Perfect year but you very seasonality If you. down a year was QX. guidance little from question That in Thank progression? versus for Could QX revenue look also talk in then so the and little terms bit

Pat O’Malley

provided, generally much line we than We generally we you more on down generally see X%. top the see -- seasonality

-- So end obviously we a quarter flat. look on this take the high we’re essentially

in -- allow and like range And that we operate things last of in said, OpEx side, this revenue. the more quarter in solidly the some we’re revenue, grow mean take we're hopefully have us started I we invested a the the we do So the on quarter little you get Jim in of cost. us. we some for probably have nice but little headwinds the FX besides on the benefit seasonality do to a

that So been biggest that's the will has hedging bankruptcy you hedging and very in tell strong functional get where out we're a watching a the the of don't we euro program. coming areas were just probably future program have we fully –

shifts, currency but So we're to as somewhat well. exposed know manage we that how to

are that the that think clearly guides line seasonality. on in certainly seasonality the with historical that could beat revenue pretty I we So with

Raimo Lenschow

Perfect, you. Thank very clear.

Operator

[indiscernible]. Your from next question comes

line is open. Your

Unidentified Analyst

Hi, Good morning.

So and your you’re manner. of potential customers channel go trying customers – directly you the to in after market aggressive trying are to to go Are trying the or first to off re-grow you a and partner? form

Jim Chirico

the Jim, is This Number the A continue for with our channel is, them. one Yes. to partners. thanks realize of work importance question. we We things. couple

speaker spoke In last at I here closer week was matter partners I of history CX the fact, been XX CX, we've fact. as years XX probably Sales company. never at to a a at I've and and keynote our just been year Conference

to And think of CEO Johnson opportunities a of our amount Dave I a grow out and have to with continuing build opportunity channel before spent strategies, with partners. day Jenny. throughout continue aligned fact distributors, we're Dennis time I leveraging fair there we our co-investment the channel. huge I [indiscernible] So talk a Foe, yesterday in my to develop

problem. That's addressed efficiencies. it an see view disruptive, overall our there economics our as that more productivity in that channel fact I would we've problem improved it opportunity. that's be channel was Avaya kind of The So anything and addressed belief of provided not the a business net We've model, a work. structure their a don't is, I don't and

we Our business Pat we this strategic we Master as and I a model to as demonstrated think of agents. at to result works on initiatives channel. that the are up and a as And Actually what cloud out. sign to One number example have with on. – go of begun well there's is, bill just quarter the -- in so working EBITDA we

provide have more signing call, through channel. we will a and that we're you color agents Master up obviously we that's We now next but have cloud in on not had quarter Master driving that the agents, earnings the

number initiatives as companies only not will grow profitably of think that a both have we other well. will grow We because

to use use the will continue we So channel. and

Unidentified Analyst

Okay.

follow-up. Just one

move it into cloud will revenue a you material because kind cloud serial what it's yet, become -- have we your just point number. isn't or top revenue will As the causes monthly of line recurring basis a your revenue --

Jim Chirico

now provides that we new host announced, recently which capability for another provide think of we these and where And it's sure people also is lot revenues grew just enterprise a we've especially offer XX% Cloud Private which the in end and significant. to cloud Avaya our they want last to our overall Cloud take Obviously sort I company. roughly journey It's can they growing, most Avaya solution quarter. of Private make the enterprise, high and that significant again we a X% is about that, a of step step large is in

good in as market far penetration. be below $XX XX% or in the bit or and about is it billion pure down the We're news that. As game, business but is early our only play, mid

we're game. So early the early that's and this in it's in game

we service we have determine the protect fairness number where and -- sure in about to we pure debt It's wanted to we our do needed make a well and have we to When there little million would cloud had that are structure in the we folks there's So We we quite catch needed doubt actually generate requirements. space. S&P cash enterprise. heavy done $XXX no invest to that. of up a have what play the to

and now offence. that I no we you be is serve that our our too us markets necessarily and distant we certainly all can a in in not now not being is will go today. in the We see become can the think do in now longer, As presence have serve we future can significant certainly focus flexibility, the far objective, we aggressive this aggressive we And markets cloud. as now

Unidentified Analyst

Okay, thank you.

Jim Chirico

Thank you.

Operator

next Charlie your with question Marshall And comes Jones from Wace.

open. is line Your

Charlie Jones

I that know you in proxy fiscal for is could to you $X.XX that gave QX and reasonable that look a but If for for full forward I guys. EPS what months at guidance a annualize I Hi $X.XX that, XX year. basis? not

Jim Chirico

about that struggle Obviously great that’s accounting. on with Obviously start question. a we fresh

you have look tomorrow. I'll follow-ups take that you to with If a Q it look you filling be you be glad and the when know we’ll at at

period, If the period the predecessor successor XXX shares. shares. you million take a – then And look we had at we had XXX XX for the days million

have So and of apples we sort a really oranges.

not what the approaching your provide look and just need you outstanding your is gross and probably the you're I'm to and up But use at I think that. I think XXX million it for to optimize, because right take your model way to EPS probably get you able take So shares about way. EBITDA is year the

challenge a I approaching of right that's discussion But lot the the there. there's is think right But way. way the you're now. So

Charlie Jones

thanks Okay guys.

Jim Chirico

Yes.

Pat O’Malley

Thanks.

Operator

Northland question Markets. next Your with Mike comes Capital from Latimore

line Your is open.

Mike Latimore

thanks. Great,

what tax give can you taxes, color are some tax we payments? And on on Just cash rates general just kind using? of

Pat O’Malley

me where latter let U.S. relevant. the and that's tax based even on law, this the we statutory for our year new in the would though rate the losses this tax do year but will really the so given XX% about not for were Yes tax U.S. be first have the U.S. cash no

U.S. So for XXXX be taxes will starting no fiscal there the really but would in be. it

$XX it’s For taxes about the to $XX for year. rest-of-the-world cash the million million for

forward, utilize XX%. all NOLs, of to we're through, come be So a it Once chart some way with this think Effective we at be benefit, I of bankruptcy that and at off have XX% tax tax good given rate rates a so period the we’ll the that of effective kind losses, the period if would out that. GAAP you use it's going model. look you if a but going to of NOLs year of have sort looking you time are but

year, a normalized be rate more tax XXXX company. much we’ll So fiscal next

the $XX to $XX from So model the million But think you the year. at anywhere well. looking probably right cash very way is way that you're from can it I million for the

Mike Latimore

then And with the a can nice sort their just current little your to the it on acquisition seeing they to confidence and give I obviously cloud. customers pace. at Spoken move idea thanks. more that just are software own that current the customers Great, of in a guess, eventually cloud you gives they the investing path

Pat O’Malley

absolutely. Yes

Jim Chirico

absolutely. is There's Jimmy it January been been, this in yes there's since announced interest Yes in back we I’d traction. say, significant

absolutely. yes So

Mike Latimore

lot. thanks Great, a

Operator

question with comes Your from next Jost Rob Invesco.

is line open. Your

Rob Jost

product? wanted give competitors you Can I are for contribution your natural follow-up thanks. the to the Spoken about that and you in expect Hi, talk who that acquisition.

Jim Chirico

necessarily I be months. it. identified far in with customer certainly base. bought again as They Yes not as have to the we that do to also the high revenue, It capability believe the in what it contribution didn't mean, not revenue leverage for fairness market, portfolio end our a our have the We not accretive across we out certainly large technology. just within runs buy do associated and will next We XX but that for XX portfolio. technology BPO

have this specialists. So technology a believe with are investment. We competitors, in case differentiation. your it’s will a so competitors center we traditional this significant contact traditional The

about this Spoken, is The acquisition AI. other is I think, underneath IntelligentWire thing, that's the group which important

those with their And demoing number were recent set. technologies key with already of a product some customers in fact

so out here with look that technology to we significant So and should around own a that our play. build

as importantly you base more market and go in actually from key done one how at, certainly compete we on how out and this this to a open, have our the we even by will to to the in which where capability think set. significant to that, growth number As at in and I areas a know XXXX, of path haven’t differentiation contributor it’s see we a cloud product and to we know areas current take growth win because that install we as lend the move said, to move prior look the is least that a to we marginalize sort into be

multi more the I capability for the what we to have this So said needed the customers we what is journey. early been needed in cloud, extend than it's needed. only game, their for obviously we but And not to in the it’s as We see. tenant

Pat O’Malley

obviously short it is your Pat, Yes, year said won't play, access in XXXX. a to in but that as revenue term for pace, Jim be gives revenue a this streams fiscal this comment was quicker

So expect highlighted come, transformation will, you're don’t but you we're R&D. earlier looking if drag as you this are you’d EBITDA for some starting conversation XXXX, Jim in want

optimize there, as look So other we to we’ll areas. make that in investment

right away. our it's to them we’re well, want but So it's very do going we portfolio. not do it’s what Obviously, to – integrate to that it going whole monitor to they job

see because that may other just you if a in from that's be get look read you miss efficiencies there’s there of just you business. aspect operational might Spoken, drag So a on at a parts drag that when it's

Jim Chirico

had over via peer which few a we’re of team company. where to is fact Pat, coming we think is Hey, quite other that, in And support are the I them. actually just if not significant it’s have need and We our part our of Transformations, a there’s to that folks out and that Spoken, been one investment team may quite is not cloud company a add shifts but difficult. which of we’re in as actually go. building cloud one, the known Avaya I team. cultural

we the I forces with engineering R&D that the if win-win. a think and melding real the So company, in it’s of here have

and highly do I engineers So acquisition. out made as to professional us want a that reason others point also of so we these team why the

Rob Jost

and… helpful that’s Okay,

Jim Chirico

Did have you else, Rob? something

Rob Jost

quick to want to just follow – to I No, add just am up, is I going which ask. a

what kind coming see through a it pent-up seeing had that sort quarter. the next be division? On of you’re organically? Is you demand Have you’ve Is available? the to ability the in been of was seeing sounds going is versus like that what and to it

Jim Chirico

will closed take which We we you of of some that ostensive side – will up. context That in the an is place breaking know the cases of good to probably have of the three will out in some a that But their period it that time participate risk they the know a on you RFPs, was activities, purposes we part pent-up have as the pent-up, if it on a in don’t in through from folks we honest mentioned is as our appliance quarters, free. is. the demand this Unfortunately to to And a of some the I for to sort obviously what pick itself or obviously were of first ends where allowed know ripple be We probably to we we better share three of number four perspective and you we if backlog understand year, demand saw very through, what is. roll that’s anything in but We to business. quarter, up will where were wanted are some some seeing RFPs. not going RFQs to on QX. I investment a We pulse that will had as with part our did but that demand that fiscal in part We CX better long-term It’s September. bets. uptick think you. where of

Rob Jost

thanks. Okay,

Jim Chirico

Rob. Thanks,

Operator

We caller. will take one more

Manoukian Stan from Your next Credit question comes Independent Research. with

open. is line Your

Stan Manoukian

in to questions. your I in me we in sales bit taking about marketing these more little relation morning. your tell strategy related changes? Good to have you a for was can should What one to regards of middle Thanks and services kind of markets. cloud-based I and just and my follow changes expect up. if addition wondering one changes profitability

Jim Chirico

is Sure, this Jim. yeah,

cloud. one billing we now resources dedicated is the fact the associated out sales with have business now units, the cloud of changes obviously that we So, the

We have in also invested customer teams. success

inside We marketing traditional it’s and associated in drive programs invested associated with marketplace with heavily and different because have would go-to also obviously a how different say. I our you marketing sales activities

master own, to have the of being in business currently cloud in they we the will will is number support why company. direct, down track you all we this, dedicated existing sales will, that’s seeing if started and on so what will market have we’re other go-to that and organizations out, its we’re But some do unit of do have they And we have of out. places in building is path the – the a reasons on. built that one agents go of all drive being some which So organization

control know we sometimes you get do an any I won’t don’t we acquisition. defined. occur when get pretty those that I have think going well you’re or that it. any into think I issues account of to

I play busy. fast service partners We’re traditionally a it off as noted that be start to will – had start. than what we a say the it market we the and teams And I our service sort would will have of our the would we good you go-to say a but way be customers. different and way

Stan Manoukian

adjust And sort sort you revenues of take will as a of growth it of you after finally in thinking sort or this long growing to follow to about How acquisitions your making organically bankruptcy do up. potentially emergence think some and just environment? into start

Jim Chirico

is Well ten as X%. know somewhere and Pat company – – average X% see you in declined the between revenue as as probably we on we’d for years earlier, mentioned

range XX our guidance FY did we based take out no little $X.X to network billion to was XXXX, normalized a there’s upon billion. will $X Pat’s less than here Our billion. XX. longer if view you $X.X because

mid-range at we the much than be, to we’ve what down somewhere being So we frankly we will done that so stable that’s X.X% be will basically but flat, better ever between as X% or view before. is

we lens a to We positioned I and on for as provide with XXXX on also lens now, the FYXXXX you growth not clearly view are. at said guidance Pat for our where but

just you also normalized could year-on-year be actually take second quarter. this at look second up we the for networking, you provided quarter Pat for If in guidance the that a

is So on the obviously I focused will revenue. company but there, stop

invest revenue. going to in We’re

this the business that are a and support. growth, Revenue are number company of there in launched and is model focused right to have interesting on supported. We initiatives everybody

be we know you following you guidance So will to provide calls. on able more

Stan Manoukian

Great, luck. of and best

Jim Chirico

Thank you.

Pat O’Malley

you. Thank

Operator

IR, Schuman, call over I for the now back will turn to Peter closing remarks.

Peter Schuman

you, Mariama. Thank

department contact any March on XXXX, the welcomed will the at of the call Enterprise Conference In Relations Orlando, fiscal always with quarter that for joining in this Thank Florida. XXX-XXX-XXXX today's you During to concludes be Connect arise. questions Investor investors you’re at meeting second meantime, Avaya our XXth with us and

Operator

your for concludes gentlemen quarterly call. that participation. you and Ladies today’s Thank earnings

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Avaya (AVYA) 1 Mar 182018 Q1 Earnings call transcript