AVYA - Earnings call transcript Q4 2019

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Operator

Good morning. My name is Suzanne, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Avaya Holdings' Fourth Quarter Fiscal 2019 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator

Vice Relations, McCarthy, your may conference. President, Michael you Investor begin Mr.

Michael McCarthy

are Welcome Chief Fiscal remarks Administrative Kieran Counsel, Avaya's Call. you, with EVP, lead to Thank operator. Chief and call QX Technology your VP CFO today's our call. Chris also share and questions. and this Shah, morning's Executive some here Jim President General Year taking CEO, for Officer our and prepared Officer, and McGrath, you and McGugan, will before Chirico, Investor XXXX Shefali

results. The where morning's today earnings and measures as the otherwise of on which of except release and will All comparisons filed non-GAAP investor year-over-year financial numbers, in website the with slides noted. Investor reference to call referenced this aid to well our X-K understanding should on financial are the be SEC, as accessible your page Avaya's

the and website. We earnings which are have measures in GAAP on included page to reconciliation release slides, investor to Investor of the such available our

We could in may remain with uncertainties may forward-looking risks as change, SEC, found in that risks, reports. uncertainties current recent guidance on circumstances most policy to revise by not to the to subsequent and subject obligations or including assumptions, to based event required facts that forecasts, and are except we and Form Form statements and It the law. actual our materially. or update reiterate expectations, Information which results XX-K be of XX-Q is differ about Avaya's otherwise undertake make filings our cause forward-looking statements no

to over call the turn now I'll Jim.

Jim Chirico

thank you morning everyone joining for Mike. and us. Good Thanks

of our the you strategic with and will then quarter year. for our This morning, outlook details and take priorities; fiscal performance the you provide perspective Kieran my on through the I'll

it up open We questions. for then will

administration social me a $XXX summary guidance, of additional of on provide the driven In that, Kieran discussed. delivered by primarily With was provide delay we previously below that million of will revenue, a security brief details quarter. QX, the non-GAAP our SSA. let

performance QX the expectations. business consistent Overall, executed with as the of rest I'm our pleased our with

profile to this cloud-based software XX%. revenue recurring increased and business. percent revenue XX% continued to a Our shift was services and reflected as Notably, of revenue and quarter a software a

best In leading over to came continue XXX of in operating deliver over on EBITDA to quarter-over-quarter continued business. QX, model. XX%, Adjusted the the that, of Non-GAAP up perspective, was we and the the business at our from we at XX%. be in basis profit income a further range demonstrating year-over-year, points top one

cash exceeded million, operations drove $XX X%, from performance or which of Our expectations.

Our cash from ended investments the on necessary our the our capital apart and allows our technologies in $XXX generate million, also sets investments cash people, us strategy. to year-over-year. up year ability to allocation the allows us million to This us and cash new our innovation, at peers. position necessary make in $XX Avaya's deliver

communications presented It customer continues approach. year outset XXXX. against at is customer-led that a our rapidly the of requiring evolve, to of each note important progressed focused to the We fiscal priorities landscape

and market partnership that cloud extended broaden and offerings new reach. entered existing expanded First, our into our we've ones our

reflective is with In recently work our Avaya. of most in IBM, Amazon, of XXXX, which out our we significantly as the new partnership we Salesforce, just well beginning as ecosystem strategic the Verint, partners, are Ring invested Affinity, and building including the doing Google, and

significantly will a which revenue multiplier capabilities, force in expand and opportunities. our are expand our partnerships growth These turn

and and Forming deliver allows address decisively differentiated unique customer partnerships opportunities us and to these solutions. aggressively

customers cloud demanding. offer, that built are such amplified our our and we Secondly, growth aggressively cloud capabilities as ReadyNow, to investments out accelerate through enterprise private

to our and a subscription recurring model. in innovating we Thirdly, and to software are transform continue core a

profitability; and set continuous drove up on 'XX. year-over-year. model the and to points our capital basis table improvement playbook FY our Recurring lastly, allocation XXX we in we Fourth, revenue business was execute in

This good and our you which is landmark couple request our receiving customers' a on responsive update branded that to is partnership leading is enthusiasm scales on the with It's we're provide and overwhelming segue game to changing. partners' the a Avaya provides of tipping UCaaS for solution. a RingCentral. years, we This

to drive Cloud The Avaya has significantly helps largely enables provides Office ACO to Avaya to from plays CCaaS, fortify pure partnership growth, our collaboration, our CPaaS by is TAM. to private to a that Avaya out base with coming rounds it from us our favorable and ACO opportunity and economics, our an in customers portfolio. investments value growth capability and un-monetized providing key accelerate its and our with up SMB transformation or a from operating allows accretive margins. preventing unlock Avaya focus position and unit cloud, partners and expands UCaaS

alignment to trailblazing is clearly This start. which partnership commitment, and off great It both a sides. requires on exists

quarter first First, year. working ACO launch with to of we are lockstep in next late RingCentral

RCO on should in own our offer be Ring's endpoints Second, qualified January.

for with This provides us our channel J Series endpoints. newest another

vast Third, quarter we support and our launch. capabilities first with are coordinating to external ecosystem internal out to build the partner

dozens Each Over been the globally from exceeded momentum hear partners and ACO in and few them my to day, in customers I've the partners expectations. weeks, build. and from last to firsthand. tremendous, customers The every enthusiasm, has interest personally of met with continues feedback, and fact,

forward Avaya communications looking hybrid are how and the drive what public, for share a in where is blended in uniquely i.e., me industry customers solutions. positioned private, calling to I'm world let cloud Now,

just QX by we what seats around knocked our and Our than the wholesale it world that's sold offer out the in June We doubling quarter. park. did channel of quarter, the XXX,XXX cloud more one partners in increased

clear our total to channel the to brand crystal to with This it public approximately me as proof XX% provides can up also able speaks of partner successfully move commitment year-over-year to that cloud on needle as it count the we'll X.X million, XXX% It cloud our and seat community and well cloud, value be that sequentially. our and brought scale, over ACO. global This the offers. makes volumes positive sell our of the sell truly our Avaya

pace rate the TCV targeted our continues ended and approximately was launched and cloud and and customers solution private developed with improve the March. delivery require scale is that enterprise mid-market designed in ReadyNow of a demand reliability, in This we of Our with collaboration in $XX and unmatched QX at million. segments cloud The market offer and private to model. a security,

flavor and leading materials to ReadyNow commercial couple to solution cloud. specific their with for a that a are to significant you a an of this the our role Here wanted differentiator why give and customers move a important providing meets manufacturer just such is in wins, customer home needs. A plays

process, competitive a ReadyNow to highly the the routing only They voice a a these leverage breadth cloud address In time had flexibility, retaining When in could response significant public investment in there recovery invest Avaya which place. scale, takes it be disaster our their private was and first, has develop; Avaya capabilities, being several comes option concerns, cloud that is mitigate cloud, robust significant capability second, contact that solution and third, by met model. that able center endpoints; their cannot to concerns. to ensuring and and existing simply

in we deployment wanted with where of footprint to through company value out the required OpEx cloud additional and recognition significant attribute-based worldwide. services a service of showcased is the the unmatched migrate won such to process technical had model of cloud. invested support company the customers cannot and ReadyNow flexibility provides required The high to base business thousands process a to speech to The examples their deliver second outsourcer an our model the capital Public Avaya and and capabilities capabilities. win the as that communication global routing. live customer

services Finally, capabilities. let our me about talk industry-leading

dedicated a scale pure unmatched We have plays. among over globally, X,XXX professionals

Let highlight professional maintenance drive our the our and of in some examples me renewals and upgrades. services ability in to successes

in of QX, the of our the that of best in points reflects approximately our underscores are Avaya, year. we importantly to up and from renewals but the we First, delivering out. start more maintenance commitment value X day achieved the year day This customers the

and consultative QX, professional by year-over-year, our center up drove XX% well bookings quarter-over-quarter services. of significant Second, our traction improvement contact we as solutions driven in as in XX% services increased

has our It success. services-led path our frictionless overwhelming Third, releases. a to program upgrade provides an been latest

quarter, lines. upgraded XXX,XXX we Just last

renewals, result, our and compelling drives is a are latest the we and innovations, experience seeing to services pull-through our features, delighted technology customers As are reinforcing that improved value. functionality and

quarter nearly XX% the me average data growth our of in market. seats years, higher share we grew signs combination bookings few positive the last Contact with $X the our The center showed same year. public cloud to the bookings during the points in best million. competing Let more and a private on we're for in period. than two quarter, how approximately In service best Xx product fourth successfully had the

with $X We added XXX million. and roughly customers over signed X,XXX transactions TCV new a

over the nine signed full deals over XXX deals $XX we $X XX For year, million TCV. included million, of and deals million $X over which

Our large-scale sign deals is unmatched. and ability global to deliver

$X.X came approximately Our in TCV billion, consistent expectations. with at our

which capitalize have market to the opportunity, now continues platform We the to grow. on

of our increasing continue opportunities. TAM are to We and we growth ahead invest

growth As I our long-term such, on remain bullish perspectives.

market. of Going a to to into better bring and momentum significant had portfolio FY 'XX, solutions we've Avaya never has

our are launch models partners, subscription premise-based ReadyNow, progress. launch our that few month, solution strategic along CCaaS alliance with examples the of announced our our a with consumption just IX-CC our The of we RingCentral strategic the last offerings and momentum partnership, of for

improve it to concluded. I our our the sheet. return thoughts outcomes. that When Kieran, expand over share initiated our we three wanted balance on process we wanted specific to offerings, to turning Before strategic capabilities recently and we of couple the and a value have shareholders We to improve technology our review,

three. value Avaya's brings all extensive market-disrupting execution with review, partnership partnership represents it a two together capabilities, Combined unlocks stakeholders. all this technology on delivered significant We RingCentral opportunity. an leaders. for After The

our early expect through the of of the million of a announced following October, $XXX of Second, review stock buyback, in to we capital to execute which we alternatives completion a shareholders strategic shortly. return against the

of FY in will enhance a of our interest Third, have further already debt completed result 'XX beyond and in million expense significant sheet. announced annual we and previously that pay-down balance the $XXX savings

Kieran? you the Now our through details our the FY Kieran capital will 'XX. behind QX allocation, and the of quarter, mechanics well for as as take outlook

Kieran McGrath

Thank and you, everyone. morning, good Jim,

Relations website stated, unless my focus supplementary otherwise commentary referenced financial on call otherwise on unless set on GAAP reconciliations. forth indicated. our to posted quarter reminder, all Investor metrics and will are fourth I non-GAAP, the the primarily this results, non-GAAP slides a As

to For period revenue non-GAAP compared million million fourth was year-ago the quarter, from QX. $XXX in the up $XXX in million $XXX and

the in below as exchange the delays due to as Social currency $X which results of with Security forecast, quarter. our the well foreign the primarily result respect transaction, as government with federal was procurement impact about revenue a million were process of Our to the Administration rates,

our XX-year heavily on call, stated were related dependent going and the timing purchase contracting the upon including SOWs our of of As $XXX to issuances QX to of earnings the be quarter fourth order related Administration process Security opportunity. conclusion Social million results the

to lodged for this this pushed delay of The delay. that One coupled upgrade, out vendors with the against products intact. the competing revenue between $XX value by of QX. $XX of a given the much created Social proposition us very million services, and the Security We product causing the award from remains to believe opportunity need the protest Avaya's contract million Administration's

run must allow for process to its procurement we US said, government That course. the

process is challenging. Forecasting might when conclude this

figures. our including QX now, for with stemming from are fiscal contract this Security in any revenue Social So we guidance Administration XXXX not

did private We over declines offset years, stemming in customers' strong and cloud in from sequential that product on-premise by growth the past bookings was our QX, product maintenance our occurred experience lower the several offering. revenue transitions to revenue performance have which

have rates remained the continued robust We $X.X renewal decrease billion. maintenance in at fourth to quarter our mitigate in flat quarter-end improved However, bookings revenue. and partially the drove TCV

of cloud XX% quarter, revenue. non-GAAP prior our with Consistent represented approximately

we the cloud, drive of XXX% During strong year-over-year. the continued increase growth representing public adding to in about seats, an XXX,XXX quarter,

front-end. color sale, As revenue fiscal heavily rebates about I'll paid a 'XX will period of the provide and impacted we and cloud few KPI are the cloud in revenue is ratable just use the nature partner is more in and current period contribution beyond moments. in SPIFFs year in the on

competitive $XXX revenue bookings CC while million performance UCaaS UC, we're year-ago Fourth the quarter product period. in quarter, and our continued to the revenue Sequentially, the we partnership we the sequentially have seasonally increase million was the modestly announcement a compared lack by CC. expected in pleased in of with impacted and product be which our in large RingCentral. by experienced with addressed of to $XXX growing offering, now

late services market compared anticipated contribution We million with the have ACO solution the expect second quarter in of revenue million branded XXXX. in QX to half Fourth revenue was in Avaya $XXX measurable fiscal fiscal to period. $XXX XXXX and year-ago in

[Technical mentioned Difficulty] previously As

Operator

for we Thank you pausing much. Thank be very playback. while moment We'll a just reset you. the

Kieran McGrath

you Hey to just continue to Suzanne, read? do me want

Operator

this Yes. we'll you. Please Thank try together. and go ahead and back time at everything link

Kieran McGrath

service in revenue million quarter $XXX the was Fourth compared year period. $XXX ago million to

mentioned, revenue previously and XXXX. transition revenues maintenance in contribution their cloud in from expect XXXX due million results private fiscal UCaaS to of offerings. backlog As we cloud to especially continue our private we and cloud, the to to contract We of ReadyNow fiscal total decline expect material value public with $XX ended ReadyNow

International for XX%, Geographically, revenue, XX%, XX% represented of and the accounted US our revenues and Asia-Pacific EMEA, Americas X% our of respectively. while

margins were and year, in compared reflect Year-over-year continue ramping up quarter XX.X% to solutions margin non-GAAP metrics, of overall multi-year primarily were product international the the in cloud profit was of from in product to impacted XX.X% Turning gross sequentially our XX.X% by margins prior XX.X% compared to services QX. Non-GAAP scaling due to the Gross mix period. to in the globally. a declines fourth gross project. impact large our year-ago XX.X% the gross

Non-GAAP sequentially APS quarter. in was large prior XX.X% completed was services base in with year, costs the associated international to compared which a during XX.X% to primarily from due XX.X% margin the project, multi-year higher down

margin a non-GAAP margin margin was XX.X% to EBITDA and XX.X%, representing year-on-year, $XXX operating and while adjusted results representing margin metrics, million, basis Turning Fourth positive. were full up basis EBITDA points, flow total year of XXX profitability up non-GAAP million, XXX an EBITDA was XQ our adjusted cash $XXX quarter operating points year-on-year. of

million total flow year X% $XX $XXX bringing in our generated of operations, revenue. full cash to million we from Further, total or

million million, cash flow cash ending the result a contributing cash quarter cash is and balance flow a in quarter. on result strong direct working sheet. a fourth at management improved our quarter, $XXX as our in balance as capital $XX of this equivalents free continued diligent and During came of to of This of well collections

like stock I'd at investment partnership in into form cash $XXX Avaya and game-changing share. partnership the financial made preferred take insight in some At the We of XXst. our moment equity a to on their transaction that the on RingCentral to million the investment per of impact a statements. time, provide RingCentral October million closed $XXX convertible $XX

reduce Avaya form Upon Office on of amount shares executed stock RingCentral as other paid also underwritten in to was future an offering issuance primarily public We XXth. sales the Avaya transaction, million prepayment the a to RingCentral of to date RingCentral sold closing of on $XXX volatility. the majority in for issued the with exposure market and of shares Cloud of November This license fees. paid those

We that and of both uplift are believe our balance holding partnership. shares Avaya as potential for the the RingCentral we a result of there as is

a balance sheet. liability as the amount accounting pre-payment on contract perspective, recognize will From an we our

with down ACO turn We well generates. on revenue a recurring as we amount with bounty seat for seat draw against that one-time each this each the as will

to 'XX I Before and approval first moving our our announced our allocation on of on full to fiscal touch quarter Board actions guidance, of year previously Directors. capital upon want

or meet As operating either of a capital to to strategy. sell XXXX, shares $XXX over of end the did company fiscal we on the with to RingCentral hand the the at requirements cash reminder, not allocation of need million the daily initiate

$XX Xth, This we expense of in result loan annualized million. will down savings November million paid On term in $XXX interest approximately debt.

reported repurchase execute will expect SEC. The stock against shortly. be with announced program quarterly the $XXX our in We filings repurchases to our begin to million

quarter from year, mid several for year fiscal a see revenue XXXX December stabilization. after the away revenue and of to of revenue high full years our outlook decline of for XXXX transition Now turning to declines, to we single-digit our fiscal significant one as Avaya,

offerings with in Avaya's Our and portfolio in enhanced of availability public the own RingCentral, ramping ACO will significantly with anticipated cloud late-year be offering, ReadyNow combined cloud private IX offering, the CC. CCaaS with UCaaS, partnership of our our

currency September that revenue rates. XXXX on reflecting expressed amounts foreign note XXth, constant all a basis, are Please exchange

above, the to availability expect offerings XXXX. enhanced revenue of trajectory With turnaround of mentioned beginning private a public fiscal and we see our in second the anticipated our in half cloud

first of to quarter, million, X% in the a representing non-GAAP $XXX between X% million anticipate we decline, For $XXX revenues measured as currency. to annual constant

We expect approximately be margin for XX% to non-GAAP EBITDA margin adjusted and operating the quarter our to our first be approximately XX%.

$X.XX from we $X.XX prior. flat revenues constant full non-GAAP billion, in representing billion anticipate between to to year currency X% year, a the the decline For

the Avaya's EBITDA we towards transition, tools, year long-term from accelerate cloud, do heavily adjusted generated invest of in margins confident help feel we that cloud. resources of and movement the our the our in this While to very progress plan in expansion systems, to

the expect margin operating adjusted XX% reflects between our be incremental and we X and year reinvestment between such, EBITDA margin As point This into to full non-GAAP for XX% to of XX% business. approximately XX%. the and be our

from the flow strategic X% associated operations process. approximately excluding our costs X% evaluation with be alternative to cash fees expect when We or and QX

Finally, end fiscal approximately and year, outstanding. XX between we to shares for year million expect to be average shares XXX XX million outstanding XX our the million weighted with to the million and shares

be to towards to take endeavor the investors process from provide highlights premise-based this transitioning progress better away the into our I measure progress. As is a utilizing history, will that to KPI we about a to -- our making talk Avaya moment want we

differentiated alliance highly to partnerships. and a the value RingCentral that our strategic early technologies, introduced KPI captured When in from partnership Avaya's high contributions the success. coming trends announced and critical cloud, evolving revenue October, strategic we and emerging we new big partners are long-term Our near and

cloud calling and We this revenue. are alliance metric partnership

we this announcement, technologies partnerships, cloud contribution represented strategic XX% our throughout approximately to XXXX. include fiscal our expect that over sharing of double revenue, our RingCentral the XX% we of partnership as mentioned emerging progress our fiscal in addition total to I long In forward to Avaya XXXX. proceed the term, we In and total revenue this We KPI when look October revenue. to

to With that, I'll turn the Jim? Jim. call back

Jim Chirico

Kieran. Thank you,

I'll close road technology Avaya a has portfolio strong a product map. and broad by saying,

they of in relationship. alliances have and partnership and are strategic portfolio has have solutions key the and more to never bedrock have years we We relevant, our a customer form deep taken relationships been These our business. place,

All to opportunities ahead well business model, in our us the of of and positioned capitalize strong with makes on this, us coupled XXXX beyond.

future over have remind I to Avaya and solutions on This turning role of the it Xnd shaping across February Before full through and as year, feature premise collaboration we XXXX in the communication portfolio the playing in want will of of the cloud. breadth for a and well heavy the CC, focus industry Q&A, event are our upcoming event ENGAGE of everyone Phoenix. our the will as held the UC, spectrum Xth,

again that will hoping of you distributing this the be are details program. them We will shortly. many and Mike join has for us

to With that, ready questions. operator, we're take

Operator

Instructions] Hall Rod from of Goldman comes Sachs. And first [Operator question our

is open. ahead, go Please open. Your though. some line line There Mr. static Hall, is your is

Unidentified Analyst

I and Ashwin Rod. is a of question. clarification had on behalf This quick a

can that Security not included there? guidance, in guidance fiscal that not mentioned is it the is fiscal is whether you think XXXX but as I included in contract Social included you or well clarify QX

Jim Chirico

We Security and all, We with partnerships proposition the really strong upgrade. we the - with is have still is absolutely partners stated, business of believe very I we that, funding as Social our believe that the intact. intact. our first the Yes, believe needs budget

the be be the the it's would time to there'll just deal some timing of - the matter to So, and product related will it in we certainly XXXX. year, think we impact to close. a that we services recognize expect think able some in shipments but are fiscal of when Clearly, happens. It's

Unidentified Analyst

in just of timing, thinking you QX are And in terms half? or sometime second more fiscal fiscal

Jim Chirico

time. an and has earlier rather be I taken in date exact I here, the be but just giving said, I as a in point - hope my will few premature Honestly, this think at than turns twists because because expectation my process and later, was I’d

Unidentified Analyst

in you you're what of calling product are of is from if terms guidance, fiscal your revenue at for And total part current XXXX revenue in year-over-year decline, decline look FX. But that you a portfolio? assuming

Kieran McGrath

I is mid-market, would Yes, the great the primarily business the premise I for shift to offerings. away characterize that year we a our UC the clearly guidance recognize the of in in think deal we've to occurring way fact cloud want seen

the frankly a therefore, have to into in as much quite will And the we going of first throughout the second be to significant [ph] talked which year. ramp about very already to realistic I year be anticipating half we in us impacts have start headwind those until and ACO, - is to part

had We our offerings feel the that high just many pretty as own optimistic business our well between of our as of about our because as in CC well, those business of print all we differentiation partners.

what Jim?. say would come from mid-markets. that mostly most as we business I So, really in UC the see the here of the headwinds

Jim Chirico

Yes, let me a just add bit. little

perspective momentum. you late with the I So, that from of you end demand. product of lot And each quarter actually day Kieran. is continues I combined I the tell We'll motion tell which is actually will at fiscal pent teams, our the our to UCaaS gain go-to-market that second the between quarter, can there every year. and agree available up a next of have

of a move fact certainly will XXXX will us play. But We're the second we into really a as out, reality as this this us pointed - and sort see for as of revenue of a Kieran move into for out the XXXX, we significant half XXXX. be be as, driver

of a see transition, year is we this that. of So, sort

us a second this half fact, gear In fiscal you have large go to our to just sort can opportunity long the of while But the expect as up we run. as very we a year. of take going in it's through

and traction. us will in have XXXX, to but for played every year continue important an as it So, XXXX, beyond we role each it'll gain role play a in important more

Operator

of from [Operator of Lance Instructions] next the line Cowen. Vitanza comes Our question

open. is line Your

Lance Vitanza

to deck and seems to X I the out think The with than ACO offering. were put actually we what the payment the and share, and is on that focus expecting. this analysts I that you've respect morning suggest maybe revenue most better Slide obviously this result to is of perhaps on wanted slide

billed walk be Avaya just principally the customer I that through and by They'll the will of Avaya, will that? channel this with though by I a at by My that RingCentral. sold billing, question it to that to be looking also on you the in partners slide, little respect this do. don't have But wanted and So, have I is by suggests kind bit. maybe of follow-up sort right. after be installed Avaya, Could comment you And serviced understanding essentially.

Kieran McGrath

going is Kozak, Kieran. question Dennis to the RingCentral. turn is This our partnership Dennis? over with to leading I'm who

Dennis Kozak

Sure, the even customer Essentially, administration you by and lifecycle partners, customer recap. the the function, I success from entire had onboarding, the the the of sales managed in and it function, the think marketing, customer your the contract. is support care Avaya right meeting, the

But out a RingCentral's the as it's provisioned cloud. is SaaS of service, usage

our therefore, makes badged metrics to order touchpoints them do Avaya will people, against. Avaya it Because experiences through But have people, and the billing, sense everything right? usage customer services, for branded flows that in through to Avaya, So, all the [ph] customer generate they be Avaya the the a partners. billing branded lot of

Lance Vitanza

percentage or it that should a as quantify qualify mean So, portion is I to whatever or is, trying what that some an Ring more so Avaya is, customer I'm booked but portion that then that is that collects then then at or Avaya gross revenue not is I booking is remits or of to say. portion less? portion from the the just Avaya accounting cash my standpoint, and from follow-up

Chris McGugan

can't as due to payments that to specifics components. One, that get with continuing the actually agreements upfront a a receive come of lack us Ring. You in rightly payment we when well a see seat But we of of much well, we too word. turned an and stated And sensitivities we'll or then recognize the the is essentially, better form two over of we bounty the some portion as for commercial these time. into have on,

not a and splitting we'll primarily it's - well. as in only get certain that amount. ongoing that we're mean, really So, then not something I involved around, it's in it's we're an something there's formula paid nature a really recurring upfront, stream it

just point. one Now,

out revenue our the Given will they've into those that convert seats. this and actually contract advance moving prepayment, then our in us, of P&L, we therefore and will, been, you into section we've for prepayment essentially, since paid liability that I&E provided to if

Operator

And of from our next question Raimo Lenschow Barclays. comes

Your line is open.

Michael Maguire

is Raimo. guys that on the cloud - I question had had I a a This regarding for on KPI and Mike just alliance. you new it discussed, how would be

Is that Verint emerging strategic well? partnerships of what are just between the or it get growth rates that? wanted to partnerships What kind And strategic obviously, and of little what you also a Because, are those bucketed bit I So, are side are from of you the of affinity? deeper growth and part XX%. on are today? technologies into that and type that that as - kind being there's of whole gap the XX% expecting

James Chirico

could if SaaS SaaS if into reason make were you take is salesforce, with infinity, one, customer revenue is it's represent of all look that service. provided that our offers the of Verint strategy those to we're we SaaS why want part sure to base to consideration fact, associated them the important company, you pure the on offer alliances. because basically The in in all it Yes, today. at they bucketing And were

actual moving is on So, an I overall markets. of the reflected through more volume think from this sort cloud into SaaS

measure because we're play. - business probably - pure a our way So obviously good market I address more think to it's the

representation. great a it's think I So

So the answer to that is, yes.

those for to continues XXXX we Yes. doing expand growth We cloud we the actually marketplace. and project Are in into that technologies because we sure, segments? as obviously they're go will emerging seeing I do in the have technologies growth partnerships. mean,

is the yes. So answer

Michael Maguire

that That's you'd know detail? Okay. that provided, provided, little helpful. be bit go just you was guidance a was spending on into And EBITDA little then the the I about you a that margin more talked EBITDA could transitions and talk side, numbers there the due about and more taking for R&D takes kind that of R&D target that some of example? are the any Can guidance you to between and are puts SG&A for place. the on

Kieran McGrath

Yes.

So Jim. then over let me start turn it I'll and just to

fiscal aggregate you between adjusted guidance know, and at EBITDA in given about XX%. 'XX XX%, ended as somewhere of XX.X% So we've we

of think through E a reinvestment. to of it go point the perspective, consistent from pretty time. development perspective on been R we've as as product say So a roughly we a from I'd

a development mostly estate We some to have we've recognized a we've savings consolidation of we been tools about and go-to-market invest in a most Jim and of from to let and Otherwise, actions say has help from that. there. but that but words synergy due really be that real headcount be perspective, some that a the little perspective, generated to taken few the a seeing I'll product perspective there, continue will you'll on what bit

Jim Chirico

Yes.

as cloud you a our being to the is, that, basically spending look, And I as XXXX, fact not and speak. the are cloud at extremely oriented. a as publicly executing When as the R&D a our if really a look So we take the take is the to component our fact mean, we're company go-to-market that matter portfolio, in us you for look of important XXXX teams of motion, far cloud sort off portfolio. of as going that's at doubling far from we're be to R&D obviously

a through wholesale we sell offer have We partners.

that we ReadyNow go-to-market we But far to the enterprise. our skills we the as motion, in need as do to sell overall from outside. and large invest it, those bring have We

actually industry level it's of bringing you company into but just the will, pedigree doing cloud. a position, extremely the the the recruitment of have well at and organization. In throughout, in number not that And if it's fact, leadership we're leaders on within every

So of we in to one obviously that as about cloud. talked need transition, it, the investments Kieran the is driving make

make a model the we and to only because to we an resources, and different we So capabilities in not it's to but -- resources company. model R&D invest historic capabilities sure market more a tools and premise-oriented than want capabilities as processing go of want in the invest

invest, our is back the the mark to growth the a that which I and EBITDA into for going business So of prudent X% we in X% think decided that investment, we sustainable invest or were around future.

massive. in quite the process about board the functional many across we're quite again, pipeline, of is frankly, areas recruitment the excited and And

the success, getting we through ourselves across spectrums say go for you business. So many in least, if we're XXXX the as positioned

So Previous I continue to need will we was a think that years, it's through a prudent significant XXXX. that investment we in it invest couple drive of go investment growth portfolio. back as and we in one and to

motions go-to-market investing it's to and process that that mentioned. been and next the into taking back Now capabilities the the Kieran tools step, that

Operator

Asiya next question Merchant is from the of Our Citigroup. of line ahead. Please go

line Your open. is

Asiya Merchant

Quick services revenues? total the question, services us professional just contribution if your and was revenue with revenues, within maintenance and you help understanding could what services software

Kieran McGrath

over seen consistently, that All don't of really we ahead sorry, level put I -- years. behaved we've I there. right? could has say, we as get think K, discrete No, maintenance past until out I'm So I I'm the little quite our would several a

from of of a compounding years, also effect. the premise the exited with we've the side the impact bankruptcy on perspective, house particular since over been improved we continuation and past UC that lost it, the pointed several to able both rates have We've even especially the the bookings So mitigate out, of year. Jim this renewal that as a

on conclude even We expected, though there. in and is much a even weaker maintenance fluctuation said, right was large where side of I the on that, international APS bit a business we rather actually our on little there pretty for year. came this have -- would but little sometimes a a billing, except even be quarter-by-quarter did maybe little APS, in a little it's relatively better. a basis, can So consistent

company probably such that bookings much environment. had that primarily business in the we Professional of customer since we've because certainly the seen exited business APS strongest quite and the we has a 'XX, from coming requires bit into fiscal of our heavy firepower But CC so bankruptcy see Services customization

that in So space. really opportunities that's for well heartening our

Asiya Merchant

Okay. That's…

Jim Chirico

XXX,XXX really the make is that seamless, our because frictionless our releases was I add And with they're latest less a a attack they upgrade could was down were were latest being competition up to we lines significant a providing frankly job the One most path the -- multiple did technology. the our and under part, and quick in latest base to really our they Kieran program that releases release. a pointed for fact now a releases as -- really and is, was, customer couple to down. by relevant software services nice for that couple just did base as Yes, of of data if led points. we out,

and maintenance well stabilize played that the for So helped to revenue. us

Asiya Merchant

Great.

Jim Chirico

unit us. are private and thing from the those with maintenance primarily base a moving there, our cloud, stay extremely accretive again, to sticky company, to other that customers is quite economics and actually The ReadyNow, the for to it's

Kieran go significant, months looking So balance us for just pointed this six fiscal TCV to material we ReadyNow we're million through of out, as $XX quite of year. for is and become as in the

Asiya Merchant

about partnership that. but the from, your so strong your on the the year? both significant that change half -- the that through from well of the -- the you're does implying as as your seasonality bit change obviously at then ReadyNow I don't came you the And a quite of seasonality RingCentral guidance the does a guidance, -- as December partnership know for year and rest the remainder for -- sorry second revenues. look from where If

Jim Chirico

could it back-end just the Asiya, you of repeat again?

Asiya Merchant

partnership of expecting visibility and because Yes, I you're your Ring. second to into about was change talking half just your seasonality the how with

Jim Chirico

That's Right. question. great a

say, expect and be slightly year be to would down So guided we we've QX in somewhere, in talked would the -- up QX, I'd back the particular we we about RingCentral. as would full of have fact most slightly given with believe probably QX QX year. that the think I that And to QX, the where as in about end

Historically, tended out we moment, the -- some before, at we back see UCaaS very our the to year, of in this we've because This of to about as of fourth offering and our business. of have strong the competitive first quarters quarter arsenal talked the pushing because lack the end. quarter that is

back historically it's quarter bit probably more think we'll think and QX a to do I I again. progress So calendar to anomalous back more an of then our see of year. first being

Asiya Merchant

Great. you. Thank

Operator

Amladi question next Partners. Guggenheim Nandan from of comes our And

Your open. is line

Nandan Amladi

Thanks for question. taking my

the So you Jim, that the will when boundaries ACO your cloud over what go market offering, ReadyNow, natural next versus are to for the offering the several position new own months?

Jim Chirico

Yes. for have from does an in I mean, as to potentially look, enterprises does a opportunity have well offer. geared fairness. public the to public cloud as obviously the It they're looking MPs UCaaS more capability where the S some ACO our a businesses the even towards cloud. is the of move It span into

see to ACO we offer. the low, way business, So but high sort our exclusive UCaaS of a end has expand all up of very to around the the capability from

-- significant that. just could as about call we'll ReadyNow, where ReadyNow a in exceeds predominantly talk really fairness, deal XX,XXX signed sort large into enterprises we next and seats the one in a and actually Where now mid-market seats, last that be we earnings up see of in that we're as signed it XX,XXX we of seeing the in north certainly about deal our our ago really instances, talking that right on are week our enterprises much some And plays quarter. to X,XXX large you in in and

in those want private. same such environment capability, is flexibility, that TCO that really to but they associated, primed for make ReadyNow it's the the So that large sure want an enterprises it's hosted

offers if these will, compete don't and with of they So one of another. sort they you -- another, both one complement

pent-up which about cover, more excited of is is end seeing and equally the for exciting the most market. Ring. And seeing us you full sort breadth actually for the quite of will, of most actually of to and small we're around that business the mid-market today the really of exciting we're of the traction is piece at if actually the demand opportunity So sort the ACO of than the we're business,

think of a we ACO, force breadth now said, agent as we way through direct up selling complement master very market So the us I provides moving from the full our have benefit end the model, through sales a that off. ReadyNow the end of low great a the for from away to a the customers all on are and that serves orientation very our of that maintenance cloud one high and sort

Nandan Amladi

And the a on a that follow-up seems this indicate fairly average the buyback. share will for count to year Kieran slow. for be The

over of to the trying quarter next Just the the or cadence buyback gauge two?

Kieran McGrath

year. between the But count with to the XX% Honestly, of be says disagree and gave that just slow That our seem you. anywhere I hate I out we'd doesn't XX% me. average to you taking in share

Operator

go Marshall with the Your Stanley. Meta next here question comes line Please from of Morgan ahead.

now line is open. Your

Meta Marshall

of to customer in tended think will customers cloud customers larger ACO; on ACO with a have leading your you've development of sense, thought, of smaller you feedback? of would been that feedback now maybe the who is engineering kind of stay from get to kind partnership the out that had proved to the decisive customer me, of just has the some change wanted in a move second and And customers kind just just head I kind then with private as cloud what has IX-CC with some RingCentral, of initial yesterday, you gotten old departed? announcements that

Jim Chirico

Yes.

sort responsibility within So, platform The IX-CC is resided And new is a that standard actually of the will, always new responsibility that leadership function the the changed. leadership process. platform on you of, and has R&D IX-CC in the platform. always changed. Because IX-CC our hasn't hasn't R&D if in the that

R&D, bifurcated we process R&D. it had did we if what who's Bartolo announced We to you be will leader yesterday if R&D change, you and will that new if and make us, of Tata, will responsibility from for getting a at, Anthony cloud the a with you maybe sort will be were we then a taking joining

A That portfolio. move. UCaaS. direction enabled Frankly, the R&D and we're we it's move, us of reasons has pretty was the on why decisive our in to the announcement fact efforts consolidate take to that ring couple did obviously going our that

exactly leadership, cloud will development number we're that's doing you will, And to of, Anthony's a response products. core and be under our: And indeed one, our that, doing if our because customers. we that consolidating

cloud, deliverables part the between CC are our as UC, and of prem. converging importantly, More trends on what

converged a is deal. sell we now deal every Almost

being shouldn't So lost role really CTO customer the ability We our enable this market have be is faster. role execution executive the now, as that in which to products being and us, Avaya. us before. to is And streamline we is that Chris that forward McGugan for announcement is going to this will new the play the fact critical. go bring But and for didn't in

opportunity It's one, continue to we're again, and technology on our what innovation us our build in spirit customers of hearing roadmap. really and the from leading still the to providing

And Chris important company. extremely an is So, the up against any stand him by imagination anyone it's technologist other I any role. of best stretch in qualified

it, portfolio advantage the be now going to off side, leverage our take build Chris look to able the of forward. side, driving way have technology And Avaya I the our at leadership. to and on is on And R&D and proven fortunate we're two leaders, technology Anthony extremely

So, I hadn't we frankly, think that position positioned to it's had us, previously.

ACO didn't we two your So, to drive quite And we're quite look the excited leaders senior have as portfolio to to I these us for that comment. catch future.

Meta Marshall

or customer ACO feedback of any may or been move heard interested you to you've private of customers. of expected customers in that stay customers what initial customers ACO. wanting smaller in and smaller had larger with cloud private? Has to of kind feedback kind Just be say larger size additional Just there enterprise still customers been has any that kind on to with on-premise or would

Jim Chirico

going now we're God, RFQ, to us public with offer. have been. Avaya go management in initial us I going wanted that a senior go to with a couple there of going to guys." just enterprise thank to from we're And a we've the And and up been by or come of with it, hand symposiums we've has come partners And feedback that go you management by - different will cloud said: couple way, tell glove and introduce larger customers Ray, that our way. it's executive to you our were the we "Boy, because in

accounts. earlier, But significant. there So, to of for our volume Because seats can the you are be an to well, obviously just VSNM associated is these of market. the offer solution of large I as space certainly mentioned with us that of number some which significant XX% ACO the pick needs as I of with the will would a opportunity larger number, enterprises imagine

basis, were And Vlad building New single two-day I York, for our partners. here ago just - in every weekly And a and I had multiple in fact and just on over with little the and and a working Vlad a week meet we're teams symposium. collecting meet we've day.

joint We We're meeting with have have our joint partners development go-to-market activities, together. we activities.

of amount on So, hard we - the there out, and But solution. solution can't we be making right a it time get wait sure the will that frictionally. working which tremendous to get we get really mentioned, one and and seamlessly out implement our a solution can in has been and differentiated that I customers energy really the fairness. really, as driving we're And actually

our an teamwork but I met, RCO on not said, from the engagement devices only if all of ACO has opportunity from has and expectations. our - been exceeded not as the and And, perspective; far so perspective, an

Operator

from Our BWS line comes next question of the Khorsand of Financial. Hamed

open. is line Your

Vahid Khorsand

call. Hamed. the calling actually in The - difficulties is There Vahid technical on some have this. were I may This missed question for

this well. may to impact as have But RingCentral And does already on you've have what if I said already So then I that a missed have follow-up guidance? it. XXXX your

Kieran McGrath

specific. we're going to Obviously, not be

results. those of that half say Just measurable start we're to All agreed, year based have upon ACO second on is the it a the as is discreetly the can understanding our launch. not we and to agreement that benefit to going ramp we have reporting I

Vahid Khorsand

terms partnership of number XXXX that investing because is, will your of in follow-up be reduced Ring? my in with R&D, in then And

Kieran McGrath

of well, as to our No, ensuring our we get completed. ability are refocus one for now well ready put wood sure gives behind our and I so cloud solution, we private us want do more own make into c-cache [indiscernible] the actually the cloud, investments it that think, into and into Christmas. is are arrow truly more as investment

on focused toward change product. any see main don't more we investment but our really So,

Operator

for Capital. Mike And for is Northland it our final Latimore, question today,

Your open. is line

Vijay Devar

Mike Devar Vijay Latimore. This for is

Going UC go to going R&D back forward? to the R&D topic; so CC will versus what percent of

Kieran McGrath

That's out. not we something break

did you that were on no, are what investments Jim earlier this we that doubling on don't the aggregate cloud planning hear UC out But, I at in overall we Christmas we year. CC. the spending versus break think intimate

Operator

very like comments. to for over McCarthy you turn I'd call the back much And gentlemen. Thank Mr. his final to

Michael McCarthy

Thanks, Susan.

questions And Well, hosting Relations when And you such As of very seeing give feel page hotel in any February Thanksgiving. ENGAGE a Jim me move our about Thanks from through if event registration the have to to there. in couple from office. upon we forward we please mentioned, have to Phoenix the we we be as and will get we back free the the weeks, February X will next X. Investor you much, call look Susan. details

Operator

today's conference concludes call. And thank you, This gentlemen.

You disconnect. may now

Avaya (AVYA) 20 Nov 192019 Q4 Earnings call transcript