AVYA - Earnings call transcript Q2 2020

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Operator

Greetings. Welcome to Avaya Fiscal Second Quarter 2020 Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded.

turn Investor over Relations. to Vice Mike like of President now the to conference McCarthy, I'd Thank may you begin.

Mike McCarthy

our and Thank your before you President and XXXX Chirico, share Year Avaya's and questions. QX and and good this some morning. Investor Welcome CFO will with Call. morning's Executive you McGrath, taking our Kieran to lead Fiscal President Vice CEO call Jim remarks prepared

will be Officer. them Anthony EVP Joining this on Product call and morning the Chief Bartolo,

of each us this Consistent with mandates our our distancing are call locations. from on assembled social morning's remote

in morning's earnings are of results. financial investor The well being which and slides your release site, aid with Web on referenced as page understanding on Investor of today this the X-K SEC, filed call Avaya's the in as accessible the our should

referencing non-GAAP except non-GAAP reference measures financial year-over-year note and numbers, and sequential that will We be all comparisons where noted. otherwise specifically

measures and in a have GAAP the of slides. to investor release such earnings our We reconciliation included in

forward-looking will this all economy. statements results to to the on remain and time. pandemic, impact to as our responses that on the continue on COVID-XX actual cause of may continued include at and which of severity business not on that which but and impacted current could being it, risks factors materially. well its may our of global to depend business uncertain and number a and governmental its We to In subject currently be assumptions, and that duration the of limited evolve business differ particular remain make The by forecasts extent uncertainties expectations, based is effect are as

law. guidance, subsequent statements facts filings including by XX-K in and otherwise our to forward-looking risks change about reiterate It or policy and recent be and required found in reports. the we undertake SEC the obligation most update revise circumstances XX-Q Avaya's no except to uncertainties or is with not Form Information our Form may event,

the call turn Jim? now over I'll Jim. to

Jim Chirico

joining thank Mike. And for you, everyone Thanks, us.

and details a execute Kieran and of highlights I'll for provide the open with we'll up morning, we our This will afterwards of you you strategy. summary second guidance performance then through it take the quarter questions. progress quarter updated our as of our our

in this before tirelessly we begin, other crisis. We frontline times the to who our worked extraordinary healthcare living thank are local like and workers throughout communities I have supporting and

Our affected. go everyone out to thoughts

to the this In face number strong take in with of of February, delivered second early challenges began COVID-XX, fronts. global multiple on significant associated a Avaya which hold quarter

highlights. some share me Let

percent within services revenue guidance, $XXX over well Our more revenue XX% is up recurring and QX GAAP as evidence Partner software quarter-over-quarter was was Alliance growth our an Especially also million are continued points and time have XX%, X was a of all services than transformed revenue a metric measures CAPS. the year-over-year, we and noteworthy software Subscription and company. record. a Cloud, our in or to Both high,

to from our CAPS stated, Simply in and all FY'XX. that XX% for grew XX% is of to of QX and in cloud of we XX% revenue and up SaaS compared metric

CAPS from at pace. will continue revenue a We of to expect that percent increase steady

in to customers most of of commitment mission solutions. critical our have company base underscores the metric valued nature largest the the this the the We of and growth our installed and rapid industry our

irreversible. out reflects growth as By is vision the software to and strategy serve shows and SaaS shift transformation our a this taking value design company continued mix will revenue a is hold. cloud-focused the engine high This to that and laid we

delivered of high-end company front, profitability $XXX XX% approximately million the guidance. On adjusted the our of of the revenue or EBITDA at

scale. of our and best-in-class model business execution continued Our performance accentuates resiliency and our the

buyback plan XX our capital cash, approximately while million with launching thoughtful and repurchases A quarter $XXX $XXX November. having million versus aggregated allowed during the strategy. We accelerated an and recent continue the lower million we achieve in utilized allocation targeted deliberate execute cost. our conditions ended repurchased us to Lastly, to contemplated. on in approach timeline only on $XXX shares our market We originally million since

not sheet Our storm, us current value allows us we how balance flexibility COVID-XX and only make strong liquidity to the key to grow to position us with provides technology weather shareholder allows and on but investments. continue

delivered models be of responded has the in and this couldn't the face I epic company address results summary, by In global purposeful the path The to march our cloud. growing all and down digital proud we fronts consumption how were on driven crisis. a of demand

of offerings we have two rooms, last Office, Cloud offer, huddle cloud Amazon, new have. video name collaboration UCaaS subscription breadth extending artificial few. and intelligence Google, our capabilities offer, introducing public [NCaaS] to video just launching Over to market hybrid a Microsoft offer, and technologies simply brought new of others or that private depth capabilities IBM, ReadyNow [ph] with with our solutions, dozens quarters, don't and solutions give the spaces cloud private and the us These our including Avaya our

just agent closed deals around on extent two to day allow world the Cloud provided to capabilities, over months, employees their licenses much one. our multiple anticipated Avaya we've Office the anywhere. To offering work launched X companies in the these punctuate We to of last and from million remote

We hundreds it to CCaaS already new business and a seats. secure deploying of growing and seeing of education video for availability free spaces healthcare, wins organizations to non-profit demand. business global and of collaboration, and offer thousands accelerated We customer introduced providing

models, the our of grew a and rich simple Lastly, functionality into nearly of set and cloud innovations contract. to demand quarter-over-quarter, bundling demonstrating while volumes features for created one value XXX% subscription latest the consumption flexible customer through upgrades

do collaboration, to from home. can Avaya delivering a to scale in experience maintaining customers capabilities add from devices our while for with center long the from video the enabled the work and to We've anywhere reach. of has leaders This customer to their work been safety productivity agents secure ability contact employees superior only seamlessly and geographic

examples. just you give me Let two

traditional services, three centers. leader global for business financial over and mortar remotely as brick same and capability for integrated less a services than globe we the global agents And locations across more provisioned work Teleperformance, for XXX,XXX dozen a licenses provided customer the digitally over we temporary contact a in in XXX,XXX company, the than days. to experience deliver For

There activate in new are are with These more ability deployed offers examples two and many making have months. Globally, how responded the with our significant base quickly customers. seats strides we last our along customer new X fueling to our acquisitions. we million with working over just

Let me some share numbers.

from number added significant more continue with over Genesis customers the XXX including of competitive XxX. Customers make Cisco, in and Avaya. we takeaways During than displacements, investments to XXXX a quarter significant

During million $X the of million with quarter, three valued XX we QX. over we X out a deals And over of TCV. have signed XX coming TCV over at and including of a billion XX TCV $X.X million,

that SaaS This high focused the cloud and In is critical mission offers based strategy technologies enterprises traction to we segments our demonstrates are value investments architected serve. we further global technology paying are and in and short, the dividends.

chose to priorities, deliver. underscore for differentiator, the additional is we transforming models. new multi-year This Let One operational as some solution Nuance consumption and solutions. enterprise mobile single Cross that streamline already me a response their and from costs, unmatched includes several private and especially to with large and ecosystem to device capabilities with is new There part customers. initiative. clients strategic and cloud and of provide customers mission. platform this the contact our such is now private ability on a wins and deal along cloud-based Avaya program, example One cloud of Cross solutions lower Cross, Red the value private hybrid, public Red zone, key furtherance technology Avaya's key Verint is and are American order cloud CPaaS Red in including significant hybrid legacy Under experience partners, deliver center Cross who color efficiency Red disparate their our improve platforms to

U.S. the of on-time On launch work the Office cloud of public and Cloud Teams. Avaya launched joint culmination successfully we the The the in was by months RingCentral hard front, Avaya

X the the influential of by agents SYNNEX AVANT, in supported most including ScanSource, is motion master go-to-market Jenne, and Telarus. Our market,

Cloud and the sell of and trained network a and We from this extremely pleased us gives XXXX one as Avaya huge Avaya coverage with of forces, day Along agents have sales I'm on-boarded with Office. over RingCentral today to progress.

What Cloud of to those couldn't we are we later has true diminished. This we the Avaya I'm Avaya strategic the Cloud at from of partners has our out launch our Canada speed. this and is cloud Office partnership The U.K. warm before that with vulnerable and customers. Office pleased the Australia, base. in reception is even our We're rationale made for the attacks more Clearly about quarter. received effectiveness attacks on is us up how of the on of demand previously laid indicative this building Pent momentum coming moving eyes. address

initial front, CCaaS planned. we in as the On our introduced March offer

have customers. signed We already several

Our as motion of from next will a is matter slated will milestones in digital point June milestone capabilities we which deliver additional regular when have for quarterly course. we

allowing possibility wins our home. CCaaS center was all our capital. with with allowed utility Hydro communicate The of employees Canada's company work safely of with seamlessly customers The them service, Ottawa interruption XXX,XXX with transition Hydro could of no from company ensuring serving while One call the customer early of was of than company, customers faced solution implementation is operations. CCaaS to the to critical more disruption their a

would is for typical solutions Another security from and scale, ways. you key purpose Avaya is and Spaces Spaces reach in cloud teaming only collaboration many growth solutions, lever enterprises with called Spaces. pure is our video and video unique built expect.

business-to-business security Security ads. which collaboration remain. to best power cloud at so of room solution First, data and capabilities. combines the to documents a conversations, platform and as notion voice extends it discussion bring together room teams not exists important, are time, pop-up for and which with it's of no of based a the threads true application, represents room there's video availability is Spaces a stakes. any table as or team Equally customer is collaboration. The and meaning

universities me thousands they Spaces are Michigan diverse as life University needs globally their State State student virtual and for Let keep share Florida now University, using such examples. in populations their couple real among connected. and a schools Italy Large Ancona classroom geographically teachers students of as Liceo with of

a greater with can April end Usage and of reduces hit our collaboration original strain continues with of the This up than use of increases been along area collaborate Hospital care. connect use epicenter. saw more province, their consult X,XXX% engagement, healthcare through the We spaces in patient In has eases Spaces of grow. more staff provider Wuhan the first overall now of hospitals our on and over hard. was PPEs, video virtually system. to patients. and healthcare offering frequently video

based model couple contract nearly for the you important And consumption this generated in embracing value in TCV has subscription, or and is a a and customers give a to the total strategy is months. an million real just on examples. six Moving let me it. our base to highlight activate company of pillar are It our $XXX

agents enabled to signed remotely. they perpetual three order, giving work need, into new IX Humana normal We require subscription wealth agents; what needed features, Hence, and when these licenses them Humana XX,XXX moved short needed they to the to to enable and quickly it. the capabilities. tap software trade of their move other our enhanced year a entitlements these to temporary within will

telephony. Spaces benefit we're was of University was university. a beginning five-year agreement They the They of for importantly, client In Avaya standing signed infrastructure long that to reliable we the and the UC, had version realized quickly on upgrade subscription to a subscription able their because the enable more are and Spaces included. of quickly an older, area

latest the delivers investments, across are of to We into The prior customers seeing them an realization their releases, rapidly to accelerated their on base. needs. pivot and capabilities moves our allows investments to meet the entire leverages subscription specific bundling return our occurring these customers

to to grow It points is to a on how that note within executing proof share continued Avaya momentum partners strategic our is accentuate our ecosystem. also the of our successfully and couple important commitment we have

named Nuance top partner solutions. top and by First, partner for group channel powered Avaya as was producing both AI

Second, transitions Avaya year the received also Verint global the Systems award successful from cloud. for the its to accelerate of to partner ability

OneCloud performance Additionally, IBM offer significant Award and Avaya our capabilities unmatched value drives private with outstanding Hybrid Excellence that we ReadyNow our its the recognized solution. last cloud Avaya Cloud to customers. lasting Together, for of week,

way was shaping ground, and communications macro the work incentive. a collaboration new Avaya It be change urgent and and what Work a become workforces is remote the a to opportunity addresses people distributed, customer trend fundamentally work breaking norm. developing and of has model. the stay is customers how will helping to both a and of the respond environment future employee accelerated this it's future move modern The perspective, or the technology only will going to experience allowing current needs. and real positioned our more connected whether to From customers anywhere Avaya lead. to is work their from is business

quarter, of allocation our With Kieran? that, Kieran you capital and take through the will the our behind QX the now details mechanics outlook.

Kieran McGrath

morning Thank you, everyone. Jim. Good

As call a Web in constant indicated on financial reminder, on posted are as site non-GAAP the unless GAAP non-GAAP currency. Relations unless this call otherwise the supplementary forth figures mentioned on metrics this set reconciliations. stated, otherwise and all to referenced reported, All our slides are Investor

QX compares million million quarter in finished in $XXX the this the quarter, fiscal revenue revenue XXXX. to second guidance was period reported year line the in $XXX provided For non-GAAP ago we in reported million February. sequentially of We with as the compared to $XXX

quarter Please and differences non-GAAP have during the start accounting immaterial. generated Fresh that note non-GAAP the revenue and GAAP are now by converged

adjustments speak non-GAAP to However, revenue year for fiscal material purposes, for so were comparisons. year-on-year 'XX in we and proper non-GAAP

for represented subscription. increased or for Revenue Cloud up by XX% full quarter-on-quarter, CAPS QX, Alliance revenue XX% total million fiscal Partner and year XX% from $XX and for XXXX. revenue of by prior primarily Subscription the quarter contribution driven from CAPS the

product XX% in revenue $XXX revenue was product Total in over down software software to digits with ago growing Hardware quarter revenue the million $XXX and period the modestly software low-single $XXX Second year revenue in was year-over-year. down and contact center revenue compared UC million was million QX. declining.

services conversions our key quarter for subscription period than a more compared represent and offset QX. $XXX year and was services to maintenance driver in a declines and million ago in and revenue under new upgrades Second up million support. $XXX fiscal million product $XXX Continuing any the growth model revenue placements, and

non-GAAP the was compared ago XX.X% margin year metrics, was profit the in year gross the gross to margin margin in in services quarter. and to our was to Non-GAAP sequentially. XX.X% year XX.X% the XX.X% XX.X% in XX.X% prior XX.X% gross and QX. to Turning XX.X% first second compared prior quarter, in period compared Non-GAAP in XX.X% and product the

Turning to profitability metrics. and total flow margin cash

XXX XXX adjusted margin $XXX million, basis non-GAAP year-on-year quarter guidance was income year-on-year range. while XX%, Second basis down EBITDA a XX%, points, operating operating of $XXX points of adjusted representing million margin was at while down a an the EBITDA non-GAAP our representing landing high-end of

liquidity like I cash impairment Before morning. and greater the was detail, press address quarter discuss that our earnings in our I'd release to flow disclosed this second goodwill in charge

economy, impact in was occurred term the Following global broader consequently test. way in period that performed price, was stock market the the on the decline and by goodwill which the event company's with during triggering the COVID-XX the affected impairment we a determined consistent and

reporting reporting that carrying of start amounts, units part as on well of allocated the part our goodwill all as As was the determined sales. and projections the we been on-premise accelerated analysis, license, risk and model market to historical have reduction or of in our our higher sales product of to unit, reflect product CapEx revenue related the the fresh of impairment established to December as we compared counting Based goodwill future in values perpetual increased test, fair our of uncertainty XXXX. adjusted from respective solutions the

shift services acceleration now new this be in decline anticipate and the subscription which innovation will through the upgrading included partially our and offerings, of reporting by offset continued customers technology unit. acquiring utilization our We of is

carrying non-cash of resulted unit the in a value $XXX for fair impairment its reporting amount charge product result, a million. exceeded As and solutions and estimated

the million of cash or we from flow, $XXX in balance X% cash process cash areas. generated quarter total operations, a contributing flow $XX in revenue, Turning in key impacted to ending cash few collection equivalents. and cash second to of million cash a COVID-XX

of our operations we due. million ageing Firstly, receivable international past a the $X took their Theatre a distributor by in large a on reserve due of to owed

of do of the customers address advantage to opted typically a of quarter. handful and discounts finally, have are an some early effort experiencing, challenges to pay And take partners in Secondly, so did we of customers that our this customers, not benefiting our strengthening while being temporarily long-term. relationships industry some terms near-term peers, payment and the our business we're now, relatively commonplace With extend for practice hit with our creditworthy this loyalty. staying hardest and building right competitive

We are more than this to have adequate support fortunate liquidity initiative.

While caution of of Avaya's management from operations. the on liquidity. cash business We on insurance and we reinforcing positive liquidity. $XX structure a this abundance the early only of I'd turbulent initiated out That an revolving start, an forecasted or cash To to update stability our on draw out provide boost an April, a to down like in as and to topic continued million confidence utmost in line being has not said, flow of an policy in immediate necessity, economically credit balances, view ability generate our capital environment.

convertible As financial the its liquidity no term in covenants mid-term scheduled or loan factor notes. near or our not has our of reminder, any does considerations. maturities into Furthermore, company a

share repurchase of in a cost $XXX program, QX, we shares at our an XX.X cash bought Regarding back million approximately million. additional

November now under implemented shares year-to-date, XX% shares, nearly outstanding that Board or when of were XX the totals the repurchases more Our of approved share than plan XXXX. the million existing program in we

fiscal As a of result, contemplated be in XXXX. while million have only million utilizing $XXX year achieved objective, to our the $XXX fiscal we XXXX spent

retain being, suspended additional aggregate, of the we given the conditions. macro repurchase economic $XXX time have approval for Board existing purchases program million While a we in still for the

fiscal for third the only the guidance. effects provide Instead, from of our Now, of in global light will of on we environment, uncertainties the an the sight we of in guidance, the turning have and the which ending year degree in for quarter, June withdrawing will pandemic, a COVID-XX high our be arising company business line update attaining. to full confidence in expectations

that basis, changes constant reflecting as Please and all of rates on year-on-year XX, XXXX. note March revenue currency a all revenue are expressed amounts

past we third anticipate currency. range to of Social annual to of the several Administration million, For Security representing been contribution discussing constant expected million quarters. the the X% revenues we've $XXX related as top million $XX end The in revenue decline the quarter, negative $XXX of measured that to X% over includes a non-GAAP opportunity negative

margin for XX% operating non-GAAP time, $XXX this At to expect be and adjusted between we be fiscal outstanding We third end currently the our XX% of margin million, no year XX%. to end, or sits quarter between expect our EBITDA million XX% between and to million shares. to shares the change quarter $XXX which to at approximately XX material our our before or third

like that, call Jim. Jim? now I'd back turn With to the to

Jim Chirico

Thank you, Kieran.

In workforce of throughout to decisive Avaya and this responding provide to closing safety business global to customer new overnight. for and period, quick has while taking maintain that demand a action, been continuity the accelerated

crisis. I customers. Avaya the rapidly thank strong of needs context pandemic, quarter during of It's who of the hard we and work mission this so the want to critical our that worked and our to nature respond because moved a global delivered the their has rise to in this technology hard of team of

services an point schools, is Avaya's differentiate and the to I'll of Avaya wrap inflection government our opportunity. in we on innovation, up forefront businesses, keep well has customers This work thought. and positioned engage front capitalize the of way the vital way healthcare our has at and running. work, and new created capabilities help we and organizations eyes. and changed world this In with scale this The

the ready Operator, we are now open for questions. to line

Operator

Please Our proceed. first Instructions] Lenschow [Operator question from you. is Barclays. Raimo Thank with

Raimo Lenschow

hope Hey, quick and safe on the thanks are question. best the Two guys quarter. and great staying you questions. taking for congrats And my all

seeing do talk qualify think in keep of you're First, And new for in kind conversations? that coming think the to look you you like? tactical strategic? how kind Jim, will as head you terms impact on the how client what like, versus the terms at of moment, much like client you're look of just the if the world of to how your slowly to your behavior that and that lights will and would people seeing up of trying out business just And lifting as,

crisis clients. kind then, held to And about offered a of of Can the little you you. and you for unfolds? one talk mentioned, think situation Kieran, about see you payment some cash, you your you cash you, the as bit for for the of how Thank current if -- some your involved the

Jim Chirico

you as would take Jim. a Remo. seeing more very strategic Yes, it. really we're look we I'll I This it Actually, say than a what much. say, Appreciate as is Thank tactical.

an a had, you of percent at services we as huge look overall If revenue. take a as in I as in -- recurring our in increase revenues, overall software, business, mentioned, our well overall our percent it's

we're So and Xx relying I hardware, type what obviously, with less say on that, revenues. less will

this the quarter, that's seats our that We and also for we're important expect And business. in that to for as million we to QX we in monetize mostly areas to moving begin free as not go remote through see shape starting growth X a take worker. to for really but in of number out of out into subscription going overall only part to engines, actually but gave us be

relationships in see We're demand, fact an enterprise seeing I we've continued we're our critical applications. mission seeing we've There's our increasing seen demand. customers. the that strengthening further ever with So large

movement invest business. become a change But So distributed, and their a they business, are to continue still improve more to the implementation improvement in companies the operate we're some an experience overall side. and seeing to the to movement customer how slowing on

than more a give any example. can one their Middle There's you one XXX of that over declared location. personnel government top in in XX be East I'll the no who's

technology you're that, playing more right from distributed perspective. into being a hands and and therefore obviously much seeing So our

type say would strategic, long-term, seeing what is five-year I So three-year, we're contracts.

have points strategy we laid So taken the proof we're out that has Kieran? hold.

Kieran McGrath

all in was million. first share which almost really repurchases, saying the the to was and change that current foremost, I'd I $XXX due we start So saw by really, the guess quarter effective

the pretty what we're customers I ended think of all of and cash closely, been $XXX like million industries would worthiness We're and I relatively I with last quarter call credit small very to XXX now their where we percentage liquidity. we down customers watching and is say a Certainly will their have of that travel to the just at our the types industries. fortunate, effective hospitality think, level, have high a and most our

no federal who customer base X% a really customer our have government more from that our perspective, places and has like We across entire share no but business in a clearly from one sector private than private is in that any there's are of significant significantly larger, our perspective, total.

one and it a to as go pretty feeling XXX terms in on We quarters, we against that have of we're that reserve, cash to creditworthiness did actually itself their positioned, for even for we and working we customer continued From take basis. confident impairment are obviously, perspective, ensure several So the hand going want well that in paid that us out we're even quite payments. but watch with our these XX, to if quite on of many good. actually of potential we're XX, charge with the frankly, next an go extend customers, days want to is quarter the customers quite

point but it time. in of did or we take just expect So to it's sooner later, under models, our at a not we accounting rules don't that have reserve the recover like to

our think million spend as shares, We're year fiscal suspending now us and our [XX.XX] extra spending share million So we're of I obviously here. really this and this year cash positioned gives that well temporarily talked the honestly, plan this $XX [ph]. year repurchasing about of said, only I in $XXX -- repurchases. worth to we We've an

a us really, quite well. nice So buffer as it gives

Operator

Our next proceed. with JPMorgan. Please Samik question is Chatterjee from

Samik Chatterjee

what acclimatize ones the you to quick about cetera two given you're to if seeing Just seeing in customers from talked the location you disposed can a if which size of to. Maybe my business customer is that on to weakness kind are balance, et there's verticals? and maybe strength the verticals, in way side, the the your are trying those exposure comment the you're

And follow quick to margins. then improving quarter-on-quarter, flat but up, you're guiding a revenues

into mix I read quarter So of Thanks. how fiscal third quarter? -- your terms should going next in into into the that

Jim Chirico

Yes, to it the Jim. sure. to I'll revenue first some Kieran questions. address then I'll into over your question, insights This is turn provide

far not is we're strength across and so whether as healthcare. So of any strength business, financials, seeing the I overall in upward the one say fact, government, seeing down. vertical, it's or verticals our and it as business, would the across, actually We're

We mentioned overall in dip small are a seeing frankly Kieran revenue. as a though, however, that, hospitality, but of is percentage most slight

a So us revenue. needle it's for not as really mover far as impacting overall

pointed But customers were offers which as for of really a fact But those the bundling we of a benefit as the an OpEx able is model, this we've fact these our But strength that actually, our we're been subscription solution. seeing additional into and is oriented forms. to innovation drive well key technology and has out, far to segments, move in to more the very CapEx that benefit. as the that across overall seeing the And us as business. we're we're basically offer come that number been successful for able

they're only that they're latest and reducing seeing So not getting seeing overall benefit in added an the costs greatest opportunity of technology.

So, as sort through balance us not the of through across only government the a as I that continued go globe, really to sort that's out, of win-win. the but in I mentioned U.S., in a the point of here would areas, we go we business expect fiscal the as for strengthening we as far the strengthen -- highlight and year. overall as been

another. really dislocation weren't versus huge, to over overall, allocated, because but we particular one I'll vertical you So if say really it isn't will,

on with So want that, associated question Kieran you revenue? take the with to

Kieran McGrath

Sure.

some FX. from perspective, But operationally of from midpoint headwinds about a is we're actually we're growth say actually sequentially, I quarter-on-quarter, facing what so actually, seeing So X%.

all as So quite strengthened do from the XX know, headwinds as has substantially XX last we to over that. We the increased dollar some days. see

we announced bit -- as, were this launching we your of if that as the well. actually point expanding a you offerings in quarter, we was Jim as been quarter, as as to CCaaS launch investing think about has the where in the quite our were recall, ACO at well additionally prior I of talking margins though the

So a we to as QX quarter launch that from the was were margin be us perspective. a low we always perspective investments some knew go-to-market our point that well from going as making to a to really due in of development from

that start snap coupled So with back revenue, the quarter-on-quarter. to improved should here, operational

Operator

Stanley. next Meta is proceed. Our Morgan Please from question with Marshall

Meta Marshall

was this I a noted that you that number. said contract a security as in

sense And kind to whether requests And we had flexing you those? terms, should had project of were head that some noted any then, Thanks. you just get thinking changes for achieved been be counts customer there how but and a you accommodating resolution you in that just or of extending any of. so wanted just timing and

Jim Chirico

over you Kieran, bit payment it as SSA, only customers additional Kieran good This Yes, insights, give that question as on insight do working on revenue we to on terms. Kieran? Thanks. that doing I some SSA. see will of is But but turn what far some is I'll over Jim. quarter, turn just begin our not to which the news. to we we're with expect the to should but a later little this

Kieran McGrath

a are with positive the general July. key two iterations and this point been contract a it's clearly, we is contractors then. early say who take position actually been in them. partners, the we place road partnered expect deal, of both there very at in note, I awarding several final with of long in are only So, to There's

procurement the themselves occurs. contract here that to traditional either Avaya avail of work from in able government own fairly we some to to ensure expect continue clear the SSA enable when been able and actually been What and be well Act CARES their services a override obviously has case, as to remote, as them under the do requirements product support quickly clients. able been though we and to to So has benefactor, to enable offerings of have just center is some to the the awarding employees this will that act to contact of their it

my before even pulled potential anywhere, of up likely get and And quarter. of is work maybe there's million see official in said, that's that into $XX of as the the goodness. awarding quarter revenue to in that I some could that contract seeing we're we we script, to a even the think this So

than months little longer heading of but nine right in direction for the us. us ago, it's anticipated it's all taken finally So finally, a any

but additional subscription to can going or his you're as times is over as Related maintenance take we you to subscription offering that several that's regular. pretty now seat fairly counts our time. or that our though has as from at where collaboration customers renewal of that the become in a technology you're business efficient it's your especially, flexing, customers do question business, more perspective, see What were also of account. content have, about out customers, well, real old technology video they a resetting anytime a offering, Spaces. to as in their contract their new of script as And at is a that's or subscription the need availing much to you That's as forward selling maintenance older the same technology amount base recasting their into in latest pointed standard advantage terms actually where the of well beneficiary time, seat reset themselves Jim the of offering, see of the have releases, you counts a the whether upgrading

fact content I'd to time. say, to perspective. the more enables see customers this utilize one quarter say more it be So compared that over exception an them real anything out didn't what we I'd Avaya take from unusual The as see would actually subscription,

Jim Chirico

just of to they innovation with offer able comment for had the and one things. a Number subscription we maintenance year. every renewal Kieran typically were technology had bundle on, came if I that, Yes. and being contracts. couple you the they one, to three add but will -- touched each years up new might We

we're if contracts were where the get board enables extendibility. upgraded moving to the two different Secondly, levels you and have to the technology. maintenance who subscription they were releases and will latest were, in we expose we to down across us seeing But a down And didn't customers provider. does it for greatest had our two customers is that

showing moving and extendibility. therefore, So that

like firm is year three or contract subscription for our renegotiation not five one contract for maintenance after a years business. secondly, And a open overall

So a us better defined it really overall enables put enables with customers, in to roadmap so customers our us revenue. get to our to get in really enables those closer us and to predictability

reasons why of the our software our recurring percent of revenues One in we and a as of saw significant as a jump overall and overall services, business. part

quite are this about offer. customers our about excited think this we So

Operator

Hall Sachs. Rod next with Goldman proceed. is question Please from Our

Ashwin Kesireddy

you performed This behalf this a have an guidance. question the I comment piece how on on And Rod. I the impact is that QX? quarter? are of you have in follow And far much so on Ashwin one on tell up. business terms us Can of hardware assuming maybe how of

Kieran McGrath

Sure.

So when major we I'd into hardware buckets. the what break three look occurred I QX, say think, down in at we performance

utilizing people time, we've of the First And third that a movement from say probably customers there decline the I'd seen. a as traditional, ongoing et cetera. for of quite more that moved been talking been about their device was away cloud. we've have all, some are as attaches that about has to is the soft phones,

look. at pause put was it, on we they off a that. some supply just the in modest some going third as customers this of out, to how quarter. settling have to in of a constraints with about so a the point did relates held to up. a on see to good And March, there's And probably pointed is would particular well. then And through I finally, their quite went bounce of And frankly, as that's start which didn't we're Jim therefore things pretty up modest Secondly, quarter, many those, it we actually back expect where third and liquidity time know

much all hardware we've think and of seem portion So the I a through looked be here recapturing first you're on would our seeing And a overall still as so along, of is expect days the I said quarter be that really But some we'll and back we've that. increasingly certainly shift to this of the of XX quarter. to get more supply far, the product services money to as smaller company track portfolio. software much we a constraints

Ashwin Kesireddy

is up follow on ACO. my Then

of Just of terms seeing [platform] [ph]? you about if could response, helpful. in That be wondering on engagement and you're would comment level sales the it's what not customer

Jim Chirico

This is sure. Jim. Yes,

So a we over mentioned, as a launched little so XX. consistent schedule with on rings ago, month March just on call, we this

more We those, thing pipeline making important and trading And with where great our you progress. that's the indicative And say the lie. Sure, is most we're believe have the that to points up. those but continues we not would data on-boarding of we we're two and with is grow. where but and heading importantly, relationship that XX I quickly partners agents where where probably signed that rank, I opportunities its only

to requirement on government response led COVID-XX. one of solution the we of the largest deal a So our just currently fronts. was address last The was a only the figure ACO worked with in also thousands TCP signed seven the partners RingCentral It's a of deal national in is And Avaya the significant to partner Friday, deal a seats number and for but for ConvergeOne. with U.K. developed not teams,

geographic It it the and Number RingCentral are the coordinating the Number its Avaya and led. shows that with how two, one, shows working co-partner it also shows reach. customer. teams

So important. extremely

we First many will seven trust figure TCP of be all, deals.

I that intended capturing is, at of the deals this And The falling significant. new is logos. line is with which network, new that's actually really What a third expectations. by And call what you are through of XXXX of if right our second it's in I our relationship, what far, mean we've that sort those partner capture. agent it the won we had is that a thus number really around take would question answer is look to

were the associated customer base. was and to-date, are base customer work but we're shows you organizations in into all solution two any been base. loyalty. It quality which driving which Avaya the this there probably you technology the demand the bid relationship of shows competitively solution other what fact U.K. of has and that a the extremely really there of shows zero, they all I'll Avaya, The from means It important, indeed sort our the by defects between the won the that none market. in our that thirds say both And with driving more issues competitive is installations an for or

of that cylinders it's hours expectations. whatever is are or hitting indications our it So just all sort XX of XX all days all on meeting in eight and

to we're rolling countries, out excited. we've additional achieved mentioned, early, quite was to And it the quite though about deal, even progress -- three which a Still results excited. very going but is the we're So excited rolling this is that U.K. now I but deal out and we're to-date. as

Operator

Mike with Our next question Please from Northland is Latimore Capital. proceed.

Mike Latimore

maintenance the there from a margin can talk about any EBITDA maintenance? versus On is subscription there change when subscription, customer goes little you to a revenue if bit on the subscription and

Jim Chirico

we're with driving well. Anthony Kieran? with little you start solutions into bit of why the you, of want that add some But we and to on as don't be don't you just subscription, why Kieran, if important think we start color a then would Sure. I

Kieran McGrath

from on far to be if tend our what the obviously so the we're happens perspective, subscription you've form we're of products. sold, So conversion is, based a which seeing premise depends maintenance bulk it traditionally of selling,

whether said, expect all that credit licenses already just we from as a see private customer we As the public we driving owned of for along, that roadmap will pointing, this the basis. what longer we for customers would give time. or a it's initially, cloud, existing perpetual they've to some cloud, revenue, into the the that is But some

the that from leaving perspective. customer not exposed it's So

will purchasing content point time. we premise take of will they're that We over increase the portion that its a change of The rest it if revenue time. and then ratable in base significant amount becomes or of

own releases, we it's -- kind customers the obviously, expect business we latest on margins our we software, customers, in get if the would be of as maintenance, quite get to see the the utilizing get that mimicking we exclusively software in see our the high we that this onto if through Obviously, time. we margins

Mike Latimore

professional to you they do well? services on in Did do they sequentially? they how then, maintenance get grow subscription when go And professional then from as the And Great. quarter? do services,

Kieran McGrath

In So, site. on to were most interesting, and our not leaders. a of a of fact the our is I teams think for real that allowed for work kudos spite quarter, real, this the services

revenue was a quarter-on-quarter almost basis. professional Our flat on services

that So, were Clearly that of they couldn't work. real were flat able get a to there for kudos be to they preponderance to keep things to should we relatively because site. the that be quarter-on-quarter. revenue, to probably of needed some the But, lot do vast team on able they

required for for some relatively there be will will the Yes, simple APS releases continue through as to release download straightforward, the primarily customers work, the but work them nonetheless, there be we will that go subscription, and from as work time. upgrade business we latest with

Operator

Our proceed. Citigroup. next question is from Asiya Please Merchant with

Asiya Merchant

another fourth of that offset the the If you. the that some some you the guys a you you you the could recurring us year understand growth obviously takes quarter steam. in now, high CCaaS about quarter of about if maintenance revenue fiscal which right bit just to again, the Thank declines fourth the guide give initial I and ACO a question quarter, about decline during are guys indication can had? footprint were but and on clearly and and puts subscription, by talk talk degree mentioned with there? gaining in guidance, cloud And there, you offerings -- have but difficult the of to revenues range then, the guidance, bit can of some and predict little it's What given little for you if takes the just

Jim Chirico

that'll Kieran. to and over start turn I'll

of if what to at which the of consistent if the traditional past, maintenance declines. seeing So its in digit been single business, has in sort clients, take you sort range mid you a been in of the will look we've the

the overall growth services. remained And seen maintenance has the anomalies haven't it I'll as that's remained, projected. say pointed around change in in has had continued it And and consistent, to track result as of so GSS. that seen we out, a of a we've increase not lot any, within subscription So but been of continuing decline offer, Kieran

I'll color turn over quarter far didn't some in ACO some we As maybe fourth the that -- -- to on that. and as on, so provide to Kieran

Kieran McGrath

Sure.

a at pulled reason obviously, is we we're days which it into the fourth quarter. back why in So current playing quarter. the we XX are Again, XX the time, days

it comfortable is gives and QX. we lot why of So sight, which quite showing line more were me a comfort the

from quarter. points recurring we the important business think and continue Your we subscription, as see for the to should head do that well are we're momentum as and well as of recurring getting about revenue, certainly we as that rest into our

think see that don't contributor it the I cash going going is actually, year in that second to year, be just quarter, purely dollar just the not to seen the factoring dollar, to to half in the our overall. in QX the a regards. last based benefit is ratable, the a from or operations $XX the have whether I our of of million resized would a when that strength we major were it's point upon because it's a change Space when QX out full we've year, one for very guess significant headwind thing I I the guidance about guidance,

business most in but And than of because are aspect think that feel of earlier year. I headwinds be some headwind. recurring will in from I should the bit they countries, we're in were perspective or in be about they'll hedged EBITDA neutral QX the and QX an our -- top-line a we it more naturally facing while really our overall, severe So and the good ratability be a little

Operator

with next question from proceed. Company. Our Cowen is and Lance Please Vitanza

Unidentified Analyst

on Christian This morning. Lance is Vitanza. Good

deferred issues already, or work in revenue all come long until to how to April dig service destruction Avaya itself to in if you starts like I lost deferred that out is period, back? it terms this in calls didn't and and into talk home at extent for [indiscernible] business impacting home that really but shelter which that of this then foregone Thanks. is want from in fulfill turns COVID customers is from difficulties revenue maybe and May your March is guys the orders about can physically time after the and And before, You alluded but how and versus to of having customer accessing demand and kind that.

Jim Chirico

is physical will been This to type the there turn it had maybe Kieran But people COVID warehouse then, in of we've a Jim. has as the it we we some as to provide on-prem, of couldn't people the supply disruption actually And get fulfill orders. with to disruption to insights. on where minor associated weren't little actually is over additional out, through orders, disruption. locations Yes. really kick some our quarter off just to place And seen pointed sort that channel I the business. with and bit chain also Kieran the exited

starting of saw quarter. our on open we little those as as an through we pointed a we're So revenues. to recover go impact out, up as country bit see this starts back And product by the balance little Kieran of

significant we implementation. however services seen remote along with that have We've capabilities in the remote company,

of in or a around So center of as our we even services the our some GSS, are well then of because primarily now business associated ready of that subscription, overall solutions. which bit overall remote contact little And be doing we're seeing capabilities. as just the an our business some on is maintenance our with uptick work

being that out fruition add with ACO, video we the monetized. for growth now market. to we out increase the starting as in have agent expectations as also And starting provided and just to continue. to that of that as we the thousands revenue also offer to continue to come We're launching we expect of our deployed seats then We're monetization see to spaces remote the with mentioned, in million as see, overall of we pointed out X in And I worker, those sense capabilities the those will hundreds company.

we're that only said, seen or a Xx one really saw overall sort with software accelerating I market sort has the was up as aspect physical had such in that offers you and we of of of are recurring really around reasons line. seeing So seeing hardware strength and why But so as the if and the business. C-XX our pop in and services, five to the that will impact helped out points close driving really more had we revenue as huge COVID in going we increases and well product

that. Anthony anymore So know more, you if Kieran, I to don't add any to want

Anthony Bartolo

maybe our more deals just did as bigger get we none given size I just focused. deals private more think tactically see transformational the of Jim revenue just perspective a have customers It from area, one those and bit. decision-making just a a really really cloud the period of other couple implementation impacted were pushed would

Unidentified Analyst

we XXX, I if to Really extra as to And intended $XX also cash will, can cash, thought "extra." extra on quick think I as may of Kieran, it you you if million referred have as repo, you delta spend that well.

cash the repo COVID do Thanks. on, repayment? the is permanently, behind extra to you with intend you to what refer if do share on Would return to this repo is So this? debt a or

Jim Chirico

of in of sort COVID-XX. are is still This I'll Jim. the Look, throes Yes. one. that we take obviously

We back have go on executed buying through capital debt we also We as ideas not strategy. number significant shares. our but some down a only paying of allocation

pointed But, I'll it we'll the -- eases, we're if do plan and what regularly. out guys the it's process, back it. else on get you and we'll what something we as anything on but the when For through a Kieran to when now, doing. cap allocation COVID around with have But as eases review this allows not execution we looking situation to Board for what those any discussions say quarter around

Operator

BWS Please is final from Financial. Our question proceed. with Hamid Khorsand

Hamid Khorsand

business just on revenue any? that if all layoffs forward to we your COVID-XX announcing these subscription and your on trying was Won't I have going understand furloughs. the have of dynamics companies said

Jim Chirico

existing Actually, do number balance of we subscription, then to what out co-licenses flexibility And we the over when are convert provide burst that required. we as we needed. folks when to

you the if So the the actually users. will, rebalance, licenses offer number subscription of reset we perpetual to to

the think I overall good demand, the marketplace. drive we out you what will, on associated a like we So pretty looks license if subscription as into with have handle that exactly associated

a quarter, as deals. as only not at we at a take obviously that pipeline QX, the look on have as backlog we this QX, of we've have the So but taken look we

decisions good subscription. of have, will these have a if and very And we'll sway, we're that making I large you think mean. to that the we understanding enterprise moving them above will that customers what with over

the if as any know don't to don't but additional you want that see run guys, don't to Anthony, I So, insights impact. in have product, I we I any you add see,

Anthony Bartolo

to their those them and activate for actually of is, are digital what it What subscription capabilities is one us through the we customers our starting consume to base it allows the what seeing order to it higher of represents our investments. activity this activate are we're investments digital on allows and to newer of particular does that some up us prioritizing top to seeing fore, actually And bring they're they product had. already and that

actually we're seeing us. subscription that's this is opening what well as crisis, really up So for what as through

Hamid Khorsand

customers product? do to deals were that iCloud how delayed of of move because many want pending and think And Okay. you release the to

Jim Chirico

not opposite. been just know, I've has anything or in think I that's that's delayed, don't fact, actually delayed been don't Kieran, fairness. in seen the I Anthony anything

Anthony Bartolo

Yes.

and ready roadmap to customers an there between the engaging talk environments. I there complicated because shift, a happens if the is We think it's that ourselves. about occurs our conversation for they what and timeframe coming the our ready of are for how particularly what an about shift getting or get element customer can actually is looks like complex

timeframe quite that find be the the need for we and they they tight such relationship So then to prepared a gets understand move.

Operator

end back like to remarks. over session. conference Mike our turn to of I would the the closing reached question-and-answer have We for

Mike McCarthy

us for for this quarter and joining everyone, morning call thanks, remarks. And Cherri. our March Thanks, conference

base have safe. and a further see please couple that questions Thank give and place different be good a you me end please you in comments, through virtually any If of now and afternoon to take the to or free call conferences quarter. we'll the you. happy stay touch Have will a feel of

Operator

concludes Thank you. conference. today's This

may this you and thank time You disconnect lines your for participation. at your

Avaya (AVYA) 11 May 202020 Q2 Earnings call transcript