AVYA - Earnings call transcript Q1 2022

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Operator

Greetings, and welcome to the Avaya First Quarter Fiscal Year 2022 Earnings 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] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Mike McCarthy. Mike. you, Thank

begin. You may

Mike McCarthy

morning's Paul. investor Welcome and XXXX you, taking lead Avaya's McGrath, some with prepared remarks to Jim Chirico, quarter before this will call. CFO, CEO; questions. EVP first and our share our you Thank your and fiscal call President Kieran and

The morning's results. call Senior X-K website filed investor the be Vice Engineering; financial this on of and which Kozak, All Senior morning Joining understanding our of should initiatives non-GAAP Revenue President page the them as the will with our this of your SEC. These and Officer; metrics on the referenced are our and revenue. Vice Chief of accessible earnings Strategic are exception include on of today highlights performance Operations. President Spears, slides, aid this Stephen Todd call in financial well with release Zerbe, Avaya's as our ESG in Investor of Dennis referenced

impacting which the the be of the all about with the COVID-XX changes vaccine participation consumers and and such to severity and recent variants, have number are be but governments, continue based vaccines impacted to customer rates, risks and earnings of will effectiveness response the distributed to in may to that the evolve not may and the as we or factors offices most that taken particular, our by cause and the our of a vaccine statements and ability obligations turn event limited over our We is virus' uncertain our of visit and Form uncertainties to included to undertake pandemic, slides. at to actions guidance forward-looking a with extent emergence subject in as of global current to by uncertainties In law. filings results on businesses SEC, include, change, to, Information its make and that our not and non-GAAP XX-K forward-looking time. sites reconciliation expectations, remain to by continued Avaya's and Form remain facts continues no now and and infection metrics policy investor and statements return or requirements regulations well reiterate taken assumptions, business impact on actual found call I'll in rate, except be update which release forecasts on this XX-Q. can otherwise in including circumstances duration, differ Jim. risks to We the speed materially. depend revise our not GAAP or as to which the the the could of required It in new economy may the be the

Jim Chirico

it's progress our a solidifying year, and and clear company's joining you we of than credit focused unpredictability. by business Thanks, it best fiscal one our we multi-year Avaya. I last successfully characterized morning this the period for business. Mike. step for that characterize This everyone environment, despite a a steady take would for high give remained Good was one for stronger And thank have journey on they is Entering are the drivers year today's a transformation call. back If and reflect, an our dynamic success. made on lot accelerated of position and and three I team started. value volatility to continuation in that objectives as long-term this strategy. we've have as I a executed our we on have a of And important navigated extremely when business

future seen cannot in many with is their gained Overall, two and momentum and we I evolve. The to customers, their we've more assets the last and needs currently new about have our are to our years, fortunate business. be moving leverage. pleased so our the insights direction behaviors Over expectations of

So made on of, objectives, below quite profitability cloud our key at two pressured we results, results by dynamics. were top-line progress I first temporary expectations, I'm which while quarter our look when and proud our primarily our

a beginning mix the contract a the of the is in of several a not it First, our roughly because significant biometric latest represents and significant deal, of deal we recognition. will leverages a significant incumbent the also public CCaaS of year because Avaya some in final a content financial in of It company. FY the services XXXX. the half the size of because number of revenue deal example we the second recognize of would to advanced had AI, realized result large the were global including of unable largest with of analytics, terms a one over did nature of history life is materialize QX, which multi-year displacement revenue delay seven OneCloud $XXX innovations, the in and deal and contracts is CCaaS the we This won be million One company, security just of agreement. but of now assumed competitors

commercial of activities a pause. Western The a deals by important with these necessary to respect as the Second, but simply customers closed. end been did that is have of and the our weeks, in deals not a note lockdown of Europe of of many especially is doubt and were our which contracting U.S. since environment, and projects stalled. with that at in many slowed slip caused the canceled, there not the activity fact What’s was to quarter. the result, lost have been customers, it few were see no many and number And to approvals we

deals solutions, for our private strong. the outcomes. including invests with proof One remain of I Cloud and cloud ARR. on amplified. new KPIs and extremely it business to the our magnitude the was which that TCV is growth, for continued by revenue, more quarter. quarter. business, million one yielding unusual consecutive pull and While QX evidenced see Cloud the greater signed that our seventh increase the continued points in with traction And importantly, push at we strong areas, clear given improvements progress hybrid transitioning not a demand any deals is the are making that in for traction XX% grew key pleased to It the These and bookings quarter, with year-over-year. remains XXXX, as am underlying the we public over cloud where enterprise large XXX where signed validates And subscription logos, are to than Success Avaya over with these this desired we are fundamentals investments

and Let and factors. sequentially end represents the year-over-year on expand several entire of by ending guidance. And remain Avaya calendar combination me is increased XX% Kieran OneCloud™ up million. ARR significant billion and will take well XXXX. The areas. meet driven million our each XXX% these target through our private hybrid, to to progress We public at you most at our $XX ARR on the in track $X of is portfolio. $XXX during of ARR our the cloud We our quarter, key another in ARR added metric growth ARR

CC. total and approximately continues XX% First, nearly proof represent is of XXX% our grew center contact to ARR business, leadership further of year-over-year, which in our

is is XX% The our of from among innovation, into hybrid our adoption others subscription the such cloud underlying by cloud total enterprise cloud Spaces, momentum third, through service, and adding of Conversational is which our Intelligence center of additional segment, comprise is the And value notification our our Avaya bundling ARR. Second, growth. fuel contact innovation helping offers as ARR AI, Avaya customers. to

you total are a contract In fact, deals value. take uplift in back a our and subscription look if hybrid average, on XX% step we seeing at

customers As we off their migrate models. maintenance

and strong. will innovation investments Our remain

have them looking experience. slowing we a and We are improve workforce customer customers to our are to because invested their help Avaya lot down not

over, with provide on me the at million Our additional for which financial form some dividends the color one to up $XXX we a performance our in are it and operate Kieran scale highlights few $XXX But from clearly can million of competitive is in outlook ARR us. quarter. turn let showing just year. investments just I from moments. before have share will in a advantage the the technology made growth we And along

Our strength than in from us prior $XX we technology million, committing are than million others with consistent TCV. signed remained deal quarters. million our that $XX roadmap. strategic, volume six the these deal their TCV, large align apart over greater XXX with their wallets million all us, enterprise the To business sizes customers that multiyear contracts needs with to two voting had than We in large, emphasize Avaya’s deals overall, $X greater peer and sets $X were greater group. six And deals nine

reinforcing significant of In XXXX, addition, well and competitiveness, the of our value differentiation again new logos once we number solutions. a signed over

our the OneCloud commitments vision have based cloud native professional hybrid the drive this the hospitals for we example to the KPI, $X.X just remains one our the a ramp a Avaya ARR CAPS TCV our year passed customers to They An highest across and we contracts, since with but nearly of contribution solution our on plus can solutions customers, we system in out. options offices from include converting with these subscription largest Customers on our customers, to successful value to offering making history. with QX, current deliberate of five-year enterprise in and shareholders. is are of effective cloud of Turning on most hospital logos our customers, the Since XXX ago, these to and recent U.S. their company's laid Health, most quarter, and last roadmaps signed the we making subscription Not XXX course, customers. launch. is they in This committing our hybrid. two customers are model validation of clinics standardize future. Avaya compelling are in nonprofit hybrid Within Ascension one the only three years deals launching for contract signed billion the mark new subscription new

seats a quarters combined, hit faster CCaaS, funnel equally previous the growth to notable we this quarter the grew and all-time Turning pace an high. at rate four as than

us the East and staff fully onboarding Avaya We we offer availability over long across our and that the engagement even to customer CCaaS seven Avaya segment out students funnel, user Middle into center and OneCloud training. size contact and Canada, channel partnership to and extend McMaster analytics BPOs Avaya CCaaS a a agent of the quota the offering. agents improving increase largest basis number challenges In Cloud has distributors times and Avaya and Teleservices, for of McMaster our that five new and We future to quality partner and selected three-year competitive OneCloud digital mid-market years. handling Cupola’s highly as and of Office the providers customers. address our and is our chose agility. of chose of reducing and in grown XX,XXX the service platform one in significantly geographic win and traction calendar for cloud with increasing remains solution experience XX,XXX carriers, unique differentiation Cupola centers, continued by to for contact year. University, deal the to We workforce basis improved beat integrated countries invest running CCaaS their primary Ontario, network end outsourced OneCloud Genesys customer of a of solid. thousands helping sales the grow below. for expanding are XXX the presales materially digital our

System, add to selected importance Authority, integration ACO through Health content CCaaS. the is with members into a UAB a an AT&T. recent We offering the differentiate platform our affiliate Avaya West specific Hospital Cloud for long partner example X,XXX including Avaya capabilities win. and enablement at their their XXX features with bringing they One our They time channel and Office Key off-campus own faxing, West Medical the integration of on continue hospital customer conferencing that list. are staff of such video partner our Avaya of platform continue efforts to helped Medical seat and growth yield the now Office results, positive ACO had Overall XX%, up locations. globally ticked XX% ACO and as XXX the box every was both over customers was up well number sold quarter. of new have partners to prior seats. Avaya from

So remain the I up, the to sum business of if it fundamentals strong. had

you over And through have revenue we that said, seen in the remains number result, communicated. take moved and to we have execution delivering I full focused. for previously As on With committed booked January, team's it and Kieran the deals out that already numbers. let the turn of we to a a that, year steady me as guidance remain

Kieran McGrath

Thank you, Jim. Good morning, everyone.

this otherwise reminder, all in figures as currency. unless constant a call mentioned As on reported indicated

QX made ratable had with the million. multi and financial QX primary a the $XXX bookings largest global highlighted pleased wins of in to We is CCaaS balance institution. $XXX in large the continuing million of OneCloud with $XX quarter, revenue contract Further, revenue at added This a and quarter Avaya are of $XXX signings the base. the OneCloud strong our largest signing expand signing by with new our was below very ending Avaya Avaya in million introduction the driven of history. of since progress ARR a OneCloud by one two million our in we very the guidance issues. is We

be resulted to in milestones be signed recognized lost, Cloud was future This to $XX but revenue subscription current was of revenue in specific future periods than periods. of This the guidance upon lower in million contracts not will hybrid primarily Firstly, revenue expectations. delivery approximately rather deliverables. contract and contribution One earned quarter related

unavailable mentioned, deals finalize $XX Jim at personnel December, to end just and approve as of several over being and key contracts to due million large dive the very POs. release stages in closing Secondly, their at late stalled

is can that top transition QX. of and to measure some line transition The growth, true the a in experience continued in expand rapidly choppiness. during ARR our has While seen

ARR up which Cloud year-over-year. million, exited and Our quarter metric One growth in at sequential represents the $XXX XX% XXX% is

This the through contribution internationally especially note quarter, we demand increased and strong adoption.

our contributing strong XX% portion with within of contact ARR. a see about ARR that total business to continue of from number We contribution center

of the fiscal ago our into X% sequentially, greater the in million and customers $XXX ARR. for Our status greater $XX paying year and reported million Alliance in contribution $XXX paying demonstrated leaders the approximately $X transformation of was is flat XX% numbers, total $X in the up number in than ARR of as annually. or XXXX growing CAPS the customers of enterprise than deeper down revenue customers of a of XX% against first revenue in another further our of Subscription, million ago Similarly million greater Getting number quarter particular, than million represents and total the the from and year in represented Revenue Cloud, as from Partner period. constant currency period. XX% indicator business paying

at total line XXXX, levels. versus software XX% our revenue recurring strong with terms devices accompany dollar continued and accounted revenue revenue. reflecting percent the quarter, for services revenue is in For software relatively fourth in in quarter KPI our of offerings. Subsequently QX. XX% came total total first revenue XX% revenue revenue XX% fiscal revenue, represented of of of newest recent at fiscal in Meanwhile, flat demand total revenue a of software that our for as Hardware

This the XX.X% profit gross compared metrics. gross XX.X% in and Turning by margin to period quarter, the was factors. sequentially. XX.X% our to in Non-GAAP first key was ago year two impacted

margin quarter software the revenue in from Cloud One to of contribution I and deals subscription point our above. First, hybrid revenue referenced handful time from of recognized high less slipped deals due lower level that software in

hardware mix the product segment. contribution Second, within the stronger

chain due Additionally, elevated gross industry-wide margins to hardware were costs. impacted significantly supply

to flow Turning profitability, margin for total metrics quarter. and the cash

basis margin a quarter points was quarter down basis and or $X.XX million. $XXX to representing in $XXX XX% year-on-year operations ago an impacts first was margin and representing from contributing of negative as year-on-year. of increased First non-GAAP to $X.XX adjusted of down the margin non-GAAP well revenue cloud a as the balance was operating cash million operating Cash Adjusted XX% $X.XX revenue sequentially. $XXX negative million XXX investments $XXX points EBITDA XX% EBITDA margin the due quarter, gross the XXX year in of in EPS ending total to million period Non-GAAP R&D go-to-market. and first was compared flow referenced

sales due call, earnings last CFFO payments our large commission incentive the our XXXX due large plan in to was discussed quarter payments to expected and our As fiscal results. our of negative for annual reps during

by receivable million This track related quarter. nearly a This large out which in impacted single on pushed quarter federal the is was was collection worth be collected government a to further $XX QX. of CFFO contractor, to

which end pool billings the million million at Investor a This Avaya. QX. $XXX contract largely an deferred of XXXX at $XXX to of assets, of future discussed to As strong grow continues the of QX reflects end represents Day, fiscal cash for collections from

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

our expect forward-looking $X fiscal the represents year-over-year. This expectation above metric, $XXX year growth with ARR At million and XX% previously at midpoint, reaffirms are or we target for year now XXXX the exiting and billion. of increasing In committed exit million. of ARR OneCloud year terms between calendar full our to of XXXX OneCloud the this $XXX guidance

Turning to revenue.

full We revenue guidance. year are reaffirming

to basis. revenue $X.XXX As and an billion continue year billion. has $X.XXX year-on-year basis X% X% constant current on to such, a of reported as between dollar X% continuing we We This expect pose our revenue. and growing and on the X% revenue the currency that full be U.S. a note between to to guided headwind a XXXX levels would beyond in strengthening

as XXXX, $XXX quarter about fiscal For anticipate X% constant revenues midpoint reported of of flat represents of million and to million, second currency which year growth the the at our $XXX basis. on we an

from XX% and $XXX of the year We implies margin. a million impact expect full full reflects be At to chain adjusted between prior $XXX the this midpoint, $XXX year million. EBITDA EBITDA EBITDA adjusted to $XXX supply reduction adjusted of higher The our million guidance million costs.

expect fiscal be the year operating for margin to XX%. non-GAAP We approximately

be our of and XX% $XXX between between to operating be between approximately quarter, or and second and margin million EBITDA to the million revenue. expected XX% XX% adjusted XX% is $XXX For non-GAAP and

be year for and to $X.XX. $X.XX the EPS to between $X.XX full prior non-GAAP expect year period. in the This compares We

between $X.XX ago quarter, the non-GAAP the of EPS period. year non-GAAP to compares $X.XX. For we in and expect to $X.XX be EPS This

For as approximately full expect a or prior the continue fiscal to guidance. to from unchanged CFFO year, be X% percent of we revenue

to I Before I turn career be Jim, that the another pursue want announce opportunity. to McCarthy call to back Mike Avaya will leaving

earnings closely I be within we’ve Mike weeks with joined years. three very each and Avaya. other So worked past Avaya will of and his this over these last six cycle

Relations many Mike time an he role. joined member team before Investor his With I as him in now like miss Nandan the to and will from since analyst of turn already call as you is luck his to the back Amladi. We Avaya wish that, equity best known and of be him Avaya Replacing XXXX. the VP Nandan a as Jim. of new June of would of Jim? to will

Jim Chirico

we was Last but the year our we’re over of transformation importantly, It’s and the only you, it. our their not years. Thank strategy how out, continued and past I’m the recognize confidence, to the positioned made in important for most team few in the Kieran. executing optimistic continue XXXX, have about we ability changes laid to have global to entering magnitude year high I business. of

We solidifying As will significant and are move will performance we lessons along there we believe ahead. our us growth. successes but and success forward, always we many, and long-term there and to been move of now we Long-term, drive robust us the the more inflection in will for work opportunity generate front growing we’ve implemented business model address transformation, remain as accelerate just help markets learned that. and additional is sustainable focused of our there’s the on do business our to continue have point we

along the customers X,XXX around thank focus I’d our please same questions. especially I value thank and tireless their And over trust their open for Avaya. to for operator, those that, X,XXX the customers. and like globe it to our on commitment for for want driving in partners Finally, With Avayans plus efforts with up

Operator

you. Thank

be Instructions] you. now will We session. question-and-answer [Operator conducting Thank a

Please with MacWilliams comes Our your question. proceed Barclays. from first question Ryan with

Ryan MacWilliams

remarks. guys and he question in McCarthy, I appreciate Kieran, Mike the congrats, the sure. taking color leaves in for but you missed, prepared hands will Thanks be for your good he

year then expand you revenue in than upon expect there, quarter? on coming revs deals, puts next the Can in that light lower majority the should these this like, million reason of the guidance this you the $XX push maintain that And the takes rev guide and Just full in were print? of quarter. to we come Thanks.

Jim Chirico

– more I add I’ll I’ll to Jim. turn bit color. is think to over Kieran it a now this Ryan, start and Yes. little

and So clearly really quarter ARR Once first, company million prepared of as we I strong $XX with the dollar pointed the stated history again, a out. deal in multi hundred of contract. our highlighted remarks, we had in bookings CCaaS as the signing a largest in OneCloud Avaya by the we’ve added million and

now to million. $XXX up We’re

take with you quite So largely of strong if kind QX, and up, a actually look it expectations. at signings sum in our were line

modeled customers however, private remarks One of to we originally subscription. cloud. in sort on our customers number what the important had of in notes, a saw we the accelerating choose that of is touched of as our are fact, we that and and public fact in instead And

to So obviously large strategy line that in customers revenue. the that that a I’d but it each enterprises, It’s position moving our say and trade make this short-term is an strategic to also customers. not very in important. our to off a partner solidifies be I’ll a had But in of impact every And that only what cloud. – in our on obviously and number fairness, really to deal, with our is time. cloud, And

the turn customers. our goal to continuing with our bit add to overall But of long ARR a the So, is continue to and I’ll model. out more it to and to relationships move color. cloud Kieran company over It’s to a little build success

Kieran McGrath

I the so question, into your revenue under two to break guidance forms. specifically Ryan, So,

I’ll $XX was quarter. out really First, what about pushed this million of call roughly

And we the point get inked. that So we would back time in terms will to from What deals come and of in revenue the those deal was thought be is to different. us. and quarter signed going

million is the that because really all couple that’s that? next as can say It’s couple might to what of more would the sign why million, the year, in the variability we deal, probably customer XX-ish deliverables, this bulk unique next revenue And terms, back come the will come they us the of it of that the final quarters. drive roughly over million about $XX years. any of like it, flexibility at of of will I $X-ish over the future quarter. give the Some

So as say, it affect overall the of the affect I signings, it the deal, endpoint. size can doesn’t the but

back rest Jim $X So deals in already I get that those would we about in-house. over in The expect slipped, talked say comes million them deals QX this year. of of about of that $XX time. as million-ish Then of related roughly here fact we the several and

key just year with about been If deals this deals, certainly saw imagine, these And of end you, the go CEO at $X not that they the a TCVs shutdown finalize times over years complex issue or unusual are from personnel, million. literally cycles companies, for into approval And I you it either finalize. and but we to XX several many you can these simply down, with the through highly from all to as C-office was at go down. think PO a available large tell would I’ve

reflection demand here and back that So to good of in it’s million really confidence QX. that comes a not $XX us

Ryan MacWilliams

do free flow. cash can And cloud in like know subscription looks down things then I you EBITDA you’re feel hear mentioned one closer prioritizing and versus wins. term just It about the with how balance to profitability quarter. your you the Glad it lower cash on but we your get be transition you position kind your Understood. time stepped item, of target? to as long messy minimum in cash as range subscription

Kieran McGrath

Right.

$XXX that, but we’ve flexibility, provides I’m doing at million incremental is like you support So $XXX to we’ve such to team with really on having to quite to confident that know, tuck-in facility. balance draw the that hand, revolving million a us liquidity without before any credit about able cash operate have as of on optimally said acquisitions. as

of we’re in honestly, on we near balances. revolving and that you utilize inventory any levels million at know, don’t and foresee the facility comfortable to at. on a has ARR the do about as that based the hand But plus We, maintain very So that $XXX term. need ABL availability,

As off end to ARR we see now, we of think we’ve coming towards out the signings a of expiring. state talked the to And to terms level this about of we start other new the year. end start back half of I this new begin swing hit of year, the back and in and more as in stuff steady the the

still why that’s So I’m this year. the with X% comfortable guidance for

Mike McCarthy

Okay.

question, Next Paul.

Operator

Thank you.

comes question question. your Capital with with Please next Group. Craig-Hallum proceed from George Our Sutton

George Sutton

the on Thank million you. Guys, competitive I’m particularly interested dynamics in that $XXX the win you had.

if that well. several forward is public you address mentioned message makes of obviously previous I’m you vendor that and this this takeaways, as I’m customer just curious a on move curious the was You could yours that with your cloud capabilities obvious, but

Jim Chirico

Hey this driving Yes, really they for we were and of deal providers for the many question. customer But this is and one footprint. your first Jim, relevance their did that CCaaS, is they traditional consolidated and UCaaS really we what digital one thanks George, it’s market it’s Yes. foremost, I would bring we across unique true to because highlights are the transformation technology, really basically deal. It’s call their complete enterprise. a integrating via of differentiation what not the business

lack are entire We of reimagining journey. customer term experience better their for

we But will next five agents. expanding agents XX,XXX years to with initially north in be starting the XX,XXX We’re or so. of

of sort Avaya that all we’re customer. capabilities others and sort simply designing functionalities a of will, of innovative that it’s really competency the the developing building combination those do stronger has capability, to our in bringing platform learning, innovation ecosystem, out the really in if So automation, not build for you the apps, machine

market other the with we the the of enterprises we that this, first business call as this a in and may the cases. as personalized provider is within really that currently XX interesting we’re this measures complexity. working complex dozen So, customer sort manage only use are regulatory but provide can compliance, that the large to I’ll sensitivity, today note be other large not believe is line

but So, because have we’re innovative have winning a the technology, projects, roadmap. these right strong, we solely not we

expertise We’re this the the the complete enterprises helping domain through large complex to manage guide of partner complex management sort right services, organization system, our and these very really journey. with transformation

So solidifying journey. a and really focusing around years on how value, three win us CCaaS our just been public that it’s work very for the exciting we last really the the but positioning really on not

George Sutton

MPC Got way it. to a took is like your away just your sounded differentiator Day, differentiator off coming be proving it into I the starting big one from ask follow-up certainly If I was message? the Is us? make marketing that Analyst perspective its a could that to as of that

Jim Chirico

yes, but give on to where additional enroll you or a on we I’ll the augment little over it Todd exactly is answer to update to marketplace. an provide to are turn and either The to color,

George Sutton

Media anchors. core process

Jim Chirico

Yes. Todd?

Todd Zerbe

you hear me? Can guys

Jim Chirico

Yep. we hear Can you.

Todd Zerbe

Okay.

Sorry.

demonstrates anchors is CCaaS millisecond our XX architecture our it in year. scale use years really We So the core media ahead in with to processing us a feel of utilization. bandwidth two cloud like global lower technology spaces features offers and Avaya’s cloud. generation it reduction, lead It AI is a in and product failover. We of public be puts available all next today, noise this XX% has generation competition It next it and at our architecture. will our media. It's it least ability mid cloud

our that public into is to we've So going heavily value additional pretty spaces the CCaaS. already providing be it's with and with that's market something released demonstrated our are that product it's a going something to knowing we've we that's and technology it

Operator

Thank you.

question. Vitanza Lance Company, Our next question Cowen from with with please comes proceed and your

Lance Vitanza

that great but inflated payments a upfront the ARR, just the to Hi larger of you whether guys. outperform metric by or for? me taking metric well, follow continues receive Or perhaps itself that could with discuss is have for upfront my report you question. But expectations. you that One as that Cloud start our for Thanks revenue guys virtue let work I recognize control you when on metric? you do up

Kieran McGrath

it. a question, That's Kieran. great its Lance Hey, you asked happy

the we annual So the metrics. do contract of essentially the what take is we value –

recognize the revenue. really with nothing more do divided is ARR the duration than the total So nothing the to we by TCV when has

So metric. it's recurring annualized an

from So no impact revenue.

Lance Vitanza

quarter. services? that And new Cloud us great. is Okay, how you at the taking logos follow rough but Thanks. apologize ARR many missed of I sense X,XXX if could added least those this, new you the are a I logos give just up And for One in my

Kieran McGrath

essentially for Well, XX% just by actually a or at over offering. hybrid it, – looking going are well it's just cloud either subscription

Lance Vitanza

Okay, great.

Operator

you. Thank

Colliers. Our with proceed with next your comes Trebnick Thank Please question you. Catharine question. from

Goldman Next Please question your Hall Sachs. from comes with with question. proceed Rod

Bala Raghav Reddy

want are implying also significant This guidance If ramp understand for in guidance, half, driving thanks Bala revenue, better the I Hi more particularly. better in I like in question. full-year look what margin in at significantly just for my just taking a half. you is to on but operating not second that second the looks Rod. so margins is

Kieran McGrath

– bottom mean, obviously Bala, that Kieran, clearly Well, the to deal Hi, Sure. I great it’s right – a line. of drives cloud profit,

literally for impacted some know, quite margin up we've a of the from time. go-to-market our QX What that just R&D was perspective ramping been revenue. us absence high in You that investment very and an both

So into revenue dealings generate see cloud, as private and half out the start year, continuing bouncing starts our the back to that many we the and now cloud ramp revenue. the that And we to back public of to with we’ve look booked. a of

Some And and that sitting half the all the our to of second and without that year the margin in of the and absorbs back as start in revenue the was to quarter. well. revenue now it in get better cost numbers ramp starts that already cost significantly as first

Jim Chirico

I’ll at a add Yes. Kieran. bit And maybe just little

a take to with to take of these complexity the anywhere agree execution say deals, between six on design profile, at you with the our the on you if can activate. full scope months, size move three imagine actually obviously to So they cloud, based and begin and look customers plan the the

than four So my did mentioned more we as last combined. previous on in did script we CCaaS, the I quarter quarters

with to in our solutions. start the same frankly cloud those second and will half we So those deploy private roll year, out of

quarter second we’re in revenue XX% the time the And then, as quarter in that subscription after roughly year. quarter. is ratably offer, hybrid to build with Thirdly deal our that that or the realize success start able we’ve residual so fact where claim continues large will to half mentioned, revenue the point that on XX% to had I of after

reaching point how overall a obviously recurring yield there’s our this in our So that’s with of which overall significant half backlog. year strategy. starting point really of XX% inflection now sort the we’re the frankly revenues, to now of about And revenue are the with second consistent

point monetizing of confident and XXXX, year lose volume through ability valued we was of don’t or subscription the what large of then deals, win pushed mentioned And year. make the half into of and from the we’re these balance didn’t we second the recurring. continue we more that that better lack at is on to for our roll as this in quarter. fact and the why we It a moving we’re first as to term So forget to activating now the any the

is and sure range. in obviously come guidance we So make confident our that why meet we’re actually the that’s same why ability and guidance the to in

Bala Raghav Reddy

push I in a Got deal I you [indiscernible] the what to maybe the Jim? caused caused to want that, Also on on up better that have slow it. lack drove but Could was really want surprise might what’s mentioned, you that more, really of of I touch just Thanks. that like personal expand unexpected this I out understand deals? bit think activity. heard down think commercial I

Jim Chirico

was felt last not and the getting there of mean, in that. out just think of North terms the that come obviously Omicron the again, of unusual and stopped contracts there impact there there. of close and I quarter go and much America, was were customers rock deals. to over or it handful highly the literally unusual, listen, mean, mostly do the the did line QX, But not, were I at they had but folks right. many that they in And an due And these the is Yes. push from Quite was and not – that to we’re engaging POS deals quarter, and the saying we many the not it nobody a on solid used QXs. finalizing in issuing that that. the quarter several I they in end days quarter frankly on even people time all into the of we pretty highly deals

Operator

Thank you.

proceed question next question. with from Please Our comes with your Trebnick Catherine Collier.

Catherine Trebnick

you. Thank

Let’s hope I don’t get go see dropped congratulations. you again in the middle sad of the question. Mike, to

So then perpetual you light, if my with gross as licenses the were question the product Thanks. can the margins affect you came in at that the did XXX between asked license. that million, parse And perpetual revenue you hardware, well? the

Jim Chirico

Sure.

So Catherine, you are spot it. on

was hardware in relatively actually for Our were million we and where QX. $XX flat about in

XX% more a demand like, continued pent-up we And pretty for generally So of That of therefore lot the consistent. XX% margins historically. hardware that was sort see devices. in to is to

expecting but to we’re we half So impact quarter. on little a been in period ease on manufacturing we actually the and and commodity Addition something bit million starts to freight an that, the And cost, in about actually about with that worth supply incremental a cost, in costs saw that’s expect we’ve incremental probably in the million of some continue shipping what year. the have $X going in of base from $XX QX, was saw which volume hearing adjusted, about chain margin. perspective a to second roughly that’s $X from million here will we

margin. about point a margin, also gross impact on basis, at revenue on flat, of though it I it relatively definitely The a of revenue, hardware a look there clearly So was product increase, chain north large very and XX% lower as larger our margin total to margins a overall impacted is that percentage a a that's had in margin has margin year-on-year – was clearly was software supply well. even overall, if

services that away shift subscription from traditional we away of remember, we some buying as CapEx and into of sales. from and as subscription product migrate to the expected hybrid would've part move Although customers to

Catherine Trebnick

All right, thanks.

Operator

Thank you.

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

Joe Cardoso

is Joe on this Cardoso Samik. for Hi,

from question me one Just guys.

ARR you're guide look at year. we your first of months activity that As seeing the in the two updated the and

seeing penetration curious any And existing quarter? those whether you're your hear to how thinking changes as versus like of the well new Just customer between increases? you. dynamics base as Thank content install you're between let's to last dynamics wins say about

Jim Chirico

I would guess say of the customers. general dollars of to driven the predominance what the be by existing our continue migration is I vast in

perspective and the candid up expand But relatively model, all said traditional was couple of over we adapt, we so far. time. quarters out land, in step it small the of in logos a this to – right? XXX hybrid at we've right? They a big last quarter landing new the started over into seen expand last almost points, go from quarter, those As number to the that see layer biggest renew are subscription We

the So XX% it that's logos not coming be would but some, earlier having cloud an migration on to are over about hybrid. Albeit most our dollars, as big and of I new effect I talked with of as subscription from behind the overall engine continues say supplement

Stephen Spears

Yes.

just a to maybe little bit Just Kieran. say

to to And important us. last over really is over ARR customers. that million hybrid months, ARR and cloud. market. added innovation all, we've a new consecutive over seven We're subscription XXX roughly XX public from now starting bringing added now to real acceleration to quarters we're of TCV. first than We've So private the But of of see deals, the our by is greater more driven X,XXX our

with video as value list on. what technology capabilities media, continued into technology demonstrating list bringing goes we're – far that around as voice AI capabilities, marketplace it platforms, and be and So and goes management social the on new the the

So really relevance. of driving degree a higher

take with think in ARR, starting really term focusing and and implementation long-long line building successful is of strategy. lens on our really – the to, I the with to plan really right importance hold recognize and the our So of

continue we're So believe obviously approach, It's important doing which we're well we it's important think we transformation this progress, we keep make about to this transition doing. disciplined quite which and for to sure us on. us as steady for that

and, and have we that product expertise and is preference many You equally in number doing may think continued preference. to that bring product our in most is weeks been and the to others skillset the days UC our customer thing in fluctuations of of sort important, – from and capabilities. technology which deals movement from, we've we global us the years growth, base differentiate CC the I But have important the more steady or progress

are we is these may you areas long-term stronger another, believe and a we hold, one the "very sway robust" to and in strategy again, way but it get or see So take than your obviously stronger in driving we're it's than our reflective customer value long-term move of to that base for ever. more and ARR. because – And seeing it exciting cloud now long-term us this is with

a a the year going time. of end That growth this billion. just I ago, period year significant to at of is As said, be we're two year X were XXX, we

Operator

Thank you.

question. Asiya Merchant next comes the proceed your with with from question Please Citigroup. Our

Asiya Merchant

that. talk opportunity, And but provided. about, Thank the on talked you've Mike and that questions you. Great. a have can been definitely have congrats, guys you on the we'll about, for any answered, and of Most new I help you you all question something maybe miss did thank that updates to my you

think monthly of UCC about you you quarter, referenced progressing, out, Analyst you CC how your about the you could model talked and seeing. as monthly that's guys Analyst generate. kind the recurring little that kind about, the revenue to your that the current that during can revenue You a event guys that about was you bit it Day recurring that lower, relative at to put or relative the And if of talk just were potential

those could, about great. that if out in you you're you talk Thank seeing what be know, So areas, would you.

Kieran McGrath

Kieran. Hey, its Asiya

you're divided obviously hybrid correct subscription of on you aggregate in Obviously, I really recognition that And, just continue from the of a revenue given portion recurring think what to MRR about, the build our are obviously, that revenues So existing that. changed. around hasn't, that right? just XX ARR, hasn't is base our talking and by we

but and billing go expect beyond we time Jim complex Once an half about deals, that it's continue to for Day, did revenue the one subscription to through blip start we in cloud. XX/XX And it, a more and we our revenue base you of move cloud. our that in of last ongoing in because overtime, are build don't just we counting we basis. actually, of large, a and towards ARR a represented second now last, see some we time, start recurring point quarter and right start hybrid see in as expect yet, MRR we the we it our we'll in know, because to said recurring more would as Analyst enterprise that year. until on What good like to these that of or between will, some our the versus You of referenced, off and of the don't it towards we'll XX/XX see, contribute ARR start rather we'll to the that that see we billing start continue

addition backlog, all a in will. So, to and between quite we honestly, that, But $XX some if significant across you cloud hybrid. to pretty this we were distribution that to recognized within ARR our starting subscription of nice very quarter generate see million pleased facets

on me moment let one just that. spend Now,

we So, pretty conservative have booking.

are overall conservative, in pretty We booking. our

bookings, our the only $XXX that's booked enterprise, deal we expect of on So achieve based we based upon quarter. the this for that committed in million little that recent And most will do we booked we on And really we milestones. year. we large less that because would as this through financial go add multi milestones XX% a actually we than that as global

not in we that backlog necessarily queue. we yet that's again, our we're RPO So representing that our publish, have in that

Asiya Merchant

Okay, great. you. Thank

Operator

Thank you.

with Financial. comes Please question Khorsand your BWS from question. Hamed with proceed next Our

Hamed Khorsand

happened to everything good funnel? Hey, and sales the team stop the just see what restart to with again? happened, I lockdowns sales over Did morning. to that have the just wanted

Jim Chirico

missed sorry; your I'm Jim. of first part the This I question. is

Kieran McGrath

sales About funnel.

Jim Chirico

were deals worth those the total. million there deals another Listen, no, no mean, done this to done. procurement here fact, if either world will They given, quarter, I the it. take from apple the of mean, they're were were can. I or always to in, I February. is the $XX early far in be teams bite about going but close it'll that January Right. mean, I these be in world deals of there. And in reality they a No, were in that's at again, mean, it's

Hamed Khorsand

then expenses recognized related the much how million $XXX to in the my was And were deal other this of quarter? question December

Jim Chirico

We're be $XXX going this up would a comparison we be proof-of-concepts our days, customers, we that to to early service but it's starting multi to going some the staff, And to small size in have to that deal. Obviously large, and in a have is number, hosting. cetera, of staff, small. obviously, infrastructure to stand already et relatively delivery give, pretty that million we're be our that's we're pretty, to ongoing,

Operator

this Mike turn would are any Thank you. closing like for time. to no back to further at I comments. the There question McCarthy floor over

Mike McCarthy

look everyone Have thanks good us for you December this soon. speaking forward to for conference And We'll joining the week. call. Paul. Thanks, with morning quarter a

Operator

conference. concludes today's This

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

Avaya (AVYA) 9 Feb 222022 Q1 Earnings call transcript