SANTA CLARA, CA--(Marketwired - Nov 11, 2015) -

Fourth Quarter Fiscal 2015:

• Revenue of $1,008 million
• Operating Income of $100 million, Non-GAAP Operating Income⁽¹⁾ of $202 million
• Adjusted EBITDA⁽¹⁾ of $246 million, 24.4% of revenue

Fiscal Year 2015:

• Revenue of $4,081 million
• Operating Income of $371 million, Non-GAAP Operating Income⁽¹⁾ of $718 million
• Adjusted EBITDA⁽¹⁾ of $900 million, 22.1% of revenue
• Record levels for Product Gross Margin and Service Gross Margin

Avaya reported financial results for the fourth fiscal quarter and fiscal year ended September 30, 2015.

Total revenue for the fourth quarter was $1,008 million, up $9 million compared to the prior quarter, down year-over-year, and within the Company's expected range. For the quarter, adjusted EBITDA⁽¹⁾ was $246 million which compares to adjusted EBITDA of $207 million for the prior quarter and $253 million for the fourth quarter of fiscal 2014. GAAP operating income was $100 million and non-GAAP operating income was $202 million which compares to non-GAAP operating income of $161 million for the prior quarter and $212 million for the fourth quarter of fiscal 2014. 

For fiscal 2015, Avaya reported revenue of $4,081 million, down 7% compared to fiscal 2014 revenue of $4,371 million, or down 4% in constant currency. GAAP operating income was $371 million and non-GAAP operating income was $718 million in fiscal 2015 compared to $727 million in fiscal 2014. Fiscal 2015 adjusted EBITDA of $900 million was $2 million higher compared to fiscal 2014. Free cash flow was $91 million for the fiscal year, with cash and cash equivalents totaling $323 million as of September 30, 2015. 

"The transformation of the company advanced throughout fiscal 2015. We saw positive leading indicators of demand and grew revenue in our areas of investment and diversification. Operationally, we extended our multi-year upward trend of increased gross margin and adjusted EBITDA percentage for the fifth consecutive year," said Kevin Kennedy, president and CEO. "In fiscal 2016, Avaya will continue to focus on operational optimization to increase its margins and will continue providing the market with industry leading products and services."

Fourth Fiscal Quarter Highlights

• Product book-to-bill for the quarter was greater than 1.0. Total bookings for the fourth quarter were 3% below the prior year in constant currency
• Total revenue under contract was $3.0 billion and increased 1% from the fourth quarter of fiscal 2014 in constant currency. Included in revenue under contract is contracted revenue for private cloud and managed services which increased 11% from the fourth quarter of fiscal 2014 in constant currency, ending the quarter at over $800 million
• Revenue from flagship products and services accounted for a record 49% of total revenue and revenue from core products and services accounted for 43% of total revenue
• Gross margin was 61.1% compared to 58.5% for the prior quarter and 58.2% for the fourth quarter of fiscal 2014 
• Non-GAAP gross margin was 62.0% compared to 59.5% for the prior quarter and 59.7% for the fourth quarter of fiscal 2014
• Adjusted EBITDA was $246 million or 24.4% of revenue compared to $207 million or 20.7% of revenue for the prior quarter and $253 million or 22.5% of revenue for the fourth quarter of fiscal 2014
• For the fourth fiscal quarter, percentage of revenue by geography was:
  • U.S. - 56% 
  • EMEA - 24%
  • Asia-Pacific - 11% 
  • Americas International - 9%

Fiscal Year Highlights

• Total bookings for the fiscal year were down 2% compared to fiscal 2014 in constant currency
• Revenue of $4,081 million was down $290 million compared to fiscal 2014, and was $168 million lower in constant currency
• Product revenue of $2,029 million was down $167 million compared to fiscal 2014, and was $123 million lower in constant currency
• Services revenue of $2,052 million down $123 million compared to fiscal 2014, and was $45 million lower in constant currency
• Gross margin was 59.5% compared to 57.2% for fiscal 2014
• Non-GAAP gross margin was 60.5% compared to 58.9% for fiscal 2014
• Adjusted EBITDA was $900 million or 22.1% of revenue compared to $898 million or 20.5% of revenue for fiscal 2014
• For the fiscal year, percentage of revenue by geography was:
  • U.S. - 54% 
  • EMEA - 26%
  • Asia-Pacific - 10% 
  • Americas International - 10%

Conference Call and Webcast
Avaya will host a financial results webcast and conference call to discuss its financial results and Q&A at 11:00 AM PST on November 11, 2015. On the call will be Kevin Kennedy, president and CEO, and Dave Vellequette, CFO. The call will be moderated by John Nunziati, senior director of investor relations.

To join the financial results live webcast and view supplementary materials, listeners should access the investor page of Avaya's website (www.avaya.com/investors). Following the live webcast, a replay will be available at the same web address in the event archives. 

To access the financial results live webcast by phone, dial 877-876-9177 in the U.S. or Canada and 785-424-1666 for international callers, using the conference ID: AVQ415. Listeners should access the webcast or the call 10-15 minutes before the start time to ensure they are connected prior to the start time. 

A replay of the financial results live webcast and conference call will be available beginning at 11:00 AM PST on November 12 through December 12, 2015, by dialing 800-688-4915 within the United States or 402-220-1319 outside the United States.

2015 Analyst and Investor Meeting
Avaya announced previously that it will be hosting a meeting for analysts and investors on Thursday, November 12, 2015 at 1:00 PM PST. The meeting will be webcast live for remote participation. Details for accessing the webcast and supporting slides, which will be posted before the start of the event, can be found on the Investor Relations page of the company's website, at this link: http://www.avaya.com/investors/events/avaya-2015-analyst-and-investor-meeting/ Access to an archived replay of the event will be available at the same site, starting at 8 AM PST on Friday, November 13, 2015.

About Avaya
Avaya is a leading provider of solutions that enable customer and team engagement across multiple channels and devices for better customer experience, increased productivity and enhanced financial performance. Its world-class contact center and unified communications technologies and services are available in a wide variety of flexible on-premise and cloud deployment options that seamlessly integrate with non-Avaya applications. The Avaya Engagement Environment enables third parties to create and customize business applications for competitive advantage. Avaya's fabric-based networking solutions help simplify and accelerate the deployment of business critical applications and services. For more information please visit www.avaya.com. 

Certain statements contained in this press release may be forward-looking statements. These statements may be identified by the use of forward-looking terminology such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "plan," "potential," "predict," "should" or "will" or other similar terminology. We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these are reasonable, such forward looking statements involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors may cause our actual results to differ materially from any future results expressed or implied by these forward-looking statements. For a list and description of such risks and uncertainties, please refer to Avaya's filings with the SEC that are available at www.sec.gov. Avaya disclaims any intention or obligation to update or revise any forward-looking statements.

¹ Refer to Supplemental Financial Information accompanying this press release for a reconciliation of GAAP to non-GAAP numbers and for reconciliation of adjusted EBITDA for the third quarter of fiscal 2015 see our Form 8-K filed with the SEC on August 4, 2015 at www.sec.gov.

Avaya Inc.
Consolidated Statements of Operations
(Unaudited; in millions)
				Three months ended September 30,								Fiscal year ended September 30,
				2015				2014				2015				2014
REVENUE
	Products			$	499			$	579			$	2,029			$	2,196
	Services				509				547				2,052				2,175
					1,008				1,126				4,081				4,371
COSTS
	Products:
		Costs (exclusive of amortization of acquired technology intangible assets)			173				221				744				854
		Amortization of acquired technology intangible assets			9				14				35				56
	Services				210				236				872				962
					392				471				1,651				1,872
GROSS PROFIT					616				655				2,430				2,499
OPERATING EXPENSES
	Selling, general and administrative				346				376				1,432				1,531
	Research and development				82				90				338				379
	Amortization of acquired intangible assets				57				56				226				227
	Restructuring charges, net				30				71				62				165
	Acquisition-related costs				1				-				1				-
					516				593				2,059				2,302
OPERATING INCOME					100				62				371				197
	Interest expense				(117	)			(112	)			(452	)			(459	)
	Loss on extinguishment of debt				-				-				(6	)			(5	)
	Other income, net				11				33				13				25
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES					(6	)			(17	)			(74	)			(242	)
Provision for income taxes of continuing operations					(67	)			(32	)			(67	)			(51	)
LOSS FROM CONTINUING OPERATIONS					(73	)			(49	)			(141	)			(293	)
Income from discontinued operations, net of income taxes					-				30				-				62
NET LOSS				$	(73	)		$	(19	)		$	(141	)		$	(231	)

Avaya Inc.
Consolidated Balance Sheets
(Unaudited; in millions)
			September 30, 2015				September 30, 2014
ASSETS
	Current assets:
	Cash and cash equivalents		$	323			$	322
	Accounts receivable, net			678				745
	Inventory			174				197
	Deferred income taxes, net			23				24
	Other current assets			171				211
	TOTAL CURRENT ASSETS			1,369				1,499
	Property, plant and equipment, net			282				281
	Deferred income taxes, net			50				52
	Acquired intangible assets, net			970				1,224
	Goodwill			4,074				4,047
	Other assets			130				99
TOTAL ASSETS			$	6,875			$	7,202
LIABILITIES
Current liabilities:
	Debt maturing within one year		$	7			$	19
	Accounts payable			379				416
	Payroll and benefit obligations			229				228
	Deferred revenue			665				668
	Business restructuring reserve, current portion			90				86
	Other current liabilities			279				254
TOTAL CURRENT LIABILITIES				1,649				1,671
	Long-term debt			5,960				5,949
	Pension obligations			1,690				1,535
	Other postretirement obligations			194				273
	Deferred income taxes, net			263				249
	Business restructuring reserve, non-current portion			67				119
	Other liabilities			415				475
TOTAL NON-CURRENT LIABILITIES				8,589				8,600
Commitments and contingencies
STOCKHOLDER'S DEFICIENCY
	Common stock			-				-
	Additional paid-in capital			2,981				2,962
	Accumulated deficit			(4,972	)			(4,831	)
	Accumulated other comprehensive loss			(1,372	)			(1,200	)
TOTAL STOCKHOLDER'S DEFICIENCY				(3,363	)			(3,069	)
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIENCY			$	6,875			$	7,202

Avaya Inc.
Condensed Statements of Cash Flows
(Unaudited; in millions)
				Fiscal year ended September 30,
				2015				2014
Net cash (used for) provided by:
	Net loss			$	(141	)		$	(231	)
	Income from discontinued operations, net of income taxes				-				62
	Loss from continuing operations				(141	)			(293	)
		Adjustments to loss from continuing operations for non-cash items			440				467
		Changes in operating assets and liabilities			(84	)			(138	)
		Continuing operating activities			215				36
		Discontinued operating activities			-				4
	Operating activities				215				40
	Investing activities				(129	)			68
	Financing activities				(53	)			(60	)
	Effect of exchange rate changes on cash and cash equivalents				(32	)			(14	)
Net increase in cash and cash equivalents					1				34
Cash and cash equivalents at beginning of period					322				288
Cash and cash equivalents at end of period				$	323			$	322

					Avaya Inc.
					Supplemental Schedules of Revenue
					(Unaudited; in millions)
Three Months Ended									Three Months Ended September 30,
									Revenues				Mix				Change
Dec. 31, 2014		Mar. 31, 2015		June 30, 2015					2015		2014		2015		2014		Amount		Pct.		Pct., net of FX impact
						Revenue by Segment
481		$440		$435		GCS			$440		$520		44%		46%		$(80)		-15%		-13%
68		47		59		Networking			59		59		6%		5%		-		0%		2%
549		487		494		Total ECS product revenue			499		579		50%		51%		(80)		-14%		-12%
530		508		505		AGS			509		547		50%		49%		(38)		-7%		-3%
1,079		$995		$999		Total revenue			$1,008		$1,126		100%		100%		$(118)		-10%		-7%
						Revenue by Geography
572		$531		$538		U.S.			$562		$588		56%		52%		$(26)		-4%		-4%
						International:
301		266		263			EMEA		243		321		24%		29%		(78)		-24%		-19%
101		104		107			APAC - Asia Pacific		113		111		11%		10%		2		2%		4%
105		94		91			Americas International - Canada and Latin America		90		106		9%		9%		(16)		-15%		-3%
507		464		461		Total International			446		538		44%		48%		(92)		-17%		-11%
1,079		$995		$999		Total revenue			$1,008		$1,126		100%		100%		$(118)		-10%		-7%

Use of non-GAAP (Adjusted) Financial Measures

The information furnished in this release includes non-GAAP financial measures that differ from measures calculated in accordance with generally accepted accounting principles in the United States (GAAP), including adjusted EBITDA, non-GAAP gross margin as a percentage of revenue, and non-GAAP operating income.

EBITDA is defined as net income (loss) before income taxes, interest expense, interest income and depreciation and amortization and excludes the results of discontinued operations for all periods presented. Adjusted EBITDA is EBITDA further adjusted to exclude certain charges and other adjustments as described in our SEC filings.

We believe that including supplementary information concerning Adjusted EBITDA is appropriate because it serves as a basis for determining management and employee compensation. In addition, we believe Adjusted EBITDA provides more comparability between our historical results and results that reflect purchase accounting and our current capital structure. Accordingly, Adjusted EBITDA measures our financial performance based on operational factors that management can impact in the short-term, namely the Company's pricing strategies, volume, costs and expenses of the organization.

Adjusted EBITDA has limitations as an analytical tool. Adjusted EBITDA does not represent net income (loss) or cash flow from operations as those terms are defined by GAAP and does not necessarily indicate whether cash flows will be sufficient to fund cash needs. While adjusted EBITDA and similar measures are frequently used as measures of operations and the ability to meet debt service requirements, these terms are not necessarily comparable to other similarly titled captions of other companies due to the potential inconsistencies in the method of calculation. Adjusted EBITDA does not reflect the impact of earnings or charges resulting from matters that we consider not to be indicative of our ongoing operations. In particular, our formulation of Adjusted EBITDA allows the addition of certain non-cash charges that are deducted in calculating net income (loss), restructuring charges, certain fees payable to our private equity sponsors and other specific cash costs and expenses and that portion of our pension costs, other post-employment benefits costs, and non-retirement post-employment benefits costs representing the amortization of pension service costs and actuarial gain or loss associated with these employment benefits as set forth in the reconciliation of GAAP to non-GAAP numbers shown below. However, these are expenses that may recur, may vary and are difficult to predict.

Non-GAAP gross margin excludes the amortization of acquired technology intangible assets, share based compensation, impairment of long lived assets and purchase accounting adjustments. We have included non-GAAP gross margin because we believe it provides additional useful information to investors regarding our operations by excluding those charges that management does not believe are reflective of the Company's ongoing operating results when assessing the performance of the business.

Non-GAAP operating income excludes the amortization of technology intangible assets, restructuring and impairment charges, acquisition and integration related costs, share based compensation, impairment of long lived assets and purchase accounting adjustments. We have included non-GAAP operating income because we believe it provides additional useful information to investors regarding our operations by excluding those charges that management does not believe are reflective of the company's ongoing operating results when assessing the performance of the business.

These non-GAAP measures are not based on any comprehensive set of accounting rules or principles and have limitations as analytical tools in that they do not reflect all of the amounts associated with Avaya's results of operations as determined in accordance with GAAP. As such, these measures should only be used to evaluate Avaya's results of operations in conjunction with the corresponding GAAP measures.

The following tables reconcile GAAP measures to non-GAAP measures:

Avaya Inc.
Supplemental Schedule of Non-GAAP Adjusted EBITDA
(Unaudited; in millions)
		Three months ended September 30,								Fiscal year ended September 30,
		2015				2014				2015				2014
Loss from continuing operations		$	(73	)		$	(49	)		$	(141	)		$	(293	)
	Interest expense		117				112				452				459
	Interest income		-				(1	)			(1	)			(2	)
	Provision for income taxes		67				32				67				51
	Depreciation and amortization		92				98				371				434
EBITDA			203				192				748				649
	Restructuring charges, net		30				71				62				165
	Sponsors' fees		2				1				7				7
	Acquisition-related costs		-				-				1				-
	Integration-related costs		2				2				3				7
	Divestiture-related costs		-				-				-				2
	Loss on extinguishment of debt		-				-				6				5
	Third-party fees expensed in connection with the debt modification		-				-				8				2
	Non-cash share-based compensation		4				5				19				25
	Gain on investments and sale of long-lived assets, net		-				-				(1	)			-
	Gain on sale of TBU business		-				(14	)			-				(14	)
	Change in certain tax indemnifications		-				(1	)			(9	)			4
	Venezuela hyperinflationary and devaluation charges		-				-				-				2
	Resolution of certain legal matters		-				-				-				8
	Gain on foreign currency transactions		(12	)			(17	)			(14	)			(18	)
	Pension/OPEB/nonretirement postemployment benefits and long-term disability costs		17				13				69				51
	Other		-				1				1				3
Adjusted EBITDA		$	246			$	253			$	900			$	898

Avaya Inc.
Supplemental Schedules of Non-GAAP Reconciliations
(Unaudited; in millions)
				Three Months Ended
				Sept. 30,				Dec. 31,				Mar. 31,				June 30,				Sept. 30,
				2014				2014				2015				2015				2015
Reconciliation of Non-GAAP Gross Profit and Non-GAAP Gross Margin
	Gross Profit			$	655			$	638			$	592			$	584			$	616
	Gross Margin				58.2	%			59.1	%			59.5	%			58.5	%			61.1	%
	Items excluded:
		Amortization of acquired technology intangible assets			14				9				7				10				9
		Share-based compensation			3				2				-				-				-
	Non-GAAP Gross Profit			$	672			$	649			$	599			$	594			$	625
	Non-GAAP Gross Margin				59.7	%			60.1	%			60.2	%			59.5	%			62.0	%
Reconciliation of Non-GAAP Operating Income
	Operating Income			$	62			$	104			$	83			$	84			$	100
		Percentage of Revenue			5.5	%			9.6	%			8.3	%			8.4	%			9.9	%
	Items excluded:
		Amortization of acquired intangible assets			70				66				64				65				66
		Restructuring charges, net			71				15				10				7				30
		Integration-related costs			3				1				-				-				2
		Acquisition-related costs			-				-				-				1				-
		Share-based compensation			5				7				4				4				4
		Other			1				-				1				-				-
	Non-GAAP Operating Income			$	212			$	193			$	162			$	161			$	202
	Non-GAAP Operating Margin				18.8	%			17.9	%			16.3	%			16.1	%			20.0	%

Avaya Inc.
Supplemental Schedules of Non-GAAP Reconciliation of Gross Profit and Gross Margin by Portfolio
(Unaudited; in millions)
			Three Months Ended
			Sept. 30,				Dec. 31,				Mar. 31,				June 30,				Sept. 30,
			2014				2014				2015				2015				2015
Reconciliation of Non-GAAP Gross Profitand Non-GAAP Gross Margin - Products
	Revenue		$	579			$	549			$	487			$	494			$	499
	Costs (exclusive of amortization of technology intangible assets)			221				203				182				186				173
	Amortization of technology intangible assets			14				9				7				10				9
	GAAP Gross Profit			344				337				298				298				317
	GAAP Gross Margin			59.4	%			61.4	%			61.2	%			60.3	%			63.5	%
Items excluded:
	Amortization of acquired technology intangible assets			14				9				7				10				9
Non-GAAP Gross Profit			$	358			$	346			$	305			$	308			$	326
Non-GAAP Gross Margin				61.8	%			63.0	%			62.6	%			62.3	%			65.3	%
Reconciliation of Non-GAAP Gross Profitand Non-GAAP Gross Margin - Services
	Revenue		$	547			$	530			$	508			$	505			$	509
	Costs			236				229				214				219				210
GAAP Gross Profit				311				301				294				286				299
GAAP Gross Margin				56.9	%			56.8	%			57.9	%			56.6	%			58.7	%
Items excluded:
	Share-based compensation			3				2				-				-				-
Non-GAAP Gross Profit			$	314			$	303			$	294			$	286			$	299
Non-GAAP Gross Margin				57.4	%			57.2	%			57.9	%			56.6	%			58.7	%