Avaya Holdings Corp.

Greetings. Welcome to Avaya Fiscal 2021 Third Quarter Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Michael McCarthy, Vice President of Investor Relations. Thank you. You may begin.

Thank you. Welcome to Avaya's Fiscal 2021 Q3 Investor Call. Jim Cherico, our President and CEO, Kieran McGrath, our Executive Vice President and CFO, will lead this morning's call and share with you some prepared remarks before taking your questions. Joining them this morning will be Anthony Bartolo, Chief Product Officer, Stephen Spears, Chief Revenue Officer, and Dennis Kozak, Senior Vice President of Global Channels. Consistent with social distancing mandates, each of us on this morning's call are assembled from our remote locations. The earnings release and investor slides, which include highlights of our ESG initiatives and performance, referred to on this morning's call, are accessible on our investor page of our website, as well as in the 8K file today with the SEC. These should aid you in your understanding of Avaya's financial results. All financial metrics referenced on this call are non-GAAP, with the exception of revenue, we have included a reconciliation of such non-GAAP metric measures to GAAP in the earnings release and investor slides. We may make forward-looking statements that are based on current expectations, forecasts, and assumptions, which remain subject to risks and uncertainties that could cause actual results to differ materially. In particular, if the global economy continues to be impacted by COVID-19, and the extent of its continued impact on our business will depend on a number of factors that include, but may not be limited to, the virus's severity and duration, including the emergence of new variants, as well as actions taken or not taken by governments, businesses, and consumers in response to the pandemic, all of which continue to evolve and remain uncertain at this time. Information about risks and uncertainties may be found in our most recent filings with the SEC, including our Form 10-K and subsequent 10-Q reports. It is Avaya's policy not to reiterate guidance, and we undertake no obligations to update or revise forward-looking statements in the event facts or circumstances change, except as otherwise required by law. I will now turn the call over to Jim.

Thanks, Mike. Good morning, everyone, and thanks for joining us today. Across every business segment and industry, we are seeing large enterprises turning to Avaya more and more to guide them through their digital transformation journey. Our technology and solutions are providing customers with the ability to grow their businesses while improving their own customer experiences, and we continue to make the investments that strengthen our portfolio, drive innovation, and extend our digital capabilities to meet the new and emerging opportunities in front of us. Our third quarter performance speaks volumes to the significant progress we've made on the transformational journey that we embarked on. We are executing ahead of plan, and I cannot be prouder of the Avaya team for their resiliency, adaptability, and the capabilities they bring to bear each and every day. The solid financial results we delivered exceeded expectations across the board in revenue, profitability, and most importantly, in ARR. Equally encouraging is that we are seeing strong performance across all areas of our business, including our traditional business segments. Our three-pronged strategy to transform to cloud and SaaS, grow the business, and sustain our highly profitable business model continues to guide the way we are operating, and we will continue to double down on our strengths in these areas. Starting with ARR, Q3 represented another strong quarter, growing 23% sequentially and over 275% from a year ago. Our growth continues to outpace our plan, and as a result, we are again raising our the high end of our guidance to $500 million for the end of the fiscal year. It is noteworthy that over 95% of our ARR comes from enterprise contracts greater than $100K in value, and over a fifth of our deals are greater than $5 million in value. This is a testament to the strength of our brand, innovation, and digital capabilities, and underscores our leading position as the partner of choice to enterprise companies who rely on Avaya to power their mission-critical operations. ARR is a true indicator of traction in our transition to cloud and SaaS, and we will grow from nearly 200 million in FY20 to 490 to 500 million at the end of FY21. We are well ahead of schedule, and we are now anticipating to hit 1 billion in ARR by the end of 2022. Moving to revenue. we delivered our fifth consecutive quarter of year-over-year revenue growth. The composition of that revenue continues to improve, with 40% coming from caps, over 64% of it recurring in nature, and roughly 90% of revenue from software and services. Our revenue performance continues to improve, and it is reflective of the investments we are making in skills, innovation, and our ecosystem, and demonstrates that the fundamentals of our business model remain solid and underscores our shift is taking hold. Important is our ability to continue to drive strong profitability as the business delivered $173 million of adjusted EBITDA or approximately 24% of revenue, consistent with expectations that we previously shared. We are sustaining our model while at the same time making investments in R&D and go-to-market required to strengthen our position. Karen will walk you through the details of our financial performance in a moment. A key component of our go-to-market transformation is our ability to leverage the significant strength that comes from our breadth, depth, and global reach, along with our technology and highly differentiated capabilities. To amplify these strengths and take advantage of the demand we are seeing, we implemented a land, adopt, expand, and renew go-to-market motion. On the land front, we continued to see significant new customer acquisition. We added approximately 1,700 new logos this quarter, the most we've added in the past two years. This success reflects the competitiveness and market acceptance of our new offerings. Large enterprises continue to set the pace. Once again, we signed 100 deals with 1 million of TCV or more for the fifth consecutive quarter. 19 of those deals were greater than $5 million, and three were greater than $10 million in value. For adoption and expansion, this is best evidenced by the continued strength of our recurring revenues, increasingly longer contract lengths in cloud and subscription, as well as the potency of our new offers, each of which I'll touch on in a minute. On the renew front, retention rates have never been more meaningful as we are making the transition to the cloud. This is one of the areas where we are making significant investments and expanding our technical expertise and customer success resources to capitalize on the opportunity to grow the total lifetime value of our customers. Over the last three years, we've developed a powerful portfolio of solutions to unlock the inherent opportunity that comes with having long-term loyal relationships with our customers. Starting with Avaya Private Cloud, This solution enables the customization that is critical to supporting the complex day-to-day needs of our enterprise customers that want a cloud experience but still have regulatory requirements and security policies to meet or simply want and need to operate in a blended hybrid environment. Importantly, private cloud represents a meaningful commitment with typically higher lifetime customer value. A measure of this success is our bookings growth and hammering that success home over the last year, our ARR has more than doubled. One such customer, General Atomics, a large defense contractor, needed our UC solution that maintains compliance with federal information processing standards. They selected our secure private cloud solution to meet the needs of 18,000 users across more than 25 sites. which also includes remote working capabilities. This is a five year, $15 million deal and representative of the type of private cloud deals we are winning and seeing in our pipeline. Moving to Avaya OneCloud subscription. This is a real value vector for us, which drives profit, longer term commitments of approximately three years, significant upside, and provides our clients with a simpler path to move to the cloud when and how they choose. demand for more consumption-like models remains strong. And although we have millions of seats already under contract, we are still in the early stages of converting our massive global install base. In addition, we are pleased with our new logo wins, which approximately doubled from what we reported to you in March. Attracting new customers highlights the market shift from CapEx to OpEx, along with the importance of having highly flexible offers. For example, we just won a multi-year, multi-million dollar subscription deal in South America. The financial services company is adopting a unified Avaya platform to provide a total UCNCC transformation for their employees, customers, including multi-experience contact center, IVR, WEM, and video across social media and traditional channels. Avaya's solution was differentiated over the competitors based on the strength of our full portfolio, along with professional services capabilities, and an appreciation for our overall customer experience strategy. Demand for public cloud solutions grew in line with our expectations as we continued to expand our go-to-market motion and layer model. For CCaaS in particular, we are seeing a strong level of customer engagement Our pipeline is building as we continue our global rollout. In addition, we are building and investing in our ecosystem of partners who are and will continue to play an increasingly larger role in our CCaaS go-to-market. Notably, we recently announced how we've expanded our relationship with Salesforce by making the full range of deployment options for Viya One Cloud Contact Center integrated with Salesforce Service Cloud. I'm also delighted to welcome the team from CT integrations to the Avaya family. Avaya closed on the strategic tuck-in acquisition earlier this month. CT provides Avaya with additional digital capabilities over the top for our contact center install base, along with a rich library of connectors for rapid integration into additional third-party solutions, helping to supercharge our public CCaaS solution. Via Cloud Office, we delivered our best quarter yet, and we are positioned to continue that momentum as our new agent channel grows, additional features are released, and international expansion continues. Our win rates continue to improve, including one customer win over 12,000 seats, and it is clear that our services capabilities and coverage are real differentiators. In the Big Apple, We are proud to have been selected by the Empire State Realty Trust to provide Avaya Cloud Office to over 500 users across their 14 retail and office locations, including the iconic Empire State Building itself. The first building to reach the cloud is now fully connected to the cloud. And in a competitive deal, Empire State Realty Trust said that the flexibility, scalability, and cost savings were the key reasons behind their decisions. Another example is Agnes Scott College in Georgia. Not only did they want to move to the cloud and improve their communication and collaboration capabilities, but they also needed to ensure compliance at scale with Carey's Law and E911. The university selected Avaya Cloud Office for more than 1,000 users, citing affordability, modernization, and compliance as key decision factors. Turning to CPaaS. This is a force multiplier for our platform. With CPaaS, we are able to rapidly integrate and compose solutions that combine third-party applications with our own spaces and CCaaS offerings, providing customers with significant value and driving a faster return on their investment. Speed of deployment and composability are increasingly important as we continue to look for new ways to work in what remains a very dynamic work environment. ARR from CPaaS grew 52% quarter over quarter, and demand for these capabilities to support the extension of our platform is increasing significantly. One particular use case that resonates with me is how Avaya, working with a partner, was able to deploy our collaboration solution in support of India's MEDIC C2 initiative in just days using Spaces and CPaaS. This initiative connects COVID-19 patients with qualified doctors from anywhere to support their recovery while helping lighten an overburdened healthcare system and fills a critical gap in patient care. In summary, Avaya's innovation engine has never been stronger. We have strengthened our portfolio significantly over the past 18 months and have a rich pipeline of new and enhanced solutions coming down the pike, which is enabling our customers to improve their customers' experiences and compete and win. With that, I'll hand the call over to Kerry.