Avaya Holdings Corp.

Greetings and welcome to the Avaya fiscal 2021 fourth 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. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Michael McCarthy, Vice President of Investor Relations for Avaya. Thank you. Please go ahead.

Thank you. Welcome to Avaya's fiscal 2021 Q4 investor call. Jim Cherico, our President and CEO, and Kieran McGrath, our EVP 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 Stephen Spears, Chief Revenue Officer, Todd Zerbe, Senior Vice President of Engineering, and Dennis Kozak, Senior Vice President of Global Channel. The earnings release and investor slides, which include highlights of our ESG initiatives and performance, referenced on this morning's call, are accessible on the investor page of our website, as well as in the 8K file today with the SEC. These should aid you in your understanding of revised 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 metrics 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, the global economy continues to be impacted by COVID-19, and to 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, The emergence of new variants, changes in infection rates, the vaccine participation rate, the effectiveness of vaccines and the speed with which the vaccine can be distributed, as well as regulations and requirements impacting the return to our offices and our ability to visit customer sites and 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. It's 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. Before handing the call over to Jim, I'd like to remind the participants on this morning's call that we'll be hosting an Investor Day meeting in conjunction with Avaya Engage, which will be held down in Orlando on Tuesday, December 14th. Registration information is available on our website on the investor relations page under the events tab. Members of Avaya's executive leadership team will be providing updates on Avaya's business strategy, technology development roadmap, growth opportunities, and updated long-term financial model. I'll now turn the call over to Jim.

Thanks, Mike. Good morning, everyone, and thank you for joining today's call. Avaya's fiscal 2021 was a landmark year for the company. What our team accomplished represents a pivotal point in our history and is a defining moment for the company, and it will play a central role in our success story of Avaya as we move forward. If you take a step back and put this past year into context, it is a year marked by many firsts, and the outstanding results we delivered exceeded expectations on most every front. These results are not only a reflection of how far we've come, but importantly, reinforce the speed at which we are delivering on our value creation strategy. Grow the company, evolve to a cloud and SaaS business model, and remain highly profitable. Let me start with growth. In Q4, we delivered our sixth consecutive quarter of year-over-year revenue growth. Revenue was $760 million. For the full year, revenue came in at $2.973 billion. Most impressive is the fact that we reversed a history of annual revenue declines, delivering year-over-year growth for the fiscal year, closing up approximately $100 million, a first for Avaya. It marks a real and substantive milestone for the company, and I couldn't be prouder of the performance or more thankful for the commitment and loyalty our customers and partners as we've navigated a purposeful and deliberate journey of transformation. This growth has been fueled by investments we've made in talent, go-to-market, digital initiatives, and our innovation engine. Especially notable is the momentum in the large enterprise segment, where for the sixth quarter in a row, we signed over 100 deals with a TCV greater than 1 million. This included 18 over 5 million, of which 7 were over 10 million. Clearly, this is a strong proof point that customers have embraced our roadmap and are on board with our strategy. In addition, we once again signed over 1,600 new logos, reinforcing the competitiveness, differentiation, and value of our solutions. Most important to note is the fact that none of this would have been possible without the efforts of our Global Avaya team, their resilience, dedication, and focus on delivering for our customers was outstanding, and I'm extremely proud of how the team performed. On the cloud front, we continue to exceed expectations across many key metrics. A year ago, we introduced Avaya OneCloud ARR as the leading indicator of our cloud transition. We finished FY21 with 530 million of ARR. That's up 25% sequentially, and 177% year-over-year. We grew over $100 million in just the fourth quarter alone, another first for us. To add some color, nearly 20% of our ARR comes from contracts greater than $5 million and over 60% from contracts greater than $1 million. And in total, over 95% of our ARR is from our enterprise segment. Additionally, 60% of ARR is driven by enterprise contact center, and we are converting this highly coveted base rapidly. We are not following the crowd. We have the best of both worlds. We are operating like a startup, but with a significant IP, technology, market share, and the install-based assets of an enterprise leader. This is fueling our exponential growth. $500-plus million of ARR in 2021 to $1 billion of ARR in 2022 to $2 billion in FY24. Our second key indicator is our CAHPS metrics, which reached 44 percent of revenue for the quarter, up 11 points from the prior year and 14 points to 40 percent for the full year. CAHPS remains a measure of our highest calorie revenue comprised of cloud alliance partner and subscription. I am particularly proud of the growth here, as is a direct reflection of the new of IAM, the potency of our new innovations, and the importance of our go-to-market ecosystem of partners. Last on profitability, adjusted EBITDA was $179 million for the quarter and $719 million for the full year, both approximately 24% of revenues. As we committed to the street and to our customers, we've executed on our plans to maintain high profitability while also investing back significantly into the business and our success shows in the numbers. Avaya is a very different company today from just four years ago when we went public. There has been a tremendous amount of effort and progress made on reshaping the company and transforming our business to be the leader in enterprise communications and collaboration. When we first shared our vision to be the leader in digital transformation for enterprise customers, our path was clear. To become a customer-led company, one that works directly with our customers to unlock value. To return to being an innovation leader in order to expand our product and service offerings. And to leverage our vast channel and technology partner ecosystem all with a focus on growing and transforming to a cloud business model. A measure of our progress to date. As of the end of September, we are approaching 10% of the company's combined UC and CC install base on an Avaya OneCloud solution. This is consistent with the overall market adoption we are seeing in the enterprise segment, and it is clear that the best is yet to come and we are well positioned to be leaders. Our subscription hybrid offer has been a key driver of this transition and represents roughly 80% of our 530 million of ARR. Customers are committing to three-year-plus contracts, which by definition means they are making a commitment to Avaya's roadmap, to our vision of the composable enterprise, and to continue their journey in a deliberate and agile way. To those that look at subscription, As a simple conversion of traditional maintenance contracts, nothing could be further from the truth. Today, Subscription Hybrid includes significant cloud capabilities, such as Avaya Spaces, Cloud Contact Center AI, Avaya Conversational Intelligence, and our cloud notification service, among others. And we continue to add additional capabilities, including many from our ecosystem of partners. And furthermore, We are seeing a 15% uplift on average and, in many cases, well north of 20% as customers make the move. One example is Wipro, which shows Avaya OneCloud subscription as the next step on their digital transformation journey because it offers ease of expansion and flexible migration as part of their cloud plans. Wipro's 17,500 users and 3,500 agents will benefit from a full solution suite, which includes multiple ecosystem components from our API Exchange Marketplace. Not only are we converting current customers, but again, in Q4, we signed over 150 subscription hybrid deals with new customers. Take Amtrak, which recently chose Avaya OneCloud to deliver advanced quality monitoring and biometrics that will reduce losses from fraud by approximately 50% while improving customer satisfaction. In a highly competitive situation, our ability to deliver full cloud capabilities immediately was key to being chosen ahead of the incumbent provider and multiple other competitors. Turning to public cloud, our UCaaS and CCaaS public cloud offerings continue to gain significant traction as they expand both in terms of capabilities and geographic availability. Our progress is ahead of our expectations, and these offers will be major drivers for recurring revenue and profitability going forward. First is CCAS. Over the last couple of quarters, we've made significant strides in maturing our CCAS offering in terms of reach, go-to-market scale, and capabilities. CCAS is now available in 49 countries and will reach 100 countries by the end of 2022. Initially offered through our direct sales force, we are now beginning to leverage our expansive channel network by bringing these partners fully online. Take North America, where we've enabled over 160 of our value-added resellers. Globally, we signed 11 master agents with access to thousands of agents as we accelerate our efforts to enable the channel. We are seeing significant signs of momentum with our pipeline more than doubling in just the last quarter. Also helping to drive CCAS traction is the integration of our offer with Avaya Cloud Office by RingCentral. We believe this will be an important driver of C growth in the SMB and mid markets. One example is a recent win in the Netherlands. Waste management and recycling company Van Happen Containers migrated to Avaya OneCloud CCAS and Avaya Cloud Office. Reliability. Greatly reduced on-site systems maintenance and platform integration were key drivers for their decision, along with integration of other channels such as WhatsApp and Facebook, all integrated with their CRM. Another international win was Transcosmos, a Japanese-based global BPO. They are using our CCaaS along with Google Cloud Contact Center AI to compose effortless customer experiences, reduce wait times, improve efficiencies, and all around satisfaction. Avaya Cloud Office continues to perform well, and we saw significant progress during the quarter. Now available in 13 countries, we continue to add Avaya specific innovations to the platform, along with integration, as I just mentioned, to our own Avaya CCaaS solution. We won multiple 1 million TCV deals during the quarter, We grew the number of customers by nearly 25% and total seats by almost 30%. Customers continue to choose Avaya Cloud Office because it combines best in public UCAS with Avaya's enterprise capabilities. One new customer, Preferred Home Care of New York, a leading home care agency, chose our UCAS to replace their existing system. With thousands of calls per day, they were experiencing persistent outages that created significant risk for staff and patients. This led to them to seek a cloud-based solution, and they selected us for over 500 users. Their solution includes video conferencing, collaboration, messaging, and calling. On the private cloud front, we continue to see significant adoption, as measured by new bookings and activations. TCV bookings of our Avaya OneCloud Private were up over 500% from the prior year, demonstrating the rapid acceleration we are seeing in demand for cloud capabilities delivered in a private cloud mode. While this growth rate will moderate as the denominator grows, the right way to think about this is Avaya is the only major UCC solution provider that can offer public and our private cloud platform delivery models at enterprise scale. This is a significant differentiator for us. One example of a recent private cloud win is with Malle, a global automotive supplier with over 70,000 employees and 160 production locations. They were struggling with inconsistent customer and employee experiences while using 19 voice vendors. They chose our private cloud solution and will now consolidate their fragmented base of vendors to a single Avaya platform. We will continue to see strong demand for private cloud and expect this to remain a major long-term growth driver. Before turning it over to Karen, I just want to thank our partners, employees, and customers again for what was an incredible milestone year for Avaya. With that, let me turn it over to Karen.