Seeking Alpha • Feb 15

Avaya Wipes Out Shareholders In Bankruptcy

Summary After protracted negotiations with creditors, ailing digital communications solutions provider Avaya finally filed for bankruptcy on Tuesday. Company has secured almost $780 million in new capital commitments from existing lenders and a bank syndicate led by Citigroup. Strategic partner RingCentral takes a major hit as $125 million in Convertible Preferred Shares are getting cancelled in bankruptcy. As predicted by me months ago already, common equity holders will be wiped out. With Avaya expected to emerge as a private entity within the next 60 to 90 days, common shareholders should sell their holdings and move on as soon as the stock commences trading on the Pink Sheets later this week. After protracted negotiations with creditors, ailing digital communications solutions provider Avaya (AVYA) finally filed for bankruptcy on Tuesday. As the restructuring support agreement has been signed by more than 90% of the company's secured lenders, implementation should go swiftly with Avaya expected to emerge as a private company within the next 60 to 90 days. Completing the Financial Restructuring will reduce the Company’s total debt by more than 75%, from approximately $3.4 billion today to approximately $800 million. Additionally, it will substantially increase Avaya’s cash and strengthen its liquidity position, resulting in an expected emergence balance sheet with less than 1x net leverage. The company has received commitments for an aggregate $628 million in debtor-in-possession (“DIP”) financing, including a new $500 million term loan facility from secured creditors Apollo Global Management (APO) and Brigade Capital Management, among others. In addition, a bank syndicate led by Citigroup (C) will provide a new $128 million asset-based lending ("ABL") facility. Following completion of the restructuring, both loans will be rolled into exit facilities. Moreover, a number of secured creditors have agreed to backstop a $150 million rights offering at exit. In aggregate, Avaya has secured almost $780 million in new capital which together with cash on hand and cash generated from operating activities, is expected to provide substantial liquidity to support the company during the restructuring process and beyond. Lastly, the company has restructured its strategic partnership with RingCentral (RNG) with RingCentral's $125 million in the company's 3% Series A Convertible Preferred Shares being cancelled: Avaya will continue to act as the exclusive sales agent for direct and partner sales of Avaya Cloud Office, Avaya’s exclusive multi-tenanted cloud PBX solution, in the geographies where it is available. The partnership has also expanded to include additional go-to-market constructs that enable Avaya to sell Avaya Cloud Office to its installed base on a direct basis. In addition, Avaya will be compensated in cash as Avaya Cloud Office seats are sold and, in connection with the Financial Restructuring, RingCentral’s preferred stock in Avaya will be eliminated.

Seeking Alpha • Jan 13

Avaya talks with lenders over potential near-term bankruptcy filing - report

Avaya Holdings. (NYSE:AVYA) has had discussions with lenders over a plan that would give them control in a potential bankruptcy filing. A Chapter 11 filing could could come as soon as the end of the month, according to a Bloomberg report from late Thursday, which cited people familiar. The telecommunications company has been in talks with first-lien lenders including Apollo Global (APO), Ares Management (ARES) and Invesco (IVZ). The report comes after the WSJ said last month that Avya (AVYA) was nearing a chapter 11 bankruptcy filing to help its balance sheet. Avaya (AVYA) last month said it was having "constructive" discussions with its financial stakeholders regarding a resolution to its balance sheet issues. Avaya (AVYA) short interest is 20%.

Seeking Alpha • Dec 15

Avaya - Secured Creditors Likely To Wipe Out Equity Holders In Bankruptcy

Summary Ailing digital communications solutions provider discloses restructuring discussions with key financial stakeholders. Company issues abysmal Q4 guidance with revenues projected to decrease by almost 40% year-over-year. Remaining liquidity is insufficient to deal with anticipated cash outflows going forward. Restructured business won't be able to support the company's massive $3+ billion debt load. Key creditors require the company to restructure under chapter 11 with the term sheet proposing a wipe-out for existing equity holders. Avaya is likely to file for bankruptcy in the near future with secured creditors about to emerge as the company's new owners. Given this issue, investors should sell existing positions and move on. Earlier this week, ailing digital communications solutions provider Avaya (AVYA) disclosed ongoing discussions with creditors "regarding a comprehensive resolution to strengthen the Company’s balance sheet and position the business for long-term success." Avaya also provided an update on Q3/FY2022 results and issued abysmal Q4 guidance with revenues projected to decrease by almost 40% year-over-year: Company Presentation For fiscal year 2022, the company now projects negative free cash flow of approximately $420. For FY2022 and FY2023 combined, cash usage is expected to approach $600 million which includes almost $200 million in restructuring charges: Company Presentation Even after proposed restructuring actions, free cash flow is expected to remain negative until fiscal year 2027. Please note that liquidity projections in the slide above are based on a number of assumptions: Receipt of $385 million under new secured term loan facilities less applicable issuer discounts and fees in January 2023. Favorable amendments to the RingCentral (RNG) partnership structure. Receipt of $50M from an IP monetization transaction closing in Q4/FY2023. An illustrative ~$90M of availability under the company's asset-backed credit facility throughout the forecast period. Over the past couple of weeks, the company and certain creditor groups have exchanged term sheets for both out-of-court and in-court restructurings. But with key creditor groups not supporting an out-of-court transaction, Avaya is likely to file for chapter 11 in the not-too-distant future. According to the term sheet provided by certain holders of the company's term loans and its 2028 senior secured notes, secured creditors would become the new owners of the business thus wiping out existing equity holders: Company Presentation

Analysis Article • Nov 10

These Return Metrics Don't Make Avaya Holdings (NYSE:AVYA) Look Too Strong

If you're looking at a mature business that's past the growth phase, what are some of the underlying trends that pop...

Seeking Alpha • Sep 20

Avaya: Didn't Go As Expected, But Potentially Set Up Again For Balance Sheet Catalyst

Summary I wrote about Avaya in June, suggesting that a successful bond offer and 2023 bond redemption could boost Avaya’s sagging share price by removing any near-term bankruptcy risk. The offering was completed, but resulted in high profile dispute with lenders following the former CEO being terminated and a surprise Q3 earnings miss coupled with a “going concern” warning. In addition, a whistleblower brought a complaint against the company which is being addressed by the Board. Given the transition to ARR, I believe the complaint centered on GAAP revenue recognition. To that end, the new CEO Alan Masarek described the recent events as “noise” which I believe is misunderstanding between point-in-time revenue vs committed ARR. The company recently signaled it expects to enter FY23 (Oct 1) with a clean financial slate which I interpret to mean: $250 million cost cuts, a 2023 debt redemption deal and a 10Q filed with the SEC (unlocking Mr. Masarek’s required ~$2 million open market stock purchases). Since I last wrote about B2B unified communications and contact center telephony firm Avaya (AVYA) in early June, it has been anything but quiet. The original thesis was that a successful bond offering would provide Avaya with the capital it needed to retire its 2023 convertible bonds, extending maturities to 2027 and 2028, thereby removing any near-term bankruptcy risk and giving the company adequate liquidity and time to complete its business model transformation from one time perpetual sales to a SaaS recurring subscription model. Avaya ultimately did raise $600 million, split between an 8% $250 million Exchange Note, convertible at $4.30 (232.50 shares per $1,000 Notes) and provided management the ability to settle in cash, common shares or any combination thereof. Given Avaya lacks liquidity to settle in cash at this point, I assume they would issue common shares provided the conditions set forth in the Exchange Note Indenture are met (more on this below). The remaining $350 million came in the form of a term loan due in 2028 at 10% over the secured overnight financing rate. The company disclosed on July 14 that it closed the financing and managed to retire $129 million of the 2023 bonds, leaving $221 million outstanding and leaving adequate cash in escrow to satisfy the rest. Then on July 29, Avaya made a surprise and shocking announcement: it fired its former CEO and hired highly regarded communications industry veteran Alan Masarek to lead Avaya’s SaaS transformation while also disclosing that the Q3 financial results missed consensus expectations for revenue and adjusted EBITDA. The company also withdrew formal guidance for the remainder of FY2022. That led to the company’s June bond offerings being challenged (and dropping in price precipitously), apparently based on the assertion that Avaya didn’t provide adequate disclosures to lenders based on updated knowledge of its business conditions. Both Avaya and the $350 million B3 term loan lenders lawyered up following the drop in bond prices (which have since begun to recover). The 2023 notes cratered from 95 on July 22 to 17 on August 15, and the last trade was at 44.50 on September 14. The volume on the 2023 bonds has essentially dried up, indicating to me that negotiations on a debt deal with the 2023 bond holders is likely getting close to being finalized. My belief is the “financial noise” described by new CEO Alan Masarek is largely centered on GAAP revenue recognition rules for SaaS contracts vs committed ARR which led to the large Q3 miss, but doesn’t provide a clear snapshot into the health of the underlying business which is primarily based on the continued growth in ARR and customer wins. Avaya closed 1400 new logos in Q3 which Mr. Masarek described as an acceleration over Q2. Separately, I understand a previously disclosed $400 million win over 7 years with a large financial services company (which included a large cohort of partners, and as such, a low margin deal) went stale and this was disclosed to the lenders during the due diligence process such that it provides a piece of evidence that Avaya’s financial health was fully disclosed and that Avaya should be free to use the $600 million raised to satisfy the 2023 bonds and general corporate uses. To add to the “financial noise,” Apollo Global Management (APO) is reportedly buying the 2028 bonds according the WSJ, and attempting to force Avaya into bankruptcy although I understand not all the other lenders are in alignment with Apollo. Nor are Avaya’s shareholders — Theodore King, an education software entrepreneur and Avaya’s single largest shareholder as of mid-August — commented on Twitter that he believes Avaya’s Board should categorically reject any “loan to own” offer from Apollo, and seek to implement its new business plan under Mr. Masarek’s leadership. To that end, Avaya announced on September 6 that it implemented a cost savings campaign to remove $250 million in annual costs (primarily job related) to create a more agile organization while it reinvents and invests in its product road map while restoring near term adjusted EBITDA to $500 million. The company also hinted there could be incremental cost savings in other areas outside the United States. So with all that said, and after a strange series of events since June, I believe we are back at the point of the original thesis: that Avaya presents a compelling risk/reward based on the company hinting that completing the 2023 bond redemption could be “weeks” away, thereby extending maturities to 2027 and 2028 and removing near term bankruptcy risk such that the equity can potentially re-rate considerably higher. Avaya VP Channels, John Lindsley (Channel Futures) The 2027 Exchange Notes As part of the June debt refinancing, Avaya first disclosed on June 23 a $150 million 8% Exchange Note with an Exchange Price of $4.30, or 232 shares per $1,000 Notes. As part of that deal, the institutional investor — Brigade Capital — was subject to a Standstill Obligation described in the 8-K to which they are precluded from trading Avaya equity linked securities. Brigade Capital Standstill Obligation (SEC 8-K) Curiously, the next day on June 24, Avaya issued another 8-K which indicated it upsized the $150 million Exchange Note to $250 million, while downsizing Brigade Capital to $125 million and spreading the remaining $125 million to a second salvo of institutional investors. Also, the June 24 8-K did not include any language related to a Standstill Obligation. That same day on June 24, Avaya shares traded down 25% on 20 million shares of volume. It certainly appears that the hedge funds who participated in the upsized Exchange Note and who weren’t subject to a Standstill Obligation began shorting Avaya shares to hedge the conversion feature of the Exchange Note on that day between prices of $3.70 and $2.60. Yet the mechanics of the Exchange Note are such that those hedge funds who are short Avaya shares via a market neutral hedge on the conversion feature of the Exchange Notes they hold are precluded from exchanging the Notes into shares until AVYA trades over 130% of the Exchange Price ($4.30) — or $5.60 per share — for 20 of 30 Trading Days preceding the end of a calendar quarter, starting October 1, 2022. Exchange Note Indenture (Exchange Note Indenture) That condition has not been met to exchange the notes in October, so the next window to exchange the notes is January 2023, provided AVYA is over $5.60 for the 20 of 30 trading days preceding December 31, 2022. Put another way, those Exchange Note holders are naked short AVYA shares until they can convert their notes to shares. Should AVYA shares begin to move back to ~$3 where the Exchange Note holders started their hedging campaign on June 24, those who are short with market neutral hedges will have to cover via open market buys as they won’t be able to deliver shares via the Exchange Notes until at least January 2023.

Seeking Alpha • Sep 06

Avaya plans job reductions to hit $250M cost-cut goal

Avaya Holdings (NYSE:AVYA) is undertaking a number of cost-reduction steps, including job cuts. In an SEC filing, Avaya (AVYA) said it's authorized a reduction in force that will help add to a combined $250M in annual cost reductions, which will allow the company to hit the higher end of its July 28 goals for $225M-$250M in cost cuts. The force reduction "better aligns the size of Avaya’s workforce with its operational strategy and cost structure," the company said. Avaya expects to incur $23M-$26M in pretax restructuring charges, all of which it expects in cash-based expenditures, and substantially all of which are tied to severance and termination benefits. It said it expects to recognize substantially all of the charges in the fourth fiscal quarter. Avaya shares pulled off a relief rally Tuesday, coming back from the long weekend with a 24% gain on volume that doubled its usual daily average. Avaya is down 83% in six months, but it's more than doubled over the past month. Following the news of job cut plans, Avaya stock is up another 2.8% postmarket.

Seeking Alpha • Aug 16

Avaya gets NYSE notice on late filing of quarterly report with SEC

Avaya (NYSE:AVYA) said Tuesday it received a non-compliance notice from NYSE as it did not timely file its quarterly report for the quarter ended Jun. 30 with the SEC. AVYA expects to file the quarterly report before the Feb. 15, 2023 deadline stipulated by NYSE. Earlier this month, AVYA said it would not be able to timely file its quarterly report due to an internal investigation to review matters related to a whistleblower letter. AVYA also raised substantial doubt about its ability to continue as a going concern.

Seeking Alpha • Aug 08

Avaya Holdings Q3 2022 Earnings Preview

Avaya Holdings (NYSE:AVYA) is scheduled to announce Q3 earnings results on Tuesday, August 9th, before market open. The consensus EPS Estimate is $0.05 (-93.3% Y/Y) and the consensus Revenue Estimate is $575.88M (-21.3% Y/Y). Over the last 2 years, AVYA has beaten EPS estimates 50% of the time and has beaten revenue estimates 75% of the time. Over the last 3 months, EPS estimates have seen 0 upward revisions and 6 downward. Revenue estimates have seen 0 upward revisions and 3 downward.

Seeking Alpha • Jul 29

Avaya: Chapter 22 Might Be In The Cards Now - Sell

Company warns of much weaker-than-expected top and bottom line results for Q3. Avaya also replaced CEO and President Jim Chirico with former Vonage CEO Alan Masarek. Company raised $600 million in new debt just two weeks before Thursday's disastrous earnings warning. Avaya's quickly deteriorating business will face severe difficulties to support the company's $3+ billion debt load going forward. With Avaya's business deteriorating at an alarming pace and chapter 11 an increasingly likely option, equityholders would be well-served to move to the sidelines here. Considering the sheer amount of debt ranking ahead of equityholders, there's basically no chance for a meaningful recovery in case of bankruptcy. Quite frankly, I was perplexed about digital communications solutions provider Avaya's (AVYA) disastrous warning released after Thursday's close: (...) Based on the information currently available for the third quarter ended June 30, 2022, the company expects revenue to be between $575 million and $580 million, compared to guidance of $685 million to $700 million, and Adjusted EBITDA to be between $50 million and $55 million, compared to guidance of $140 million to $150 million.1 The company is also finalizing testing of its goodwill and intangible assets that is expected to result in significant non-cash impairment charges as of June 30, 2022. Avaya also announced it has initiated cost-cutting measures that are expected to primarily impact the company’s overall selling, general and administrative expenses, as well as discretionary spending. These actions are expected to generate between $225 million and $250 million in annual cost reductions beginning in the first quarter of fiscal 2023. The company also replaced CEO and President Jim Chirico with former Vonage CEO Alan Masarek. Remember that the company already provided Q2 guidance well below expectations on May 10 with almost six weeks of the quarter already behind it. On the Q2 conference call, management attributed the weak guidance to a faster-than-expected shift to the company's OneCloud subscription offering and to a lesser extent to disruptions from Russia's assault on Ukraine as well as currency headwinds. This time, Avaya has not provided any explanation for the massive miss which, in combination with the CEO removal and very aggressive cost cutting efforts, points to severe structural issues in the company's business. Moreover, just two weeks ago, Avaya closed on an aggregate $600 million in new senior secured debt financings in order to address the upcoming maturity of $350 million in convertible notes next year. Subsequently, the company used a portion of the proceeds to repurchase approximately $129 million principal amount of the convertible notes and terminated related hedge and warrant transactions. Quite frankly, I don't think Avaya would have been able to secure these new capital commitments if the company had appropriately disclosed the dismal state of its business to creditors. Even worse, with Q3 Adjusted EBITDA coming in almost $100 million below management's guidance, I would expect cash at the end of Q2 to be down by almost $150 million sequentially to approximately $175 million. While Avaya just raised a meaningful amount of new capital and put some very aggressive cost cutting measures in place, at least in my view it is becoming increasingly clear that the company's quickly deteriorating business won't be able to support Avaya's $3+ billion debt load going forward, particularly not given the fact that the business is currently burning significant amounts of cash. With the additional $600 million in debt raised earlier this month, the company will be paying well above $200 million in cash interest this year. At the current quarterly revenue run rate, the company's debt service obligations (solely interest at this point) represent approximately 10% of sales which appears to be unsustainably high. Given persistent macroeconomic headwinds, there won't be an easy cure for Avaya's structural issues and given the magnitude of the company's announced cost reduction efforts, I firmly expect revenues to decrease even further going forward.

Seeking Alpha • Jul 14

Avaya: An Asymmetrical Investment Opportunity

Avaya shares dropped over 90% from last year, as the company may once again be facing bankruptcy. The company has just secured $600 million in new financing to fund June 2023 maturities and to support the acceleration of its business model. Avaya is transitioning towards a recurring revenue model, similar to Adobe in 2015, with OneCloud ARR growing 118%. Shares are priced for bankruptcy, although its Shareholder's equity stands at over twice its current market cap. With over $500 million in TTM EBITDA, Avaya should be able to serve debt for at least two more years, regardless of its success in transitioning the business. Overview The once high-flying telecommunications company Avaya (NYSE:AVYA) appears to be in trouble once again. The Silicon Valley company, which spun off from Lucent Technologies in 2000, filed for bankruptcy in 2016 after being unable to serve its debt. A year later, the company emerged from debt restructuring after slashing its debt load by nearly $3 billion. Fast forward, the company listed on the New York Stock Exchange just 12 months after filing for bankruptcy. Now, the company which competes with heavy-weights including Microsoft (MSFT) and Cisco (CSCO) by offering unified communications and collaboration, has dropped over 90% year-over-year as rising interest rates put pressure on Avaya's high debt load and increases the risk of bankruptcy. Nevertheless, Avaya is working relentlessly on restructuring its business model toward a recurring Cloud-based model, which is growing at a tremendous rate. More importantly, at current levels, shares are priced for a bankruptcy scenario, although Avaya has minimum liquidity to serve debt for at least 2 more years, regardless of having to raise more debt in the future. Therefore, Avaya currently represents an enormous asymmetrical opportunity, with a favorable risk/reward profile. The downside is capped at 100% in the case of bankruptcy, while shares could easily multiply many times in the case of a successful business transition and positive free cash flow generation. Q2 Earnings Avaya shares are down over 60% since reporting its Q2 earnings, despite demonstrating a successful and accelerating transition towards its Cloud business. Overall, Avaya posted revenues of $716 million for the quarter, down by 2% on a constant currency basis, missing estimates by roughly 3%. The company reported earnings per share of $0.53, compared to estimates of $0.61 per share. However, this was expected as an outcome of the company's accelerated success in moving to a recurring revenue model which is resulting in higher working capital requirements. Here, OneCloud ARR was $750 million, up 21% sequentially and 118% year-over-year. As part of OneCloud, CAPS (Cloud, Alliance, Partner and Subscription) was 54% of revenue, up from 40% a year ago. Overall recurring revenue was 69% of revenue, up from 66% last year. Adjusted EBITDA was $145 million, 20% of revenue, while cash from operations was $(2) million, an improvement from Q2 2021, when cash from operations was $(24) million. Overall, Avaya posted $1 million net loss and Non-GAPP Net Income of $51 million. Avaya IR We drove record growth for Avaya OneCloud ARR with a $130 million quarter over quarter increase and an over $400 million year over year increase, to $750 million. The path to hit the $1 billion ARR mark by the end of calendar year 2022 is well paved. We are successfully repositioning the company from our historic one-time revenue model to a recurring one, in fact 75% of our new bookings were Avaya OneCloud. Our strategy is clearly taking hold faster than we anticipated leading to a significant and fundamental shift in our business. - Jim Chrico, CEO Avaya The company ended the quarter with $2.3 billion in remaining performance obligations and added over 1400 new customers. Over 95% of OneCloud ARR came from customers generating $100,000 or more, demonstrating a highly diversified client base. For the full year, Avaya expects revenue between $2.8-$2.85 billion and OneCloud ARR in the range of $940 million to $960 million. GAAP-Operating Income is expected to be between $80 million to $100 million with adjusted EBITDA in the range of $580 million to $600 million, representing a 21% margin. Business Transition Avaya Investor Presentation After exiting bankruptcy and listing on the New York Stock Exchange, CEO Jim Chirico noted that the IPO would free up to $300 million to spend on R&D to drive future growth. However, he also noted that Avaya has to act differently by investing in the future of the cloud era. By doing so, it introduced its OneCloud product in 2020, talking up the company's vision for artificial intelligence, IoT, and blockchain through which the company hopes to make a mark. Recently, it launched its public cloud offering outside of the US, bringing its Pure Cloud product to Europe. What Is Avaya OneCloud? Avaya IR As Avaya is shifting its business model from a perpetual revenue model to a subscription business, it's transforming from a legacy hardware business to a software as a service vendor. This transformation is built upon its experience platform Avaya OneCloud which incorporates three main segments including Contact Center as a Service (CCaaS), Unified Communications as a service (UCaaS) and Communications Platform as a Service (CPaaS) or Anything as a service (XaaS) to deliver cloud architecture. Through these segments, Avaya offers a unified communications platform that brings voice, video and data together into a single, unified platform. It allows businesses to scale up or down their UCaaS and CCaaS solutions as needed through a Pay-As-You-Go Model, similar to AWS, Microsoft Azure and Google Cloud (GOOG) (GOOGL). Since, pay-as-you-go models are extremely powerful for both companies and customers, they require a certain scale to be profitable and might initially drag on profitability as seen with Avaya in past quarters. Furthermore, Avaya has partnered with leading cloud platforms including Microsoft Azure, AWS, Google Cloud and IBM (IBM) to offer organizations more flexibility in increasing their productivity and customer engagement trough additional scale. Our strategic partnership with Microsoft is an important milestone in our continued transformation to a cloud business model. The global scale of Microsoft helps ensure that our joint customers rapidly deploy Avaya OneCloud solutions in any cloud environment of their choice with speed, agility and cost competitiveness. This represents a tremendous opportunity for customers to accelerate their journey to the cloud, and a tremendous opportunity for Avaya to expand our go-to-market reach through the co-selling efforts we have identified with our trusted partner -David Austin, Senior Vice President Avaya. Within just under two years, Avaya has grown its OneCloud subscription platform from just $35 million to $750 million in ARR and expects to hit the $1 billion mark in early 2023. It expects to hit $2 billion by 2024, which would be roughly 70% of its current total revenue. In the past, bears have noted that the stellar growth in subscription revenue has come from simply flipping the install base from perpetual to subscription, which means the growth trajectory could soon come to an end. Avaya IR However, Avaya's subscription model is growing exponentially as seen in its sequential quarter-to-quarter growth. Before Q2 2022, its highest sequential growth was $105 million from Q3 21' to Q4 21'. This quarter OneCloud grew by a staggering $130 million, demonstrating a steep exponential curve. If it was true that the growth really only came from switching existing seats to its subscription model, the growth curve would already be flattening, considering that $750 million would come close to 50% of its current total revenues. Moreover, as noted before, Avaya added over 1400 new customer last quarter alone, meaning it's still growing its existing seats. Avaya IR Even if OneCloud would stop growing at $2 billion in ARR, I would not be too concerned as switching existing customers to a subscription-based model would result in higher long-term margins due to lower fixed costs. For instance, Adobe (ADBE) transitioned its business model to a subscription-based service in 2012, by releasing its Creative Cloud. Within years of launch it hit over $4 billion in ARR and is has now grown to over $10 billion. As a result of significantly lower fixed costs, Adobe's net profit margins swelled from just 5% in 2014 to nearly 40% in 2021. It is unrealistic to assume Avaya will achieve anywhere near those profit margins in the future, simply due to its heavy indebtedness, but it is certainly the right strategy to increase free cash flow over the long-term. Asymmetrical Risk/Reward Valuation Data by YCharts What's most intriguing about Avaya as an investment opportunity is not the fact that the business is transforming towards a software subscription model, but rather just about how cheap shares are trading at the moment. At its current market cap of around $160 million, Avaya is priced for immediate bankruptcy, although this is simply not the case. When subtracting all liabilities (including its debt) from Avaya's Assets, its current shareholder's equity stands at $563M. This translates to a book value of less than 0.3; in other words, Avaya's book value per share should be at least $5-$6, based on its assets alone, regardless of its transitioning core business. Data by YCharts Certainly, Avaya's current free cash flow appears frightening considering its heavy indebtedness. However, Avaya still has around $320 million in Cash & Equivalents on hand and just secured $600 million in new financing which will significantly increase its short term liquidity (more on that later). Currently, Avaya's total interest expenses amount to $214 million per year. Thus, even at the current cash burn rate, Avaya has the required liquidity to serve its interest expenses for at least two more years. However, its cash burn will likely improve as a result of its subscription business reaching scale. However, the market is currently pricing in a doomsday scenario. Data by YCharts Avaya's current situation may draw some similarities to GameStop's (GME) short squeeze in early 2021. While the situation was different due to GameStop's heavy short interest and positive free cash flow generation, they do also share striking similarities. For one, GameStop was also a struggling company that failed to adjust its business model, which caused revenues and profits to drop. Second, the company was restructuring its business to stay competitive, by shifting its business towards digital sales. Third, GameStop also had heavy indebtedness and bears warned from potential bankruptcy. Finally, GameStop also appeared severely undervalued based on its past valuation metrics. For instance, the company traded at a book value of less than 1x and less than its annual free cash flow. It also traded at just 0.06 times Sales, compared to its long-time average of 0.25-0.35x. In comparison, Avaya traded at 0.6x Price to Sales one year ago and now trades at only 0.05 times Price to Sales. In comparison, this is the same as Bed Bath & Beyond (BBBY), a struggling retailer with just half of Avaya's gross margins. Avaya Investor Presentation Chirico and his team sound like they've learned from previous mistakes, but the proof of that will be in the company's balance sheets in the years ahead. What looks interesting is the fact that Avaya increases its R&D spend compared to last year, despite being in a troublesome financial situation. It also barely cut back on S&G expenses, which makes sense considering it's trying to grow its subscription business by winning new logos. As OneCloud reaches a certain scale, it is plausible to expect S&G expenses to drop slightly, say roughly 10%. Without the $108 million in annual interest expenses, Avaya would actually be profitable as shown by its Operating Income of $22 million. If Avaya cuts $50 million in S&G expenses, its annual cash burn would narrow significantly. However, the fact that Avaya has actual increased expenses, points to high management optimism regarding its available liquidity.

Seeking Alpha • Jun 13

Avaya: Near-Term Balance Sheet Catalyst Could Send Shares Higher

Avaya Holdings is a large unified communications and contact center as a service provider undergoing a business model transformation to the cloud and an Annual Recurring Revenue (“ARR”) model. ARR has scaled dramatically since it was first offered in early 2020 and is on pace to end the calendar year 2022 at $1 billion or more. The transition from one-time perpetual sales impacted near-term revenue and cash flow but yielded stickier revenue and more predictable cash flow over time while also ostensibly stressing the balance sheet. Avaya shares sold off dramatically in May as a result of bankruptcy fears regarding a June 2023 $350 million bond maturity. The company launched a $500 million offering which should close soon and cause liquidity fears to subside, yielding upside to the stock.

Analysis Article • May 10

These 4 Measures Indicate That Avaya Holdings (NYSE:AVYA) Is Using Debt In A Risky Way

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of...

Seeking Alpha • Apr 26

Top 2 Cloud Computing Stocks For 2022

Cloud remains one of the best modes of delivering products and services, and the infrastructure to support it becomes increasingly key. However, cloud stocks are likely to carry higher multiples because of the growth expectations baked into their prices. Below we give a couple of picks for cloud stocks that have clear value investment angles that could work in the current environment.

Seeking Alpha • Apr 13

Avaya Is A Cheap Tech Deleveraging Opportunity

Similar to companies like Avid Technology, Avaya is making a business model change by shifting its clients, and acquiring new ones, on a subscription rather than with perpetual licenses. This subscription product is a communication and collaboration suite offered on the cloud, with many customers needing them for contact/call centers. An important dynamic that investors should wonder about is if the growth is actually there, as customers are basically becoming rebilled as they become subscribers rather than license owners. However, new logos is the metric to look at and it is growing, so the topline stagnation should come to an end once critical mass is reached beyond 44% in the mix. Incremental sales are coming from subscription revenue which is lower ticket, and with decent economics and strong WFH markets, deleveraging could be on the horizon.

Analysis Article • Feb 24

Avaya Holdings Corp.'s (NYSE:AVYA) CEO Compensation Is Looking A Bit Stretched At The Moment

Shareholders of Avaya Holdings Corp. ( NYSE:AVYA ) will have been dismayed by the negative share price return over the...

Analysis Article • Jan 23

Avaya Holdings (NYSE:AVYA) Has A Somewhat Strained Balance Sheet

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it might be obvious that you need to...

Analysis Article • Dec 28

Here's What's Concerning About Avaya Holdings' (NYSE:AVYA) Returns On Capital

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an...

Analysis Article • Oct 22

Avaya Holdings (NYSE:AVYA) Takes On Some Risk With Its Use Of Debt

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the...

Analysis Article • Sep 12

Some Investors May Be Worried About Avaya Holdings' (NYSE:AVYA) Returns On Capital

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll...

Analysis Article • Aug 17

We Think Avaya Holdings' (NYSE:AVYA) Robust Earnings Are Conservative

Even though Avaya Holdings Corp.'s ( NYSE:AVYA ) recent earnings release was robust, the market didn't seem to notice...

Analysis Article • Jul 21

Avaya Holdings (NYSE:AVYA) Takes On Some Risk With Its Use Of Debt

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says...

Analysis Article • May 22

There Are Reasons To Feel Uneasy About Avaya Holdings' (NYSE:AVYA) Returns On Capital

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Amongst other things...

Analysis Article • Apr 17

Is Avaya Holdings (NYSE:AVYA) Using Too Much Debt?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' It's only natural to consider a company's...

Analysis Article • Mar 27

Avaya Holdings Corp. (NYSE:AVYA) Shares Could Be 26% Below Their Intrinsic Value Estimate

Today we'll do a simple run through of a valuation method used to estimate the attractiveness of Avaya Holdings Corp...

Analysis Article • Mar 06

Need To Know: Avaya Holdings Corp. (NYSE:AVYA) Insiders Have Been Buying Shares

We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. The...

Analysis Article • Feb 16

Avaya Holdings (NYSE:AVYA) Shareholders Have Enjoyed An Impressive 132% Share Price Gain

When you buy shares in a company, there is always a risk that the price drops to zero. On the other hand, if you find a...

Snowflake Score
Valuation	2/6
Future Growth	0/6
Past Performance	0/6
Financial Health	0/6
Dividends	0/6

Historical stock prices
Current Share Price	US$0.0029
52 Week High	US$10.17
52 Week Low	US$0.0001
Beta	1.46
1 Month Change	1,350.00%
3 Month Change	-99.26%
1 Year Change	-99.97%
3 Year Change	-99.97%
5 Year Change	-99.99%
Change since IPO	-99.98%

	AVYA.Q	US Software	US Market
7D	1,350.0%	8.6%	1.6%
1Y	-100.0%	-0.9%	28.5%

AVYA.Q volatility
AVYA.Q Average Weekly Movement	569.0%
Software Industry Average Movement	9.7%
Market Average Movement	7.2%
10% most volatile stocks in US Market	16.8%
10% least volatile stocks in US Market	3.0%

AVYA.Q fundamental statistics
Market cap	US$251.86k
Earnings (TTM)	-US$1.47b
Revenue (TTM)	US$2.77b

AVYA.Q income statement (TTM)
Revenue	US$2.77b
Cost of Revenue	US$1.20b
Gross Profit	US$1.57b
Other Expenses	US$3.04b
Earnings	-US$1.47b

Earnings per share (EPS)	-16.96
Gross Margin	56.76%
Net Profit Margin	-53.25%
Debt/Equity Ratio	-356.0%

Data	Last Updated (UTC time)
Company Analysis	2023/05/03 05:12
End of Day Share Price	2023/05/01 00:00
Earnings	2022/06/30
Annual Earnings	2021/09/30

Package	Data	Timeframe	Example US Source ^*
Company Financials	10 years	Income statement Cash flow statement Balance sheet	SEC Form 10-K SEC Form 10-Q
Analyst Consensus Estimates	+3 years	Forecast financials Analyst price targets	Analyst Research Reports Blue Matrix
Market Prices	30 years	Stock prices Dividends, Splits and Actions	ICE Market Data SEC Form S-1
Ownership	10 years	Top shareholders Insider trading	SEC Form 4 SEC Form 13D
Management	10 years	Leadership team Board of directors	SEC Form 10-K SEC Form DEF 14A
Key Developments	10 years	Company announcements	SEC Form 8-K

Analyst	Institution
Asiya Merchant	Citigroup Inc
Catharine Trebnick	Colliers Securities
George Sutton	Craig-Hallum Capital Group LLC

This company listing is no longer active

Avaya Holdings (AVYA.Q) Stock Overview

Risk Analysis

Avaya Holdings Corp. Competitors

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Price History & Performance

Recent News & Updates

NYSE to Suspend Trading Immediately in Avaya Holdings and Commence Delisting Proceedings

Avaya Inc. Filed for Bankruptcy

Avaya Wipes Out Shareholders In Bankruptcy

Avaya Holdings Corp. announced delayed 10-Q filing

Avaya Holdings Corp. Appoints Carrie Teffner to Board of Directors

Avaya talks with lenders over potential near-term bankruptcy filing - report

Recent updates

NYSE to Suspend Trading Immediately in Avaya Holdings and Commence Delisting Proceedings

Avaya Inc. Filed for Bankruptcy

Avaya Wipes Out Shareholders In Bankruptcy

Avaya Holdings Corp. announced delayed 10-Q filing

Avaya Holdings Corp. Appoints Carrie Teffner to Board of Directors

Avaya talks with lenders over potential near-term bankruptcy filing - report

Pomerantz LLP Announces the Filing of Class Action Against Avaya Holdings Corp

Avaya - Secured Creditors Likely To Wipe Out Equity Holders In Bankruptcy

Price target decreased to US$0.63

Insufficient new directors

These Return Metrics Don't Make Avaya Holdings (NYSE:AVYA) Look Too Strong

Price target decreased to US$0.63

Insufficient new directors

Avaya: Didn't Go As Expected, But Potentially Set Up Again For Balance Sheet Catalyst

Avaya plans job reductions to hit $250M cost-cut goal

Avaya gets NYSE notice on late filing of quarterly report with SEC

Avaya Holdings Q3 2022 Earnings Preview

Consensus forecasts updated

Avaya: Chapter 22 Might Be In The Cards Now - Sell

Avaya: An Asymmetrical Investment Opportunity

Price target decreased to US$6.46

Avaya: Near-Term Balance Sheet Catalyst Could Send Shares Higher

Consensus EPS estimates fall by 50%

Price target decreased to US$16.86

Second quarter 2022 earnings: EPS exceeds analyst expectations while revenues lag behind

These 4 Measures Indicate That Avaya Holdings (NYSE:AVYA) Is Using Debt In A Risky Way

Insufficient new directors

Top 2 Cloud Computing Stocks For 2022

Avaya Is A Cheap Tech Deleveraging Opportunity

Insufficient new directors

Avaya Holdings Corp.'s (NYSE:AVYA) CEO Compensation Is Looking A Bit Stretched At The Moment

President exercised options and sold US$1.8m worth of stock

Consensus forecasts updated

First quarter 2022 earnings: EPS exceeds analyst expectations while revenues lag behind

Avaya Holdings (NYSE:AVYA) Has A Somewhat Strained Balance Sheet

Here's What's Concerning About Avaya Holdings' (NYSE:AVYA) Returns On Capital

President recently sold US$633k worth of stock

Insider recently sold US$200k worth of stock

President recently sold US$1.1m worth of stock

Full year 2021 earnings: EPS misses analyst expectations

Forecast breakeven date pushed back to 2023

Avaya Holdings (NYSE:AVYA) Takes On Some Risk With Its Use Of Debt

Executive VP & Chief Product Officer Anthony Bartolo has left the company

Executive VP & Chief Revenue Officer recently sold US$250k worth of stock

Some Investors May Be Worried About Avaya Holdings' (NYSE:AVYA) Returns On Capital

We Think Avaya Holdings' (NYSE:AVYA) Robust Earnings Are Conservative

Consensus forecasts updated

Third quarter 2021 earnings released: EPS US$0.49 (vs US$0.084 in 3Q 2020)

Avaya Holdings (NYSE:AVYA) Takes On Some Risk With Its Use Of Debt

There Are Reasons To Feel Uneasy About Avaya Holdings' (NYSE:AVYA) Returns On Capital

Second quarter 2021 earnings released: US$0.69 loss per share (vs US$7.24 loss in 2Q 2020)

Is Avaya Holdings (NYSE:AVYA) Using Too Much Debt?

Avaya Holdings Corp. (NYSE:AVYA) Shares Could Be 26% Below Their Intrinsic Value Estimate

Need To Know: Avaya Holdings Corp. (NYSE:AVYA) Insiders Have Been Buying Shares

President exercised options and sold US$4.1m worth of stock

Avaya Holdings (NYSE:AVYA) Shareholders Have Enjoyed An Impressive 132% Share Price Gain

First quarter 2021 earnings released: US$0.06 loss per share (vs US$0.54 loss in 1Q 2020)

Price target raised to US$33.10

Shareholder Returns

Price Volatility

About the Company

Avaya Holdings Corp. Fundamentals Summary

Earnings & Revenue