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AVYA

Avaya Holdings NYSE:AVYA Stock Report

Last Price

US$1.48

Market Cap

US$128.5m

7D

-18.2%

1Y

-92.6%

Updated

27 Sep, 2022

Data

Company Financials +
AVYA fundamental analysis
Snowflake Score
Valuation3/6
Future Growth0/6
Past Performance0/6
Financial Health0/6
Dividends0/6

AVYA Stock Overview

Avaya Holdings Corp., through its subsidiaries, provides digital communications products, solutions, and services for businesses worldwide.

Avaya Holdings Corp. Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Avaya Holdings
Historical stock prices
Current Share PriceUS$1.48
52 Week HighUS$22.47
52 Week LowUS$0.60
Beta1.12
1 Month Change12.12%
3 Month Change-37.55%
1 Year Change-92.57%
3 Year Change-85.43%
5 Year Changen/a
Change since IPO-91.00%

Recent News & Updates

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.

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.

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.

Shareholder Returns

AVYAUS SoftwareUS Market
7D-18.2%-4.9%-6.9%
1Y-92.6%-34.3%-23.7%

Return vs Industry: AVYA underperformed the US Software industry which returned -34.3% over the past year.

Return vs Market: AVYA underperformed the US Market which returned -23.7% over the past year.

Price Volatility

Is AVYA's price volatile compared to industry and market?
AVYA volatility
AVYA Average Weekly Movement31.6%
Software Industry Average Movement9.0%
Market Average Movement6.9%
10% most volatile stocks in US Market15.7%
10% least volatile stocks in US Market2.8%

Stable Share Price: AVYA is more volatile than 90% of US stocks over the past 3 months, typically moving +/- 32% a week.

Volatility Over Time: AVYA's weekly volatility has increased from 20% to 32% over the past year.

About the Company

FoundedEmployeesCEOWebsite
n/a7,851Alan Masarekhttps://www.avaya.com

Avaya Holdings Corp., through its subsidiaries, provides digital communications products, solutions, and services for businesses worldwide. The company operates in two segments, Products & Solutions and Services. The Products & Solutions segment offers unified communications and collaboration (UCC), and contact center (CC) platforms, applications, and devices.

Avaya Holdings Corp. Fundamentals Summary

How do Avaya Holdings's earnings and revenue compare to its market cap?
AVYA fundamental statistics
Market CapUS$128.53m
Earnings (TTM)-US$1.47b
Revenue (TTM)US$2.77b

0.0x

P/S Ratio

-0.1x

P/E Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
AVYA income statement (TTM)
RevenueUS$2.77b
Cost of RevenueUS$1.20b
Gross ProfitUS$1.57b
Other ExpensesUS$3.04b
Earnings-US$1.47b

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)-16.96
Gross Margin56.76%
Net Profit Margin-53.25%
Debt/Equity Ratio-356.0%

How did AVYA perform over the long term?

See historical performance and comparison