Avaya Holdings Corp. Net Income jumped on 1,893% while Revenue dropped on 12.9%
12/04/2018 • About Avaya Holdings Corp. (
$AVYA) • By InTwits
Avaya Holdings Corp. reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
- Avaya Holdings Corp. is a company in decline: FY2018 revenue growth was -12.9%, 5 years revenue CAGR was -9.5%
- In the last 5 years the company invested considerably less than D&A: $74m vs. $415m. In FY2018 this situation was still the same: CAPEX was 74 while D&A was 415
- The company has unprofitable business model: ROIC is -17.8%
- It operates with high leverage: Net Debt/EBITDA is 7.4x while industry average is -2.2x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue dropped on 12.9%. Annual revenue decline showed slowdown in FY18Q4 - revenue decreased on 7.0%. Revenue decline was accelerating on average at -1.6 pp per annum in the last 5 years.
Gross Margin decreased on 8.3 pp from 61.1% to 52.8% in FY2018. During the last 5 years Gross Margin topped in FY2017 at 61.1%. SG&A as a % of Revenue increased slightly on 1.2 pp from 39.2% to 40.4% in FY2018. SG&A as a % of Revenue followed a growing trend at 1.5 pp per annum in FY2014-FY2018.
Net Income margin surged on 120 pp from -5.6% to 114% in FY2018.
Investments (CAPEX, working capital and M&A)
In FY2018 Avaya Holdings Corp. had CAPEX/Revenue of 2.6%. Avaya Holdings Corp.'s CAPEX/Revenue increased on 2.6 pp from 0% in FY2015 to 2.6% in FY2018.
Accounts receivable as a % of Revenue decreased on 3.2 pp from 16.4% to 13.2% in FY2018. Inventories as a % of Revenue showed almost no change at 2.8% in FY2018. Accounts payable as a % of Revenue decreased on 2.4 pp from 22.2% to 19.8% in FY2018.
Avaya Holdings Corp. has spent
$157m on M&A in FY2018 which accounts for 5.5% of revenue.
Leverage (Debt)
Debt level is 7.4x Net Debt / EBITDA and 9.6x Debt / EBITDA. Net Debt / EBITDA jumped7.4x from to 7.4x in FY2018. Debt jumped on 331% while cash dropped on 20.1%.
Avaya Holdings Corp. has no short term refinancing risk: cash is higher than short term debt (2,413.8%).
Valuation and dividends
Avaya Holdings Corp.'s trades at EV/EBITDA 13.3x and P/E 0.6x.
Management team
1.2% of the company is owned by insiders. Insider ownership didn't change in 2018.
Financial and operational results
FY ended 09/30/2018
Avaya Holdings Corp. ($AVYA) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 4,371 | 4,081 | 3,702 | 3,272 | 2,851 | -12.9% |
| Gross Profit | 2,555 | 2,465 | 2,245 | 1,999 | 1,505 | -24.7% |
| SG&A | 1,531 | 1,432 | 1,413 | 1,282 | 1,152 | -10.1% |
| EBITDA | | | | | 326 | |
| EBIT | | | | | -89 | |
| Interest expence | 459 | 452 | 471 | | | |
| Tax | 51 | 70 | 11 | -16 | -87 | |
| Net Income | -253 | -168 | -730 | -182 | 3,264 | |
| Stock Based Compensation | | | | | 19 | |
Balance Sheet
|
|---|
| Cash | 322 | 323 | 336 | 876 | 700 | -20.1% |
| Accounts Receivable | 745 | 678 | 584 | 536 | 377 | -29.7% |
| Inventory | 197 | 174 | 153 | 96 | 81 | -15.6% |
| Accounts Payable | 416 | 379 | 338 | 282 | 266 | -5.7% |
| Short Term Debt | 32 | 7 | 6,018 | 725 | 29 | -96.0% |
| Long Term Debt | 5,991 | 5,960 | 0 | 0 | 3,097 | |
Cash flow
|
|---|
| Capex | 0 | 0 | | | 74 | |
| Acquisitions | | | | | 157 | |
Ratios
|
|---|
| Revenue growth | -7.2% | -6.6% | -9.3% | -11.6% | -12.9% | |
|
|---|
| Gross Margin | 58.5% | 60.4% | 60.6% | 61.1% | 52.8% | -8.3% |
| EBITDA Margin | | | | | 11.4% |
| EBIT Margin | | | | | -3.1% |
| SG&A, % of revenue | 35.0% | 35.1% | 38.2% | 39.2% | 40.4% | 1.2% |
| SBC, % of revenue | | | | | 0.7% |
| Net Income Margin | -5.8% | -4.1% | -19.7% | -5.6% | 114.5% | 120.0% |
| CAPEX, % of revenue | 0.0% | 0.0% | | | 2.6% | |
|
|---|
| ROIC | 5.9% | 12.8% | -17.0% | | -17.8% | |
| Net Debt/EBITDA | | | | | 7.4x |
| Interest expence / Average debt | 7.6% | 7.5% | 7.9% | | | |
People
|
|---|
| Insider ownership | 1.2% | 1.2% | 1.2% | 1.2% | 1.2% | 0.0% |
Avaya Holdings Corp. ($AVYA) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 752 | 672 | 692 | 735 | | -14.1% | -16.4% | -13.8% | -7.0% |
| EBITDA | 91 | 34 | 39 | 162 | | | | | |
| Net Income | 3,214 | -130 | -88 | 268 | | | | | 892.6% |
Balance Sheet
|
|---|
| Cash | 417 | 311 | 685 | 700 | | 99.5% | -59.3% | -6.0% | -20.1% |
| Short Term Debt | 29 | 29 | 29 | 29 | | -99.5% | -96.0% | 16.0% | -96.0% |
| Long Term Debt | 2,867 | 2,860 | 3,099 | 3,097 | | | | | |
Ratios
|
|---|
| Gross Margin | 58.5% | 48.1% | 50.9% | 53.1% | | -3.0% | -11.8% | -10.2% | -9.6% |
| EBITDA Margin | 12.1% | 5.1% | 5.6% | 22.0% | | 12.1% | 5.1% | 5.6% | 22.0% |
| Net Income Margin | 427.4% | -19.3% | -12.7% | 36.5% | | 439.1% | -18.6% | 0.4% | 33.0% |
Peers in Application Software
Below you can find Avaya Holdings Corp. benchmarking vs. other companies in Application Software industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| nFusz Inc ($FUSZ) | | | | | 433.3% |
| CloudCommerce Inc ($CLWD) | | -38.1% | 247.6% | 40.9% | 301.1% |
| Seven Stars Cloud Group, Inc. ($SSC) | | 134.7% | 663.8% | 310.3% | 161.7% |
| Aurora Mobile Limited ($JG) | | | | 304.9% | 150.8% |
| Intelligent Systems Corporation ($INS) | | 14.2% | 71.0% | 12.2% | 119.0% |
| |
|---|
| Median (150 companies) | 27.9% | 14.0% | 14.3% | 15.7% | 15.2% |
|---|
| Avaya Holdings Corp. ($AVYA) | | -6.6% | -9.3% | -11.6% | -12.9% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Skkynet Cloud Systems Inc ($SKKY) | 99.7% | 97.4% | 98.0% | 97.6% | 96.5% |
| hopTo Inc ($HPTO) | 91.8% | 87.8% | 95.9% | 98.2% | 95.4% |
| Aware, Inc. ($AWRE) | 75.4% | 87.2% | 90.3% | 94.6% | 92.3% |
| Alteryx, Inc. ($AYX) | 77.5% | 80.5% | 81.3% | 83.4% | 91.0% |
| Aspen Technology, Inc. ($AZPN) | 86.5% | 88.7% | 89.7% | 90.2% | 89.9% |
| |
|---|
| Median (149 companies) | 63.4% | 61.9% | 64.2% | 64.6% | 66.0% |
|---|
| Avaya Holdings Corp. ($AVYA) | 58.5% | 60.4% | 60.6% | 61.1% | 52.8% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Aspen Technology, Inc. ($AZPN) | 34.5% | 42.2% | 46.0% | 45.2% | 43.3% |
| ANSYS, Inc. ($ANSS) | 45.9% | 45.8% | 45.1% | 41.9% | 41.4% |
| Paycom Software, Inc. ($PAYC) | 15.1% | 19.5% | 35.1% | 34.4% | 35.9% |
| j2 Global, Inc. ($JCOM) | 41.6% | 40.6% | 41.7% | 36.5% | 35.7% |
| Adobe Inc. ($ADBE) | 17.5% | 25.9% | 31.2% | 34.2% | 35.3% |
| |
|---|
| Median (151 companies) | -10.3% | -10.7% | -5.3% | -3.7% | -3.3% |
|---|
| Avaya Holdings Corp. ($AVYA) | | | | | 11.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| TimefireVR Inc ($TFVR) | 0.0% | 350.5% | 4.3% | | 1,021.9% |
| MGT Capital Investments Inc ($MGTI) | 0.0% | 36.5% | 221.4% | 129.8% | 344.5% |
| Integrated Ventures Inc ($INTV) | | | | | 199.9% |
| ShotSpotter, Inc. ($SSTI) | | 18.3% | 28.9% | 27.1% | 24.3% |
| Ellie Mae, Inc. ($ELLI) | 12.3% | 20.6% | 16.7% | 21.1% | 19.4% |
| |
|---|
| Median (152 companies) | 2.8% | 2.7% | 2.9% | 2.3% | 2.4% |
|---|
| Avaya Holdings Corp. ($AVYA) | 0.0% | 0.0% | | | 2.6% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| InsPro Technologies Corp ($ITCC) | -558.9% | | | | 127.4% |
| Manhattan Associates, Inc. ($MANH) | 64.8% | 78.7% | 99.3% | 102.5% | 80.9% |
| Intuit Inc. ($INTU) | 34.2% | 23.7% | 52.1% | 72.6% | 66.8% |
| Aspen Technology, Inc. ($AZPN) | 133.4% | | | | 58.1% |
| Paycom Software, Inc. ($PAYC) | 16.7% | 30.5% | 75.4% | 51.1% | 47.5% |
| |
|---|
| Median (178 companies) | -14.4% | -13.1% | -9.2% | -11.0% | -9.1% |
|---|
| Avaya Holdings Corp. ($AVYA) | 5.9% | 12.8% | -17.0% | | -17.8% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Upland Software, Inc. ($UPLD) | | | 16.4x | 115.6x | 16.7x |
| Nuance Communications, Inc. ($NUAN) | 7.9x | 5.7x | 5.3x | 7.1x | 15.2x |
| Asure Software Inc ($ASUR) | 3.4x | 4.5x | 3.6x | 9.5x | 14.5x |
| SS&C Technologies Holdings, Inc. ($SSNC) | 1.7x | 7.3x | 4.6x | 3.1x | 8.5x |
| Five9, Inc. ($FIVN) | | | -6.7x | -8.6x | 7.3x |
| |
|---|
| Median (69 companies) | -1.4x | -1.0x | -0.9x | -0.8x | -0.7x |
|---|
| Avaya Holdings Corp. ($AVYA) | | | | | 7.4x |
