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© 2018 Avaya Inc. All rights reserved.
Investor Day
December 12, 2018
© 2018 Avaya Inc. All rights reserved.
Forward-looking StatementsCautionary note regarding forward-looking statements
This presentation contains certain “forward-looking statements.” All statements other than statements of historical fact are “forward-looking” statements for purposes of the U.S. federal and state securities laws. These statements may be identified by the use offorward looking terminology such as "anticipate," "believe," "continue," "could," "estimate," “model,” "expect," "intend," "may," "might," “target,” “our vision,” "plan," "potential," "preliminary," "predict," "should," "will," or “would” or the negative thereof or other variations thereof or comparable terminology, and include, but are not limited to, the outlook for fiscal year 2019 and the Company’s long-term targets. The company has based these forward-looking statements on its current expectations, assumptions, estimates and projections. While the company believes these expectations, assumptions, estimates and projections are reasonable,such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond its control, that may cause its actual results, performance or achievements to differ materially from any future results,performance or achievements expressed or implied by these forward looking statements. For a list and description of such risks and uncertainties, please refer to Amendment No. 3 to the company’s Registration Statement on Form 10 and subsequent Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission (the “SEC”), that are available at www.sec.gov. The company cautions you that the list of important factors included in the company’s SEC filings may not contain all of the material factors that are important to you. The company undertakes no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.
2
© 2018 Avaya Inc. All rights reserved.
Use of non-GAAP (Adjusted) Financial MeasuresThis presentation should be read in conjunction with our fourth quarter fiscal 2018 earnings press release issued on December 4, 2018. Within this presentation, we refer to certain non-GAAP financial measures, such as non-GAAP revenue, non-GAAP operating income, EBITDA and adjusted EBITDA, that involve adjustments to GAAP measures. Reconciliations between our non-GAAP financial measures and the most closely comparable GAAP financial measures are included in the Appendix to this presentation.
EBITDA is defined as net income (loss) before income taxes, interest expense, interest income and depreciation and amortization. Adjusted EBITDA is EBITDA further adjusted to exclude certain charges and other adjustments described in our SEC filings and the tables below.
We believe that including supplementary information concerning adjusted EBITDA is appropriate because it serves as a basis for determining management and employee compensation and it is used as a basis for calculating covenants in our credit agreements. In addition, we believe adjusted EBITDA provides more comparability between our historical results and results that reflect purchase accounting and our current capital structure. We also present EBITDA and adjusted EBITDA because we believe analysts and investors utilize these measures in analyzing our results. Accordingly, adjusted EBITDA measures our financial performance based on operational factors that management can impact in the short-term, such as our pricing strategies, volume, costs and expenses of the organization and it presents our financial performance in a way that can be more easily compared to prior quarters or fiscal years.
EBITDA and adjusted EBITDA have limitations as analytical tools. EBITDA measures do not represent net income (loss) or cash flow from operations as those terms are defined by GAAP and do not necessarily indicate whether cash flows will be sufficient to fund cash needs. However, these terms are not necessarily comparable to other similarly titled captions of other companies due to the potential inconsistencies in the method of calculation. Adjusted EBITDA excludes the impact of earnings or charges resulting from matters that we consider not to be indicative of our ongoing operations. In particular, our formulation of adjusted EBITDA allows adjustment for certain amounts that are included in calculating net income (loss), however, these are expenses that may recur, may vary and are difficult to predict.
We do not provide a forward-looking reconciliation of expected fiscal 2019 adjusted EBITDA, non-GAAP operating income or non-GAAP revenue guidance as the amount of significance of special items required to develop meaningful comparable GAAP financial measures cannot be estimated at this time without unreasonable efforts. These special items could be meaningful.
3
© 2018 Avaya Inc. All rights reserved.
12:30 – 1:00 PM Overview and Agenda for Growth Jim Chirico
1:00 - 1:20 PM Innovating the Core Chris McGugan
1:20 - 1:50 PM Emerging Technologies and Innovation Laurent Philonenko
1:50 – 2:20 PM Cloud Gaurav Passi
Break
2:30 – 3:00 PM Customer Panel MetLife, NYC 311, U.S. Bank
3:00 - 3:30 PM GTM for Growth Dino Di Palma
3:30 - 4:00 PM Financial Model Pat O'Malley
4:00 – 4:30 PM Closing and Q&A
4:30 – 5:30 PM Demos and Cocktails
Agenda
4
© 2018 Avaya Inc. All rights reserved.© 2018 Avaya Inc. All rights reserved.
SVP, Solutions and Technology
SVP, Innovation
President, Americas Sales and Global Accounts
President, Cloud Business Group
SVP and Chief Financial Officer
Chris McGugan
Laurent Philonenko
Gaurav Passi
Dino Di Palma
Pat O’Malley
CEO and President
Jim Chirico
© 2018 Avaya Inc. All rights reserved. 5
© 2018 Avaya Inc. All rights reserved.© 2018 Avaya Inc. All rights reserved.© 2018 Avaya Inc. All rights reserved. 6
SVP, Global Business Operations
Fred Hayes
President, Avaya International
NidalAbou-Ltaif
SVP, Chief Administrative Officer and General Counsel
ShefaliShah
SVP, Corporate Strategy and Development
Nikos Nikolopoulos
President, Avaya Services
Ed Nalbandian
Head of Global Marketing
Becky Carr
VP Business Operations
David Austin
© 2018 Avaya Inc. All rights reserved.
Jim ChiricoPresident and CEO
Investor Day
© 2018 Avaya Inc. All rights reserved.
January 17, 2018
© 2018 Avaya Inc. All rights reserved.
Avaya elevates communications to the next generation of engagement, connecting organizations to their customers, workforce and communities with secure, intelligent experiences that matter
Vision
Avaya is a transformative force in digital communications software, services and devices, designed for businesses of all sizes. Through our open, converged and innovative solutions, Avaya is taking intelligent experiences to new heights for our customers, partners, and their customers - in the cloud, on-premise, or hybrid
Mission
9
© 2018 Avaya Inc. All rights reserved.
Our Strategy
Innovatingour core
Creating Long-term sustainable value
Bringing emerging technologies to market
Investing and delivering acomprehensive Cloud portfolio
10
© 2018 Avaya Inc. All rights reserved.
C o r e C l o u d
I n n o v a t i o nS e r v i c e s
© 2018 Avaya Inc. All rights reserved.
FY18 • Stability• Momentum
• Growth • Acceleration
• Industry Leadership
FY19
FY21C l o u d R e v e n u e
FY15 FY16 FY17 FY18
11
© 2018 Avaya Inc. All rights reserved. 12
© 2018 Avaya Inc. All rights reserved.© 2018 Avaya Inc. All rights reserved.
100,000+seat implementations
World-class Services
Global and Scalable
175+ countries
15M calls 4M agent interactions
13
Every minute:
© 2018 Avaya Inc. All rights reserved.
Long-term Value Creation
© 2018 Avaya Inc. All rights reserved.
114
© 2018 Avaya Inc. All rights reserved.
Customer-led
© 2018 Avaya Inc. All rights reserved.
215
© 2018 Avaya Inc. All rights reserved.
Convergence
© 2018 Avaya Inc. All rights reserved.
316
© 2018 Avaya Inc. All rights reserved.
Software and services
82%
Recurring
57%
High-marginsoftware
60%
Total contract value
$2.4B
Gross margin
63%
Cloud
11%
Public Cloud seat growth
300%
Revenue
FY18 Establishing Momentum
© 2018 Avaya Inc. All rights reserved.
Customer Led: Providing What Customers Want
7,000
440+ 15
54New logos
over $1M
over $10M
Net Promoter ScoreProduct revenue from new products
37%
55 over $5M
Deals
18
*
* Represents Q4 FY18 metric
© 2018 Avaya Inc. All rights reserved.
FY18 Key Accomplishments
© 2018 Avaya Inc. All rights reserved.
Strengthened foundation for growth
Made strategic investments
Upheld best-in-classbusiness model
Focused on customer
19
© 2018 Avaya Inc. All rights reserved.
Growth Pillars
© 2018 Avaya Inc. All rights reserved.
FY19 4
20
© 2018 Avaya Inc. All rights reserved.
1 Innovating Our Core
© 2018 Avaya Inc. All rights reserved.
Modernize and monetize our base
Solutions that are secure, scalable and reliable
Seamless, simple and integrated
Focused on user experience
21
© 2018 Avaya Inc. All rights reserved.© 2018 Avaya Inc. All rights reserved.
2 Bringing Emerging Technologies to Market
Artificial Intelligenceand Mobility
Driving new opportunities for our customers
Disruptive products in market
At the forefront ofnext generation
Accelerating adoption
22
© 2018 Avaya Inc. All rights reserved.
3 Delivering Breadth and Depth of Cloud
© 2018 Avaya Inc. All rights reserved.
Cloud first
Investing across the portfolio
Public / Private / Hybrid
Aggressively pursuing Midmarket
Building Cloud ecosystem
© 2018 Avaya Inc. All rights reserved.
4 Providing High-valueServices
© 2018 Avaya Inc. All rights reserved.
Service offerings include: support, managed and professional services
Global scale
Unmatched expertise
Drives significant value for customers
24
© 2018 Avaya Inc. All rights reserved.© 2018 Avaya Inc. All rights reserved.
Why AvayaWhy we are winningWhat is different
25
© 2018 Avaya Inc. All rights reserved.
Pure-play UC / CC company#1
UC lines139M
CC Users5.5M
Global customers130K
Fortune 10090%
World’s Largest Installed Base
26
© 2018 Avaya Inc. All rights reserved.
Seat contact centers
50,000Countries
175Seat UC implementations
100,000multiple
Delivering Large, Scalable Solutions
multiple
27
© 2018 Avaya Inc. All rights reserved.
Convergence
© 2018 Avaya Inc. All rights reserved.
#1
CC#2
UC#1UC & CC
28
© 2018 Avaya Inc. All rights reserved.
Market Coverage
• Global reach and vertical practices with SIs & SPs
• Channel network, agents, storefront, inside sales 4,700
• Strategic alliances
• Geo-based sales organization 2,000
• Global direct account teams - top accounts
• Consultative services 1,200 professionals
• Cloud sales and customer success
29
© 2018 Avaya Inc. All rights reserved.
ServicesCapabilities
© 2018 Avaya Inc. All rights reserved.
Professional
Support
Managed
© 2018 Avaya Inc. All rights reserved.
3.3xNet-debt /
Adj. EBITDA
25% EBITDAmargin
Generate
8-10% of revenue
in cash
Financial Strength and Flexibility
Resources to invest
Liquidity
Strong balance sheet
Highly profitable
$700MCash Balance
© 2018 Avaya Inc. All rights reserved.
Moving Ahead
Sustaining our industry-leading business model
Increasing our investment in technology and talentTaking cloud to market aggressively
Driving the business to 2 – 4% CAGR with 25% of our revenue coming from cloud
32
Expanding partner ecosystem
© 2018 Avaya Inc. All rights reserved.
Innovating Our Core
Chris McGuganSolutions and Technology
© 2018 Avaya Inc. All rights reserved.
Trusted Partner of World’s Largest Enterprises
Airlines Services Companies
Automotive Manufacturers
InsuranceCompanies
Hotel Groups
Banks
CC / UCGartner Magic
Quadrant Leader
$2.7Brevenue
17 / 9years
World’s largest
installed base
145M
Source: Avaya Management estimates
10 of the Top 10
© 2018 Avaya Inc. All rights reserved. 34
Product revenue
growth in FY18
lines
© 2018 Avaya Inc. All rights reserved.
Adaptable solutions
Enable the digital workplace
Communicate / collaborate using any touchpoint
Converged / seamless across channels
Context aware and anticipatory
Best-of-breed flexibility
Tailored / optimized to company-specific processes
Rapidly extendible, keeping up with the ‘speed of business’
Interoperability, flexibility, customization
Unified Communications Portfolio
Ease of use
Multipledeployment / consumptionoptions
Calling Messaging
Team Collaboration
Meetings
Simple, empowering experiences
139 Million Lines in Service35
© 2018 Avaya Inc. All rights reserved.
Adaptable solutions
Simple, empowering experiences
Facilitate digital transformation
Exceed customer expectations and Increase agent performance
Offer choice of deployment and consumption options
Deliver world-class services and support
Any touch point
All channels
Context-aware and anticipatory
Best-of-breed flexibility
Tailored to your business
Extensible
Self-service Assisted Service
Artificial Intelligence
Performance Management
Contact Center Portfolio
Powering the World’s Largest Contact Centers36
© 2018 Avaya Inc. All rights reserved.
Driving customer journey transformations
1,200 technical professionals with 1,000 technical certifications
Reference architectures
Agile Development
Services Portfolio
Consulting
Enterprise Cloud and Managed
Design and Implementation
Industry-leading enterprise Cloud, managed and support services
3,000 technical professionals / 20 global centers / 16 languages
Advanced automation / AI
Single global delivery model
Highest Renewal Rate in 2 years
Unmatched in Scale, Breadth and Depth
Support
37
© 2018 Avaya Inc. All rights reserved.
Looking for a trusted partner
Simplicity
Single platform
Modernizing existing investments
Convergence is a Key Differentiator
© 2018 Avaya Inc. All rights reserved.
UCApps
CCApps
© 2018 Avaya Inc. All rights reserved.
FY18 InvestmentRoadmap
Refreshed and Expanded Device Portfolio
Added Intelligent Self-Service, Smart Routing, Conversational Intelligence, Agent Guidance; expanded A.I.Connect ecosystem
Aura 8.0 including AWS, Azure and Google Cloud
IP Office Converged
Modern Workspaces for Elite customers
Converged UC / CC Platform
New AI Capabilities
Expanded IaaS Deployments
Equinox and Team Spaces
Single platform
Expanded Workforce Optimization Portfolio
Omnichannel improvements
Open SIP
Vertical Consulting Offers
Healthcare, Hospitality
Customer Management Platform
Self-service analytics and reporting
39
© 2018 Avaya Inc. All rights reserved.
FY18 Key Highlights
Financial
#$150M Total Contract Value; highest in 2 years
60% Product revenue from software
3Consecutive quarters of product and 1x bookings growth
$60M Competitive wins in Q4
100% Omnichannel growth
8% Professional services growth
$150M Investment in the core
Endpoints
Collaboration
12,000 Converged customers
100,000+ Developer ecosystem
Open SIP phones
New product line
Launched
New release
Technology
40
98+% High retention rates
© 2018 Avaya Inc. All rights reserved.
FY19 Executing on Customer-Led PrioritiesM
idm
arke
t
Pay per use
Integrated mobile
experience
Self-service support
Soft phonesS
MB
Ente
rpri
se Best of suite ↓
Single platform
Convergence: CC + UC +
Collaboration
Enterprise grade moves downstream
Emerging technologies /
AI +++
High-touch + self-services
Vertical specialization
Managed / multi-vendor / hybrid Cloud
© 2018 Avaya Inc. All rights reserved.
FY19 InvestmentRoadmap
• SMB Bundles• Mobile Experience• Mobile Identity• Next-gen Digital• Cloud Migration Tools• Unified Workspaces
w/Analytics• WFO in the Cloud
• Headsets• Huddle Rooms• Device as a Service• Open SIP• AI on Multimedia
Devices
Unified Communications
Contact Center
DevicesArtificial Intelligence
• SMB Bundles• Device as a Service• Open SIP• Spaces & Meeting
Convergence• Cloud Migration Tools• SIP Trunking
42
• Conversational Intel, Self-service bots
© 2018 Avaya Inc. All rights reserved.
Product + Services
Cloud
89%
11%
FY18( Re v e n u e )
Product + Services
Cloud
75%
25%
FY21( Re v e n u e )
Our Core is a Significant Opportunity
Source: Avaya Management estimates 43
© 2018 Avaya Inc. All rights reserved.
Core is Strategic, Relevant and Wide Ranging
This is just a sampling of Avaya’s Development partners. For a complete list visit avaya.com/devconnect
Broad enterprise ecosystem
CRMintegrations
AI integrations
Business / vertical integrations
Snap-ins
Analytics engines
CCintegrations
44
© 2018 Avaya Inc. All rights reserved.
InnovationStrategy
Laurent PhilonenkoSVP Innovation
© 2018 Avaya Inc. All rights reserved.
Differentiates Avaya
Focuses on next-gen solutions
Delivers high-value solutions
Maintains innovation pipeline
Innovation Incubator
46
© 2018 Avaya Inc. All rights reserved.
Current Massive Opportunities
Creating unrivalled customer experiences
Changing the game in contact centers
Artificial IntelligenceMobility
47
© 2018 Avaya Inc. All rights reserved.
Leading Through Innovation
AI and Mobility
Significant Customer
Value Creation
Opportunities
FocusedInvestment
Contact Center and
Cloud
Long-term value creation
Convergence of technologies
Customer-led
© 2018 Avaya Inc. All rights reserved.
Selected as AI supplier for a G8 government (voice applications, predictive insights)
Bots for bank customer service
Voice applications for police force
Insights for large TMT company
Mobility application at Software company
Pipeline validates strategy
Customer-LedMomentum100+ opportunities
Case-based approach
© 2018 Avaya Inc. All rights reserved.
AI + Mobility Transforming Contact Centers
Effortless self-service
Predictiverouting
Agent augmentation
Interaction insights
Market Reality
"IVR Hell"
Skills & queues FIFO per queue
Classroom and self training, knowledge
base, peers
Operational KPIs
Avaya's Innovation
Conversationalself-service
Optimize agent –customer pairing
Coach agents in real-time
Customer behaviors and intents
Mobility No mobile context Dedicated mobile capabilities
© 2018 Avaya Inc. All rights reserved.
Software company
TMT company
800# Cost reduction~$2B US
spend
Digital experience / Secure identity
Fraud management
~$10B spend
Future applications
5G
Location
Advanced audio
Financial dataprovider
Retailbank
Insurance company
Public services company
Mobility: Unique, Patented Value Proposition for a Large Market
FY21 Objective
>$100MSaaS
Live CustomersNo Competition
51
© 2018 Avaya Inc. All rights reserved.
Customers Demand Avaya Mobile Identity
• Voice – facial biometrics
• Blockchain-like storage• Quantum safe
• User-controlled identity
Nearly 1B individualcybercrime victims
US fraud losses totaled $16.7B in 2017
49% of companies are victims of fraud and economic crime –up from 36%
Problem Solution
• State of the art cryptography
52
© 2018 Avaya Inc. All rights reserved.
Leading the AI RaceLive Customers –Modernizing the Base
Large Market: • AI software $26B in 2021• Unique IP and partnerships• Broadest solution set
Avaya FY21 Objective
AVAbots
>$100MSaaS
Predictiverouting
Conversationintelligence Insights
© 2018 Avaya Inc. All rights reserved. 53
© 2018 Avaya Inc. All rights reserved.
Effortless Self Service
PredictiveRouting
Agent Augmentation
Interaction Insights
Our AI CapabilitiesCover the Entire CC Scope Today
AVA: virtual assistant
Predictive Insights: customer handling
Behavioral Pairing: agent optimization
Real Time Transcription: core to productivity
Intent Detection: better response
Agent Coaching: real-time, not offline
Call Summarization: save agent work
Automated Quality Monitoring: productivity
© 2018 Avaya Inc. All rights reserved. 54
© 2018 Avaya Inc. All rights reserved.
Avaya AI Ecosystem – AI ConnectAttracts the Best On the Avaya Platform
All trademarks identified by the ®, ™, or ℠ are registered trademarks, trademarks, or service marks respectively, of Avaya Inc. Other trademarks are the property of their respective owners.
www.avaya.com/aiconnect
© 2018 Avaya Inc. All rights reserved.
The OpportunityGrowth and differentiationin large new markets
Revenue acceleration objective in FY21: >$200M for AI + Mobility
Value creation for customers and Avaya
Additional adjacencies
Drive modernizationof the base
56
© 2018 Avaya Inc. All rights reserved.
CloudStrategy
Gaurav PassiCloud
© 2018 Avaya Inc. All rights reserved.
Why I Joined Avaya
Huge Loyal Base
Customers and partners
Domain Expertise
Decades of deep understanding of UC, CC markets
Wherewithal
Best positioned for Cloud / digital transformation
© 2018 Avaya Inc. All rights reserved. 66
© 2018 Avaya Inc. All rights reserved.
Cloud seats3.5M
Customers3,600
Did You Know?
FY18 Cloudsubscription revenue
$330M
Customers with ARR >$1M
64Avaya Cloud
Source: Avaya Management estimates 67
© 2018 Avaya Inc. All rights reserved.
Key Takeaways
Doubling down on Cloudwe are now a Cloud-first company
Battlefield is Up-market (MM – ENT): Pure Cloud players not ready for Up-market
Entering into a new era of strategic Cloud partnerships
Avaya is a trusted partner for Enterprises for decades; we are now going to aggressively compete in Midmarket
1
2
3
4
5
Leadership positionrequires additional investment
© 2018 Avaya Inc. All rights reserved.
Avaya Base
Support and Services
4,700
2,000
3,000
1,500
10
Channel Partners
SalesProfessionals
R&D
Worldwide DataCenters
Source: Avaya Management estimates 69
© 2018 Avaya Inc. All rights reserved.
Avaya Base
Support and Services
4,700
2,000
3,000
1,500
10
Channel Partners
SalesProfessionals
R&D
Worldwide Data Centers
Source: Avaya Management estimates
10k agents >10k employees
1k – 10k agents>5k employees
250 – 1k agents>1k employees
50 – 250 agents <1k employees
<50 agents<500 employees
SM
BM
MEN
T –
LG E
NT
70
CC UC
© 2018 Avaya Inc. All rights reserved.
Avaya Base
5.5M CC Agents; 139M UC Lines
Support and Services
4,700
2,000
3,000
1,500
10
Channel Partners
SalesProfessionals
R&D
Worldwide Data Centers
130,000 Customers in 175 Countries
Source: Avaya Management estimates from billing and contracting systems
80%10k agents >10k employees
1k – 10k agents>5k employees
250 – 1k agents>1k employees
50 – 250 agents <1k employees
<50 agents<500 employees
SM
BM
MEN
T –
LG E
NT
CC UC
71
© 2018 Avaya Inc. All rights reserved.
Midmarket to Enterprise: The BattlegroundSegments
SMB
MM
ENT -LG ENT
TAM, Value
LOW
HIGH
Cloud Adoption
HIGH
LOW
High degree of scalability and customizationSecurity (e.g., HIPAA, PCI, CPNI)Complex integrationsRich / Advanced featuresOmnichannel / AIHigh maintenance and support SLAs
Low costBasic integrated suiteFast and easy setup
Ease of installationMinimal support and on-site dependency
Customer NeedsAvaya Base
72
© 2018 Avaya Inc. All rights reserved.
Avaya Base on Digital Transformation
73
© 2018 Avaya Inc. All rights reserved.
Pure Cloud players not ready for Up-market
Enterprises don’t want to invest in Data Centers
Data Security
SecureCloud
Converged Services& Maintenance
Global Presence
Trusted Advisor
Omnichannel
AI | Mobility
Digital Transformation
What We’re Hearing From Customers
PaySubscription
Expansion
OPEX Model
74
© 2018 Avaya Inc. All rights reserved.
Enterprise-grade functionalityoffered public, private or hybrid
Hybrid option: Practical path for large migrations
Customized solution to maintain user experience / business workflows
Single global delivery model
How We’re Meeting Enterprise Requirements
$330M(FY18 Rev)
On-premise vs. Hosted UC:Which is right for your business?
or or ?
Source: Avaya Management estimates
© 2018 Avaya Inc. All rights reserved.
Trusted and Scalable
Why We Win vs. Cloud
Competitors
Up Market
A Single, Integrated Communications Platform
All Cloud Options
Enterprise Features
Full Application Suite
76
© 2018 Avaya Inc. All rights reserved.
Unified Communications TAM
$64B
Source: Avaya Global Market Demand Forecast, Avaya Management estimates, Gartner, MZA Limited, Synergy Research Group, Company Filings and News ReportsNote: TAM is for 2021
450MLines
Total Market
Contact Center TAM
$32B13.5M
Agents
Total Market
The Opportunity
77
© 2018 Avaya Inc. All rights reserved.
What Additional Investment Can Yield
$0.0
$2.5
$5.0
$7.5
$10.0
$12.5
$15.0
$17.5
$20.0
1% 3% 5% 20% 40% 60% 80%
Avaya Installed Customer Base Conversion to Cloud
Ava
ya C
lou
d O
pp
ort
un
ity
$B
Cloud Revenue
Opportunity
1% of Installed Base =
$250M in Revenue
Source: Avaya Management estimates
© 2018 Avaya Inc. All rights reserved.
Cloud Journey Requires Additional Investment
• CCaaS
• Integration
• Digital
• Portfolio Simplification & Expansion
• Storefront
• Midmarket
• International
Intelligent Experience Centers
Building Customer Success Cloud LeadershipFY18: 11% FY21: 25%FY19: 12 - 14%
Source: Avaya Management estimatesNote: Percentages based on % of total revenue, pricing shown is illustrative only 79
© 2018 Avaya Inc. All rights reserved.
Portfolio Investment
Meetings
Collaboration
Phone
Devices
CRM Integrations
Omni Desktop
Management Tools
Artificial Intelligence
Avaya Cloud
Voice, Video, Text
80
© 2018 Avaya Inc. All rights reserved.
Storefront and Services
Note: Pricing shown is illustrative only 81
Avaya Cloud
Voice, Video, Text
© 2018 Avaya Inc. All rights reserved.
UCaaS - Phone
82
Avaya Cloud
Voice, Video, Text
© 2018 Avaya Inc. All rights reserved.
UCaaS - Meetings
83
Avaya Cloud
Voice, Video, Text
© 2018 Avaya Inc. All rights reserved.
UCaaS - Collaboration
84
Avaya Cloud
Voice, Video, Text
© 2018 Avaya Inc. All rights reserved.
CCaaS – Omni Desktop
85
Avaya Cloud
Voice, Video, Text
© 2018 Avaya Inc. All rights reserved.
CCaaS – CRM Integration
86
Avaya Cloud
Voice, Video, Text
© 2018 Avaya Inc. All rights reserved.
42,000 New Seats On CCaaS (Spoken)
1000 seats; scaling to 5000
Work-from Home-agents
VoC score increased by 8.5%
Ramping 1500 seats; 30K full ramp
Reliability across global contact centers
Reduced labor with conversation center
6300 seats; 25K full ramp
Security & compliance
Platform reliability
Large TMT Company
© 2018 Avaya Inc. All rights reserved.
Vision FY21: 25% in Cloud
Secure Our BaseDominate Enterprise
• Big Advantage with no CAC
• Competition needs heavy investment
Aggressively Compete in MidmarketPortfolio Simplification
• Storefront
• Invest in Direct (Inside Sales)
• Arm Channel
InternationalExpansion
• Germany
• Next: India and Japan
Strategic Cloud Ecosystem
Joint
• Salesforce
• Verint
• Others
Offers
Strategic Investments
• CCaaS: Spoken
• Additional Investments
• Innovation: AI, Mobility
89
© 2018 Avaya Inc. All rights reserved.
Short Break
© 2018 Avaya Inc. All rights reserved.
Customer Panel
Dino Di PalmaAmericas Sales and Global Accounts
© 2018 Avaya Inc. All rights reserved.
GTM for Growth
Dino Di PalmaAmericas Sales and Global Accounts
© 2018 Avaya Inc. All rights reserved.
Market opportunity1
Where we are today 2
How we are transitioning our GTM strategy for success3
Where we are focused for growth 4
Why we win5
Key Messages
102
© 2018 Avaya Inc. All rights reserved.
LARGE TAM
$105BContact Center
(CC)Unified Communication
(UC)Communications Platform
as a Service (CPaaS)+ +
$32B $64B $8BSource: Avaya Global Market Demand ForecastNote: TAM is for 2021; Totals may not add up due to rounding 103
© 2018 Avaya Inc. All rights reserved.
Market Coverage
• Global reach and vertical practices with SIs & SPs
• Channel network, agents, storefront, inside sales 4,700
• Strategic alliances
• Geo-based sales organization 2,000
• Global direct account teams - top accounts
• Consultative services 1,200 professionals
• Cloud sales and customer success
104
© 2018 Avaya Inc. All rights reserved.
GTM Strategy – Customer Segmentation
Global AVAYA Top 50
Large Enterprise 10,000+
Enterprise 1,000-10,000
Midmarket 250-1,000
SMB <250
SEGMENTS CLOUD OPTIONS COVERAGE
Leading customers through their Digital Transformation
Services
Public Cloud
Fiel
d sa
les
Sto
refr
ont
Mas
ter
agen
ts
Insi
de s
ales
SP
sell-
thru
SI
sell-
thru
Cha
nnel
par
tner
s
Private and
Hybrid
105
© 2018 Avaya Inc. All rights reserved.
The End-to-end Customer Journey
Avaya Field Sales / SESolution Architect
(or Partner)
EndpointDelivery
ProfessionalServices
Avaya CustomerSuccess
(or Partner)
AutomatedProvisioning
Direct /Partner – Enterprise
Agent /Master Agent
Storefront SMB: Avaya Inside SalesMM: Avaya Field Sales / SE
AutomatedProvisioning
EndpointDelivery
Avaya CustomerSuccess
Retail – Midmarket
Partner Avaya PartnerSuccess
AutomatedProvisioning
EndpointDelivery
Partner Customer Success
Avaya Field Sales
Wholesale / SP – SMB
Customer
Customer
Customer
106
© 2018 Avaya Inc. All rights reserved.
Playbook 1Customer
segmentation
2Cloud sales
motion
3Channel
ecosystem
4Vertical strategy
5Sales and marketing
enablement
6Services
and customer success
107
© 2018 Avaya Inc. All rights reserved. LOGOS
LOGOSGlobal
Customers
Largest Installed Customer Base in the Industry
130K
of Fortune 100
90%
UC Lines139M
CC Agents
5.5M
Enterprise / Midmarket
~80%
SMB
~20%
Customer Segments
Source: Avaya Management estimatesNote: Customer breakout based on number of lines with the customer (Enterprise / Middle Market >250 Lines, SMB <250)
© 2018 Avaya Inc. All rights reserved.
Omnichannel
Mobile Experience
AI
Analytics
Innovation Sales Motion to Enable Transformation
Cloud
109
Growth Drivers
© 2018 Avaya Inc. All rights reserved.
Our Channel
Ecosystem
Channel today
>4,700 Partners worldwide
Coverage and service in SMB and MM
Early enterprise success
Now delivering enterprise wins
US based with international locations
Larger partners have begun to sell ACP
Channel sales motion shifting
Move to cloud has started
Provide acceleration
Customer success for top partners
Virtual support/ vertical partner focus
For FY19
Master agent program
Global expansion for hosted
Next generation eCommerce
More offers in partner program
110
© 2018 Avaya Inc. All rights reserved.
Cloud Transformation Strategic AlliancesDevices
Midmarket, enterprise and federal sell-thru initiatives with tier
1 SP’s
Digital transformation practice alignment
with SI and consultant ecosystem
Adoption/sales via Open SIP,
DaaS and DPFF
‘Big Friend’ partnerships with independent
(aligned) sales motions
Service Provider / System Integrator
111
© 2018 Avaya Inc. All rights reserved.
Vertical Market Opportunity
Healthcare Hospitality Public Safety and Emergency Services
Financial and Insurance
$6B $4B $3B $11B
Source: Avaya Global Market Demand ForecastNote: TAM is for 2021 112
© 2018 Avaya Inc. All rights reserved.
Customer Success
Success Factors• Enterprise practice with
2,000 service people globally
• Unique per segment sharing common goals
• Customer retention and expansion
• Shared responsibility
Onboard
Initial deployment
and onboarding Training and
first applicationExpectation
management and continuous engagement
Natural outcome
Enable
Communicate
Renew
New tech and departmental
expansion
Expand
113
© 2018 Avaya Inc. All rights reserved.
WhyWe Win
• Global Coverage
• Loyal customer base
• One of the largest channel ecosystems
• Multiple cloud deployment options
• Enhanced CX / Innovation
• Services Expertise
114
© 2018 Avaya Inc. All rights reserved.
FinancialModel
Pat O’MalleyFinance
© 2018 Avaya Inc. All rights reserved.
27%Expand Adj. EBITDA margin
2 - 4%Revenue CAGR
50%Increase investments in Cloud & Innovation over 3 years
11 - 13%Improve cash from operations (% of revenue)
Key Goals to Drive Long-term Value
© 2018 Avaya Inc. All rights reserved.
Long-term Targets
Revenue
Profitability
Innovate our core to modernize installed baseGrow Cloud & Innovation #25 - 30% of total revenueDrive consultative services to 3 - 5% CAGR
Expand gross margins to 63 - 65%Increase software and services mix to 88 - 90%Grow recurring revenueDrive productivity and operational efficiencies
Cash Flow and Balance Sheet
Improve cash from operations to 11 - 13% of revenue to:• Fund investments• Reduce debt• Return capital to shareholders
Continue strengthening balance sheet and reduce cost of capital
121
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24.4% Adj. EBITDA margin; best-in-class business model
62.5% Gross margin record
Established foundation for revenue momentum by investing in core, cloud, innovation and professional services
Stabilized revenue
$150MIncrease in TCV to $2.4B+
122
FY18 Significant Achievements
© 2018 Avaya Inc. All rights reserved.
FY18 Accomplishments
RevenueGrowth
BusinessMomentum
34%
$150M
165%
312%
11%57%
7,000
440
62.5%3.3x
$700M
Product revenue from new products
#TCV @ $2.4B+
Growth in Cloud MRR Midmarket / SMB MRQ
Growth in UCaaS / CCaaS Seats
Cloud % Revenue
Recurring% Revenue
New logos
Deals > $1M
Gross margin
Net debt / Adj. EBITDA
Cash and cash equivalents
82% Software and Services% Revenue
24.4% Adj. EBITDA margin
Operations and Balance Sheet
© 2018 Avaya Inc. All rights reserved. MRQ = Most Recent QuarterMRR = Monthly Recurring Revenue
3% CC product revenue growth
123(Amounts are non-GAAP)
© 2018 Avaya Inc. All rights reserved.
Financial Transformation
% Recurring revenue
48%57%
71%
82%
% Revenue from software and
services
Non-GAAPgross margin %
61% 63%
AdjustedEBITDA margin %
22%
24%
% Product revenue from
software
42%
58%
+11 pts +9 pts +2 pts +2 pts+16 pts
© 2018 Avaya Inc. All rights reserved.
FY15 FY18 FY15 FY18 FY15 FY18 FY15 FY18 FY15 FY18
% Cloud and Innovation revenue
7%11%
FY15 FY18
+4 pts
Note: FY15 financials based on reported metrics; Numbers may not add up due to rounding 124
© 2018 Avaya Inc. All rights reserved. 125
FY19 Key Objectives
8 - 10% of RevenueCash from Operations
25 - 26% Adj. EBITDA marginExpand best-in-class business model
12 - 14% Cloud % of revenue, ~1% Innovation % of revenue
Revenue Growth
$225M Increase R&D investment withfocus on Cloud and Innovation
© 2018 Avaya Inc. All rights reserved.
F Y 1 8
A C T U A L
F Y 1 9
O U T L O O K
Non-GAAP Revenue*Annual growth
$3.057B $3.05 - 3.15B+0 - +3%
% Software and services 82.2% 83 – 85%
% Recurring revenue 57.4% 58 – 59%
% Cloud revenue 11% 12 – 14%
% Innovation revenue - ~1%
Non-GAAP Gross margin % 62.5% 62 – 63%
R&D % of product revenue 15.2% 15 – 16%
Adj. EBITDA margin % 24.4% 25 – 26%
Cash from operations % revenue** 6.8% 8 – 10%
FY19 Outlook
* based on September 30th, 2018 currency rates ** normalized for restructuring related items and PBGC pension settlement payment 126
© 2018 Avaya Inc. All rights reserved.
Growth Driven by Product and Cloud & Innovation
47% 45 – 47%
42% 42 – 44%
11% 12 – 14%
FY18A FY19E
Product
Services
Cloud & Innovation
$3.057B $3.05 - 3.15B
Note: Totals may not add up due to rounding
© 2018 Avaya Inc. All rights reserved.
38% 35 – 36%
9% 10 – 11%
30% 30 – 31%
12% 12 – 13%
11% 12 – 14%
FY18A FY19E
Growth Momentum Across Business
APS
Maintenance and other services
$3.057B $3.05 - 3.15B
CC
UC
Cloud & Innovation
Note: Totals may not add up due to rounding
© 2018 Avaya Inc. All rights reserved.
FY18 Actual
FY19Outlook
Long-term Targets
Non-GAAP revenue $3.057B $3.05 - 3.15B 2 - 4% CAGR
% Software and services 82.2% 83 - 85% 88 - 90%
% Recurring revenue 57.4% 58 - 59% 63 - 65%
% Cloud revenue 11% 12 - 14% 21 - 25%
% Innovation revenue - ~1% 4 - 6%
Non-GAAP Gross margin % 62.5% 62 - 63% 63 - 65%
R&D $198M $225M $275 – 300M
Adj. EBITDA margin % 24.4% 25 - 26% ~27%
Cash from Operations* % Revenue 7% 8 - 10% 11 - 13%
* Net Cash interest includes payments classified as Adequate payment protectionNote: Long term targets represent 3+ years financial model* FY18 Cash from operations normalized for restructuring related items and PBGC pension settlement payment
Long-termTargets
© 2018 Avaya Inc. All rights reserved.© 2018 Avaya Inc. All rights reserved.
48%
57%64%
61%63%
64%
22%
24%
27%
Business Model Transformation
%Recurring revenue
71%
82%89%
%Revenue from software and
services
Non-GAAP Gross margin %
AdjustedEBITDA
margin %
42%
58%
77%
%Product Revenue from software
FY15 FY18 LT
+7 pts +7 pts +19 pts +2 pts +3 pts
Note: LT represents mid-point of Long-term Target model
FY15 FY18 LT7%
11%
28%
% Cloud & Innovation
revenue
+17 pts
FY15 FY18 LTFY15 FY18 LTFY15 FY18 LTFY15 FY18 LT
130
© 2018 Avaya Inc. All rights reserved.
11% 12 – 14% 25 – 31%
42% 42 – 44%35 – 37%
47% 45 – 47% 39 - 41%
FY18A FY19E FY21LT Target
Long-term Revenue Target
* Excluding divested networking revenue ** '19- 23 CAGR© 2018 Avaya Inc. All rights reserved.
$3.057B $3.05 - 3.15B2% - 4% CAGR
Services
Product
Cloud & Innovation
Note: Totals may not add up due to rounding 131
© 2018 Avaya Inc. All rights reserved.
Compelling Cloud EconomicsWin-Win for Customers and Avaya
Note: Unit prices above reflect illustrative blended examples. UC license revenues include attached devices/hardware. Cloud revenues reflect illustrative conversion of UC/CC customer to Avaya public and private cloud offers.
Cloud conversion offers compelling benefits:
Scalable, feature-rich UCaaS / CCaaS for customers within OpEx model
Reduce customer upfront costs and eliminate redundant IT resources
Stickier, predictable revenue stream for Avaya
Enhances lifetime customer value with typical 6-12 month payback
On Premise Cloud
License (1x)
Prof Services
(1x)
Maintenance(MRR)
3 Year Revenue
Cloud MRR
3 YearRevenue
Payback (mths)
UCaaS $138 $25 $2.25 $244 $18 $630 11
CCaaS $260 $133 $7.25 $654 $70 $2,520 7
132
© 2018 Avaya Inc. All rights reserved.
Long-term Gross Margin Targets
* Excluding divested networking revenue ** '19- 23 CAGR© 2018 Avaya Inc. All rights reserved. Note: Graph represents total GM% and $s.
Services
Private Cloud
64% 62 – 64% 60 – 63%
37% 41 – 43% 47 – 49%32% 47 – 49% 75 – 80%
67% 67 – 68% 65 – 69%
63% 62 – 63%
FY18A FY19E FY21
Product
LT Targets
Public Cloud
63 – 65%
133
Higher mix of SW driving product GM%Cloud GM% increasing with volume/scaleMaintaining services GM%
© 2018 Avaya Inc. All rights reserved.
Long-term R&D TargetIncreasing R&D spend
* Excluding divested networking revenue ** '19- 23 CAGR
Increased R&D investment• FY18 R&D expense of $198M
• Increasing to ~$225M in FY19 and LT target of $275M-$300M (17%-18% of product and Cloud revenue)
R&D Investment focused on growth• Investment in Cloud, AI, mobility
and new product offerings
• LT target: 60% of R&D investment on new product offering including Cloud, AI, mobility and innovation (FY18: 35%; FY16: 11%)
© 2018 Avaya Inc. All rights reserved.
R&D(% of product and Cloud revenue)
15.2% ~16% 17 – 18%
FY18A FY19E FY21LT Target
Note: Graph represents total R&D% and $s. 134
© 2018 Avaya Inc. All rights reserved.
• Net Cash interest includes payments classified as adequate payment protection
• Pension settlement payment to PBGC not included within Pension & Post Retirement payments
Cash Requirements$M
Restructuring
Pension & Post Retirement
Net Cash Interest
CapEx & Capital Lease (<3% Revenue)
Cash Taxes
421 428 355
270 204 212 207
148 161
62
130
65 55 53
90 121
78 54
68 49 27
140 119
83 90
97 99 99
56 51
33 29
81 95 99
855 880
611 573 515 510 485
FY15 A FY16 A FY17 A FY18 A FY19 E FY20 E FY21 E
135
© 2018 Avaya Inc. All rights reserved. Note: FY18A includes $39 million in US Pension catch up contributions
Assets and Liabilities ($M)
Book Balances as of 9/30/18 Assets Liabilities Net
US Pension $881 $(1,050) $(169)
OPEB $178 $(368) $(190)
German Pension $3 $(499) $(496)
Other Non-US Pension $11 $(37) $(26)
Total $1,073 $(1,954) $(881)
Pension and OPEBCurrent US pension net liability is $169M
Total net pension and OPEB net liability is $881M
Approximately 95% of foreign pension obligations are related to German plans
German plans are primarily “pay as you go” with no investments held or obligations to pre-fund with annual cash flow of $21M to $25M per year
26
2523 24
12
1414 14
130
65 55 53
FY18A FY19E FY20E FY21E
OPEBNon-US Pension
Contribution
US Pension Contribution
Expected Contributions
136
© 2018 Avaya Inc. All rights reserved.
Capital Allocation Priorities
Priority uses of cash will evolve as business continues to generate healthy cash flow
DividendsShare repurchase
Enhance shareholder returns
R&D investmentsAssess M&A opportunities
Fund and de-risk pensionReduce term debt
Focus on technologies that create customer value
Strengthen balance sheetImprove credit ratingReduce cost-of-capital
CAPITAL ALLOCATIONS PLAYBOOK
137
RETURN CAPITALDE-LEVERINVESTING IN GROWTH
© 2018 Avaya Inc. All rights reserved.
Q&A
© 2018 Avaya Inc. All rights reserved.
Appendix
© 2018 Avaya Inc. All rights reserved.
Successor Predecessor Successor Predecessor
(In millions)
Three months ended
September 30, 2018
Three months ended
June 30,2018
Three months ended
September 30, 2017
Period from December 16,
2017through
September 30, 2018
Period fromOctober 1, 2017
throughDecember 15,
2017
Fiscal year ended
September 30, 2017
Net income (loss) $ 268 $ (88) $ 27 $ 287 $ 2,977 $ (182)
Interest expense 57 56 17 169 14 246
Interest income (3) (1) (2) (5) (2) (4)
(Benefit from) provision for income taxes (311) 20 6 (546) 459 (16)
Depreciation and amortization 120 119 63 384 31 326
EBITDA 131 106 111 289 3,479 370
Impact of fresh start accounting adjustments 29 54 — 196 — —
Restructuring charges, net 1 30 8 81 14 30
Advisory fees 3 3 3 18 3 85
Acquisition-related costs 4 4 — 15 — 1
Reorganization items, net — — 21 — (3,416) 98
Non-cash share-based compensation 6 7 1 19 — 11
Impairment of indefinite-lived intangible assets — — — — — 65
Goodwill impairment — — — — — 52
Impairment of long-lived asset — — — — — 3
Loss on sale/disposal of long-lived assets, net — 2 — 4 1 —
Gain on sale of Networking business — — (2) — — (2)
Resolution of certain legal matters — — 64 — 37 64
Change in fair value of Emergence Date Warrants 8 (6) — 17 — —
Gain on foreign currency transactions (4) (25) (1) (28) — (2)
Pension/OPEB/nonretirement postemployment benefits and long-term disability costs — — 20 — 17 90
Other — — — — — 1
Adjusted EBITDA $ 178 $ 175 $ 225 $ 611 $ 135 $ 866
Non-GAAP ReconciliationAdjusted EBITDA
© 2018 Avaya Inc. All rights reserved.
Non-GAAP ReconciliationGAAP to Non-GAAP Results
Successor Predecessor FY17
Period from Dec. 16, 2017
throughSept. 30,
2018
Period fromOct. 1, 2017
throughDec. 15, 2017
Combined Results
Adj. for Fresh Start Accounting
Amortization of Intangible
AssetsRestructuring Charges, net
Acquisition Costs
Share-based Comp
Advisory Fees
Other Costs, net
Non-GAAP Results
GAAP Results
Non-GAAP Results
Revenue
Products $ 989 $ 253 $ 1,242 $ 63 $ — $ — $ — $ — $ — $ — $ 1,305 $ 1,437 $ 1,437
Services 1,258 351 1,609 143 — — — — — — 1,752 1,835 1,835
2,247 604 2,851 206 — — — — — — 3,057 3,272 3,272
Costs
Products:
Costs 372 84 456 (21) — — — — — — 433 499 499Amortization of technology intangible assets 135 3 138 — (138) — — — — — — 20 —
Services 597 155 752 (37) — — — (1) — — 712 745 745
1,104 242 1,346 (58) (138) — — (1) — — 1,145 1,264 1,244
GROSS PROFIT 1,143 362 1,505 264 138 — — 1 — — 1,912 2,008 2,028
OPERATING EXPENSES
Selling, general and administrative 888 264 1,152 16 — — (15) (17) (21) — 1,077 1,261 1,100
Research and development 172 38 210 (11) — — — (1) — — 198 225 225
Amortization of intangible assets 127 10 137 — (137) — — — — — — 204 —Impairment of indefinite-lived intangible assets — — — — — — — — — — — 65 —
Goodwill impairment — — — — — — — — — — — 52 —
Restructuring charges, net 81 14 95 — — (95) — — — — — 30 —
1,268 326 1,594 5 (137) (95) (15) (18) (21) — 1,275 1,837 1,325
OPERATING (LOSS) INCOME (125) 36 (89) 259 275 95 15 19 21 — 637 171 703
Interest expense (169) (14) (183) — — — — — — — (183) (246) (246)
Other income (expense), net 35 (2) 33 — — — — — — (18) 15 (25) (31)
Reorganization items, net — 3,416 3,416 — — — — — — — — (98) —
(LOSS) INCOME BEFORE INCOME TAXES $ (259) $ 3,436 $ 3,177 $ 259 $ 275 $ 95 $ 15 $ 19 $ 21 $ (18) $ 469 $ (198) $ 426
© 2018 Avaya Inc. All rights reserved.
FY'18 NotesNon GAAP Revenue 3,057
Cash Flow from Operations (212)
Adjustments / NormalizationAdvisor Fees (c11 specific) 77 Cash paymentsTreatment of pmts into escrow (advisor fees) 76 Offset amount within investing activities (restricted cash)Payment to PBGC 340 One time settlement payment relating to APPSEPension catch up payments 39 Catch up payments required relating to 'payment freeze' during C11Adequate Protection Payments (111) Shown within financing activities
Adjusted Cash From Operations (FY'18) 209 %age revenue 6.8%
Adjusted Cash From Operations FY’18