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November 18, 2015

Avaya's Fourth Quarter & 2015 Fiscal Year: Ups and Downs


By Steve Anderson Contributing Writer



Earnings season often brings with it exciting news about the companies we all know, love and shop with, and gives us a look at how these companies are doing in the field. Avaya recently reported its fourth quarter and fiscal year 2015 results, and though there were some bright spots, some results were clearly off.


First, the good news: fourth quarter revenues were at $1.008 billion, which was up $9 million against the previous quarter. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were likewise up against the third quarter, with the fourth quarter's figures at $246 million against $207 million the quarter previous. Gross margin was likewise upward, at 61.1 percent, which compares well against the last quarter at 58.5 percent and the same time last year at 58.2 percent.

However, there was some less pleasant news. Generally accepted accounting principles (GAAP) operating income was down at $100 million, and non-GAAP operating income was at $202 million. That's up against the $161 million in non-GAAP from the third quarter, but down against 2014's fourth quarter, which was at $212 million. The fiscal year 2015 earnings were at $4.081 billion, which was down seven percent against 2014 at $4.371 billion. Non-GAAP operating income for the year in 2015 was $718 million, also down against 2014's $727 million figure. The biggest source of revenue was the United States at 54 percent, followed by the Europe, Middle East and Africa region at 26 percent. Next was Asia-Pacific at 10 percent, tied with Americas International.

Avaya CEO Kevin Kennedy commented, “The transformation of the company advanced throughout fiscal 2015. We saw positive leading indicators of demand and grew revenue in our areas of investment and diversification. Operationally, we extended our multi-year upward trend of increased gross margin and adjusted EBITDA percentage for the fifth consecutive year.” Kennedy also noted that fiscal 2016 would have a particular focus on improving operations to further drive margins.

Image via Pixabay

The good news in all this is that even the down side isn't too bad. These don't seem like disasters in the making; looking at the non-GAAP operating income numbers, for example, reveals that the difference between the two is just over one percent. That kind of drop shouldn't hamper Avaya's plans for future expansion very hard, and should instead provide plenty of resources afoot for stepping up product development and keeping itself toward the top of the heap. Some drop would even be expected in the midst of major sea changes, as it takes some time for these course changes to take effect. Recovery in the non-GAAP income between third and fourth quarter suggests that much afoot.

 Avaya has plenty of reason to focus on further transformation and keeping an eye toward improvement. Constant growth is impossible in any system, and some slumps are unavoidable. Avaya seems to have a plan for its development, and on some levels, it's working quite well.




Edited by Kyle Piscioniere
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