Voss Capital, an investment management firm, published its fourth-quarter 2021 investor letter – a copy of which can be downloaded here. In Q4 2021, the Voss Value Fund, LP and the Voss Value Offshore Fund, Ltd., returned +13.6% and +14.3% to investors net of fees and expenses, respectively, compared to +2.1% total return for the Russell 2000, +3.9% price return for the Russell 2000 Value, and +11.0% total return for the S&P 500. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
Voss Capital, in its Q4 2021 investor letter, mentioned Avaya Holdings Corp. (NYSE:AVYA) and discussed its stance on the firm. Founded in 2007, Avaya Holdings Corp. (NYSE:AVYA) is a Durham, North Carolina-based business communications company with a $1.1 billion market capitalization, and is currently spearheaded by its CEO, Jim Chirico. Avaya Holdings Corp. (NYSE:AVYA) delivered a -31.16% return since the beginning of the year, while its 12-month returns are down by -52.51%. The stock closed at $13.63 per share on March 22, 2022.
Here is what Voss Capital has to say about Avaya Holdings Corp. (NYSE:AVYA) in its Q4 2021 investor letter:
“Avaya is an American multinational technology company headquartered in Durham, North Carolina, that specializes in cloud communications and workstream collaboration solutions. Avaya is a “legacy” tech player undergoing a material business model transition from perpetual license and maintenance to a cloud and subscription model. The company has amassed a giant enterprise customer base in their Telephony (100 million seats) and Contact Center (6 million seats, ~40% global market share) businesses. Avaya is working to rapidly convert these customers to a subscription model while also moving as many as possible to public and private cloud infrastructures.
Converting a customer to subscription on its own provides an over 20% uplift in recurring revenue but moving them to public and private clouds gives a far more substantial uplift as the customer is able to generate significant savings from the move. i Management has guided to $1 billion in Annual Recurring Revenue from transitioning to subscriptions/cloud by the end of this year and $2 billion by fiscal year 2024 (versus $620 million now). We believe the buyside is skeptical of these numbers given the valuation and recent collapse in the stock. Putting aside the fact that the company has raised their ARR estimates each of the last four quarters, what finally convinced us they are making tangible progress in converting large cloud customers (as opposed to just subscription) was a $400 million, seven-year win with a “major financial institution” in Q4 for Contact Center as a Service (CCaaS).ii We believe this came in at roughly $125/month/seat which, if extrapolated to the rest of their Contact Center base, would give them a $9 billion ARR TAM. Keep in mind that this estimation is just considering their existing customer base and does not even include the 100 million Telephony users. The company only needs to convert a small percentage of its current base to cloud to achieve its stated $2 billion ARR target…” (Click here to see the full text)
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Our calculations show that Avaya Holdings Corp. (NYSE:AVYA) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. Avaya Holdings Corp. (NYSE:AVYA) was in 25 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 25 funds in the previous quarter. Avaya Holdings Corp. (NYSE:AVYA) delivered a -28.94% return in the past 3 months.
In May 2021, we published an article that includes Avaya Holdings Corp. (NYSE:AVYA) in the 10 Best Video Conferencing Stocks to Buy. You can find more than 100 investor letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.
