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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-38289
AVAYA HOLDINGS CORP.
(Exact name of registrant as specified in its charter)
Delaware26-1119726
(State or other jurisdiction of incorporation or organization) 
(I.R.S. Employer Identification No.)
2605 Meridian Parkway, Suite 20027713
Durham,North Carolina
(Address of Principal executive offices) (Zip Code)
(908) 953-6000
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act
Title of Each ClassTrading Symbol(s)Name of each exchange on which registered
Common StockAVYANew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes     No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer 
Non-accelerated filerSmaller Reporting Company 
Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes     No  
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes      No  
As of April 30, 2022, 85,836,560 shares of common stock, $.01 par value, of the registrant were outstanding.

1


When we use the terms "we," "us," "our," "Avaya" or the "Company," we mean Avaya Holdings Corp., a Delaware corporation, and its consolidated subsidiaries taken as a whole, unless the context otherwise indicates.
This Quarterly Report on Form 10-Q contains the registered and unregistered trademarks or service marks of Avaya and are the property of Avaya Holdings Corp. and/or its affiliates. This Quarterly Report on Form 10-Q also contains additional trade names, trademarks or service marks belonging to us and to other companies. We do not intend our use or display of other parties' trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties.
 


2

PART I—FINANCIAL INFORMATION

Item 1.Financial Statements.

Avaya Holdings Corp.
Condensed Consolidated Statements of Operations (Unaudited)
(In millions, except per share amounts)
 
Three months ended
March 31,
Six months ended
March 31,
2022202120222021
REVENUE
Products$223 $226 $454 $492 
Services493 512 975 989 
716 738 1,429 1,481 
COSTS
Products:
Costs119 92 230 197 
Amortization of technology intangible assets35 43 77 86 
Services191 191 382 370 
345 326 689 653 
GROSS PROFIT371 412 740 828 
OPERATING EXPENSES
Selling, general and administrative245 264 507 519 
Research and development60 57 121 112 
Amortization of intangible assets40 39 80 79 
Restructuring charges, net3 8 10 12 
348 368 718 722 
OPERATING INCOME23 44 22 106 
Interest expense(54)(59)(108)(115)
Other income, net17 1 24 1 
LOSS BEFORE INCOME TAXES(14)(14)(62)(8)
Benefit from (provision for) income taxes13 (44)(5)(54)
NET LOSS$(1)$(58)$(67)$(62)
LOSS PER SHARE
Basic$(0.02)$(0.70)$(0.81)$(0.76)
Diluted$(0.02)$(0.70)$(0.81)$(0.76)
Weighted average shares outstanding
Basic85.6 84.6 85.1 84.2 
Diluted85.6 84.6 85.1 84.2 
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
1

Avaya Holdings Corp.
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
(In millions)
Three months ended
March 31,
Six months ended
March 31,
2022202120222021
Net loss$(1)$(58)$(67)$(62)
Other comprehensive income:
Pension, post-retirement and post-employment benefit-related items, net of income taxes of $0 for both the three and six months ended March 31, 2022, and $(1) for both the three and six months ended March 31, 2021
(2)34 (3)46 
Cumulative translation adjustment1 21 14 15 
Change in interest rate swaps, net of income taxes of $(14) for both the three and six months ended March 31, 2022 and $0 for both the three and six months ended March 31, 2021
40 30 68 41 
Other comprehensive income39 85 79 102 
Total comprehensive income$38 $27 $12 $40 
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

2

Avaya Holdings Corp.
Condensed Consolidated Balance Sheets (Unaudited)
(In millions, except per share and share amounts)
March 31, 2022September 30, 2021
ASSETS
Current assets:
Cash and cash equivalents$324 $498 
Accounts receivable, net315 307 
Inventory49 51 
Contract assets, net640 518 
Contract costs115 117 
Other current assets132 100 
TOTAL CURRENT ASSETS1,575 1,591 
Property, plant and equipment, net301 295 
Deferred income taxes, net31 40 
Intangible assets, net2,078 2,235 
Goodwill1,476 1,480 
Operating lease right-of-use assets118 135 
Other assets245 209 
TOTAL ASSETS$5,824 $5,985 
LIABILITIES
Current liabilities:
Accounts payable$306 $295 
Payroll and benefit obligations128 193 
Contract liabilities315 360 
Operating lease liabilities44 49 
Business restructuring reserves16 19 
Other current liabilities139 181 
TOTAL CURRENT LIABILITIES948 1,097 
Non-current liabilities:
Long-term debt2,827 2,813 
Pension obligations607 648 
Other post-retirement obligations151 153 
Deferred income taxes, net73 53 
Contract liabilities309 305 
Operating lease liabilities87 102 
Business restructuring reserves19 25 
Other liabilities240 267 
TOTAL NON-CURRENT LIABILITIES4,313 4,366 
TOTAL LIABILITIES5,261 5,463 
Commitments and contingencies (Note 18)
Preferred stock, $0.01 par value; 55,000,000 shares authorized at March 31, 2022 and September 30, 2021
Convertible series A preferred stock; 125,000 shares issued and outstanding at March 31, 2022 and September 30, 2021
131 130 
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value; 550,000,000 shares authorized; 85,677,909 shares issued and outstanding at March 31, 2022; and 84,115,602 shares issued and outstanding at September 30, 2021
1 1 
Additional paid-in capital1,495 1,467 
Accumulated deficit(1,052)(985)
Accumulated other comprehensive loss(12)(91)
TOTAL STOCKHOLDERS' EQUITY 432 392 
TOTAL LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS' EQUITY $5,824 $5,985 
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
3

Avaya Holdings Corp.
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
(In millions)
Common StockAdditional
Paid-In
Capital
Accumulated DeficitAccumulated
Other
Comprehensive
Loss
Total
Stockholders'
Equity
SharesPar Value
Balance as of September 30, 202184.1 $1 $1,467 $(985)$(91)$392 
Issuance of common stock under the equity incentive plan and the Stock Bonus Program0.9 5 5 
Issuance of common stock under the employee stock purchase plan0.2 3 3 
Shares repurchased and retired for tax withholding on vesting of restricted stock units and Stock Bonus Program shares(0.3)(7)(7)
Share-based compensation expense14 14 
Preferred stock dividends paid(1)(1)
Net loss(66)(66)
Other comprehensive income40 40 
Balance as of December 31, 202184.9 $1 $1,481 $(1,051)$(51)$380 
Issuance of common stock under the equity incentive plan0.7  
Issuance of common stock under the employee stock purchase plan0.3 4 4 
Shares repurchased and retired for tax withholding on vesting of restricted stock units(0.2)(3)(3)
Share-based compensation expense14 14 
Preferred stock dividends accrued(1)(1)
Net loss(1)(1)
Other comprehensive income39 39 
Balance as of March 31, 202285.7 $1 $1,495 $(1,052)$(12)$432 
Balance as of September 30, 202083.3 $1 $1,449 $(969)$(245)$236 
Issuance of common stock under the equity incentive plan0.3  
Issuance of common stock under the employee stock purchase plan0.3 3 3 
Shares repurchased and retired for tax withholding on vesting of restricted stock units(0.1)(2)(2)
Share-based compensation expense14 14 
Preferred stock dividends accrued(1)(1)
Adjustment for adoption of new accounting standard(3)(3)
Net loss (4)(4)
Other comprehensive income17 17 
Balance as of December 31, 202083.8 $1 $1,463 $(976)$(228)$260 
Issuance of common stock under the equity incentive plan1.2 8 8 
Issuance of common stock under the employee stock purchase plan0.2 3 3 
Shares repurchased and retired for tax withholding on vesting of restricted stock units(0.3)(7)(7)
Shares repurchased and retired under share repurchase program(0.2)(7)(7)
Share-based compensation expense13 13 
Preferred stock dividends accrued(1)(1)
Net loss(58)(58)
Other comprehensive income85 85 
Balance as of March 31, 202184.7 $1 $1,472 $(1,034)$(143)$296 
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
4

Avaya Holdings Corp.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In millions)
Six months ended
March 31,
20222021
OPERATING ACTIVITIES:
Net loss$(67)$(62)
Adjustments to reconcile net loss to net cash (used for) provided by operating activities:
Depreciation and amortization203 209 
Share-based compensation28 27 
Amortization of debt discount and issuance costs14 13 
Loss on extinguishment of debt 1 
Deferred income taxes, net15 (4)
Gain on post-retirement plan settlement (14)
Change in fair value of emergence date warrants(8)27 
Unrealized (gain) loss on foreign currency transactions(3)12 
Other non-cash charges, net1 1 
Changes in operating assets and liabilities:
Accounts receivable(6)(12)
Inventory 3 
Operating lease right-of-use assets and liabilities(3)2 
Contract assets(165)(122)
Contract costs1 (5)
Accounts payable12 21 
Payroll and benefit obligations(91)(76)
Business restructuring reserves(7)(8)
Contract liabilities(38)(22)
Other assets and liabilities1 33 
NET CASH (USED FOR) PROVIDED BY OPERATING ACTIVITIES(113)24 
INVESTING ACTIVITIES:
Capital expenditures(52)(53)
NET CASH USED FOR INVESTING ACTIVITIES(52)(53)
FINANCING ACTIVITIES:
Shares repurchased under share repurchase program (7)
Repayment of Term Loan Credit Agreement due to refinancing (743)
Proceeds from Term Loan Credit Agreement due to refinancing 743 
Repayment of Term Loan Credit Agreement (100)
Principal payments for financing leases(4)(8)
Payments for other financing arrangements(1) 
Proceeds from other financing arrangements 3 
Debt issuance costs (2)
Proceeds from Employee Stock Purchase Plan7 7 
Proceeds from exercises of stock options1 8 
Preferred stock dividends paid(1) 
Shares repurchased for tax withholdings on vesting of restricted stock units and Stock Bonus Program shares(10)(9)
NET CASH USED FOR FINANCING ACTIVITIES(8)(108)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(1)3 
NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH(174)(134)
Cash, cash equivalents, and restricted cash at beginning of period502 731 
Cash, cash equivalents, and restricted cash at end of period$328 $597 
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
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Avaya Holdings Corp.
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Background and Basis of Presentation
Background
Avaya Holdings Corp. (the "Parent" or "Avaya Holdings"), together with its consolidated subsidiaries (collectively, the "Company" or "Avaya"), is a global leader in digital communications products, solutions and services for businesses of all sizes delivering its technology predominantly through software and services. Avaya builds innovative open, converged software solutions to enhance and simplify communications and collaboration in the cloud, on-premise or a hybrid of both. The Company's global team of professionals delivers services from initial planning and design, to implementation and integration, to ongoing managed operations, optimization, training and support. The Company manages its business operations in two segments, Products & Solutions and Services. The Company sells directly to customers through its worldwide sales force and indirectly through its global network of channel partners, including distributors, service providers, dealers, value-added resellers, system integrators and business partners that provide sales and services support.
Basis of Presentation
Avaya Holdings has no material assets or standalone operations other than its ownership of its direct wholly-owned subsidiary Avaya Inc. and its subsidiaries. The accompanying unaudited interim Condensed Consolidated Financial Statements reflect the operating results of Avaya Holdings and its consolidated subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") for interim financial statements. The unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and other financial information for the fiscal year ended September 30, 2021, included in the Company's Annual Report on Form 10-K filed with the SEC on November 22, 2021. In management's opinion, these unaudited interim Condensed Consolidated Financial Statements reflect all adjustments, consisting of normal and recurring adjustments, necessary to fairly state the results of operations, financial position and cash flows for the periods indicated. The condensed consolidated results of operations for the interim periods reported are not necessarily indicative of the results for the entire fiscal year.
Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the periods reported. The Company uses estimates to assess expected credit losses on its financial assets, sales returns and allowances, the use and recoverability of inventory, the realization of deferred tax assets, annual effective tax rate, the recoverability of long-lived assets, useful lives and impairment of tangible and intangible assets including goodwill, business restructuring reserves, pension and post-retirement benefit costs, the fair value of assets and liabilities in business combinations and the amount of exposure from potential loss contingencies, among others. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the Condensed Consolidated Financial Statements in the period they are determined to be necessary. Actual results could differ from these estimates. The spread of COVID-19, the effects on the Company's employees and the actions required to mitigate its impact have created substantial disruption to the global economy. In addition, we have experienced and are experiencing varying levels of inflation resulting in part from various supply chain disruptions, including, but not limited to increased shipping and transportation costs and increased raw material costs caused by the COVID‐19 pandemic and general global economic conditions. Furthermore, the military conflict between Russia and Ukraine, including the sanctions and export controls that have been imposed by the U.S. and other countries in response to the conflict, severely limits commercial activities in Russia and impacts other markets where we do business. These global issues, among others, may affect management’s estimates and assumptions, in particular those that require a projection of our financial results, our cash flows or broader economic conditions. The COVID-19 pandemic and the Russia/Ukraine conflict did not have a material impact on the Company's operating results during the second quarter of fiscal 2022.
We believe that our existing cash and cash equivalents and borrowings available under the ABL Credit Agreement will be sufficient to meet our future cash requirements for at least the next twelve months from the filing of this quarterly report on Form 10-Q. We expect to seek incremental financing to fund the maturity of the $350 million Convertible 2.25% Senior Notes due June 15, 2023. There can be no assurance we will be able to obtain such financing on acceptable terms.
2. Recent Accounting Pronouncements
Recent Standards Not Yet Adopted
In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848): "Facilitation of the Effects of Reference Rate Reform on Financial Reporting". This standard, along with other guidance subsequently issued by the FASB, contains practical expedients for reference rate reform related activities that impact debt, derivatives and other contracts. The guidance in this standard is optional and may be elected
6

at any time as reference rate reform activities occur. The standard may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company intends to use the expedients, if needed, for the reference rate transition. The Company continues to monitor activities related to reference rate reform and does not currently expect this standard to have a material impact on the Company's Condensed Consolidated Financial Statements.
In August 2020, the FASB issued ASU 2020-06, "Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity." This standard simplifies the accounting for convertible instruments and the application of the derivatives scope exception for contracts in an entity's own equity. The standard also amends the accounting for convertible instruments in the diluted earnings per share calculation and requires enhanced disclosures of convertible instruments and contracts in an entity's own equity. This standard is effective for the Company in the first quarter of fiscal 2023. The adoption may be applied on a modified or fully retrospective basis. An entity may also irrevocably elect the fair value option in accordance with Accounting Standards Codification ("ASC") 825 for any financial instrument that is a convertible security upon adoption of this standard. The Company is currently assessing the impact the new guidance will have on its Condensed Consolidated Financial Statements.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” This standard requires contract assets and contract liabilities acquired in a business combination to be recognized in accordance with Topic 606 as if the acquirer had originated the contracts. This standard is effective for the Company in the first quarter of fiscal 2024, with early adoption permitted. The impact of this standard will depend on the nature of future transactions within its scope.
In March 2022, the FASB issued ASU 2022-02, “Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures”. This standard requires an entity to disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases measured at amortized cost. The standard also eliminates the existing troubled debt restructuring recognition and measurement guidance and, instead, requires an entity to evaluate whether the modification represents a new loan or a continuation of an existing loan in a manner consistent with other loan modifications. This standard is effective for the Company in the first quarter of fiscal 2024, with early adoption permitted. The Company is currently assessing the impact the new guidance will have on its Condensed Consolidated Financial Statements.
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3. Contracts with Customers
Disaggregation of Revenue
The following tables provide the Company's disaggregated revenue for the periods presented:
Three months ended
March 31,
Six months ended
March 31,
(In millions)2022202120222021
Revenue:
Products & Solutions$223 $226 $454 $492 
Services493 513 975 990 
Unallocated Amounts
 (1) (1)
Total Revenue$716 $738 $1,429 $1,481 
Three months ended March 31, 2022Three months ended March 31, 2021
(In millions)Products & SolutionsServicesTotalProducts & SolutionsServicesUnallocatedTotal
Revenue:
U.S.$130 $292 $422 $102 $311 $ $413 
International:
Europe, Middle East and Africa55 120 175 73 115 (1)187 
Asia Pacific
21 46 67 30 47  77 
Americas International - Canada and Latin America17 35 52 21 40  61 
Total International93 201 294 124 202 (1)325 
Total Revenue$223 $493 $716 $226 $513 $(1)$738 
Six months ended March 31, 2022Six months ended March 31, 2021
(In millions)Products & SolutionsServicesTotalProducts & SolutionsServicesUnallocatedTotal
Revenue:
U.S.$244 $553 $797 $228 $599 $ $827 
International:
Europe, Middle East and Africa120 247 367 165 218 (1)382 
Asia Pacific53 95 148 59 93  152 
Americas International - Canada and Latin America37 80 117 40 80  120 
Total International210 422 632 264 391 (1)654 
Total Revenue$454 $975 $1,429 $492 $990 $(1)$1,481 
Unallocated amounts represent the fair value adjustment to deferred revenue recognized upon the Company's emergence from bankruptcy in December 2017 and excluded from segment revenue.
Transaction Price Allocated to the Remaining Performance Obligations
The transaction price allocated to remaining performance obligations that were wholly or partially unsatisfied as of March 31, 2022 was $2.3 billion, of which 52% and 25% is expected to be recognized within 12 months and 13-24 months, respectively, with the remaining balance expected to be recognized thereafter. This excludes amounts for remaining performance obligations that are (1) for contracts recognized over time using the "right to invoice" practical expedient, (2) related to sales or usage based royalties promised in exchange for a license of intellectual property and (3) related to variable consideration allocated entirely to a wholly unsatisfied performance obligation.
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Contract Balances
The following table provides information about accounts receivable, contract assets, contract costs and contract liabilities for the periods presented:
(In millions)March 31, 2022September 30, 2021Increase (Decrease)
Accounts receivable, net$315 $307 $8 
Contract assets, net:
Current$640 $518 $122 
Non-current (Other assets)131 88 43 
$771 $606 $165 
Cost of obtaining a contract:
Current (Contract costs)$88 $89 $(1)
Non-current (Other assets)54 53 1 
$142 $142 $ 
Cost to fulfill a contract:
Current (Contract costs)$27 $28 $(1)
Contract liabilities:
Current$315 $360 $(45)
Non-current309 305 4 
$624 $665 $(41)
The increase in Contract assets was mainly driven by growth in the Company's subscription offerings. The decrease in Contract liabilities was mainly driven by anticipated declines in hardware maintenance and software support services as customers continue to transition to the Company's subscription hybrid offering. The decrease was also driven by revenue earned from the consideration advance received in connection with the strategic partnership with RingCentral, Inc. ("RingCentral"). During the three and six months ended March 31, 2022 and 2021, the Company did not record any asset impairment charges related to contract assets.
During the six months ended March 31, 2022 and 2021, the Company recognized revenue of $321 million and $402 million that had been previously recorded as a Contract liability as of October 1, 2021 and October 1, 2020, respectively. During the three months ended March 31, 2022, adjustments for performance obligations that were satisfied, or partially satisfied, in prior periods were not material. During the three months ended March 31, 2021, the Company recognized a decrease to revenue of $1 million, for performance obligations that were satisfied, or partially satisfied, in prior periods. During the six months ended March 31, 2022, the Company recognized a decrease to revenue of $2 million, for performance obligations that were satisfied, or partially satisfied, in prior periods. During the six months ended March 31, 2021, adjustments for performance obligations that were satisfied or partially satisfied, in prior periods were not material.
Contract Costs
The following table provides information regarding the location and amount for amortization of costs to obtain and costs to fulfill customer contracts recognized in the Company's Condensed Consolidated Statements of Operations for the periods
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presented:
Three months ended
March 31,
Six months ended
March 31,
(In millions)2022202120222021
Costs to obtain customer contracts:
Selling, general and administrative$36 $48 $80 $91 
Revenue6 3 10 4 
Total Amortization$42 $51 $90 $95 
Costs to fulfill customer contracts:
Costs$7 $10 $15 $14 

Allowance for Credit Losses
The following table presents the change in the allowance for credit losses by portfolio segment for the period indicated:
(In millions)
Accounts Receivable(1)
Short-term Contract Assets(2)
Long-term Contract Assets(3)
Total
Allowance for credit loss as of September 30, 2021$4 $1 $1 $6 
Adjustment to credit loss provision1   1 
Allowance for credit loss as of March 31, 2022$5 $1 $1 $7 
(1)Recorded within Accounts receivable, net on the Condensed Consolidated Balance Sheets.