Avaya Holdings Corp. [AVYA] Filings

10-Q 1 avya-20220331.htm 10-Q avya-20220331

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


☐			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)


Delaware		26-1119726
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2605 Meridian Parkway, Suite 200		27713
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 Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	AVYA	New 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 filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller 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.

TABLE OF CONTENTS


Item	Description	Page

	PART I—FINANCIAL INFORMATION
1.	Financial Statements	1
2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	28
3.	Quantitative and Qualitative Disclosures About Market Risk	42
4.	Controls and Procedures	43

	PART II—OTHER INFORMATION
1.	Legal Proceedings	44
1A.	Risk Factors	44
2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
3.	Defaults Upon Senior Securities	46
4.	Mine Safety Disclosures	46
5.	Other Information	46
6.	Exhibits	47
7.	Signatures	48

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.

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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,
	2022		2021		2022		2021
REVENUE
Products	$	223	$	226	$	454	$	492
Services	493		512		975		989
	716		738		1,429		1,481
COSTS
Products:
Costs	119		92		230		197
Amortization of technology intangible assets	35		43		77		86
Services	191		191		382		370
	345		326		689		653
GROSS PROFIT	371		412		740		828
OPERATING EXPENSES
Selling, general and administrative	245		264		507		519
Research and development	60		57		121		112
Amortization of intangible assets	40		39		80		79
Restructuring charges, net	3		8		10		12
	348		368		718		722
OPERATING INCOME	23		44		22		106
Interest expense	(54)		(59)		(108)		(115)
Other income, net	17		1		24		1
LOSS BEFORE INCOME TAXES	(14)		(14)		(62)		(8)
Benefit from (provision for) income taxes	13		(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
Basic	85.6		84.6		85.1		84.2
Diluted	85.6		84.6		85.1		84.2

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

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Avaya Holdings Corp.

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(In millions)


	Three months ended March 31,				Six months ended March 31,
	2022		2021		2022		2021
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 adjustment	1		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 income	39		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.

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Avaya Holdings Corp.

Condensed Consolidated Balance Sheets (Unaudited)

(In millions, except per share and share amounts)


	March 31, 2022		September 30, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	324	$	498
Accounts receivable, net	315		307
Inventory	49		51
Contract assets, net	640		518
Contract costs	115		117
Other current assets	132		100
TOTAL CURRENT ASSETS	1,575		1,591
Property, plant and equipment, net	301		295
Deferred income taxes, net	31		40
Intangible assets, net	2,078		2,235
Goodwill	1,476		1,480
Operating lease right-of-use assets	118		135
Other assets	245		209
TOTAL ASSETS	$	5,824	$	5,985
LIABILITIES
Current liabilities:
Accounts payable	$	306	$	295
Payroll and benefit obligations	128		193
Contract liabilities	315		360
Operating lease liabilities	44		49
Business restructuring reserves	16		19
Other current liabilities	139		181
TOTAL CURRENT LIABILITIES	948		1,097
Non-current liabilities:
Long-term debt	2,827		2,813
Pension obligations	607		648
Other post-retirement obligations	151		153
Deferred income taxes, net	73		53
Contract liabilities	309		305
Operating lease liabilities	87		102
Business restructuring reserves	19		25
Other liabilities	240		267
TOTAL NON-CURRENT LIABILITIES	4,313		4,366
TOTAL LIABILITIES	5,261		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 capital	1,495		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.

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Avaya Holdings Corp.

Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)

(In millions)


	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
	Shares	Par Value
Balance as of September 30, 2021	84.1	$	1	$	1,467	$	(985)	$	(91)	$	392
Issuance of common stock under the equity incentive plan and the Stock Bonus Program	0.9			5						5
Issuance of common stock under the employee stock purchase plan	0.2			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 expense				14						14
Preferred stock dividends paid				(1)						(1)
Net loss						(66)				(66)
Other comprehensive income								40		40
Balance as of December 31, 2021	84.9	$	1	$	1,481	$	(1,051)	$	(51)	$	380
Issuance of common stock under the equity incentive plan	0.7									—
Issuance of common stock under the employee stock purchase plan	0.3			4						4
Shares repurchased and retired for tax withholding on vesting of restricted stock units	(0.2)			(3)						(3)
Share-based compensation expense				14						14
Preferred stock dividends accrued				(1)						(1)
Net loss						(1)				(1)
Other comprehensive income								39		39
Balance as of March 31, 2022	85.7	$	1	$	1,495	$	(1,052)	$	(12)	$	432

Balance as of September 30, 2020	83.3	$	1	$	1,449	$	(969)	$	(245)	$	236
Issuance of common stock under the equity incentive plan	0.3									—
Issuance of common stock under the employee stock purchase plan	0.3			3						3
Shares repurchased and retired for tax withholding on vesting of restricted stock units	(0.1)			(2)						(2)
Share-based compensation expense				14						14
Preferred stock dividends accrued				(1)						(1)
Adjustment for adoption of new accounting standard						(3)				(3)
Net loss						(4)				(4)
Other comprehensive income								17		17
Balance as of December 31, 2020	83.8	$	1	$	1,463	$	(976)	$	(228)	$	260
Issuance of common stock under the equity incentive plan	1.2			8						8
Issuance of common stock under the employee stock purchase plan	0.2			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 expense				13						13
Preferred stock dividends accrued				(1)						(1)
Net loss						(58)				(58)
Other comprehensive income								85		85
Balance as of March 31, 2021	84.7	$	1	$	1,472	$	(1,034)	$	(143)	$	296

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

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Avaya Holdings Corp.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)


	Six months ended March 31,
	2022		2021
OPERATING ACTIVITIES:
Net loss	$	(67)	$	(62)
Adjustments to reconcile net loss to net cash (used for) provided by operating activities:
Depreciation and amortization	203		209
Share-based compensation	28		27
Amortization of debt discount and issuance costs	14		13
Loss on extinguishment of debt	—		1
Deferred income taxes, net	15		(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, net	1		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 costs	1		(5)
Accounts payable	12		21
Payroll and benefit obligations	(91)		(76)
Business restructuring reserves	(7)		(8)
Contract liabilities	(38)		(22)
Other assets and liabilities	1		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 Plan	7		7
Proceeds from exercises of stock options	1		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 period	502		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

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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)	2022		2021		2022		2021
Revenue:
Products & Solutions	$	223	$	226	$	454	$	492
Services	493		513		975		990
Unallocated Amounts	—		(1)		—		(1)
Total Revenue	$	716	$	738	$	1,429	$	1,481


	Three months ended March 31, 2022				Three months ended March 31, 2021
(In millions)	Products & Solutions		Services		Total		Products & Solutions		Services		Unallocated		Total
Revenue:
U.S.	$	130	$	292	$	422	$	102	$	311	$	—	$	413
International:
Europe, Middle East and Africa	55		120		175		73		115		(1)		187
Asia Pacific	21		46		67		30		47		—		77
Americas International - Canada and Latin America	17		35		52		21		40		—		61
Total International	93		201		294		124		202		(1)		325
Total Revenue	$	223	$	493	$	716	$	226	$	513	$	(1)	$	738


	Six months ended March 31, 2022				Six months ended March 31, 2021
(In millions)	Products & Solutions		Services		Total		Products & Solutions		Services		Unallocated		Total
Revenue:
U.S.	$	244	$	553	$	797	$	228	$	599	$	—	$	827
International:
Europe, Middle East and Africa	120		247		367		165		218		(1)		382
Asia Pacific	53		95		148		59		93		—		152
Americas International - Canada and Latin America	37		80		117		40		80		—		120
Total International	210		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, 2022		September 30, 2021		Increase (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-current	309		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)	2022		2021		2022		2021
Costs to obtain customer contracts:
Selling, general and administrative	$	36	$	48	$	80	$	91
Revenue	6		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 provision	1		—		—		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.