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

Avaya Holdings Corp.

Condensed Consolidated Statements of ~~Changes in Stockholders' Equity (Deficit)~~Comprehensive Loss (Unaudited)

(In millions)

Common Stock
Number Par Value Additional
Paid-in
Capital (Accumulated
Deficit) Retained Earnings Accumulated
Other
Comprehensive
(Loss) Income Total
Stockholders'
(Deficit) Equity
Balance as of September 30, 2017 (Predecessor) 494.8
$ —
$ 2,389
$ (5,954 ) $ (1,448 ) $ (5,013 )
Issuance of common stock, net of shares redeemed and cancelled, under employee stock option plan —
Amortization of share-based compensation 3
3
Accrued dividends on Series A preferred stock (2 ) (2 )
Accrued dividends on Series B preferred stock (4 ) (4 )
Reclassifications to equity awards on redeemable shares 1
1
Net income 2,977
2,977
Other comprehensive income 658
658
Balance as of December 15, 2017 (Predecessor) 494.8
—
2,387
(2,977 ) (790 ) (1,380 )
Cancellation of Predecessor equity (494.8 )
(2,387 ) 2,977
790
1,380
Balance as of December 15, 2017 (Predecessor) —
$ —
$ —
$ —
$ —
$ —

Common Stock
Number Par Value Additional
Paid-in
Capital (Accumulated
Deficit) Retained Earnings Accumulated
Other
Comprehensive
(Loss) Income Total
Stockholders'
Equity
(Deficit)
Balance as of December 15, 2017 (Predecessor) —
$ —
$ —
$ —
$ —
$ —
Issuance of Successor common stock

Common stock issued for Predecessor debt 103.7
1
1,548
1,549
Common stock issued for Pension Benefit Guaranty Corporation 6.1
90
90
Common stock issued for general unsecured creditors or Predecessor debt 0.2
3
3
Balance as of December 15, 2017 (Predecessor) 110.0
$ 1
$ 1,641
$ —
$ —
$ 1,642

Balance as of December 15, 2017 (Successor) 110.0
1
1,641
—
—
1,642
Issuance of common stock, net —
Amortization of share-based compensation 1
1
Net income 237
237
Other comprehensive loss (13 ) (13 )
Balance as of December 31, 2017 (Successor) 110.0
$ 1
$ 1,642
$ 237
$ (13 ) $ 1,867


	Three months ended December 31,
	2022		2021
Net loss	$	(164)	$	(66)
Other comprehensive (loss) income:
Pension, post-retirement and post-employment benefit-related items, net of income taxes of $0 for both the three months ended December 31, 2022 and 2021, respectively	(6)		(1)
Cumulative translation adjustment	(14)		13
Change in interest rate swaps, net of income taxes of $(18) and $0 for the three months ended December 31, 2022 and 2021, respectively	(80)		28
Other comprehensive (loss) income	(100)		40
Total comprehensive loss	$	(264)	$	(26)

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~~Balance Sheets (Unaudited)

(In ~~millions)~~

Successor Predecessor
Period from December 16, 2017 through December 31, 2017 Period from October 1, 2017 through December 15, 2017 Three months ended December 31, 2016
OPERATING ACTIVITIES:
Net income (loss) $ 237
$ 2,977
$ (103 )
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation and amortization 22
31
90
Share-based compensation 1
—
2
Amortization of debt issuance costs —
—
36
Accretion of debt discount —
—
25
Provision for uncollectible receivables 1
(1 ) 1
Deferred income taxes, net (245 ) 455
(1 )
Post-retirement curtailment —
—
(4 )
Loss on disposal of long-lived assets —
1
—
Unrealized gain on foreign currency exchange (4 ) —
(8 )
Reorganization items:
     Net gain on settlement of Liabilities subject to compromise —
(1,804 ) —
     Payment to PBGC —
(340 ) —
     Payment to pension trust —
(49 ) —
     Payment of unsecured claims —
(58 ) —
     Fresh start adjustments, net —
(1,671 ) —
  Non-cash and financing related reorganization items, net —
26
—
Changes in operating assets and liabilities:
Accounts receivable 5
14
54
Inventory 3
(2 ) 1
Accounts payable 27
(40 ) (22 )
Payroll and benefit obligations (22 ) 16
(56 )
Business restructuring reserve (3 ) (7 ) (18 )
Deferred revenue 44
28
1
Other assets and liabilities —
(16 ) (42 )
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES 66
(440 ) (44 )
INVESTING ACTIVITIES:
Capital expenditures (2 ) (13 ) (14 )
Acquisition of businesses, net of cash acquired —
—
(4 )
Restricted cash 10
21
—
Other investing activities, net —
—
3
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES 8
8
(15 )
FINANCING ACTIVITIES:
Proceeds from Term Loan Credit Agreement —
2,896
—
Repayment of DIP financing —
(725 ) —
Repayment of first lien debt —
(2,061 ) —
Repayment of Foreign ABL —
—
(5 )
Repayment of Domestic ABL —
—
(22 )
Repayment of long-term debt, including adequate protection payments —
(111 ) (6 )
Debt issuance costs —
(97 ) —
Repayments of borrowings on revolving loans under the Senior Secured Credit Agreement —
—
(18 )
Repayments of borrowings under sale-leaseback transaction —
(4 ) (5 )
Other financing activities, net —
—
(1 )
NET CASH USED FOR FINANCING ACTIVITIES —
(102 ) (57 )
Effect of exchange rate changes on cash and cash equivalents 3
(2 ) (11 )
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 77
(536 ) (127 )
Cash and cash equivalents at beginning of period 340
876
336
Cash and cash equivalents at end of period $ 417
$ 340
$ 209

millions, except per share and share amounts)


	December 31, 2022		September 30, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	225	$	253
Restricted cash	223		222
Accounts receivable, net	302		322
Inventory	81		74
Contract assets, net	505		543
Contract costs	104		110
Other current assets	113		116
TOTAL CURRENT ASSETS	1,553		1,640
Property, plant and equipment, net	280		281
Intangible assets, net	1,695		1,776

Operating lease right-of-use assets	90		97
Other assets	229		279
TOTAL ASSETS	$	3,847	$	4,073
LIABILITIES
Current liabilities:
Debt maturing within one year	$	3,358	$	210
Accounts payable	263		263
Payroll and benefit obligations	105		108
Contract liabilities	255		245
Operating lease liabilities	40		40
Business restructuring reserves	19		26
Other current liabilities	137		137
TOTAL CURRENT LIABILITIES	4,177		1,029
Non-current liabilities:
Long-term debt	—		3,032
Pension obligations	434		410
Other post-retirement obligations	111		109
Deferred income taxes, net	42		43
Contract liabilities	287		300
Operating lease liabilities	66		72
Business restructuring reserves	26		23
Other liabilities	207		224
TOTAL NON-CURRENT LIABILITIES	1,173		4,213
TOTAL LIABILITIES	5,350		5,242
Commitments and contingencies (Note 18)
Preferred stock, $0.01 par value; 55,000,000 shares authorized at December 31, 2022 and September 30, 2022
Convertible series A preferred stock; 125,000 shares issued and outstanding at December 31, 2022 and September 30, 2022	134		133
STOCKHOLDERS' DEFICIT
Common stock, $0.01 par value; 550,000,000 shares authorized; 86,846,958 shares issued and outstanding at December 31, 2022 and September 30, 2022	1		1
Additional paid-in capital	1,428		1,546
Accumulated deficit	(3,198)		(3,081)
Accumulated other comprehensive income	132		232
TOTAL STOCKHOLDERS' DEFICIT	(1,637)		(1,302)
TOTAL LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS' DEFICIT	$	3,847	$	4,073

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)~~Avaya Holdings Corp.

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

(In millions)


	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' (Deficit) Equity
	Shares	Par Value
Balance as of September 30, 2022	86.8	$	1	$	1,546	$	(3,081)	$	232	$	(1,302)
Share-based compensation expense				1						1
Preferred stock dividends accrued				(1)						(1)
Adoption of ASU 2020-06 (Note 2)				(118)		47				(71)
Net loss						(164)				(164)
Other comprehensive loss								(100)		(100)
Balance as of December 31, 2022	86.8	$	1	$	1,428	$	(3,198)	$	132	$	(1,637)

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

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

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1.	~~Background and Basis of Presentation~~

Avaya Holdings Corp.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)


	Three months ended December 31,
	2022		2021
OPERATING ACTIVITIES:
Net loss	$	(164)	$	(66)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation and amortization	99		104
Share-based compensation	1		14
Amortization of debt discount and issuance costs	5		7
Deferred income taxes, net	(19)		(4)
Impairment charges	9		—
Change in fair value of emergence date warrants	—		(1)
Change in fair value of interest rate swap agreements	13		—
Change in fair value of debt-related embedded derivatives	(16)		—
Reclassification of AOCI associated with interest rate swaps	(62)		—
Unrealized gain on foreign currency transactions	10		(2)
Other non-cash charges, net	1		2
Changes in operating assets and liabilities:
Accounts receivable	22		(44)
Inventory	(9)		1

Contract assets	48		(57)
Contract costs	13		(1)
Accounts payable	(4)		46
Payroll and benefit obligations	(12)		(70)
Business restructuring reserves	(8)		(3)
Contract liabilities	(9)		(28)
Other assets and liabilities	17		(9)
NET CASH USED FOR OPERATING ACTIVITIES	(65)		(111)
INVESTING ACTIVITIES:
Capital expenditures	(17)		(27)
NET CASH USED FOR INVESTING ACTIVITIES	(17)		(27)
FINANCING ACTIVITIES:





Borrowings under ABL Credit Agreement	90		—
Repayments of ABL Credit Agreement	(34)		—

Principal payments for financing leases	(2)		(2)


Proceeds from Employee Stock Purchase Plan	—		4
Proceeds from exercises of stock options	—		1
Preferred stock dividends paid	—		(1)
Shares repurchased for tax withholdings on vesting of restricted stock units and Stock Bonus Program shares	—		(7)
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	54		(5)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	2		(1)
NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	(26)		(144)
Cash, cash equivalents, and restricted cash at beginning of period	478		502
Cash, cash equivalents, and restricted cash at end of period	$	452	$	358

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”~~"Company" or ~~“Avaya”~~"Avaya"), is a ~~leading~~ global ~~provider of software and associated hardware~~leader in digital communications products, solutions and services for ~~contact center~~businesses of all sizes delivering its technology predominantly through software and ~~unified~~services. Avaya builds innovative open, converged software solutions to enhance and simplify communications ~~offered on-premises,~~and collaboration in the cloud, on-premise or as a hybrid ~~solution. Avaya provides the mission-critical, real-time communication applications for small businesses~~of both. The Company's global team of professionals delivers services from initial planning and design, to ~~large multinational enterprises~~implementation and ~~government organizations. Currently, the~~integration, to ongoing managed operations, optimization, training and support. The Company manages its business operations in two ~~segments, Global Communications~~segments: Products & Solutions ~~("GCS") representing the Company's products portfolio,~~ and ~~Avaya Global Services ("AGS") representing the Company's services portfolio.~~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 inof its direct wholly-owned subsidiary Avaya Inc. and its subsidiaries. The accompanying unaudited interim Condensed Consolidated Financial Statements ~~as of December 31, 2017 and for the period from December 16, 2017 through December 31, 2017, the period from October 1, 2017 through December 15, 2017 and the three months ended December 31, 2016,~~ 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”~~("GAAP") and the rules and regulations of the U.S. Securities and Exchange Commission ~~(“SEC”~~("SEC") for interim financial ~~statements, and~~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, ~~2017,~~2022, included in ~~Amendment No. 3 to~~ the ~~Company’s~~Company's Annual Report on Form 1010-K filed with the SEC on ~~January 10, 2018.~~September 8, 2023. In ~~management’s~~management's opinion, these unaudited interim Condensed Consolidated Financial Statements reflect all adjustments, consisting of normal and recurring adjustments, necessary to ~~present~~ fairly state the results of operations, financial position and cash flows for the periods indicated. The unaudited condensed consolidated results of operations for the interim periods reported are not necessarily indicative of ~~our~~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. ~~These~~The Company uses estimates ~~include assessing the collectability of accounts receivable,~~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, business restructuring reserves, pension and post-retirement benefit costs, the fair value of equity compensation, the fair value of assets and liabilities in connection with fresh start accounting as well as those acquired in business combinations,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, ~~and fair value measurements,~~ among others. The markets for the Company’s products are characterized by intense competition, rapid technological development and frequent new product introductions, all of which could affect the future recoverability of the Company’s assets. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the ~~consolidated financial statements~~Condensed Consolidated Financial Statements in the period they are determined to be necessary. Actual results could differ from these estimates. The ongoing 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. This global issue, among others, have resulted in elevated levels of inflation throughout the world, increased raw material costs and other supply chain issues all of which 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.

Board and Audit Committee Investigations

In February 2023, the Company announced a delay in the filing of its Quarterly Report on Form 10-Q (this "Quarterly Report") for the quarter ended December 31, 2022, due to, among other things, the commencement of an investigation by the audit committee (the "Audit Committee", and such investigation, the "Financial Results Investigation") of the Company's board of directors (the "Board") related to the circumstances surrounding the Company's financial results for the third quarter of fiscal 2022, which were significantly lower than the Company's expectations and previously issued guidance. This investigation also addressed the information provided by the Company to the lenders of the Tranche B-3 Term Loans and the 8.00% Exchangeable Senior Secured Notes due 2027 which was funded in July 2022 as discussed in Note 7, "Financing Arrangements."

The Company also announced the Audit Committee had commenced a separate internal investigation to review matters related to a whistleblower letter (the "Whistleblower Letter Investigation"). The Company engaged outside counsel, which reported to the Audit Committee, to assist in these investigations and notified the SEC and the Company's external auditor, PricewaterhouseCoopers LLP, about the investigations at that time.

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The Company also announced in August 2022 that it was reviewing matters related to the maintenance of its whistleblower log and the proper dissemination of related information and materials. The review related to an email received by a Board member prior to the filing of the Company's Annual Report on Form 10-K for fiscal year ended September 30, 2021 (the "2021 Form 10-K"). Upon receipt of the email, the Board determined to undertake an investigation, assisted by outside counsel (the “Whistleblower Email Investigation” and together with the Financial Results Investigation and the Whistleblower Letter Investigation, the "Investigations"). Upon conclusion of the Whistleblower Email Investigation, it was determined that the claims included were unsubstantiated (see Note 18, "Commitments and Contingencies").

Avaya notified the SEC of the Investigations and the SEC initiated an investigation to review, among other things, the circumstances surrounding Avaya's financial results for the quarter ended June 30, 2022.

On ~~January 19, 2017~~February 10, 2023, the Company filed a Form 12b-25 announcing a delay in the filing of its Quarterly Report on Form 10-Q for the three months ended December 31, 2022. As a result of the activities noted above, the Company required additional time to complete its review of its financial statements and other disclosures as of December 31, 2022, and to complete its quarterly closing processes and controls, and was unable to file its Quarterly Report on Form 10-Q on or prior to the prescribed due date of February 9, 2023.

The Audit Committee has completed its planned procedures with respect to its Investigations and continues to cooperate with the SEC's on-going investigation, which could require additional procedures to be performed. The Audit Committee identified several contributing factors for the significant differences between the Company's forecasts and actual financial results for the third quarter of fiscal 2022, including:

•Inappropriate tone at the top among certain members of senior management, which resulted in a corporate culture characterized by significant pressure to meet aggressive sales projections and a failure to foster an environment of appropriate and open communication of significant matters throughout the organization and with others outside of the organization;

•A declining pipeline of existing legacy customers (with expiring maintenance contracts) eligible for migration to the Company's subscription model;

•A business model in which a significant portion of quarterly revenue is generated at the end of each quarter, making it difficult to accurately forecast revenue;

•Adverse market conditions, as well as concerns that arose during the third quarter about the Company's financial health, which negatively influenced customer sentiment; and

•The ineffective control environment with respect to tone at the top noted above contributed to additional material weaknesses, that the Company did not design and maintain effective controls over the information and communication component of the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") framework which led to an additional material weakness with respect to the ethics and compliance program. The Company did not maintain a complete and accurate whistleblower log and did not inform certain members of senior management and its external auditor about an investigation undertaken by a committee of the Board of Directors.

In addition, the investigation identified revenue of $3 million that was recognized for product shipments during the three months ended March 31, 2022 that had rights of return and, accordingly, should not have been recognized as revenue. The Company corrected this error during the three months ended June 30, 2022. This out-of-period correction was not material to any interim period and had no impact on the financial results for the year ended September 30, 2022.

The SEC is investigating the matters underlying the Audit Committee's investigation and may be subject to additional regulatory or legal proceedings. These investigations and legal proceedings may result in adverse findings, damages, the imposition of fines or other penalties, increased costs and expenses as well as the diversion of management's time and resources.

Chapter 11 Filing

On February 14, 2023 (the ~~“Petition Date”~~"Petition Date"), Avaya Holdings ~~together with~~and certain of its affiliates, namely Avaya CALA Inc., Avaya EMEA Ltd., Avaya Federal Solutions, Inc., Avaya Holdings LLC, Avaya Holdings Two, LLC, Avaya Inc., Avaya Integrated Cabinet Solutions Inc., Avaya Management Services Inc., Avaya Services Inc., Avaya World Services Inc., Octel Communications LLC, Sierra Asia Pacific Inc., Sierra Communication International LLC, Technology Corporation of America, Inc., Ubiquity Software Corporation, VPNet Technologies, Inc.,direct and ~~Zang, Inc.~~indirect subsidiaries (collectively, the "Debtors") commenced voluntary cases (the ~~“Debtors”), filed voluntary petitions for relief (the “Bankruptcy Filing”~~"Chapter 11 Cases") under Chapter 11 of Title 11 of the United States ~~Bankruptcy~~ Code (the ~~“Bankruptcy Code’~~"Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of ~~New York (the “Bankruptcy Court’).~~Texas. The ~~cases~~Chapter 11 Cases were jointly administered under the caption In re Avaya Inc., et al., case number 23-90088.

On the Petition Date, the Company entered into a Restructuring Support Agreement (the "RSA") with certain of its creditors (the "Consenting Stakeholders") and RingCentral, Inc. ("RingCentral"). The RSA contemplated a prepackaged joint plan of reorganization (the "Plan"). The Plan provided for (i) the commencement of the Chapter 11 Cases, (ii) debtor-in-possession financing facilities in the aggregate amount of approximately $628 million that were subsequently converted into exit financing facilities upon the Company's Emergence (as defined below), (iii) a fully backstopped $150 million rights offering, (iv) payment in full of all trade liabilities, (v) the repayment of approximately $225 million escrowed cash to certain senior lenders

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and (vi) entry into amended and restated agreements with RingCentral (the "Amended and Restated RingCentral Agreements") that collectively govern the Company's commercial relationship with RingCentral upon Emergence (which agreements were entered into immediately prior to, and in connection with, the execution of the RSA).

The RSA and the Plan did not contemplate any recovery for holders of the Company's existing common stock, par value $0.01 per share (the "Common Stock") or Series A Convertible Preferred Stock, par value $0.01 per share (the "Series A Preferred Stock").

On February 15, 2023, trading in the Company's Common Stock on the New York Stock Exchange ("NYSE") was permanently suspended and the Common Stock was delisted from the NYSE effective February 25, 2023.

To ensure their ability to continue operating in the ordinary course of business, the Debtors filed a variety of motions seeking "first day" relief, including the authority to continue using their cash management system, pay employee wages and benefits and pay vendors in the ordinary course of business. As of March 22, 2023, all "first day" relief had been granted by the Bankruptcy Court on a final basis.

The commencement of the Chapter 11 Cases constituted an event of default that accelerated and, as ~~Case No. 17-10089 (SMB)~~applicable, increased certain obligations under each of the Term Loan and ABL Credit Agreements and the indentures governing the Senior Notes, the Convertible Notes and the Exchangeable Notes (each as defined below) (collectively the "Pre-Petition Debt Instruments") and agreements described in Note 7, "Financing Arrangements," other than the DIP Term Loan (as defined below) and the DIP ABL Loan (as defined below). At December 31, 2022, all debt was classified as a current liability based on the Company's violation of certain covenants in December 2022.

The Pre-Petition Debt Instruments provided that, as a result of the Chapter 11 Cases, the principal and interest and certain other amounts (to the extent applicable) due thereunder were immediately due and payable. Any efforts to enforce such payment obligations under the Pre-Petition Debt Instruments against the Debtors were automatically stayed as a result of the Chapter 11 Cases, and the creditors' rights of enforcement in respect of the Pre-Petition Debt Instruments were subject to the applicable provisions of the Bankruptcy Code.

Under the Plan, holders of pre-petition claims were not required to file proofs of claim and all filed proofs of claim were automatically considered objected and disputed, and all other claims (other than cure disputes/rejection claims) were deemed withdrawn and expunged as of May 1, 2023 (the "Emergence Date"). On the Emergence Date, the Company reviewed claims that had been filed and updated the claims register to reflect whether claims had been withdrawn, expunged or satisfied, as applicable, as of the Emergence Date and did not identify any adjustments to its consolidated financial statements.

Subject to certain specific exceptions under the Bankruptcy Code, the Chapter 11 Cases automatically stayed most judicial or administrative actions against the Debtors and efforts by creditors to collect on or otherwise exercise rights or remedies with respect to pre-petition claims.

The Debtors operated ~~their businesses~~ as ~~"debtors-in-possession" under the jurisdiction of the Bankruptcy Court and~~debtors-in-possession in accordance with the applicable provisions of ~~Chapter 11 of~~ the Bankruptcy Code and entered into (a) a $500 million priming superpriority senior secured debtors-in-possession term loan facility (the "DIP Term Loan," and such facility, the ~~orders of~~"DIP Term Loan Facility") and (b) an approximately $128 million priming superpriority senior secured debtors-in-possession asset-based loan facility (the "DIP ABL Loan," and such facility, the ~~Bankruptcy Court until their emergence from bankruptcy on December 15, 2017.~~"DIP ABL Facility"). The DIP Term Loan and DIP ABL Loan converted into exit financing upon Avaya's Emergence. See Note 7, "Financing Arrangements".

Subsequent to the Petition Date, all expenses, gains and losses directly associated with the reorganization proceedings were reported as Reorganization items, net in the accompanying Condensed Consolidated Statements of Operations. In addition, Liabilities subject to compromise during Chapter 11 proceedings were distinguished from liabilities of the non-debtors and

from post-petition liabilities in the accompanying Condensed Consolidated Balance Sheets. The Company's other subsidiaries that were not part of the Bankruptcy Filing ("non-debtors") continued to operate in the ordinary course of business.

Upon emergence from bankruptcy on December 15, 2017 (the "Emergence Date"), the Company applied fresh start accounting, which resulted in a new basis of accounting and the Company becoming a new entity for financial reporting purposes. As a result of the application of fresh start accounting and the effects of the implementation of the Second Amended Joint Plan of Reorganization filed by the Debtors on October 24, 2017 and approved by the Bankruptcy Court on November 28, 2017 (the "Plan of Reorganization"), the consolidated financial statements after the Emergence Date, are not comparable with the consolidated financial statements on or before that date. Refer to Note 5, "Fresh Start Accounting," for additional information.

The accompanying Condensed Consolidated Financial Statements of the Company have been prepared on a basis that assumes that the Company will continue as a going concern and contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. During the Chapter 11 proceedings, the Company's ability to continue as a going concern was contingent upon its ability to comply with the financial and other covenants contained in its debtor-in-possession credit agreement, the Bankruptcy Court's approval of the Company's Plan of Reorganization and the Company's ability to successfully implement the Plan of Reorganization, among other factors. As a result of the execution of the Plan of Reorganization, there is no longer substantial doubt about the Company's ability to continue as a going concern.

References to "Successor" or "Successor Company" relate to the financial position and results of operations of the reorganized Avaya Holdings after the Emergence Date. References to "Predecessor" or "Predecessor Company" refer to the financial position and results of operations of Avaya Holdings on or before the Emergence Date.

~~2. Accounting Policy Changes~~

The Company emerged from bankruptcy on December 15, 2017, and qualified for fresh start accounting. Fresh start accounting allows a company to set new accounting policies for the successor company independent of those followed by the predecessor company. As such, the following are the accounting policy changes the Successor Company has adopted.

~~Fair Value of Equity Awards~~

~~Successor Accounting Policy:~~ The Black-Scholes-Merton option pricing model ("Black-Scholes") replaced the Cox-Ross-Rubinstein ("CRR") binomial option pricing model in calculating the fair value of equity awards, including the fair value of warrants to purchase common stock. In addition to the change in option pricing models, the Company now accounts for forfeitures as incurred.

~~Predecessor Accounting Policy:~~ The CRR binomial option pricing model was utilized to determine the grant date fair values of the equity awards, including the fair value of the Preferred Series A and B Stock warrants. Forfeitures was an input assumption in the valuation model.

~~Uncollected Deferred Revenue~~

~~Successor Accounting Policy:~~ The Company does not recognize deferred revenue relating to any sales transactions that have been billed, but for which the related account receivable has not yet been collected. The aggregate amount of unrecognized accounts receivable and deferred revenue was $100 million at December 31, 2017.

~~Predecessor Accounting Policy:~~ ~~The Company recorded the deferred revenue and related collectible accounts receivable in its consolidated balance sheets.~~

~~Foreign Currency~~

~~Successor Accounting Policy:~~ ~~Income and expense of non-U.S. dollar functional currency subsidiaries are translated into U.S. dollars using an average rate for the period.~~

~~Predecessor Accounting Policy:~~ ~~Income and expense of non-U.S. dollar functional currency subsidiaries are translated into U.S. dollars at the spot rate for the transaction.~~

~~3. Recent Accounting Pronouncements~~

~~Recently Adopted Accounting Pronouncements~~

In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-09, "Improvements to Employee Share-Based Payment Accounting." This standard simplifies the accounting for share-based payments and their presentation in the statements of cash flows as well as the income tax effects of share-based payments. The Company adopted this standard as of October 1, 2017 on a prospective basis. The adoption of this standard did not have a material impact on its Condensed Consolidated Financial Statements.

In March 2017, the FASB issued ASU No. 2017-07, "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-retirement Benefit Cost." This standard changes how employers that sponsor defined benefit pension and other post-retirement benefit plans present net periodic benefit cost in the income statement. This amendment requires that the service cost component be disaggregated from the other components of pension and post-retirement benefit costs on the income statement. The service cost component is reported in the same line items as other compensation costs and the other components of pension and post-retirement benefit costs (including interest cost, expected return on plan assets, amortization and curtailments and settlements) are reported in Other income (expense), net in the Company's Condensed Consolidated Financial Statements. The Company early adopted this accounting standard as of October 1, 2017. Changes to the Condensed Consolidated Financial Statements have been applied retrospectively. As a result, the Company reclassified $(6) million of other pension and post-retirement benefit costs to other income (expense), net for the three months ended December 31, 2016 (Predecessor). For the period from December 16, 2017 through December 31, 2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor), the Company recorded $1 million and $(8) million, respectively, of other pension and post-retirement benefit costs in other income (expense), net.

~~Recent Standards Not Yet Effective~~

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” This standard supersedes most of the current revenue recognition guidance under GAAP and is intended to improve and converge with international standards the financial reporting requirements for revenue recognition. The core principle of the new guidance is that an entity should recognize revenue to depict the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. New disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers are also required. Subsequently, the FASB issued several standards that clarified certain aspects of the standard but did not change the original standard. This new guidance is effective for the Company beginning in the first quarter of fiscal 2019. The ASU may be applied retrospectively (a) to each reporting period presented or (b) with the cumulative effect in retained earnings at the beginning of the adoption period.

We currently anticipate adoption of the new standard effective October 1, 2018 using the modified retrospective method whereby the cumulative effect is recorded to retained earnings at the beginning of the adoption period. Adoption of the standard is dependent on completion of a detailed accounting assessment, the success of the design and implementation phase for changes to the Company's processes, internal controls and system functionality and the completion of our analysis of information necessary to assess the overall impact of adoption of this guidance on our consolidated financial statements.

We continue to make progress on the accounting assessment and implementation phases to identify and implement the required changes to accounting policies and disclosures in our consolidated financial statements. We have reached preliminary conclusions on certain accounting assessments and we will continue to monitor and assess the impact of changes to the standard and interpretations as they become available. We expect revenue recognition related to our stand-alone product shipments and maintenance services to remain substantially unchanged. However, we continue to evaluate our preliminary conclusion and assess the impact on our other sources of revenue recognition.

4. Emergence from Voluntary Reorganization under Chapter 11 ~~Proceedings~~

~~Plan~~ of ~~Reorganization~~

~~On November 28, 2017,~~ the Bankruptcy Code

The Bankruptcy Court ~~entered an order confirming~~confirmed the Plan ~~of Reorganization. On the Emergence Date, the Plan of Reorganization became effective~~on March 22, 2023, and the Debtors satisfied all conditions required for Plan effectiveness and emerged from ~~bankruptcy.~~the Chapter 11 Cases ("Emergence") on May 1, 2023.

On or following the Emergence Date and pursuant to the terms of the Plan, ~~of Reorganization,~~ the following ~~occurred:~~occurred or became effective:

~~Debtor-in-Possession Credit Agreement.~~ ~~The Company paid in full the debtor-in-possession credit agreement (the "DIP Credit Agreement") in the amount of $725 million;~~

~~Predecessor~~▪Debtors' Equity and ~~Indebtedness.~~ ~~The~~Indebtedness. All of the Debtors' ~~obligations under stock certificates,~~pre-petition equity ~~interests,~~ and ~~/ or any other instrument or document directly or indirectly evidencing or creating any indebtedness or obligation of, or ownership interest in,~~debt facilities as well as the ~~Debtors or giving rise to any claim or equity interest~~Debtors' securities were ~~cancelled, except as provided under the Plan of Reorganization;~~

canceled.

~~Successor Equity.~~▪Reorganized Company Equity. The Company's certificate of incorporation was amended and restated to authorize the issuance of ~~605.0~~80 million shares of ~~Successor Company~~the Company's common stock, ~~consisting~~par value $0.01 per share (the "New Common Stock"), of ~~55.0~~which 36 million shares were issued on the Emergence Date. The Company's certificate of incorporation was also amended and restated to authorize the issuance of 20 million shares of the Company's preferred stock, par value $0.01 per share ~~and 550.0 million shares of common stock, par value $0.01 per share,~~(the "New Preferred Stock"), of which ~~110.0 million~~no shares ~~of common stock~~ were issued ~~(as discussed below);~~

on the Emergence Date.

▪Exit ~~Financing.~~Financing. The ~~Successor Company entered into (1) a term loan credit agreement ("the~~DIP Term Loan ~~Credit Agreement")~~converted into an Exit Term Loan (as defined herein) and the Company incurred an additional $310 million under the Exit Term Loan Facility (including amounts incurred pursuant to a rights offering and amounts deemed incurred pursuant to the Plan by creditors under the Pre-Petition Debt Instruments) for aan aggregate principal amount of ~~$2,925~~$810 million, ~~maturing on December 15, 2024, and (2) a $300 million asset-based revolving credit facility (the "ABL Credit Agreement") maturing on December 15, 2022;~~

~~First Lien Debt Claims.~~ ~~All of the Predecessor Company's outstanding obligations under the variable rate term B-3, B-4, B-6, and B-7 loans~~ and the ~~7% and 9% senior secured notes (collectively, the "Predecessor first lien obligations") were cancelled, and the holders~~DIP ABL Loan converted into an Exit ABL Loan (as defined

Table of ~~claims under the Predecessor first lien obligations received 99.3 million shares of Successor Company common stock. In addition, the holders of the Predecessor first lien obligations received cash~~Contents

herein) in the amount of ~~$2,061 million;~~

approximately $128 million. As contemplated in the bankruptcy court proceedings and approved by the court, the imputed enterprise value of the Company upon Emergence was approximately $1,426 million.

~~Second Lien Debt Claims.~~ ~~All~~▪Contracts with Customers and Suppliers. Suppliers and customers were paid or will be paid in full in respect of pre-petition amounts owed by the ~~Predecessor Company's outstanding obligations under the 10.50% senior secured notes (the "Predecessor second lien obligations") were cancelled,~~Company, and the ~~holders of claims under~~Company assumed the ~~Predecessor second lien obligations received 4.4 million shares of Successor Company common stock. In addition, holders~~Amended and Restated RingCentral Agreements (as defined within Note 18, "Commitments and Contingencies") (which agreements were entered into immediately prior to, and in connection with, the execution of the ~~Predecessor second lien obligations received warrants to purchase 5.6 million shares of Successor~~RSA).

▪PBGC Settlement. The Company ~~common stock at an exercise price of $25.55 per warrant (the "Warrants");~~

~~Claims of~~entered into a settlement with the Pension Benefit Guaranty Corporation ~~("PBGC"~~(the "PBGC"). ~~The Predecessor Company's outstanding obligations under~~ providing for the Avaya Inc. Pension Plan for Salaried Employees ("APPSE") were terminated and transferred to the PBGC. The PBGC received 6.1 million shares of Successor Company common stock and $340 million in cash; and

~~General Unsecured Claims.~~ ~~Holders~~assumption of the ~~Predecessor Company's general unsecured claims will receive their pro rata share~~hourly pension plan and the consensual termination of the ~~general unsecured recovery pool. A liquidating trust was established in~~settlement with the ~~amount of $58 million for the benefit~~PBGC entered into as part of the ~~general unsecured claims. Included in~~Company's 2017 plan of reorganization, including the ~~110.0 million Successor~~excess contribution obligations thereunder.

▪Settlements. The Company ~~common stock issued are 0.2 million additional shares~~entered into a number of ~~common stock that have been issued (but are not outstanding) for~~other settlements, including, inter alia, those with the ~~benefit~~Consenting Stakeholders and an ad hoc group of the general unsecured creditors. The general unsecured creditors will receive a total of $58 million in cash and common stock. Any excess cash and / or common stock not distributed to the general unsecured creditors will be distributed to the holders of the ~~Predecessor first lien obligations.~~

Convertible Notes, and all of these settlements became effective on the Emergence Date.

~~Section 363 Asset Sales~~

~~In July 2017, the Company sold its networking business ("Networking" or the "Networking business") to Extreme Networks, Inc. ("Extreme"). The Networking business was comprised primarily~~Adoption of certain assets of the Company's Networking segment (which prior to the sale was a separate operating segment), along with the maintenance and professional services of the Networking business, which were part of the AGS segment. Under a Transition Services Agreement ("TSA"), the Company provides administrative services to Extreme for process support, maintenance services and product logistics on a fee basis. While the TSA can expire sooner, the agreement terminates after 2 years.

~~5. Fresh Start Accounting~~

~~In connection with the Company's emergence from bankruptcy and in accordance with FASB~~ Accounting Standards Codification ("ASC") Topic 852

On the Emergence Date, the Company may qualify for and adopt fresh start accounting in accordance with Financial Accounting Standards Board Codification Topic 852, ~~"Reorganizations"~~Reorganizations ("ASC 852"), which specifies the ~~Company applied the provisions~~accounting and financial reporting requirements for entities reorganizing through Chapter 11 bankruptcy proceedings. The application of fresh start accounting ~~to its Condensed Consolidated Financial Statements on~~would result in a new basis of accounting and the ~~Emergence Date. The~~ Company ~~was required to use fresh start accounting since (i) the holders of existing voting shares~~would become a new entity for financial reporting purposes. As a result of the ~~Predecessor Company received less than 50% of the voting shares of the emerging entity and (ii) the reorganization value of the Company's assets immediately prior to confirmation~~implementation of the Plan ~~of Reorganization was less than~~and the ~~post-petition liabilities and allowed claims.~~

~~ASC 852 prescribes that with the~~potential application of fresh start accounting, the ~~Company allocated~~Consolidated Financial Statements after the Emergence Date would not be comparable to the Consolidated Financial Statements before that date, and the historical financial statements on or before the Emergence Date would not be a reliable indicator of its ~~reorganization value to its individual assets based on their estimated fair values in conformity with ASC 805, "Business Combinations". The reorganization value represents~~financial condition and results of operations for any period after the ~~fair value of the Successor~~ Company's ~~assets before considering liabilities. The excess reorganization value over the fair value of identified tangible and intangible assets is reported as goodwill. As a result of the application~~adoption of fresh start ~~accounting~~accounting.

Liquidity and the effects of the implementation of the Plan of Reorganization, the consolidated financial statements after December 15, 2017 are not comparable with the consolidated financial statements as of or prior to that date.Going Concern

~~Reorganization Value~~

~~As set forth in the Plan of Reorganization, the agreed upon enterprise value~~The accompanying unaudited Condensed Consolidated Financial Statements of the Company ~~was $5,721 million. This value is within the initial range calculated by~~have been prepared assuming the Company of approximately $5,100 million to approximately $7,100 million using an income approach. The $5,721 million enterprise value was selected as it was the transaction price agreed to in the global settlement agreement with the Company’s creditor constituencies, including the PBGC. The reorganization value was then determined by adding back liabilities other than interest bearing debt, pension obligations and the deferred tax impact of the reorganization and fresh start adjustments.

~~The following table reconciles the enterprise value to the estimated fair value of the Successor stockholders' equity as of the Emergence Date:~~

(In millions, except per share amount)
Enterprise value $ 5,721
Plus:
Cash and cash equivalents 340
Less:
Minimum cash required for operations (120 )
Fair value of Term Loan Credit Agreement⁽¹⁾
(2,896 )
Fair value of capitalized leases (20 )
Fair value of pension and other post-retirement obligations, net of tax⁽²⁾
(856 )
Change in net deferred tax liabilities from reorganization (510 )
Fair value of Successor warrants⁽³⁾
(17 )
Fair value of Successor common stock $ 1,642
Shares issued at December 15, 2017 110.0
Per share value $ 14.93


⁽¹⁾	The fair value of the Term Loan Credit Agreement was determined based on a market approach utilizing market-clearing data on the valuation date in addition to bid/ask prices and was estimated to be 99% of par value.


⁽²⁾	The following assumptions were used when measuring the fair value of the U.S. pension, non-U.S. pension, and post-retirement benefit plans: weighted-average return on assets of 7.75%, 3.80% and 5.90%, and weighted-average discount rate to measure plan obligations of 3.70%, 1.52% and 3.77%, respectively.


⁽³⁾	~~The fair value of the Warrants was estimated using the Black-Scholes pricing model.~~

~~The following table reconciles the enterprise value to the estimated reorganization value as of the Emergence Date:~~

(In millions)
Enterprise value $ 5,721
Plus:
Non-debt current liabilities 955
Non-debt non-current liabilities 2,090
Excess cash and cash equivalents 220
Less:
Pension and other post-retirement obligations, net of deferred taxes (856 )
Capital lease obligations (20 )
Change in net deferred tax liabilities from reorganization (510 )
Warrants issued upon emergence (17 )
Reorganization value of Successor assets $ 7,583

~~Consolidated Balance Sheet~~

The adjustments set forth in the following consolidated balance sheet as of December 15, 2017 reflect the effect of the consummation of the transactions contemplated by the Plan of Reorganization (reflected in the column "Reorganization Adjustments") as well as fair value adjustmentswill continue as a ~~result of applying fresh start accounting (reflected in the column "Fresh Start Adjustments"). The explanatory notes highlight methods used to determine fair values or other amounts of the assets~~going concern and ~~liabilities, as well as significant assumptions or inputs.~~

(In millions) Predecessor Company Reorganization Adjustments Fresh Start Adjustments Successor Company December 15, 2017
ASSETS
Current assets:
Cash and cash equivalents $ 744
$ (404 ) (1) $ —
$ 340
Accounts receivable, net 523
—
(106 ) (21,29) 417
Inventory 98
—
29
(22) 127
Other current assets 366
(58 ) (2) (66 ) (23) 242
TOTAL CURRENT ASSETS 1,731
(462 ) (143 ) 1,126
Property, plant and equipment, net 194
—
116
(24) 310
Deferred income taxes, net —
48
(3) (17 ) (25) 31
Intangible assets, net 298
—
3,137
(26) 3,435
Goodwill 3,541
—
(909 ) (27) 2,632
Other assets 70
6
(4) (27 ) (28) 49
TOTAL ASSETS $ 5,834
$ (408 ) $ 2,157
$ 7,583
LIABILITIES
Current liabilities:
Debt maturing within one year $ 725
$ (696 ) (5) $ —
$ 29
Accounts payable 325
(49 ) (6) —
276
Payroll and benefit obligations 123
23
(7) —
146
Deferred revenue 627
50
(8) (341 ) (29) 336
Business restructuring reserve 35
3
(9) —
38
Other current liabilities 97
65
(6,10) (3 ) (30) 159
TOTAL CURRENT LIABILITIES 1,932
(604 ) (344 ) 984
Non-current liabilities:
Long-term debt, net of current portion —
2,771
(11) 96
(31) 2,867
Pension obligations 539
246
(12) —
785
Other post-retirement obligations —
212
(13) —
212
Deferred income taxes, net 28
113
(14) 548
(32) 689
Business restructuring reserve 26
4
(9) 4
(33) 34
Other liabilities 180
233
(8,15) (43 ) (29,34) 370
TOTAL NON-CURRENT LIABILITIES 773
3,579
605
4,957
LIABILITIES SUBJECT TO COMPROMISE 7,585
(7,585 ) (16) —
—
TOTAL LIABILITIES 10,290
(4,610 ) 261
5,941
Commitments and contingencies
Equity awards on redeemable shares 6
(6 ) (17) —
—
Preferred stock:
Series B 397
(397 ) (17) —
—
Series A 186
(186 ) (17) —
—
STOCKHOLDERS' (DEFICIT) EQUITY
Common stock (Successor) —
1
(18) —
1
Additional paid-in capital (Successor) —
1,641
(18) —
1,641
Common stock (Predecessor) —
—
—
—
Additional paid-in capital (Predecessor) 2,387
(2,387 ) (17) —
—
(Accumulated deficit) retained earnings (5,978 ) 4,872
(19) 1,106
(36) —
Accumulated other comprehensive (loss) income (1,454 ) 664
(20) 790
(35) —
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY (5,045 ) 4,791
1,896
1,642
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY $ 5,834
$ (408 ) $ 2,157
$ 7,583

~~Reorganization Adjustments~~

~~In accordance with the Plan of Reorganization, the following adjustments were made:~~

1.~~Sources and Uses of Cash.~~ ~~The following reflects the net cash payments recorded as of the Emergence Date as a result of implementing the Plan of Reorganization:~~

(In millions)
Sources:
Proceeds from Term Loan Credit Agreement, net of original issue discount $ 2,896
Release of restricted cash 76
Total sources of cash 2,972
Uses:
Repayment of DIP Credit Agreement (725 )
Payment of DIP accrued interest (1 )
Cash paid to Predecessor first lien debt-holders (2,061 )
Cash paid to PBGC (340 )
Payment for professional fees escrow account (56 )
Funding payment for Avaya represented employee pension plan (49 )
Payment of accrued professional & administrative fees (27 )
Costs incurred for Term Loan Credit Agreement and ABL Credit Agreement (59 )
Payment for general unsecured claims (58 )
Total uses of cash (3,376 )
Net uses of cash $ (404 )


2.	~~Other Current Assets.~~

(In millions)
Release of restricted cash $ (76 )
Reclassification of prepaid debt issuance costs related to the Term Loan Credit Agreement (42 )
Payment of fees related to the ABL Credit Agreement 5
Restricted cash for bankruptcy related professional fees 55
Total other current assets $ (58 )


3.	~~Deferred Income Taxes.~~ The adjustment represents the release of the valuation allowance on deferred tax assets for certain non-U.S. subsidiaries which management believes more likely than not will be realized as a result of the bankruptcy reorganization.


4.	~~Other Assets.~~ ~~The adjustment represents the re-establishment of a foreign prepaid tax.~~


5.	~~Debt Maturing Within One Year.~~ The adjustment represents the net effect of the Company’s repayment of $725 million for the DIP Credit Agreement and Term Loan Credit Agreement principal payments of $29 million due over the next year.

~~Accounts Payable~~. The net decrease of $49 million includes $50 million for professional fees that were reclassified to Other current liabilities for accrued bankruptcy related professional fees that will be paid from an escrow account and the payment of $3 million of bankruptcy related professional fees, partially offset by reinstatement of $4 million contact cure costs from liabilities subject to compromise.


7.	~~Payroll and Benefi~~t ~~Obligations.~~ ~~The Company reinstated $23 million of liabilities subject to compromise related to the post-employment and post-retirement benefit obligations.~~


8.	~~Deferred Revenue.~~ ~~The reinstatement of liabilities subject to compromise was $79 million of which $50 million is included in deferred revenue and $29 million in other liabilities.~~


9.	~~Business Restructuring Reserve.~~ ~~The reinstatement of liabilities subject to compromise was $7 million, of which $3 million is current and $4 million is non-current.~~

~~10.Other Current Liabilities.~~

(In millions)
Reclassification of accrued bankruptcy related professional fees $ 50
Reinstatement of other current liabilities 16
Payment of accrued interest on the DIP Credit Agreement (1 )
Total other current liabilities $ 65

~~11.Exit Financing.~~ In accordance with the Plan of Reorganization, the Company entered into the Term Loan Credit Agreement with a principal amount of $2,925 million maturing seven years from the date of issuance, and the ABL Credit Agreement, which allows borrowings up to an aggregate principal amount of $300 million, subject to borrowing base availability, maturing five years from the date of issuance.

(In millions)
Term Loan Credit Agreement $ 2,925
Less:
Discount (29 )
Upfront and underwriting fees (54 )
Cash received upon emergence from bankruptcy 2,842
Reclassification of debt issuance cost incurred prior to emergence from bankruptcy (42 )
Current portion of Long-term debt (29 )
Long-term debt, net of current portion $ 2,771


~~12.~~	~~Pension Obligations.~~ In accordance with the Plan of Reorganization, the Company reinstated from liabilities subject to compromise $295 million related to the Avaya Pension Plan for represented employees and also contributed $49 million to the related pension trust.


~~13.~~	~~Other Post-retirement Obligations.~~ ~~Other post-retirement benefit obligations of $212 million were reinstated from liabilities subject to compromise.~~


~~14.~~	~~Deferred Income Taxes. The adjustment represents the reinstatement of the deferred tax liability that was included in liabilities subject to compromise.~~


~~15.~~	~~Other Liabilities~~. The increase of $233 million primarily relates to the reinstatement of employee benefits, tax liabilities and deferred revenue from liabilities subject to compromise. Also included is the value of the Warrants issued to the holders of the Predecessor second lien obligations on the Emergence Date.

~~16.Liabilities Subject to Compromise.~~ ~~Liabilities subject to compromise were reinstated or settled as follows~~ in accordance with GAAP. The going concern basis of presentation assumes that the ~~Plan~~Company will continue in operation one year after the date these Condensed Consolidated Financial Statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of ~~Reorganization:~~

business.

(In millions)
Liabilities subject to compromise $ 7,585
Less amounts settled per the Plan of Reorganization
Pre-petition first lien debt (4,281 )
Pre-petition second lien debt (1,440 )
Avaya Pension Plan for Salaried Employees (620 )
Amounts reinstated:
Accounts payable (4 )
Payroll and benefit obligations (23 )
Deferred revenue (50 )
Business restructuring reserves (7 )
Other current liabilities (16 )
Pension obligations (295 )
Other post-retirement obligations (212 )
Deferred income taxes, net (118 )
Other liabilities (216 )
Total liabilities reinstated at emergence (941 )
General unsecured credit claims⁽¹⁾
(303 )
Liabilities subject to compromise $ —

⁽¹⁾~~In settlement~~During the fiscal year ended September 30, 2022, the Company experienced a significant slowdown in its operations and had operating cash outflows of ~~allowed general unsecured claims, each claimant will receive a pro-rata distribution of $58 million~~$312 million. Additionally, prior to the Chapter 11 Cases, the Company had been involved in discussions with its lenders relating to the financing transactions it completed in July 2022 (as described further in Note 7, "Financing Arrangements") and the scheduled June 2023 maturity of the ~~general unsecured claims account.~~Convertible Notes. In its Form 12b-25 in respect of the Quarterly Report on Form 10-Q for the period ended June 30, 2022 filed with the SEC on August 9, 2022, the Company indicated that in light of the Convertible Notes being characterized as a current liability and the related engagement with advisors to address the Convertible Notes, coupled with the decline in revenues during the third quarter, which represented substantially lower revenues than previous Company expectations, and the negative impact of significant operating losses on the Company's cash balance, the Company determined that there was substantial doubt about the Company's ability to continue as a going concern.

The ~~following table displays the detail on the gain on settlement of liabilities subject~~Company has completed certain restructuring actions and is working to ~~compromise:~~

(In millions)
Pre-petition first lien debt $ 734
Pre-petition second lien debt 1,357
Avaya pension plan for salaried employees (514 )
General unsecured creditors' claims 227
Net gain on settlement of Liabilities subject to compromise $ 1,804


~~17.~~	~~Cancellation of Predecessor Preferred and Common Stock.~~ ~~All common stock, Series A and B preferred stock and all other equity awards of the Predecessor Company were cancelled on the Emergence Date without any recovery on account thereof.~~

~~18.~~

~~Issuance of Successor Common Stock and Warrants.~~ In settlement of the Company's $5,721 million Predecessor first lien obligations and Predecessor second lien obligations, the holders of the Predecessor first lien obligations received a total of 99.3 million shares of common stock (fair value of $1,486 million) and $2,061 million in cash and the holders of the Predecessor second lien obligations received a total of 4.4 million shares of common stock (fair value of $66 million) and 5.6 million of Warrants to purchase additional common shares (fair value of $17 million). In addition, as part of the Plan of Reorganization, the Company completed a distressed termination of the APPSE in accordance with the Stipulation Settlement with the PBGC, the PBGC received $340 million in cash and 6.1 million shares of common stock (fair value of $90 million).


~~19.~~	~~Accumulated Deficit.~~

(In millions)
Accumulated deficit:
Net gain on settlement of liabilities subject to compromise $ 1,804
Expense for certain professional fees (26 )
Benefit from income taxes 118
Cancellation of Predecessor equity awards 6
Cancellation of Predecessor Preferred stock Series B 397
Cancellation of Predecessor Preferred stock Series A 186
Cancellation of Predecessor Common stock 2,387
Total $ 4,872


~~20.~~	~~Accumulated Comprehensive Loss.~~ ~~The changes to Accumulated comprehensive loss relate to the settlement of the APPSE and the Avaya Supplemental Pension Plan ("ASPP") and the associated taxes.~~

~~Fresh Start Adjustments~~

Atcomplete its remaining restructuring plan as its operating cash flows are expected to remain negative through at least fiscal 2023. The Company may take additional actions, as needed. The Company’s plans are designed to reduce its operating expenses and improve cash flows in line with its forecasted revenues. On the Emergence Date, the Company ~~met~~had approximately $585 million of cash and cash equivalents, and its post-Emergence debt profile was significantly improved (an aggregate principal amount of $810 million compared to $3,420 million at December 31, 2022), reducing its annual interest expense and extending the earliest maturity of its non-revolving long-term debt to 2028. This post-Emergence capital structure, coupled with restructuring actions that the Company executed to reduce its on-going operating expenses, have provided the Company with sufficient working capital to meet its operating cash flow requirements ~~under ASC 852~~ for ~~fresh start accounting~~at least one year from the issuance of these financial statements. Accordingly, as ~~(i) the holders of existing voting shares~~a result of the ~~Predecessor~~successful Emergence, the Company ~~received less than 50%~~has alleviated the substantial doubt that had previously existed regarding the Company's ability to continue as a going concern. The Company's longer term liquidity profile will depend on successfully implementing its strategic plan which includes enhancing its product offerings, successfully partnering with alliance companies and executing on remaining cost reductions.

Table of Contents

2. Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 ~~voting shares~~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. The Company adopted the ~~emerging entity~~standard on a modified retrospective basis effective October 1, 2022.

Upon adoption, the Company recorded a cumulative effect adjustment which decreased the opening balance of Accumulated deficit on the Condensed Consolidated Balance Sheet by $47 million, decreased Additional paid-in-capital by $118 million and ~~(ii)~~increased Debt maturing within one year and Long-term debt by $10 million and $61 million, respectively, to eliminate the ~~reorganization value~~historical separation of debt and equity components of the Company's convertible or exchangeable debt instruments.

Recent Standards Not Yet Adopted

In March 2020, the FASB issued 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 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, 2024. 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 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 ~~immediately prior~~and contract liabilities acquired in a business combination to ~~confirmation was less than~~be recognized in accordance with Topic 606 as if the ~~post-petition liabilities~~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 ~~allowed claims. These adjustments reflect actual amounts recorded~~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.

In September 2022, the FASB issued ASU 2022-04, "Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations." This standard requires that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. The amendments in this standard do not affect the recognition, measurement, or financial statement presentation of obligations covered by supplier finance programs. The standard is effective for the Company in the first quarter of fiscal 2024, with early adoption permitted. Certain disclosures required by the standard are effective in the first quarter of fiscal 2025. The Company is currently assessing the impact the new guidance will have on its disclosures within 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 December 31,
(In millions)	2022		2021
Revenue:
Products & Solutions	$	136	$	231
Services	282		482

Total Revenue	$	418	$	713


	Three months ended December 31, 2022				Three months ended December 31, 2021
(In millions)	Products & Solutions		Services		Total		Products & Solutions		Services		Total
Revenue:
U.S.	$	62	$	146	$	208	$	114	$	261	$	375
International:
Europe, Middle East and Africa	38		71		109		65		127		192
Asia Pacific	19		37		56		32		49		81
Americas International - Canada and Latin America	17		28		45		20		45		65
Total International	74		136		210		117		221		338
Total Revenue	$	136	$	282	$	418	$	231	$	482	$	713

Transaction Price Allocated to the Remaining Performance Obligations

The transaction price allocated to remaining performance obligations that were wholly or partially unsatisfied as of December 31, 2022 was $1,920 million, of which 52% and 26% is expected to be recognized within 12 months and 13-24 months, respectively, with the ~~Emergence Date.~~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.


~~21.~~	~~Accounts Receivable.~~ This adjustment relates to a change in accounting policy for the way the Company will present uncollected deferred revenue upon emergence from bankruptcy. The Company will offset such deferred revenue against the related account receivable.


~~22.~~	~~Inventory. This adjustment relates to the write-up of inventory to fair value based on estimated selling prices, less costs of disposal.~~


~~23.~~	~~Other Current Assets. This adjustment reflects the write-off of certain prepaid commissions, deferred installation costs and debt issuance costs that do not meet the definition of an asset upon emergence.~~


~~24.~~	~~Property, Plant and Equipment~~. An adjustment of $116 million was recorded to increase the net book value of property, plant and equipment to its estimated fair value based on estimated current acquisition price, plus costs to make the property fully operational.

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Contract Balances

The following table ~~reflects~~provides information about accounts receivable, contract assets, contract costs and contract liabilities for the ~~components~~periods presented:


(In millions)	December 31, 2022		September 30, 2022		Increase (Decrease)
Accounts receivable, net	$	302	$	322	$	(20)

Contract assets, net:
Current	$	505	$	543	$	(38)
Non-current (Other assets)	127		134		(7)
	$	632	$	677	$	(45)

Cost of obtaining a contract:
Current (Contract costs)	$	78	$	81	$	(3)
Non-current (Other assets)	40		46		(6)
	$	118	$	127	$	(9)

Cost to fulfill a contract:
Current (Contract costs)	$	26	$	29	$	(3)

Contract liabilities:
Current	$	255	$	245	$	10
Non-current	287		300		(13)
	$	542	$	545	$	(3)

The decrease in Contract assets was mainly driven by billings which outpaced bookings in the Company's subscription offerings during the quarter. The decrease in contract costs was driven by lower sales and continued shift to 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 lower revenue earned from the consideration advance received in connection with the strategic partnership with RingCentral, Inc..

During the three months ended December 31, 2022 and 2021, the Company did not record any asset impairment charges related to contract assets.

During the three months ended December 31, 2022 and 2021, the Company recognized revenue of ~~property, plant~~$109 million and ~~equipment, net~~$162 million that had been previously recorded as a Contract liability as of ~~December 15, 2017:~~October 1, 2022 and October 1, 2021, respectively.

(In millions)
Buildings and improvements $ 82
Machinery and equipment 38
Rental equipment 85
Assets under construction 13
Internal use software 92
Total property, plant and equipment 310
Less: accumulated depreciation and amortization —
Property, plant and equipment, net $ 310


~~25.~~	~~Deferred Income Tax.~~The adjustment represents the release of the valuation allowance on deferred tax assets for certain non-U.S. subsidiaries which management believes more likely than not will be realized as a result of future taxable income from the reversal of deferred tax liabilities that were established as part of fresh start accounting.


~~26.~~	~~Intangible Assets.~~ ~~The Company recorded an adjustment to intangible assets for $3,137 million as follows:~~

(In millions) Successor Predecessor
December 15, 2017 Post-emergence December 15, 2017 Pre-emergence Difference
Customer relationships and other intangible assets $ 2,155
$ 96
$ 2,059
Technology and patents 905
12
893
Trademarks and trade names 375
190
185
Total $ 3,435
$ 298
$ 3,137

~~The fair value of customer relationships was determined using~~During the ~~excess earnings method, a derivation of the income approach that calculates residual profit attributable to an asset after proper returns are paid to complementary or contributory assets.~~

The fair value of technology and patents and trademarks and trade names determined using the royalty savings method, a derivation of the income approach that estimates the royalties saved through ownership of the assets.

~~27.Goodwill.~~ ~~Predecessor goodwill of $3,541 million was eliminated and Successor goodwill of $2,632 million was established based on the calculated reorganization value.~~

(In millions)
Reorganization value of Successor Company $ 7,583
Less: Fair value of Successor Company assets (4,951 )
Reorganization value of Successor Company assets in excess of fair value - goodwill $ 2,632


~~28.~~	~~Other Assets.~~ ~~The $27 million decrease to other assets is related to prepaid commissions that do not meet the definition of an asset upon emergence as there is no future benefit to the Successor Company.~~

~~29.~~

~~Deferred Revenue.~~ The fair value of deferred revenue, which principally relates to payments on annual maintenance contracts, was determined by deducting selling costs and associated profit from the Predecessor deferred revenue balance to arrive at the costs and profit associated with fulfilling the liability. Additionally, the decrease includes the impact of an accounting policy change whereby the Successor Company no longer presents uncollected deferred revenue.


~~30.~~	~~Other Current Liabilities.~~ The decrease of $3 million to other current liabilities is related to the fair value of real estate leases determined to be above or below market using the income approach based on the difference between the contractual rental rate and the estimated market rental rate, discounted utilizing a risk-related discount rate.


~~31.~~	~~Long-term Debt. The fair value of the Term Loan Credit Agreement was determined based on a market approach utilizing market-clearing data on the valuation date in addition to bid/ask prices.~~

~~32.~~

~~Deferred Income Taxes.~~ The adjustment represents the establishment of deferred tax liabilities related to book/tax differences created by fresh start accounting adjustments. The amount is net of the release of the valuation allowance on deferred tax assets, which management believes more likely than not will be realized as a result of future taxable income from the reversal of such deferred tax liabilities.


~~33.~~	~~Business Restructuring Reserve.~~ ~~The Company recorded an increase to its non-current business restructuring reserves based on estimated future cash flows applied to a current discount rate at emergence.~~


~~34.~~	~~Other Liabilities.~~ ~~A decrease in other liabilities of $43 million relates to deferred revenue and real estate leases as previously discussed.~~


~~35.~~	~~Accumulated Other Comprehensive Loss.~~ ~~The remaining balance in Accumulated comprehensive loss was reversed to Reorganization expenses, net.~~


~~36.~~	~~Fresh Start Adjustments.~~ The following table reflects the cumulative impact of the fresh start adjustments as discussed above, the elimination of the Predecessor Company's accumulated other comprehensive loss and the adjustments required to eliminate accumulated deficit.

(In millions)
Eliminate Predecessor Intangible assets $ (298 )
Eliminate Predecessor Goodwill (3,541 )
Establish Successor Intangible assets 3,435

Establish Successor Goodwill 2,632

Fair value adjustment to Inventory 29

Fair value adjustment to Other current assets (66 )
Fair value adjustment to Property, plant and equipment 116

Fair value adjustment to Other assets (27 )
Fair value adjustment to Deferred revenue 235

Fair value adjustment to Business restructuring reserves (4 )
Fair value adjustment to Other current liabilities 3

Fair value adjustment to Long-term debt (96 )
Fair value adjustment to Other liabilities 43

Release Predecessor Accumulated comprehensive loss (790 )
Fresh start adjustments included in Reorganization items, net $ 1,671
Tax impact of fresh start adjustments (565 )
Gain on fresh start accounting $ 1,106


6.	~~Goodwill and Intangible Assets~~

~~Goodwill~~

Goodwill is not amortized but is subject to periodic testing for impairment in accordance with GAAP at the reporting unit level, which is one level below the Company’s operating segments. The Company performs impairment testing annually or more frequently if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

~~The Company determined that no events occurred or circumstances changed during the period from December 16, 2017 through~~three months ended December 31, ~~2017 (Successor)~~2022 and 2021, the ~~period from October 1, 2017 through December 15, 2017 (Predecessor)~~Company recognized a decrease in revenue of $4 million and $2 million, respectively, for performance obligations that ~~would more likely than not reduce~~were satisfied, or partially satisfied, in prior periods.

As disclosed in Note 19, "Subsequent Events,” the ~~fair value~~Company and RingCentral agreed to amend their agreement.

Table of ~~any~~Contents

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 ~~reporting units below their respective carrying amounts. However, if conditions deteriorate or there is a~~Condensed Consolidated Statements of Operations for the periods presented:


	Three months ended December 31,
(In millions)	2022		2021
Costs to obtain customer contracts:
Selling, general and administrative	$	37	$	44
Revenue	2		4
Total Amortization	$	39	$	48

Costs to fulfill customer contracts:
Costs	$	3	$	8

Allowance for Credit Losses

The following table presents the change in the ~~business, it may be necessary to record impairment charges in~~allowance for credit losses by portfolio segment for the ~~future.~~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, 2022	$	5	$	1	$	2	$	8
Adjustment to credit loss provision	—		—		(1)		(1)
Write-offs, net of recoveries	—		—		—		—
Allowance for credit loss as of December 31, 2022	$	5	$	1	$	1	$	7

(1)Recorded within Accounts receivable, net on the Condensed Consolidated Balance Sheets.

(2)Recorded within Contract assets, net on the Condensed Consolidated Balance Sheets.

(3)Recorded within Other assets on the Condensed Consolidated Balance Sheets.

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4. Intangible Assets, net

The ~~Company adjusted~~Company's intangible assets consist of the ~~carrying value of goodwill upon application of fresh start accounting.~~

~~The carrying value of goodwill by operating segments~~following for the periods ~~indicated was as follows:~~indicated:


(In millions)	Technology and Patents		Customer Relationships and Other Intangibles		Trademarks and Trade Names		Total
Balance as of December 31, 2022
Finite-lived intangible assets:
Cost	$	966	$	2,149	$	42	$	3,157
Accumulated amortization	(834)		(781)		(25)		(1,640)
Finite-lived intangible assets, net	132		1,368		17		1,517
Indefinite-lived intangible assets:
Cost	—		—		333		333
Accumulated impairment	—		—		(155)		(155)
Indefinite-lived intangible assets, net	—		—		178		178
Intangible assets, net	$	132	$	1,368	$	195	$	1,695
Balance as of September 30, 2022
Finite-lived intangible assets:
Cost	$	964	$	2,146	$	42	$	3,152
Accumulated amortization	(797)		(741)		(25)		(1,563)
Finite-lived intangible assets, net	167		1,405		17		1,589
Indefinite-lived intangible assets:
Cost	—		—		333		333
Accumulated impairment	—		—		(146)		(146)
Indefinite-lived intangible assets, net	—		—		187		187
Intangible assets, net	$	167	$	1,405	$	204	$	1,776

(In millions)
Global
Communications
Solutions
Avaya Global Services Total
September 30, 2017 (Predecessor) $ 1,093
$ 2,449
$ 3,542
Adjustments (1 ) —
(1 )
Impact of fresh start accounting 68
(977 ) (909 )
December 15, 2017 (Predecessor) $ 1,160
$ 1,472
$ 2,632

December 31, 2017 (Successor) $ 1,160
$ 1,472
$ 2,632

~~Intangible Assets~~

~~Intangible assets include technology, customer relationships, trademarks and trade-names and other intangibles.~~ Intangible assets with finite lives are amortized using the straight-line method over the estimated economic lives of the ~~assets, which range from three years to twenty years.~~

~~Long-lived assets, including intangible~~assets. Intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

Intangible assets determined to have indefinite useful lives are not ~~amortized. The Company performs~~amortized but are subject to impairment testing annually, on July 1st, or more frequently if events occur or circumstances change that indicate an asset may be impaired.

As announced in a Form 8-K dated December 13, 2022, the Company was unable to reach an out-of-court resolution with certain holders of the Convertible Notes, Senior Notes, Exchangeable Notes, and the Term Loans outstanding under the Term Loan Credit Agreement, regarding one or more potential financings, refinancings, recapitalizations, reorganizations, restructurings, or investment transactions involving the Company. As a result, the Company revised its outlook to reflect the increased likelihood of a solvency event. The Company concluded that a triggering event had occurred and performed an interim quantitative impairment test for its indefinite-lived intangible asset, the Avaya Trade Name, as of December 31, 2022 to compare the fair value of the Avaya Trade Name to its carrying amount.

The fair value of the Avaya Trade Name was estimated using the relief-from-royalty model, a form of the income approach. Under this methodology, the fair value of the trade name was estimated by applying a royalty rate to forecasted net revenues which was then discounted using a risk-adjusted rate of return on capital. The model relies on assumptions regarding revenue growth rates, royalty rate, discount rate and terminal growth rate. Revenue growth rates inherent in the forecast were based on input from internal and external market intelligence research sources that compare factors such as growth in global economies, regional industry trends and product evolutions. The royalty rate was determined using a set of observed market royalty rates. The discount rate the Company used represents the estimated weighted average cost of capital, which reflects the overall level of inherent risk and the rate of return an outside investor would expect to earn. To estimate royalty cash flows beyond the final year of its model, the Company used a terminal value approach. Under this approach, the Company applied a perpetuity growth assumption to determine the terminal value. The Company incorporated the present value of the resulting terminal value into its estimate of fair value. The result of the interim impairment test of the Avaya Trade Name as of December 31, 2022 indicated that the carrying amount of the Avaya Trade Name exceeded its estimated fair value primarily due to the updated outlook. As a result, the Company recorded an indefinite-lived intangible asset impairment charge of $9 million within the Impairment charges line item in the Condensed Consolidated Statements of Operations, representing the amount by which the carrying

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amount of the Avaya Trade Name exceeded its fair value. As of December 31, 2022, the remaining carrying amount of the Avaya Trade Name was $178 million.

To the extent that business conditions deteriorate further or if changes in circumstances indicate that it is more likely than not that the asset is impaired. The Avaya trade name is expected to generate cash flow indefinitely. Consequently, this asset is classified as an indefinite-lived intangible.

~~The Company determined that no events had occurred or circumstances changed during the period~~key assumptions and estimates differ significantly from December 16, 2017 through December 31, 2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor) that would indicate that its long-lived assets, including intangible assets with finite lives, may not be recoverable or that it is more likely than not that its intangible assets with indefinite lives are impaired. However, if conditions deteriorate or there is a change in the business,management's expectations, it may be necessary to record additional impairment charges in the future.

~~The Company adjusted the carrying value of intangible assets upon application of fresh start accounting.~~

~~The gross carrying amount and accumulated amortization by major intangible asset category as of December 31, 2017 (Successor) and September 30, 2017 (Predecessor) were as follows:~~

Successor
As of December 31, 2017
(In millions) Technology and patents Customer relationships and other intangibles Trademarks
and trade
names Total
Gross Carrying Amount $ 905
$ 2,155
$ 375
$ 3,435
Accumulated Amortization (7 ) (7 ) —
(14 )
Net $ 898
$ 2,148
$ 375
$ 3,421

Predecessor
As of September 30, 2017
(In millions) Technology and patents Customer relationships and other intangibles Trademarks
and trade
names Total
Gross Carrying Amount $ 1,427
$ 2,196
$ 545
$ 4,168
Accumulated Amortization (1,411 ) (2,091 ) —
(3,502 )
Accumulated Impairment —
—
(355 ) (355 )
Net $ 16
$ 105
$ 190
$ 311

Amortization expense related to intangible assets was $14 million, $13 million and $62 million for the period from December 16, 2017 through December 31, 2017 (Successor), the period from October 1, 2017 through December 15, 2017 (Predecessor) and the three months ended December 31, 2016 (Predecessor), respectively.

The technology and patents have useful lives that range between 3 years and 10 years with a weighted average remaining useful life of 5.7 years. Customer relationships have useful lives that range between 7 years and 20 years with a weighted average useful life of 14.5 years. Amortizable product trade names have useful lives of 10 years. The Avaya trade name is expected to generate cash flows indefinitely and, consequently, this asset is classified as an indefinite-lived intangible.

~~Future amortization expense related to intangible assets as of December 31, 2017 are as follows:~~

(In millions)
Remainder of fiscal 2018 $ 247
2019 326
2020 326
2021 325
2022 298
2023 and thereafter 1,566
Total $ 3,088


7.	5. Supplementary Financial ~~Information~~

~~Supplemental Operations~~ Information

AThe following table presents a summary of other (expense) income, net for the periods ~~indicated is presented in the~~indicated:


	Three months ended December 31,
(In millions)	2022		2021
OTHER (EXPENSE) INCOME, NET
Interest income	$	4	$	—
Foreign currency losses, net	(10)		—


Other pension and post-retirement benefit credits, net	2		6
Change in fair value of 2017 Emergence Date Warrants	—		1


Total other (expense) income, net	$	(4)	$	7

The following ~~table:~~

Successor Predecessor
(In millions) Period from December 16, 2017 through December 31, 2017 Period from October 1, 2017 through December 15, 2017 Three months ended December 31, 2016
OTHER (EXPENSE) INCOME, NET
Interest income $ —
$ 2
$ —
Foreign currency gains, net 2
—
11
Income from transition services agreement, net —
3
—
Other pension and post-retirement benefit costs 1
(8 ) (6 )
Change in fair value of the warrant liability (5 ) —
—
Other, net —
1
(1 )
Total other (expense) income, net $ (2 ) $ (2 ) $ 4

~~A summary of reorganization items, net~~table presents supplemental cash flow information for the periods ~~indicated is presented in the following table:~~

Successor Predecessor
(In millions) Period from December 16, 2017 through December 31, 2017 Period from October 1, 2017 through December 15, 2017 Three months ended December 31, 2016
REORGANIZATION ITEMS, NET
Bankruptcy-related professional fees $ —
$ (56 ) $ —
Net gain on settlement of liabilities subject to compromise —
1,804
—
Net gain on fresh start adjustments —
1,671
—
Other items, net —
(3 ) —
Reorganization items, net $ —
$ 3,416
$ —
Cash payments for reorganization items $ 1
$ 2,524
$ —

Costs directly attributable to the implementation of the Plan of Reorganization were reported as reorganization items, net. The cash payments for reorganization items for the period from October 1, 2017 through December 15, 2017 (Predecessor) included ~~$2,468 million~~ ~~of claims paid related to liabilities subject to compromise and~~ ~~$56 million~~ ~~for bankruptcy-related professional fees, including emergence and success fees paid on the Emergence Date.~~


8.	~~Business Restructuring Reserves and Programs~~

For the period from December 16, 2017 through December 31, 2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor), the Company recognized restructuring charges of $10 million and $14 million, respectively, including adjustments to the restructuring programs of prior fiscal years primarily consisting of the termination/buyout of leases. As the Company continues to evaluate opportunities to streamline its operations, it may identify cost savings globally and take additional restructuring actions in the future and the costs of those actions could be material.

~~Fiscal 2018 Restructuring Program~~presented:


	Three months ended December 31,
(In millions)	2022		2021
OTHER PAYMENTS
Interest payments (excluding lease related interest)	$	55	$	33
Income tax payments	5		7

NON-CASH INVESTING ACTIVITIES
Increase (decrease) in Accounts payable for Capital expenditures	$	1	$	(2)
Acquisition of equipment under operating leases	1		7

During the ~~period from December 16, 2017 through~~three months ended December 31, ~~2017 (Successor)~~2022 and 2021, the ~~period from October 1, 2017 through December 15, 2017 (Predecessor), recognized~~Company made payments for operating lease liabilities of $12 million and $15 million, respectively, and made payments for finance lease liabilities of $3 million and $3 million, respectively.

The following table presents a reconciliation of cash, cash equivalents, and restricted cash that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows for the periods presented:


(In millions)	December 31, 2022		September 30, 2022		December 31, 2021		September 30, 2021
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
Cash and cash equivalents	$	225	$	253	$	354	$	498
Restricted cash	223		222		—		—
Restricted cash included in other assets	4		3		4		4
Total cash, cash equivalents, and restricted cash	$	452	$	478	$	358	$	502

6. Business Restructuring Reserves and Programs

The following table summarizes the restructuring charges by activity for the ~~fiscal 2018 restructuring program were for~~periods presented:


	Three months ended December 31,
(In millions)	2022		2021
Employee separation costs	$	8	$	2
Facility exit costs	2		5
Total restructuring charges	$	10	$	7

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The Company's employee separation costs ~~associated with employee~~generally consist of severance ~~actions primarily in the U.S. and Europe, Middle East and Africa ("EMEA"), primarily the U.K. and for~~charges which the related payments are expected to be completed by the beginning of fiscal 2020. These actions include workforce reductions of 206 employees including 120 in the U.S. and 25 in EMEA. The separation charges include, but are not limited to, termination payments, pension fund payments, ~~and~~ health care and unemployment insurance costs to be paid to, or on behalf of, the affected ~~employees.~~employees and other associated costs. Facility exit costs primarily consist of lease obligation charges for exited facilities, including the impact of accelerated lease expense for right-of-use assets and accelerated depreciation expense for leasehold improvements with reductions in their estimated useful lives due to exited facilities. The restructuring charges include changes in estimates for increases and decreases in costs or changes in the timing of payments related to the restructuring programs of prior fiscal years. The Company does not allocate restructuring reserves to its operating segments.

The following table summarizes the components of the fiscal 2018 restructuring program for the period from December 16, 2017 through December 31, 2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor):

(In millions) Employee Separation Costs Lease Obligations Total
2018 restructuring charges $ 12
$ —
$ 12
Cash payments (3 ) —
(3 )
Balance as of December 15, 2017 (Predecessor) $ 9
$ —
$ 9

2018 restructuring charges⁽¹⁾
$ —
$ 10
$ 10
Cash payments (2 ) (10 ) (12 )
Balance as of December 31, 2017 (Successor) $ 7
$ —
$ 7

⁽¹⁾~~Charges incurred in connection with the termination of the Santa Clara lease.~~

~~Fiscal 2017 Restructuring Program~~

~~During fiscal 2017, the Company identified opportunities to streamline operations and generate costs savings, which included eliminating employee positions. These obligations are primarily~~activity for employee separation costs ~~associated with~~recognized under the Company's restructuring programs for the three months ended December 31, 2022:


(In millions)	Fiscal 2023 Restructuring Program(1)		Fiscal 2022 Restructuring Program(1)		Fiscal 2021 and prior Restructuring Programs(2)		Total
Accrual balance as of September 30, 2022	$	—	$	26	$	23	$	49
Restructuring charges	8		—		—		8
Cash payments	(2)		(11)		(3)		(16)

Impact of foreign currency fluctuations	—		2		2		4
Accrual balance as of December 31, 2022	$	6	$	17	$	22	$	45

(1)Payments related to the fiscal ~~2017 employee severance actions in the U.S.~~2023 and ~~EMEA, for which the related payments~~fiscal 2022 restructuring programs are expected to be completed in fiscal ~~2023. The separation charges include, but are not limited~~2028.

(2)Payments related to ~~pension fund payments and health care and unemployment insurance costs to be paid to or on behalf of the affected employees.~~

~~The following table summarizes the components of~~ the fiscal ~~2017 restructuring program for the period from December 16, 2017 through December 31, 2017 (Successor)~~2021 and ~~the period from October 1, 2017 through December 15, 2017 (Predecessor):~~

(In millions) Employee Separation Costs Lease Obligations Total
Balance as of September 30, 2017 (Predecessor) $ 4
$ 1
$ 5
Cash payments (1 ) (1 ) (2 )
Balance as of December 15, 2017 (Predecessor) $ 3
$ —
$ 3

Balance as of December 31, 2017 (Successor) $ 3
$ —
$ 3

~~Fiscal 2008 through 2016 Restructuring Programs~~

During fiscal years 2008 through 2016, the Company identified opportunities to streamline operations and generate cost savings, which included eliminating employee positions and exiting facilities. The remaining obligations related to theseprior restructuring programs are ~~for employee severance costs are primarily associated with EMEA plans~~ expected to be completed byin fiscal ~~2023.~~2027.

The following table aggregates the components of the fiscal 2008 through 2016 restructuring programs for the period from December 16, 2017 through December 31, 2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor):

7. Financing Arrangements

(In millions) Employee Separation Costs Lease Obligations Total
Balance as of September 30, 2017 (Predecessor) $ 51
$ 24
$ 75
Cash payments (3 ) (17 ) (20 )
Expense 1
1
2
Adjustments - fresh start and reorganization items $ 4
$ (1 ) $ 3
Balance as of December 15, 2017 (Predecessor) $ 53
$ 7
$ 60

Cash Payments (2 ) —
(2 )
Impact of foreign currency fluctuations 2
—
2
Balance as of December 31, 2017 (Successor) $ 53
$ 7
$ 60


9.	~~Financing Arrangements~~

The following table reflects principal amounts of debt and debt net of discounts and issuance costs asfor the periods presented:


	December 31, 2022				September 30, 2022
(In millions)	Principal amount		Net of discounts and issuance costs		Principal amount		Net of discounts and issuance costs
Senior 6.125% Notes due September 15, 2028	$	1,000	$	988	$	1,000	$	988
Tranche B-1 Term Loans due December 15, 2027	800		784		800		783
Tranche B-2 Term Loans due December 15, 2027	743		738		743		738
Tranche B-3 Term Loans due December 15, 2027	350		285		350		282
Exchangeable 8.00% Senior Notes due December 15, 2027	250		231		250		169
Convertible 2.25% Senior Notes due June 15, 2023	221		220		221		210
ABL Credit Agreement due September 25, 2025	56		56		—		—
Total debt	$	3,420	$	3,302	$	3,364	$	3,170
Embedded derivatives liabilities	56		56		72		72
Debt maturing within one year	(3,476)		(3,358)		(221)		(210)
Long-term debt, net of current portion and derivatives	$	—	$	—	$	3,215	$	3,032

Term Loan and ABL Credit Agreements

As of December 31, ~~2017 (Successor)~~2022 and ~~principal amounts of debt and debt net of discounts and issuance costs as of~~ September 30, ~~2017 (Predecessor), which includes~~2022, the ~~impact of adequate protection payments and accrued interest as of January 19, 2017:~~

Successor Predecessor
December 31, 2017 September 30, 2017
(In millions) Principal amount Net of discounts and issuance costs Principal amount Net of discounts and issuance costs
Term Loan Credit Agreement $ 2,925
$ 2,896
$ —
$ —
DIP Credit Agreement due January 19, 2018 —
—
725
725
First lien debt:
     Senior secured term B-3 loans —
—
594
594
     Senior secured term B-4 loans —
—
1
1
     Senior secured term B-6 loans —
—
519
519
     Senior secured term B-7 loans —
—
2,012
2,012
     7% senior secured notes —
—
982
982
     9% senior secured notes —
—
284
284
Second lien debt:
     10.50% senior secured notes —
—
1,440
1,440
Total debt $ 2,925
2,896
$ 6,557
6,557
Debt maturing within one year (29 ) (725 )
Long-term debt, net of current portion⁽¹⁾
$ 2,867
$ 5,832

⁽¹⁾ ~~Pre-petition long-term debt as of September 30, 2017 (Predecessor) was included in liabilities subject to compromise.~~

~~On the Emergence Date:~~


1.	~~the Successor Company entered into the Term Loan Credit Agreement and the ABL Credit Agreement;~~


2.	~~the DIP Credit Agreement was paid in full;~~


3.	the holders of the Predecessor first lien obligations received cash and Successor Company common stock (aggregate fair value of $3,547 million) and the Company cancelled $4,281 million of the Predecessor Company first lien obligations; and


4.	the holders of the Predecessor second lien obligations received Successor Company common stock and Warrants to purchase common stock (aggregate fair value of $83 million) and the Company cancelled $1,440 million of the Predecessor Company second lien obligations.

~~Successor Financing~~

~~On the Emergence Date, Avaya Inc. entered into~~Company maintained (i) ~~the~~its Term Loan Credit Agreement among Avaya Inc., as borrower, Avaya Holdings, the lending institutions from time to time party thereto, and Goldman Sachs Bank USA, as administrative agent and collateral agent ~~which provided a $2,925 million term loan facility maturing on December 15, 2024~~(the "Term Loan Credit Agreement") and (ii) ~~the~~its ABL Credit Agreement, ~~maturing on December 15, 2022,~~ among Avaya Inc., as borrower, Avaya Holdings, the several other borrowers party thereto, the several lenders from time to time party thereto, and Citibank, N.A., as administrative agent and collateral agent, which provided a revolving credit facility consisting of a U.S. tranche and a foreign tranche allowing for borrowings of up to an aggregate principal amount of ~~$300~~$200 million ~~from time to time,~~ subject to borrowing base availability (the "ABL Credit Agreement"). The ABL Credit Agreement ~~together with~~matures on September 25, 2025.

Prior to July 12, 2022, the Term Loan Credit Agreement matured in two tranches, with principal amounts of $800 million (the "Tranche B-1 Term Loans") and $743 million (the "Tranche B-2 Term Loans") maturing on December 15, 2027. On July 12, 2022, the ~~“Credit Agreements”). The~~Company amended the Term Loan Credit Agreement ("Amendment No. 4"), pursuant to which the Company incurred incremental term loans in an aggregate principal amount of $350 million (the "Tranche B-3 Term Loans"). The Tranche B-3 Term Loans bear interest (a) in the case of ~~ABR~~alternative base rate ("ABR") Loans ~~bears interest~~ at a rate per annum equal to ~~3.75%~~9.00% plus the highest of (i) the Federal Funds Rate plus 0.50%, (ii) the U.S. prime rate as publicly announced in the Wall Street

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Journal and (iii) the ~~LIBOR~~greater of (x) the adjusted Secured Overnight Financing Rate ("SOFR") Rate for an interest period of one month plus 1.00% and (y) 2.00% and (b) in the case of ~~LIBOR~~SOFR Loans, ~~bears~~bear interest at a rate per annum equal to ~~4.75%~~10.00% plus the applicable ~~LIBOR Rate,~~SOFR rate, subject to a 1%1.00% floor. ~~The ABL Credit Agreement bears interest:~~


1.	InAmendment No. 4 also made certain other changes to the case of Base Rate Loans denominated in U.S. dollars, at a rate per annum equal to 0.75% (subject to a 0.25% step-up or step-down based on availability) plus the highest of (i) the Federal Funds Rate plus 0.50%, (ii) the U.S. prime rate as publicly announced by Citibank, N.A. and (iii) the LIBOR Rate for an interest period of one month;


2.	~~In the case of LIBOR Rate Loans denominated in U.S. dollars, at a rate per annum equal to 1.75% (subject to a 0.25% step-up or step-down based on availability) plus the applicable LIBOR Rate;~~


3.	In the case of Canadian Prime Rate Loans denominated in Canadian dollars, at a rate per annum equal to 0.75% (subject to a 0.25% step-up or step-down based on availability) plus the highest of (i) the “Base Rate” as publicly announced by Citibank, N.A., Canadian branch and (ii) the CDOR Rate for an interest period of 30 days;


4.	~~In the case of CDOR Rate Loans denominated in Canadian dollars, at a rate per annum equal to 1.75% (subject to a 0.25% step-up or step-down based on availability) plus the applicable CDOR Rate;~~


5.	~~In the case of LIBOR Rate Loans denominated in Sterling, at a rate per annum equal to 1.75% (subject to a 0.25% step-up or step-down based on availability) plus the applicable LIBOR Rate;~~


6.	~~In the case of EURIBOR Rate Loans denominated in Euro, at a rate per annum equal to 1.75% (subject to a 0.25% step-up or step-down based on availability) plus the applicable LIBOR Rate; and~~


7.	~~In the case of Overnight LIBOR Rate Loans, at a rate per annum equal to 1.75% (subject to a 0.25% step-up or step-down based on availability) plus the applicable Overnight LIBOR Rate.~~

The Credit Agreements limit, among other things, Avaya Inc.’s ability to (i) incur indebtedness, (ii) incur liens, (iii) dispose of assets, (iv) make investments, (v) make dividends, or conduct redemptions and repurchases of capital stock, (vi) prepay junior indebtedness or amend junior indebtedness documents, (vii) enter into restricted agreements, (viii) enter into transactions with affiliates and (ix) modify the terms of any of its organizational documents.

~~The~~ Term Loan Credit Agreement ~~does not contain any financial~~solely for the benefit of the lenders providing the Tranche B-3 Term Loans, including reducing flexibility for the Company to incur additional debt and liens or make restricted payments or investments under certain of the negative covenants. The ~~ABL~~Company placed $221 million of the net proceeds of the Tranche B-3 Term Loans in escrow.Filing of the Chapter 11 Cases triggered an event of default under the Term Loan Credit Agreement ~~does not contain any financial covenants other than a requirement to maintain a minimum fixed charge coverage ratio~~causing the automatic acceleration of ~~1:1~~all obligations thereunder, including the Tranche B-3 Term Loans.

The Company evaluated Amendment No. 4 in accordance with ASC 815, Derivatives and Hedging, and determined that ~~becomes applicable only~~there are embedded features in the ~~event~~amendment that are not clearly and closely related to the ~~net borrowing availability~~underlying debt instrument and did not qualify for any scope exceptions set forth in the accounting standards. Accordingly, these embedded features are required to be bifurcated from their host instrument and accounted for separately as an embedded derivative liability. As a result, the Company recorded the fair value of the embedded derivatives as of the issuance date as a $30 million reduction of the initial carrying amount of the Tranche B-3 Term Loans (as part of the debt discount). The discount is amortized to interest expense using the effective interest method over the life of the Tranche B-3 Term Loans. The embedded derivatives will be adjusted to fair value each reported period with changes in fair value subsequent to the issuance date recognized within Interest Expense in the Condensed Consolidated Statements of Operations. See Note 8, "Derivative Instruments and Hedging Activities," for further information regarding the valuation of the embedded derivatives. The aggregate fair value of the embedded derivatives is reflected within Long-term debt in the Condensed Consolidated Balance Sheets.

For the three months ended December 31, 2022 and 2021, the Company recognized interest expense of $30 million and $18 million, respectively, related to the Term Loan Credit Agreement, including the amortization of the underwriting discount and issuance costs. The three months ended December 31, 2022 includes $(17) million of interest expense related to the change in the fair value of the Tranche B-3 Term Loans embedded derivatives during the period.

As of December 31, 2022, the Company had an outstanding balance of $56 million under the ABL Credit Agreement, ~~is less than the greater~~which includes borrowings of ~~$25~~$90 million and ~~10%~~repayments of $34 million made during the first quarter of fiscal 2023. The borrowing matures monthly and is renewable at the Company's election in accordance with the terms and conditions of the ~~lesser of the total borrowing base and the~~ ABL ~~commitments (commonly known as the "line cap").~~

Credit Agreement. As of December 31, ~~2017,~~2022, the Company ~~was not in default under any of its debt agreements.~~

has the ability and intent to repay the ABL Credit Agreement balance within one year and has classified the balance as current. Under the terms of the ABL Credit Agreement, the Company can issue letters of credit up to $150 million. At December 31, ~~2017,~~2022, the Company had issued and outstanding letters of credit and guarantees of ~~$74 million.~~$38 million under the ABL Credit Agreement. The aggregate additional principal amount that may be borrowed under the ABL Credit Agreement, based on the borrowing base less ~~$74~~$38 million of outstanding borrowings, letters of credit and guarantees was ~~$139~~$21 million at December 31, ~~2017.~~2022. For the three months ended December 31, 2022, recognized interest expense related to the ABL Credit Agreement was $1 million. For the three months ended December 31, 2021, recognized interest expense related to the ABL Credit Agreement was not material.

Senior Notes

The Company’s Senior 6.125% First Lien Notes have an aggregate principal amount outstanding of $1,000 million and mature on September 15, 2028 (the "Senior Notes").The Senior Notes were issued on September 25, 2020, pursuant to an indenture among the Company, the Company's subsidiaries that are guarantors of the Senior Notes and party thereto and Wilmington Trust, National Association, as trustee and notes collateral agent.

For each of the three months ended December 31, 2022 and 2021, the Company recognized interest expense of $16 million related to the Senior Notes, including the amortization of debt issuance costs.

Convertible Notes

The Company's 2.25% Convertible Notes have an aggregate principal amount outstanding of $350 million (including notes issued in connection with the underwriters' exercise in full of an over-allotment option of $50 million) and mature on June 15, 2023. The Convertible Notes were issued under an indenture, by and between the Company and the Bank of New York Mellon Trust Company N.A., as trustee.

On July 12, 2022, the Company repurchased approximately $129 million principal amount of the Company's $350 million Convertible Notes due June 15, 2023. The repurchase was accounted for as a loan extinguishment. Based on the application of the loan extinguishment guidance within ASC 470, the Company recorded a $5 million gain on extinguishment within Interest expense in the Consolidated Statements of Operations during fiscal 2022. In connection with the repurchase, the Company terminated a portion of the Bond Hedge and Call Spread Warrants, each representing 4.7 million of its common stock.

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For the three months ended December 31, 2022 and 2021, the Company recognized interest expense of $2 million and $7 million related to the Convertible Notes, which includes $0 million and $5 million of amortization of the debt discount and issuance costs, respectively.

The net carrying amount of the Convertible Notes for the periods indicated was as follows:


(In millions)	December 31, 2022		September 30, 2022
Principal	$	221	$	221
Less:
Unamortized debt discount	—		(10)
Unamortized issuance costs	(1)		(1)
Net carrying amount	$	220	$	210

The net carrying amount of the equity component of the Convertible Notes for the periods indicated was as follows:


(In millions)	December 31, 2022 (1)		September 30, 2022
Debt discount for conversion option	$	79	$	92
Less:
Conversion option retirement	—		(10)
Issuance costs	—		(3)
Adoption of ASU 2020-06	(56)		—
Net carrying amount	$	23	$	79

(1)Upon adoption of ASU 2020-06 on October 1, 2022, the Company recorded an adjustment to reclassify the debt discount for the conversion option and issuance costs associated with the equity component of the Convertible Notes. See Note 2, "Recent Accounting Pronouncements," for further information regarding the cumulative effect adjustment made by the Company upon adoption. The remaining equity component of the Convertible Notes is related to the $129 million of the Convertible Notes which were repurchased prior to the adoption of ASU 2020-06 as described above.

Exchangeable Notes

On July 12, 2022, the Company issued its 8.00% Exchangeable Senior Secured Notes due 2027 with an aggregate principal amount of $250 million (the "Exchangeable Notes"). The Exchangeable Notes were issued pursuant to an indenture by and among Avaya Inc., the guarantors party thereto and Wilmington Trust, National Association, as trustee, exchange agent and notes collateral agent.

The Company evaluated the indenture governing the Exchangeable Notes in accordance with ASC 815, Derivatives and Hedging, and determined that there are embedded features in the indenture that are not clearly and closely related to the underlying debt instrument and did not qualify for any scope exceptions set forth in the accounting standards. Accordingly, these embedded features are required to be bifurcated from their host instrument and accounted for separately as an embedded derivative liability. As a result, the Company recorded the fair value of the embedded derivatives as of the issuance date as a $4 million reduction of the initial carrying amount of the Exchangeable Notes (as part of the debt discount). The discount is amortized to interest expense using the effective interest method over the life of the Exchangeable Notes. The embedded derivatives will be adjusted to fair value each reported period with changes in fair value subsequent to the issuance date recognized within Interest Expense in the Condensed Consolidated Statements of Operations. See Note 8, "Derivative Instruments and Hedging Activities," for further information regarding the valuation of the embedded derivatives. The aggregate fair value of the embedded derivatives is reflected within Long-term debt in the Condensed Consolidated Balance Sheets.

For the three months ended December 31, 2022, the Company recognized interest expense of $7 million related to the Exchangeable Notes, which includes $1 million of amortization of the debt issuance costs, and $1 million related to the change in the fair value of the Exchangeable Notes embedded derivatives during the period.

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The net carrying amount of the Exchangeable Notes for the periods indicated was as follows:


(In millions)	December 31, 2022		September 30, 2022
Principal	$	250	$	250
Less:
Unamortized debt discount	—		(65)
Unamortized issuance costs	(15)		(12)
Unamortized debt discount - Embedded derivative liability	(4)		(4)
Net carrying amount	$	231	$	169

The net carrying amount of the equity component of the Exchangeable Notes for the period indicated was as follows:


(In millions)	December 31, 2022 (1)		September 30, 2022
Debt discount for conversion option	$	62	$	66
Less:
Issuance costs	—		(4)
Adoption of ASU 2020-06	(62)		—
Net carrying amount	$	—	$	62

(1)Upon adoption of ASU 2020-06 on October 1, 2022, The Company recorded an adjustment to reclassify the debt discount for the conversion option and issuance costs associated with the equity component of the Exchangeable Notes. See Note 2, "Recent Accounting Pronouncements," for further information regarding the cumulative effect adjustment made by the Company upon adoption.

The weighted average contractual interest rate of the ~~Company’s~~Company's outstanding debt was 8.0% as of December 31, ~~2017~~2022 and 7.4% as of September 30, 2022, including adjustments related to the Company's interest rate swap agreements (see Note 8, "Derivative Instruments and Hedging Activities"). The effective interest rate for the Term Loan Credit Agreement was ~~6.2%.~~

~~Predecessor Financing~~

~~Debt Covenants~~10.7% as of December 31, 2022 and ~~Default.~~ 9.0% as of September 30, 2022. The ~~indentures governing~~effective interest rate for the ~~Predecessor senior secured notes contained a number~~Senior Notes as of ~~covenants that, among other things~~December 31, 2022 and ~~subject~~September 30, 2022 was not materially different than its contractual interest rate. The effective interest rate for the Convertible Notes was 2.8% as of December 31, 2022, reflecting adjustment to ~~certain exceptions, restricted~~ the ~~ability~~conversion feature in equity upon adoption of ASU 2020-06. The effective interest rate for the Convertible Notes was 9.2% as of September 30, 2022, reflecting the separation of the ~~Predecessor and certain~~conversion feature in equity. The effective interest rate for the Exchangeable Notes was 9.9% as of ~~its subsidiaries~~December 31, 2022, reflecting adjustment to ~~(a) incur or guarantee additional~~the conversion feature in equity upon adoption of ASU 2020-06. The effective interest rate for the Exchangeable Notes was 17.7% as of September 30, 2022, reflecting the separation of the conversion feature in equity. The effective interest rates include interest on the debt and issue or sell certain preferred stock, (b) pay dividends on, redeem or repurchase capital stock, (c) make certain acquisitions or investments, (d) incur or assume certain liens, (e) enter into transactions with affiliates, (f) merge or consolidate with another company, (g) transfer or otherwise disposeamortization of ~~assets, (h) redeem subordinated debt, (i) incur obligations that restricted~~discounts and issuance costs.

On December 29, 2022, the ~~ability~~Company provided Notices of Default to the administrative agents of the ~~Company’s subsidiaries to pay dividends or make other payments~~Term Loan Credit Agreement and ABL Credit Agreement; and the trustees of the Senior Notes, Convertible Notes and Exchangeable Notes due to the ~~Company,~~Company's failure to timely deliver financial statements for the nine months ended June 30, 2022 and ~~(j) create or designate unrestricted subsidiaries. They also contained customary affirmative covenants~~the fiscal year ended September 30, 2022. It is not probable that the violation will be cured during the grace period and ~~events~~therefore, in accordance with the terms of ~~default.~~the credit agreements, the debt is deemed callable and has been classified as a current liability on the Condensed Consolidated Balance Sheet as of December 31, 2022. As noted in Note 1, "Background and Basis of Presentation," all of the Debtors' pre-petition equity and debt facilities as well as the Debtors' securities were extinguished upon Emergence.

Debtor in Possession Financing

On the Petition Date, the Debtors entered into the DIP Term Loan Facility. On February 24, 2023, the Debtors entered into the DIP ABL Facility. The Bankruptcy Court provided final approval for both facilities on March 7, 2023.

The ~~Bankruptcy Filing~~filing of the Chapter 11 Cases constituted an event of default under the ABL Credit Agreement, the Term Loan Credit Agreement, the Senior Notes, the Convertible Notes and the Exchangeable Notes, that accelerated and, as applicable, increased certain obligations thereunder.

Reorganized Company Financing

On the ~~Predecessor’s payment obligations~~Emergence Date, the DIP Term Loan converted on a dollar-for-dollar basis into a term loan under ~~the~~a senior secured credit agreements and the senior secured notes. As a result of the Bankruptcy Filing, the principal and interest due under the Predecessor’s debt agreements became due and payable. However, any efforts to enforce such payment obligations were automatically stayed as a result of the Bankruptcy Filing, and the creditors’ rights of enforcement were subject to the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. Consequently, all debt outstanding was classified as liabilities subject to compromise and all unamortized debt issuance costs and unaccreted debt discounts were expensed.

~~DIP Credit Agreement.~~ ~~In connection with the Bankruptcy Filing, on the Petition Date, the Predecessor entered into the DIP Credit Agreement, which provided a $725 million~~exit term loan facility ~~due January 2018,~~ and the Company incurred an additional $310 million under the facility (including amounts incurred pursuant to a ~~cash collateralized letter of credit facility in~~rights offering) for an aggregate ~~amount equal to $150 million. All letters of credit were cash collateralized in an amount equal to 101.5% of the face~~principal amount of $810 million (the "Exit Term Loan", such ~~letters of credit denominated in U.S. dollars~~facility, the "Exit Term Loan Facility", and ~~103% of~~ the ~~face amount of letters of credit denominated in alternative currencies.~~agreement providing for such facility, the "Exit Term Loan Credit Agreement") and the DIP ABL Facility converted on a dollar-for-dollar basis into a senior secured exit asset-based revolving loan facility (the "Exit ABL Loan", such facility, the "Exit ABL Loan Facility", and the agreement providing for such facility, the "Exit ABL Credit Agreement"). The ~~DIP Credit Agreement, in the case of the Base Rate Loans, bore~~Exit Term Loan bears interest at a rate ~~per annum~~ equal to ~~6.5%~~(1) Term SOFR plus (i) 7.50% to the ~~highest~~extent interest is paid

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entirely in cash or (ii) 8.50% to the ~~Federal Funds~~extent interest is paid with a combination of cash and payment in kind (consisting of 1.50% payable in cash and 7.00% paid in kind) or (1) Base Rate plus ~~0.5%~~(i) 6.50% to the extent interest is paid entirely in cash or (ii) 7.50% to the extent interest is paid with a combination of cash and ~~(iii) the Eurocurrency Rate for an interest period~~payment in kind (consisting of ~~one month,~~1.00% payable in cash and 6.50% paid in kind), subject to a 2%1.00% floor and matures on August 1, 2028. The Company has the option to pay interest with a combination of cash and payment-in-kind for interest payment dates through, and including, June 30, 2024. For interest payments dates after June 30, 2024, interest is payable in ~~the case of the Eurocurrency Loans, bore~~cash. The Exit ABL Loan bears interest at a rate ~~per annum~~ equal to ~~7.5%~~Term SOFR plus ~~the applicable Eurocurrency~~3.00% or Base Rate ~~subject to a 1% floor.~~

~~Capital Lease Obligations~~

~~Included in other liabilities is $22 million~~plus 2.00% and $14 million of capital lease obligations, net of imputed interest as of December 31, 2017 (Successor) and September 30, 2017 (Predecessor), respectively, and excluded amounts included in liabilities subject to compromise of $12 million as of September 30, 2017.matures on May 1, 2026.

The ~~Company entered into an agreement to outsource certain delivery services associated with~~Exit Term Loan Credit Agreement and the ~~Avaya Private Cloud Services business. That agreement also included~~Exit ABL Credit Agreement each include conditions precedent, representations and warranties, affirmative and negative covenants, and events of default customary for financings of this type and size. The Borrower's obligations under the ~~sale of specified assets owned by~~Exit Term Loan Credit Agreement and the ~~Company, which~~Exit ABL Credit Agreement are ~~being leased-back~~guaranteed by the Company and ~~accounted for as~~are collectively secured by a ~~capital lease. As~~security interest in, and a lien on, substantially all property (subject to certain exceptions) of ~~December 31, 2017 (Successor)~~the Company. The Exit Term Loan Credit Agreement and ~~September 30, 2017 (Predecessor), capital lease obligations associated with this agreement were $21 million~~the Exit ABL Credit Agreement also contain customary covenants that limit the ability of the Company to, among other things, (1) incur additional indebtedness and ~~$24 million, respectively, and include $10 million within liabilities~~permit liens to exist on their assets, (2) pay dividends or make certain other restricted payments, (3) sell assets or (4) make certain investments. These covenants are subject to ~~compromise~~exceptions and qualifications as ~~of September 30, 2017.~~


~~10.~~	~~Derivative Warrant Liability~~

~~In accordance with the Plan of Reorganization, on the Emergence Date the Company issued Warrants to purchase 5,645,200 shares of Successor common stock to the holders~~set forth in each of the ~~Predecessor second lien obligations pursuant to a warrant agreement (“Warrant Agreement”). Each Warrant has an exercise price of $25.55 per share~~Exit Term Loan Credit Agreement and ~~expires five years from~~ the ~~date of issuance. We account~~Exit ABL Credit Agreement.

8. Derivative Instruments and Hedging Activities

The Company accounts for derivative financial instruments in accordance with FASB ASC Topic 815, "Derivatives and ~~Hedging.~~Hedging," ("ASC 815") and does not enter into derivatives for trading or speculative purposes.

Interest Rate Contracts

The Company, from time to time, enters into interest rate swap contracts as a hedge against changes in interest rates on its outstanding variable rate loans.

On May 16, 2018, the Company entered into interest rate swap agreements with six counterparties, which fixed a portion of the variable interest due under its Term Loan Credit Agreement (the "Original Swap Agreements"). Under the terms of the Original Swap Agreements, which matured on December 15, 2022, the Company paid a fixed rate of 2.935% and received a variable rate of interest based on one-month LIBOR. Through September 23, 2020, the total $1,800 million notional amount of the Original Swap Agreements were designated as cash flow hedges and deemed highly effective as defined under ASC 815.

On September 23, 2020, the Company entered into an interest rate swap agreement for a notional amount of $257 million (the “Offsetting Swap Agreement”). Under the terms of the Offsetting Swap Agreement, which matured on December 15, 2022, the Company paid a variable rate of interest based on one-month LIBOR and received a fixed rate of 0.1745%. The Company entered into the Offsetting Swap Agreement to maintain a net notional amount less than the amount of the Company’s variable rate loans outstanding. The Offsetting Swap Agreement was not designated for hedge accounting treatment. On September 23, 2020, Original Swap Agreements with a notional amount of $257 million were also de-designated from hedge accounting treatment. Through June 30, 2022, Original Swap Agreements with a notional amount of $1,543 million were designated as cash flow hedges and deemed highly effective as defined under ASC 815. On June 30, 2022, the Company determined that the hedged transactions were no longer highly probable of occurring as forecasted, and as such, the Company de-designated the remaining Original Swap Agreements from hedge accounting treatment.

On July 1, 2020, the Company entered into interest rate swap agreements with four counterparties, which fixed a portion of the variable interest due under its Term Loan Credit Agreement (the "Forward Swap Agreements") from December 15, 2022 (the maturity date of the Original Swap Agreements) through December 15, 2024. Under the terms of the Forward Swap Agreements, the Company would pay a fixed rate of 0.7047% and receive a variable rate of interest based on one-month LIBOR. The total notional amount of the Forward Swap Agreements was $1,400 million. Through March 23, 2022, the Forward Swap Agreements were designated as cash flow hedges and deemed highly effective as defined by ASC 815.

On March 23, 2022, the Company terminated the Forward Swap Agreements and simultaneously entered into new interest rate swap agreements with four counterparties (the "New Forward Swap Agreements"), which resulted in the receipt of $52 million cash proceeds. The New Forward Swap Agreements fixed a portion of the variable interest due under the Company's Term Loan Credit Agreement from December 15, 2022 through June 15, 2027. Under the terms of the New Forward Swap Agreements, the Company paid a fixed rate of 2.5480% and received a variable rate of interest based on one-month SOFR. The total notional amount of the New Forward Swap Agreements is $1,000 million. Through June 30, 2022, the New Forward Swap Agreements were designated as cash flow hedges and deemed highly effective as defined by ASC 815. On June 30, 2022, the Company determined that the hedged transactions were no longer highly probable of occurring as forecasted, and as such, the Company de-designated the New Forward Swap Agreements from hedge accounting treatment.

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The Company records changes in the fair value of interest rate swap agreements designated as cash flow hedges initially within Accumulated other comprehensive income (loss) in the Condensed Consolidated Balance Sheets. As interest expense is recognized on the Term Loan Credit Agreement, the corresponding deferred gain or loss on the cash flow hedge is reclassified from Accumulated other comprehensive income (loss) to Interest expense in the Condensed Consolidated Statements of Operations. The Company records changes in the fair value of interest rate swap agreements not designated for hedge accounting within Interest expense. On September 23, 2020, the Company froze a $15 million deferred loss within Accumulated other comprehensive income (loss) related to the de-designated Original Swap Agreements, which was reclassified to Interest expense over the term of the Original Swap Agreements. On March 23, 2022, the Company froze a $52 million deferred gain within Accumulated other comprehensive income (loss) related to the termination of the Forward Swap Agreements, which was reclassified to Interest expense over the term of the original Forward Swap Agreements. On June 30, 2022, the Company froze a $9 million deferred gain within Accumulated other comprehensive income (loss) related to the de-designation of the Original Swap Agreements and New Forward Swap Agreements, which was reclassified to Interest expense over the term of the respective swap agreements.

In December 2022, the Company concluded that the hedged forecasted transactions related to the interest rate swap agreements are probable of not occurring as a result of the Company's inability to reach an out of court solution regarding potential financings, refinancings, recapitalizations, reorganizations, restructurings or investment transactions involving the Company and certain debt holders. As a result, frozen deferred gains of $63 million related to the Company's interest rate swap agreements were reclassified to Interest expense during the first quarter of fiscal 2023. The Company later terminated its New Forward Swap Agreements resulting in the receipt of $40 million of net cash proceeds which is reflected within cash used for operating activities in the Condensed Consolidated Statements of Cash Flows for the three months ended December 31, 2022.

It is management's intention that the net notional amount of interest rate swap agreements be less than or equal to the variable rate loans outstanding during the life of the derivatives.

Debt-Related Embedded Derivatives

The Company's Tranche B-3 Term Loans and Exchangeable Notes contain embedded features that, in certain scenarios, could modify the cash flows of their respective debt instruments. These embedded features (the "Debt-related embedded derivatives") are required to be bifurcated from their host contracts and accounted for as an embedded derivative. The Debt-related embedded derivatives are recorded at fair value with changes in fair value subsequent to the issuance date recorded in Interest expense in the Condensed Consolidated Statements of Operations.

On July 12, 2022, the issuance date, the aggregate fair value of the Debt-related embedded derivatives was $34 million, which was recorded as a debt discount (contra liability) and a derivative liability within Long-term debt on the Consolidated Balance Sheets. As of December 31, 2022 and September 30, 2022, the aggregate fair value of the Debt-related embedded derivatives was $56 million and $72 million, respectively.

The fair value of the derivatives is determined using the with-and-without model which compares the estimated fair value of the underlying debt instrument with the embedded features to the estimated fair value of the underlying debt instrument without the embedded features, with the difference representing the estimated fair value of the embedded derivative features. The with-and-without model includes significant unobservable estimates, including estimated market yield, an estimation of the Company’s probability of default and creditor recovery rates, and the probability of the occurrence of a change of control event or asset sale.

The fair value of the derivatives as of December 31, 2022 was determined using the market assumptions summarized below:


	December 31, 2022
Tranche B-3 Term Loans due December 15, 2027
Credit Spread	31.03	%
Risk-free interest rates	3.99	%
Exchangeable 8.00% Senior Secured Notes due 2027
Credit Spread	31.03	%
Risk-free interest rates	3.99	%
Implied volatility	273.31	%
Price per share of common stock	$0.20

Foreign Currency Forward Contracts

The Company, from time to time, utilizes foreign currency forward contracts primarily to hedge fluctuations associated with certain monetary assets and liabilities including receivables, payables and certain intercompany balances. These foreign currency forward contracts are not designated for hedge accounting treatment. As a result, changes in the fair value of these

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contracts are recorded as a component of Other income, net to offset the change in the value of the hedged assets and liabilities. As of December 31, 2022, the Company had no open foreign currency forward contracts. As of September 30, 2022, the Company maintained open foreign currency forward contracts with a total notional value of $12 million, hedging the Czech Koruna.

2017 Emergence Date Warrants

In accordance with the bankruptcy plan of reorganization adopted in connection with the Company's emergence from bankruptcy on December 15, 2017 (the "2017 Plan of Reorganization"), the Company issued warrants to purchase 5,645,200 shares of the Company's common stock to the holders of the second lien obligations extinguished pursuant to the 2017 Plan of Reorganization (the "2017 Emergence Date Warrants"). Each 2017 Emergence Date Warrant had an exercise price of $25.55 per share and expired on December 15, 2022. The 2017 Emergence Date Warrants ~~contain~~contained certain derivative features that ~~require the Warrants~~required them to be classified as a liability and for changes in the fair value of the liability to be recognized in earnings each reporting period. ~~The Successor~~On November 14, 2018, the Company's Board approved a warrant repurchase program, authorizing the Company ~~had no other derivative instruments at December 31, 2017.~~to repurchase up to $15 million worth of the 2017 Emergence Date Warrants. None of the 2017 Emergence Date Warrants were exercised or repurchased.

The fair value of the 2017 Emergence Date Warrants was determined using a probability weighted Black-Scholes option pricing model. This model requires certain input assumptions including risk-free interest rates, volatility, expected life and dividend rates. Selection of these inputs involves significant judgment.

The fair value of the ~~Warrants, on the~~2017 Emergence Date ~~and at December 31, 2017,~~Warrants as of September 30, 2022 was determined by using ~~the Black-Scholes option pricing model with~~ the input assumptions summarized ~~below. Accordingly, we recorded a loss of $5 million for~~below:


	September 30, 2022 (1)
Expected volatility	113.93	%
Risk-free interest rates	2.36	%
Contractual remaining life (in years)	0.46
Price per share of common stock	$2.24

(1)The Company qualitatively determined the ~~period from December 16, 2017 through December 31, 2017 (Successor) related to the change in~~ fair value of the ~~warrant liability~~. 2017 Emergence Date Warrants as of September 30, 2022 to be negligible as a result of the decline in Company's stock price since the most recent quantitative analysis (June 30, 2022) and the remaining contractual term of 0.21 years as of September 30, 2022. The amounts presented represent the input assumptions as of June 30, 2022.

In determining the fair value ~~loss~~of the 2017 Emergence Date Warrants, the dividend yield was ~~recognized in Other (expense) income, net in~~assumed to be zero as the Company did not anticipate paying dividends on its common stock throughout the term of the warrants.

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Financial Statement Information Related to Derivative Instruments

The following table summarizes the fair value of the Company's derivatives on a gross basis, including accrued interest:


		December 31, 2022				September 30, 2022
(In millions)	Balance Sheet Caption	Asset		Liability		Asset		Liability
Derivatives Not Designated as Hedging Instruments:
Interest rate contracts	Other current assets	$	—	$	—	$	15	$	—
Interest rate contracts	Other assets	—		—		40		—
Interest rate contracts	Other current liabilities	—		—		—		2

Debt-related embedded derivatives	Debt maturing within one year	—		56		—		—
Debt-related embedded derivatives	Long-term debt	—		—		—		72



		—		56		55		74
Total derivatives fair value		$	—	$	56	$	55	$	74

The following table provides information regarding the location and amount of pre-tax gains (losses) for interest rate contracts designated as cash flow hedges:


	Three months ended December 31,
	2022				2021
(In millions)	Interest Expense		Other Comprehensive Loss		Interest Expense		Other Comprehensive Income
Financial Statement Line Item in which Cash Flow Hedges are Recorded	$	(5)	$	(100)	$	(54)	$	40

Impact of cash flow hedging relationships:
Gain recognized in AOCI on interest rate swaps	—		—		—		15
Interest expense reclassified from AOCI	(62)		62		(13)		13

The following table provides information regarding the pre-tax (losses) gains for derivatives not designated as hedging instruments on the Condensed Consolidated Statements of ~~Operations.~~Operations:


		Three months ended December 31,
(In millions)	Location of Derivative Pre-tax (Loss) Gain	2022		2021
Interest rate contracts	Interest expense	$	(13)	$	—
Debt-related embedded derivatives	Interest expense	(16)		—
2017 Emergence Date Warrants	Other income, net	—		1

The Company records its derivatives on a gross basis in the Condensed Consolidated Balance Sheets. The Company has master netting agreements with several of its financial institution counterparties. The following table provides information on the Company's derivative positions as if those subject to master netting arrangements were presented on a net basis, allowing for the right to offset by counterparty per the master netting agreements:


	December 31, 2022				September 30, 2022
(In millions)	Asset		Liability		Asset		Liability
Gross amounts recognized in the Condensed Consolidated Balance Sheets	$	—	$	56	$	55	$	74
Gross amount subject to offset in master netting arrangements not offset in the Condensed Consolidated Balance Sheets	—		—		(2)		(2)
Net amounts	$	—	$	56	$	53	$	72

9. Fair Value Measurements

December 31, 2017 December 15, 2017
Expected volatility 52.38 % 54.57 %
Risk free interest rates 2.20 % 2.20 %
Expected life (in years) 4.96
5.00
Price per share of common stock $17.55 $14.93

Fair value of warrant liability $22 million $17 million


~~11.~~	~~Fair Value Measures~~

Pursuant to the accounting guidance for fair value measurements, fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the

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Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.Considerable judgment was required in developing certain of the estimates of fair value and accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

Fair Value Hierarchy

The accounting guidance for fair value measurements also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial ~~instrument’s~~instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The inputs are prioritized into three levels that may be used to measure fair value:

Level 1: Inputs that reflect quoted prices for identical assets or liabilities in active markets that are observable.

Level 2: Inputs that reflect quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3: Inputs that are unobservable to the extent that observable inputs are not available for the asset or liability at the measurement date.

~~Asset~~Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis as of December 31, ~~2017~~ ~~(Successor)~~2022 and September 30, ~~2017~~ ~~(Predecessor)~~2022 were as follows:


	December 31, 2022								September 30, 2022
	Fair Value Measurements Using								Fair Value Measurements Using
(In millions)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Interest rate contracts	$	—	$	—	$	—	$	—	$	55	$	—	$	55	$	—

Total assets	$	—	$	—	$	—	$	—	$	55	$	—	$	55	$	—

Liabilities:
Interest rate contracts	$	—	$	—	$	—	$	—	$	2	$	—	$	2	$	—

Debt-related embedded derivatives	56		—		—		56		72		—		—		72

Total liabilities	$	56	$	—	$	—	$	56	$	74	$	—	$	2	$	72

Successor
December 31, 2017
Fair Value Measurements Using
(In millions) Total Level 1 Level 2 Level 3
Other Non-Current Assets:
Investments $ 1
$ 1
$ —
$ —
Other Non-Current Liabilities:
Warrants $ 22
$ —
$ —
$ 22

Predecessor
September 30, 2017
Fair Value Measurements Using
(In millions) Total Level 1 Level 2 Level 3
Other Non-Current Assets:
Investments $ 1
$ 1
$ —
$ —

~~Investments~~

~~Investments~~Interest rate contracts classified as Level 12 assets and liabilities are ~~priced~~not actively traded and are valued using ~~quoted market prices for identical assets in active markets~~pricing models that ~~are observable.~~use observable inputs.

~~Warrants~~

~~Warrants~~Debt-related Embedded Derivatives classified as Level 3 liabilities are ~~priced~~valued using the ~~Black-Scholes option pricing model.~~ with-and-without model which is further described in Note 8, "Derivative Instruments and Hedging Activities."

The following table provides changes to those fair value measurements using Level 3 inputs for the three months ended December 31, 2022:


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(In millions)	Debt-Related Embedded Derivatives
Balance as of September 30, 2022	$	72
Change in fair value (1)	(16)
Balance as of December 31, 2022	$	56

(1)The change in fair value of the ~~Warrants is recognized~~debt-related embedded derivatives was recorded in ~~Other (expense) income, net in~~Interest expense.

During the ~~Condensed Consolidated Statements~~three months ended December 31, 2022 and 2021, there were no transfers into or out of ~~Operations.~~Level 3.

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Fair Value of Financial Instruments

The estimated fair values of ~~amounts borrowed under~~ the ~~Company’s financing arrangements at~~ Senior Notes, Term Loans, Exchangeable Notes and Convertible Notes as of December 31, ~~2017~~ ~~(Successor)~~2022 and September 30, ~~2017~~ ~~(Predecessor)~~2022 were as follows:


	December 31, 2022				September 30, 2022
(In millions)	Principal amount		Fair value		Principal amount		Fair value
Senior 6.125% Notes due September 15, 2028	$	1,000	$	307	$	1,000	$	497
Tranche B-1 Term Loans due December 15, 2027	800		275		800		433
Tranche B-2 Term Loans due December 15, 2027	743		260		743		403
Tranche B-3 Term Loans due December 15, 2027	350		$	217	350		232
Exchangeable 8.00% Senior Notes due December 15, 2027	250		$	88	250		162
Convertible 2.25% Senior Notes due June 15, 2023	221		9		221		95
Total	$	3,364	$	1,156	$	3,364	$	1,822

The estimated ~~based on a~~fair value of the Company's Senior Notes and Term Loans was determined using Level 2 ~~input~~inputs based on a market approach utilizing market-clearing data on the valuation date in addition to bid/ask prices.

The estimated fair value of the Exchangeable Notes and Convertible Notes was determined based on the quoted price of the Exchangeable Notes and Convertible Notes in an inactive market on the last trading day of the reporting period and has been classified as Level 2. The fair value of the outstanding balance under ABL credit agreement approximates its carrying amount due to its short term maturities and seniority over the Company's other outstanding debt instruments.

The fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, to the ~~amounts borrowed under~~extent the ~~Company’s financing agreements at~~ underlying liability will be settled in cash, approximate their carrying values because of the short-term nature of these instruments.

10. Income Taxes

The Company's effective income tax rate for the three months ended December 31, ~~2017~~ ~~(Successor) and~~ ~~September 30, 2017~~ ~~(Predecessor) are as follows:~~

Successor Predecessor
December 31, 2017 September 30, 2017
(In millions)
Principal
Amount

Fair
Value

Principal
Amount

Fair
Value
Term Loan Credit Agreement due December 15, 2024 $ 2,925
$ 2,896
$ —
$ —
DIP Credit Agreement due January 19, 2018 —
—
725
732
Variable rate Term B-3 Loans due October 26, 2017 —
—
594
503
Variable rate Term B-4 Loans due October 26, 2017 —
—
1
1
Variable rate Term B-6 Loans due March 31, 2018 —
—
519
440
Variable rate Term B-7 Loans due May 29, 2020 —
—
2,012
1,709
7% senior secured notes due April 1, 2019 —
—
982
832
9% senior secured notes due April 1, 2019 —
—
284
241
10.50% senior secured notes due March 1, 2021 —
—
1,440
67
Total $ 2,925
$ 2,896
$ 6,557
$ 4,525

~~The Company adjusted the carrying value of debt to fair value upon application of fresh start accounting.~~


~~12.~~	~~Income Taxes~~

~~For the Predecessor period ended December 15, 2017, the difference between the Company’s recorded provision and the provision that would result~~2022 differed from ~~applying~~ the U.S. ~~statutory~~federal tax rate ~~of 35% is primarily attributable to: (1) income and losses taxed at different foreign tax rates, (2) losses generated within certain foreign jurisdictions~~by 7% or $14 million principally related to deferred taxes (including losses) for which no benefit was recorded because it is more likely than not that the tax benefits would not be realized ~~(3) non-U.S. withholding~~and the release of deferred taxes ~~on foreign earnings, (4) current period changes to unrecognized~~from Accumulated Other Comprehensive Income upon termination of interest rate swaps.

The Company's effective income tax ~~positions, (5) U.S. state and local income taxes, and (6)~~rate for the ~~impact of reorganization and fresh start adjustments.~~

~~For the Successor period~~three months ended December 31, ~~2017,~~2021 differed from the ~~difference between the Company’s recorded benefit and the benefit that would result from applying the new~~ U.S. ~~statutory~~federal tax rate ~~of 24.5%, is primarily attributable to: (1) income and losses taxed at different foreign tax rates, (2) losses~~by 59% or $28 million principally related to deferred taxes (including losses) generated ~~within certain foreign jurisdictions~~ for which no benefit was recorded because it is more likely than not that the tax benefits would not be ~~realized, (3) non-U.S. withholding taxes on foreign earnings, (4) current period changes to unrecognized tax positions, (5) U.S. state~~realized; and ~~local income taxes, and (6) the impact of the Tax Cuts and Jobs Act (“the Act”), as more fully described below.~~certain nondeductible expenses.

For the three months ended December 31, 2016, the difference between the Company’s recorded provision and the benefit that would result from applying the U.S. statutory rate of 35% is primarily attributable to: (1) income and losses taxed at different foreign tax rates, (2) changes in the valuation allowance established against the Company’s deferred tax assets, and (3) current period changes to unrecognized tax positions.

Under the Plan of Reorganization a substantial amount of the Company’s debt was extinguished. Absent an exception, a debtor recognizes cancellation of indebtedness income (“CODI”) upon discharge of its outstanding indebtedness for an amount of consideration that is less than its adjusted issue price. The Internal Revenue Code of 1986, as amended, provides that a debtor in a bankruptcy case may exclude CODI from taxable income but must reduce certain of its tax attributes by the amount of any CODI recognized as a result of the consummation of a plan of reorganization. The amount of CODI recognized by a taxpayer is the adjusted issue price of any indebtedness discharged less the sum of (i) the amount of cash paid, (ii) the issue price of any new indebtedness issued and (iii) the fair market value of any other consideration, including equity, issued. The reduction in tax attributes does not occur until the first day of the Company’s first tax year subsequent to the date of emergence, which is October 1, 2018. The Company estimates that the U.S. federal net operating loss (“NOL”) and tax credits disclosed in its September 30, 2017 Condensed Consolidated Financial Statements and the tax loss generated during the September 30, 2018 tax year will be entirely eliminated on October 1, 2018. The Company estimates that $196 million of the tax loss generated during the Predecessor period ended December 15, 2017 will be absorbed by taxable income generated during the Successor period ending September 30, 2018. These estimates are subject to revision and any changes in the estimates will affect income or loss from continuing operations in the Successor period ending September 30, 2018.11. Benefit Obligations

Prior to September 30, 2017, a full valuation allowance was established in any jurisdiction that had a net deferred tax asset. A portion of the U.S. valuation allowance in the amount of $787 million was reversed as part of the reorganization adjustments as it was previously established against (i) the NOL and tax credits which will be eliminated as a result of the CODI rules and (ii) other deferred tax assets that were previously established for liabilities that were discharged in the Plan of Reorganization and eliminated as part of the reorganization adjustments. The valuation allowance in the amount of $47 million was reversed in certain non U.S. jurisdictions as part of the reorganization adjustments as management concluded it is more likely than not that the related deferred tax assets will be realized. The remaining U.S. valuation allowance in the amount of $461 million was reversed as part of the fresh start adjustments because management concluded it is more likely than not that the deferred tax assets will be realized primarily due to future sources of taxable income that will be generated by the reversal of deferred tax liabilities established in the fresh start adjustments.

On December 22, 2017, the Act was signed into law. The Act lowered the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018. Corporations with a fiscal year-end that is not a calendar year but includes January 1, 2018 are subject to a blended tax rate based on the number of days in the fiscal year before and after January 1, 2018. The Company has a September 30^th ~~tax year-end and therefore the U.S. federal tax rate for the year ending September 30, 2018 is 24.5%.~~

The SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) on December 22, 2017 which provided guidance to registrants on the accounting for tax related impacts under the Act. The guidance provides a measurement period of up to one year after the enactment date for companies to complete the tax accounting implications of the Act. As of the first quarter, the Company has provided a provisional estimate related to the revaluation of its deferred taxes and the deemed repatriation of unremitted foreign earnings. We will continue to refine our estimate, which could result in a material adjustment, given additional guidance under the Act, interpretations, available information and assumptions made by the Company. As a fiscal year-end tax filer, we are subject to various provisions under the Act for fiscal year 2018, including the change to the U.S. federal statutory tax rate and the mandatory deemed repatriation of unremitted foreign earnings. Beginning in our 2019 fiscal year, various other newly enacted provisions will become effective, including provisions that may result in the current U.S. taxation of certain income earned by the Company’s foreign subsidiaries. The FASB has published guidance (Topic 740, No. 5), regarding how to account for the Global Intangible Low-Taxed Income (“GILTI”) provisions included in the Act. The guidance states th

at a company may make a policy decision with respect to the accounting for taxes related to GILTI and whether deferred taxes should be established. The Company estimates that it will generate income that may be taxed as GILTI beginning in fiscal 2019. On a provisional basis, no deferred taxes have been established for GILTI as of December 31, 2018.

The Company does not expect to incur a cash tax liability with respect to the one-time tax on foreign earnings due to historical foreign deficits. The Company previously established a deferred tax liability for non-U.S. withholding taxes to be incurred upon the remittance of foreign earnings. The Condensed Consolidated Financial Statements for the Predecessor and Successor periods include an adjustment for such withholding taxes attributable to current period earnings. In prior periods, the Company established a U.S. deferred income tax liability for certain foreign earnings under the assumption that such earnings would be remitted to the U.S. This deferred tax liability has been adjusted in the Successor period based on the taxation of such earnings under the Act.

A net deferred tax liability was established at the U.S. federal tax rates in effect on December 15, 2017 as part of fresh start accounting for U.S. book-to-tax differences. These deferred taxes are primarily related to differences arising from recording intangible and other assets at fair market value. As of the December 22, 2017 enactment date of the Act, deferred taxes were adjusted to reflect the new tax rates in effect as of the date the deferred tax amounts are expected to be realized.

The provisional amount of the reduction to the net deferred tax liability as a result of the ACT is $245 million and has been recorded as an income tax benefit from continuing operations in the Successor period.


~~13.~~	~~Benefit Obligations~~

The Company sponsors non-contributory defined benefit pension plans covering a portion of its U.S. employees and retirees, and post-retirement benefit plans covering a portion of its U.S. employees and retirees that include healthcare benefits and life insurance coverage. Certain non-U.S. operations have various retirement benefit programs covering substantially all of their employees. Some of these programs are considered to be defined benefit pension plans for accounting purposes.

~~Effective January~~

25 ~~2018, the Company and the Communications Workers~~

Table of America (“CWA”) and the International Brotherhood of Electrical Workers (“IBEW”), agreed to extend the 2009 Collective Bargaining Agreement (“CBA”), previously extended through June 14, 2018, until September 21, 2019. The contract extensions did not affect the Company’s obligation for pension and post-retirement benefits available to U.S. employees of the Company who are represented by the CWA or IBEW (“represented employees”).Contents

In September 2015, the Company amended the post-retirement medical plan for represented retirees effective January 1, 2017, to replace medical coverage through the Company’s group plan for represented retirees who are retired as of October 15, 2015 and their eligible dependents, with medical coverage through the private and public insurance marketplace. The change allows the existing retirees to choose insurance from the marketplace and receive financial support from the Company toward the cost of coverage through a Health Reimbursement Arrangement ("HRA").

The components of the pension and post-retirement net periodic benefit (credit) cost ~~(credit)~~ for the periods indicated are provided in the ~~tables~~table below:


	Three months ended December 31,
(In millions)	2022		2021
Pension Benefits - U.S.
Components of net periodic benefit credit
Service cost	$	1	$	1
Interest cost	10		5
Expected return on plan assets	(12)		(12)

Net periodic benefit credit	$	(1)	$	(6)
Pension Benefits - Non-U.S.
Components of net periodic benefit cost
Service cost	$	1	$	2
Interest cost	3		1
Amortization of actuarial gain	(3)		—
Net periodic benefit cost	$	1	$	3
Post-retirement Benefits - U.S.
Components of net periodic benefit cost

Interest cost	$	1	$	1

Amortization of prior service credit	(1)		(1)


Net periodic benefit cost	$	—	$	—

Successor Predecessor
(In millions) Period from December 16, 2017 through December 31, 2017 Period from October 1, 2017 through December 15, 2017 Three months ended December 31, 2016
Pension Benefits - U.S.
Components of Net Periodic Benefit Cost
Service cost $ —
$ 1
$ 1
Interest cost 1
22
24
Expected return on plan assets (2 ) (38 ) (45 )
Amortization of previously unrecognized net actuarial loss —
20
26
Settlement loss⁽¹⁾
—
—
—
Net periodic benefit cost $ (1 ) $ 5
$ 6

⁽¹⁾ ~~Excludes Plan~~The service components of ~~Reorganization related settlements discussed below that~~net periodic benefit (credit) cost were recorded similar to compensation expense, while all other components were recorded in ~~Reorganization items, net in the Condensed Consolidated Statements of Operations.~~

Successor Predecessor
(In millions) Period from December 16, 2017 through December 31, 2017 Period from October 1, 2017 through December 15, 2017 Three months ended December 31, 2016
Pension Benefits - Non-U.S.
Components of Net Periodic Benefit Cost
Service cost $ —
$ 2
$ 2
Interest cost —
3
2
Amortization of previously unrecognized net actuarial loss —
1
3
Net periodic benefit cost $ —
$ 6
$ 7

Successor Predecessor
(In millions) Period from December 16, 2017 through December 31, 2017 Period from October 1, 2017 through December 15, 2017 Three months ended December 31, 2016
Post-retirement Benefits - U.S.
Components of Net Periodic Benefit Cost
Interest cost $ —
$ 3
$ 3
Expected return on plan assets —
(2 ) (2 )
Amortization of unrecognized prior service cost —
(3 ) (4 )
Amortization of previously unrecognized net actuarial loss —
2
3
Curtailment —
—
(4 )
Net periodic benefit cost $ —
$ —
$ (4 )

On December 15, 2017, the APPSE, a qualified pension plan, was settled with the PBGC. At that time, the Company and the PBGC executed a termination and trusteeship agreement to terminate the APPSE and to appoint the PBGC as the statutory trustee of the plan. The Company also paid settlement consideration to the PBGC consisting of $340 million in cash and 6.1 million shares of Successor Company common stock (fair value of $90 million). With this payment, any accrued but unpaid minimum funding contributions due were deemed to have been paid in full. As a result of the plan termination on December 15, 2017, the Company's projected benefit obligation and pension trust assets were reduced by $2,192 million and $1,573 million, respectively. Including the settlement consideration and $703 million of Accumulated other comprehensive loss recorded in the Condensed Consolidated Balance Sheet, a settlement loss of $514 million was recorded in Reorganization items, net in the Condensed Consolidated Statement of Operations.

On December 15, 2017, the unfunded ASPP, a non-qualified excess benefit pension plan, was also terminated and settled. Benefit liabilities for ASPP participants were included as allowed claims in the general unsecured recovery pool. Settlement consideration of $17 million in the form of allowed claims payable to ASPP participants was estimated based upon claims data as of the Emergence Date as amounts due to individual general unsecured creditors had not been finalized and paid. As a result of the termination, the Company's projected benefit obligation was reduced by $88 million. Including the settlement consideration and $18 million of Accumulated other comprehensive loss recorded in the Condensed Consolidated Balance Sheet, a settlement gain of $53 million was recorded in Reorganization items, net in the Condensed Consolidated Statements of Operations.Other (loss) income, net.

The Company's general funding policy with respect to its U.S. qualified pension plans is to contribute amounts at least sufficient to satisfy the minimum amount required by applicable ~~laws~~law and regulations, or to directly pay benefits where appropriate. In March 2021, the American Rescue Plan Act was signed into law, providing limited interest-rate relief provisions and an extended shortfall amortization period for pension funding and retirement plan distributions. As a result, of the ~~Bankruptcy Filing in January 2017, there was an automatic stay on the Company's~~Company did not make any contributions to the U.S. pension plans during ~~fiscal 2017. Therefore,~~ the ~~minimum funding requirements for~~three months ended December 31, 2022 and does not expect to make any contributions to the U.S. pension plans ~~were not met~~ during ~~fiscal 2017.~~

The Plan of Reorganization included contributions to or settlements of all U.S. pension plans, which are the Avaya Pension Plan for Represented Employees ("APP"), the APPSE and the ASPP. On December 15, 2017, the Company paid the aggregate unpaid required minimum funding for the APP, a qualified plan, of $49 million.

~~Remeasurement as a result of fresh start accounting increased the APP and other post-retirement benefit plan obligations by $3 million on December 15, 2017.~~

The Company made no contributions to satisfy minimum statutory funding requirements for its U.S. funded defined benefit pension plans for the period from December 16, 2017 through December 31, 2017 (Successor) and for the period from October 1, 2017 through December 15, 2017 (Predecessor), exclusive of the payments discussed above as part of the Plan of Reorganization for the APP and settlement consideration to the PBGC for the APPSE. Estimated payments to satisfy minimum statutory funding requirements for the remainder of fiscal ~~2018 are $43 million.~~2023.

~~The Company provided~~Contributions to the non-U.S. pension ~~benefits~~plans were $5 million for ~~U.S. employees, which were not pre-funded. Consequently,~~ the ~~Company made payments as the benefits were disbursed or claims were paid. For the period from December 16, 2017 through~~three months ended December 31, 2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor), the Company made payments for the U.S. pension benefits in each of the periods of amounts totaling less than $1 million.

The Company provides for certain pension benefits for non-U.S. employees, the majority of which are not pre-funded. The Company made payments for these non-U.S. pension benefits for the period from December 16, 2017 through December 31, 2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor) totaling $1 million and $3 million, respectively. Estimated payments for these non-U.S. pension benefits for2022. For the remainder of fiscal ~~2018~~ ~~are $24 million.~~

~~During the period from December 16, 2017 through December 31, 2017 (Successor),~~2023, the Company ~~was reimbursed $3 million from the represented employees’ post-retirement health trust for claims paid~~estimates that exceeded the Company's obligations. During the period from October 1, 2017 through December 15, 2017 (Predecessor), the Company contributed $2 million to the represented employees’ post-retirement health trust to fund current benefit claims and costs of administration in compliance with the terms of the CBA, as extended through September 21, 2019. Estimated payments under the terms of the 2009 agreement as extended are $12it will make contributions totaling $19 million for ~~the remainder of fiscal 2018.~~non-U.S. plans.

~~The Company also provides certain retiree~~Most post-retirement medical benefits ~~for U.S. employees through an HRA, which~~ are not pre-funded. Consequently, the Company makes payments directly to the claims administrator as ~~these benefits~~retiree medical benefit claims are disbursed. ~~For~~These payments are funded by the ~~period~~Company up to the maximum contribution amounts specified in the plan documents and contracts with the Communications Workers of America and the International Brotherhood of Electrical Workers, and contributions from ~~December 16, 2017 through~~the participants, if required. During the three months ended December 31, ~~2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor),~~2022, the Company made payments ~~in each of the periods totaling less than $1 million~~ for ~~these~~ retiree medical ~~benefits. Estimated~~and dental benefits of $2 million and received reimbursements from the represented employees' post-retirement health trust of $2 million related to payments in prior periods. The Company estimates it will make payments for ~~these~~ retiree medical and dental benefits totaling $8 million for the remainder of fiscal ~~2018 are less than $1 million.~~2023.

~~14.~~12. Share-based Compensation

The ~~Predecessor Company's common and preferred stock were cancelled and new common stock was issued on the Emergence Date. Accordingly, the Predecessor Company's then existing~~Company maintains share-based compensation ~~awards were also cancelled,~~plans under which ~~resulted in the recognition of any previously unamortized expense on the date of cancellation. Share-based compensation for the Successor and Predecessor periods are not comparable.~~

~~Successor~~

~~Pursuant to terms of the Plan of Reorganization, the Avaya Holdings Corp. 2017 Equity Incentive Plan ("2017 Equity Incentive Plan") became effective on the Emergence Date.~~

The Successor Company's Board of Directors or any committee duly authorized thereby, will administer the 2017 Equity Incentive Plan. The administrator has broad authority to, among other things: (i) select participants; (ii) determine the types of awards that participants are to receive and the number of shares that are to be granted under such awards; and (iii) establish the terms and conditions of awards, including the price to be paid for the shares or the award.

~~Persons eligible to receive awards under the 2017 Equity Incentive Plan include~~ non-employee directors, employees of the ~~Successor~~ Company or any of its affiliates, and certain consultants and advisors ~~to the Successor Company or any of its affiliates. The types of awards that~~ may be granted ~~under the 2017 Equity Incentive Plan include~~ stock options, restricted stock, restricted stock units ("RSUs"), performance awards ("PRSUs") and other forms of awards granted or denominated in shares of ~~Successor~~the Company's common stock, as well as certain cash-based awards. Pre-tax share-based compensation expense for the three months ended December 31, 2022 and 2021 was $1 million and $14 million, respectively. The decrease in pre-tax share-based compensation is primarily due to forfeitures of RSUs and PRSUs which have occurred since the first quarter of fiscal 2022. The forfeitures were driven in part by restructuring activities initiated by the Company beginning in the fourth quarter of fiscal 2022.

~~The maximum number~~During the fourth quarter of fiscal 2022, the Company suspended distribution of shares ~~of common stock that may be issued or granted~~ under the ~~2017~~2019 Equity Incentive Plan ~~is 7.4 million shares. If any option or other stock-based award granted~~(the "2019 Plan") and suspended purchases of shares under the ~~2017 Equity Incentive~~Employee Stock Purchase Plan ~~expires, terminates or is cancelled for any reason without having been exercised in full,~~until the ~~number of shares of common stock underlying any unexercised award will again be available for the purpose of~~Company's registration statements are reinstated. Existing awards issued under the ~~2017 Equity Incentive Plan. If any shares~~2019 Plan will continue to vest in accordance with the terms of ~~restricted stock, performance awards or other stock-based awards denominated in shares~~the

Table of ~~common stock awarded~~Contents

respective award agreements. As of December 31, 2022, there were 890,042 RSUs that vested but were unissued under the ~~2017 Equity Incentive Plan to a participant are forfeited for any reason,~~2019 Plan. All awards and the ~~number of forfeited~~ shares ~~of restricted stock, performance awards or other stock-based awards denominated in shares of common stock will again be available for purposes of awards~~reserved under the ~~2017 Equity Incentive Plan. Any award under~~2019 Plan were canceled upon Emergence.

Restricted Stock Units

During the 2017 Equity Incentive Plan settled in cash will not be counted against the foregoing maximum share limitations. Shares withheld by the Company in satisfaction of the applicable exercise price or withholding taxes upon the issuance, vesting or settlement of awards, in each case, shall not be available for future issuance under the 2017 Equity Incentive Plan.

~~The aggregate~~three months ended December 31, 2022, there were 639,065 RSUs that vested with a weighted average grant date fair value of ~~all awards granted~~$18.79 per RSU. The Company did not grant any RSUs during the three months ended December 31, 2022.

Stock Bonus Program

In fiscal 2021, the Company adopted the Avaya Holdings Corp. Stock Bonus Program ("Stock Bonus Program") under which certain employees can elect to ~~any non-employee director during any calendar year (excluding awards made pursuant to deferred compensation arrangements made~~receive a specified percentage of their annual incentive bonus in the form of fully vested shares of the Company’s common stock in lieu of cash. Annually, the Company's Board approved the maximum number of shares that could be issued under the Stock Bonus Program. For fiscal 2023, the Company's Board did not approve any shares for issuance under the Stock Bonus Program.

Upon implementation of the Plan, all share-based awards were canceled.

13. Preferred Stock

There were 125,000 shares of the Company's 3% Series A Convertible Preferred Stock, par value $0.01 per share ("Series A Preferred Stock"), issued and outstanding as of December 31, 2022. Upon implementation of the Plan pursuant to the RSA, the Series A Preferred Stock was canceled upon Emergence and the attendant board designation rights described below were eliminated.

The Series A Preferred Stock was convertible into shares of the Company's common stock at an initial conversion price of $16.00 per share, which represented an approximately 9% interest in the Company's common stock on an as-converted basis as of December 31, 2022, assuming no holders of options, warrants, convertible notes or similar instruments exercised their exercise or conversion rights.

As of December 31, 2022, the carrying value of the Series A Preferred Stock was $134 million, which included $9 million of accreted dividends paid in kind. During the three months ended December 31, 2022, the carrying value of the Series A Preferred Stock increased $1 million due to accreted dividends paid in kind.

In connection with the issuance of the Series A Preferred Stock, the Company granted RingCentral certain customary consent rights with respect to certain actions by the Company, including amending the Company's organizational documents in a ~~portion~~manner that would have an adverse effect on the Series A Preferred Stock and issuing securities that are senior to, or equal in priority with, the Series A Preferred Stock. In addition, pursuant to an investor rights agreement, until such time when RingCentral and its affiliates hold or beneficially own less than 4,759,339 shares of ~~cash retainers~~the Company's common stock (on an as-converted basis), RingCentral has the right to nominate one person for election to the Company's Board. The director designated by RingCentral has the option (i) to serve on the Company's Audit and Nominating and Corporate Governance Committees or (ii) to attend (but not vote at) all of the Company's Board's committee meetings. On November 6, 2020, Robert Theis was elected to join the Company's Board as RingCentral's designee. On October 20, 2022, Robert Theis provided notice of his intent to resign from the Board effective October 31, 2022, in order to focus on his other commitments as General Partner of World Innovation Lab and Lead Independent Director of RingCentral. Mr. Theis's resignation was not due to any ~~dividends payable in respect of outstanding awards) may not exceed $750,000.~~

disagreement between Mr. Theis and the Company on any matter relating to the Company’s operations, policies, or practices. Subsequent to Mr. Theis's departure, RingCentral nominated Jill K. Frizzley for election to the Company's Board. On December 13, 2022, Ms. Frizzley was elected to join the Board. On the Emergence Date, the Company granted 3.4 million restricted stock units and 1.2 million stock options to executives and other employees. The awards are subject to time based vesting. There are 2.8 million shares remaining under the 2017 Equity Incentive Plan available to be granted.

~~The fair value~~all members of the ~~premium-priced stock options granted on~~Board resigned and the ~~Emergence Date~~New Board was ~~determined using a lattice option pricing model with the following assumptions:~~

Exercise price $ 19.46
Expected term (in years)⁽¹⁾
8.54
Volatility⁽²⁾
65.37 %
Risk-free rate⁽³⁾
2.35 %
Dividend yield⁽⁴⁾
— %

⁽¹⁾ ~~Expected term based on the vesting terms of the option and a contractual life of ten years.~~

⁽²⁾~~Volatility based on peer group companies adjusted for the Company's leverage.~~

⁽³⁾ ~~Risk-free rate based on U.S. Treasury yields with a term equal~~appointed pursuant to the ~~expected option term.~~Plan.

⁽⁴⁾ ~~Dividend yield was assumed to be zero as the Company does not anticipate paying dividends.~~

At December 31, 2017, all share-based awards granted by the Successor Company were unvested and the related share-based compensation expense recorded for the period from December 16, 2017 through December 31, 2017 (Successor) was $1 million.

~~Predecessor~~

Prior to the Emergence Date, the Predecessor Company had granted share-based awards that were cancelled upon emergence from bankruptcy. In conjunction with the cancellation, the Predecessor Company accelerated the unrecognized share-based compensation expense and recorded $3 million

Table of ~~compensation expense in the period from October 1, 2017 through December 15, 2017.~~

Contents

~~15. Capital Stock~~

~~Successor~~

~~Preferred Stock.~~ The Successor Company's certificate of incorporation authorizes it to issue up to 55.0 million shares of preferred stock with a par value of $0.01 per share. As of December 31, 2017, there were no preferred shares issued or outstanding.

~~Common Stock.~~ The Successor Company's certificate of incorporation authorizes it to issue up to 550.0 million shares of common stock with a par value of $0.01 per share. As of December 31, 2017, there were 110.0 million shares issued and 109.8 million outstanding. The outstanding shares were issued to (1) holders of Predecessor first lien obligations (99.3 million shares); (2) holders of Predecessor second lien obligations (4.4 million shares); and (3) PBGC (6.1 million shares). Issued but not outstanding are the shares held on behalf of the general unsecured creditor reserve or the holders of Predecessor first lien debt obligations (0.2 million shares).

~~Predecessor~~

In connection with the Company's Plan of Reorganization and emergence from bankruptcy, all equity interests in the Predecessor Company were cancelled, including preferred and common stock, warrants and equity-based awards.

~~16. Earnings (Loss)~~14. Loss Per Common Share

~~All outstanding shares of common stock and common stock equivalents of the Predecessor Company were cancelled pursuant to the Plan of Reorganization.~~

Upon emergence, the Successor Company authorized and issued 110.0 million shares of common stock of which 109.8 million shares were outstanding at December 31, 2017 and used as the basis for determining earnings per share.

Basic earnings per share are calculated by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share reflect the potential dilution that would occur if equity awards granted under the various share-based compensation plans were vested or exercised resulting in the issuance of common shares that would participate in the earnings of the Company.

The following table sets forth the calculation of net ~~income~~loss attributable to common ~~shareholders~~stockholders and the computation of basic and diluted ~~earnings (loss)~~loss per share for the periods indicated:


	Three months ended December 31,
(In millions, except per share amounts)	2022			2021
Loss per share:
Numerator
Net loss	$	(164)		$	(66)
Dividends to preferred stockholders	(1)			(1)
Undistributed loss	(165)			(67)
Percentage allocated to common stockholders(1)	100.0		%	100.0		%
Numerator for basic and diluted loss per common share	$	(165)		$	(67)

Denominator for basic and diluted loss per common share	87.5			84.7

Loss per common share
Basic	$	(1.89)		$	(0.79)
Diluted	$	(1.89)		$	(0.79)

(1) Basic weighted average common stock outstanding	87.5			84.7
Basic weighted average common stock and common stock equivalents (preferred shares)	87.5			84.7
Percentage allocated to common stockholders	100.0		%	100.0		%

Successor Predecessor
(In millions, except per share amounts) Period from December 16, 2017 through December 31, 2017 Period from October 1, 2017 through December 15, 2017 Three months ended December 31, 2016
Net income (loss) per share:
Numerator
Net income (loss) $ 237
$ 2,977
$ (103 )
Dividends to preferred stockholders —
(6 ) (8 )
Undistributed earnings 237
2,971
(111 )
Percentage allocated to common stockholders⁽¹⁾
100.0 % 86.9 % 100.0 %
Numerator for basic and diluted earnings per common share $ 237
$ 2,582
$ (111 )

Denominator
Denominator for basic earnings per weighted average common shares 109.8
497.3
497.0
Effect of dilutive securities
Restricted stock units 0.5
—
—
Stock options —
—
—
Warrants —
—
—
Denominator for diluted earnings per weighted average common shares 110.3
497.3
497.0

Per common share net income (loss)
Basic $ 2.16
$ 5.19
$ (0.22 )
Diluted $ 2.15
$ 5.19
$ (0.22 )

⁽¹⁾ Basic weighted average common stock outstanding
109.8
497.3
497.0
Basic weighted average common stock and common stock equivalents (preferred shares) 109.8
572.4
497.0
Percentage allocated to common stockholders 100.0 % 86.9 % 100.0 %

~~There were 0.5 million dilutive securities for~~For the ~~period from December 16, 2017 through~~three months ended December 31, ~~2017 (Successor).~~


~~17.~~	~~Operating Segments~~

~~On July 14, 2017,~~2022, the Company ~~sold its Networking business to Extreme. Prior to~~excluded 3.2 million RSUs, 0.3 million stock options, 58.1 million shares underlying the ~~sale,~~Exchangeable Notes, 7.9 million shares underlying the Convertible Notes and Call Spread Warrants, 22.1 million shares underlying the outstanding consideration advance received in connection with the Company's strategic partnership with RingCentral and 0.1 million shares of Series A Preferred Stock from the diluted loss per share calculation as their effect would have been anti-dilutive. The Company also excluded 3.8 million PRSUs from the diluted loss per share calculation as either their performance metrics have not yet been attained or their effect would have been anti-dilutive.

For the three months ended December 31, 2021, the Company excluded 4.6 million RSUs, 0.3 million stock options, 0.2 million shares issuable under the ESPP, 5.6 million 2017 Emergence Date Warrants, 12.6 million shares underlying the Convertible Notes and Call Spread Warrants and 0.1 million shares of Series A Preferred Stock from the diluted loss per share calculation as their effect would have been anti-dilutive. The Company also excluded 2.1 million PRSUs and 0.3 million shares authorized under the Company's Stock Bonus Program from the diluted loss per share calculation as either their performance metrics had ~~three separate operating segments. After~~not yet been attained or their effect would have been anti-dilutive.

With the ~~sale,~~adoption of ASU 2020-06 on October 1, 2022, the Company is required to calculate the potential dilutive effect of its convertible instruments under the if-converted method. As disclosed in our fiscal 2022 Form 10-K filed on September 8, 2023, the Company has ~~two operating segments, GCS representing~~been using the if-converted method to calculate the dilutive impact of its convertible instruments since the third quarter of fiscal 2022. The use of the if-converted method in the current period does not impact the comparability of diluted earnings per share for the three months ended December 31, 2022 and 2021 as the Company's ~~products portfolio~~convertible instruments would have been anti-dilutive under both the treasury stock and ~~AGS representing the Company's services portfolio. Both GCS and Networking made up the Company’s Enterprise Collaboration Solutions ("ECS") products portfolio.~~if-converted methodologies.

15. Operating Segments

The ~~GCS~~Products & Solutions segment primarily develops, markets, and sells unified communications and collaboration and contact center solutions, offered ~~on premises,~~on-premise, in the cloud, or as a hybrid solution. These integrate multiple forms of communications, including telephony, ~~e-mail,~~email, instant messaging and video. The ~~AGS~~Services segment develops, markets and sells comprehensive end-to-end global service offerings that enable customers to evaluate, plan, design, implement, monitor, manage and optimize ~~even~~ complex enterprise communications networks. ~~The Networking segment portfolio~~Revenue from customers who upgrade and acquire new technology through the Company's subscription offerings is reported within the Services segment.

Table of ~~software and hardware products offered integrated networking products.~~Contents

The ~~Company’s~~Company's chief operating decision maker makes financial decisions and allocates resources based on segment profit information obtained from the ~~Company’s~~Company's internal management systems. Management does not include in its segment measures of profitability selling, general and administrative expenses, research and development expenses, amortization of intangible assets, and certain discrete items, such as fair value adjustments recognized upon emergence from bankruptcy, charges relating to restructuring actions, and impairment charges ~~and merger-related costs~~ as these costs are not core to the measurement of segment performance, but rather are controlled at the corporate level.

Summarized financial information relating to the ~~Company’s~~Company's operating segments is shown in the following table for the periods indicated:


	Three months ended December 31,
(In millions)	2022		2021
REVENUE
Products & Solutions	$	136	$	231
Services	282		482

	418		713
GROSS PROFIT
Products & Solutions	66		120
Services	117		291
Unallocated Amounts(1)	(35)		(42)
	148		369
OPERATING EXPENSES
Selling, general and administrative	221		262
Research and development	50		61
Amortization of intangible assets	39		40
Impairment charges	9		—
Restructuring charges, net	10		7
	329		370
OPERATING LOSS	(181)		(1)
INTEREST EXPENSE AND OTHER (EXPENSE) INCOME, NET	(9)		(47)
LOSS BEFORE INCOME TAXES	$	(190)	$	(48)

Successor Predecessor
(In millions) Period from December 16, 2017 through December 31, 2017 Period from October 1, 2017 through December 15, 2017 Three months ended December 31, 2016
REVENUE
Global Communications Solutions $ 71
$ 253
$ 343
Avaya Networking ⁽¹⁾
—
—
58
Enterprise Collaboration Solutions 71
253
401
Avaya Global Services 77
351
474
$ 148
$ 604
$ 875
GROSS PROFIT
Global Communications Solutions $ 41
$ 169
$ 231
Avaya Networking ⁽¹⁾
—
—
25
Enterprise Collaboration Solutions 41
169
256
Avaya Global Services 50
196
284
Unallocated Amounts⁽²⁾
(13 ) (3 ) (5 )
78
362
535
OPERATING EXPENSES
Selling, general and administrative 50
264
336
Research and development 9
38
62
Amortization of intangible assets 7
10
57
Restructuring charges, net 10
14
10
76
326
465
OPERATING INCOME 2
36
70
INTEREST EXPENSE, OTHER (EXPENSE) INCOME, NET AND REORGANIZATION ITEMS, NET (11 ) 3,400
(170 )
(LOSS) INCOME BEFORE INCOME TAXES $ (9 ) $ 3,436
$ (100 )

⁽¹⁾~~The Networking business was sold on July 14, 2017.~~

⁽²⁾Unallocated ~~Amounts~~amounts in Gross Profit ~~include~~reflect the effect of the amortization of technology ~~intangibles and costs that are not core to the measurement~~intangible assets.

Table of ~~segment management’s performance, but rather are controlled at the corporate level.~~Contents


~~18.~~	~~Accumulated Other Comprehensive Loss~~

16. Accumulated Other Comprehensive Income (Loss)

The components of ~~accumulated~~Accumulated other comprehensive income (loss) for the periods indicated ~~are summarized~~were as follows:


(In millions)	Pension, Post-retirement and Post-employment Benefit-related Items		Foreign Currency Translation		Unrealized Gain on Interest Rate Swaps		Accumulated Other Comprehensive Income
Balance as of September 30, 2022	$	151	$	1	$	80	$	232
Other comprehensive loss before reclassifications	—		(14)		—		(14)
Amounts reclassified to earnings	(6)		—		(62)		(68)
Provision for income taxes	—		—		(18)		(18)
Balance as of December 31, 2022	$	145	$	(13)	$	—	$	132


(In millions)	Change in unamortized pension, post-retirement and postemployment benefit-related items			Foreign Currency Translation			Other			Accumulated Other Comprehensive Income (Loss)			(In millions)	Pension, Post-retirement and Post-employment Benefit-related Items		Foreign Currency Translation		Unrealized Loss on Interest Rate Swaps		Accumulated Other Comprehensive Loss
Beginning balance September 30, 2016 (Predecessor)	$	(1,627	)	$	(33	)	$	(1	)	$	(1,661	)
Balance as of September 30, 2021													Balance as of September 30, 2021	$	(20)	$	(37)	$	(34)	$	(91)
Other comprehensive income before reclassifications	—			19			—			19			Other comprehensive income before reclassifications	—		13		15		28
Amounts reclassified to earnings	20			—			—			20			Amounts reclassified to earnings	(1)		—		13		12
(Provision for) benefit from income taxes	(6		)	4			—			(2		)
Ending balance December 31, 2016 (Predecessor)	$	(1,613	)	$	(10	)	$	(1	)	$	(1,624	)

Balance as of December 31, 2021													Balance as of December 31, 2021	$	(21)	$	(24)	$	(6)	$	(51)

Table of Contents


Item 2.			Management's Discussion and Analysis of Financial Condition and Results of Operations

~~Item 2.Management’s~~Unless the context otherwise indicates, as used in this "Management's Discussion and Analysis of Financial Condition and Results of ~~Operations.~~

~~Unless the context otherwise indicates, as used in this “Management’s Discussion and Analysis of Financial Condition and Results of~~ Operations,”" the terms ~~“we,” “us,” “our,” “the~~"we," "us," "our," "the Company,~~” “Avaya”~~" "Avaya" and similar terms refer to Avaya Holdings Corp. and its consolidated subsidiaries. ~~“Management’s~~The following Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations”~~Operations is intended to help the reader understand the results of operations and financial condition of the Company.Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited interim Condensed Consolidated Financial Statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q and our Consolidated Financial Statements and other financial information for the fiscal year ended September 30, ~~2017, which were~~2022, included in our ~~Registration Statement~~Annual Report on Form ~~10 Amendment No. 3~~10-K for the fiscal year ended September 30, 2022 filed with the ~~SEC~~United States Securities and Exchange Commission ("SEC") on ~~January 10, 2018.~~September 8, 2023.

Our accompanying unaudited interim Condensed Consolidated Financial Statements ~~as of~~ ~~December 31, 2017~~ and for the period from December 16, 2017 through December 31, 2017 (Successor), the period from October 1, 2017 through December 15, 2017 (Predecessor) and the three months ended December 31, 2016 (Predecessor) have been prepared in accordance with accounting principles generally accepted in the United States of America ~~(“GAAP”~~("GAAP") and the rules and regulations of the ~~United States Securities and Exchange Commission ("SEC")~~SEC for interim financial statements. In our opinion, the unaudited interim Condensed Consolidated Financial Statements reflect all adjustments, consisting of normal and recurring adjustments, ~~as well as fresh start and reorganization adjustments,~~ necessary to ~~present~~state fairly the financial position, results of operations and cash flows for the periods indicated.

~~The matters discussed~~ Capitalized terms used in ~~“Management’s~~this Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations”~~Operations not otherwise defined have the meaning given to them in the notes to the Company’s unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.

The matters discussed in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. See ~~“Cautionary~~"Cautionary Note Regarding Forward-Looking ~~Statements”~~Statements" at the end of this discussion.

Overview

Avaya is a global leader in ~~digital~~ communications ~~software,~~products, solutions and services ~~and devices~~ for businesses of all ~~sizes. Our~~sizes, delivering technology predominantly through software and services. We enable organizations worldwide to succeed by creating intelligent communications experiences for our clients, their employees and their customers. Avaya is building innovative open, ~~intelligent and customizable solutions for~~converged contact ~~centers~~center ("CC") and unified communications and collaboration ("UCC") software solutions to enhance and simplify communications and collaboration in the cloud, on-premises or as a hybrid of both. We offer hardware and gateway solutions, including devices that enhance collaboration and productivity, and position organizations to incorporate future technological advancements.

Our global, experienced team of professionals delivers award-winning services from initial planning and design, to seamless implementation and integration, to ongoing managed operations, optimization and support. We also help clients customize and personalize our software solutions to address their specific needs.

Businesses are built by the ~~flexibility~~experiences they provide, and Avaya solutions deliver millions of ~~Cloud,~~those experiences globally every day. With a global install base including many of the largest enterprise customers with the most complex needs, Avaya is shaping the future of businesses and workplaces, with innovation and partnerships that power tangible business results. Our communications solutions power tailored, effortless customer and employee experiences that enable our clients to effectively engage and interact with each other and with their customers.

In serving both our existing and new customers across verticals, Avaya is uniquely positioned to meet customers where they are in their digital transformation and journeys to cloud communications, so they can innovate without disruption to gain the benefit of high-value cloud capabilities. We offer a full range of software sales and licensing models that can be deployed on-premises ~~and~~or via a public/multi-tenant cloud, private/dedicated instance cloud or as a hybrid ~~deployments. Avaya shapes intelligent connections and creates seamless communication experiences for~~cloud solution. With our open, extensible development platform, customers and third parties can create custom applications and automated workflows for their ~~customers. Our professional planning, support~~unique needs and ~~management services teams help optimize solutions, for highly reliable~~integrate Avaya’s capabilities into the customer's existing infrastructure and ~~efficient deployments.~~business applications. Our solutions ~~fall under~~enable a seamless communications experience that adapts to how employees work, instead of changing how they work.

Operating Segments

The Company has two operating segments:Products & Solutions and Services.

~~Global Communication~~Products & Solutions ~~("GCS")~~

Products & Solutions encompasses our ~~real-time collaboration~~CC and UCC software platforms, applications and devices, including cloud-based solutions ~~for unified communications~~embedded with Artificial Intelligence ("AI") to create enhanced user experiences and contact center offerings to drive exceptional customer experiences. We take a cloud-first approach with a fully open architecture that supports flexibility, reliability, security and scaling so customers can move to the cloud in a way that best meets their specific needs. Avaya omnichannelimprove performance.

•Contact Center: Avaya’s industry-leading contact center solutions ~~that~~ enable ~~customers~~clients to build a customized portfolio of applications to drive stronger customer engagement and ~~promote~~ higher customer lifetime value. Our ~~highly~~ reliable, secure and

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scalable ~~communications-centric~~communications solutions include voice, ~~e-mail,~~email, chat, social media, video, ~~performance management~~workforce engagement and ~~ease of~~ third-party integration that can improve customer service and help companies compete more effectively.

~~Our unified communications~~Avaya delivers Contact Center as a Service ("CCaaS") solutions ~~help companies increase employee productivity, improve customer service~~for cloud deployment, and ~~reduce costs~~we continue to support enterprises with world-class premises-based solutions and add new value by ~~integrating multiple forms of communications, including telephony, e-mail, instant messaging~~complementing this highly dependable infrastructure with new capabilities from the cloud. We continue to integrate AI and video. Avaya embeds communications directly into the applications, browsers and devices employees use every day to create a single, powerful gateway for voice, video, messaging, conferencing and collaboration. We free people from their desktop and give them a more natural and efficient way to connect, communicate and share when, where and how they want.

This operating segment also includes an open, extensible development platform, so that our customers and third parties can easily adapt our technology by creating custom applications and automated workflows for their unique needs, integrating Avaya’sautomation capabilities into our portfolio, providing our clients a deeper understanding of their ~~existing infrastructure~~customers’ needs with a robust and ~~business applications.~~secure platform.

•Unified Communications: Avaya ~~Global Services ("AGS")~~ ~~includes professional~~communications and collaboration solutions support ~~services designed~~hybrid working environments, empowering teams with fast, always-on continuous collaboration from anywhere. Employees can communicate in context with better access to ~~help our customers maximize the benefits~~communication tools and better quality of our solutions. Our global, experienced professional services team helps maximize customer investments in collaborative communications, with services from initial planning and design, to seamless implementation, to integration and ongoing optimization. We help customers use communications to help ~~minimize risk, enable people, and~~ deliver ~~a differentiated customer experience.~~greater business impacts.

Avaya ~~also~~multi-tenant cloud-based UCaaS solutions integrate chat, file sharing and task management with real-time collaboration including calling, meetings and content sharing for distributed team productivity. Avaya offers ~~every level~~Avaya Cloud Office in partnership with RingCentral, giving customers looking to replace outdated or disparate legacy telephony systems with a simple, comprehensive communications solution. Our on-premises Unified Communications ("UC") solutions, IP Office for midmarket clients and Avaya Aura for enterprise clients continue to deliver high reliability and functionality that is preferred in a variety of situations, including specific verticals, or where connectivity may be an issue.

Services

Complementing our product and solutions portfolio is an award-winning global services portfolio, delivered by Avaya and our extensive partner ecosystem. Within our services portfolio, we utilize a variety of formal survey and customer feedback mechanisms to drive continuous improvement and streamlined process automation, with a focus on constantly increasing our value to customers. Our innovative offerings provide solutions for new clients who want to directly utilize our cloud solutions, support for clients who have the need for hybrid cloud solutions that maximize the value their on-premises systems can deliver, and flexible migration paths for our premises-based customers. This is delivered and supported by:

•Professional Services enable our customers to take full advantage of their IT and communications ~~solutions,~~solution investments to drive measurable business results. Avaya has repositioned its professional services organization to focus on go-forward customer needs. The new Avaya Customer Experience Service ("ACES") brings our depth of experience as our experts partner with ~~award-winning~~customers and guide them along each step of the solution lifecycle to deliver services that add value and drive business transformation — including journey to cloud consulting services. The role of professional services organizations changes in a cloud world, moving from implementations to cloud migration. ACES takes a client-led approach to bring the expertise and practice areas that help clients define the choices and pace for ~~implementation, deployment, training, monitoring, troubleshooting~~their journey, based on their priorities for experiences and ~~optimization,~~outcomes. Importantly, organizations can bring forward the customizations they have built over the years and ~~more. Our pro-active, preventative monitoring~~add new value with AI and cloud capabilities. Most of ~~system performance~~our professional services revenue is non-recurring in nature.

•Enterprise Cloud and the ability to quickly find and fix problems help keep customer communications running optimally. Remote diagnostics and resolutions help us rapidly resolve potential problems, saving time and reducing risk of an outage.

~~This operating segment also includes our private cloud and managed services, which~~Managed Services enable customers to take advantage of our technology via the cloud, on-premises solutions or in a ~~private, public or~~ hybrid ~~(i.e., mix~~ of ~~on-premises, private and/or public) cloud environment,~~both, depending on ~~solution~~the system and the needs of the customer. Avaya focuses on customer ~~needs. The majority~~performance and growth, encompassing software releases, operating customer cloud, premise or hybrid-based communication systems and helping customers migrate to next-generation business communications environments. Most of our enterprise cloud and managed services revenue ~~in this reporting segment~~ is recurring in nature and based on multi-year services contracts.

•Global Support Services help businesses protect their technology investments and address the risk of business-impacting outages. Understanding that agility and high availability are critical to maintain or gain competitive advantage, we facilitate those capabilities through proactive problem prevention, rapid resolution, continual solution optimization, and we increasingly leverage automation to onboard and manage a customer’s communications infrastructure, for faster, more effective deployments from proof of concept to production, and ever-increasing automation. Our subscription offering sets a foundation for continually evolving the customer experience by providing access to future capabilities and solution enhancements. Most of our global support services revenue is recurring in nature.

Through our comprehensive services, we support our customers' ability to fully leverage our technology and maximize their business results. Our solutions drive employee productivity improvements and a differentiated customer experience.

Our services teams help our customers maximize their ability to benefit from Avaya's next-generation communications solutions. Customers can choose the level of support best suited for their needs, aligned with deployment, monitoring, solution management, optimization and more. Our enhanced performance monitoring, coupled with a continuous focus on automation allows us to quickly identify and remediate issues to avoid business impact.

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Recent Developments

As previously disclosed, on February 14, 2023 (the “Petition Date”), Avaya Holdings and certain of its direct and indirect subsidiaries (the “Debtors”) entered into a Restructuring Support Agreement (the “RSA”) with certain of its creditors and RingCentral which contemplated the Plan.

On the Petition Date, the Debtors commenced the Chapter 11 Cases in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”). The Chapter 11 Cases were jointly administered under the caption In re Avaya Inc., et al., case number 23-90088.

The Bankruptcy Court confirmed the Plan on March 22, 2023 and the Debtors satisfied all conditions required for Plan effectiveness and emerged from the Chapter 11 Cases on May 1, 2023.

Upon Emergence, the Debtors reduced their total debt by more than 75%, and increased their liquidity position to over $650 million.

See Note 1, “Background and Basis of Presentation,” Note 7, "Financing Arrangements," and Note 19, "Subsequent Events," to our unaudited Condensed Consolidated Financial Statements for additional information on the Chapter 11 Cases as well as:

▪the Board and Audit Committee Investigations;

▪the Chapter 11 Filing;

▪the Restructuring Support Agreement;

▪the Automatic Stay;

▪the Plan;

▪the Debtor in Possession Financing and Exit Financing;

▪the NYSE Delisting; and

▪the Emergence from Voluntary Reorganization under Chapter 11 of the Bankruptcy Code.

Cost-Cutting Initiative

Since July ~~14, 2017,~~2022, the Company ~~sold its former networking business~~has initiated a number of cost-cutting measures that are expected to ~~Extreme Networks, Inc. (“Extreme”). Prior~~primarily impact the Company’s overall selling, general and administrative expenses, as well as discretionary spending, including but not limited to ~~the~~

~~sale,~~reductions in force with respect to employees globally aimed at aligning the ~~networking business was a separate operating segment comprised of certain assets~~size of the Company’s ~~Networking~~

~~segment, along~~workforce with the ~~maintenance~~Company’s operational strategy and ~~professional services~~cost structure. As a result of these cost-cutting actions, the ~~networking business,~~Company expects to generate more than $500 million in annual cost reductions. The Company has commenced these actions which ~~were part~~began to yield quantifiable savings in the first quarter of ~~the AGS~~

~~segment. Networking included advanced fabric networking technology, which offered a unique end-to-end virtualized~~

~~architecture network designed~~fiscal 2023 and are expected to be ~~simple~~completed in fiscal 2024.

OneCloud Business Updates

During the first quarter of fiscal 2022, the Company executed a OneCloud arrangement for a large global financial institution with an estimated total contract value at that time in excess of $400 million over a term of up to ~~deploy. This operating segment also included software~~7 years. The contract was subsequently canceled during the fourth quarter of fiscal 2022. As a result, in the fourth quarter of fiscal 2022 the Company recognized revenue of $14 million and ~~hardware products~~

~~such as ethernet switches, wireless networking, access control,~~expenses of $22 million, which includes impairment of fixed assets, acceleration of previously deferred costs and ~~unified management and orchestration solutions, which~~

~~provided network and device management. Accordingly, after the sale of the networking business, our operating segments~~

~~consist solely of GCS and AGS.~~

other third party costs, associated with this arrangement.

Factors and Trends Affecting Our Results of Operations

There are ~~a number of~~several trends and uncertainties affecting our business. ~~For example,~~Most importantly, we are dependent on general economic conditions, ~~and~~ the willingness of our customers to invest in technology. In addition, instability in the geopolitical environment of our customers, instability in the global credit markets and other disruptions put pressure on the global economy causing uncertainties. We are also affected by the impact of foreign currency exchange rates on our business. We believe these uncertainties have impacted our customers’ willingness to spend on ITtechnology and the manner in which ~~they~~our customers procure such ~~technologies~~technology and services.

Industry Trends

Cloud Growth and Migration:

•Growth in cloud-based technologies continues as businesses focus on digital transformation projects. This ~~includes delays~~expansion of cloud delivery of software applications and management of varied devices in turn leads to an increasing demand for reliability and security.

•Even with the growing contact center market conversion to cloud, on-premises solutions remain a meaningful share of the market, estimated at ~48% in 2026.

•While companies seek innovation, they also want to avoid disruption. The ability to add modular innovation over the top of existing systems can drive significant value, enabling them to transform in a phased approach. This preference

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for a hybrid approach that mitigates risk favors vendors that have a large install base of customers with dependable technology in place.

•With the increasing overlap between CC and UCC, driven by customer workflows and the need to bring the back office into the frontline of the company, platforms that deliver integrated CCaaS and UCaaS are the foundation of next-generation business communications solutions. A converged, integrated offering for next-generation communications capabilities delivered across a host of mobile devices, and multiple communication and customer service channels bridges what has typically been siloed CC and UCC applications into one powerful tool.

Hybrid/Distributed Workforce:

•A clear priority is the business need to support individuals' expectations for flexible, multi-channel communications and remote and hybrid work styles that have arisen out of the COVID-19 pandemic. The global pandemic altered the way employees and end customers interact and engage, resulting in broad impacts to the ways businesses approach their internal and customer-facing communications planning and platforms.

•Evolving hybrid work environments highlight the need for organizations to ensure consistent collaboration experiences in unpredictable situations, regardless of workers' locations or ~~rejection~~time zones. Avaya solutions are well positioned to enable this work from anywhere approach while maintaining security, reliability and scalability requirements.

•Businesses plan to modify their use of ~~capital projects, including~~office space to accommodate hybrid and remote work. Modifications will include space reduction, implementing hot-desking and hoteling solutions and equipping shared spaces and meeting rooms for video conferencing with remote participants. Video conferencing and collaboration solutions are an integral part of the ~~implementation~~changing office environment.

The Rise of Artificial Intelligence:

•Automation through AI solutions is driving improved customer and employee experiences. Conversational AI infused in contact center solutions will improve operational efficiencies and customer experiences leading to accelerated contact center platform replacements. AI enhancements also improve the meeting and collaboration experience between in-person and remote meeting participants. Video applications are increasingly being infused with virtual assistants, smart transcription and translation, and facial recognition.

•Extreme automation is fueling simplicity. Although the enabling technologies in our sector are becoming more complex, their use in contact center applications is driving increased simplicity for organizations and their employees. Simplicity in operations, engagement, customer intelligence and customer experience form the root of the innovation happening in our space.

Growth of the Experience Economy:

•The experience economy continues to grow. The experience economy is based on the concept that experience is a key source of value — it is a differentiator that creates a competitive advantage for products and services. ~~In addition,~~As consumers embrace new technologies and devices in creative ways and at an accelerating pace, Avaya is continuing to invest in AI-powered solutions delivered through cloud and subscription models to create "experiences that matter" for customers, employees and agents. This increased adoption and deployment of AI is providing significant new opportunities for enhanced CC and UCC solutions that improve the customer experience and transform the digital workplace communications and workflows.

Russia/Ukraine Conflict

The military operation launched by Russia against Ukraine created economic and security concerns that have had and will likely continue to have an impact on regional and global economies and, in turn, our business. Sanctions and other retaliatory measures against Russia have been taken, and could be taken in the future, by the U.S., EU (as defined herein) and other jurisdictions which severely limit our ability to conduct commercial activities with Russian companies, organizations and individuals on the U.S.'s List of Specially Designated Nationals, some of which are Avaya customers. Under current restrictions we cannot provide certain services to customers in Russia, and as ~~further explained below,~~a result, as we ~~believe there is a growing market trend around cloud consumption preferences~~comply with ~~more~~all applicable sanctions, we are unable to fulfill certain of our existing contractual obligations to customers ~~exploring operating expense models as opposed to capital expenditure (“CapEx”) models for procuring technology. We believe the market trend toward cloud models~~in Russia, nor can we commence new maintenance and support arrangements in Russia. The conflict and related retaliatory measures have had, and will continue ~~as customers seek ways~~to have, a negative effect on revenue in Russia for the foreseeable future. Revenue from Russia during the three months ended December 31, 2022 was $2 million, compared to revenue of ~~reducing their fixed overhead and other costs.~~

We continue to evolve into a software and services business and focus our go-to-market efforts by introducing new solutions and innovations, particularly on workflow automation, multi-channel customer engagement and cloud-enabled communications applications. These include Avaya Oceana®, Avaya Oceanalytics™, Avaya Equinox®, Avaya® Enterprise Private Cloud and Zang® Cloud. We also launched a next-generation desktop device, Avaya Vantage™.

As a result of a growing market trend preferring cloud consumption, more customers are exploring subscription and pay-per-use based models, rather than CapEx models, for procuring technology. The shift to subscription and pay-per-use models enables customers to manage costs and efficiencies by paying a subscription or per minute or per message fee for business communications services rather than purchasing$17 million during the ~~underlying products and services, infrastructure and personnel, which are owned and managed by~~three months ended December 31, 2021. Prolonged hostilities could exacerbate the equipment vendor or a cloud and managed services provider. We believe the market trend toward these flexible consumption models will continue as we see an increasing number of opportunities and requests for proposal based on subscription and pay-per-use models. This trend has driven an increase in the proportion of total Company revenues attributable to software and services.

In addition, we believe customers are moving away from owned and operated infrastructure, preferring cloud offerings and virtualized server defined networks, which provide us with reduced associated maintenance support opportunities. Despite the benefits of a robust indirect channel, which include expanding our sales reach, our channel partners have direct contact with our customers that may foster independent relationships between them and a loss of certain services agreements for us. We have been able to offset these impacts by focusing on utilizing partners in a sales agent relationship, whereby partners perform selling activities but the contract remains with Avaya. We are also offering higher-value services in support of our software offerings, such as professional services and cloud-managed services, which are not traditionally provided by our channel partners.

The Company has maintained its focus on profitability levels and investing in future results. As the Company continues its transformation to a software and service-led organization, it has implemented programs designed to streamline its operations, generate cost savings and eliminate overlapping processes and resources. These cost savings programs include: (1) reducing headcount, (2) eliminating real estate costs associated with unused or under-utilized facilities and (3) implementing gross margin improvement and other cost reduction initiatives. The Company continues to evaluate opportunities to streamline its operations and identify cost savings globally and may take additional restructuring actions in the future. The costs of those actions could be material.

~~Emergence from Bankruptcy~~

On January 19, 2017 (the "Petition Date"), Avaya Holdings Corp., together with certain of its affiliates (collectively, the "Debtors"), filed voluntary petitions for relief (the "Bankruptcy Filing") under Chapter 11overall effects of the ~~United States Bankruptcy~~conflict on our Company, both in Russia and in other markets where we do business.

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~~Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District~~Effects of ~~New York (the "Bankruptcy Court").~~Inflation

On November 28, 2017, the Bankruptcy Court entered an order confirming the Second Amended Joint Plan of Reorganization filed by the Debtors on October 24, 2017 (the "Plan of Reorganization"). On December 15, 2017 (the "Emergence Date"), the Plan of Reorganization became effective and the Debtors emerged from bankruptcy.

~~In accordance with the Plan of Reorganization, the following significant transactions occurred on the Emergence Date:~~

The ~~Company paid in full amounts outstanding under the debtor-in-possession credit agreement (the "DIP Credit Agreement").~~

The Debtors' obligations under stock certificates, equity interests, and / or any other instrument or document directly or indirectly evidencing or creating any indebtedness or obligation of, or ownership interest in, the Debtors or giving riseCompany’s operations expose it to ~~any claim or equity interest were cancelled, except as provided under the Plan of Reorganization;~~

The Company's certificate of incorporation was amended and restated to authorize the issuance of 605.0 million shares of stock, consisting of 55.0 million shares of preferred stock, par value $0.01 per share, and 550.0 million shares of common stock, par value $0.01 per share;

The Company entered into a term loan credit agreement (the "Term Loan Credit Agreement") with a principal amount of $2,925 million and a $300 million asset-based revolving credit facility (the "ABL Credit Agreement");

The Company issued 99.3 million shares of Successor Company common stock to the holders of the Predecessor's first lien obligations that was extinguished in the bankruptcy. In addition, these holders received $2,061 million in cash;

The Company issued 4.4 million shares of Successor Company common stock to the holders of the Predecessor's second lien obligations that was extinguished in the bankruptcy. In addition, these holders received warrants to purchase 5.6 million shares of Successor Company common stock at an exercise price of $25.55 per warrant (the "Warrants");

~~The Company issued 6.1 million shares of Successor Company common stock to the Pension Benefit Guaranty Corporation ("PBGC"). In addition, the PBGC received $340 million in cash; and~~

The Debtors established a liquidating trust in the amount of $58 million for the benefit of general unsecured creditors. In addition, the Company issued 0.2 million additional shares of Successor Company common stock for the benefit of its former general unsecured creditors. The general unsecured creditors will receive a total of $58 million in cash and these shares of common stock. Any excess cash and / or common stock not distributed to the general unsecured creditors will be distributed to the holders of the Predecessor first lien obligations.

Upon emergence from bankruptcy on December 15, 2017, the Company applied fresh start accounting, which resulted in a new basis of accounting and the Company becoming a new entity for financial reporting purposes. As a result of the application of fresh start accounting and the effects of inflation. Inflation has become a significant factor in the ~~implementation of~~world economy post-pandemicand has led to an increased interest rate environment as well as inflationary pressures on the ~~Plan of Reorganization, the consolidated financial statements after December 15, 2017 are~~Company’s operations, including but not ~~comparable with the consolidated financial statements on or prior~~limited to ~~that date. Refer to Note 5, "Fresh Start Accounting," to our unaudited interim Condensed Consolidated Financial Statements for further details.~~increased labor and finance costs.

Financial Results Summary

Our financial results for the period October 1, 2017 through December 15, 2017 are referred to as those of the “Predecessor” period. Our financial results for the period December 16, 2017 through December 31, 2017 are referred to as those of the “Successor” period. Our results of operations as reported inThe following table displays our Condensed Consolidated Financial Statements for these periods are in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Although GAAP requires that we report on our results for the periods October 1, 2017 through December 15, 2017 and December 16, 2017 through December 31, 2017 separately, management views the Company’s operating resultsconsolidated net loss for the three months ended December 31, ~~2017 by combining the results of the Predecessor~~2022 and ~~Successor periods because such presentation provides the most meaningful comparison of our results to prior periods.~~2021:


	Three months ended December 31,
(In millions)	2022		2021
REVENUE
Products	$	136	$	231
Services	282		482
	418		713
COSTS
Products:
Costs	70		111
Amortization of technology intangible assets	35		42
Services	165		191
	270		344
GROSS PROFIT	148		369
OPERATING EXPENSES
Selling, general and administrative	221		262
Research and development	50		61
Amortization of intangible assets	39		40
Impairment charges	9		—
Restructuring charges, net	10		7
	329		370
OPERATING LOSS	(181)		(1)
Interest expense	(5)		(54)
Other (expense) income, net	(4)		7
LOSS BEFORE INCOME TAXES	(190)		(48)
Benefit from (provision for) income taxes	26		(18)
NET LOSS	$	(164)	$	(66)

~~The Company cannot adequately benchmark the operating results of the 16-day period~~

Three months ended December 31, 2017 against any of the previous periods reported in its Condensed Consolidated Financial Statements and does not believe that reviewing the results of this period in isolation would be useful in identifying any trends in or reaching any conclusions regarding the Company’s overall operating performance. Management believes that the key performance metrics such as revenue, gross margin and operating income for the Successor period when combined2022 compared with the ~~Predecessor period from October 1, 2017 through~~Three months ended December 15, 2017 provide more meaningful comparisons to other periods and are useful in identifying current business trends. Accordingly, in addition to presenting our results of operations as reported in our Condensed Consolidated Financial Statements in accordance with GAAP, the table below also presents the combined results31, 2021

Revenue

Revenue for the three months ended December 31, ~~2017, which is considered non-GAAP.~~

~~The combined results~~2022 was $418 million compared to $713 million for the three months ended December 31, ~~2017 represent~~2021. The decrease was primarily driven by the ~~sum~~cumulative effect of the ~~reported amounts for the Predecessor period~~continuing shift away from ~~October 1, 2017 through December 15, 2017~~on-premise product solutions, and the ~~Successor period~~associated maintenance, software support services and professional services, to subscription and cloud-based solutions; lower revenue from ~~December 16, 2017 through December 31, 2017. These combined results do not comply with GAAP~~hardware products; the negative impact from various sanctions and have not been prepared as pro forma results under applicable regulations, but are presented because we believe they provide the most meaningful comparison of our results to prior periods. The combined operating results may not reflect the actual results we would have achieved absent our emergence from bankruptcy and may not be indicative of future results.

~~The following table displays our consolidated net income (loss) for the periods indicated:~~

Successor Predecessor Non-GAAP Combined Predecessor
(In millions) Period from December 16, 2017 through December 31, 2017 Period from October 1, 2017 through December 15, 2017 Three Months Ended December 31, 2017 Three months ended December 31, 2016
REVENUE
Products $ 71
$ 253
$ 324
$ 401
Services 77
351
428
474
148
604
752
875
COSTS
Products:
Costs 33
84
117
145
Amortization of technology intangible assets 7
3
10
5
Services 30
155
185
190
70
242
312
340
GROSS PROFIT 78
362
440
535
OPERATING EXPENSES
Selling, general and administrative 50
264
314
336
Research and development 9
38
47
62
Amortization of intangible assets 7
10
17
57
Restructuring charges, net 10
14
24
10
76
326
402
465
OPERATING INCOME 2
36
38
70
Interest expense (9 ) (14 ) (23 ) (174 )
Other (expense) income, net (2 ) (2 ) (4 ) 4
Reorganization items, net —
3,416
3,416
—
(LOSS) INCOME BEFORE INCOME TAXES (9 ) 3,436
3,427
(100 )
Benefit from (provision for) income taxes 246
(459 ) (213 ) (3 )
NET INCOME (LOSS) $ 237
$ 2,977
$ 3,214
$ (103 )

~~Three Months Ended December 31, 2017 combined results compared to the~~ ~~Three Months Ended December 31, 2016~~

~~Revenue~~

~~Revenue decreased in the first three months of fiscal 2018 primarily as the result of lower demand for products and services due to extended procurement cycles~~other retaliatory measures against Russia resulting from the ~~Bankruptcy Filing, the sale of the Networking business in July 2017~~Russia/Ukraine conflict; and the unfavorable impact of ~~fresh start accounting following~~foreign currency exchange rates. In addition, the ~~Emergence Date. The lower demand for our unified communications, contact center and networking products has contributed, in part,~~Company's subscription revenue declined due to lower ~~maintenance services~~rates of migrations and shorter contract durations. The decrease was partially offset by higher revenue from the Company's public and private cloud ~~and managed services revenue.~~offerings.

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The following table displays revenue and the percentage of revenue to total sales by operating segment for the periods indicated:


					Percentage of Total Revenue				Yr. to Yr. Percentage Change		Yr. to Yr. Percentage Change, net of Foreign Currency Impact
	Three months ended December 31,				Three months ended December 31,
(In millions)	2022		2021		2022		2021
Products & Solutions	$	136	$	231	33	%	32	%	(41)	%	(40)	%
Services	282		482		67	%	68	%	(41)	%	(39)	%

Total revenue	$	418	$	713	100	%	100	%	(41)	%	(39)	%

Percentage of Total Revenue
Successor Predecessor Non-GAAP Combined Predecessor Non-GAAP Combined Predecessor Yr. to Yr. Percentage Change, net of Foreign Currency Impact
(In millions) Period from December 16, 2017 through December 31, 2017 Period from October 1, 2017 through December 15, 2017 Three Months Ended December 31, 2017 Three Months Ended December 31, 2016 Three Months Ended December 31, 2017 Three Months Ended December 31, 2016 Yr. to Yr. Percentage Change
GCS $ 71
$ 253
$ 324
$ 343
43 % 39 % (6 )% (7 )%
Networking —
—
—
58
0 % 7 % (100 )% (100 )%
Total ECS product revenue 71
253
324
401
43 % 46 % (19 )% (20 )%
AGS 77
351
428
474
57 % 54 % (10 )% (11 )%
Total revenue $ 148
$ 604
$ 752
$ 875
100 % 100 % (14 )% (15 )%

~~Our~~Products & Solutions revenue for the three months ended December 31, ~~2017~~2022 was ~~$752~~$136 million compared to ~~$875~~$231 million for the three months ended December 31, ~~2016.~~2021. The decrease was primarily driven by the continuing shift away from on-premise product solutions to the Company's subscription and cloud portfolio; lower revenue from hardware products; and the unfavorable impact of foreign currency exchange rates.

~~GCS~~Services revenue for the three months ended December 31, ~~2017~~2022 was ~~$324~~$282 million compared to ~~$343~~$482 million for the three months ended December 31, ~~2016.~~2021. The decrease ~~in GCS revenue~~ was primarily ~~attributable~~driven by declines in hardware maintenance, software support services and professional services which continue to ~~uncertainties, procurement slowdowns and extended procurement cycles resulting~~face headwinds driven by the cumulative effect of the continuing shift away from ~~the Bankruptcy Filing. As a result, there was a lower demand for endpoints, gateways, legacy Nortel and Tenovis products, SME Telephony products and servers. The decrease in GCS revenue was also due~~on-premise product solutions to the Company's subscription and cloud portfolio; and the unfavorable impact of ~~fresh start accounting on~~foreign currency exchange rates. In addition, the ~~balance of deferred~~Company's subscription revenue ~~upon emergence from bankruptcy and subsequently the recognition of revenue in the Successor period.~~

~~Networking revenue for the three months ended December 31, 2016 was $58 million. The Networking business was sold to Extreme in July 2017.~~

~~AGS revenue for the three months ended December 31, 2017 was $428 million compared to $474 million for the three months ended December 31, 2016. The decrease in AGS revenue was primarily~~declined due to lower ~~maintenance services revenue as a result~~rates of ~~the lower product sales discussed above~~migrations and ~~lower professional services revenue.~~shorter contract durations. The decrease ~~in AGS~~was partially offset by higher revenue ~~was also due to~~from the ~~impact of fresh start accounting on the balance of deferred revenue upon emergence from bankruptcy~~Company's public and ~~subsequently the recognition of related revenue in the Successor period.~~private cloud offerings.

The following table displays revenue and the percentage of revenue to total sales by location for the periods indicated:

Percentage of Total Revenue
Successor Predecessor Non-GAAP Combined Predecessor Non-GAAP Combined Predecessor Yr. to Yr. Percentage Change, net of Foreign Currency Impact
(In millions) Period from December 16, 2017 through December 31, 2017 Period from October 1, 2017 through December 15, 2017 Three Months Ended December 31, 2017 Three Months Ended December 31, 2016 Three Months Ended December 31, 2017 Three months ended December 31, 2016 Yr. to Yr. Percentage Change
U.S. $ 71
$ 331
$ 402
$ 466
53 % 53 % (14 )% (14 )%
International:
EMEA 42
166
208
234
28 % 27 % (11 )% (15 )%
APAC - Asia Pacific 19
57
76
90
10 % 10 % (16 )% (17 )%
Americas International - Canada and Latin America 16
50
66
85
9 % 10 % (22 )% (25 )%
Total International 77
273
350
409
47 % 47 % (14 )% (17 )%
Total revenue $ 148
$ 604
$ 752
$ 875
100 % 100 % (14 )% (15 )%


					Percentage of Total Revenue				Yr. to Yr. Percentage Change		Yr. to Yr. Percentage Change, net of Foreign Currency Impact
	Three months ended December 31,				Three months ended December 31,
(In millions)	2022		2021		2022		2021
U.S.	$	208	$	375	50	%	53	%	(45)	%	(45)	%
International:
Europe, Middle East and Africa	109		192		26	%	27	%	(43)	%	(38)	%
Asia Pacific	56		81		13	%	11	%	(31)	%	(27)	%
Americas International - Canada and Latin America	45		65		11	%	9	%	(31)	%	(28)	%
Total International	210		338		50	%	47	%	(38)	%	(34)	%
Total Revenue	$	418	$	713	100	%	100	%	(41)	%	(39)	%

Revenue in the U.S. for the three months ended December 31, ~~2017~~2022 was ~~$402~~$208 million compared to ~~$466~~$375 million for the three months ended December 31, ~~2016.~~2021. The decrease in the U.S. ~~revenue~~ was ~~primarily attributable to~~mainly driven by the ~~impact of fresh start accounting on~~continuing shift away from on-premise product solutions, and the ~~balance of deferred revenue upon emergence from bankruptcy and subsequently the recognition of related revenue in the Successor period, a decrease in global~~associated maintenance, software support services and professional services, to subscription and cloud-based solutions; and lower ~~sales~~revenue from hardware products. In addition, the Company's subscription revenue declined due to lower rates of ~~unified communications products including endpoints, SME Telephony,~~migrations and ~~gateways, as well as~~shorter contract durations. The decrease was partially offset by higher revenue from the ~~impact of the sale of the Networking business in July 2017.~~

Company's public and private cloud offerings.

Revenue in ~~EMEA (Europe,~~Europe, Middle East ~~Africa)~~and Africa ("EMEA") for the three months ended December 31, ~~2017~~2022 was ~~$208~~$109 million compared to ~~$234~~$192 million for the three months ended December 31, ~~2016.~~2021. The decrease in EMEA ~~revenue~~ was ~~primarily attributable to the impact of the sale of the Networking business in July 2017, partially offset~~mainly driven by the ~~favorable~~continuing shift away from on-premise product solutions, and the associated hardware maintenance, software support services and professional services, to subscription and cloud-based solutions; lower revenue from hardware products; the negative impact from various sanctions and other retaliatory measures against Russia resulting from the Russia/Ukraine conflict; and the unfavorable impact of foreign ~~currency.~~ currency exchange rates. In addition, the Company's subscription revenue declined due to lower rates of migrations and shorter contract durations.

Revenue in ~~APAC~~Asia Pacific ("APAC") for the three months ended December 31, ~~2017~~2022 was ~~$76~~$56 million compared to ~~$90~~$81 million for the three months ended December 31, ~~2016.~~2021. The decrease in APAC revenue was ~~primarily attributable~~mainly driven by the continuing shift away from on-premise product solutions, and the associated hardware maintenance, software support services and professional services, to subscription and cloud-based solutions; lower revenue from hardware products; and to the unfavorable impact of foreign currency exchange rates. In addition, the ~~sale~~Company's subscription revenue declined due to lower rates of ~~the Networking business in July 2017~~migrations and ~~lower revenue associated with professional and support services.~~ shorter contract durations.

Table of Contents

Revenue in Americas International for the three months ended December 31, ~~2017~~2022 was ~~$66~~$45 million compared to ~~$85~~$65 million for the three months ended December 31, ~~2016.~~2021. The decrease in Americas International revenue was ~~primarily attributable~~mainly driven by the continuing shift away from on-premise product solutions, and the associated hardware maintenance, software support services and professional services, to subscription and cloud-based solutions; lower revenue from hardware products; and to the ~~sale~~unfavorable impact of foreign currency exchange rates. In addition, the ~~Networking business in July 2017~~Company's subscription revenue declined due to lower rates of migrations and ~~lower sales of unified communications products including endpoints, SME Telephony, and gateways.~~

We sell our products directly to end users and through an indirect sales channel. The following table sets forth a comparison of revenue from sales of products by channel and the percentage of product revenue from sales of products by channel for the periods indicated:

Percentage of Total Revenue
Successor Predecessor Non-GAAP Combined Predecessor Non-GAAP Combined Predecessor Yr. to Yr. Percentage Change, net of Foreign Currency Impact
(In millions) Period from December 16, 2017 through December 31, 2017 Period from October 1, 2017 through December 15, 2017 Three Months Ended December 31, 2017 Three Months Ended December 31, 2016 Three Months Ended December 31, 2017 Three months ended December 31, 2016 Yr. to Yr. Percentage Change
Direct $ 17
$ 80
$ 97
$ 99
30 % 25 % (2 )% (5 )%
Indirect 54
173
227
302
70 % 75 % (25 )% (25 )%
Total ECS product revenue $ 71
$ 253
$ 324
$ 401
100 % 100 % (19 )% (20 )%
shorter contract durations.

Gross Profit

The following table sets forth gross profit and gross margin by operating segment for the periods indicated:


					Gross Margin				Change
	Three months ended December 31,				Three months ended December 31,
(In millions)	2022		2021		2022		2021		Amount		Percent
Products & Solutions	$	66	$	120	48.5	%	51.9	%	$	(54)	(45)	%
Services	117		291		41.5	%	60.4	%	(174)		(60)	%
Unallocated amounts	(35)		(42)		(1)		(1)		7		(1)
Total	$	148	$	369	35.4	%	51.8	%	$	(221)	(60)	%

(1)Not meaningful.

Gross Margin
Successor Predecessor Non-GAAP Combined Predecessor Non-GAAP Combined Predecessor Change
(In millions) Period from December 16, 2017 through December 31, 2017 Period from October 1, 2017 through December 15, 2017 Three Months Ended December 31, 2017 Three Months Ended December 31, 2016 Three Months Ended December 31, 2017 Three months ended December 31, 2016 Amount Percent
GCS $ 41
$ 169
$ 210
$ 231
64.8 % 67.3 % $ (21 ) (9.1 )%
Networking —
—
—
25
—
43.1 % (25 ) (100.0 )%
ECS 41
169
210
256
64.8 % 63.8 % (46 ) (18.0 )%
AGS 50
196
246
284
57.5 % 59.9 % (38 ) (13.4 )%
Unallocated amounts (13 ) (3 ) (16 ) (5 )
⁽¹⁾

⁽¹⁾

(11 )
⁽¹⁾

Total $ 78
$ 362
$ 440
$ 535
58.5 % 61.1 % $ (95 ) (17.8 )%

⁽¹⁾~~Not meaningful~~

Gross profit for the three months ended December 31, 2017 was $440 million compared to $535 million for the three months ended December 31, 2016. The decrease was attributable to the impact of the sale of the Networking business in July 2017, the decrease in sales of global support services, the impact of applying fresh start accounting upon emergence from bankruptcy and lower sales of unified communications products including endpoints, SME Telephony, and gateways.

~~GCS~~Products & Solutions gross profit for the three months ended December 31, ~~2017~~2022 was ~~$210~~$66 million compared to ~~$231~~$120 million for the three months ended December 31, ~~2016.~~2021. The decrease was mainly attributable to the ~~lower sales~~decline in revenue described above. Products & Solutions gross margin decrease from 51.9% for the three months ended December 31, 2021 to 48.5% for the three months ended December 31, 2022. The decrease in margin was attributable to a less favorable product mix including a higher proportion of ~~unified communications products including endpoints, SME Telephony, and gateways, as well~~revenue from hardware as the ~~impact~~consumption of ~~applying fresh start accounting upon emergence from bankruptcy.~~higher margin software continues to shift to a subscription model.

~~Networking~~Services gross profit for the three months ended December 31, ~~2016~~2022 was ~~$25 million. The Networking business was sold to Extreme in July 2017.~~

~~AGS gross profit for the three months ended December 31, 2017 was $246~~$117 million compared to ~~$284~~$291 million for the three months ended December 31, ~~2016.~~2021. The decrease was mainly driven by the decline in revenue described above. Services gross margin decreased from 60.4% for the three months ended December 31, 2021 to 41.5% for the three months ended December 31, 2022. The decrease in ~~AGS gross profit~~margin was ~~due to a decrease~~mainly driven by lower subscription revenues, the cumulative effect of the decline in ~~sales of global~~higher margin software support services and ~~the impact~~a higher mix of ~~applying fresh start accounting upon emergence from bankruptcy.~~

lower margin cloud and partner offerings.

Unallocated amounts for the three months ended December 31, ~~2017~~2022 and ~~2016 included the effect of~~2021 include the amortization of technology ~~intangibles~~intangible assets and ~~costs that~~fair value adjustments recognized upon emergence from bankruptcy which are ~~not core to the measurement of~~excluded from segment ~~performance, but rather are controlled at the corporate level.~~gross profit.

Operating Expenses

The following table sets forth operating expenses and the percentage of operating expenses to total revenue for the periods indicated:


					Percentage of Total Revenue				Change
	Three months ended December 31,				Three months ended December 31,
(In millions)	2022		2021		2022		2021		Amount		Percent
Selling, general and administrative	$	221	$	262	52.9	%	36.7	%	$	(41)	(16)	%
Research and development	50		61		12.0	%	8.6	%	(11)		(18)	%
Amortization of intangible assets	39		40		9.3	%	5.6	%	(1)		(3)	%
Impairment charges	9		—		2.2	%	—	%	9		n/a
Restructuring charges, net	10		7		2.4	%	1.0	%	3		43	%
Total operating expenses	$	329	$	370	78.8	%	51.9	%	$	(41)	(11)	%

Percentage of Revenue
Successor Predecessor Non-GAAP Combined Predecessor Non-GAAP Combined Predecessor Change
(In millions) Period from December 16, 2017 through December 31, 2017 Period from October 1, 2017 through December 15, 2017 Three Months Ended December 31, 2017 Three Months Ended December 31, 2016 Three Months Ended December 31, 2017 Three months ended December 31, 2016 Amount Percent
Selling, general and administrative $ 50
$ 264
$ 314
$ 336
41.7 % 38.4 % $ (22 ) (7 )%
Research and development 9
38
47
62
6.3 % 7.1 % (15 ) (24 )%
Amortization of intangible assets 7
10
17
57
2.3 % 6.5 % (40 ) (70 )%
Restructuring charges, net 10
14
24
10
3.2 % 1.1 % 14
140 %
Total operating expenses $ 76
$ 326
$ 402
$ 465
53.5 % 53.1 % $ (63 ) (14 )%

~~SG&A~~Selling, general and administrative expenses for the three months ended December 31, ~~2017 was $314~~2022 were $221 million compared to ~~$336~~$262 million for the three months ended December 31, ~~2016.~~2021. The decrease was primarily attributable to lower third party, lower employee related expenses, and lower marketing and advertisement costs driven by the cost cutting initiatives undertaken beginning in fiscal 2022. The decrease was also attributable to lower stock compensation expense and the favorable impact of foreign currency exchange rates. The decrease was partially offset by advisory fees ~~incurred~~ in the ~~prior year~~current period to assist in the assessment of strategic and financial alternatives to improve the ~~Company’s~~Company's capital ~~structure~~structure.

Table of Contents

Research and ~~results from the Networking business, that was sold to Extreme in July 2017, as well as an unfavorable impact of foreign currency.~~

~~R&D~~development expenses for the three months ended December 31, ~~2017 was $47~~2022 were $50 million compared to ~~$62~~$61 million for the three months ended December 31, ~~2016.~~2021. The decrease was primarily attributable to lower third party and employee related expenses driven by the ~~results from the Networking business incurred~~cost cutting initiatives undertaken beginning in ~~the prior year period as that business was sold to Extreme in July 2017.~~fiscal 2022.

Amortization of ~~acquired~~ intangible assets for three months ended December 31, 2022 were $39 million compared to $40 million for three months ended December 31, 2021.

Impairment charges for three months ended December 31, 2022 were $9 million, consisting of a $9 million indefinite-lived intangible asset impairment charge. The Company concluded that a triggering event occurred during the three months ended December 31, ~~2017~~2022 as the Company was ~~$17 million compared~~unable to ~~$57 million for~~reach an out-of-court resolution with certain holders of the ~~three months ended~~Convertible Notes, Senior Notes, Exchangeable Notes, and the Term Loans outstanding under the Term Loan Credit Agreement, regarding one or more potential financings, refinancing, recapitalizations, reorganizations, restructurings, or investment transactions involving the Company. As a result, the Company performed an interim quantitative indefinite-lived intangible asset impairment test as of December 31, ~~2016.~~2022. The ~~decrease was~~results of the Company's impairment test indicated that the carrying amount of the Company's indefinite-lived intangible asset, the Avaya Trade Name, exceeded its estimated fair value primarily ~~attributable~~due to ~~certain customer relationships and other intangible assets that were fully amortized during~~a reduction in the Predecessor period. The carrying value of intangible assets was adjusted upon the application of fresh start accounting. See Note 6, “Goodwill and Intangible Assets - Intangible Assets” to our unaudited interim Condensed Consolidated Financial Statements for further details, including potential future amortization expense related to intangible assets.Company's revenue in its updated outlook.

Restructuring charges, net ~~for the three months ended December 31, 2017 was $24 million compared to~~were $10 million for the three months ended December 31, 2016. Restructuring charges recorded during the three months ended December 31, 2017 included employee separation costs of $13 million primarily associated with employee severance actions in the U.S. and EMEA and lease obligations of $11 million primarily in the U.S. and EMEA. The increase was primarily related to charges for employee separation costs and payments made under lease termination agreements associated with vacated facilities, particularly in EMEA and the U.S. Restructuring charges recorded during the three months ended December 31, 2016 included employee separation costs of $8 million primarily associated with employee severance actions in the U.S. and EMEA and lease obligations of $2 million primarily in EMEA.

~~Operating Income~~

~~Operating income for the three months ended December 31, 2017 was $38 million~~2022 compared to ~~$70~~$7 million for the three months ended December 31, ~~2016.~~2021. Restructuring charges during the three months ended December 31, 2022 consisted of $8 million for employee separation actions primarily in the U.S. and EMEA, and $2 million for facility exit costs as the Company optimizes its real-estate footprint. Restructuring charges for the three months ended December 31, 2021 consisted of $5 million for facility exit costs and $2 million for employee separation actions primarily in the U.S. and EMEA. The Company anticipates additional restructuring charges in fiscal 2023 in connection with the cost-cutting actions described above.

Operating Loss

Operating loss for the three months ended December 31, 2022 was $181 million compared to an operating loss of $1 million for the three months ended December 31, 2021. Our operating results for the three months ended December 31, ~~2017~~2022 as compared to the three months ended December 31, ~~2016~~2021 reflect, among other ~~things:~~things, the following items which are described in more detail above:

~~the impact of applying fresh start accounting upon emergence from bankruptcy on December 15, 2017;~~

~~during the three months ended December 31, 2016, the Company recognized $49 million in advisory fees incurred to assist in the assessment of strategic~~•lower revenue and ~~financial alternatives to improve the Company’s capital structure;~~

~~operating results from the Networking business~~gross profit for the three months ended December 31, ~~2016;~~2022; and

~~higher restructuring charges~~•lower selling, general and administrative and research and development costs for the three months ended December 31, ~~2017 primarily related to employee separation charges and lease termination agreements associated with vacated facilities particularly in Europe and the U.S.;~~

~~a favorable impact of foreign currency on our operating results; and~~

Operating income includes depreciation and amortization of $53 million and non-cash share-based compensation of $1 million for the three months ended December 31, 2017 compared to depreciation and amortization of $90 million and non-cash share-based compensation of $2 million for the three months ended December 31, 2016.2022.

Interest Expense

Interest expense for the three months ended December 31, ~~2017~~2022 was ~~$23~~$5 million as compared to ~~$174~~$54 million for the three months ended December 31, ~~2016.~~2021. The ~~three months ended December 31, 2016 included non-cash interest expense of $61 million related~~decrease was primarily attributable to the ~~accelerated amortization~~settlement of ~~debt~~the interest rate swaps and the adoption of ASU 2020-06; offset by an increase in LIBOR rates and the issuance ~~costs~~of the Exchangeable Notes, and ~~accretion of debt discount. Our Bankruptcy Filing, which constituted an event of default under our Predecessor first lien obligations and Predecessor second lien obligations, accelerated~~ the Company's payment obligations under those instruments. Consequently, all debt outstanding under our Predecessor first lien obligations and Predecessor second lien obligations were classified as liabilities subject to compromise and related unamortized deferred financing costs and debt discounts in the amount of $61 million were expensedassociated embedded derivatives during the ~~three months ended December 31, 2016. Effective January 19, 2017,~~fourth quarter of the Company ceased recording interest expense on outstanding pre-petition debt classified as liabilities subject to compromise. Contractual interest expense represents amounts due under the contractual terms of outstanding debt, including debt subject to compromise. For the period from October 1, 2017 through December 15, 2017, contractual interest expense of $94 million has not been recorded, as it was not expected to be an allowed claim under the Bankruptcy Filing. Cash interest expense for the three months ended December 31, 2017 and 2016 was $23 million and $113 million, respectively, a decrease of $90 million.fiscal 2022.

Other (Expense) Income, Net

Other (expense) income, net for the three months ended December 31, ~~2017~~2022 was $(4) million as compared to $4$7 million for the three months ended December 31, ~~2016. Other expense, net for~~2021. The decrease was mainly driven by the ~~three months ended December 31, 2017 includes~~decrease in other pension and post-retirement benefit ~~costs of $7 million~~credits and ~~a change~~an increase in ~~fair value of the Warrant liability of $5 million,~~foreign currency losses, partially offset by ~~income from the Extreme Transition Services Agreement of $3 million,~~an increase in interest income ~~of $2 million and foreign currency gains of $2 million. Other income, net for~~during the ~~three months ended December 31, 2016 includes net foreign currency gains of $11 million partially offset by other pension and post-retirement benefit costs of $6 million.~~current period.

~~Beginning in fiscal 2018, the Company adopted ASU No. 2017-07, "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-retirement~~ Benefit ~~Cost." This amendment requires that the service cost component be disaggregated~~ from the other components of net benefit costs on the income statement. The service cost component is reported in the same line items as other compensation costs and the other components of net benefit costs are reported in Other (expense) income, net in the Company's Condensed Consolidated Financial Statements. Changes to the Company's Condensed Financial Statements have been applied retrospectively. As a result, the Company reclassified $6 million of other pension and post-retirement benefit costs to Other (expense) income, net for the three months ended December 31, 2016. For the three months ended December 31, 2017, the Company recorded $7 million of other pension and post-retirement benefit costs in Other (expense) income, net. See Note 3, "Recent Accounting Pronouncements - Recently Adopted Accounting Pronouncements," to our unaudited interim Condensed Consolidated Financial Statements for further details.

~~Reorganization Items, Net~~

Reorganization items, net for the three months ended December 31, 2017 was $3,416 million. Reorganization items, net consists of the net gain from the consummation of the Plan of Reorganization and the related settlement of liabilities. Reorganization items, net also represent amounts incurred subsequent to the Bankruptcy Filing as a direct result of the Bankruptcy Filing and is comprised of professional service fees, DIP Credit Agreement financing costs and contract rejection fees.

~~Provision for~~(Provision for) Income Taxes

The ~~provision for~~benefit from income taxes was ~~$213~~$26 million for the three months ended December 31, ~~2017~~2022 compared ~~with~~to a provision for income taxes of $3$18 million for the three months ended December 31, ~~2016.~~2021.

~~For~~The Company's effective income tax rate for the ~~Successor period~~three months ended December 31, ~~2017,~~2022 differed from the ~~difference between the Company’s recorded provision and the benefit that would result from applying the new~~ U.S. ~~statutory~~federal tax rate ~~of 24.5%, is primarily attributable to: (1) income and losses taxed at different foreign tax rates, (2) losses generated within certain foreign jurisdictions~~by 7% or $14 million principally related to deferred taxes (including losses) for which no benefit was recorded because it is more likely than not that the tax benefits would not be realized ~~(3) non-U.S. withholding~~and the release of deferred taxes ~~on foreign earnings, (4) current period changes to unrecognized~~from Accumulated Other Comprehensive Income upon termination of interest rate swaps.

The Company's effective income tax ~~positions, (5) U.S. state and local income taxes, and (6)~~rate for the ~~impact of the Tax Cuts and Jobs Act.~~

~~For the Predecessor period~~three months ended December ~~15, 2017, the difference between the Company’s recorded provision and the provision that would result~~31, 2021 differed from ~~applying~~ the U.S. ~~statutory~~federal tax rate ~~of 35% is primarily attributable to: (1) income and losses taxed~~

~~at different foreign tax rates, (2) losses~~by 59% or $28 million principally related to deferred taxes (including losses) generated ~~within certain foreign jurisdictions~~ for which no benefit was recorded because it is more likely than not that the tax benefits would not be ~~realized, (3) non-U.S. withholding taxes on foreign earnings, (4) current period changes to unrecognized tax positions, (5) U.S. state~~realized; and ~~local income taxes, and (6) the impact~~nondeductible expenses.

Table of ~~reorganization and fresh start adjustments.~~Contents

The Company’s effective income tax rate for fiscal 2016 differs from the statutory U.S. Federal income tax rate primarily due to (1) the effect of tax rate differentials on foreign income/loss, (2) changes in the valuation allowance established against the Company’s deferred tax assets, and (3) tax positions taken during the current period offset by reductions for unrecognized tax benefits resulting from the lapse of statute of limitations.

Net ~~Income (Loss)~~Loss

Net ~~income~~loss was ~~$3,214~~$164 million for the three months ended December 31, ~~2017~~2022 compared to a net loss of ~~$103~~$66 million for the three months ended December 31, ~~2016, primarily due to~~2021 as a result of the ~~reorganization gain of $3,416 million resulting from our emergence from bankruptcy.~~items discussed above.

Liquidity and Capital Resources

~~We expect our cash balances, cash generated by~~The accompanying unaudited Condensed Consolidated Financial Statements of the Company have been prepared assuming the Company will continue as a going concern and in accordance with GAAP. The going concern basis of presentation assumes that the Company will continue in operation one year after the date these Condensed Consolidated Financial Statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business.

During the fiscal year ended September 30, 2022, the Company experienced a significant slowdown in its operations and ~~borrowings available under our ABL Credit Agreement~~had operating cash outflows of $312 million. Additionally, prior to ~~be our primary sources~~the Chapter 11 Cases, the Company had been involved in discussions with its lenders relating to the financing transactions it completed in July 2022 (as described further in Note 7, "Financing Arrangements") and the scheduled June 2023 maturity of ~~short-term liquidity. Based~~the Convertible Notes. In its Form 12b-25 in respect of the Quarterly Report on ~~our~~Form 10-Q for the period ended June 30, 2022 filed with the SEC on August 9, 2022, the Company indicated that in light of the Convertible Notes being characterized as a current ~~level~~liability and the related engagement with advisors to address the Convertible Notes, coupled with the decline in revenues during the third quarter, which represented substantially lower revenues than previous Company expectations, and the negative impact of ~~operations, we believe these sources will be adequate~~significant operating losses on the Company’s cash balance, the Company determined that there was substantial doubt about the Company’s ability to continue as a going concern.

The Company has completed certain restructuring actions and is working to complete its remaining restructuring plan as its operating cash flows are expected to remain negative through at least fiscal 2023. The Company may take additional actions, as needed. The Company’s plans are designed to reduce its operating expenses and improve cash flows in line with its forecasted revenues. On the Emergence Date, the Company had approximately $585 million of cash and cash equivalents, and its post-Emergence debt profile was significantly improved (an aggregate principal amount of $810 million compared to $3,420 million at December 31, 2022), reducing its annual interest expense and extending the earliest maturity of its non-revolving long-term debt to 2028. This post-Emergence capital structure, coupled with restructuring actions that the Company executed to reduce its on-going operating expenses, have provided the Company with sufficient working capital to meet ~~our liquidity needs~~its operating cash flow requirements for at least one year from the ~~next twelve months. Our ability to meet our cash requirements will depend on our ability to generate cash in the future, which is subject to general economic,~~issuance of these financial competitive, legislative, regulatory and other factors that are beyond our control. However, there can be no assurance that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under our credit facilities in an amount sufficient to enable us to repay our indebtedness, or to fund our other liquidity needs.

~~Sources and Uses of Cash~~

~~The following reflects the net cash payments recorded as of the Emergence Date~~statements. Accordingly, as a result of the successful Emergence, the Company has alleviated the substantial doubt that had previously existed regarding the Company's ability to continue as a going concern. The Company's longer term liquidity profile will depend on successfully implementing ~~the Plan of Reorganization:~~

(In millions)
Sources:
Proceeds from Term Loan Credit Agreement, net of original issue discount $ 2,896
Release of restricted cash 76
Total sources of cash 2,972
Uses:
Repayment of DIP Credit Agreement (725 )
Payment of DIP accrued interest (1 )
Cash paid to Predecessor first lien debt-holders (2,061 )
Cash paid to PBGC (340 )
Payment for professional fees escrow account (56 )
Funding payment for Avaya represented employee pension plan (49 )
Payment of accrued professional & administrative fees (27 )
Payments of debt issuance costs (59 )
Payment for general unsecured claims (58 )
Total uses of cash (3,376 )
Net uses of cash $ (404 )

its strategic plan which includes enhancing its product offerings, successfully partnering with alliance companies and executing on remaining cost reductions.

Cash Flow Activity

The following table provides a summary of the ~~condensed~~ statements of cash flows for the periods indicated:


	Three months ended December 31,
(In millions)	2022		2021
Net cash (used for) provided by:
Operating activities	$	(65)	$	(111)
Investing activities	(17)		(27)
Financing activities	54		(5)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	2		(1)
Net decrease in cash, cash equivalents, and restricted cash	(26)		(144)
Cash, cash equivalents, and restricted cash at beginning of period	478		502
Cash, cash equivalents, and restricted cash at end of period(1)	$	452	$	358

Successor Predecessor Non-GAAP Combined Predecessor
(In millions) Period from December 16, 2017 through December 31, 2017 Period from October 1, 2017 through December 15, 2017 Three months ended December 31, 2017 Three months ended December 31, 2016
Net cash provided by (used for):
Net income (loss) $ 237
$ 2,977
3,214
$ (103 )
Adjustments to net income (loss) for non-cash items (225 ) (3,410 ) (3,635 ) 141
Changes in operating assets and liabilities 54
(7 ) 47
(82 )
Operating activities 66
(440 ) (374 ) (44 )
Investing activities 8
8
16
(15 )
Financing activities —
(102 ) (102 ) (57 )
Effect of exchange rate changes on cash and cash equivalents 3
(2 ) 1
(11 )
Net increase (decrease) in cash and cash equivalents 77
(536 ) (459 ) (127 )
Cash and cash equivalents at beginning of period 340
876
876
336
Cash and cash equivalents at end of period $ 417
$ 340
417
$ 209
(1)Includes $227 million and $4 million of restricted cash for three months ended December 31, 2022 and 2021, respectively.

Operating Activities

Cash ~~(used for)~~used for operating activities ~~was $(374) million and $(44) million~~ for the three months ended December 31, ~~2017 and 2016, respectively.~~

~~Adjustments~~2022 was $65 million compared to ~~reconcile net income (loss) to net cash (used for) operations for the~~$111 million three months ended December 31, ~~2017 and 2016 were $(3,635)~~2021. The change was primarily due to lower incentive compensation payments, $40 million ~~and $141 million, respectively. The adjustments in~~of net proceeds received from the ~~current period primarily consisted~~termination of the ~~gain related~~Company's New Forward Swap Agreements described in Note 8, "Derivative Instruments and Hedging Activities," to fresh start accounting of $1,671 million, a non-cash reorganization gain of $1,804 million and cash payments to the PBGC, for general unsecured creditor claims and to the APP pension trust of $340 million, $58 million and $49 million, respectively. For the three months ended December 31, 2017, other adjustments included deferred income taxes of $210 million, depreciation and amortization of $53 million, unrealized gain on foreign currency exchange of $4 million, and share-based compensation of $1 million. For the ~~three months ended December 31, 2016~~, other adjustments included depreciation and amortization of $90 million, non-cash interest expense of $61 million, unrealized gain on foreign currency exchange of $8 million, share-based compensation of $2 million and deferred income taxes of $(1) million.

~~During the three months ended December 31, 2017, changes in~~ our ~~operating assets and liabilities resulted in a net increase in cash and cash equivalents of $47 million. The net increase was driven by increases in deferred revenue~~unaudited interim Condensed Consolidated Financial Statements and the timing of customer cash payments as the Company continues its transition to ~~our vendors, partially~~a cloud and subscription model, offset by ~~timing~~

Table of ~~collection of accounts receivable~~Contents

lower cash earnings and ~~payments associated with our business restructuring reserves established in previous periods.~~

~~During the~~ ~~three months ended December 31, 2016, changes in our operating assets and liabilities resulted in a net decrease in cash and cash equivalents of $(82) million. The net decreases were driven by payments~~higher advisory fees associated with the ~~timing~~assessment of ~~payments~~strategic and financial alternatives to vendors, our employee incentive programs, and business restructuring reserves. These decreases were partially offset by collection of accounts receivable, increases in accrued interest, increases in deferred revenues and lower inventory.improve the Company's capital structure.

Investing Activities

Cash ~~provided by (used for)~~used for investing activities for the three months ended December 31, ~~2017 and 2016~~2022 was ~~$16~~$17 million and $(15) million, respectively. During the three months ended December 31, 2017, cash provided by investing activities included the release of restricted cash of $21 million as a result of implementing the Plan of Reorganization, partially offset by capital expenditures of $15 million. During the three months ended December 31, 2016, cash used for investing activities included capital expenditures of $14 million and acquisitions of businesses, net of cash acquired of $4 million, as we continuecompared to ~~enhance our technology portfolio.~~

~~Financing Activities~~

~~Cash used for financing activities was $102 million and $57~~$27 million for the three months ended December 31, ~~2017 and 2016, respectively.~~2021 as a result of capital expenditures in each period.

Financing Activities

Cash ~~flows from~~provided by financing activities for the three months ended December 31, ~~2017 included proceeds of $2,896~~2022 was $54 million ~~from the Term Loan Credit Agreement, offset by repayments of the DIP Credit Agreement of $725 million and the first lien debt holders of $2,061 million.~~

~~Cash~~compared to cash used for financing activities of $5 million for the three months ended December 31, ~~2016 included $45~~2021. The change was primarily due to net borrowings under the ABL Credit Agreement of $56 million during the three months ended December 31, 2022. The change was also driven by $7 million of ~~repayments~~shares repurchased and retired for tax withholdings on the vesting of restricted stock units and Stock Bonus Program shares and proceeds of $4 million from the Employee Stock Purchase Plan during the three months ended December 31, 2021 with no comparable transactions in ~~excess of borrowings under our revolving credit facilities, $6 million of scheduled debt repayments and $5 million repayment in connection with financing~~ the ~~use of equipment for the performance of services under our agreement with HP Enterprise Services, LLC ("HP").~~

~~Credit Facilities~~

current period. See Note ~~9, “Financing~~7, "Financing Arrangements,”" and Note 12, "Share-based Compensation," to our unaudited interim Condensed Consolidated Financial Statements for ~~a discussion~~additional information.

Financing Arrangements

See Note 1, "Background and Basis of Presentation," Note 7, "Financing Arrangements," and Note 19, "Subsequent Events," to our unaudited interim Condensed Consolidated Financial Statements for additional information regarding the Company's Pre-Petition Debt Instruments, including the Term Loan Credit Agreement, ~~and~~the ABL Credit ~~Agreement. As~~Agreement the Senior Notes, the Convertible Notes and the Exchangeable Notes, as well as the DIP Term Loan Facility, the DIP ABL Facility and the effects of ~~December 31, 2017,~~ the ~~Company was not in default under any of its debt agreements.~~Chapter 11 Cases on the Pre-Petition Debt Instruments.

Future Cash Requirements

Our primary future cash requirements will be to fund operations, debt service, capital expenditures, benefit obligations, restructuring payments ~~capital expenditures~~ and ~~benefit obligations. In addition, we~~bankruptcy filing stays payments. We may also use cash in the future to make strategic ~~acquisitions.~~acquisitions or investments.

~~Specifically, we expect our primary cash requirements for the remainder of fiscal 2018 to be as follows:~~

~~Debt service—We expect to make payments of $160 million during the remainder of fiscal 2018 in principal and interest associated~~In connection with the Company’s Emergence, our pre-petition debt was extinguished and we are currently operating under the Exit Term Loan ~~Credit Agreement~~ and Exit ABL Loan and our interest expense will adjust in accordance with such facilities. We have no debt maturing in the near term.

In addition, the Company agreed to purchase seats of Avaya Cloud Office ("ACO") in the event certain volumes of ACO sales are not met over the term of its agreement with RingCentral, Inc. ("RingCentral"), which is described further in Note 18, "Commitments and ~~fees associated with our ABL Credit Agreement.~~Contingencies." In the ~~ordinary course~~event that the cumulative number of ~~business, we may~~ACO seats sold as of the end of each calendar quarter is lower than the agreed upon threshold for such quarter, the Company will be required to purchase a number of ACO seats equal to such shortfall from ~~time to time borrow and repay amounts under our ABL Credit Agreement.~~

~~Restructuring payments~~—We expect to make payments of approximately $25 million to $30 million during the remainder of fiscal 2018 for employee separation costs and lease termination obligations associated with restructuring actions we have taken through December 31, 2017 and additional actions we may take in fiscal 2018. The Company continues to evaluate opportunities to streamline its operations and identify additional cost savings globally.

~~Capital expenditures—We expect to spend approximately $50 million to $60 million for capital expenditures and capitalized software development costs during the remainder of fiscal 2018.~~

~~Benefit obligations~~—We estimate we will make payments in respect of our pension and post-retirement benefit obligations totaling $80 million during the remainder of fiscal 2018. These payments include $43 million for the Avaya Pension Plan for represented employees; $24 million for our non-U.S. benefit plans, which are predominately not pre-funded; $1 million for our U.S. retiree medical benefit plan, which is not pre-funded and $12 million for represented retiree post-retirement health trusts. See discussion in Note 13, “Benefit Obligations” to our unaudited interim Condensed Consolidated Financial Statements for further details of our benefit obligations.

~~Acquisitions—The acquisition of Spoken Communications is expected to close within the next two months and be funded by cash on hand, however the ultimate purchase price and certain other terms~~RingCentral. Any such ACO seats purchased are subject to ~~further negotiation.~~

certain limitations and must be purchased for a two-year paid term with payments made monthly and pricing that is variable based on sales volumes by jurisdiction, contract size and product tier. The Company may resell such ACO seats to end customers or maintain them for internal use. In the event of any such requirement to purchase ACO seats, the required cash payments to RingCentral could have a significant adverse impact on the Company's financial position, results of operations and operating cash flows. Based on the variable nature of the commitment, the Company is not able to estimate the ultimate future cash flow impact, if any, of these increasing volume commitments.

In ~~addition to the matters identified above, in~~ the ordinary course of business, the Company is involved in litigation, claims, government inquiries, investigations and proceedings relating to intellectual property, commercial, employment, environmental and regulatory matters, including but not limited to ~~those identified~~a suit filed by Solaborate Inc. and Solaborate LLC described in Note ~~20,~~18, "Commitments and Contingencies," to our unaudited interim Condensed Consolidated Financial Statements. On February 3, 2023, the Company reached an agreement to settle the lawsuit with Solaborate which will not have a material adverse effect on the Company's future cash requirements or cash flow.

Future Sources of Liquidity

Our existing cash balance and proceeds from the Exit Term Loan and Exit ABL Loan are our primary sources of future liquidity. As a result of the extinguishment of a significant amount of our debt in the Chapter 11 Cases, our annual interest expense was significantly reduced upon Emergence when compared to our pre-petition capital structure.

Both the Exit Term Loan and the Exit ABL Loan include conditions precedent, representations and warranties, affirmative and negative covenants, and events of default customary for financings of this type and size. See Note 7, "Financing Arrangements,” for additional information on the Exit Term Loan and the Exit ABL Loan.

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As of December 31, 2022, our cash and cash equivalent balances were $225 million, which includes unrestricted net proceeds from the July 12, 2022 financings, as well as borrowings under our ABL Credit Agreement. During the three months ended December 31, 2022, the Company borrowed $90 million and repaid $34 million under the ABL Credit Agreement. During the second quarter of fiscal 2023, the Company repaid the remainder of the ABL Credit Agreement.

As of both December 31, 2022 and September 30, 2022, our cash and cash equivalent balances held outside the U.S. were $117 million. As of December 31, 2022, the Company's cash and cash equivalents held outside the U.S. may need to be repatriated to fund the Company's operations in the U.S. based on our expected future sources of liquidity.

At December 31, 2022, the Company had issued and outstanding letters of credit and guarantees of $38 million under the ABL Credit Agreement and had $56 million of borrowings outstanding under its ABL Credit Agreement.

Off-Balance Sheet Arrangements

See discussion in Note 18, "Commitments and Contingencies," to our unaudited interim Condensed Consolidated Financial Statements ~~relating to intellectual property, commercial, employment, environmental and regulatory matters.~~

These and other legal matters could have a material adverse effect on the manner in which the Company does business and the Company's financial position, results of operations, cash flows and liquidity.

~~For the three months ended December 31, 2017, the Company recognized $37 million of costs incurred in connection with the resolution of certain legal matters.~~

~~Future Sources of Liquidity~~

~~We expect our cash balances, cash generated by operations and borrowings available under our ABL Credit Agreement to be our primary sources of short-term liquidity.~~

As of December 31, 2017 and September 30, 2017, our cash and cash equivalent balances held outside the U.S. were $149 million and $246 million, respectively. As of December 31, 2017, cash and cash equivalents held outside the U.S. in excess of in-country needs and, which could not be distributed to the U.S. without restriction, were not material.

Under the terms of the ABL Credit Agreement the Company can issue letters of credit up to $150 million. At December 31, 2017, the Company had outstanding letters of credit and guarantees of $74 million. The aggregate additional principal amount that may be borrowed under the ABL Credit Agreement, based on the borrowing base, less $74 million of outstanding letters of credit and guarantees, was $139 million at December 31, 2017.

We believe that our existing cash and cash equivalents of $417 million as of December 31, 2017, future cash provided by operating activities and borrowings available under the ABL Credit Agreement will be sufficient to meet our future cash requirements for at least the next twelve months. Our ability to meet these requirements will depend on our ability to generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

~~Off-Balance Sheet Arrangements~~

~~See discussion in Note 20, “Commitments and Contingencies,” to our unaudited interim Condensed Consolidated Financial Statements~~ for further details.

~~Debt Ratings~~

On the Emergence Date, the Company obtained ratings from Moody’s Investors Service (“Moody’s”), Standard and Poor's ("S&P") and Fitch Ratings Inc. (“Fitch”). Moody’s issued a corporate family rating of “B2” with a stable outlook and a rating of the 7-year $2,925 million Term Loan Credit Agreement of “B2”. S&P issued a definitive corporate credit rating of "B" with a stable outlook and a rating of the Term Loan Credit Agreement of "B". Fitch issued a Long-Term Issuer Default Rating of “B” with a stable outlook and a rating of the Term Loan Credit Agreement of “B+”.

Our ability to obtain additional external financing and the related cost of borrowing may be affected by our ratings, which are periodically reviewed by the major credit rating agencies. The ratings are subject to change or withdrawal at any time by the respective credit rating agencies.

Critical Accounting Policies and Estimates

Management has reassessed the critical accounting policies asand estimates disclosed in ~~our Registration Statement~~the Company's Annual Report on Form ~~10 Amendment No. 3~~10-K filed with the SEC on ~~January 10, 2018~~September 8, 2023 and determined that there were no significant changes to our critical accounting policies and estimates during the three months ended December 31, 2022 except for the ~~period from~~changes discussed in more detail below.

Indefinite-lived Intangible Assets

As announced in a Form 8-K dated December ~~16, 2017 through~~13, 2022, the Company was unable to reach an out-of-court resolution with certain holders of the Convertible Notes, Senior Notes, Exchangeable Notes, and the Term Loans outstanding under the Term Loan Credit Agreement, regarding one or more potential financings, refinancings, recapitalizations, reorganizations, restructurings, or investment transactions involving the Company. As a result, the Company revised its outlook to reflect the increased likelihood of a solvency event. The Company concluded that a triggering event had occurred and performed an interim quantitative impairment test for its indefinite-lived intangible asset, the Avaya Trade Name, as of December 31, ~~2017~~2022 to compare the fair value of the Avaya Trade Name to its carrying amount. The fair value of the Avaya Trade Name was estimated using the relief-from-royalty model, a form of the income approach. Under this methodology, the fair value of the trade name was estimated by applying a royalty rate to forecasted net revenues which was then discounted using a risk-adjusted rate of return on capital. The model relies on assumptions regarding revenue growth rates, royalty rate, discount rate and terminal growth rate. Revenue growth rates inherent in the forecast were based on input from internal and external market intelligence research sources that compare factors such as growth in global economies, regional industry trends and product evolutions. The royalty rate was determined using a set of observed market royalty rates. The discount rate the Company used represents the estimated weighted average cost of capital, which reflects the overall level of inherent risk and the ~~period~~rate of return an outside investor would expect to earn. To estimate royalty cash flows beyond the final year of its model, the Company used a terminal value approach. Under this approach, the Company applied a perpetuity growth assumption to determine the terminal value. The Company incorporated the present value of the resulting terminal value into its estimate of fair value. The result of the interim impairment test of the Avaya Trade Name as of December 31, 2022 indicated that the carrying amount of the Avaya Trade Name exceeded its estimated fair value primarily due to the updated outlook. As a result, the Company recorded an indefinite-lived intangible asset impairment charge of $9 million within the Impairment charges line item in the Condensed Consolidated Statements of Operations, representing the amount by which the carrying amount of the Avaya Trade Name exceeded its fair value. As of December 31, 2022, the remaining carrying amount of the Avaya Trade Name was $178 million.

Based on the estimates used in the interim impairment test of the Avaya Trade Name as of December 31, 2022, an increase in the discount rate or a decrease in the long-term growth rate of 50 basis points would have resulted in an incremental impairment charge of approximately $7 million and $2 million, respectively.

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To the extent that business conditions deteriorate further or if changes in key assumptions and estimates differ significantly from ~~October 1, 2017 through~~management's expectations, it may be necessary to record additional impairment charges in the future.

Embedded Derivatives

The fair value of the debt-related embedded derivatives is determined using the with-and-without model which compares the estimated fair value of the underlying debt instrument with the embedded features to the estimated fair value of the underlying debt instrument without the embedded features, with the difference representing the estimated fair value of the embedded derivative features. The with-and-without model includes significant unobservable estimates, including estimated market yield, an estimation of the Company’s probability of default and creditor recovery rates, and the probability of the occurrence of a change of control event or asset sale. Market yields are estimated using the risk-free rate commensurate with the remaining term of the instrument, an implied credit-spread based on the issuance price and the change in option adjusted spread of the traded debt instruments. The Company uses observable trading prices of its existing debt instruments to imply a probability of default and uses the S&P recovery rating to determine the creditor recovery rate each period. Management estimates the probability of the change of control or asset sale based on its assessment of entity specific factors and the status of on-going transaction negotiations, if any. Changes in the inputs into the valuation model may have a significant impact on the estimated fair value of the Debt-related embedded derivatives.

As of December ~~15, 2017, except~~31, 2022, the aggregate fair value of the Debt-related embedded derivatives was $56 million, which was recorded within Debt maturing within one year.

As of December 31, 2022, a hypothetical 100 basis point change in the estimated market yield would have resulted in an immaterial change in the aggregate fair value of the Debt-related embedded derivatives. A hypothetical 1000 basis point increase in the estimated probability of default would have resulted in an immaterial change in the aggregate fair value of the Debt-related embedded derivatives. A hypothetical 1000 basis point decrease in the estimated probability of default would have resulted in a change in the aggregate fair value of the Debt-related embedded derivatives of $(1) million. A hypothetical 1000 basis point change in the estimated probability of a change of control/asset sale for ~~recently adopted accounting policy changes as discussed~~the Tranche B-3 Term Loans and a hypothetical 500 basis point change in the estimated probability of a change of control/asset sale for the Exchangeable Notes would have resulted in an immaterial change in the aggregate fair value of the Debt-related derivatives.

New Accounting Pronouncements

See discussion in Note 2, ~~“Accounting Policy Changes,”~~"Recent Accounting Pronouncements," to our unaudited interim Condensed Consolidated Financial ~~Statements.~~

~~New Accounting Pronouncements~~

~~See discussion in the Company's Notes to the Consolidated Financial~~ Statements ~~for the fiscal year ended September 30, 2017, included in Amendment No. 3 to the Company’s Form 10 filed with the SEC on January 10, 2018,~~ for further details.

EBITDA and Adjusted EBITDA

We present below the Company's EBITDA and Adjusted EBITDA, each of which is a non-GAAP measure.

EBITDA is defined as net income (loss) before income taxes, interest expense, interest income and depreciation and amortization and excludes the results of discontinued operations. EBITDA provides us with a measure of operating performance that excludes ~~items that are outside the control of management,~~certain non-operating and/or non-cash expenses, which can differ significantly from company to company depending on capital structure, the tax jurisdictions in which companies operate and capital investments.

Adjusted EBITDA is EBITDA as further adjusted by the items noted in the reconciliation table below. We believe Adjusted EBITDA ~~measures~~provides a measure of 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 ittherefore presents our financial performance in a way that can be more easily compared to prior quarters or fiscal years. In addition, Adjusted EBITDA serves as a basis for determining certain management and employee compensation. We also present EBITDA and Adjusted EBITDA because we believe analysts and investors utilize these measures in analyzing our results. Under the Company's debt agreements, the ability to engage in activities such as incurring additional indebtedness, making investments and paying dividends is tied in part to ratios based on a measure of Adjusted EBITDA.

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. While EBITDA measures are frequently used as measures of operations and the ability to meet debt service requirements, these terms are not necessarily comparable to other similarly titled captions of other companies due to the potential inconsistencies in the method of calculation. ~~Generally,~~Further, Adjusted EBITDA excludes the impact of earnings or charges resulting from matters that we consider not to be indicative of our ongoing ~~operations.~~operations that still affect our net income (loss). In particular, our formulation of Adjusted EBITDA ~~allows adjustment~~adjusts for certain amounts that are included in calculating net income (loss) as set forth in the following table including, but not limited to, restructuring charges, ~~certain fees payable to our Predecessor private equity sponsors and other advisors,~~impairment charges, resolution of certain legal matters and a portion of our pension costs and ~~post-employment~~post-retirement benefits costs, which represents the amortization of ~~pension~~prior service costs (credits) and actuarial ~~gain (loss)~~(gains) losses associated with these benefits. However, these are expenses that may recur, may vary ~~and are~~and/or may be difficult to predict.

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The ~~unaudited~~ reconciliation of net ~~income (loss),~~loss, which is a GAAP measure, to EBITDA and Adjusted EBITDA, which are non-GAAP measures, is presented below for the periods ~~indicated, is presented below:~~ indicated:


	Three months ended December 31,
(In millions)	2022		2021
Net loss	$	(164)	$	(66)
Interest expense	5		54
Interest income	(4)		—
(Benefit from) provision for income taxes	(26)		18
Depreciation and amortization	99		104
EBITDA	(90)		110

Restructuring charges(a)	10		7
Advisory fees(b)	33		—

Share-based compensation	1		14
Impairment charges(c)	9		—
Pension and post-retirement benefit costs	(4)		(1)
Change in fair value of the 2017 Emergence Date Warrants	—		(1)
Loss on foreign currency transactions	10		—
Adjusted EBITDA	$	(31)	$	129

(a)Restructuring charges represent employee separation costs and facility exit costs (excluding the impact of accelerated depreciation expense) related to the Company's restructuring programs, net of sublease income.

(b)Advisory fees represent costs incurred to assist in the assessment of strategic and financial alternatives to improve the Company's capital structure.

(c)Impairment charges include an indefinite-lived intangible asset impairment charge of $9 million. See Note 4, "Intangible Assets, net" for additional information.

Successor Predecessor
(In millions) Period from December 16, 2017 through December 31, 2017 Period from October 1, 2017 through December 15, 2017 Three months ended December 31, 2016
Net income (loss) $ 237
$ 2,977
$ (103 )
Interest expense ^(a)
9
14
174
Interest income —
(2 ) —
(Benefit from) provision for income taxes (246 ) 459
3
Depreciation and amortization 22
31
90
EBITDA 22
3,479
164
Impact of fresh start accounting adjustments ^(b)
27
—
—
Restructuring charges, net 10
14
10
Sponsors’ and other advisory fees ^(c)
8
3
51
Reorganization items, net —
(3,416 ) —
Non-cash share-based compensation 1
—
2
Loss on disposal of long-lived assets —
1
—
Resolution of certain legal matters ^(d)
—
37
—
Change in fair value of warrant liability 5
—
—
Gain on foreign currency transactions (2 ) —
(11 )
Pension/OPEB/nonretirement postemployment benefits and long-term disability costs ^(e)
—
17
21
Other —
—
1
Adjusted EBITDA $ 71
$ 135
$ 238

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^(a)

Effective January 19, 2017, the Company ceased recording interest expense on outstanding pre-petition debt classified as liabilities subject to compromise. Contractual interest expense represents amounts due under the contractual terms of outstanding debt, including debt subject to compromise. For the period from October 1, 2017 through December 15, 2017, contractual interest expense related to debt subject to compromise of $94 million has not been recorded, as it was not expected to be an allowed claim under the Bankruptcy Filing.


^(b)	~~The impact of fresh start accounting adjustments in connection with the Company's emergence from bankruptcy.~~

^(c)

Sponsors’ fees represent monitoring fees payable to affiliates of two private equity firms, Silver Lake Partners (“Silver Lake”) and TPG Capital (“TPG”, together with Silver Lake, the “Sponsors”) that each had an ownership interest in the Predecessor Company and their designees pursuant to a management services agreement. Upon emergence, the Company no longer has affiliations with the Sponsors. Other advisory fees represent costs incurred to assist in the assessment of strategic and financial alternatives to improve the Company's capital structure.


^(d)	~~Costs in connection with certain legal matters includes reserves and settlements, as well as associated legal costs.~~


^(e)	~~Represents that portion of our pension and post-employment benefit costs which represent the amortization of prior service costs and net actuarial gain (loss) associated with these benefits.~~

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this ~~quarterly report,~~Quarterly Report on Form 10-Q, including statements containing words such as ~~“anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would”~~"anticipate," "believe," "estimate," "expect," "intend," "plan," "project," "target," "model," "can," "could," "may," "should," "will," "would" or similar words or the negative thereof, constitute ~~“forward-looking~~"forward-looking statements.”" These forward-looking statements, which are based on our current plans, expectations, estimates and projections about future events, should not be unduly relied upon. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance and achievements to materially differ from any future results, performance and achievements expressed or implied by such forward-looking statements. We caution you therefore against relying on any of these forward-looking statements.

The forward-looking statements included herein are based upon our assumptions, estimates and beliefs and involve judgments with respect to, among other things, future economic, competitive and market conditions, the anticipated impact of our previously announced cost-cutting initiatives and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements and may be affected by a variety of risks, uncertainties and other factors, which may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. ~~Some~~Risks, uncertainties and other factors that may cause these forward-looking statements to be inaccurate include, among others: the effect of Emergence on our business; the sufficiency of the ~~key factors that could cause actual results to differ from~~Exit Term Loan Facility and the Exit ABL Facility for our ~~expectations include:~~

~~we face formidable competition from providers of unified communications and contact center products and related services;~~

~~market opportunity for business communications products and services may not develop in the ways that we anticipate;~~

future liquidity needs; our ability to ~~rely on our indirect sales channel;~~

~~our products~~continue implementing operating efficiencies and ~~services may fail to keep pace with rapidly changing technology and evolving industry standards;~~

~~we rely on third-party contract manufacturers and component suppliers, some of which are sole source and limited source suppliers, as well as warehousing and distribution logistics providers;~~

~~recently completed bankruptcy proceedings may adversely affect our operations in the future;~~

~~our actual financial results may vary significantly from the financial projections filed with the Bankruptcy Court;~~

~~our historical financial information may not be indicative of our future financial performance;~~

~~our quarterly and annual revenues and operating results have historically fluctuated and the results of one period may not provide a reliable indicator of our future performance;~~

~~operational and logistical challenges as well as changes in economic or political conditions, in a specific country or region;~~

~~our revenues are dependent on general economic conditions and the willingness of enterprises to invest in technology;~~

~~the potential that we may not be able to protect our proprietary rights or that those rights may be invalidated or circumvented;~~

~~certain software we use is from open source code sources, which, under certain circumstances, may lead to unintended consequences;~~

~~changes in our tax rates, the adoption of new U.S. or international tax legislation or exposure to additional tax liabilities;~~

~~cancellation of indebtedness income is expected to result in material reductions in, or elimination of, tax attributes;~~

~~tax examinations and audits;~~

~~fluctuations in foreign currency exchange rates;~~

~~business communications products are complex, and design defects, errors, failures or “bugs” may be difficult to detect and correct;~~

~~if we are unable to integrate acquired businesses effectively;~~

~~failure to realize the benefits we expect from our cost-reduction initiatives;~~

liabilities incurred as a result of our obligation to indemnify, and to share certain liabilities with, Lucent Technologies, Inc. ("Lucent") (now Nokia Corporation) in connection with our spin-off from Lucent in September 2000;

~~transfers or issuances of our equity may impair or reduce~~technical developments; our ability to ~~utilize~~capitalize on the reorganization and emerge as a stronger and more competitive enterprise; potential adverse effects of the Emergence on the Company's operations, third-party relationships and employee attrition; the impact and timing of any cost-savings measures and related local law requirements in various jurisdictions; the effectiveness of our ~~net operating loss carryforwards and certain other tax attributes in the future;~~

~~our ability to retain and attract key personnel;~~

~~our ability to establish and maintain proper and effective~~ internal control over financial ~~reporting;~~

~~if we do not adequately remediate our material weaknesses, or if we experience~~reporting and disclosure controls and procedures, and the potential for additional material weaknesses in our internal controls over financial reporting or other potential weaknesses of which we are not currently aware or which have not been detected; the ~~future;~~

~~potential~~impact of litigation ~~in connection with our emergence from bankruptcy;~~

~~breach~~and regulatory proceedings; the findings of the ~~security~~Audit Committee’s investigations; the impact of ~~our information systems, products or services or of the information systems of our third-party providers;~~

~~business interruptions, whether due to catastrophic disasters or other events;~~

~~claims that were not discharged in the Plan of Reorganization could have a material adverse effect on our results of operations and profitability;~~

~~potential~~ litigation and ~~infringement claims, which could cause us to incur significant expenses or prevent us from selling our products or services;~~

regulatory proceedings; the ~~composition~~impact and timing of ~~our board of directors has changed significantly;~~

~~we have entered into many related party transactions with a significant number of our foreign subsidiaries, which could adversely affect us in~~any cost-savings measures; and the ~~event of their bankruptcy or similar insolvency proceeding; and~~

~~environmental, health and safety, laws, regulations, costs~~risks and other ~~liabilities.~~factors discussed in Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Part II, Item 1A "Risk Factors" in this Quarterly Report on Form 10-Q, as well as Part I, Item 1A "Risk Factors" and Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K filed with the SEC on September 8, 2023.

~~Any of the assumptions underlying forward-looking statements could be inaccurate.~~ All forward-looking statements are made as of the date of this ~~quarterly report~~Quarterly Report on Form 10-Q and the risk that actual results will differ materially from the expectations expressed in this ~~quarterly report~~Quarterly Report will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements after the date of this ~~quarterly report,~~Quarterly Report, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this ~~quarterly report,~~Quarterly Report, the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this ~~quarterly report~~Quarterly Report will be achieved.



Item 3.			Quantitative and Qualitative Disclosures About Market ~~Risk.~~Risk

Interest Rate Risk

The Company ~~has~~had exposure to changing interest rates primarily under the Term Loan Credit Agreement and ABL Credit Agreement, each of which ~~bear~~bore interest at variable ~~rates~~rates. The Company had $1,949 million of variable rate loans outstanding as of December 31, 2022.

The Company maintained interest rate swap agreements with a net notional amount of $1,543 million which fixed a portion of the variable interest due under its Term Loan Credit Agreement (the "Original Swap Agreements"). Under the terms of the Original Swap Agreements, which matured on December 15, 2022, the Company paid a fixed rate of 2.935% and received a variable rate of interest based on one-month LIBOR.

The Company also had forward starting swap agreements to fix a portion of the variable rate interest due on its Term Loan Credit Agreement from December 15, 2022 (the maturity date of the Original Swap Agreements) through June 15, 2027 (the "New Forward Swap Agreements"). Under the terms of the forward starting swap agreements, the Company paid a fixed rate of 2.5480% and received a variable rate of interest based on one-month SOFR. The forward swap agreements had a notional amount of $1,000 million.

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In December 2022, the Company terminated its New Forward Swap Agreements and received $40 million of net cash proceeds as a result of the termination. Additionally, the frozen deferred gains of $63 million related to the Company's interest rate swap agreements were reclassified to Interest expense during the first quarter of fiscal 2023.

Subsequent to the termination of the New Forward Swap Agreements, the Company’s variable rate debt will no longer be hedged. Based on the Company's variable rate debt outstanding at December 31, 2022, a hypothetical one percent change in interest rates would affect interest expense by approximately $20 million over the twelve months following December 31, 2022.

For the three months ended December 31, 2022 and 2021, the Company recognized a gain (loss) on the interest rate swap agreements of $49 million and $(13) million, respectively, which is reflected in Interest expense in the Condensed Consolidated Statements of Operations.

See Note 1, "Background and Basis of Presentation", Note 7, "Financing Arrangements" and Note 8, "Derivative Instruments and Hedging Activities," to our Condensed Consolidated Financial Statements included in Part I, Item I of this Quarterly Report on Form 10-Q for additional information related to the Company's variable rate Pre-Petition Debt Instruments and interest rate swap agreements.

Foreign Currency Risk

Foreign currency risk is the potential change in value, income and cash flow arising from adverse changes in foreign currency exchange rates. Each of our non-U.S. ("foreign") operations maintains capital in the currency of the country of its geographic location consistent with local regulatory guidelines. Each foreign operation may conduct business in its local currency, as well as the currency of other countries in which it operates. The primary foreign currency exposures for these foreign operations are the Euro, Canadian Dollar, Chinese Renminbi, British Pound Sterling and Australian Dollar.

Non-U.S. denominated revenue was $104 million for the three months ended December 31, 2022. We estimate a 10% change in the value of the U.S. dollar relative to all foreign currencies would have affected our revenue for the three months ended December 31, 2022 by $10 million.

The Company, from time-to-time, utilizes foreign currency forward contracts primarily to hedge fluctuations associated with certain monetary assets and liabilities including receivables, payables and certain intercompany balances. These foreign currency forward contracts are not designated for hedge accounting treatment. As a result, changes in the fair value of these contracts are recorded as a component of Other income, net to offset the change in the value of the underlying assets and liabilities. As of December 31, ~~2017, a 25 bps increase in LIBOR would result in a $7 million increase in our annual interest expense~~2022, the Company had no open foreign exchange contracts. For each of the three months ended December 31, 2022 and ~~a 25bps decrease in LIBOR would result in a $7 million decrease in our annual interest expense.~~2021, the Company's loss on foreign exchange contracts was not material.



Item 4.			Controls and ~~Procedures.~~Procedures

~~Evaluation of~~ Disclosure Controls and ~~Procedures.~~Procedures

As previously disclosed in the Company's Form 8-K as filed with the SEC on November 30, 2022, the Company determined that certain material weaknesses in the Company's internal control over financial reporting existed as of September 30, 2021. Those material weaknesses are described below and continue to exist as of December 31, 2022.

As of December 31, 2022, the end of the period covered by this report, ~~management,~~the Company, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the ~~Company’s~~Company's disclosure controls and procedures (as such term is defined in Rules ~~13a-15(e)~~§240.13a-15(e) and ~~15d-15(e)~~§240.15d-15(e) under the Securities Exchange Act of 1934, as ~~amended.~~amended (the "Exchange Act")). Based on ~~this~~that evaluation, due to the material weaknesses in internal control over financial reporting described below, our Chief Executive Officer and Chief Financial Officer have concluded that ~~the Company’s~~our disclosure controls and procedures were not effective as of December 31, ~~2017, because~~2022. Nevertheless, based on the completion of the Audit Committee's planned procedures with respect to its investigations, and the performance of additional procedures by management designed to ensure the reliability of our financial reporting, we believe that the condensed consolidated financial statements in this Quarterly Report fairly present, in all material ~~weaknesses~~respects, our financial position, results of operations and cash flows as of the dates, and for the periods, presented, in conformity with generally accepted accounting principles in the ~~Company's internal control over financial reporting described below.~~United States of America ("U.S. GAAP").

Material Weaknesses in Internal Control Over Financial Reporting

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of ~~the Company's~~our annual or interim financial statements will not be prevented or detected on a timely basis.

~~In connection with~~The following material weaknesses have been identified and continue to exist as of December 31, 2022:

The Company did not design and maintain an effective control environment as former senior management failed to set an appropriate tone at the ~~preparation~~top. Specifically, former senior management applied pressure to individuals to achieve financial targets

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which created an environment where employees were hesitant to express dissent or communicate concerns to others within the organization. The ineffective control environment contributed to the following additional material weaknesses:

The Company did not design and maintain effective controls related to the information and communication component of the Company’s consolidated financial statements for the quarter ended June 30, 2017, the Company identified control deficiencies that constituted material weaknesses in its internal control over financial reporting.COSO framework. Specifically, the Company did not design and maintain effective controls to ensure appropriate communication between certain functions within the ~~appropriate complement of resources in its tax department commensurate with the volume and complexity of accounting for income taxes subsequent to the Company’s Bankruptcy Filing.~~Company. This material weakness contributed to an additional material weakness, that the ~~following control deficiencies,~~Company did not design and maintain effective controls over the ethics and compliance program.

These material weaknesses did not result in any material misstatements of the Company's financial statements or disclosures, but did result in an immaterial interim out-of-period correction during fiscal 2022. Additionally, each of ~~which are individually considered to be~~the material weaknesses ~~relating to the completeness and accuracy of the Company’s accounting for income taxes, including the related tax assets and liabilities:~~

Control activities over the completeness and accuracy of interim forecasts by tax jurisdiction used in accounting for the Company’s interim income tax provision were not performed at the appropriate level of precision. This control deficiency resulted in an adjustment to the Company’s income tax provision for the quarter ended June 30, 2017.

Control activities over the completeness and accuracy of the allocation of the tax provision calculations (the “intraperiod allocation”) were insufficient to ensure that the intraperiod allocation balances were accurately determined. This control deficiency resulted in an adjustment to the Company’s income tax provision for the quarter ended June 30, 2017.

These control deficiencies resulted in material adjustments to our income tax provision for the quarter ended June 30, 2017. These adjustments were detected and corrected prior to the release of the related financial statements. However, the existence of these control deficienciesdescribed above could result in a misstatement of ~~the aforementioned accounts and~~substantially all account balances or disclosures ~~in the future~~ that ~~could~~would result in a material misstatement ofto the annual or interim consolidated financial statements that would not be prevented or detected. ~~Accordingly, our management has determined that these control deficiencies constitute material weaknesses.~~

Remediation Plan ~~for Remediation~~

Management ~~has begun implementing a remediation plan~~is actively engaged and committed to ~~address~~taking steps necessary to remediate the control deficiencies that ~~led~~constituted the material weaknesses. To date, the Company made the following enhancements to our internal control over financial reporting:

▪On July 28, 2022, Avaya removed James M. Chirico, Jr. as Chief Executive Officer and appointed Alan B. Masarek as new Chief Executive Officer, effective August 1, 2022;

▪It was determined that Stephen D. Spears would step down from his role as Chief Revenue Officer on October 18, 2022 and he departed the Company effective November 1, 2022;

▪Kieran McGrath stepped down as Chief Financial Officer, effective November 9, 2022, and retired from the Company, effective December 1, 2022;

▪Avaya appointed Rebecca A. Roof as Interim Chief Financial Officer, effective November 9, 2022, and on June 16, 2023, the Company appointed Amy O'Keefe as its Chief Financial Officer;

▪Alan B. Masarek has held multiple "All Hands" meetings with Avaya employees where he reinforces his expectations of an environment grounded in transparency;

▪Alan B. Masarek has held executive coaching sessions with leadership team to align on effective communication and a culture that includes a safe environment for transparent communication; and

▪Enhanced inquiries within the scope of internal management representation letters.

Our remediation activities are continuing during fiscal 2023. In addition to the ~~material weaknesses referenced above. The remediation~~above actions, Avaya is in the process of designing and implementing additional activities, including but not limited to:

▪Enhancing its policies and procedures related to appropriate maintenance of its whistleblower log and the proper dissemination of related information and materials, including those received by members of the Board.

▪Providing additional and continuing training for employees and members of management to ensure information is appropriately communicated to all relevant personnel in connection with SEC filings and/or the preparation of our consolidated financial statements or other matters.

▪Enhancing internal disclosure control processes and related internal management representation letter processes and training to improve communication.

▪To ensure employees fully understand the Company's commitment to establishing and maintaining an effective control environment and appropriate tone at the top, management will continue to execute against a communications plan that includes the following:

~~Implementing specific additional review procedures over~~•Board level participation in messaging across the ~~income tax provision calculations~~organization that reinforces a safe environment for ~~interim quarters to ensure that~~raising concerns without fear of retaliation;

•Conducting in-depth special training courses for the ~~results of such calculations are not inconsistent with the actual results~~Company's entire sales team and ~~trends being observed~~personnel involved in the ~~business. The deficiency,~~forecasting process regarding the importance of the Company establishing and maintaining effective disclosure controls. Management intends to include these principles as an ongoing component of our new hire training and other on-going training courses; and

•Enhancement of future employee engagement surveys to monitor for negative indicators of tone at the ~~related remediation, applies only to interim quarters in which the income tax provision is based on forecast results for the year. The~~top.

▪To ensure effective information and communication controls and ~~processes~~enhanced controls related to the ~~income tax provision for our fiscal year-end are not affected as they are based on actual results for~~ethics and compliance program, management is developing a program to address the ~~year.~~following remediation activities:

~~Hiring additional personnel, including a Vice President~~

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•Enhance Board of Directors manual to define communications process related to allegations of fraud or misconduct;

•Reinforce management Disclosure Committee procedures with respect to the ~~appropriate experience~~evaluation of potential allegations of fraud or misconduct; and ~~technical expertise in income taxes.~~

~~Notwithstanding the identified material weaknesses, management believes the Condensed Consolidated Financial Statements as~~•Develop employee training to improve awareness of fraud and misconduct allegations that should be included in Part I of the Quarterly Report on Form 10-Q fairly represent, in all material respects, the Company's financial condition, results of operations and cash flows as of and for the periods presented in accordance with generally accepted accounting principles in the United States.internal management representation letters.

Changes in Internal Control Over Financial Reporting

There were no changes in ~~the Company's~~our internal control over financial reporting (as such term is defined in Rules §240.13a-15(f) and §240.15d-15(f) of the Exchange Act) during the ~~most recent fiscal~~ quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, ~~the Company's~~our internal control over financial reporting.

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PART II. OTHER INFORMATION



Item 1.			Legal ~~Proceedings.~~Proceedings

The information ~~included in~~set forth under Note ~~20, “Commitments~~18, "Commitments and Contingencies,”" to the unaudited interim Condensed Consolidated Financial Statements is incorporated herein by reference.



Item 1A.			Risk ~~Factors.~~Factors

There have been no material changes during the quarterly period ended December 31, ~~2017~~2022 to the risk factors previously disclosed in the ~~Company’s Registration Statement on~~Company's Form ~~10 Amendment No. 3~~10-K filed with the ~~SEC~~Securities and Exchange Commission on ~~January 10, 2018.~~September 8, 2023.



Item 2.			Unregistered Sales of Equity Securities and Use of ~~Proceeds.~~Proceeds

~~None.~~Purchases of Equity Securities by the Issuer

The following table provides information with respect to purchases by the Company of shares of common stock during the three months ended December 31, 2022:


Period	Total Number of Shares (or Units) Purchased(1)	Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under Plans or Programs(2)(3)
October 1 - 31, 2022	—	$	—	—	$	147,473,425
November 1 - 30, 2022	—	$	—	—	$	147,473,425
December 1 - 31, 2022	—	$	—	—	$	132,473,425
Total	—	$	—	—

(1)During the fourth quarter of fiscal 2022, the Company suspended distribution of shares of its common stock which vested pursuant to awards issued under the 2019 Equity Incentive Plan until the Company's related registration statement is reinstated. As such, no shares of common stock were withheld for taxes on restricted stock units that vested during the three months ended December 31, 2022. Refer to Note 12, "Share-based Compensation," for further details.

(2)The Company maintained a warrant repurchase program which authorized it to repurchase the Company's outstanding warrants to purchase shares of the Company's common stock for an aggregate expenditure of up to $15 million. The Company's 2017 Emergence Date Warrants expired on December 15, 2022, and none of the 2017 Emergence Date Warrants were repurchased.

(3)The Company maintained a share repurchase program which authorized it to repurchase the Company's common stock for an aggregate expenditure of up to $500 million. The repurchases were to be made from time to time in the open market, through block trades or in privately negotiated transactions. Upon implementation of the Plan, the common stock was canceled.



Item 3.			Defaults Upon Senior ~~Securities.~~Securities

~~Not Applicable.~~See Note 1, “Background and Basis of Presentation,” and our current report on Form 8-K filed with the SEC on February 14, 2023 for a description of our previously disclosed defaults under our Pre-Petition Debt Instruments.



Item 4.			Mine Safety ~~Disclosures.~~Disclosures

Not ~~Applicable.~~applicable.



Item 5.			Other ~~Information.~~Information

None.

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~~Item 6.~~	~~Exhibits.~~



~~Exhibit Number~~Item 6.			Exhibits


~~10.1~~Exhibit Number		Exhibit Description
10.1*+		~~Transition and Consulting~~Schedule 1 to the Management Services Agreement, dated ~~January 12, 2018,~~as of November 4, 2022, by and between ~~Kevin J. Kennedy and Avaya Inc.~~
~~10.2~~	~~Form of Restricted Stock Unit Award Agreement pursuant to the~~ Avaya Holdings Corp. ~~2017 Equity Incentive Plan for Non-Employee Directors~~and AP Services, LLC, a subsidiary of AlixPartners, LLP, related to the provision of the services of Interim CFO Rebecca A. Roof
~~31.1~~10.2		Retention Bonus and Sign-on Bonus Letter Agreement, dated December 23, 2022, between Avaya Inc. and Alan B. Masarek
10.3		Retention Bonus Letter Agreement, dated December 23, 2022, between Avaya Inc. and Shefali Shah
31.1		Certification of ~~James M. Chirico, Jr.~~Alan B. Masarek pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of ~~Patrick J. O'Malley, III~~Amy O'Keefe pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of ~~James M. Chirico, Jr.~~Alan B. Masarek pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of ~~Patrick J. O'Malley, III~~Amy O'Keefe pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculation Linkbase
101.DEF		XBRL Taxonomy Extension Definition Linkbase
101.LAB		XBRL Taxonomy Extension Labels Linkbase
101.PRE		XBRL Taxonomy Extension Presentation Linkbase
104		Cover Page Interactive Data File (formatted as Inline XBRL in Exhibit 101)

*Indicates management contract or compensatory plan or arrangement.

+Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K, which portions will be furnished to the Securities and Exchange Commission upon request.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



A~~VAYA~~ H~~OLDINGS~~ C~~ORP.~~		AVAYA HOLDINGS CORP.

By:	/s/ ~~L. DAVID~~ D~~ELL'Osso~~AMY O'KEEFE
Name:	~~L. David Dell'Osso~~ Amy O'Keefe
Title:	Executive Vice President ~~Corporate Controller &~~and Chief ~~Accounting~~Financial Officer ~~(Principal Accounting Officer)~~

September 8, 2023

~~March 2, 2018~~

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

~~4655 Great America Parkway~~ ~~Santa Clara, California~~350 Mt. Kemble Avenue			~~95054~~07960
Morristown,		New Jersey
(Address of ~~principal~~Principal executive offices)			(Zip Code)


Title of Each Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	AVYA	New York Stock Exchange


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



¨☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



Item	Description	Page

	PART I—FINANCIAL INFORMATION
1.	Financial Statements	1
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
3.	Quantitative and Qualitative Disclosures About Market Risk	55
4.	Controls and Procedures	55

	PART II—OTHER INFORMATION
1.	Legal Proceedings	57
1A.	Risk Factors	57
2.	Unregistered Sales of Equity Securities and Use of Proceeds	57
3.	Defaults Upon Senior Securities	57
4.	Mine Safety Disclosures	57
5.	Other Information	57
6.	Exhibits	58
	Signatures	59



	Successor			Predecessor
	Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017			Three months ended December 31, 2016
REVENUE
Products	$	71		$	253		$	401
Services	77			351			474
	148			604			875
COSTS
Products:
Costs	33			84			145
Amortization of technology intangible assets	7			3			5
Services	30			155			190
	70			242			340
GROSS PROFIT	78			362			535
OPERATING EXPENSES
Selling, general and administrative	50			264			336
Research and development	9			38			62
Amortization of intangible assets	7			10			57
Restructuring charges, net	10			14			10
	76			326			465
OPERATING INCOME	2			36			70
Interest expense	(9		)	(14		)	(174		)
Other (expense) income, net	(2		)	(2		)	4
Reorganization items, net	—			3,416			—
(LOSS) INCOME BEFORE INCOME TAXES	(9		)	3,436			(100		)
Benefit from (provision for) income taxes	246			(459		)	(3		)
NET INCOME (LOSS)	$	237		$	2,977		$	(103	)
Net income (loss) per share:
Basic	$	2.16		$	5.19		$	(0.22	)
Diluted	$	2.15		$	5.19		$	(0.22	)
Weighted average shares outstanding:
Basic	109.8			497.3			497.0
Diluted	110.3			497.3			497.0



	Successor			Predecessor
	December 31, 2017			September 30, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	417		$	876
Accounts receivable, net	413			536
Inventory	124			96
Other current assets	230			269
TOTAL CURRENT ASSETS	1,184			1,777
Property, plant and equipment, net	306			200
Deferred income taxes, net	31			—
Intangible assets, net	3,421			311
Goodwill	2,632			3,542
Other assets	53			68
TOTAL ASSETS	$	7,627		$	5,898
LIABILITIES
Current liabilities:
Debt maturing within one year	$	—		$	725
Long-term debt, current portion	29			—
Accounts payable	304			282
Payroll and benefit obligations	124			127
Deferred revenue	384			614
Business restructuring reserve	36			35
Other current liabilities	153			90
TOTAL CURRENT LIABILITIES	1,030			1,873
Non-current liabilities:
Long-term debt, net of current portion	2,867			—
Pension obligations	793			513
Other post-retirement obligations	215			—
Deferred income taxes, net	444			32
Business restructuring reserve	34			34
Other liabilities	377			170
TOTAL NON-CURRENT LIABILITIES	4,730			749
LIABILITIES SUBJECT TO COMPROMISE	—			7,705
TOTAL LIABILITIES	5,760			10,327
Commitments and contingencies (Note 20)
Predecessor equity awards on redeemable shares	—			7
Predecessor preferred stock, $0.001 par value, 250,000 shares authorized at September 30, 2017
Convertible Series B preferred stock; 48,922 shares issued and outstanding at September 30, 2017	—			393
Series A preferred stock; 125,000 shares issued and outstanding at September 30, 2017	—			184
Successor preferred stock, $0.01 par value; 55,000,000 authorized, no shares issued or outstanding at December 31, 2017				—
STOCKHOLDERS' EQUITY (DEFICIT)
Predecessor common stock, $0.001 par value; 750,000,000 shares authorized, 494,768,243 issued and outstanding at September 30, 2017	—			—
Successor common stock, $0.01 par value; 550,000,000 shares authorized, 110,000,000 issued and 109,794,137 outstanding at December 31, 2017	1			—
Additional paid-in capital	1,642			2,389
Retained earnings (Accumulated deficit)	237			(5,954		)
Accumulated other comprehensive loss	(13		)	(1,448		)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)	1,867			(5,013		)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$	7,627		$	5,898



	Common Stock
	Number		Par Value		Additional Paid-in Capital			(Accumulated Deficit) Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Total Stockholders' (Deficit) Equity
Balance as of September 30, 2017 (Predecessor)	494.8		$	—	$	2,389		$	(5,954	)	$	(1,448	)	$	(5,013	)
Issuance of common stock, net of shares redeemed and cancelled, under employee stock option plan														—
Amortization of share-based compensation					3									3
Accrued dividends on Series A preferred stock					(2		)							(2		)
Accrued dividends on Series B preferred stock					(4		)							(4		)
Reclassifications to equity awards on redeemable shares					1									1
Net income								2,977						2,977
Other comprehensive income											658			658
Balance as of December 15, 2017 (Predecessor)	494.8		—		2,387			(2,977		)	(790		)	(1,380		)
Cancellation of Predecessor equity	(494.8	)			(2,387		)	2,977			790			1,380
Balance as of December 15, 2017 (Predecessor)	—		$	—	$	—		$	—		$	—		$	—

	Common Stock
	Number		Par Value		Additional Paid-in Capital			(Accumulated Deficit) Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Total Stockholders' Equity (Deficit)
Balance as of December 15, 2017 (Predecessor)	—		$	—	$	—		$	—		$	—		$	—
Issuance of Successor common stock
Common stock issued for Predecessor debt	103.7		1		1,548									1,549
Common stock issued for Pension Benefit Guaranty Corporation	6.1				90									90
Common stock issued for general unsecured creditors or Predecessor debt	0.2				3									3
Balance as of December 15, 2017 (Predecessor)	110.0		$	1	$	1,641		$	—		$	—		$	1,642


Balance as of December 15, 2017 (Successor)	110.0		1		1,641			—			—			1,642
Issuance of common stock, net														—
Amortization of share-based compensation					1									1
Net income								237						237
Other comprehensive loss											(13		)	(13		)
Balance as of December 31, 2017 (Successor)	110.0		$	1	$	1,642		$	237		$	(13	)	$	1,867



(In millions, except per share amount)
Enterprise value	$	5,721
Plus:
Cash and cash equivalents	340
Less:
Minimum cash required for operations	(120		)
Fair value of Term Loan Credit Agreement⁽¹⁾	(2,896		)
Fair value of capitalized leases	(20		)
Fair value of pension and other post-retirement obligations, net of tax⁽²⁾	(856		)
Change in net deferred tax liabilities from reorganization	(510		)
Fair value of Successor warrants⁽³⁾	(17		)
Fair value of Successor common stock	$	1,642
Shares issued at December 15, 2017	110.0
Per share value	$	14.93



(In millions)	Predecessor Company			Reorganization Adjustments				Fresh Start Adjustments				Successor Company December 15, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	744		$	(404	)	(1)	$	—			$	340
Accounts receivable, net	523			—				(106		)	(21,29)	417
Inventory	98			—				29			(22)	127
Other current assets	366			(58		)	(2)	(66		)	(23)	242
TOTAL CURRENT ASSETS	1,731			(462		)		(143		)		1,126
Property, plant and equipment, net	194			—				116			(24)	310
Deferred income taxes, net	—			48			(3)	(17		)	(25)	31
Intangible assets, net	298			—				3,137			(26)	3,435
Goodwill	3,541			—				(909		)	(27)	2,632
Other assets	70			6			(4)	(27		)	(28)	49
TOTAL ASSETS	$	5,834		$	(408	)		$	2,157			$	7,583
LIABILITIES
Current liabilities:
Debt maturing within one year	$	725		$	(696	)	(5)	$	—			$	29
Accounts payable	325			(49		)	(6)	—				276
Payroll and benefit obligations	123			23			(7)	—				146
Deferred revenue	627			50			(8)	(341		)	(29)	336
Business restructuring reserve	35			3			(9)	—				38
Other current liabilities	97			65			(6,10)	(3		)	(30)	159
TOTAL CURRENT LIABILITIES	1,932			(604		)		(344		)		984
Non-current liabilities:
Long-term debt, net of current portion	—			2,771			(11)	96			(31)	2,867
Pension obligations	539			246			(12)	—				785
Other post-retirement obligations	—			212			(13)	—				212
Deferred income taxes, net	28			113			(14)	548			(32)	689
Business restructuring reserve	26			4			(9)	4			(33)	34
Other liabilities	180			233			(8,15)	(43		)	(29,34)	370
TOTAL NON-CURRENT LIABILITIES	773			3,579				605				4,957
LIABILITIES SUBJECT TO COMPROMISE	7,585			(7,585		)	(16)	—				—
TOTAL LIABILITIES	10,290			(4,610		)		261				5,941
Commitments and contingencies
Equity awards on redeemable shares	6			(6		)	(17)	—				—
Preferred stock:
Series B	397			(397		)	(17)	—				—
Series A	186			(186		)	(17)	—				—
STOCKHOLDERS' (DEFICIT) EQUITY
Common stock (Successor)	—			1			(18)	—				1
Additional paid-in capital (Successor)	—			1,641			(18)	—				1,641
Common stock (Predecessor)	—			—				—				—
Additional paid-in capital (Predecessor)	2,387			(2,387		)	(17)	—				—
(Accumulated deficit) retained earnings	(5,978		)	4,872			(19)	1,106			(36)	—
Accumulated other comprehensive (loss) income	(1,454		)	664			(20)	790			(35)	—
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY	(5,045		)	4,791				1,896				1,642
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY	$	5,834		$	(408	)		$	2,157			$	7,583



(In millions)
Sources:
Proceeds from Term Loan Credit Agreement, net of original issue discount	$	2,896
Release of restricted cash	76
Total sources of cash	2,972
Uses:
Repayment of DIP Credit Agreement	(725		)
Payment of DIP accrued interest	(1		)
Cash paid to Predecessor first lien debt-holders	(2,061		)
Cash paid to PBGC	(340		)
Payment for professional fees escrow account	(56		)
Funding payment for Avaya represented employee pension plan	(49		)
Payment of accrued professional & administrative fees	(27		)
Costs incurred for Term Loan Credit Agreement and ABL Credit Agreement	(59		)
Payment for general unsecured claims	(58		)
Total uses of cash	(3,376		)
Net uses of cash	$	(404	)



(In millions)
Release of restricted cash	$	(76	)
Reclassification of prepaid debt issuance costs related to the Term Loan Credit Agreement	(42		)
Payment of fees related to the ABL Credit Agreement	5
Restricted cash for bankruptcy related professional fees	55
Total other current assets	$	(58	)



(In millions)
Reclassification of accrued bankruptcy related professional fees	$	50
Reinstatement of other current liabilities	16
Payment of accrued interest on the DIP Credit Agreement	(1		)
Total other current liabilities	$	65



(In millions)
Term Loan Credit Agreement	$	2,925
Less:
Discount	(29		)
Upfront and underwriting fees	(54		)
Cash received upon emergence from bankruptcy	2,842
Reclassification of debt issuance cost incurred prior to emergence from bankruptcy	(42		)
Current portion of Long-term debt	(29		)
Long-term debt, net of current portion	$	2,771



(In millions)
Pre-petition first lien debt	$	734
Pre-petition second lien debt	1,357
Avaya pension plan for salaried employees	(514		)
General unsecured creditors' claims	227
Net gain on settlement of Liabilities subject to compromise	$	1,804



(In millions)
Accumulated deficit:
Net gain on settlement of liabilities subject to compromise	$	1,804
Expense for certain professional fees	(26		)
Benefit from income taxes	118
Cancellation of Predecessor equity awards	6
Cancellation of Predecessor Preferred stock Series B	397
Cancellation of Predecessor Preferred stock Series A	186
Cancellation of Predecessor Common stock	2,387
Total	$	4,872



(In millions)
Buildings and improvements	$	82
Machinery and equipment	38
Rental equipment	85
Assets under construction	13
Internal use software	92
Total property, plant and equipment	310
Less: accumulated depreciation and amortization	—
Property, plant and equipment, net	$	310



(In millions)
Reorganization value of Successor Company	$	7,583
Less: Fair value of Successor Company assets	(4,951		)
Reorganization value of Successor Company assets in excess of fair value - goodwill	$	2,632



(In millions)
Eliminate Predecessor Intangible assets	$	(298	)
Eliminate Predecessor Goodwill	(3,541		)
Establish Successor Intangible assets	3,435
Establish Successor Goodwill	2,632
Fair value adjustment to Inventory	29
Fair value adjustment to Other current assets	(66		)
Fair value adjustment to Property, plant and equipment	116
Fair value adjustment to Other assets	(27		)
Fair value adjustment to Deferred revenue	235
Fair value adjustment to Business restructuring reserves	(4		)
Fair value adjustment to Other current liabilities	3
Fair value adjustment to Long-term debt	(96		)
Fair value adjustment to Other liabilities	43
Release Predecessor Accumulated comprehensive loss	(790		)
Fresh start adjustments included in Reorganization items, net				$	1,671
Tax impact of fresh start adjustments				(565		)
Gain on fresh start accounting				$	1,106



(In millions)	Global Communications Solutions			Avaya Global Services			Total
September 30, 2017 (Predecessor)	$	1,093		$	2,449		$	3,542
Adjustments	(1		)	—			(1		)
Impact of fresh start accounting	68			(977		)	(909		)
December 15, 2017 (Predecessor)	$	1,160		$	1,472		$	2,632


December 31, 2017 (Successor)	$	1,160		$	1,472		$	2,632



	Successor
	As of December 31, 2017
(In millions)	Technology and patents			Customer relationships and other intangibles			Trademarks and trade names			Total
Gross Carrying Amount	$	905		$	2,155		$	375		$	3,435
Accumulated Amortization	(7		)	(7		)	—			(14		)
Net	$	898		$	2,148		$	375		$	3,421


	Predecessor
	As of September 30, 2017
(In millions)	Technology and patents			Customer relationships and other intangibles			Trademarks and trade names			Total
Gross Carrying Amount	$	1,427		$	2,196		$	545		$	4,168
Accumulated Amortization	(1,411		)	(2,091		)	—			(3,502		)
Accumulated Impairment	—			—			(355		)	(355		)
Net	$	16		$	105		$	190		$	311



(In millions)
Remainder of fiscal 2018	$	247
2019	326
2020	326
2021	325
2022	298
2023 and thereafter	1,566
Total	$	3,088



(In millions)	Employee Separation Costs			Lease Obligations			Total
2018 restructuring charges	$	12		$	—		$	12
Cash payments	(3		)	—			(3		)
Balance as of December 15, 2017 (Predecessor)	$	9		$	—		$	9


2018 restructuring charges⁽¹⁾	$	—		$	10		$	10
Cash payments	(2		)	(10		)	(12		)
Balance as of December 31, 2017 (Successor)	$	7		$	—		$	7



	December 31, 2017		December 15, 2017
Expected volatility	52.38	%	54.57	%
Risk free interest rates	2.20	%	2.20	%
Expected life (in years)	4.96		5.00
Price per share of common stock	$17.55		$14.93

Fair value of warrant liability	$22 million		$17 million



Exercise price	$	19.46
Expected term (in years)⁽¹⁾	8.54
Volatility⁽²⁾	65.37		%
Risk-free rate⁽³⁾	2.35		%
Dividend yield⁽⁴⁾	—		%



(In millions)
Accrued warranty obligations as of September 30, 2017 (Predecessor)	$	2
Reductions for payments and costs to satisfy claims	(1		)
Accruals for warranties issued during the period	1
Accrued warranty obligations as of December 15, 2017 (Predecessor)	$	2


Reductions for payments and costs to satisfy claims	$	(1	)
Accruals for warranties issued during the period	1
Accrued warranty obligations as of December 31, 2017 (Successor)	$	2


~~21.~~	~~Condensed Financial Information of Parent Company~~



	Successor			Predecessor			Non-GAAP Combined			Predecessor
(In millions)	Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017			Three Months Ended December 31, 2017			Three months ended December 31, 2016
REVENUE
Products	$	71		$	253		$	324		$	401
Services	77			351			428			474
	148			604			752			875
COSTS
Products:
Costs	33			84			117			145
Amortization of technology intangible assets	7			3			10			5
Services	30			155			185			190
	70			242			312			340
GROSS PROFIT	78			362			440			535
OPERATING EXPENSES
Selling, general and administrative	50			264			314			336
Research and development	9			38			47			62
Amortization of intangible assets	7			10			17			57
Restructuring charges, net	10			14			24			10
	76			326			402			465
OPERATING INCOME	2			36			38			70
Interest expense	(9		)	(14		)	(23		)	(174		)
Other (expense) income, net	(2		)	(2		)	(4		)	4
Reorganization items, net	—			3,416			3,416			—
(LOSS) INCOME BEFORE INCOME TAXES	(9		)	3,436			3,427			(100		)
Benefit from (provision for) income taxes	246			(459		)	(213		)	(3		)
NET INCOME (LOSS)	$	237		$	2,977		$	3,214		$	(103	)



									Percentage of Revenue
	Successor		Predecessor		Non-GAAP Combined		Predecessor		Non-GAAP Combined		Predecessor		Change
(In millions)	Period from December 16, 2017 through December 31, 2017		Period from October 1, 2017 through December 15, 2017		Three Months Ended December 31, 2017		Three Months Ended December 31, 2016		Three Months Ended December 31, 2017		Three months ended December 31, 2016		Amount			Percent
Selling, general and administrative	$	50	$	264	$	314	$	336	41.7	%	38.4	%	$	(22	)	(7	)%
Research and development	9		38		47		62		6.3	%	7.1	%	(15		)	(24	)%
Amortization of intangible assets	7		10		17		57		2.3	%	6.5	%	(40		)	(70	)%
Restructuring charges, net	10		14		24		10		3.2	%	1.1	%	14			140	%
Total operating expenses	$	76	$	326	$	402	$	465	53.5	%	53.1	%	$	(63	)	(14	)%