UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE) 

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

For the quarterly period ended April 30, 2023 

OR 

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

For transition period from              to        

 Commission File Number: 001-15405

 AGILENT TECHNOLOGIES, INC.

(Exact Name of registrant as specified in its charter)

	Delaware		77-0518772
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

 

5301 Stevens Creek Blvd.,

Santa Clara, California 95051

(Address of principal executive offices)

Registrant’s telephone number, including area code: (800) 227-9770  

Securities registered pursuant to Section 12(b) of the Act:

Title of each Class	Trading Symbol		Name of each Exchange on which registered
Common Stock, $0.01 par value		A		New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ☒  No  ☐

 Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ☒  No  ☐  

 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐
Smaller reporting company	☐			Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐    

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ☐ No  ☒ 

As of May 22, 2023, the registrant had 295,375,818 shares of common stock, $0.01 par value per share, outstanding.

AGILENT TECHNOLOGIES, INC.

TABLE OF CONTENTS

			Page Number
Part I.	Financial Information		3
	Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
		Condensed Consolidated Statement of Operations	3
		Condensed Consolidated Statement of Comprehensive Income (Loss)	4
		Condensed Consolidated Balance Sheet	5
		Condensed Consolidated Statement of Cash Flows	6
		Condensed Consolidated Statement of Equity	7
		Notes to Condensed Consolidated Financial Statements	9
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46
	Item 4.	Controls and Procedures	46
Part II.	Other Information		47
	Item 1.	Legal Proceedings	47
	Item 1A.	Risk Factors	47
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
	Item 6.	Exhibits	60
Signature			61

2

PART I— FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

AGILENT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(in millions, except per share amounts)

(Unaudited)

	Three Months Ended				Six Months Ended
	April 30,				April 30,
	2023		2022		2023		2022
Net revenue:
Products	$	1,274	$	1,204	$	2,597	$	2,467
Services and other	443		403		876		814
Total net revenue	1,717		1,607		3,473		3,281
Costs and expenses:
Cost of products	550		530		1,106		1,075
Cost of services and other	243		216		475		435
Total costs	793		746		1,581		1,510
Research and development	126		115		249		232
Selling, general and administrative	415		386		834		803
Total costs and expenses	1,334		1,247		2,664		2,545
Income from operations	383		360		809		736
Interest income	12		1		21		2
Interest expense	(24)		(21)		(49)		(42)
Other income (expense), net	6		(7)		6		(44)
Income before taxes	377		333		787		652
Provision for income taxes	75		59		133		95
Net income	$	302	$	274	$	654	$	557
Net income per share:
Basic	$	1.02	$	0.92	$	2.21	$	1.86
Diluted	$	1.02	$	0.91	$	2.20	$	1.84
Weighted average shares used in computing net income per share:
Basic	296		299		296		300
Diluted	297		301		297		302

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

AGILENT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(in millions)

(Unaudited)

	Three Months Ended				Six Months Ended
	April 30,				April 30,
	2023		2022		2023		2022
Net income	$	302	$	274	$	654	$	557
Other comprehensive income (loss):
Unrealized gain (loss) on derivative instruments, net of tax expense (benefit) of $4, $5, $(5) and $7	7		16		(15)		22
Amounts reclassified into earnings related to derivative instruments, net of tax expense (benefit) of $1, $(1), $(1) and $(2)	3		(4)		(1)		(6)
Foreign currency translation, net of tax expense (benefit) of $0, $0, $(1) and $0	(13)		(54)		78		(81)
Net defined benefit pension cost and post retirement plan costs:
Change in actuarial net loss, net of tax expense of $0, $3, $0 and $5	2		7		4		14
Change in net prior service benefit, net of tax expense of $0, $0, $0 and $0	(1)		—		(1)		—
Other comprehensive income (loss)	(2)		(35)		65		(51)
Total comprehensive income	$	300	$	239	$	719	$	506

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

AGILENT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEET

(in millions, except par value and share amounts)

(Unaudited)

	April 30, 2023		October 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	1,175	$	1,053
Accounts receivable, net	1,401		1,405
Inventory	1,103		1,038
Other current assets	270		282
Total current assets	3,949		3,778
Property, plant and equipment, net	1,184		1,100
Goodwill	3,980		3,952
Other intangible assets, net	798		821
Long-term investments	186		195
Other assets	695		686
Total assets	$	10,792	$	10,532
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	479	$	580
Employee compensation and benefits	359		455
Deferred revenue	519		461
Short-term debt	—		36
Other accrued liabilities	309		329
Total current liabilities	1,666		1,861
Long-term debt	2,733		2,733
Retirement and post-retirement benefits	97		97
Other long-term liabilities	515		536
Total liabilities	5,011		5,227
Commitments and contingencies (Notes 9 and 12)
Total equity:
Stockholders’ equity:
Preferred stock; $0.01 par value; 125 million shares authorized; none issued and outstanding at April 30, 2023 and October 31, 2022	—		—
Common stock; $0.01 par value; 2 billion shares authorized; 295 million shares at April 30, 2023 and 295 million shares at October 31, 2022 issued and outstanding	3		3
Additional paid-in-capital	5,360		5,325
Retained earnings	700		324
Accumulated other comprehensive loss	(282)		(347)
Total stockholders' equity	5,781		5,305
Total liabilities and stockholders' equity	$	10,792	$	10,532

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

AGILENT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(in millions)

(Unaudited)

	Six Months Ended
	April 30,
	2023		2022
Cash flows from operating activities:
Net income	$	654	$	557
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	138		164
Share-based compensation	68		71
Deferred taxes	(1)		19
Excess and obsolete inventory related charges	15		10
Net loss on equity securities	14		62
Change in fair value of contingent consideration	1		(25)
Other non-cash (income) expense, net	2		9
Changes in assets and liabilities:
Accounts receivable, net	49		(108)
Inventory	(71)		(124)
Accounts payable	(101)		54
Employee compensation and benefits	(110)		(144)
Other assets and liabilities	36		(7)
Net cash provided by operating activities	694		538
Cash flows from investing activities:
Payments to acquire property, plant and equipment	(133)		(139)
Payments to acquire equity securities	(1)		(3)
Proceeds from sale of equity securities	5		6
Payments in exchange for convertible note	(5)		(1)
Proceeds from convertible note	4		—
Acquisitions of businesses and intangible assets, net of cash acquired	(51)		(18)
Net cash used in investing activities	(181)		(155)
Cash flows from financing activities:
Proceeds from issuance of common stock under employee stock plans	35		27
Payments of taxes related to net share settlement of equity awards	(52)		(64)
Payments of dividends	(133)		(126)
Proceeds from revolving credit facility	175		—
Repayment of revolving credit facility	(175)		—
Proceeds from issuance of commercial paper	1,412		575
Repayment of commercial paper	(1,447)		(400)
Payment for contingent consideration	(62)		—
Payments for repurchase of common stock	(160)		(681)
Net cash used in financing activities	(407)		(669)
Effect of exchange rate movements	16		(16)
Net increase (decrease) in cash, cash equivalents and restricted cash	122		(302)
Cash, cash equivalents and restricted cash at beginning of period	1,056		1,490
Cash, cash equivalents and restricted cash at end of period	$	1,178	$	1,188
Supplemental cash flow information:
Income tax paid, net of refunds received	$	128	$	134
Interest payments, net of capitalized interest	$	44	$	40
Net change in property, plant and equipment included in accounts payable and accrued liabilities-increase (decrease)	$	(8)	$	9

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

AGILENT TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(in millions, except number of shares in thousands)

(Unaudited)

	Common Stock							Accumulated Other Comprehensive Loss
Three Months Ended April 30, 2023	Number of Shares	Par Value		Additional Paid-in Capital		Retained Earnings				Total Stockholders' Equity
Balance as of January 31, 2023	295,821	$	3	$	5,345	$	541	$	(280)	$	5,609
Components of comprehensive income, net of tax:
Net income	—	—		—		302		—		302
Other comprehensive loss	—	—		—		—		(2)		(2)
Total comprehensive income										300
Cash dividends declared ($0.225 per common share)	—	—		—		(66)		—		(66)
Share-based awards issued, net of tax of $1	46	—		(1)		—		—		(1)
Repurchase of common stock	(606)	—		(8)		(77)		—		(85)
Share-based compensation	—	—		24		—		—		24
Balance as of April 30, 2023	295,261	$	3	$	5,360	$	700	$	(282)	$	5,781

	Common Stock							Accumulated Other Comprehensive Loss
Six Months Ended April 30, 2023	Number of Shares	Par Value		Additional Paid-in Capital		Retained Earnings				Total Stockholders' Equity
Balance as of October 31, 2022	295,259	$	3	$	5,325	$	324	$	(347)	$	5,305
Components of comprehensive income, net of tax:
Net income	—	—		—		654		—		654
Other comprehensive income	—	—		—		—		65		65
Total comprehensive income										719
Cash dividends declared ($0.450 per common share)	—	—		—		(133)		—		(133)
Share-based awards issued, net of tax of $52	1,107	—		(18)		—		—		(18)
Repurchase of common stock	(1,105)	—		(15)		(145)		—		(160)
Share-based compensation	—	—		68		—		—		68
Balance as of April 30, 2023	295,261	$	3	$	5,360	$	700	$	(282)	$	5,781

7

	Common Stock							Accumulated Other Comprehensive Loss
Three Months Ended April 30, 2022	Number of Shares	Par Value		Additional Paid-in Capital		Retained Earnings				Total Stockholders' Equity
Balance as of January 31, 2022	300,273	$	3	$	5,290	$	159	$	(298)	$	5,154
Components of comprehensive income, net of tax:
Net income	—	—		—		274		—		274
Other comprehensive loss	—	—		—		—		(35)		(35)
Total comprehensive income										239
Cash dividends declared ($0.210 per common share)	—	—		—		(63)		—		(63)
Share-based awards issued, net of tax of $1	43	—		(1)		—		—		(1)
Repurchase of common stock	(1,751)	—		(24)		(210)		—		(234)
Share-based compensation	—	—		27		—		—		27
Balance as of April 30, 2022	298,565	$	3	$	5,292	$	160	$	(333)	$	5,122

	Common Stock							Accumulated Other Comprehensive Loss
Six Months Ended April 30, 2022	Number of Shares	Par Value		Additional Paid-in Capital		Retained Earnings				Total Stockholders' Equity
Balance as of October 31, 2021	302,208	$	3	$	5,320	$	348	$	(282)	$	5,389
Components of comprehensive income, net of tax:
Net income	—	—		—		557		—		557
Other comprehensive loss	—	—		—		—		(51)		(51)
Total comprehensive income										506
Cash dividends declared ($0.420 per common share)	—	—		—		(126)		—		(126)
Share-based awards issued, net of tax of $64	1,015	—		(37)		—		—		(37)
Repurchase of common stock	(4,658)	—		(62)		(619)		—		(681)
Share-based compensation	—	—		71		—		—		71
Balance as of April 30, 2022	298,565	$	3	$	5,292	$	160	$	(333)	$	5,122

The accompanying notes are an integral part of these condensed consolidated financial statements.

8

AGILENT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. OVERVIEW, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Overview. Agilent Technologies, Inc. ("we," "Agilent" or the "company"), incorporated in Delaware in May 1999, is a global leader in life sciences, diagnostics and applied chemical markets, providing application focused solutions that include instruments, software, services and consumables for the entire laboratory workflow.

Our fiscal year-end is October 31, and our fiscal quarters end on January 31, April 30 and July 31. Unless otherwise stated, these dates refer to our fiscal year and fiscal quarters.

Basis of Presentation. We have prepared the accompanying financial data for the three and six months ended April 30, 2023 and 2022 pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) in the U.S. have been condensed or omitted pursuant to such rules and regulations. The October 31, 2022 condensed balance sheet data was derived from audited financial statements but does not include all the disclosures required in audited financial statements by U.S. GAAP. The accompanying financial data and information should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended October 31, 2022.

In the opinion of management, the accompanying condensed consolidated financial statements contain all normal and recurring adjustments necessary for a fair statement of our condensed consolidated balance sheet as of April 30, 2023 and October 31, 2022, condensed consolidated statement of comprehensive income (loss) for the three and six months ended April 30, 2023 and 2022, condensed consolidated statement of operations for the three and six months ended April 30, 2023 and 2022, condensed consolidated statement of cash flows for the six months ended April 30, 2023 and 2022 and condensed consolidated statement of equity for the three and six months ended April 30, 2023 and 2022.

Use of Estimates. The preparation of condensed consolidated financial statements in accordance with GAAP in the U.S. requires management to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management’s best knowledge of current events and actions that may impact the company in the future, actual results may be different from the estimates. Our critical accounting policies are those that affect our financial statements materially and involve difficult, subjective or complex judgments by management. Those policies are revenue recognition, valuation of goodwill and purchased intangible assets, inventory valuation, retirement and post-retirement benefit plan assumptions and accounting for income taxes.

Restricted Cash and Restricted Cash Equivalents. Restricted cash and restricted cash equivalents are included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. A reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheet follows:

	April 30,		October 31,
	2023		2022
	(in millions)
Cash and cash equivalents	$	1,175	$	1,053
Restricted cash included in other assets	3		3
Total cash, cash equivalents and restricted cash	$	1,178	$	1,056

Leases. As of April 30, 2023 and October 31, 2022, operating lease right-of-use assets where we are the lessee were $154 million and $150 million, respectively, and were included within other assets in the accompanying condensed consolidated balance sheet. The associated operating lease liabilities were $158 million and $152 million as of April 30, 2023 and October 31, 2022, respectively, and were included in other accrued liabilities and other long-term liabilities in the accompanying condensed consolidated balance sheet.

Variable Interest Entities. We make a determination upon entering into an arrangement whether an entity in which we have made an investment is considered a Variable Interest Entity (“VIE”). We evaluate our investments in privately held companies on an ongoing basis. We have determined that as of April 30, 2023 and October 31, 2022, there were no VIEs required to be consolidated in our consolidated financial statements because we do not have a controlling financial interest in

9

AGILENT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

any of the VIEs in which we have invested nor are we the primary beneficiary. We account for these investments under either the equity method or as equity investments without readily determinable fair value ("RDFV"), depending on the circumstances. We periodically reassess whether we are the primary beneficiary of a VIE. The reassessment process considers whether we have acquired the power to direct the most significant activities of the VIE through changes in governing documents or other circumstances. We also reconsider whether entities previously determined not to be VIEs have become VIEs and vice-versa, based on changes in facts and circumstances including changes in contractual arrangements and capital structure.

As of April 30, 2023 and October 31, 2022, the total carrying value of investments and loans in privately held companies considered as VIEs was $66 million and $87 million respectively. The maximum exposure is equal to the carrying value because we do not have future funding commitments. The investments are included on the long-term investments line and the loans on the other current assets and other assets lines (depending upon tenure of loan) on the condensed consolidated balance sheet.

Fair Value of Financial Instruments. The carrying values of certain of our financial instruments including cash and cash equivalents, accounts receivable, accounts payable, accrued compensation and other accrued liabilities approximate fair value because of their short maturities. The fair value of long-term equity investments which are readily determinable, and which are not accounted under the equity method are reported at fair value using quoted market prices for those securities when available with gains and losses included in net income. The fair value of long-term equity investments which are not readily determinable, and which are not accounted under the equity method are reported at cost with adjustments for observable changes in prices or impairments included in net income. As of April 30, 2023 and October 31, 2022, the fair value of the term loans approximates its carrying value. As of April 30, 2023, the fair value of our senior notes was $1,871 million with a carrying value of $2,133 million. This compares to the fair value of our senior notes of $1,754 million with a carrying value of $2,133 million as of October 31, 2022. The change in the fair value compared to carrying value in the six months ended April 30, 2023 is primarily due to decreased market interest rates. The fair value was calculated from quoted prices which are primarily Level 1 inputs under the accounting guidance. The fair value of foreign currency contracts used for hedging purposes is estimated internally by using inputs tied to active markets. These inputs, for example, interest rate yield curves, foreign exchange rates, and forward and spot prices for currencies are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. See also Note 9, "Fair Value Measurements" for additional information on the fair value of financial instruments and contingent consideration.

 2. NEW ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

In November 2021, the FASB issued updates to increase the transparency in the annual disclosure requirements relating to government assistance received by business entities in Topic 832, Government Assistance. The guidance requires certain disclosures about transactions with a government that are accounted for by applying a grant or contribution model. On November 1, 2022, we adopted this guidance which did not have a material impact on our condensed consolidated financial statements and disclosures.

Accounting Pronouncements Not Yet Adopted

There were no additions to the new accounting pronouncements not yet adopted as described in our Annual Report on Form 10-K for the fiscal year ended October 31, 2022.

Other amendments to GAAP in the U.S. that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our condensed consolidated financial statements upon adoption.

10

AGILENT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

3. REVENUE

The following table presents the company’s total revenue and segment revenue disaggregated by geographical region:

	Three Months Ended April 30,
	2023								2022
	Life Sciences and Applied Markets		Agilent CrossLab		Diagnostics and Genomics		Total		Life Sciences and Applied Markets		Agilent CrossLab		Diagnostics and Genomics		Total
	(in millions)
Revenue by Region
Americas	$	310	$	154	$	212	$	676	$	321	$	137	$	201	$	659
Europe	225		103		105		433		216		97		110		423
Asia Pacific	433		130		45		608		359		119		47		525
Total	$	968	$	387	$	362	$	1,717	$	896	$	353	$	358	$	1,607

	Six Months Ended April 30,
	2023								2022
	Life Sciences and Applied Markets		Agilent CrossLab		Diagnostics and Genomics		Total		Life Sciences and Applied Markets		Agilent CrossLab		Diagnostics and Genomics		Total
	(in millions)
Revenue by Region
Americas	$	642	$	308	$	413	$	1,363	$	638	$	269	$	389	$	1,296
Europe	484		201		204		889		468		195		211		874
Asia Pacific	875		259		87		1,221		766		248		97		1,111
Total	$	2,001	$	768	$	704	$	3,473	$	1,872	$	712	$	697	$	3,281

The following table presents the company’s total revenue disaggregated by end markets and by revenue type:

	Three Months Ended				Six Months Ended
	April 30,				April 30,
	2023		2022		2023		2022
	(in millions)
Revenue by End Markets
Pharmaceutical and Biopharmaceutical	$	612	$	589	$	1,251	$	1,191
Chemicals and Advanced Materials	378		335		784		708
Diagnostics and Clinical	250		241		489		484
Food	161		137		321		295
Academia and Government	159		146		305		287
Environmental and Forensics	157		159		323		316
Total	$	1,717	$	1,607	$	3,473	$	3,281
Revenue by Type
Instrumentation	$	689	$	646	$	1,448	$	1,337
Non-instrumentation and other	1,028		961		2,025		1,944
Total	$	1,717	$	1,607	$	3,473	$	3,281

Revenue by region is based on the ship to location of the customer. Revenue by end market is determined by the market indicator of the customer and by customer type. Instrumentation revenue includes sales from instruments, remarketed instruments and third-party products. Non-instrumentation and other revenue include sales from contract and per incident services, our companion diagnostics and our nucleic acid solutions businesses as well as sales from spare parts, consumables, reagents, vacuum pumps, subscriptions, software licenses and associated services.

11

AGILENT TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)

Contract Balances

Contract Assets

Contract assets (unbilled accounts receivable) primarily relate to the company's right to consideration for work completed but not billed at the reporting date. The unbilled receivables are reclassified to trade receivables when billed to customers. Contract assets are generally classified as current assets and are included in "Accounts receivable, net" in the condensed consolidated balance sheet. The balances of contract assets as of April 30, 2023 and October 31, 2022 were $262 million and $275 million, respectively.

Contract Liabilities

The following table provides information about contract liabilities (deferred revenue) and the significant changes in the balances during the six months ended April 30, 2023:

	Contract Liabilities
	(in millions)
Ending balance as of October 31, 2022	$	557
Net revenue deferred in the period	370
Revenue recognized that was included in the contract liability balance at the beginning of the period	(299)
Change in deferrals from customer cash advances, net of revenue recognized	(21)
Currency translation and other adjustments	19
Ending balance as of April 30, 2023	$	626

During the six months ended April 30, 2022 revenue recognized that was included in the contract liability balance at October 31, 2021 was $283 million.

Contract liabilities primarily relate to multiple element arrangements for which billing has occurred but transfer of control of all elements to the customer has either partially or not occurred at the balance sheet date. This includes cash received from customers for products and related installation and services in advance of the transfer of control. Contract liabilities are classified as either current in deferred revenue or long-term in other long-term liabilities in the condensed consolidated balance sheet based on the timing of when we expect to complete our performance obligation.

Contract Costs

Incremental costs of obtaining a contract with a customer are recognized as an asset if we expect the benefit of those costs to be longer than one year. We have determined that certain sales incentive programs meet the requirements to be capitalized. The change in total capitalized costs to obtain a contract was immaterial during the three and six months ended April 30, 2023 and was included in other current and long-term assets on the condensed consolidated balance sheet. We have applied the practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. These costs include the company's internal sales force compensation program, as we have determined that annual compensation is commensurate with annual sales activities.

Transaction Price Allocated to the Remaining Performance Obligations

We have applied the practical expedient in ASC 606-10-50-14 and have not disclosed information about transaction price allocated to remaining performance obligations that have original expected durations of one year or less.

The estimated revenue expected to be recognized for remaining performance obligations that have an original term of more than one year, as of April 30, 2023, was $356 million, the majority of which is expected to be recognized over the next